GOVERNMENT=S SUPPLEMENTAL SENTENCING MEMORANDUM SEEKING OBSTRUCTION OF JUSTICE AND DENIAL OF ACCEPTANCE
This memorandum is submitted in further aid of the sentencing of Defendant Gregory P. Loles, who as is now apparent stole more that $27 million from friends, clients, the endowment fund and building fund of a church in Orange, Connecticut, St. Barbara=s Greek Orthodox Church (Athe Church@ or ASt. Barbara=s@), and as recently corroborated, from a Greek family overseas. In particular, this memorandum is submitted in support of the Government=s adjusted Guidelines= calculation which now seeks an additional two levels for amount of loss, provides additional evidence and argument for the number of victims being greater than 250, and seeks an enhancement for obstruction of justice based on the Defendants lying under oath to the Court and the corresponding denial of the adjustment for acceptance of responsibility. For the reasons set forth in the Government=s Original Sentencing Memorandum (Dkt. No. 80), those set forth in the Governments Reply Memorandum (Dkt. No. 89), those set forth in open Court at the multi-day hearing, and those set forth below, the Government asserts that the Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 1 of 30
2 Defendant=s Guidelines= range should also include a two-point enhancement for obstruction of justice and he should be denied acceptance of responsibility. I. Guideline Calculation A. Burden of Proof The parties agree that the Defendants base offense level pursuant to the United States Sentencing Guidelines is a base of 7 as the offense charged has a statutory maximum of 20 years or more. See U.S.S.G. ' 2B1.1(a)(1). The remaining factors, about which the parties do not agree, need only be established by a preponderance of the evidence. As the court explained in United States v. Salim, 287 F.Supp.2d 250, 305-06 (S.D.N.Y. 2003) [a]lthough the Sentencing Guidelines do not specify a burden of proof to govern the resolution of disputed sentencing factors, the Second Circuit has held that the preponderance of the evidence standard satisfies the requirements of due process in determining conduct relevant to sentencing issues under the Guidelineseven for the determination of unconvicted conduct. (citing United States v. Gigante, 94 F.3d 53, 55 (2d Cir. 1996) ( [U]nconvicted conduct may be relied upon to adjust a defendant's sentence level as contemplated by the Guidelines based on proof by a preponderance of the evidence.); United States v. Guerra, 888 F.2d 247, 251 (2d Cir. 1989) ( [T]he preponderance of the evidence standard satisfies the requisite due process in determining relevant conduct pursuant to the Sentencing Guidelines in the calculation of offense level based on defendant's possession of uncharged narcotics). Additionally, the Second Circuit has found that in making factual findings in determining the Guidelines, a sentencing court remains entitled to rely on any type of information known to it. United States v. Concepcion, 983 F.2d 369, 388 (2d Cir.1992) (upholding sentence where court referred at sentencing to conduct for which the defendant was acquitted) (citing United States v. Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 2 of 30 3 Carmona, 873 F.2d 569, 574 (2d Cir. 1989)); see also United States v. Franklyn, 157 F.3d 90, 97 (2d Cir. 1998) (Disputed facts relevant to sentencing must be established by a preponderance of the evidence, and the sentencing court may rely upon any information known to it). A. The Amount of Loss is Over $20 million The amount of loss suffered as a result of the fraud now is calculated above $20,000,000. Therefore, the offense level is increased by 22 pursuant to U.S.S.G ' 2B1.1(b)(1)(L). As established in the Government=s Sentencing Memorandum and as established by witness testimony at the Defendant=s sentencing hearing, the Defendant stole over $12 million from St. BarbarasChurch, his friends and investor-clients in the United States, and individuals he met through his Farnbacher-Loles car businesses and subsequently defrauded. However, as established in more detail below, after the Defendant testified under oath that $14 million from Milbury Holdings was his money purportedly from a combination of profitable trades in the Greek stock exchange and twelve years of compounding from an initial investment of amillion Euro or a little bit more than a million Euro, originally made in the late 1980s, the Government investigated and has established that the money was not the Defendants money. Moreover, thisfurther investigation revealed that the over $14 million at issue were investment funds of the familyinvested with Loles fraudulent entity Apeiron. (See Attachments I and J ). Accordingly, while in an earlier sentencing memorandum (Dkt. No. 80)) the Government argued that, were the Court to take an aggressive posture the Court could include in the reasonable estimate of loss the additional $14 million taken in by the Defendant, from Milbury Holdings (Gov. Mem. (Dkt. No. 80) at Attachment 2), the Government now asserts that the Court should include the money that the Family invested via Milbury Holdings in its loss Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 3 of 30 4 calculation. See Attachment A (Government Exhibit 1C). Loles theft and fraudulent taking of the additional $14 million was part of the same fraudscheme and, as explained in detail by counsel for the victim family, Loles used the same motis operandi and same manner and means in defrauding the Family as he did with all the other victims. He pretended to befriend them, gained their confidence even attending a family funeral in Greece, told them he had millions of dollars under management, told them he had investments for them that would pay a certain steady percentage, provided them corresponding account statements, impressed them with his luxury car businesses, and eventually stole their money. (See Attachments F, G, H, I, J , and K). Accordingly, the loss amount for the Guidelines calculation should be found to be well above $20,000, 000. Thus, resulting in an increase of 22-levels for the amount of loss. B. Determination of the Number of Victims As set forth in the Government=s Sentencing Memorandum (Gov. Mem. (Dkt. No. 80) at 29-33) and the Reply Sentencing Memorandum (Dkt. No. 89) as well as the additional arguments made before the Court, in determining the specific offense characteristic for the number of victims, the Court should count as victims the hundreds of parishioners who donated to the endowment fund and the building fund and who were relying on the safety and security of the investments made with the Defendant in the so-called bonds. The Guidelines define a victim as Aany person who sustained any part of the actual loss . . .@ U.S.S.G. ' 2B1.1, App. Note 1. Attached to this Memorandum at Attachment B are the names of parishioners, individuals, families and parish organizations who made donations to the Building Fund prior to December 2009 and attached at Attachment C are the names of Sunday School children and Greek School children who collected coins and donated portions of their allowance and donated to the Family as he did with all the other victims. the Family as he did with all the other victims. Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 4 of 30
5 the Churchs Building Fund prior to December 2009. These are 327 specific identified individuals and families and 86 specific school children who gave their money to the St. Barbara Building funds before the discovery of the fraud in December 2009 (a few were anonymous). These specific identified donors, many of whom were families and couples, resulting in over 700 in total, should be included in the Courts calculation of the number of victims. This is not an unidentified amorphous group of donors but, to the contrary, comprise a specific identified list of donors who were victimized. The inclusion of these individuals as victims for Guidelines purposes is clearly supported by controlling case law. In United States v. Gonzalez, 641 F.3d 41 (2d Cir 2011) the Second Circuit reached this conclusion regarding donors to a charity, a holding that is clearly on point here and should be followed as controlling precedent. In Gonzalez, the Second Circuit found that the individuals who made charitable contributions were properly considered victims pursuant to U.S.S.G. 2B1.1(b)(2) and held as follows: [a] donor whose charitable contribution was included in the district courts finding of actual loss under 2B1.1(b)(1) is thus, by definition, a victim within the meaning of 2B1.1(b)(2). There is no suggestion in this definition or any other part of the Guidelines that the victim must be linked with a specific part of the loss. Gonzalez, 641 F.3d at 63. In rejecting the contention raised by defendant Gonzalez, the Second Circuit reasoned: [a]s Guidelines commentary observes elsewhere, defendants who exploit victims charitable impulses or trust in government create particular social harm. Guidelines 2B1.1 Application Note 19(D). We see no intent in the multiple-victim-enhancement provision of the Guidelines to exacerbate societal harm by rewarding a defendant who simply commingles fraudulently obtained charitable contributions before spending them. Id. at 63-64. Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 5 of 30
6 The Eleventh Circuit reached the same conclusion in United States v. Longo, 184 Fed. Appx. 910, 2006 WL 1674267 (11th Cir. 2006) (unpublished per curiam). In Longo, the Eleventh Circuit held that the district court did not err in counting as victims all 110 individual members of an employee benefit plan from which the defendant embezzled. See Longo, 184 Fed. Appx. 910, 970 n.1 (noting that the record showed that Longos fraud and theft diminished the total plan assets). As the Government has argued previously in this case, the Eleventh Circuit's analysis in Longo applies here. In Longo, each participant in the employee benefit plan put money into the plan and sought to draw on it in the future. When the plans funds were diminished by the fraud each employee who had contributed was determined to be a victim. Here, as the money was going to the St. Barbara Endowment fund and Building fund, each parishioner, including the 86 school children, relied on the fact that they believed the money would be there in the future to support the Church and its programs. Similarly in United States v. Ellisor, 522 F.3d 1255, 1275 (11th Cir. 2008) the Court found that where money belonging to multiple individuals has been aggregated by a school for the production of a Christmas pageant (not too different from pooling funds for the construction of a building) and each individual maintained his or her interest in seeing the show (or enjoying the building), each individual may be counted as a victim. In Ellisor, 522 F.3d at 1275, the Court held that where thousands of parents and students each paid money for tickets to a sham Christmas pageant, it did not matter that the schools had aggregated the money; each child or parent who had paid was considered a victim. The same logic holds here. As the Court need only find by a preponderance of the evidence that the approximately $1.9 million that the Defendant took from St. Barbara=s can be attributed to more than 250 victims, the government asserts that the Court should make this finding. Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 6 of 30
7 Finally, as previously argued, if the Court determines that a mere four-level increase is appropriate based on the discrete victims, the Government will argue for an upward departure so that the losses suffered by the parishioners B as members of the church who donated to the building fund and the school children who collected coins and donated portions of their allowances B are considered by the Court. C. Obstruction of Justice a. Legal Standards The U.S. Sentencing Guidelines direct that: If (A) the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice during the course of the investigation, prosecution, or sentencing of the instant offense of conviction, and (B) the obstructive conduct related to (i) the defendant's offense of conviction and any relevant conduct; or (ii) a closely related offense, increase the offense level by 2 levels.
U.S.S.G. 3C1.1 (emphasis added). The Guidelines provide that the conduct to which this adjustment applies is not subject to precise definition, U.S.S.G. 3C1.1, Application Note 3, and provide a non-exhaustive list of conduct to which the adjustment is intended to apply, U.S.S.G. 3C1.1, Application Note 4, including, inter alia, providing materially false information to a judge or magistrate, U.S.S.G. 3C1.1, Application Note 4(F); providing materially false information to a law enforcement officer that significantly obstructed or impeded the official investigation or prosecution of the instant offense; U.S.S.G. 3C1.1, Application Note 4(G); and providing materially false information to a probation officer in respect to a pre-sentence or other investigation for the court. U.S.S.G. 3C1.1, Application Note 4(H). In connection with an enhancement for obstruction of justice pursuant to U.S.S.G. 3C1.1 the misrepresentations must be material. U.S.S.G. 3C1.1, Application Notes 4(F), 4(G) and Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 7 of 30
8 4(H). For the false statements to be material, they must be information that, if believed, would tend to influence or affect the issue under determination. U.S.S.G. 3C1.1, Application Note 6; see also United States v. McKay, 183 F.3d 89, 93 (2d Cir.1999) (defendant's statement in pre-sentence interview that he was a peripheral participantwhen in fact he was the leader of a narcotics ring, which resulted in an erroneous Probation reportwas material because it could have impeded imposition of an appropriate sentence); United States v. Johns, 27 F.3d 31, 34 (2d Cir.1994) (Under the law of this Circuit ... we look to the defendant's representations in deciding the issue of materiality. If those representations could affect the sentence (if believed), then it is irrelevant that the government has possession of other information that rebuts the defendant's representations.); United States v. Rodriguez, 943 F.2d 215, 218 (2d Cir.1991) (The definition of a material statement embraces all false statements that would tend to affect a defendant's sentence, whether or not discovery of the falsity of the statement is inevitable.). As the Salim court discussed, in Second Circuit cases upholding application of U.S.S.G. 3C1.1 wherein a defendant made false statements, it is apparent that the defendant's false statements would have improved the defendant's position with respect to the proceedingeither by minimizing or mitigating the defendant's potential sentence. United States v. Salim, 287 F.Supp.2d at 312 (collecting cases at note 83 including inter alia: United States v. McLeod, 251 F.3d 78, 82 (2d Cir. 2001) (defendant repeatedly lied at sentencing after fraud conviction in his attempts to disclaim responsibility for fraudulent documents); United States v. Lincecum, 220 F.3d 77, 8081 (2d Cir. 2000) (Defendant's false representations in affidavit in support of motion to suppress post-arrest statements would have resulted in granting of defendant's motion to suppress); United States v. Kelly, 147 F.3d 172, 179 (2d Cir.1998) (district court found defendant's false testimony at trial for tax fraud was given to confuse the jury and to prevent the jury from Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 8 of 30 9 finding him guilty concerning the charges in the indictment); United States v. Ventura, 146 F.3d 91, 98 (2d Cir.1998) (Defendant's false statements about his age, accompanied by fraudulent or forged documents, were made in order to secure a more favorable sentence, caused considerable delay in sentencing, and required investigation by a number of officials of the United States and Honduran governments.); United States v. Rodriguez, 943 F.2d 215, 218 (2d Cir. 1991) (Defendant stated falsely to probation officer that he had no prior record, when in fact he had been arrested and convicted six times previously)). b. Defendant Provided False Testimony Regarding $14 million in Losses It is clear based on the entirety of the evidence, including his own statements, documents previously collected by the Government, and the information discovered through the Governments additional investigation, that Loles provided material false testimony to the Court during his re-direct and re-cross examination on November 25, 2013, (see Attachment E) and also provided materially false information to the Federal Bureau of Investigation during the course of numerous interviews. (See Attachments L-P). These false statements if believed would have influenced the Courts determination of the estimated loss amount, and ultimately the seriousness of the crime. Defendant Loles gave the following materially false testimony during his re-direct examination on November 25, 2013. (Attachment E at pages 6-10.) Q. The money that came over from Milbury Holdings, I mean, it belonged to Milbury Holdings, but who owned Milbury Holdings? A. Milbury Holdings, upon his passing, was was the owner of Milbury Holdings. Q. Did that money really belong to ? A. No. Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 9 of 30 10 Q. Who did it belong to? A. The money that came is money that I earned with J ohn over the years primarily in trading over the Greekstock. Q. Essentially, it was you're money? A. Well, yeah. That's why it came in the fashion it came. It was just sort of on demand. THE COURT: Can you explain that a littlemore? BY MR. DONOVAN: Q. Why don't you explain that a little bit more. Tell us how that money was earned? THE COURT: How it's his money if it's Milbury Holdings money? BY MR. DONOVAN: Q. Why was Milbury Holdings money really yours? A. Milbury Holdings was the investor for most of the investing that he and I did in the Greek -- Greece was an emerging market in the early '90s and so forth. Sothere was huge interest and appreciation in the market. Q. Remind us who "he" was? A. He was Mr. who passed away, who was a friend and lawyer that represented -- because we lived in Greece, as you know, for a number of years and that's where I met him. So when the Greek markets started doing well and therewas a lot of investing, I was sort of already in the investment business and here we had a emerging market at our feet. A lot of new capitalization and so forth. So a lot of money was made. And the investment vehicle in the Greek markets, he chose for it to be Milbury Holdings. So we both put some seed money and then just started trading, mostly in new capitalizations. And it just -- and it grew substantially as the whole market grew. Q. What was Milbury Holdings? Was it a company or anLLC? A. It was -- I believe it was Panamanian. It was acompany that he basically was running his finances through. So the way these capitalizations were working inthe Greek market system is an entity would actually askfor a certain amount of stock, let's say, in an offeringand then it would be granted. And if it was over-subscribed, everything would be prorated. It wasunlike here where the stock is given to individuals. There you actually -- there was a proration done. And then there's a lot of secondary trading that we did. I mean, I lived in Greece. Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 10 of 30 11 Q. You don't have to go through all the details. THE COURT: I guess I'm getting the impressionfrom what your client is saying is that he's saying he put money into Milbury Holdings, Mr. put money in, and that money was invested and he subsequently got a return of his investment withearnings. I guess what I'm interested in is when did he put money in and how much? Does that come out? Is that somewhere in the record? BY MR. DONOVAN: Q. Could you tell us that? A. Let's see. My contributions would have been now we're talking in the late '80s. I can go to the bank records and probably try to -- well, not bank recordshere. Q. J ust roughly? A. I would say a total of a million euro, a littlemore than a million euro. Q. And that was an investment made in the late '80s? A. Yeah. That's way, way early. My dad had some property. We had sold some things. And everybody in Greece was investing in the market. And we had done -- and that was sort my contribution. And then he kept his ledger about sort of what was mine, what was his. I was, if you will, the more market knowledgeable person. But again, it was a roaring bull market. So it was morejust being in the right place at the right time. Q. And what period of time did the trading take place, the initial public offerings and the investment in companies? A. Well, when Greece was granted the Olympics for 2004, it was the 10 years, if you will, before that was the big sort of financial boom. And Greece had just entered into the European community. So suddenly, borrowing in Greece went from 8, 9 percent to 4 percent, overnight literally, which is what's created obviously the huge financial problems that Greece has now. But yeah, it was in that period sort of from thelate '80s it started as Greece was sort of an emerging market and then it became a developed market. And then obviously came the huge crash like all the emerging markets in I think the early 2000s. Q. Where were you living when you were doing this trading? A. Well, we were living mostly in Greece. And that'swhere he and I sort of met and solidified our relationship. And then we continued, even when I cameback to the U.S. in -- came back -- I'm sorry came back to the U.S. in '91 we obviously continued. There was no need for me to be there. Through various sort of computer systems, I was able to see the Greek market live. So I was able to continue doing whatever trading we needed to do. put money into Milbury Holdings, Mr. put put money into Milbury Holdings, Mr. put Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 11 of 30 12 (Attachment E Re-direct Testimony of Loles at 6-10.) Then, on cross examination, and in response to questions from the Court, itself, Defendant Loles gave the further following materially false testimony also on November 25, 2013. (Attachment E at 26-33). Q. Do you remember telling the FBI that the intent wasthat Loles was growing the Farnbacher Loles business andhe would reconcile with George later? Do you remember telling the FBI that, that youwould pay George his money back later? A. Well, I think reconcile with George -- it wasn't George's money. It was sitting in Milbury Holdings. Q. It was the family's money, correct? A. No, it was not. Not what came here. If there was more money in Milbury Holdings, that could be theirs, but that's not accurate what you're saying. Q. I'm just quoting you back to you. So if it's not accurate, which time were you not accurate? When youtalked to the FBI for four hours in 2010, or when youtalked to this judge for two hours today? Which timewas it not accurate? A. Mr. McGarry, George was afraid that the $14 million would be seized. Medtronic -- Q. Let me put it this way: George would have noreason to worry about the $14 million if it was your money, would he? But he was worried about it being seized because it was not your money, correct? A. Because it was in their family entity. I didn't have direct link. He knew his father and I had dealings, but I didn't have -- I couldn't go and physically takethe money out. So obviously I assumed that in this context we're talking about -- because George was very worried and that's how I even heard about all this Karayanis stuff because he brought me in and he said Medtronic is being investigated, Smith & Nephew is being investigated. Eventually are they going to try to implicate my father? We sort of pieced together what exactly was going on. I mean, I'm sorry that I'm confused. Q. Let me direct your attention to page 2. Do youremember telling the FBI Milbury Holdings is a Panamanian company and is personal company comprised of his personal money? A. The most -- most of the money in Milbury Holdings was his, but what we did in trading together and was therefore then allowed to come to me was obviously my part of profits with George's father. Panamanian company and is personal Panamanian company and is personal Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 12 of 30
13 * * *
THE COURT: I guess I'd like to understand something. THE WITNESS: Yes.
THE COURT: We're talking about $14 million. You say you put in, I think, a million euros originally back in 19 THE WITNESS: In the '80s.
THE COURT: So just explain to me -- THE WITNESS: The growth --
THE COURT: -- what happened to that money and how much was in at the time we're talking about when we're talking about the $14 million? How much was in Milbury Holdings and who did it come from? THE WITNESS: I only knew what I had an interest in. So I don't know the total balance of Milbury Holdings.
THE COURT: Okay. THE WITNESS: Because again --
THE COURT: So just give me a rough approximation over the years, so far as you can, from the 1980s to the point in time we're talking about, about how much money you had in Milbury Holdings? THE WITNESS: Well, eventually it grew to that full amount.
THE COURT: What full amount? THE WITNESS: The 14.
THE COURT: Okay. THE WITNESS: There was over, I would say, 12 years of active trading. And then there was a period where the Greek market was not doing anything. And then obviously, unfortunately J ohn just passed away all of a sudden and it created the confusion. George sees all these investigations and his father's name being mentioned and so forth. As you can see, if there was a fear that something was happening.
THE COURT: I'm not -- I'm just interested in the amounts of money and when. That's all I want to know. THE WITNESS: Yes. So that would be the total. And I would draw in
THE COURT: And you don't have any recollection as to the growth from a million euros to $14 million? THE WITNESS: Oh, no. There was 12 years. I could sit and sort of put something to show you, but there was years and years of investing. And Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 13 of 30
14 obviously, with the big capitalizations, just like when the market was growing here, these things were coming public at 120 percent. Big increases as new companies were being capitalized. And we, like everyone
THE COURT: I guess what I'm trying to get a sense for is at what rate did the value of your investment in Milbury Holdings grow? THE WITNESS: I guess it was compounding we can sit and calculate. I think it was about 12 years of active trading. So it was compounding at 25 percent.
THE COURT: 25 percent a year on average? THE WITNESS: Maybe a bit more. Obviously, by leaving the money in and taking bigger and bigger allocations, I mean, some of these --
THE COURT: I'm only interested in numbers. THE WITNESS: Yes.
THE COURT: I think you're supposed to be financially astute. 25 percent a year or more compounding? THE WITNESS: Right.
THE COURT: That answers my question. And then at the end of this time period your total -- the total value of your investment was $14 million? THE WITNESS: Thereabouts.
THE COURT: That was everything? THE WITNESS: That was everything. And obviously, when it was all brought
THE COURT: That answers my question.
* * *
Q. And in fact, I believe you told the FBI that it was comprised of his personal money. A. That's just not accurate. What can I tell you?
Q. So when you told that to the FBI you were not being accurate? A. No. Milbury Holdings, obviously I described Milbury Holdings, which was the company that J ohn would do a lot of his personal finances through, including our mutual trading.
Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 14 of 30 15 c. Defendants Testimony Regarding $14 Million is Demonstrably False The testimony Loles provided the Court is demonstrably false for a number of reasons, most importantly it is directly contradicted by information and documentary evidence provided by an attorney for the victim-family. After Loles provided the new and wholly incredible testimony to the Court, the government reinitiated the investigation into the source of the $14 million, about which the Government had been aware but had not previously focusedon. As background, on May 21, 2010, Loles had been specifically asked about Milbury Holdings and the approximately $14 million wire transfers into his accounts. (Attachment M). Loles gave a detailed answer to questions about Milbury Holdings and never mentioned or alluded tothe funds being his money or his share of the trading profits. He never mentioned his being entitled to trading profits, or a million Euros invested in the late 1980s, or any portion of the Milbury money being his money. Loles told the government that Milbury Holdings was personal company comprised of his personal money. (Attachment M at 2). Loles provided a lengthy and complex explanation that included statements regarding: how was only getting 1% -1.5% interest on the money in London (Id. at 4), and how Loles would reconcile with George later. (Id.). Loles stated that the purpose of transferring the money to Loles was to get the money out of London. (Id.). Loles further stated that he did not have any agreement as to how the money would be returned to George. Loles clearly stated that George and his mother still think their $14 million is still there, but it was already spent by Loles. (Id. at 5). In J une of 2010, Loles was again asked about Milbury holdings and the $14 million Milbury had placed with him. Loles told the FBI that he is waiting to see what Milbury Holdings is going tosay. Because as he stated, there is no money. (Attachment N at 7). Loles told the Holdings was personal company comprised Holdings was personal company comprised Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 15 of 30 16 FBI that the approximate $14 million received from MilburyHoldings went into Farnbacher Loles and for other general purposes. Milbury Holdings was not going to give Lolesmoney to build his business or to make investments like the church or other individuals. Milbury Holdings was giving the money to Loles to park it. (Attachment N at 7). As discussed more below, the family didin fact believe that they had invested with Apeiron and produced account statements, and an account questionnaire, as well as photographs taken at Loles home, in New York City and at his garage, to support their belief that he was their investment advisor and they had invested with Apeiron and Somerset Partners. (Attachments I, J , at K). Also during the May 21, 2010 interview, Loles told the FBI that George [and the family] was not a who invested his money with Loles. (Attachment M at 4). This was not true. (See Attachments F, G, I, J and K). Loles stated that there was no formal agreement from George to invest in Farnbacher Loles but to simply take the money off his hands, but it was the family's money. Loles also stated that George was afraid the $14 million would be seized by the authorities in the United Kingdom. (Attachment M at 4). When confronted on re-cross examination with the direct contradiction between his re-direct testimony that it was his money and this statement previously given to the FBI, Lolesprovided no explanation and attempted to side-step thequestion. (Attachment E at 27, re-cross examination 11/25/13). Also during the May 21, 2010 interview, Loles told the FBI that he received a visitor at Wyatt from an unknown man regarding Milbury Holdings. (Attachment M at 1). In an August 2010 interview (Attachment P) Loles disclosed the name of the visitor as Ian Cook. (Attachment P at 3). Also during the August 2010 interview, the Government was provided a letter that had been sent to Loles defense counsel from HCLS LLP, Solicitors, a law firm in who invested Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 16 of 30 17 London, referencing Mr. Cook and their client (the family) and the significant sums that had been sent to Loles for investment purposes. (Attachment R). After Loles provided the Court sworn testimony that directly and materially contradicted his earlier statements regarding the ownership of the $14 million and the documents provided by his own counsel, the prosecution team, in coordination with the Department of J usticesOffice of International Affairs and the Federal Bureau of Investigations London LEGAT, reached out to the London Solicitors and spoke to Mr. Cook. After a brief conversation with Mr. Cook and a subsequent phone call, the Government was contacted by Attorney Frederick Kessler on behalf of the family. Attorney Kessler provided a detailed history of the family relationship with Loles and also provided documents that establishedthat the family, like the scores of other individuals and families that dealt with Defendant Loles, were victims of his fraud. Attorney Kessler provided an Apeiron account statement that is precisely the same type of fraudulent account statement provided to the other victims. (Attachment I). Attorney Kessler also provided, from the family, what appearedto be at least to the family an account opening questionnaire for an account purportedly in Bermuda and purportedly opened in the name of Somerset Associates Limited. (Attachment J ). This document clearly lists Gregory P. Loles and his home address as the Client Contact and describes the intended type of business as Hold Family Assets and Estate Planning. (Attachment J ). This account questionnaire contained the same company name as in the earlier document provided by counsel from the London solicitors (Attachment R) yet it proved to be merely a further element or prop of the fraud perpetrated on this Greek family. the family. the family. ttorney Kessler provided a detailed history of the family relationship with ttorney Kessler provided a detailed history of the family relationship with that the family that the family at least to the family at least to the family Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 17 of 30 18 Attorney Kessler told the FBI that Loles abused the trust placed in him by the family. Kessler stated the family was the biggest victim of his Loles scheme. (Attachment F at 1). Attorney Kessler explained to the FBI that Milbury Holdings was an entity of the family. The money sent from Milbury holdings was not Loles money. The money belonged to the family. Milbury Holdings is the familys investment vehicle and it included three victims. Kessler primarily dealt with George . (Id. at 1). Attorney Kessler explained how Loles had nurtured the trust of the family just as he had done with so many parishioners at St. Barbaras. Attorney Kessler explained that George had been hosted by Loles at his home when his kids went tothe Hopkins School, back in 2002. (Id. at 1) and Attachment S). This apparently was the nurturing of the relationship of trust that Loles later usedto steal the millions of dollars. After the death of Georges father, the family sent millions of dollars toLoles. Approximately three months or so after Georgesfather passed away, Loles contacted George and told him that he had a $300 million fundwhich was how he was able to get 7 to 7.5% returns on investments. (Attachment F at 1). Attorney Kessler met with the FBI on December 20, 2013 and provided additional detail of this part of the fraud. Attorney Kessler explained to the FBI how the relationship between the family and Loleswas initially furthered in the summer of 2002, when George went to Connecticut to participate in asummer school programat the Hopkins School in New Haven with the Loles children. George spent six weeks living with the Loles family while heattended the program. (Attachment G). While visiting Connecticut, George observed firsthand how Loles livedthe high life in his home, that George described as a mansion, and wherehe saw nice cars including a Range Rover and BMW during his six week visit. Over the years contact between stated the family was the biggest victim of stated the family was the biggest victim of of the family. of the family. family. Milbury Holdings is the family family. Milbury Holdings is the family Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 18 of 30 19 George and the Loles family was sporadic. In J une of 2007, Georges father passed away. The next day Loles flewto Greece to attend the funeral. This gesture was much appreciated by the family at that time. Loles stayed for several days and said he would return to Greece at some point. (Attachment G at 2). Later in the summer of 2007, Loles did return to Greece and told George, Georges mother, and Georges sister that he, Loles, had a $300 million fund that got modest returns of about 7 to 7.5%. Loles explained his fee for managing this money was 1.5% of the assets under management, but since the family was like family to him, Loles would not charge a fee. Later in 2007, more wire transfers came from the family account in London to Loles. In the later part of 2007, when the wires continued George explained that Loles played the role of second father to George. Loles and George spokeon the phone and discussed Georges education and his girlfriends and Loles bragged about his Porsche dealership and investments. (Id.). This discussion of the courting of the family is remarkably (and predictably) similar to the experiences provided to the Court by the and other parishioners who were told by Loles that they were like family or like a father to him. This is even more despicable when one considers that George was only about 19 years of age or so at the time of his fathers passing. Attorney Kessler also explained to the FBI that around Christmas time of 2007 into 2008 the family decidedto visit the Loles family in Connecticut for a 10 day trip. (Attachment G at 2). During this trip, Loles paid for everything. Loles wined and dined the family and took them on a trip to New York City where they stayed at the Carlisle Hotel and visited the famed Rainbow Room. (Id.) Kessler provided to the FBI the photographs (attached as Attachment K) of this trip. While staying at the Loles mansion, Georgeobserved art he believed to be of significant value as well as a newgarage structure that had beenbuilt by Loles transfers came from the family account in London to Loles. transfers came from the family account in London to Loles. e family is remarkably (and predictably) similar to the e family is remarkably (and predictably) similar to the experiences provided to the Court by the and other parishioners who were told by experiences provided to the Court by the and other parishioners who were told by he family decided he family decided Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 19 of 30 20 since Georges original 2002 visit. (Id. at 2; Attachment K). George observed fancy cars including a Porsche, Mercedes, BMW and a Range Rover. Many of the rooms inside the Loles house had plasma televisions which was rare at this time. (Id. at 3). On New Years Eve George observed Loles book their dinner reservations using an American Express Black card which was an exclusive credit card. They enjoyed fancy dinners at this time. During this visit the family also visited Loles race car business. (A photograph is attached at Attachment K depicting the visit to the car racing facility). Clearly Loles was using the racing car business to establish his bona fides as a wealthy successful money manager. As has been stated by other victim-witnesses, George observed a Bloomberg terminal in Loles office in the car racing facility which gave Georges family the impression that he was an Investment Advisor. (Attachment G at 3). At this time the family did not live a wealthy lifestyle like the Loles family. It was during this Christmas visit that Loles gave the family the investment statements from Apeiron Capital Management. (Attachment G at 3; Attachment I). In the springof 2009, Loles asked George to sendmoney to Knightsbridge which served as Loles investment vehicle. (Attachment G at 4). At that time wire transfers were sent to Knightsbridge. Again, this is the precise conduct and precise experience suffered by many of Loles other victims. Some of the family wires weresent from Space Trading, which was another investment vehicle owned by the family. In addition George had a telephone call with Loles in approximately J une of 2009 where Loles asked if George could send money to his car racing business partner Farnbacher to whom Loles owed money. Loles told George he would credit the family account. Again this is consistent with things Loles told other victim-investors, such as the . The wiretransfers sent by the family from Milbury Holdings in 2009effectively emptied their account in London. (Attachment At this time the family did not live a wealthy lifestyle like the Loles family. At this time the family did not live a wealthy lifestyle like the Loles family. was during this Christmas visit that Loles gave the family the investment statements was during this Christmas visit that Loles gave the family the investment statements George he would credit the family account. George he would credit the family account. Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 20 of 30 21 G at 4). Accordingly, statements to the Court that Loles took his share of the Milbury money and there is other money there, while wholly incredible on its face, is further belied by his greed in which he took all of the money in the Milbury Holdings London account. In J anuary of 2010 after Loles was arrested, George reached out to theBermudan law firm to inquire about his investment. It was then that he learned the Bermuda entity (Attachment J ) had never heard of Loles and the forms Loles had filled out on their behalf could have been obtained by simply going to their website. (Attachment G at 4). Loles was supposed to have establishedSomerset as an investment funds or account for the family which George now knows never existed. (Attachment G at 4). In a follow-up discussion, Attorney Kessler explained to the FBI that the family had no knowledge of any partnership agreement between Ioannis (the father) and Loles for investment purposes. (Attachment H). The family had no knowledge of any involvement with investments in Smith and Nephew or Medtronic. Loles never told the family that he, Loles, andtheir father Ioannis had a partnership of any kind. (Id.). Their father also never mentioned that he had a partnership with Loles when he was alive. (Id.). d. Loles Testimony is itself Incredible Were the information, account statements, and photographs provided by counsel for the family not sufficient to convince the Court that Loles lied to the Court and obstructed justice, the Court could also look at the statements themselves to establish their falsehood. The statements themselves simply do not make sense and are not consistent. As detailed above they are contradicted by numerous earlier statements by Loles. However, they are also illogical and not credible. First, Loles told the Court directly that he invested a million Euro or a little more than a million Euro in the late 1980s. This was under scored by the Court itself and The family The family Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 21 of 30
22 Government counsel during re-cross examination. However, as the Court is presumably aware, the Euro as a currency was not in existence in the late 1980s nor was the European Union. The Euro itself was introduced J anuary 1, 2002. (See Attachment T). Thus, typical of a con-mans effort to deflect and distract, Loles was clearly just using the Euro to sound international and making up figures and numbers out of thin air. Second, Loles also told the Court that he turned one million Euro into $14 million by investing in the bull market, and being in the right place at the right time. However, upon inquiry, Loles could not give a single concrete example of a company he invested in or an investment he made, an IPO he participated in, or a trade that he engaged in on behalf of Milbury Holdings. As the Court observed, he is supposed to be financially astute, having held a brokers license and having passed the Series 7, Series 63, and Series 65 exams. (Attachment U at 6). In fact, Loles scored a 96 on the series 7 exam and an 88 on the series 63 exam. (Id.) Yet, while under oath he could not explain to the Court what he invested in, what IPOs he had purchased, or how the money grew. Typical of a con-man, Loles was long on generalities, spoke about the market, even mentioned the fact that Greece hosted the 2004 Olympics, but did not mention one company by name that he had invested the Milbury Holding money into. In fact, he even at one point, when questioned by the Court, attempted to explain the significant growth as the result of compounding, a term generally used for interest being accrued and re-invested and earning more steady interest. Loles estimated this compounding at a steady rate of 25% per year, every year, for more than 12 years. But again could give no specifics as how he achieved this return. He also described seeing the Greek markets live on his computer here in the United States, but did not explain what or how he was trading half a world away, who his executing broker was, who Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 22 of 30
23 confirmed the trades, which firm he used as a settlement agent, why the money was in a London account, or why a 19 year-old in Greece and his mother had control of the funds as compared to Loles himself. As he said in his own words, Because it was in their family entity. I didnt have direct link. He knew his father and I had dealings, but I didn't have -- I couldn't go and physically take the money out. (Attachment E at 27). It simply makes no sense, that a sophisticated licensed investment professional would have $14 million and have no direct link and couldnt go and take the money out. That is not a credible story because it is false. What rings true is that he had no direct link and could not go and directly take the money out because it was not his money and thus he had to fool the family into giving him the money as he did with everyone else. Third, Loles did not and simply could not explain on re-cross examination why he had entirely failed to mention in the hours and hours of interviews that the $14 million was his own money, including when he was asked by the FBI specifically about Milbury Holdings. Additionally, on direct examination that had occurred a few weeks prior (Attachment D), Loles did not mention that he had made $14 million in trading, yet he painstakingly took the Court and the victims through much smaller transactions in an attempt to shave a few thousand dollars off the Guidelines loss calculation. On its face, the testimony was not credible, was filled with double-speak, and as is typical of Loles constant attempts to cloud the issue, was replete with claims of grandeur. e. Loles Testimony is Belied by the Entirety of the Record Loles testimony, that the $14 million was his money, is demonstrably false based on all the other documents, evidence, and circumstances surrounding this matter. In this regard, Loles provided the FBI, in an initial interview, a somewhat detailed work history (Attachment L) Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 23 of 30
24 and never mentioned that he had done significant trading in the Greek market. As pointed out in Court and addressed above, Loles spoke to the FBI for hours including specific questions about Milbury Holdings and never mentioned that it was his money. (Attachments M, N, O, P). The interview Loles gave to Probation, as set forth in the PSR, does not mention anywhere his purported prolific trading and the millions of dollars of profit he made with Milbury Holdings in the Greek markets. Paragraphs 113, 114, 115, 116, 117, and 118 describe his work history and he plainly did not tell the U.S. Probation Officer about Milbury Holdings or his business dealings overseas. In fact, paragraph 115 describes him taking a job as a stockbroker trainee at Investors Associates, Inc. in New York City, in 1992. The Court may wonder why Loles would need to be a mere trainee in New York City if he were in the midst of a 12 year run, begun in the late 1980s, of generating returns through compounding of 25% per year every year. As reflected in paragraph 117 of the PSR, Loles told Probation he earned approximately $350,000 per year as an investment advisor from 1995-2002. This clearly does not include any of the $14 million made from Milbury Holdings, presumably because he made no such money. His work history reflects that of a failed broker who turned to a Ponzi scheme to support his lifestyle, not that of a multi-millionaire. Similarly, other portions of the PSR also tend to undermine his testimony that he was a multi-millionaire. In paragraph 99 and 100 of the PSR he states that his wifes family contributed significantly to the purchase of their home and that his wife worked as a sales information analyst at Virgin Atlantic Airlines. These facts are not consistent with someone who is a millionaire 14 times over and who can achieve remarkable rates of return of 25 % consistently for more than a decade. Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 24 of 30 25 Similarly, with regards to New Haven Savings Bank, Loles described for the Court at great detail how he was able to secure money from a man named Gus Boosalis but at incredibly high rates for the parishioners to participate in the mutual bank conversion. Had Loles actually been entitled to the $14 million in the spring of 2004, before the death of Mr. would not this money have been used to help the church and parishioners rather than pay the extortionist rates Boosalis was charging the St Barbaras parishioners? Obviously Loles had no rights to the Milbury Holdings money until he took it from the family by fraudafter the fathers passing. Additionally, in connection with the New Haven Savings Bank transactions, Loles provided sworn testimony to the United States Securities and Exchange Commission (SEC) on March 23, 2006. This sworn SEC testimony has been previously provided to the Court. In that testimony, sworn and under oath, Loles was asked what he had been doing in terms of employment for the last 10 years, which would cover back to at least March 1996. Loles gave various answers, memorialized on pages 7 through 10, and at no point did Loles mention trading in the Greek markets and making millions of dollars through Milbury Holdings. Such information, if true would have been responsive to the questions posed by the SEC and the Connecticut Department of Banking. In addition to statements made in Court and to the United States Probation Officer, Loles also provided his work history when he applied for a license to be an investment professional. This information is retained by FINRA and included at Attachment U. As memorialized in the FINRA documents, Loles gave his work history from 1982 up through 1997. In connection with applying to be an investment professional Loles indicated that his positions up to and before 1993 were NOT investment related. (Attachment U at 5). This work history is consistent with what entitled to the $14 million in the spring of 2004, before the death of Mr. would not this entitled to the $14 million in the spring of 2004, before the death of Mr. would not this Milbury Holdings money until he took it from the family by fraud Milbury Holdings money until he took it from the family by fraud Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 25 of 30 26 he told Probation and what he originally told the FBI, but is not consistent with his sworn testimony to the Court that he was trading in the Greek markets from the late 1980s again trading a million Euros which did not yet exist and earning approximately 25 %. In summary, prior to taking the stand and seeking to mislead the Court, Loles had spoken with the FBI on numerous occasions and never mentioned trading in the Greek markets and making $14 million in the Greek stock market. He gave a Pre-Sentence Interview to U.S. Probation and never mentioned making $14 million in the Greek stock market. He gave sworn testimony to the SEC, who asked about his investment and investment advisor history and work history, and he never mentionedtrading in and making $14 million in the Greek stock market. He applied for and received a Series 7, a Series 63, and a Series 65 license and never mentioned to FINRA that he had engaged in trading in the Greek stock market, and in fact, to the contrary indicated that his work was not investment related. In fact, he even testified on direct examination on November 7, 2013 and even addressed Milbury Holdings specifically (Attachment D at 68-70) and mentioned that he wanted whistle blower protection related to Milbury Holdings and Smith and Nephew, but never mentioned that it was a trading vehicle that he had an ownership interest or a personal financial interest in. It was only later, when hefor some reason thought he could influence the Court and limit his Guidelines exposure that he decidedhe would make the material misstatement and claim that the $14 million that he had previously described to the FBI as family money was somehow his. Loles has now placed himself in the precarious position of either: (i) having lied to the FBI and U.S. Probation by making false statements about Milbury Holdings, and failing to disclose his Greek trading to the FBI and U.S. Probation (as well as FINRA and the SEC) or (ii) having lied to the Court. Clearly both versions cannot be true. described to the FBI as family described to the FBI as family Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 26 of 30 27 D. Loles Alternative Version of the Facts It is commonly said that one is entitled to ones own opinion but not entitled to ones own version of the facts. Loles seems to want multiple versions of the facts depending on his predicament. In that regard, the Government contends that the facts are as presented by the Government both in Court and set forth above and in the cited attachments. That is, that Loles made materially false statements to the Court. However, it bears mention that if Loles version of the facts were to be true which they are not and if he did in fact have $14 million in Milbury Holdings upon which he could draw but which he did not call upon until approximately 2007, then he stands before the Court as an individual who was amillionaire 14 times over but still chose to run a Ponzi scheme and defraud his friends andfellow Parishioners. He stands before the Court a multi-millionaire14 times over who still chose to steal the money from the St. Barbara Church Endowment fund and Building fund, including stealing scholarship money and money donated by hundreds of families (Attachment B) and collected by school children. (Attchment C). He would stand before the Court a millionaire 14 times over who stole the retirement money, college tuition money, life insurance proceeds, and devastated an entire community simply so that he could run astreet performance race car business and race Porschesaround in a circle, live like a kingin a huge home with tennis courts, a pool and a multi-car garage, and travel internationally, all while leaving his $14 million untouched in an account in London until 2007. Were this the version of the facts, the Government would then contend that the nature and characteristics of Loles as a person and the utter soullessness of the crime would be that much more egregious. That he could steal from , , , , , Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 27 of 30 28 himself, the Endowment Fund, the Building Fund, all while having a $14 million nest egg in London at Milbury Holdings. Frankly, this newest version is simply not believable. What is believable and what is the true version of the facts is that even after four years of incarcerationLoles has still not yet learned any lessons, that he still seeks to deceive, mislead and outright lie if he perceives it will benefit him in some way. Now Loles has succeeded in adding the Court itself to the list of those to whom he has lied and should be found to have obstructed justice. Thus, no matter which version of the facts the Defendant choses to advance, and as a con-man he has advanced many versions, he must still be sentenced to a remarkably long term of imprisonment. Accordingly, the Government now calculates the Guidelines range as follows: Base Offense Level 7 Loss Greater than $20,000,000 +22 More than 250 Victims + 6 Charitable Misrepresentation + 2 Sophisticated Means + 2 Violation of Securities Law while acting as Investment Advisor + 4 Money Laundering in Violation of 1956 + 2 Obstruction of J ustice + 2 Adjustment for Acceptance of Responsibility Zero Total 49 If the Court were to decline to find obstruction of justice and decide, even given the Defendants false testimony, to award a three level adjustment for acceptance of responsibility, the DefendantsAdjusted Offense level would still be a level 44, placing him literally above the Guidelines. Given the incredibly serious nature of the crime and the utter contempt that he has shown the Court and the process, a sentence of 360 months would not be inappropriate. Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 28 of 30
29 II. CONCLUSION For the foregoing reasons, those set forth in the prior Government=s Sentencing Memoranda, and those advanced in open Court, the Government respectfully submits that, under the circumstances of this case the Defendants Offense level is a level 49. Moreover, under either calculation, the Court should not hesitate to give Defendant Loles a remarkably long period of incarceration and an order of restitution of over $26 million to the victims of his crimes.
Respectfully submitted, DEIRDRE M. DALY UNITED STATES ATTORNEY
/S/ MICHAEL S. MCGARRY ASSISTANT U.S. ATTORNEY Federal Bar No. CT25713 157 Church Street, 23rd Floor New Haven, CT 06510 Tel.: (203) 821-3751 Fax: (203) 773-5378 Michael.McGarry@usdoj.gov
Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 29 of 30
30 CERTIFICATION I hereby certify that on December 31, 2013 a copy of foregoing Government=s Sentencing Memorandum was filed electronically and served by hand on anyone unable to accept electronic filing. Notice of this filing will be sent by e-mail to all parties by operation of the Court=s electronic filing system or by mail to anyone unable to accept electronic filing as indicated on the Notice of Electronic Filing. Parties may access this filing through the Court=s CM/ECF System.
/S/ MICHAEL S. McGARRY ASSISTANT U.S. ATTORNEY Case 3:10-cr-00237-AWT Document 163 Filed 02/20/14 Page 30 of 30
ATTACHMENT A Case 3:10-cr-00237-AWT Document 163-1 Filed 02/20/14 Page 1 of 3 Case 3:10-cr-00237-AWT Document 163-1 Filed 02/20/14 Page 2 of 3 Case 3:10-cr-00237-AWT Document 163-1 Filed 02/20/14 Page 3 of 3
ATTACHMENT C Case 3:10-cr-00237-AWT Document 163-3 Filed 02/20/14 Page 1 of 4 Sunday School and Greek School Children Who Collected Coins and Donated Portions of Their Allowance and Donated to the Church's Building Fund Prior to December 2009 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. Case 3:10-cr-00237-AWT Document 163-3 Filed 02/20/14 Page 2 of 4 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. Case 3:10-cr-00237-AWT Document 163-3 Filed 02/20/14 Page 3 of 4 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. Number of Pledges: 86 Case 3:10-cr-00237-AWT Document 163-3 Filed 02/20/14 Page 4 of 4
ATTACHMENT D Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 1 of 74 UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
- - - - - - - - - - - - - - - - x
UNITED STATES OF AMERICA 3:10CR00237(AWT)
vs.
GREGORY P. LOLES HARTFORD, CONNECTICUT Defendant NOVEMBER 7 , 2013
- - - - - - - - - - - - - - - - x
EXCERPT OF SENTENCING HEARING - VOLUME II DIRECT EXAMINATION OF GREGORY LOLES
BEFORE:
HON. ALVIN W. THOMPSON, U.S.D.J.
APPEARANCES:
FOR THE GOVERNMENT:
OFFICE OF THE UNITED STATES ATTORNEY 157 Church Street, 23rd Floor New Haven, Connecticut 06510 BY: MICHAEL S. MCGARRY, AUSA
FOR THE DEFENDANT:
LAW OFFICE OF JEREMIAH F. DONOVAN P. O. bOX 554 Old Saybrook, Connecticut 06854 BY: JEREMIAH DONOVAN, ESQ.
Corinna F. Thompson, RPR Official Court Reporter Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 2 of 74 2 TABLE OF CONTENTS
WITNESS DIRECT CROSS REDIRECT RECROSS GREGORY LOLES BY MR. DONOVAN: 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 3 of 74 3 (Transcript excerpt follows.) MR. DONOVAN: May I call Mr. Loles, please. THE COURT: Yes. GREGORY LOLES, called as a witness, having been first duly sworn or affirmed, was examined and testified as follows:
THE CLERK: Please state your name and spell your last name for the record. THE WITNESS: My name is Gregory Peter Loles. Last name is L-O-L-E-S. THE CLERK: Thank you, sir.
DIRECT EXAMINATION BY MR. DONOVAN: Q. Mr. Loles, are you the defendant in this case? A. Yes, I am. Q. And you understand we're here for the first part of a sentencing hearing? A. Yes, I understand. Q. And you understand on the last part of the sentencing hearing you'll be able to talk directly to the Judge and to people who may or -- who may be here about a variety of different things. You understand 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 4 of 74 4 that, don't you? A. Yes, I do. Q. And today we're only concerned about kind of technical and specific aspects of the amount of loss? A. I understand. Q. Although I know there are a lot of things you want to explain and talk about, I'm going to be asking you some specific questions about the events and how they led to loss. You understand? A. Yes. Q. Do you know St. Barbara's Church? A. Yes, I do. Q. Where is it located? A. In Orange, Connecticut. Q. What was your relationship to St. Barbara's? A. I believe in about 1994, '95, my wife and I were trying to -- Q. Just quickly. A. I became a parishioner. Q. Did you ever sit on any of the boards of St. Barbara's? A. I was invited to sit on the board of the Endowment Fund. Q. And did you sit? A. Yes, I did. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 5 of 74 5 Q. Do you remember when you began on the Endowment Fund? A. I believe it was around or about 1995. Q. How many members sit on the Endowment Fund? A. The charter, it had to be between I think nine and 13. Q. Did it vary during the course of your time there? A. Sometimes. Q. Did you sit on the Endowment Fund until the time of your arrest? A. Yes. Q. When you began at the Endowment Fund, where were the endowment fund's assets kept? A. They were kept at a local branch of a brokerage firm named Tucker Anthony. Q. Did there come a time when those Endowment Fund assets were moved? A. Yes. Q. Where were they moved to? A. They were moved to the company that was providing custody for me. Q. What was the name of that company? A. DLJ Pershing. Q. Very briefly, was that a decision of the Endowment Fund board? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 6 of 74 6 A. Yes, it was. Q. Was it taken after some discussion? A. Yes. Q. Can you tell the Court why it was decided to move the assets of the Endowment Fund to I'll call it Pershing? A. After seeing some of the transaction statements from Tucker Anthony, I noticed that the Endowment Fund was paying full retail commission for every transaction. Q. Would they have to do that if they moved to Pershing? A. At Pershing, because I was an institutional client, the transaction cost was almost nothing. Very small. Q. All right. Now, are you familiar with -- have you ever heard the term "day trade"? A. Yes. Q. And have you yourself acted as a day trader? A. Yes, I have. Q. And what does a day trader trade? A. He can trade all sorts of different instruments. Q. Financial instruments? A. Financial instruments. Q. Why do they call it day trading? A. Because by the end of the trading day at 4:00, his positions are typically all closed. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 7 of 74 7 Q. Now, you said that you have worked as a day trader; is that right? A. I day traded for myself. I never was employed as a day trader. Q. Did there come a time when you began assigning certain day trades to the church? A. Yes. Q. And about when was that? A. I believe, from the church statements, the first appearance of day trade entries were in 1995. '96 for sure. Q. I want to explain mechanically to the Court how this would work. First of all, just give me an example of a day trade, a fictitious day trade. A. Well, on a given day through the day, let's, as an example, say I am trading IBM stock. So I may do 20 transactions during the day, buying 5,000 shares, selling 5,000, then buying 15, selling five. All sorts of transactions around one instrument. Now, at the end of the day, the custodian, DLJ in this case, would then add up all the buys and come up with a price. Then they would add up all the sells and come up with a price. So I would then be informed at the end of the day that I bought, through the day, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 8 of 74 8 100,000 shares of IBM, average price $100. And then they would say to me, your 100,000 shares you have also sold today at an average price of, let's say, $101, for example. Q. Did your day trading suggest to you a way to make contributions to the church without actually giving money from your own account to the church? A. Yes. Q. And tell us about that? A. Well, because now we're in the bull market of late '96 and I'm getting more and more active in day trading, there were many days that I had, let's say, a good day. Q. If you had a good day, was there something that you wanted to do? A. When I had a good day, I decided that I would like to put some of these completed trades into the Endowment Fund. Q. And the Endowment Fund's account was also at the same firm where Apeiron's account was? A. The Endowment Fund had decided by then to move into DLJ. And that was key, that they both had to be in the same place so then I can do this transfer, in essence, after the fact. Q. Got you. I'll call the firm then DLJ. A. DLJ. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 9 of 74 9 Q. What would you do at the end of the day in order to assign certain of the sales to the church? A. Well, at the end of the day, I had to complete what was called a blotter. And the blotter -- Q. Really briefly. A. I would basically, if during the day there was 100,000 shares bought and 100,000 shares sold, I would then tell DLJ, 2,000 shares, put them in the St. Barbara account and put the 98 in my account. Q. And was St. Barbara's endowment account ever on the line for those trades? A. No. The whole concept was that it was after the trades were opened and closed that the assignment would be made. And this is something that obviously I asked permission from the Endowment Fund to do. I couldn't just do it. Q. And the Endowment board agreed that that should be done? A. They agreed. In the beginning it was a little odd to them because they said, So this is like free? I said, yes. And I said this is something I would like to do. Q. Hold on. 13 words or less. 12 words or less. They agreed? A. They agreed. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 10 of 74 10 Q. I want to talk about how that was accounted for. The Endowment Fund you said was a separate fund at DLJ; is that right? A. Well, the Endowment Fund initially had one account at DLJ and then at some point it became two. But that one account would get statements every month. Q. That's the next question. Who would those statements be sent to? A. I would get a statement. Q. Would anybody else? A. And the second one would go to the then treasurer, Peter Anastasion. Q. Is he in court today, Peter Anastasion? A. I believe he was here yesterday. Q. Did St. Barbara's Endowment Fund have any kind of financial -- well, yearly financial reporting? A. Peter Anastasion at the end of the year would do a comprehensive annual report that would then be presented to the General Assembly of the parish. Q. And that was Peter Anastasion's responsibility? A. For a very long time, and the last few years he passed the torch on to another lady. Q. Now, did your day trades that were assigned to the church appear in those financial reports? A. He did break out the day trades on his statements. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 11 of 74 11 Q. Did the day trades -- did the statements have an income and expenditure section? A. Yes. Q. And were the day trades listed there? A. They were listed under the income section. Q. Now, while we were preparing for this sentencing proceeding, did we request of the Court its annual statements -- not the Court -- the church? A. Yes. Q. Was the church good enough to provide those for us? A. We did get them about three months ago, I believe. Q. And did you yourself go through the statements to see that each year -- or most years, some years not -- most years there was listed income to the church from your day trading? A. Yes. Q. And did anybody else do that day trading that might have been in that figure? A. Anybody else from the Endowment Fund? Q. Anybody else from anywhere. A. No. Q. So when you look at the financial reports and see in a particular year the church made a certain amount from day trades, that's your day trading that you assigned to the church? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 12 of 74 12 A. Yes. Q. All right. Were you in court yesterday when we agreed with the church that we wouldn't introduce their financial documents because they are kind of confidential? A. As they wish, yes. Q. And you're also aware that we've gone through the financial reports that just summarized each year that indicates that the day trades were made; is that right? A. Yes, I think we've tallied. Q. I'm going to direct your attention to Defendant's Exhibit 1 and 2. Is a portion of those documents a listing of the day trades year by year? A. Yes, it is. Q. Does it appear to be accurate to you? A. It appears to be accurate. MR.McGARRY: May I have a minute, Your Honor? What's 2? MR. DONOVAN: Sorry. THE COURT: Do you have extra copies, Mr. Donovan? MR. DONOVAN: I'm not offering it yet, Your Honor. THE COURT: Okay. MR. DONOVAN: And may it please the Court, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 13 of 74 13 just so the Court knows, this is really a summary of our contentions. THE COURT: I figured. MR. DONOVAN: And at the end, after I've tried to establish it. BY MR. DONOVAN: Q. I just want to make sure concerning the information that was contained in the church reports and whether it was accurate. Each year, once the church began investing in Apeiron's bond activities, would you provide a number to the church concerning its Apeiron account? A. Yes. Q. And that would appear in the church financial statements? A. In the consolidated statement that Mr. Anastasion would put together, yes. Q. And he would base that amount on what you told -- on documents that you provided? A. Yes, he would. Q. And those amounts would be false? A. Yes. Q. How about with respect to the day trades; how did the person who prepared the financial reports determine how much in day trading was made? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 14 of 74 14 A. The confirmations for the day trades came directly to him from DLJ. Q. So that was based on the account statements of DLJ? A. Yes. Q. Not on anything you told him? A. Nothing I told him. Q. So that's with respect to the day trades. I want to ask you a little bit later about Mr. Nicholson's $700,000 and its relation to the day trades, but I'll come back to that in a minute. What I want to move on to now is, do you know someone named Gus Boosalis? A. Yes, I do. Q. Do you remember when you first spoke with Gus Boosalis, what year was it, roughly? A. I know very well. It was in 2004. Q. And the first time you spoke with him, how did you speak with him? A. I was informed -- Q. What method? A. By phone. Q. By phone. Prior to speaking to him, was it a surprise that he called you? A. I was alerted by Father Peter that I would receive a call from a gentleman named Gus Boosalis. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 15 of 74 15 Q. Tell the Judge what Father Peter told you? A. Father Peter told me that he received a call from him and that this man started explaining some financial opportunity that he wanted to offer to people in the community based on the fact that New Haven Savings Bank was going public. And Father Peter said, and somewhere in there he offered me that I could make money. And then Father Peter sort of giggled because he says, I don't know what he's talking about, but I gave him your name. Q. So Father Peter told you he had spoken with him and he would be calling you? A. Yes. Q. And it's fair to say, is it not, that Father Peter's virtues are spiritual and inspirational rather than financial? A. That's very true. Q. When you received a call from Boosalis, you were not surprised? A. I expected a call from a person about something, yes. Q. Okay. At the time you received the call from Boosalis -- I've missed this in talking previously. At the time that you received the call from Boosalis, was the New Haven Savings Bank undergoing a transformation? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 16 of 74 16 A. Yes. Q. Can you, in a few words, describe what that transformation was? A. New Haven Savings Bank decided to go public. Q. Okay. Was it going to go public by means of one of these initial public offerings, IPO? A. An initial public offering. Q. Just to jump back a second. Sorry to be disjointed. In addition to the day trades, would you also trade in initial public offerings? A. Because of my trading activity, one form of compensation a trader gets from brokerage firms that he trades with is IPOs. Q. What does IPO stand for? A. Initial public offerings. Q. What is offered in an initial public offerings? A. It is an initial or sometimes a follow-on sale of stock. Q. And is the stock sold at a certain price? A. There's a price set and then trading beginnings. Q. What's the hope of the trader if he purchases the set price stock? A. Certain stocks, because of their nature and the economy or the success of the company, immediately will trade at a substantial premium. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 17 of 74 17 Q. Ironically, I think today Twitter went public and its stock is up 77 percent, but that has nothing to do with this. THE COURT: I thought you were going to tell me you were well invested and you were leaving us. BY MR. DONOVAN: Q. Did you do IPO trades on behalf of the church as well? A. I was given IPOs by my brokers as, if you will, compensation, and a number of those IPOs I assigned to our church account. Q. And were those also listed on the financial firm's statements? A. Peter actually broke those out, I think, in most years as sort of day trades and then IPO trades. Q. And again, the information concerning the IPO trades came from? A. Confirmations produced by DLJ sent directly to him. Q. Let me get back to the New Haven Savings Bank IPO. Do you know what kind of an institution the New Haven Savings Bank was before the IPO? A. I believe the term is a mutual bank. Q. And do you know who owned it? A. Well, the shareholders own it. Q. So when the IPO takes place, who gets to buy the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 18 of 74 18 shares of the bank? A. The board of the bank, once it makes a decision to go public, sets a date and shareholders as of that date -- or I should say account holders, who are the shareholders, as of that date are then offered the opportunity to invest in the public offering of the bank. Q. What is the hope of a depositor who invests in the IPO? A. Well, the hope of any investor would be to have a profit on his investment. Q. And with respect to the New Haven Savings Bank IPO, was it widely believed that the shares on the open market would be considerably more expensive than the price that a depositor could buy them? A. There was very good reason to believe that, yes. Q. If a depositor qualified, do you know how many shares he could buy or how much worth of stock he could buy? A. I forget what the amount of deposit required was, but if -- it was not a very high threshold. I would guess it was about $10,000. Q. Not so much concerned about qualified, but how much they could buy? A. The maximum amount that they can buy if they 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 19 of 74 19 qualified would be 70,000 shares at $10 a share. Q. So if they wanted to stay to the maximum, they would have to come up with how much? A. $700,000. Q. Were you yourself a depositor? A. Unfortunately not. Q. Was Father Peter a depositor? A. Yes, he was. Q. To your knowledge, did he participate in this IPO? A. He did. Q. Was the church a depositor? A. Yes, it was. Q. Did the church have many accounts at New Haven Savings Bank? A. Although we had many accounts, unfortunately they were all under the same tax ID so we only had one participation. Q. In the course of your conversation with Gus Boosalis, did he talk to you about the New Haven IPO? A. After he inquired on who I was and why I was being -- or he was being told to talk to me, he explained what we already knew. We knew that the bank was coming public. He explained that he has this company that makes these loans available. Q. Did he tell you what the name of the company was? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 20 of 74 20 A. Yes. Q. What was it? A. Old Financial. Q. Where was Old Financial located? A. It was based in Fargo. Q. And Fargo is in South Dakota? A. I think it's south. South or north. Q. One of the? MR.McGARRY: Want to take judicial notice that it's North Dakota, Your Honor. BY MR. DONOVAN: Q. And during the course of your dealings with Mr. Boosalis and with Old Financial, did it turn out there was a reason for it to be in that particular state? A. Yes, there was. Q. And what was the reason? A. The reason was that apparently that state allows what was explained to me as negotiated interest rates. Q. Essentially, they didn't have usury limits, right? A. Correct. Q. And so what was the deal that Old Financial was offering? A. Old Financial was interested in financing these purchases for people that had the ability to buy shares 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 21 of 74 21 but did not have the money to buy those shares. Q. Let's give an example. I had $15,000 in New Haven Savings Bank on the day that was the cut-off date and I want to participate in the IPO as much as I can, but I don't have any ready cash. What was the deal that would be offered to me? A. What Old Financial in that situation would then be willing to lend you up to the $700,000, assuming you qualified for $700,000 of the stock. Q. And what would Old Financial's -- how would it make money? A. They're initial documents that were presented to me were that their compensation for this loan would be 75 percent of the profit generated by -- at the sale of the securities. Q. Would a person who purchased the IPO be required to sell the stock immediately after the IPO if it were profitable or could he make a different decision? A. Actually, no, they didn't have to sell the stock. Q. But when they sold the stock, Old Financial would -- initially it would get 75 percent of the profit? A. If they decided to hold the stock for long term, they would have to put up some security. I believe it was half of the money. And then they can hold and do 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 22 of 74 22 whatever they want. Q. And was the stock also to be a security for the loan, the stock itself? A. And the two documents that were sent to us that a borrower had to execute, one was, I believe it was called a securitization document that basically said if they default in their loan obligation, the shares can be, I guess, the collateral. And then there was the loan document. There were two documents that they in ordered. Q. All right. So in the hypothetical of impoverished Jeremiah buying as much as he can, I would sign those two documents and then what would happen? A. You would sign those two documents. You would then give them a bank account and they would send the $700,000. Q. And then what would happen to the $700,000? A. Well, then you would -- ideally, you would participate in the IPO. Q. I would get as many shares as I could, right? A. If you qualified for 70,000 and you had the $700,000, you can obviously buy the 70 shares. Q. What would I do with the shares? A. You then, at your own discretion, would sell them. Q. And most people would sell them, right? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 23 of 74 23 A. Most people didn't sell at the first moment, but in the first week or 10 days eventually people sold their stock. Q. What would happen with the money that was made on the sale of the stock? A. Once the stock was sold, then one can do the calculation as per the loan document, and most people then returned in two transactions or two, let's say, checks. First they returned the principal, i.e., $700,000, or some lesser amount if that's what they borrowed. And then another check would be, if you will, this negotiated interest. Q. Now you said that originally the amount was 75/25 with Old Financial getting 75 percent? A. Yes. Q. Did you negotiate with them in order to try to get a better deal for the depositors? A. Yes. Obviously we were shocked at what the deal was, but that was the deal. And based on Connecticut state tax, that was the argument that I gave; that there's going to be a cost to the borrower and eventually the lawyer for Old Financial conceded to 72 versus 75 percent. Q. All right. Now, I'm going back to when you talked to Gus Boosalis. What was it that he wanted you to do? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 24 of 74 24 A. His interest was to find people that had these accounts. Q. All right. And eventually what -- tell me the activities that you engaged on behalf of Old Financial? A. The main activity was to identify these people. Q. After you had identified those people, how was the proposition presented to them? A. Well, what they were told is that -- what I would tell them is, Number 1, if you have money, go do this for yourself. That was my advice to everybody. Q. Let me stop you right there. You said that the bank was a depositor; is that right? A. You mean the church? Q. I'm sorry. The church was a depositor, right? A. Yes. Q. And the church had the money to do it itself, right? A. Yes. Q. And it did? A. Absolutely. Q. We're not claiming any subtraction as a result of the amount of loss from that transaction? A. No, no. Q. Did you talk only to people inside the church? A. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 25 of 74 25 Q. Let me take that away. Did you talk only to church parishioners? A. No. Q. Who did you talk to? A. Well, it started with church parishioners because that's where we would have the information that they have an account at New Haven Savings, and then word of mouth, other people got involved. Q. Now, eventually do you know the total number of people who participated? A. Twenty-one. Q. Twenty-one. A. I would say 21 entities. One or two were entities versus physical people. Q. Now, you said that when you found out that somebody had a New Haven Savings Bank account you would go and present the proposition to them; is that right? A. I felt -- yes. Q. And if the person were interested, what would you do then? A. If the person was interested, and obviously I was comfortable, because I also felt that it had to be somebody that I was comfortable who's not going to run away with the this money, which they obviously could. There was no way that you can force them to go do the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 26 of 74 26 IPO once this loan was consummated. I would submit the name of the person and his banking information to Lawyer Frisk in Fargo. Q. Let's stop there for one second before we move on. Your initial conversation was Mr. Boosalis; is that right? A. Yes. Q. And during the course of the month -- was it a couple of months before the -- A. Not even. About a month and change. Q. Did Boosalis continue to be your point person with Old Financial? A. There was communication with Gus Boosalis, but the point person was clearly Attorney Frisk. Q. About how often would you speak with him during this period? A. In the period before the closing date, several times a day. Q. And did any of the depositors who wanted to take part in the transaction speak with Frisk? A. Interestingly, both Frisk and Boosalis said that that is not an option for anybody to speak to them. Q. So you were to be the contact for anybody in Connecticut? A. They only wanted me to be the contact. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 27 of 74 27 Q. Did they do anything in order to check you out to make sure that you were legitimate? A. Yes. Q. What did they do? A. They came to my home. Q. And who came? A. I believe it was the father-in-law of Mr. Boosalis who also, I believe, was affiliated with Old Financial. And another gentleman. Q. And the reason -- would it be fair to say that the reason that they are contacting the Greek church here in Milford is because they themselves were Greeks and members of a Greek church in California? A. I think that was one of the links, absolutely. Q. There was some security in dealing with a close-knit community that tended to be trustworthy? A. I believe that's one of the their reasons. Q. So now in addition to being the point person who acted as the liaison between Old Financial in North Dakota and the depositors here, did you perform any functions once the IPO actually took place? A. Well, quite a few of the people that invested were not people that are sort of market investor types. So not wanting to be sort of personally involved, I found a local brokerage firm actually in Westport, Connecticut 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 28 of 74 28 and that I just knew someone at and I said we're going to need someone to sell all this stock for us. I went, and because there was going to be a lot of stock, I was able to get a very small rate for the people as the commission paid. That was used for the great majority of the sales of the various people's stock. Q. Now, you testified that you tried to identify New Haven Savings Bank depositors who might qualify. You spoke with them and presented the proposition to them. If they accepted, you arranged for the documents to be sent out. Afterwards you helped them with the sale of the stock? A. The ones that wanted to. Q. And did you perform any other functions with respect to Old Financial? A. With respect to Old Financial, obviously before they wired this money, these two documents were executed. Q. You had to make sure they were executed properly? A. And I held the originals. And then at a given point the originals were forwarded to Fargo. Q. So it sounds to me you were acting kind of like a loan facilitator in real estate transactions with respect to banks; is that right? A. Yeah, I would say so. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 29 of 74 29 Q. I mean, did the people who participated in end up making money? A. Yes. Q. About how much did they make on the average? A. A person that had to borrow the full amount, meaning they didn't have any of their own money to participate, after all taxes paid made approximately 40 to $42,000. Q. And this was money that they wouldn't have made if they hadn't gotten a loan to buy the full amount? A. Yes. Q. What was in this for you? A. From that first phone call, Boosalis made it clear that, Number 1, he's done this in multiple conversions as these are called across the country. Q. And did he say that when he did this in various other places he worked with some kind of liaison person such as yourself? A. Sometimes. Other times he would physically go there himself. Q. And this time he was going to work with a liaison person? A. This is -- yes. Q. What did he say that the liaison person would receive? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 30 of 74 30 A. What he called the flat rate would be 15 percent. Q. 15 percent of what? A. Of the 75 percent, if you will. Q. Of the transaction? A. Which became 72 percent. Q. Now, eventually was this 15-percent commission calculated? A. Yes. Q. And how much did it come to? Well, the amount that went to the church is not actually the amount that it came to, right? A. Yes. There was a couple of adjustments that had to be made. Q. We'll talk about those adjustments in just one second. How much was the amount that eventually went to the church? A. I believe it was $987,000 and change. Q. Could you tell the Court why it went to the church instead of to you? A. Upon the final calculation with Frisk, he called me to confirm the number with me and he said to me, Where do you want me to send this? And he was implying did I want it to go to my DLJ or my Citibank account. He was aware of both. I said, Why not just send it directly to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 31 of 74 31 the church. It was no secret to him or to anyone that I wasn't interested in this money. I was running around because we obviously needed money for our projects. Q. When you were explaining the deal to various New Haven Savings Bank depositors who might participate, did you tell them that you were entitled to a commission or what you were planning to do with it? A. Absolutely. Q. That was actually a selling point? A. It was, because I said that money will come of this. Because they would scratch their heads, 70-some percent. And I said, Well, but here's the good news. A certain amount is coming from that and I will forward that to the church. Q. So the people who participated thought not only would they make a certain amount of money but their activities might result in the church getting some money from you? A. They knew it would. Q. Okay. Now, we talked about some adjustments, right? I think you testified that you knew that Father Peter was a depositor at New Haven Savings Bank? A. Yes, he was. Q. Was he entitled to the full amount of shares? A. No, he wasn't. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 32 of 74 32 Q. As a result, did you advise Father Peter that he should participate in this program? A. Absolutely. Q. And did he? A. Yes, he did. Q. And do you know the total amount of gain -- we see a $100,000 deposit with Apeiron. Was that the gain that he enjoyed on the sale of the stock? A. It resulted from the gain of the stock. I don't know if there was a bit more gain. It would be odd for it to be exactly a $100,000. Q. Father Peter was required, was he not, to pay the 73 percent -- 72 percent? A. All people had to pay that. Father Peter doesn't get involved in these things, as from the beginning he didn't. Q. But he had to pay that interest payment? A. All the money had that obligation. Q. And did you do something in order to relieve him from that obligation? A. When we did our netting out with Mr. Frisk, I basically said, Well, don't worry about that, just absorb it. Q. Was your commission and the commission that went to the church then reduced by that number? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 33 of 74 33 A. By that and one other small transaction. Q. And do you remember what the number was, that is the amount of Father Peter's interest that you -- that you took care of by reducing the amount of your commission and the amount that would then go to the church, roughly? A. I don't know the exact amount, but by definition it would be 72 percent of whatever profit was made. Q. Can you make just a rough estimate? A. If the profit was $100,000 then it would be $72,000. Q. And Father Peter then didn't have to pay that? A. Father Peter didn't pay that. Q. You said there was another small adjustment. What was that? A. There was the daughter of another parishioner who was in a hard-time situation and I made the decision that she didn't have to pay interest either. Q. All right. Now, I want to talk about Nelson Nicholson and Fantasma. We've been talking about a $700,000 amount of money that Nelson Nicholson placed into the -- in some way into the church's endowment. Can you explain that $700,000 separate amount? A. As the day trading started getting more frequent 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 34 of 74 34 and bigger, "bigger" meaning bigger size transactions, I brought to the attention of the board that I am being limited by the fact that I can't put a trade of a bigger size based on what the Endowment Fund was worth, that they had to understand that that will limit on how much I can do. After that meeting, Nelson said, Hum, we've got money sitting in Pershing. Why don't you just have me transfer money into the church's name and then you will have what I call the band width or the capacity to put more trades. Q. Now, as an accounting matter, was that Nelson Nicholson's -- was the amount $700,000? A. It wasn't exactly 700. I don't recall. But it was very close to $700,000. Q. And as a matter of accounting, was that $700,000 kept separately from the Endowment Fund itself? A. Eventually, to facilitate Peter Anastasion, who had to do all this nonsense accounting, we opened a second account so he would get confirmations that were just the day trades, and then the regular long-term stuff. Q. So the $700,000 that Nelson Nicholson provided to the church, that wasn't being used actually in the day trades? A. No. What was required -- the day trades were 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 35 of 74 35 always complete before they were logged. But the way -- Q. Fair enough. And that money was also not being used for the initial public offering trading that you did, some of which resulted to the benefit of the church? A. The money simply allowed bigger transactions to fit. Q. So the answer is? The answer to the question is that money wasn't being used to actually trade with? A. No, no, no. No trades initiated in that account. Q. Did there come a time when you had some conversation with Boosalis -- I'm sorry -- with Frisk, the attorney for Old Financial, concerning the number of people that you had found who wanted to participate in the Old Financial loan? A. When the loan amount reached $6 million, which $700,000 at a time was not that many people, he basically said to me, I think we're done. Q. And why -- did he explain why he wanted to be done at that point? A. Well, I think he felt exposure of $6 million to someone that he met -- he personally hadn't met, his people came to visit -- was enough of a risk to this person's judgment. Q. When he said that, did you have some other people 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 36 of 74 36 who were interested in participating in that loan program? A. As you can imagine, once the word got out, yes, there were more people. Q. Did you do something in order to persuade him to increase the number and the amount of loans? A. When he cited security as his issue, I came up with the idea of just sort off the top of my head, I said, Well, suppose I send you some money to hold? Q. As security for the other people? A. As if people run off with your loan money because I gave it to the wrong people, I would suffer. Q. Did you have some talk with Nelson Nicholson about it? A. Well, I told Nelson that I need to put up money. And since we weren't trading, it was now '04 and that that money is sitting there, would he let me borrow it, because, in essence, it was his money. Everybody knew it was his money. It was never on the books at the church. Would he let me borrow it for a month and a half, because this whole period was only a month and a half. Q. It was on the books but it was separately identified? A. It was never -- we referred to it as a loan, but it 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 37 of 74 37 wasn't not -- it wasn't on the balance sheet, let's say. It was something known in the Endowment Fund. Q. And everyone knew that that was just money that was there so you could do larger day trades? A. Yes. Q. And larger IPOs? A. They were asked their permission to allow it, yes. Q. What was Nelson's response to your suggestion that he let you use that money for a different purpose? A. As Nelson referred to me yesterday as his son, there was no way he would say no. Q. He agreed that you'd be able to send that money? A. He said do whatever you can do. Q. And did you send Nelson Nicholson's $700,000 somewhere? A. Actually, I had no power to do that, but he authorized Peter Anastasion, because, mind you, the money is at Pershing. He authorized Peter Anastasion to give an authorization request to Pershing, which usually was via fax, to then wire the money to this bank in North Dakota, wherever Frisk told us. And then I wired, obviously, money from my trading account. Q. That was your Apeiron account? A. Yes. I actually had to stop trading because this was obviously more important. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 38 of 74 38 Q. How much money did Apeiron wire? A. I had told Frisk that I will send you a million four, which is obviously two people's worth of money. And he was sort of surprised and he says, So you're confident? I said, Yeah, obviously I'm confident. No one is going to run away with your money. Q. So you used Apeiron sent $700,000? A. Yes. Q. And Nicholson's $700,000 was also sent or wired? A. Yes, the one that was in the trading account. Q. And as a result of that, were additional persons allowed to get loans from Old Financial? A. We got another $7 million for a total of 13. Q. Even more than the $1.4 million that you had secured? A. The 1.4 he treated as a security deposit. They had no problem of having money to lend people. Q. Now, after the New Haven Savings Bank initial public offering took place, what happened to the $700,000 that you had -- that Apeiron had sent? A. Once everything netted out, and obviously they -- we calculated the amount, they got all their money back. Actually, even before they got all their money back, I made sure the last million four was still in friendly hands. I said to Frisk, I would like the money back, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 39 of 74 39 obviously. And he wired the million four to Apeiron's, I believe either Citibank -- to an Apeiron account. Q. And how about Nelson Nicholson's $700,000? A. It was all sent together. Q. So following some time after the closing of the New Haven Savings Bank IPO, Nelson Nicholson's $700,000 is now sitting in the Apeiron account? A. Obviously, with his knowledge, it is now sitting in the Apeiron account. Q. All right. So I want to get on to the toy company in just a second, but let's just make sure that I've established the numbers that I need to. The St. Barbara's Building Fund financial statement indicates an increase of $975,000 which it attributes to New Haven Savings Bank stock. That's the statement January through December of 2004. What's that $975,000? A. Actually, that number is a little inaccurate. It was 987, or whatever that number was. That was, I believe it was a check. I don't think it was a wire. Q. But what is it? A. That is the commission, if you will. The commission, compensation, from all the people that borrowed money from Old Financial. Q. And then we have to add to that Father Peter's 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 40 of 74 40 roughly $70,000? A. If the profit was $100,000, it was 70. And the other person was the numbers were even smaller. So roughly about a $100,000 I would say. Q. Okay. Now let's talk a little bit about the toy company. When Nelson Nicholson first began discussing with you the toy company, where was his $700,000 at that point? A. When he first introduced me to Dwyer, the owner of the toy company, I think it was '02, '03, so it was sitting in that trading account. We were trading at St. Barbara. Q. Okay. Eventually Mr. Nicholson discussed with you making an investment with respect to the toy company? A. Yes. Q. Tell me how it developed, briefly? A. The -- I was present at a lunch in New York where he wanted to introduce me to his friend, Mr. Dwyer. The result of that lunch was what Nelson described him giving a $100,000 check for a napkin receipt from Mr. Dwyer who explained how he's getting these nice orders from these big companies, i.e., FAO Schwartz. He needed the money to produce the product in China to be able to fill his orders. And that's where, at that 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 41 of 74 41 moment, that's where Nelson would come in. Q. So that $100,000 was a loan from Nelson to the person who started the toy company? A. It started as a loan. I think Dwyer offered I think it was 10 percent just to make things easy. And Nelson said okay. Q. And you could see from their dealings that Nelson and he had been friends from childhood? A. Yes, yes. Q. Was there an event that had a sort of traumatic business experience upon the toy company? A. Eventually the toy company needed more money, substantially more money, Nelson, thinking he was doing me a favor, said, Why don't do you come in, too? Q. Did the toy company need substantially more money because of something that had happened to one of its customers? A. No. Initially they needed more money because they had bigger orders. Q. Eventually did they suffer some losses? A. Unfortunately, eventually the money that we financed orders with was for a big order for FAO Schwartz. Q. What did FAO Schwartz do? A. After the holiday season they went bankrupt. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 42 of 74 42 Q. Let's talk about how it was that you came about to invest in the toy company. Was it a conversation you had with Nelson? A. It was just Nelson saying 10 percent. We've got these orders. I know this guy. And it was clear that I think he wanted me to get involved and I said okay. Q. How much was Nelson going to invest? A. Well, it was sort of like a demand from Dwyer. It's what he needed. So it wasn't an investment. It was almost -- we were lending against, in essence, orders that Dwyer would get from the marketplace. So he would call and say, I need 150, I need 100, I need 200. I forget. I want to say we put initially -- and again, the first couple of transactions was all Nelson and eventually, because of our relationship and he wanted me sort of around, because he liked Dwyer but he also sort of I think appreciated me, my business sense, eventually got to a point where I said, Okay. Well then let me put some money, too. You don't have to do all of it. Q. When we talk about money going to the toy company, was this prior to the founding of -- to the establishment of this limited partnership? A. Yes. That came towards the end. Q. Now, when money was given to the toy company, what was the deal with the toy company? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 43 of 74 43 A. Again, it was somewhat informal. The deal was that obviously we kept tally of what they were given and I believe the interest was 10 percent. Q. And was there any limit on how long the loan would be, when they had to repay it? A. Well, typically these big department stores would have 120-, 180-day payables, so it would take a while. Q. But he was going to pay it back to you when he could? A. He was going to pay it back, yeah. Or if things went well, he would have to keep it because he would have new orders. Q. How did the payments -- how were the payments made to the toy company? A. I want to say -- obviously I'm not talking from documents so this may not be perfectly accurate -- but the payments were made to this corporation. I think it was a corporation in New York. Fantasma Toys, we called it, New York. Checks would be written. Wires would be -- I think Mrs. McCartney probably has a better idea if they were checks, wires, whatever. Q. Ms. McCartney has given a total of the amount of money that came out of Apeiron accounts to the toy company. Did that sound about right to you? A. I believe the number was $740,000? That sounds 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 44 of 74 44 about right. Q. That sounds about right? A. This is to New York. Q. Apeiron sent to the toy company in New York $740,000. Now, how much of that was your money and how much of that was some of the $700,000 that was sitting there that was Nelson's money? A. The $700,000 that was sitting there, keep in mind, that happened in the middle of '04. That happened after the bank IPO. So monies started flowing to Fantasma, I believe, and -- and the wires would be a better -- in '02, '03. And then when the bankruptcy happened, that was the big problem for us because we had to either just walk away, or what Dwyer said to us, Now you got to, in essence, give me more even more money, a lot more money because they've wiped me out. I can't do anything. I've lost all my receivables. And the decision was made to stick it out. Q. Would it be fair to describe this relationship between you and Nicholson and Dwyer as kind of a gentleman's agreement kind of a relationship in which there really were no documents produced? A. Eventually when it got really hairy, to a million five, I think Nelson started getting some documents from 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 45 of 74 45 him. But from our standpoint -- and obviously, Nelson felt horrible. And one of the reasons that the 700 was left in Apeiron was because he felt horrible. Because now it was clear that we had a very high probability of this wasn't going to work. Q. Now, of the $740,000 that Apeiron sent to Dwyer, sent to the toy company, how much do you think was yours and how much was Nelson's? A. Of the money that came out of -- that's a tough question because I don't have any documents. But the money that came out of Apeiron accounts I believe was primarily my money because it was coming out of -- and again, did you find it mostly coming out of Pershing? Q. That's not the way things work here. A. I'm sorry. I don't have the documents. I don't want to just guess. Q. So, in your view, that was essentially mostly your money? A. Initially it was, yes. Q. So of the $740,000, give me a number that you think was yours. A. I would be guessing. Q. When you say "you're guessing," there's no document that tells us this money is your yours, this money is mine? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 46 of 74 46 A. But the origin of where it came from I believe exists. Q. We know it came from the Apeiron account. So the $740,000 that came from Apeiron to that company, part of it is your investment and part of it is Mr. Nicholson's investment; is that fair to say? A. Potentially some of it was his. I can't say with certainty. Q. So would it be fair to say then that you and he never really talked about how much of this is mine, how much of this is yours? A. I think you established that, or he established our finances were very informal. Q. All right. Now, did there come a time when he instructed you with respect to your investment in the toy company, Mr. Nicholson? A. It was clear that -- now we're approaching the middle of '04 -- and Farnbacher Loles is starting to get much more serious. And at that point I think he felt that he got us into, if you will, his words, that mess, that he felt that initially just keep the 700 there so you're safe. And then he said, I understand you need to go do things. Go do what you need to do. Q. What about your deal with respect to the toy company? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 47 of 74 47 A. Well, he basically was taking -- Q. What did he say? He didn't say, Go do what you got to do? A. No. He basically said, I want to have the full exposure. If it works out, I will do real well. If it doesn't work out, that's my problem. Q. How were you to be repaid for whatever that portion of that 740 that you had invested of Apeiron's money? A. Well, he obviously had $700,000 sitting in Apeiron. Q. So did he tell you that that was going to be your payment? A. He said that you're out of the investment. And his motive was -- Q. I don't care what his motive was. I care what he said. A. He said, You're out of the investment, yes. Q. What were you supposed to get from that? Did he tell you you were to keep the $700,000? A. Yes. Q. He said that explicitly? A. He said that this is what you put in, roughly $700,000. We're not going to argue if it's a little bit more or a little bit less. Obviously, it was a positive. Q. Now, in the government's calculation of loss, is 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 48 of 74 48 that $700,000, when it comes into the Apeiron account from North Dakota, is that counted as money that should be included in the amount of loss? A. Yes, it is. Q. Does the government give you credit for a $700,000 payment to Mr. Nicholson after Mr. Nicholson told you, Look, keep the money and you're out of the deal? A. They weren't aware of that. Q. And you feel as though the amount of loss to Nicholson should be decreased by that amount? A. Yes. It should be accounted in that way. Q. Okay. Now, there are a few miscellaneous points I want to make, but before we get to those I want to direct your attention to Defendant's Exhibit 1. Would you agree with me that on Defendant's Exhibit 1 are listed capital gains from IPOs and day trades? A. Yes. Q. And those seem -- those seem to be accurate numbers that were taken out of the church's financial reports? A. I believe these are Peter Anastasion's numbers, yes. Q. And those numbers, so far as you can recall, were accurate? That's how much you made for the church in day trades on the years indicated? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 49 of 74 49 A. Peter was very accurate. Q. But that's not the question. Do you think the numbers are accurate? A. Yes, yes, absolutely. Q. In addition to that there is listed a figure of $975,000; is that right? A. Yes, that's what's listed. Q. What is that? A. Well, it's been -- you're titling it New Haven Savings stock, meaning from the stock offering. I believe that number should be a little bit higher. Q. And that's the commission that you told Old Financial you should be paying to the church? A. I told Frisk. He was the only person at Old -- I don't think he was part. He was the lawyer for Old Financial. He's the person I spoke. Q. And this sum does not include -- this sum obviously has to do with St. Barbara's loss, but in addition, you think that Mr. Nicholson's loss should be diminished by that $700,000 that involved the toy company? A. Well, that $700,000 has to go on one ledger or the other. Q. And that should be either the $700,000 in shouldn't be counted, or if it is counted, you should be given a credit for the $700,000 out when he told you, Let's end 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 50 of 74 50 your involvement? A. The $700,000 that's listed as what was the trading account money was Nelson Nicholson's money. I don't think that's in dispute. And that's, I believe, the item that should not be included in the loss. Q. And directing your attention to Defendant's Exhibit 2, is that again the same figures calculated in a slightly different way; that is, Defendant's 1 shows the net gain to St. Barbara's, if we consider all of these factors, and Number 2 indicates the total monies that really should be subtracted from the government's amount? A. Yes, I mean -- MR. DONOVAN: This will be much more clear to the Court when I offer the exhibit and I hand it up to the Court. MR.McGARRY: Your Honor, is this the time where I object and you say it goes to the weight and it we talk about the various factors? THE COURT: Yes, it is. MR. McGARRY: Well, I would object. I know the Court can consider anything in sentencing, so I'm objecting to protect the record. But specifically, the number of these day trades are '97, '98 -- I'm looking at Defendant's 1 if 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 51 of 74 51 you have a copy of it. THE COURT: I don't. I think I know what you're alluding to because I've seen references to these things. MR.McGARRY: '97, '98, '99, 2000 are all before the fraud to which Mr. Loles has pled guilty. So I would argue that is irrelevant. The objection is to relevance. It's before the fraud. I don't think he can claim credit for money that he may have -- if he could even claim credit for money on day trades against the money he stole, then he certainly shouldn't be allowed to claim beforehand. That would be my first objection as to those. As for the 2002, I have less of an objection. It's also a small number. As to 2008, I think it goes to the weight. We do have time before the actual date of sentencing, but it's not clear to me where the church was getting the numbers for their profit. It's my understanding that Pershing had been effectively emptied, at least some of the Pershing accounts. So I'm concerned that Mr. Anastasion, who was here yesterday and who is in his 90s now, was probably in his 80s then, may have gotten the information from Mr. Loles. In that case it really goes to the weight because I wouldn't want the Court to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 52 of 74 52 credit if it's another made-up document like some of the other documents that we saw. Similarly, the $17,000 under St. Barbara's Endowment Fund IPOs for '96 and '97, I think we're getting pretty far afield from the fraud that started in 2001. That would be the objection to that. And the New Haven Savings Bank stock, leaving aside that' it's, as Mr. Loles testified and I believe Ms. McCartney testified, 987, not 975, we will argue that since the church got it, had it in their account and gave it to him, as a legal matter he shouldn't claim credit for that. So that again, I think, goes to the weight. And the numbers are similar on Defendant's Exhibit 2. So that would be my objection. But again, in sentencing, since the Court can consider almost anything, with that I certainly expect the Court to look at it and give it what weight the Court wants to give it. THE COURT: Okay. I'm just trying to follow along on Defendant's 1 versus 2. MR. McGARRY: I think -- I'll leave it to the defendant's counsel. I think Defendant's 1 he takes the government's number, puts it on top, and then subtracts 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 53 of 74 53 his numbers from, ending in a negative number basically, with the conclusion that thanks to Mr. Loles, the church is up $6,900 if we go back to 1996. Defendant's 2 is just the purported gains that Mr. Loles is claiming credit for. MR. DONOVAN: I think that's right. THE COURT: I follow it now. MR. DONOVAN: Can I assume that Mr. McGarry predicted correctly and that you're admitting this? THE COURT: Just like everything else. MR. McGARRY: Amazing that Mr. McGarry has such prescience, Your Honor. BY MR.DONOVAN: Q. Just with respect to Mr. McGarry's last objection concerning that last trade year, 2008, again, was -- to the best of your recollection, that number comes off of the financial reports of the church; is that right? A. I believe, I'm not sure -- but I'll have a better idea if I look at statements -- I believe he's correct that that one may not be accurate. But I know where to look and I'll be able to answer that question. Q. What do you need to look at in order to answer it? A. I need to look at -- I believe it's $28,000? MR. McGARRY: That's what the document says. A. That's what the document says. I recall that there 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 54 of 74 54 was a need for that amount, and I believe that $28,000 was wired. We did not have any money at DLJ by 2008. So it clearly was not accounted as the way everything else was. BY MR.DONOVAN: Q. I'm having a hard time following this. For some reason the Endowment Fund needed to have $28,000 in it? A. And I believe it was wired to them. I think, if I'm given access to the CDs that I have at the Wyatt, I may be able to establish that and give a specific transaction that is that $28,000. Q. Suppose that's true. What's the affect on the amount of loss? Does the $28,000 come out of Apeiron? A. I believe the $28,000 came out of Apeiron, yes. Q. Is that $28,000 accounted for in the accountings of the government, do you know? A. I believe not. Q. So in either case, it's either a credit to you or a -- in either case, it's a credit to you? A. I don't want to say something and then make it seem like I'm trying to mislead. I'd rather see. Q. There's a few other points I think you wanted me to make. I'm sorry. There is one other thing. Last night when you were returned to Wyatt, did you 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 55 of 74 55 find some additional payments that you made that you think that you should get credit for? A. Yes. Q. And could you tell us where you found those payments? A. Those payments were found in the documents that Peter Anastasion was presenting on an annual basis to the General Assembly. Q. The church financial reports? A. Yes. Q. And directing your attention to -- Sandy has been nice enough to mark these. This should be Defendant's 3 also. Directing your attention to Defendant's 3, can you tell me what that is? A. Yes. The Endowment Fund. Q. No. What is the document? A. It's an accounting of some additional monies that I believe should be credited. Q. And explain to the Court how that document was produced? A. These amounts appear on Peter Anastasian's section called Distributions. And I -- when I saw the distributions, I recalled that I was paying these amounts directly from my Apeiron Citibank account. And 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 56 of 74 56 therefore, it was Apeiron paying on behalf of the Endowment Fund. Q. And because of the names, it might not have been immediately obvious to the government that these were payments -- A. They would have no way of knowing. Q. And then in addition to the listing of payments to individuals, is there also a listing of a transfer to another account? A. I did find something that may -- that I don't think is accounted, and that is a contribution that I made to the Endowment Fund to establish what I think was referred to as the Building Maintenance Fund. I know the amount was $15,000. Q. And that also appears on the financial statements of the church? A. My memory was jogged by Peter Anastasion's documents, yes. MR.McGARRY: Your Honor, I'm not trying to interrupt Mr. Donovan, though I guess that's exactly what I did. Just to kind of speed things along, the FBI financial analyst just told me she's already taken into consideration the $15,000. We are checking with the church to see if these individuals are scholarship 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 57 of 74 57 people that may have gotten money from the Endowment Fund. We're talking about $34,000. Just in the interest of cooperation, to move things along, if she can find these and if we can credit them as people who received scholarships directly from Apeiron as opposed to running it through the Endowment Fund, then I think we would agree that Mr. Loles would get credit for the return of principal under Guideline Application Note for this $34,000. MR.DONOVAN: And with a few questions I can clarify that. BY MR. DONOVAN: Q. First of all, would you cross off the $15,000 on that list? A. Yes. Q. Now, next, who are the two people named as recipients? A. The two people are people that worked for the community. Q. What are their names? A. Simos and Dembakelis. Q. What were their jobs? A. Simos was a cantor and Mrs. Dembakelis helped in the church office. Q. The financial documents indicate that those 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 58 of 74 58 payments are coming from the Nelson Nicholson Fund. Why do you say you deserve credit for it? A. Within the Endowment Fund there are what we call named funds. And Nelson had the discretion to pay people out of his named fund within the Endowment Fund. And then, given his instruction, the Endowment Fund had to disburse what he wanted. And that was the case with these and some other. I don't remember that other payments were made by Apeiron. Now I have something to look for. But these were absolutely made by Apeiron. Q. Even though it says it coming from the Nelson Nicholson Fund -- A. Yes. Q. -- Apeiron was paying them? A. Yes. Q. And did the payments come out of an Apeiron account or the Knights Bridge account? A. Well, again, I don't have the document, but I know I made the payments. So it's one or the other. I don't remember which account. MS. McCARTNEY: (Interruption.) A. It was basically is an obligation of the Endowment Fund. These people had to get this money on a monthly basis and obviously, I -- I had to do that. MR. DONOVAN: Your Honor is actually getting a 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 59 of 74 59 glimpse into the discussions that we've been having back and forth. THE COURT: I think we're driving the court reporter nuts with people who are not supposed to be talking, but -- BY MR. DONOVAN: Q. There are a couple of other points you wanted me to make and question me about. MR. DONOVAN: If you give me one second, Your Honor? THE COURT: Yes. BY MR. DONOVAN: Q. Just a few little questions -- a few questions about the agent's testimony this morning and what some people told him. Do you remember he testified that Mr. Goebbel had in his statement told him about amounts under management at various brokerage firms with whom you dealt, right? A. Yes. Q. Was there a time when you did have those amounts under management? A. Yes, absolutely. Q. And when was that? A. It was in the late '90s when the broker/dealer and the RIA was operating. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 60 of 74 60 Q. So you may well have made those statements to Goebbel at that time? A. I would assume he heard those in conversations with other market people; that that was definitely in my past, yes. Q. Now, we heard some testimony about Luk Oil and I want to go through this really briefly. Luk Oil was a Russian oil company? A. Luk Oil is a Russian oil company. Q. And you learned somehow that Luk Oil might be interested in paying a large amount of money to sponsor the Farnbacher Loles racing team? A. Yes. Q. Who did you learn that from? A. An individual contacted Roger Garbow. Q. Who's Roger Garbow? A. He was one of our marketing people at the time. Q. And he gave you that information? A. Via e-mail. Q. Who did you deal with with respect to Luk Oil? A. I forget the name, but there was a representative that wanted to go into a relationship with us. Q. Did he seem legitimate at first? A. Well, he clearly seemed legitimate to Roger, and then upon my conversation he invited me to actually to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 61 of 74 61 go to Milan to meet with him. He wanted to see a package of what we can do in sponsorship for Luk Oil. Q. How many times did you go to Milan to meet with this fellow? A. I ended up going three times. Q. Would it be fair to say that at this point you were somewhat desperate to get financing for Farnbacher Loles? A. It wasn't at time that we were desperate. It was a time that we had success, and hopefully success in racing so as to build my relationship with Porsche, I would want to have sponsorship to do more racing. Q. Did you tell other people about the possibility that Luk Oil was going to sponsor your racing team? A. After my first meeting in Milan where we presented what we can do as a company, he was very convincing that he was going to be able to broker a transaction. Obviously, this person knew that Luk Oil was already sponsoring racing in Europe so it was easy to believe. And I, unfortunately, made the mistake that I ran to Porsche to say that I have good news, I can do a higher level program. I was granted the program. Why not, since somebody was going to pay for it? And then after the second meeting it started becoming obvious that this was not going to pan out. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 62 of 74 62 Q. Did this guy then begin talking to you about you paying him money in order to get this deal under way? A. It kept on getting more and more complicated and obviously more and more embarrassing. And having -- if I hadn't gone to Porsche, it would have been one thing, but because I had announced it to Germany, I put myself in yet another ridiculous position. Q. Eventually you decided this guy must be a con man and you broke off contact? A. Eventually it came to the time where he had to consummate a deal, and I did everything that made sense that he was asking, and then their requests obviously got to where it was obvious he knew some people at Luk Oil, he had some influence, but he was not able to deliver a sponsorship. Q. Now I want to talk to you about Lacey. We had testimony this morning that Lacey said and presented documents that indicated that you had given security interests in the same car; is that right? A. Yes. Q. Could you tell the Court how that happened? A. There's two documents that I believe the government has. If you look at the bottom of the two documents -- MR. McGARRY: I believe Government's Exhibits 5 and 6, for the record. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 63 of 74 63 BY MR. DONOVAN: Q. I don't think we need the documents. A. Let me explain what I saw in those documents. And for the longest time, this is my first time of seeing those documents and now I sort of understand something that was being said. Every year the race -- Q. Let's make the explanation short, okay? A. But I have to give a little background. Q. Let me ask you this question -- A. Yes. Q. -- did you give a security interest to Lacey? A. Yes. Q. And did you also give a security interest to someone else on the same car? A. Inadvertently it showed up as the same car, but -- Q. Those are with respect to contractual relationships with Lacey and who was the other person? A. With Lux. Q. With Lux. Okay. And without going into greet detail about the contracts themselves, because that's not important, tell the Court how it was that you ended up putting a security interest on the same car, two security interests? A. If you notice it says 86 car, 2009 86 car. Every 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 64 of 74 64 team has a series of numbers that are the same every year. So there's a 2007 86 car, there's an '08, '09 and so forth 86 car. At the time that those contracts happened, Farnbacher Loles was in possession of five cars, its '09 cars, its '08 cars and one '07 car. There was no reason to put that one '09 car on both. However, the VIN number used is the same on the one car. And that was obviously in October. The other document doesn't have a date, but in October of '09, obviously my world is crashing. So that was a mistake. But it's clear we had five cars. There would be no reason for me to give the same car. Why? I mean, they were sitting in the garage in Atlanta. Q. Fair enough. In preparing this, which ever was the second of the security interests, you just didn't have the first one in front of you probably? A. It's actually not even dated. I don't remember what the date -- I don't see a date on the Lux transaction, yes. Q. So is it your testimony that that was inadvertent mistake? A. Absolutely was, because the collateral existed and there would be no reason. Q. Okay. Now, we had a number of -- a lot of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 65 of 74 65 testimony about persons -- THE COURT: Can you excuse me for one second? (Pause.) THE COURT: Thank you. BY MR. DONOVAN: Q. And just briefly. You said you had those other cars that you could have put a security interest on. Were those cars -- did those cars already have security interests on them? A. No. Q. With respect to -- we had a number of reported statements in which people said they either wanted to buy cars from you or you were arranging for the manufacture of cars and that they made you money, right? A. Yes. Q. And that did happen? A. That's how it would always happen in that industry, always, because they are obviously very specialized cars. Always the money is collected up front and then in the spring typically the cars are delivered. And unfortunately, several people got caught where they ordered a car and obviously we never made it to the February/March window where those cars typically arrive from Europe, or in the case of Pratt and Miller, the production -- and there was various delays there that we 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 66 of 74 66 can get into if you want -- but those cars did not even start. Q. But in any case, those people -- those people lost money because Farnbacher Loles failed? A. Absolutely. Q. When you took the money from them, did you have any sense that you were defrauding them? Did you intend to -- A. No. Q. -- keep the money without providing the cars? A. No. Q. We had some testimony concerning Mr. Carlisle -- A. Yes. Q. -- and the statement he made. Can you remind us who Carlisle is? A. Darrell Carlisle became a client. I'm not sure what year. But the incident where unfortunately he ended up losing some money had to do with a car that he wanted to sell that was in our possession, as many client cars were in our possession. We had already done a loan that he described for $200,000. So he knew that I was having some short-term financial need. However, he wanted me to sell his old car so he could buy a new one. Q. Did you find a buyer for that car? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 67 of 74 67 A. I found a buyer for a car. Q. Did you have cars that you yourself could have sold to the buyer? A. I also needed to sell a car at the time. Q. Why didn't you sell your car to that buyer? A. Well, because his car was a better fit. Q. To the demands of the buyer? A. For the new buyer who eventually you hope will become a client of the firm. Q. Did you have any conversation with Carlisle about the way that you might do the deal but you would get access to the money? A. Yes. Q. What did you tell him? A. I told Darrell that his car would be a better fit but I definitely need to sell a car. However, if he'd like me to sell his car, I would have to keep the money. And then in the spring, when it's time for him to pay for a new car, that would be bought again through us, Porsche Motorsports, I would be able to do that for him. Q. And he'd get credit for the money you had received? A. Yes. And he was nice enough to say fine. And then obviously we never got to that spring. Q. All right. We had some conversation about Grossman I think. Grossman's investment? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 68 of 74 68 A. Marya. My point was that Marya was a long-term friend of Mr. Nicholson. That's the point. Q. That's how you were introduced to him? A. Yes. I didn't know Mrs. Grossman. Q. The agent has testified about how you told him concerning a scheme that was eventually resulted in a SEC investigation and a plea involving Greek medical devices; is that right? A. Involving medical device sales in Greece, yes. Q. Sales to Greece. Fair enough. And this came out of your working with Milbury Holdings, right? A. It came out actually with the death of my friend and lawyer in Greece. Q. Explain to the Court what Milbury Holdings had to do with all this? A. Milbury Holdings belonged to my Greek lawyer. It was a vehicle that was used for a lot of trading in the Greek stock market when the Greek market was an emerging market. Q. How did you find out about this medical device scheme? A. So upon his sort of sudden death, one of his clients, this Mr. Karayanis (phonetic) individual, contacted his son, and were very friendly obviously with the Mislidis family, and started describing things that 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 69 of 74 69 his father was helping him with. And the son had just lost his father -- I think he was 20 at the time -- reached out to me and said, I don't know what dad was doing. So he says would you mind talking to this guy? So there was a trip to Greece. I sat down with this Karayanis guy and he described to me what I then described to the special agent with great detail of how they were -- they had created a scheme actually with Smith & Nephew, which is a New York Stock Exchange listed company, and more importantly with Medtronic, which is an even larger U.S. listed company, American company. And they were, in essence, creating a fraud on the Greek hospitals by paying employees of the hospital to buy their stuff versus the other stuff at these ridiculous prices. Q. In any case you gave that information to the agent and eventually you learned through the newspapers that that that had resulted in a United States prosecution, right? A. The United States under the foreign I think it's called corruption whatever, did get a $22 million settlement with Smith & Nephew. Q. And that was reported in the Wall Street Journal? A. Yes. But not with Medtronic. And I'm -- I have two interests in why. Obviously the one interest is 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 70 of 74 70 anything that I can do that can help me, I would do. The other interest, obviously -- and I had discussed this with my previous lawyer -- is that this information, the government has set up a program where if you can help them go prosecute these types of things, they actually compensate. Q. Whistleblower? A. How wonderful would that be if that could be assigned to the people that lost. But Medtronic to this day I have not -- I have no knowledge that they have settled. Q. Okay. This doesn't exactly have to do with the amount of loss, but it came up during the cost of our earlier examination. Let me ask you this: Again remembering that this hearing is only for the purposes of establishing the amount of loss -- there are many other facts, many other guideline calculations that the Court is going to have make some determinations on -- as well as a final sentencing which the Court has to consider the sentencing statute and a whole bunch of other both emotional, ideological and social factors, with that in mind, is there something that I should have asked you that I haven't that you think it's important for the Court to know in its determination of amount of loss? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 71 of 74 71 A. As far as loss, I believe the one thing that we didn't touch was there was a little spreadsheet done by the community yesterday -- Q. Yes. A. -- of contributions by me to the community. And I think there's certain large contributions that aren't there. So I would ask for those to be added. And I can be specific, if you'd like. Q. Let me get to that. MR. DONOVAN: That won't take too much longer, Your Honor. THE COURT: Are you talking about Government's 3? MR. McGARRY: I believe it's Government's Exhibit 3, Your Honor. THE COURT: Yes. MR. McGARRY: That was prepared and presented by Mr. Martini to the government on behalf of the church. So while we introduced it, I guess the sponsor of the document, if you will, would be the church through their agent, Mr. Martini. THE COURT: Can we just do this: Can we just have the witness tell his lawyer, I think this is missing, and then have that information given to the church or the community and get a response back? I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 72 of 74 72 mean, at this point he's going to say this is missing. That's not going to be very helpful to me. MR. DONOVAN: That's fair enough. It's another question whether Your Honor will even subtract amounts that he donated from the amount of loss. That's a legal question you're going to have to decide. THE COURT: Yes. BY MR. DONOVAN: Q. Anything else that I failed to ask you that might be of assistance to the Court in calculating the amount of loss? A. I can't think of anything right now. MR. DONOVAN: No further questions, Your Honor. THE COURT: I have people who have been here since 3:30 waiting for something. Let me caucus with them at the sidebar. Our court reporter will need a break also. (Whereupon, a recess followed.) (End of transcript excerpt.) * * * * * 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-4 Filed 02/20/14 Page 73 of 74 73 C E R T I F I C A T E
UNITED STATES V. GREGORY LOLES 3:10CR00237(AWT)
I, Corinna F. Thompson, RPR, Official Court Reporter for the United States District Court for the District of Connecticut, do hereby certify that the foregoing pages, pages 1 - 72, are a true and accurate transcription of AN EXCERPT OF my shorthand notes taken in the aforementioned matter on November 7, 2013, to the best of my skill and ability.
/s/__________________________
CORINNA F. THOMPSON, RPR Official Court Reporter 450 Main Street, Room #225 Hartford, Connecticut 06103 (860) 547-0580
ATTACHMENT E (PART 1) Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 1 of 104 UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
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UNITED STATES OF AMERICA 3:10CR00237(AWT)
vs.
GREGORY P. LOLES HARTFORD, CONNECTICUT Defendant NOVEMBER 25 , 2013
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EXCERPT OF SENTENCING HEARING - VOLUME III CROSS-EXAMINATION OF GREGORY LOLES
BEFORE:
HON. ALVIN W. THOMPSON, U.S.D.J.
APPEARANCES:
FOR THE GOVERNMENT:
OFFICE OF THE UNITED STATES ATTORNEY 157 Church Street, 23rd Floor New Haven, Connecticut 06510 BY: MICHAEL S. MCGARRY, AUSA
FOR THE DEFENDANT:
LAW OFFICE OF JEREMIAH F. DONOVAN P. O. bOX 554 Old Saybrook, Connecticut 06854 BY: JEREMIAH DONOVAN, ESQ.
Corinna F. Thompson, RPR Official Court Reporter Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 2 of 104 TABLE OF CONTENTS
WITNESS DIRECT CROSS REDIRECT RECROSS GREGORY LOLES BY MR. McGARRY: 3 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 3 of 104 3 (Omission.)
(Transcript excerpt follows.) MR. McGARRY: Should we inquire? THE COURT: After she reminds him he's under oath. GREGORY LOLES, called as a witness, having been previously duly sworn or affirmed, was examined and testified as follows:
THE CLERK: May I remind you you remain under oath. THE WITNESS: Yes. THE CLERK: Please state your name for the record. THE WITNESS: Gregory Loles. THE CLERK: And could you spell your last name. THE WITNESS: L-O-L-E-S.
CROSS-EXAMINATION BY MR. McGARRY: Q. Good morning, Mr. Loles. A. Good morning. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 4 of 104 4 Q. The first thing that I'd like to direct your attention to is a document that is not a factual document but it's your plea agreement. You recall entering into a plea agreement with the government, correct? A. Yes. Q. And pursuant to the plea agreement, the government was recommending or agreed to recommend that you would get points for acceptance of responsibility, correct? A. Yes. Q. And you've become familiar with the Guidelines. And though you've had counsel, you also are aware that there's a Guideline calculation and part of that calculation that was done would give you three points for acceptance of responsibility, correct? A. Yes, I was. Q. And it's also in the plea agreement -- and I can show it to you if you need your recollection refreshed -- that the above listed recommendation for acceptance is conditioned on the defendant's affirmative demonstration of acceptance of responsibility, correct? A. Correct. Q. And included in that, must truthfully admit the conduct comprising the offense of conviction and truthfully admitting or not falsely denying any 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 5 of 104 5 additional relevant conduct for which the defendant is accountable under 1B1.3. You're familiar with that provision, correct? A. Yes. Q. And you are also required to truthfully disclose to the probation officer, here today in the person of Sandra Hunt, information requested including a truthful financial statement and details of your financial condition, correct? A. Yes. Q. And you've done the latter one, correct? A. I believe you have received that, yes. Q. And as far as the acceptance of responsibility, you're aware, are you not, that the government reserves the right to seek a denial of the acceptance of responsibility if you engage in acts which indicate you're not terminated or withdrawn from the criminal conduct, which here you've done. You've been incarcerated, correct? A. Correct. Q. Or could provide a basis for an adjustment for obstructing or impeding the administration of justice. You're familiar with that provision, correct? A. Correct. Q. And the plea agreement cites to Section 3C1.1 of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 6 of 104 6 the Guidelines. You're familiar with the Guidelines, correct? A. Yes. Q. And page 3C1.1 provides as a basis for denying you acceptance of responsibility providing material false information to a judge. Are you familiar with that? A. Yes, I've heard that. Q. And/or providing materially false statements to law enforcement that significantly obstructs or impeded the investigation. You're familiar with that, correct? A. Yes. Q. So the bottom line is you're required to tell the truth, correct? A. Absolutely. Q. And regardless of loss amount, number of victims, use of sophisticated means, one of the other factors that goes into your sentence is whether or not you're accepting responsibility, correct? A. Yes. Q. And if the Judge were to believe that you're making a material false statement, he could deny you that, correct? A. I understand. Q. And if he were to deny you that, your guidelines would presumably go up by the additional three levels 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 7 of 104 7 that your now credited with, correct? A. I understand. Q. And you understand that if he were to find that you were obstructing justice, he could impose an additional two levels above that. Do you understand that? A. I understand. Q. So what hangs in the balance as far as a Guideline calculation is not just the loss figure, but it could conceivably go up an additional five levels if you were to make materially false statements or the Judge were to find that you're obstructing justice. You understand that? A. I understand. Q. I'd like to turn to part of your direct testimony where you talked about Milbury Holdings. Do you remember talking about Milbury Holdings, yes? A. Yes. Q. A couple of weeks ago or last week. And also, I believe when you met with the FBI agents, specifically Agent McPhillips, you mentioned at one point in your interviews that all of the accounts became one account. Do you remember saying that, words to that effect? A. All the accounts here in the U.S. The Apeiron Capital account at Citibank was the means that 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 8 of 104 8 Farnbacher Loles was being sort of grown, and all other financial transactions started from the Apeiron Capital account. THE COURT: When we say "all of the accounts became one account," what do we mean by that? I'll just ask Mr. McGarry to make sure I understand that. BY MR. McGARRY: Q. Fair to say that you moved money between Apeiron and Farnbacher Loles as you needed it in order to keep both entities going as long as you could? A. Well, the Apeiron account was the source of all funding for Farnbacher Loles at its inception. So everything when Farnbacher Loles started came from the Apeiron account. Q. I'm looking for the quote. In that regard, just to go back to the Judge's question, you kind of informed the agent, did you not, that all accounts even became one account; that you used the money -- you commingled and moved the money back and forth as needed, correct? A. Well, the Apeiron account was where all my money was, if you will -- anything that I earned. And then I think you've seen I paid my expenses out of that account from before, obviously, this horrible thing started. It was always the Apeiron account. So when I decided to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 9 of 104 9 create this new business, the funding for it all came from the Apeiron account. Q. So the money in Apeiron was used to cover Farnbacher Loles' expenses. The money went from Apeiron to Farnbacher Loles, correct? A. Yes. I mean, the Apeiron account was the source of -- that's where all our family money was and eventually obviously other people's money also went into that account. Q. So again, if you could just answer my question. The Farnbacher Loles was born, in part, out of Apeiron, correct? A. It was funded, yes. The creation of the company was funded by Apeiron Capital. Q. Again going to your statement that you gave to the FBI, you told the FBI, didn't you, that the money in Apeiron was used to cover Farnbacher Loles expenses, correct? A. Well, again, like I said, it was money from Apeiron that created Farnbacher Loles. Q. And you told the FBI you needed to create value and you made a conscious decision to create Farnbacher Loles. And you also admitted to the FBI that you took money from old ladies who invested their money through Apeiron to create your company Farnbacher Loles, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 10 of 104 10 correct? A. The company was not created -- I mean, I had money and I was able to create Farnbacher Loles. Eventually -- Q. And part of that money was money that you took from people who were at the church, correct? A. Eventually there was money involved from people from the church, because their money went into the same Apeiron account. And when I said that all accounts became one, the Apeiron account, who was, if you will, the banker of -- Q. Let me stop you there. So you did say all accounts became one account? A. But what I meant by that is -- Q. But you said it, correct? A. Well, but the context I think is what is important, or what you want to lead to. And the context is that the Apeiron account was the center of all my finances from 1995, not only when this started. Q. I'm going to try to limit my questions to the fraud which started 2001. And if you could limit your answers to that, I think that will be helpful in moving us along, okay? To the extent that we need to get context, we'll ask for context, okay? A. I simply want to say the nature of how the Apeiron 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 11 of 104 11 account, the one Citibank Apeiron account was used starts in 1995. It did not start just in 2001. Q. Let's talk about 2001 moving forward. You created Farnbacher Loles, correct? A. Yes. Q. You created Farnbacher Loles using money out of Apeiron, correct? A. Yes. Q. And as things went, you went back -- money went back and forth between the two, correct? A. Eventually, when Farnbacher Loles had free cash flow, it did numerous times return money to the Apeiron account, keeping in mind that Apeiron has one shareholder and Farnbacher Loles, the years that it was being built, only had one shareholder before some equity was sold. So yes, when Farnbacher Loles had free cash flow or there was money that now went in the other direction as well. That's absolutely true. Q. So money went from Apeiron to Farnbacher Loles when it was needed, and when there was cash at Farnbacher Loles and you needed it at Apeiron, cash went back, correct? A. Yes. Because Farnbacher Loles started having revenues. Q. But the money went back, correct? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 12 of 104 12 A. Eventually there was movement in both directions, absolutely. Q. And that is how you came to the statement to the FBI that it all became one account? A. Because -- exactly. I mean, Apeiron was financing obviously the fraud as well. And when I say one account, obviously I was paying those liabilities from the same account, yes. Q. And included in the Apeiron account was money that you also got from Milbury Holdings, correct? A. Money that came from overseas, yes. Q. And I believe we saw that in Government's Exhibit 4 last week, but let me pull that up. You see on the screen in front of you a list of transactions prepared by the FBI of money coming in from Milbury Holdings? A. Yes. Q. And that was some of the money that went into Apeiron, correct? A. All of that went into Apeiron, I believe. Q. And some of that money was commingled and used to support Farnbacher Loles, correct? A. To grow Farnbacher Loles, yes. Q. And the money from Apeiron -- I'm sorry -- from Milbury Holdings, I believe you testified about it last 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 13 of 104 13 week, but there was -- you had a friend in Greece, correct? A. I assume you're referring to Mr. Missailidis who has passed away? Q. I was referring -- I guess Mr. Missailidis served as a business lawyer for the Karayanis family; is that correct? A. Among other people, yes, Mr. Karayanis was a client of Mr. Missailidis. I found out after his death, but yes. Q. And I believe you also stated that the companies in Greece supplied medical devices, but they also needed to bribe doctors with cash to get into major hospitals? A. Would you like me to explain that statement? Q. Did you say this to the FBI when they asked you about the money? A. This is what I found out about Mr. Karayanis's activities, yes. Q. And this is what you told the FBI, correct? A. He disclosed to me after -- Q. The FBI didn't disclose anything to you, did they? A. Mr. Karayanis disclosed his activities in Greece, and these are the references to Smith & Nephew and Medtronic Corporation here in the U.S.; that they were -- and I think I explained what I knew of how they 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 14 of 104 14 did what they did to -- at the meetings we had. We can go into all that if you wish. Q. They gave you the money presumably to park it in your account, correct? A. What do you mean they gave me the money? Q. When Milbury Holdings sent you the money, they weren't going to buy the Arbitrage bonds or the Knightsbridge bonds, they were giving you the money to park it in your account, correct? A. Milbury Holdings was a company that Mr. Missailidis, that passed away, John Missailidis, I believe it was a Panamanian company, and he was using this for his investing and for all sorts of things. Q. But he wasn't giving you the money to build your business, was he? A. No. Together -- together, he and I invested in -- I don't think we ever got into this, but we invested in the Greek stock market and a lot of money was made. Q. But the money that came over here to Apeiron -- A. Yes. Q. -- he gave you that money to park it in the United States to keep it from the Greek authorities or the tax authorities, correct? A. That's not true. Q. He didn't give it to you to park it? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 15 of 104 15 A. First of all, he had passed away. So he didn't do anything. Q. Okay. A. He passed away before any of this happened. Q. Okay. A. I don't know if that's clear in the record. Q. Okay. Was the money from Milbury Holdings given to you to park it? A. You say that term because I used that term. Q. Interestingly, yes. A. Yes. I used that term because when Farnbacher Loles was being built, I brought some of that money into the U.S., and the hope was that once the company was able to build its revenues, it would be able to be returned. Obviously that wasn't the case. It cost much, much more to establish Farnbacher Loles and eventually the money was invested into Farnbacher Loles. THE COURT: What were the terms of the transfer? BY MR. McGARRY: Q. These were wire transfers that came in, correct? A. Yes, it was. Q. And you didn't have an agreement or contract, did you? A. Agreement or contract for what? For bringing the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 16 of 104 16 money in? Q. For the $14 million coming to you. A. Yes. Well, but -- Q. Did you have an agreement, yes or no? A. With who? No. Q. With Milbury Holdings? A. Milbury Holdings simply is where this money existed. Q. I understand. A. Yes. Q. Did you have an agreement with Milbury Holdings as to why they were sending you the money? A. Because I instructed them to send me the money. Q. And they were sending you the money to park it? A. They were sending me the money because I had the right to have this money where I wanted it and I wanted it here to grow this business. THE COURT: Let me just ask this: What kind of an entity is Milbury Holdings, or was it? THE WITNESS: Milbury Holdings is a Panamanian corporation. THE COURT: And Apeiron is another company. THE WITNESS: Apeiron Capital Management is I -- I believe it was Delaware. THE COURT: So it's not you. It's a company. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 17 of 104 17 I guess my question is: If we have money transferred from one company to another company, that's no different than if money goes from my account to Mr. McGarry's. THE WITNESS: Yes. THE COURT: I'm going to want to have some understanding of where my money is going from my account to Mr. McGarry's. My question is: What were the terms of the transfer? THE WITNESS: The money that was in -- THE COURT: You can't say I wanted the money. It's Apeiron that's getting the money. You're not Apeiron. It's an entity. Milbury Holdings is an entity. So the question I have is: What were the terms of the transfer? THE WITNESS: The terms of the transfer was that that money was -- although it was held in an entity, it was Loles money, and I needed it here because this is where this investment needed support at the time. THE COURT: Okay. Thank you. THE WITNESS: I used this term "parked" because the hope was that it wouldn't have to stay here. It would be a loan that could then be repaid. It didn't work out that way. Farnbacher Loles was dramatically more expensive to build out than what obviously I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 18 of 104 18 thought. BY MR. McGARRY: Q. In fact, somebody came to visit you at Wyatt, didn't they, to ask about their money? A. Someone came for Mr. -- for George Missailidis had somebody come, yes. Q. And I believe they threatened a lawsuit, correct? A. Well, George was very concerned because what we discovered obviously after his father passed away is what the Karayanis family, or what his father potentially was involved in helping the Karayanis family do in Greece. Q. Which was avoid paying taxes on medical devices that were being sold, correct? A. Oh, much more than that. Q. But that was part of it, correct? A. I don't think -- what they were doing is they were bribing Greek authorities to buy these grossly over-priced medical devices that they were selling for years and years representing Smith & Nephew and Medtronic products in Greece. This is what the Karayanis father and two sons that I met with in Greece explained to me. And what they basically said is that John, the deceased father, was helping them doing some invoicing and such things through the UK. We discussed 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 19 of 104 19 the details, I think. And he wanted a continuation of this. And obviously I told George, the son, that you can't be involved in what these guys are doing. And it did eventually stop. Q. So there was some potentially illegal activity with these companies overseas, correct? MR. DONOVAN: Object to the form of the question. It's just too vague. BY MR. McGARRY: Q. Was it your understanding that there was some potentially illegal activities going on and they gave you the money to park it in the United States? A. Mr. McGarry, it was not their money. The Karayanis money was not in Milbury Holdings. You seem to -- Karayanis family and their businesses in Greece who were representing American companies in medical devices were clients of Mr. Missailidis. Milbury Holdings, to make clear, what I know of Milbury Holdings is for many years Mr. Missailidis had this company and he would invest with it as being the investor entity when the Greek stock markets were booming and there were a lot of people investing. This is an entity that he used, as a lot of people in Greece do, versus doing things in their own name they use entities. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 20 of 104 20 Q. Let me ask you a simple question: Was one of the purposes of transferring the money to get the money out of London? A. The money was fine where it was in London. I don't understand what you mean to get it out of London? I needed the funding here. Q. I'm going to ask my question again. Was part of a purpose of transferring the money to you to get the money out of London? A. You're saying transferring the money. It was my decision to bring this money in. I don't understand -- you're implying -- and again, there may have been other funds in Milbury Holdings as well, but I don't understand what you want me to say. Q. Did you tell the FBI that the purpose of transferring the money to Loles, yourself, was to get the money out of London? A. I don't know what the context of getting out of London. It was perfectly safe in London. But I see what you're saying. I mean, I think -- again, I don't know what the question was that -- can you -- yeah. I mean, the $14 million was accumulated over the years. The purpose of transferring the money to Loles was to get the money out of London. I don't recall me saying that it was to get it out of London. Why would it 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 21 of 104 21 matter where the money was kept? Q. Okay. A. I mean, I'm not following. Q. Let's move forward. At some point in time you took in an investment into Farnbacher Loles of $1 million from Mr. Zugel? A. Yes. Q. And you sold Mr. Zugel, by your estimates, 10 percent of the company, correct? A. Yes. Q. And you, by yourself, valued the company and told him it was valued at $10 million. So 10 percent would be $1 million, correct? A. That's not correct. Q. I'll ask the question again. Did you value the company at $10 million? A. We jointly valued the company at $10 million. And the agreement for the sale of the 10 percent was a rather substantial document created by Mr. Zugel's lawyers. Q. You didn't -- A. Excuse me. Attached to that is a balance sheet. Q. You didn't disclose to him when you sold him 10 percent of your company that some of the money going into Farnbacher Loles was from Milbury Holdings, did 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 22 of 104 22 you? A. There was -- why would Milbury Holdings matter to Mr. Zugel? Q. You did not disclose to him that some of the money that was supporting Farnbacher Loles at this time was from Milbury Holdings, did you? THE COURT: I guess, just because I'm noticing this, Mr. Loles -- THE WITNESS: Yes. THE COURT: -- Mr. McGarry asks you a question, and instead of answering the question, Why would that matter to Mr. Zugel? What I'm interested in is not you asking him a question but you answering the question. THE WITNESS: I'm sorry. Please ask the question again. BY MR. McGARRY: Q. You didn't disclose to Mr. Zugel when you sold him 10 percent of your company that money from Milbury Holdings was being put into Farnbacher Loles, did you? A. No, Milbury Holdings was never mentioned between me and Mr. Zugel. Q. When he was trying to make his investment decision, he didn't know that part of the money that was keeping Farnbacher Loles going at that point was from Milbury 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 23 of 104 23 Holdings, did he? A. No. Q. And you also at one point entered into a agreement with Mr. Nicholson to give him 10 percent of Farnbacher Loles? THE COURT: Let me ask a follow-up question. MR. McGARRY: Yes, sir. THE COURT: Mr. Loles referred to a balance sheet was attached -- THE WITNESS: Yes. THE COURT: -- to that agreement. Did the money that came from Milbury Holdings affect what was on that balance sheet? THE WITNESS: The balance sheet which was attached to the agreement actually listed all the assets of Farnbacher Loles. And actually, Mr. Zugel felt -- because the assets weren't 10 million. The assets, I think, were about five and a half to 6 million. And he included what we called goodwill because the company had functioned for several years. THE COURT: Who prepared the balance sheet? THE WITNESS: We did it together with Mr. Zugel. Mr. Zugel was a big client of the company and that's how he became familiar with it and decided that he wanted to invest in the company. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 24 of 104 24 THE COURT: As you went down the lines of balance sheet, were any of the numbers that were on the balance sheet affected by the fact that money had come from Milbury Holdings? THE WITNESS: Well, the balance sheet had assets of Farnbacher Loles. Money from Milbury Holdings -- THE COURT: Were any of the assets greater because money had come from Milbury Holdings? THE WITNESS: Money from Milbury Holdings, our personal money, had bought -- THE COURT: So the answer is "yes"? THE WITNESS: Yes, I mean. THE COURT: Thank you. BY MR. McGARRY: Q. Were any of those assets greater because money came from Apeiron, which was, at that point, taking money from investors who were parishioners of the church? A. All the funds went into the Apeiron account. So there's money from Milbury Holdings, there's our money, our family money, and there's money from other people. And eventually, obviously, money moved from the Apeiron account to Farnbacher Loles. Q. So is the answer "yes"? A. So yes, you would have to say that the sources of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 25 of 104 25 money to the Apeiron account were, in essence, three, including other people who obviously got hurt, myself, and Milbury Holdings' money. Q. And you did not disclose to Mr. Zugel this source of money of Milbury Holdings or the people who got hurt, the parishioners of the church, the other investors, did you? A. No. Q. And you also entered into an agreement with Nelson Nicholson where you agreed, because of money he had given you, that he would get 10 percent of the company, didn't you? A. Nelson wanted to get -- to give 10 percent, a 10 percent interest in Farnbacher Loles to his nephew. And I gave him the document that I see you have here, which is the document that Mr. Zugel's lawyers created. And I said this is what the first 10 percent was sold. Obviously, Nelson was aware of that. And if you want to do it, I think this should be the basis of investing. Q. So it's your testimony that this document revealed to Mr. Nicholson that 10 percent had gone to Mr. Zugel? A. Well, he was aware. Nelson and I were very close. He knew I had sold 10 percent to -- that I had sold 10 percent of Farnbacher Loles. I don't know if he knew the name of the person or if it mattered, but 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 26 of 104 26 absolutely. MR. McGARRY: This is a government's exhibit, which we premarked, Your Honor, so it's a little out of order, but this is Government's Exhibit 37. THE COURT: Okay. MR. McGARRY: Make sure to give a hard copy for the record. BY MR. McGARRY: Q. Take a look at Exhibit A, which is page number i. This the lays out initial percentage interest. Do you see that? 85 percent for Gregory Loles, 10 percent for Nicholson Properties, 5 percent for Horst Farnbacher. Do you see that? A. Yes. Q. And that adds up to 100 percent, doesn't it? A. Yes. Obviously, Christian Zugel should have been here as well. Q. But he wasn't, was he? A. It wasn't put in, no. Q. And Mr. Zugel had invested in October of 2006 thereabouts, didn't he? A. No, that's not correct. Not October 2006. I believe -- Q. It was 20096, wasn't it? Before 2007? A. I believe it was in the beginning of '08, but I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 27 of 104 27 think -- yes, because '09 -- I think you need to check on that. I don't think it was that early. So please check on that. Q. Well, you didn't disclose to Mr. Zugel -- Mr. Zugel wired in $255,000 October 30 th , 2006, $55,000, December 2006? MR. McGARRY: May I approach? THE COURT: You may. MR. McGARRY: This might refresh your recollection. A. As I said, Mr. Zugel was a client. Those transactions -- and you can obviously contact Mr. Zugel -- those transactions had nothing to do with his purchase. I am fairly sure that -- yes, here it is. You see 1/8/2009, $335,000. That is one of the first transactions for the purchase, right here. 1/8. BY MR. McGARRY: Q. So it was your testimony a few minutes ago -- A. Yes. Q. -- that Mr. Zugel bought 10 percent of the company -- A. Yes. Q. -- based on a valuation that you and he did? A. Yes. Q. And you valued it at $10 million, correct? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 28 of 104 28 A. Yes. Q. And that he got 10 percent at $1 million, correct? A. Yes. Q. That was your testimony about 10 minutes ago? A. Yes. Q. However, you didn't disclose to Mr. Zugel that Mr. Nicholson already owned 10 percent of the company, did you? A. That's incorrect. Mr. Zugel bought his 10 percent first. I'm afraid that your dates are wrong. Mr. Zugel -- Q. So Mr. Zugel bought his 10 percent first? A. Which I believe was in January of '08. Q. So then you didn't disclose to Mr. Nicholson that Mr. Zugel owned 10 percent and it's nowhere in this agreement, is it? A. He knew -- Nelson knew that I had sold 10 percent of the company and that he was buying an additional -- that I was divesting an additional 10 percent. It's not reflected on this page clearly correctly. It should have been, yes. Q. I'm going to go back to the acceptance of responsibility and remind you that you're under oath. A. Yes. MR. DONOVAN: May it please the Court, that's 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 29 of 104 29 unnecessary. BY MR. McGARRY: Q. Did you disclose to Nelson Nicholson -- MR. DONOVAN: I'll withdraw the objection. BY MR. McGARRY: Q. -- that Christian Zugel had bought 10 percent when Nelson was buying -- when Nelson was buying 10 percent of the company, did you disclose to him that you had sold to Mr. Zugel 10 percent of the company already? A. 100 percent. Q. You disclosed 100 percent? A. He absolutely knew and we used the Zugel documents to do it, except for this exhibit where obviously his name was put in where Christian Zugel's name was where it should have been in addition. But Nelson definitely knew that I had already sold -- we had celebrated together that Farnbacher Loles had reached the point where a sophisticated person like Christian Zugel, a hedge fund manager who knew the company, studied the company, saw enough promise in it that he invested $1 million in the company. Q. But he didn't know that part of what was propping up the company was money from Milbury Holdings, did he? A. He did not know the source of my funds, no. Q. I want to move forward to another topic. You 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 30 of 104 30 testified last week about day trading and profits that you made day trading, correct? A. Yes. Q. And prior to beginning this scheme for which you've pleaded guilty, you were a registered broker, correct? A. Yes. Q. You had your license, correct? A. Yes, I did. Q. You had a Series 7, I believe? A. I had a Series 7. Q. I believe you had Series 63? A. Or 65. One of those. Q. And you're familiar with the rules and regulations regarding securities trading, correct? A. Fairly familiar, yes. Q. And you were familiar with the term "cherry picking," correct? A. I understand what it applies, yes. Q. And cherry picking is when you take favorable trades and assign them to one account and give that account preference over other accounts, correct? A. Correct. Q. And the SEC has brought cases on cherry picking, correct? A. If bad trades are given to certain people and the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 31 of 104 31 good trades are given to other people, or to oneself, absolutely. Q. And here what you were doing was taking good trades and giving them to the church and you said you'd take bad trades and kept them for yourself? A. I was day trading for myself. Q. I'm going to ask you if you can answer my question. You testified that you took successful trades and gave -- assigned them at the end of day after the positions were closed, assigned them to the church, and you took the unsuccessful trades and assigned them to either other clients or yourself, correct? A. There were no other clients. Q. To yourself, correct? A. I kept all trades in my account. At the end of the day on a particularly successful day, yes, I gave whatever I was able to to the church account. And this was -- and they knew this was happening. I asked for their permission before. Q. So you were cherry picking the good trades to give to the church, correct? A. From myself. In a way, yes. Q. And if you had kept them, if you had opened them for yourself, closed them for yourself, realized the gain, you would then have a short-term capital gain, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 32 of 104 32 correct? A. Yes. There would be gains, yes. Q. And there would be tax consequences on a short-term capital gain, correct? A. There would be. Q. And then if you turned around and were being charitable and donated the equal amount of profit to the church, the church being a charity wouldn't have to pay taxes on it, correct? A. They wouldn't, obviously. Q. But you would have paid taxes on the short-term capital gain, presumably? A. I would have paid taxes. And then potentially if I did it that way, would then get a donation deduction for the amount. Q. But the donation deduction might go against ordinary income, not against short-term capital gains which are at a different rate, correct? A. I believe that that maximized the money to the community by doing it this way. Q. And it avoided taxes that you would have had to pay had you not cherry picked at the end of the day after the positions were closed, correct? A. I was trying to give money to the community. If taxes were avoided, I didn't keep any benefit, I gave it 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 33 of 104 33 all to the community. Q. But you didn't pay taxes on the trades that you would have had to pay if you didn't cherry pick, correct? A. Well, those trades weren't realized in my account. They were booked into the church's account. If I had not given them, you are correct, there would have been a tax liability to me. Q. And if you had losses, then you were able to credit those losses against your personal tax liability, correct? A. The losses are losses, yes. Q. And I believe the Judge asked a question last week, but let me ask it to you: You never reported the money that you took from the investors that you used for yourself on your taxes, did you? A. You mean as income? Q. Correct. A. No. Q. So all through -- the scheme alleges from 2001 to the day of your arrest, for '01 through '09, you never reported any of those monies that you used for your house or your child's college education, you never reported that money as income, did you? MR. DONOVAN: Object to the form of the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 34 of 104 34 question. There's an assumption inside the question which he's not being asked. It's just assumed. I guess it's a "are you still beating your wife" kind of question. MR. McGARRY: I'll ask it this way. BY MR. McGARRY: Q. Did you use some of the money that you took to pay tuition at Saint Andrew's? A. The Apeiron account paid for tuition at Saint Andrew's. The Apeiron account was where all our money was. And that is the same account that other people's money went into, and Milbury Holdings as you call it money went into. So the monies that we contributed were far more than what the tuition was at Saint Andrew's. But if you would like to say that other people's money paid the tuition at Saint Andrew's, I guess you can say that because that account that received all our family money, Milbury Holdings, and unfortunately other people's money did pay all our expenses, as it did from 1995, as I think we said in our conversations. We always used that Apeiron account as our -- how we paid things. Q. You also paid tuition at Cornell, didn't you? A. Absolutely. Q. And that came out of the Apeiron account? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 35 of 104 35 A. Everything came out of the Apeiron account. Q. Which was where the parishioners who are listed here on Exhibit 1A, where their money went into, correct? A. Almost all the money, I believe, went straight into the Apeiron account, yes. Q. And you also took some trips, correct? You went to Milan, I believe? A. It was actually business trips to Milan. Q. And the money that you paid for your personal expenses, you never declared that on your taxes, did you, as income? You never bothered to try to track it, did you? A. To -- when I went on a business trip, to say that the cost of the business trip should be income? No, I did not do that. Q. How about the college tuition at Cornell? A. No. Q. The Saint Andrew's tuition? A. Apeiron is where we had our money. Yes, that is also the same account that other people's money went in. Q. And you lived out of that account, correct? A. From 1995 that's how we -- that's the account -- from when I started working as a broker and making money, it was always the Apeiron account. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 36 of 104 36 Q. But starting in 2001, you weren't a broker anymore, correct? A. No. Q. And you weren't making money, correct? A. I was trading for myself. I was making money and we had been successful. We had made money. Q. In the past you had made money? A. Absolutely. Q. But then you started the scheme, correct? A. In 2001, that's when it started. Q. And that was your primary source of funds, correct? A. No, it wasn't. Q. Was Milbury Holdings your primary source of funds? A. Milbury Holdings was one source, as you know. Q. And the Ponzi scheme was another? MR. DONOVAN: May I object to the form of the question. BY MR. McGARRY: Q. The scheme to which you pleaded guilty was another? A. There were funds that came from that, absolutely. Q. And you didn't have any other source of positive income in 2003, '04, '05, '06, '07, did you? A. Well, Farnbacher Loles had started. Q. It had started, but it was using money from Apeiron and Milbury Holdings to keep it going, correct? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 37 of 104 37 A. Not to keep it -- to grow. It was buying assets. I don't understand why you're saying to keep it going. Q. It wasn't generating profit above its expenses, was it? A. It was a new company. It did not have free cash flow probably until '05, '06. Q. But it didn't -- even in '05, '06, it didn't generate positive income, it was still drawing off Milbury and Apeiron? A. It was still growing, yes. Q. It was still drawing off Milbury and Apeiron, correct? A. The company was still growing, yes, and needed infusions of funds, yes. THE COURT: Do I take it then you're agreeing that it was drawing money as opposed -- you're saying "growing" and he's saying "drawing money." THE WITNESS: As we started with one facility in Danbury -- THE COURT: Put it this way: Unless you say "no," I'm going to construe that answer as you were drawing the money. THE WITNESS: Apeiron was transferring money into Farnbacher Loles through this time period, yes. THE COURT: Okay. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 38 of 104 38 BY MR. McGARRY: Q. I want to talk -- we're talking about day trading. I'd like to talk about the money that Nelson Nicholson loaned you to do this day trading, okay? A. Okay. Q. Nelson Nicholson gave, into the Pershing account, $700,000, correct? A. Into the church's Pershing account, yes. Q. And that was in Pershing and Peter Anastasian -- if I'm pronouncing his name correctly -- A. You are. Q. -- had signature authority over that, correct? A. Yes. Q. And approximately March of 2004, in connection with the New Haven Savings Bank transaction, which we'll get to, Nelson instructed Peter Anastasian to wire the money to a law firm of at the State Bank of Trust of Fargo, Fargo, North Dakota, correct? A. Correct. Q. And prior to that, you didn't have custody over the money. It was in a Pershing account, correct? A. Absolutely. MR. McGARRY: This, Your Honor, is Government's Exhibit 42 which is up on the screen. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 39 of 104 39 BY MR. McGARRY: Q. I'm going to jump ahead to after New Haven Savings Bank. That money, when it came back -- and I know your testimony and we'll get to it -- that money came back to an Apeiron account at Citibank, didn't it? A. I believe so, yes. Q. It didn't go back into Pershing, did it? A. No. Q. And Peter Anastasian didn't get signature authority back over the money, did he? A. It was no longer part of the church account, that's correct. Q. And it went to the Apeiron account, correct? A. Yes. Q. And it never went back to Mr. Nicholson, did it? A. It sat in the Apeiron account, yes. Q. And then it was eventually used with the other money in the Apeiron account, correct? A. It was then used for the Fantasma transaction with Mr. Nicholson that I think we've talked about and described. Yes, it was used. Q. He never got the money back, did he? A. No, because -- Q. He never got the money back, did he? A. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 40 of 104 40 Q. And the church never got the money back, did it? A. The money -- it was Mr. Nicholson's money. It was never the church's money. Q. Mr. Nicholson loaned it to the church for the benefit of the church, correct? A. Yes. Q. It went to North Dakota, correct? A. Uh-huh. Q. It came back to Citibank, correct? A. Correct. Q. And Mr. Nicholson never got it back, correct? A. He didn't get it back. Q. Did you -- A. Because he instructed me, as you know, as part of the Fantasma transaction, that he wanted to take the 100 percent of it, as I think he had mentioned when he spoke with -- Q. That's your testimony. Your testimony is that he -- I want to get this clear. A. He did not get it back. Q. He didn't get it back, correct? A. He did not get it back because he instructed -- Q. Is it your testimony that he explicitly instructed you to take that $700,000 and do something with it and send it to Fantasma Toys? Is that your testimony? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 41 of 104 41 A. No, not to Fantasma Toys. He told me -- I had already sent $700,000 plus to Fantasma Toys. When it went poorly, he basically said, because it was his friend, his idea, Nelson said the money that is sitting in Apeiron -- he knew when the money came back from North Dakota it didn't go to his account. He knew that. It didn't go to the church account. Everybody knew that. He knew where it was sitting. Q. And is it your testimony that you told him that you had sent money to Fantasma Toys that was your money? A. There's -- the transfers, I think you have them. I think it was $740,000 prior to New Haven Savings of my money from -- Q. Your money? A. -- from I believe Pershing. Again, unfortunately I don't have the Pershing records, but I believe it was from my Pershing trading account that monies were sent to -- I sent $750,000 originally. I sent roughly $750,000. Q. And the money that you sent originally -- A. Yes. Q. -- that was other people's money, wasn't it? A. I can't say it was other people's money. Q. It was money in the Apeiron account, wasn't it? A. Not everything in the Apeiron account was other 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 42 of 104 42 people's money. Q. You didn't have $700,000 of money that you had earned in a legitimate job in 2004, did you? A. There was money in our account. I don't know how much I had. First of all, it wasn't in 2004. I think it was in 2002, 2003, in smaller amounts that the monies were going into Fantasma. I believe you may have the wire transfers. I don't have them. Q. The money in the account included money from the Endowment Fund, didn't it, at that point? A. You're asking me things that obviously I have no documents to say, so -- Q. You don't know? A. I can't say. You're saying that transfers from Apeiron to Fantasma in New York, you want me to tell you what the origin of those transfers were. I don't have the dates. Q. You don't know? A. I can't tell you off the top of my head, no. Q. Do you know or do you not know whether or not money from the Endowment Fund was in your account when you sent the money to Fantasma toys? A. Money from the Endowment Fund I guess started flowing sometime in 2001, 2002. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 43 of 104 43 Q. Do you know or do you not know that money from Iosifidis was in your account when you sent money to Fantasma Toys? A. Obviously, there was money. There was a transaction with the Iosifidis family. Q. Money from Myra Grossman, money from Judith Lang, money from Chaltas, money from L-O-L-I-S was in the account when you sent money to Fantasma Toys, correct? A. There was -- obviously, if you have the transfers, then absolutely, there was. Q. When, in your mind, Mr. Nicholson, as you testified, bought you out, or said you could have -- he would buy you out, did you tell him in fact he wasn't buying you out but he was buying out the Endowment Fund and the Iosifidis and Grossman and the other people whose money made up the balance of the account when you sent those transfers down to New York? A. No, I didn't say that. Q. So in essence, by staying silent, if he in fact did say that -- and I believe his testimony differs from yours -- if in fact he did say that, that was just another fraud on Nelson Nicholson, wasn't it? A. If that's what you want to say, that's what -- obviously, I understand what you're saying since other people's money was in that account -- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 44 of 104 44 Q. Since other people's money was in the account, it would have been their half of Fantasma Toys, correct? A. You choose to make it seem like the Loles family had no money. I wish I had the documents, and perhaps maybe with Mr. Donovan's help, I can get the documents to show that the Loles family did have money. But there's no question that the same account at Citibank that received these good people's money was the account that went into this investment with Mr. Nicholson in New York. Q. And you didn't tell Nelson Nicholson that, did you, when you had this conversation that you claim occurred where he absolved you of the other half of the company and was going to take it for himself, did you? A. He wanted -- to tell him that there were other people's monies involved, obviously no, I did not. Q. Correct. You didn't tell him that, did you? A. No, I did not. Q. So if in fact you did sell him -- and so the record is clear, I'm not necessarily accepting that -- but if in fact you did sell him your half of the company, in fact you were selling him something you didn't own in the first place, correct? A. First of all, it wasn't a company that he was buying. It was we both put this money into Fantasma New 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 45 of 104 45 York as loans, as I think you know. It wasn't equity or anything. And when the company in New York got into trouble, obviously he felt bad that on his recommendation I also stood to lose, and that's how the 700 that came from North Dakota between he and I was settled out. Q. But you didn't stand to lose, did you, because it wasn't your money? MR. DONOVAN: I haven't objected -- A. You're implying that we don't have money as a family. MR. DONOVAN: Mr. Loles -- A. I don't accept that. MR. DONOVAN: I'll withdraw that. Could the court Instruct the witness that if I object, he has to wait until Your Honor rules. THE COURT: Yes. If Mr. Donovan stands up, you stop talking. THE WITNESS: I'm sorry. THE COURT: You keep saying it's not as if the Loles family didn't have money. What percentage of the money in the account was Loles family money, roughly? You can just give me a number. MR. DONOVAN: I wonder if I can object to your question, because it's over a period of time. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 46 of 104 46 THE COURT: At the point in time we're talking about of this transaction. MR. DONOVAN: Thank you, Your Honor. THE WITNESS: When the money was returned, or as the money was put into this company in New York? I believe it was in 2002, 2003. I think they have -- THE COURT: You don't know? THE WITNESS: I couldn't tell exactly. But obviously, this is something that hopefully over the next couple of days I have some of my banking records available to me. THE COURT: Okay. THE WITNESS: Perhaps we can work some -- to provide a little bit more information. BY MR. McGARRY: Q. It's fair to say, isn't it, that after the money came back from North Dakota, the $700,000 that was loaned to (sic) the church, it never went back to Mr. Nicholson or the church, correct? A. Correct. Q. I'd like to keep moving forward as to the New Haven Savings Bank transaction. A. Yes. Q. When this fellow by the name of Gus Boosalis called, he was told to talk to you, correct? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 47 of 104 47 A. My -- Q. He was told to talk to you, correct? A. I believe Father Peter did refer him just to me, yes. Q. And he called you, correct? A. Correct. Q. And the initial documents were presented to you, correct? A. Eventually, yes, he presented -- or his lawyer, Mr. Frisk, presented the two documents that they were using. Q. And you negotiated -- eventually negotiated a better rate from the rate originally proposed, correct? A. I believe the document had 75 percent and it went to 72 percent or something like that. Q. And you advised members of the church who were depositors that if they had money, that they should do it themselves, correct? A. Yes. Q. That's the advice you gave them, correct? A. To anyone that had this opportunity, if they had the ability, I was fairly confident that it was going to be very successful so they should participate if they can. Q. And for you -- for them to deal with Gus Boosalis 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 48 of 104 48 and Attorney Frisk, you had to be comfortable with them, correct? A. Because of the liability of this money being lent to these people, definitely wanted people that, one, would be comfortable, would not run off with this loan money and then potentially put me at risk. Q. So you had to be comfortable with them, correct? A. I tried to be as comfortable as possible of the people that I would recommend -- I believe it was Old Financial was the name of their company -- would lend money to. Q. But you felt that it had to be someone that you were comfortable with that was not going to run away with the money, correct? A. Well, it was a big liability. And it seemed -- not it seemed -- it was clear that if they chose to not do any -- any purchasing of the IPO or so forth, they can take this money and go. Q. Right, and for them to participate -- A. Yes. Q. -- and I'm referring to your testimony before this Court -- it had to be someone that, quote, I was comfortable, who was not going to run away with the money, correct? A. Absolutely. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 49 of 104 49 Q. And that was your decision, correct? A. Well, I was -- I was recommending names to Old Financial to lend money to. Q. And you would submit the names, correct? A. I submitted the names. Q. And they wanted you to be the contact person, correct? A. Yes. I mean, I would give them the documents, tell them to go review them with their attorney or whoever they'd like to understand. Q. And you talked to Gus Boosalis more than 10 times before the offering, correct? A. Yes. He was calling frequently. Q. And you were sort of a liaison for the parishioners and the church -- a liaison between the parishioners and the church office, correct? You were sort of a liaison, fair to say? A. Yes. I mean, Mr. Boosalis, his initial contact with the community was to, in essence, find an agent. He hoped that Father Peter may be that agent. Q. But it turned out that it was you, correct? A. It turned out that it was me. Q. And you had to make sure that the documents were executed correctly, didn't you? A. Part of my responsibility was to get the documents 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 50 of 104 50 signed and -- Q. Executed correctly? A. Executed correctly, yes. Q. And in fact, you told some of the parishioners to open an account at a local brokerage firm in Westport, didn't you? A. Well, eventually they would have to sell the stock. So I knew some people at this local firm and that was one place that potentially could handle the sale of the stock for them. Q. And you told some of the parishioners to open a account at a local brokerage firm, didn't you? A. Yes. Q. And you even went there with them, with a couple of them, didn't you? A. Whoever wanted me to be there with them to open their account, yes. Q. So you went with them, with a couple of them to the brokerage firm, didn't you? A. Yes. Q. And you provided them with documents and discussed the financial arrangement with them to the extent they wanted to discuss it with you, didn't you? A. The documents -- the loans documents they were signing you're referring to? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 51 of 104 51 Q. Correct. A. Yes. Q. To the extent they wanted to discuss it, you provided them the documents and discussed the financial arrangements with them, didn't you? A. I explained my understanding of the documents to them. Q. And you were the source for them, if they had questions, eventually if they had questions, they would come to you, correct? A. Yes. If they -- it was their decision, obviously, if they wanted to execute this loan. But if they had any questions, Old Financial didn't want to interact with anybody. They wanted just one person. And they -- Q. And they would come to you? A. They made me that person, yes. Q. And you had to kind of translate the documents for some of the parishioners, correct? A. If you mean into Greek? People that were not well versed in English? Q. I mean explain, financially explain it to some of them. A. Or explain what their responsibility is that they are creating by their signature on these documents, yes. Q. And you went through it with them. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 52 of 104 52 A. To the best of my ability, yes. Q. And you even opened a account for some of them, correct? A. Once they decided that they wanted to enter this transaction, anything that I could do to help them, I would help them. Q. And eight or 10 people you helped set up a account at Source Capital, didn't you? A. Source -- was that the brokerage in Westport, I believe? Was it called Source? Q. Let me ask you: Did you help eight or 10 people set up a account at a brokerage firm in Westport to help sell the shares? A. Yes. Q. And most of the people were not particularly sophisticated, were they? A. I would say that they weren't particularly sophisticated. Q. That they were not particularly sophisticated? A. Yes, I would agree. Q. In fact, for some of them you took the shares to Source Capital for them or with them, didn't you? A. Whatever help they needed, I was there to help them, yes. Q. You took the shares to Source Capital for them or 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 53 of 104 53 with them, didn't you? A. Yes. Q. And you even communicated with Source Capital to sell some of the shares based on dollar-cost averaging, didn't you? A. The group decision was for -- yes. I'm sorry. You don't want the explanations. You want yes or no answers. So I'll just say yes. Q. You communicated with Source Capital to sell based on dollar-cost averaging, didn't you? A. I felt that was the best way to do it just so everybody got the same. Q. You communicated with Source Capital to sell based on dollar-cost averaging, didn't you? A. Yes. Q. And you actually complained about the rate that Old Financial was taking, didn't you? You complained to Old Financial, to Frisk? A. About the 72 percent? Q. Correct. A. Yes. Obviously, I thought that was outrageous. Q. But you told parishioners that Old Financial was going to make a contribution to the church, didn't you? A. What I told them is that there is compensation for this and that all the compensation will go to the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 54 of 104 54 church, meaning my compensation as agent I would turn over to the church, absolutely. I wasn't trying to make anything for myself here, as everything was turned over. Q. Well, you were personally going to get no compensation from either side, correct? You weren't going to get paid by the parishioners and you weren't going to get paid by Old Financial, were you? There was no compensation from either side? A. No. I, as agent, they had an arrangement, not just with me but I believe with somebody else in New London or something, that there was compensation for bringing them people. Q. We're not talking about someone in New London. You personally were going to get no compensation from either side, were you? A. I had made the decision before even the first person signed that I was going to turn everything over to the community, absolutely. Q. Do you remember giving SEC testimony? A. Absolutely. Q. And you were under oath, correct? A. Yes. Q. And you were in New Haven, Connecticut; is that correct? A. I believe Hartford or -- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 55 of 104 55 Q. And you testified: So I had absolutely no compensation from either side. A. Yes. This was after the fact. And that was a correct statement, since I turned over all the compensation. Q. And you definitely told the parishioners, under what you testified to under oath where you swore to tell the truth, correct? A. Yes. Q. The same oath that you took here, correct? A. Yes. Q. And it was in Connecticut, correct? A. Yes. Q. And you testified that you told the parishioners that hopefully you're going to remember the church and you know when it's time for fundraising and for whatever reason the fundraiser is going to come in a couple of months, that you wanted the parishioners to contribute as well, correct? A. I wanted the people that would benefit from these loans, hopefully some of their windfall, that they would also contribute, because we were in the midst of collecting money for our building fund. Q. But you personally received no compensation or there was no compensation to you or anyone else, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 56 of 104 56 correct? A. I turned over all my compensation to the community. Attorney Frisk told me, once we made that calculation, that odd number, the $987,000 and change number, he said, What do you want me to do with it? And I said, Send it to the church office. Q. So there was no compensation to you? A. I did not take any compensation. Q. Or anyone else? A. What do you mean "anyone else"? I was the agent so I don't know what "anyone else" would mean. What do you mean? Q. You were asked if you had any documents related to compensation and you testified, I don't have any in my possession, any documents, and there was no compensation to myself or anyone else. So there's no document that has anything to do with compensation, correct? A. There was no compensation. Q. Thank you. There was no compensation. That's your testimony? A. You know what I mean, sir. There was $987,000 earned as a commission from those loans that were made. Q. Well, you told the parishioners that Old Financial was going to make a contribution to the church, didn't 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 57 of 104 57 you? A. I told them that everything that I make will go to the church. Q. You testified, did you not, Once Frisk said to us that there would be something coming from Old Financial, we absolutely -- we told people that, you know, we had, you know -- we're saying to people we expect you to help the church from your end of the windfall. But, you know, people were seeing that sort of the bulk of the money was going to go back to Old Financial. We did tell them they're telling us that they are also going to give us some kind of contribution. A. That's right. The compensation. It was laid out from the beginning that they would give 15 percent commission for every loan that was made. Q. And you started to get more aggressive as the number of parishioners participating went up, didn't you, with Frisk? A. I wouldn't say more aggressive. After about $6 million worth of funding, he actually wanted to stop. And that's where the transfer of the million four came about. Q. But you kept on toting to Frisk -- A. That I want more. I want you to make more loans, obviously to create a bigger -- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 58 of 104 58 Q. And you were getting a little more aggressive with him, weren't you? A. I don't know if it's aggressive. I was just saying that there are more people that want to borrow. Why wouldn't you want to lend us more money? Q. Do you remember giving your testimony at the SEC? A. Yes. Q. I was getting a little more aggressive because it was clear this was getting really good for them. So you were getting more aggressive with him, weren't you? A. Well, he started questioning, you know, $6 million is a lot of money. We don't know you people and so forth. So I guess I used the word "aggressive" saying, but there's more people through word of mouth that wanted these loans, that didn't have the ability to do the IPO with their own funds. And it was -- I looked at it as a double positive. They would make some money. Unfortunately, not as much as if they had their own money to do the IPO, but better than not doing anything. Q. And you told Boosalis, didn't you, that there was going to be a lot of running around that you were going to have to do and that the church was going to be compensated, didn't you? A. I said that, absolutely. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 59 of 104 59 Q. You did a major piece of the running around for the community so that the money would come to the church, correct? A. I had made the decision from the initial day when he said that there would be compensation for this that I would turn it all over to the community. Q. My question was: You did a major piece of the running around for the community so that money would come to the church, correct? A. So that the money would be made and it would eventually be given to the church, yes. Q. And you kept pounding away, didn't you, hoping you'd get a substantial donation for the church out of the whole deal, didn't you? A. It's not a donation. We can refer to it as a donation, but -- Q. So it wasn't a donation? A. It was compensation that I then directed it to go to the church. Q. So if somebody were to have called it a donation, they would be wrong, correct? A. A donation from who? Q. From Old Financial to the church. If somebody said it was a donation, they would be incorrect? A. I think that would be incorrect, yes. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 60 of 104 60 Q. Let's look at your testimony from the SEC. Did you discuss the Old Financial contribution with the church? Yes, I'm sure at some point I did. Yeah, I basically told them, I said, you know, I remember at some point saying, you know, there's going to be a lot of running around here that we're going to have to do. The church is going to get compensated. And he said, obviously, yes. Because obviously I would have been pretty upset if suddenly I did a major part, piece of the running around here for the community and a lot of people acknowledged it. And yeah, it's great for all these people, and some of the money -- but everybody knows that my main interest was that, you know, the money come to the church? A. Exactly. The money come to the church was my interest. And Mr. McGarry -- Q. And you say here, So I kept on pounding away, you know, perhaps maybe in the back of my mind hoping that we, you know, a substantial, you know, donation out of this whole deal. So you were the one who used the word "donation." But today you don't want that word. Today you call it compensation. A. Mr. McGarry, he offered 15 percent on every loan. Once they stopped wanting to give us more money at about 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 61 of 104 61 $6 million of the total $13 million that they lent, I organized to send the million four, in essence as a security deposit to them. And then another $7 million came, for a total of $13 million, which created this money that was turned over to the church. And I think you're aware, even though I was very much not interested in it, there was even a thank you that was put in a newsletter by the community. Q. We'll get to that. THE COURT: Why don't we give the court reporter about a five minute break or so. MR. McGARRY: Right now? THE COURT: Yes. MR. McGARRY: Sure. (Whereupon, a recess followed.) THE COURT: Please be seated everyone. MR. McGARRY: Continue, Your Honor? THE COURT: Yes, please. BY MR. McGARRY: Q. Did you request that Old Financial make a contribution to the church? A. I told Mr. Frisk to wire -- to send the money to the church versus to Apeiron, yes. Q. You told him to send it directly to the church, correct? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 62 of 104 62 A. Yes. Q. And so did you request the contribution on behalf of the church, or did he offer? A. From the first phone call, Mr. Boosalis said, This is how I do these transactions. The agent gets 15 percent of what we make on every loan. Q. So did you request that they make a contribution to the church? A. I told them to -- once we calculated the amount of $987,000, less whatever corrections, he said, What do you want me -- I remember the phone call. It was a while ago obviously. What do you want me to do with the money? Because obviously, he had wired money to me before. And I said, Send it directly to the church. Q. And you said, Why not just send it just directly to the church; is that your testimony? A. Excuse me? Q. You said -- I believe you testified in this court, Why not send it directly to the church? A. He told me, What do you want to do with the money? I remember that question from him. And I said to send it directly to the church. I had obviously told them what my intentions were as well, Boosalis, Frisk. There was no -- Q. So would you say he brought it up or you suggested 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 63 of 104 63 it? A. No. Once the number was calculated, he said, Where do you want me to send the money? And then I responded. Q. But didn't you testify in front of the SEC that you were complaining about the rate and he brought up the idea of the contribution to the church? A. The rate had nothing to do with the contribution. It was what the borrowers were going to pay. Q. Didn't you tell the SEC that you complained about the rate and he brought up the concept of making a contribution to the church? A. The two were not -- I mean, I complained about the 72 percent. And then obviously he said, But it's not like we keep all of it -- or the 75 percent. He says there's the agent fee. And I had made clear from Mr. Boosalis from the beginning that whatever your deal is, I want you to know that I'm going to give this money to the church. And his reaction was, That's your business. I don't care what you do. I just want good reliable people that we can lend money to, which obviously was his concern. Q. This is the SEC testimony. Question: Did anyone within the church organization suggest a contribution from Old Financial to the church? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 64 of 104 64 Answer: I think some people, you know, were skeptical. And you're asked here: Whose idea was it that Old Financial would make a contribution to the church? Answer: I would say that he brought it up. But it's your testimony here today that you told him that you wanted it to go to the church. So did he bring up the concept of the contribution to the church, as you testified under oath in front of the SEC, or did you bring up the concept of sending the money to the church as you testified in front of Judge Thompson? A. The money was generated as a fee. Now, the question that I was asked back then was -- let me read it again. Whose idea was it that Old Financial would make a contribution to the church? I would say that he brought it up. Did you request it? Q. No, I didn't. I was just sort of complaining about the rate. I didn't, you know, request specifically. I was hoping that, you know, I was hoping that our rate would be better and then we could go to our parishioners and say, hey, do something? A. Excuse me. So here -- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 65 of 104 65 Q. Did he bring up the idea that Old Financial would make a contribution to the church, as you testified in front of the SEC? Or did you bring up the idea of sending money to the church as you testified here in court? A. You're mixing two things together. If you would let me clarify. When I was complaining to him about the rate, it was the rate that the borrowers were going to pay. And in the conversation, instead of reducing the rate -- apparently obviously it was much fresher then. This was a few months after all this happened -- he must have come back and said, Well, I'd rather keep the rate at 75 percent than go to -- eventually we went to 72 percent. Maybe we can make a contribution. Q. So it was -- A. Because, as you can see, this was negotiating the rate, not the fee for the loans. This was the rate on the loans. So you're confusing -- Q. So you're saying that he said that they'll make a contribution to the church instead of lowering the interest rate? A. Let's keep it at 75 and then I can just give something to the church. Q. So the money to the church wasn't an agent fee? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 66 of 104 66 A. It was a agent fee for placing the loan. Q. Was it an agent fee or was it to keep the rate at 72 percent? A. It was an agent fee for placing the loans. The negotiation was to go from 75 to a better number for the people that were borrowing and he was resisting, apparently, and saying let's keep it at 75, because that's what we do everywhere, and maybe we can give something to the church. He knew that obviously I wanted -- Q. So for keeping it at 75, then he made the contribution to the church? A. Which he didn't. It went to 72, as you know. Q. It went to 72. So he didn't keep it at 75? A. No. Q. We got into 72? A. We got it to 72, but the fee for placing loans, the agency fee for placing loans, that's irrespective of if it's 75, 72 or 85. Those are two different things. He -- that conversation clearly was me trying to get a better rate. That didn't affect what the fee would be. Q. Whose side idea was it that Old Financial would make a contribution to the church? A. Well, here apparently he was trying to keep it at 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 67 of 104 67 75. That's what this implies. Eventually we didn't keep it at 75. It did go to 72. Q. So whose idea was it that Old Financial would make a contribution to the church? MR. DONOVAN: I'm objecting because there is two different, quote, contributions, and my friend is combining them into one. THE COURT: Well, what are the two contributions? MR. DONOVAN: One is the agency fee that was contributed. THE COURT: I know what we're saying the sources or reasons are. I want to know when are the contributions? I only heard about one contribution. Are you saying there are two components to the -- MR. DONOVAN: There is a proposed contribution that's never made because they get the rate from 75 to 72. THE COURT: Let's talk about the contribution and the proposed contribution. MR. DONOVAN: Great. Thank you, Your Honor. BY MR. McGARRY: Q. So the check that came to the church was a contribution to the church, correct? A. The check had nothing to do with this contribution 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 68 of 104 68 conversation here. Eventually it failed because the rate went to 72 percent. So there was no contribution by Frisk to the community to keep it at 75 because it didn't stay at 75. Now, the monies that came to the church were a result of the calculation of a fee based on 15 percent to the agent that placed the loans. Q. So what you're saying is that the contribution was separate from the conversation to lower the rate to 72 percent? A. Absolutely. Two unrelated things. Q. Let's go down to lines 14 and 15. Question: And did the conversation about the contribution occur before Mr. Frisk agreed to lower the interest rate to 72 percent? Um, I would say part of that conversation. So it was in fact part of that conversation and they weren't two different things? A. Mr. McGarry, I think you understand the context of lowering from 75 to 72, okay? The money that was generated because of the placement of the loans. And Father Peter can testify, because he was offered the money originally. And obviously, he laughed it off and said, I don't even know what he was talking about, this guy, that's why I told him to call you. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 69 of 104 69 These people wanted an agent mostly in the Greek community. That's why they approached the Greek church. Q. So would you agree with me that your testimony in front of the SEC reads as follows: Question: Whose idea was it that Old Financial would make a contribution to the church? Answer: I would say he brought it up. Does it say that? A. Yes. And there we go again. Q. Will you agree with me -- A. That's what it says. Q. -- that in your testimony in this court you testified, And he was implying, did I want it to go to my DLJ or my Citibank account. He was aware of both. I said, Why not send it directly to the church. Would you agree with me that those two statements are inconsistent? A. They are not inconsistent. They are two different things. Like we said, the 75, 72 calculation is one thing. The other day here in court we were talking about where the $987,000 should go. And clearly I chose for it to go directly to the church. Q. So on -- moving forward. On June 15 th of 2004 -- MR. McGARRY: And I have one copy -- we have the executed copy, which is premarked 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 70 of 104 70 Government's Exhibit 43, which is difficult to see. We got a better copy this morning, Your Honor, so we were unable to pre-mark it, but I'll mark Government's Exhibit 43A and I have a copy for the Court and for Probation. BY MR. McGARRY: Q. As you can see, the copy on your screen, Mr. Loles, is not entirely clear. Do you recognize this document, Mr. Loles? A. I never actually saw the check, but I recognize Old Financial as the lender. Q. And it's from Fargo, North Dakota, correct? A. That's where they were out of. Q. So after doing all this work and all this, I think we saw in your testimony you called it running around, after doing all this running around, eventually, regardless of who brought it up, who suggested it, Old Financial sent $987,895 to the church, correct? A. Yes. Q. It went to St. Barbara's Church, correct? A. Yes. Q. And it was deposited into the building fund, correct? If you look at the back of the check -- A. Yes. It says building fund, absolutely. Q. And so this was for the benefit of the church, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 71 of 104 71 correct? A. This was the church's building fund, yes. Q. And this is was the amount that the church received, correct? A. Yes. Q. So the church got nearly a million dollars, and I believe you testified last time, based in part on you're forts, correct? A. Yes. Q. And then the money went from the -- went from the church's account to the Citibank Apeiron account, didn't it? A. They then decided to put the money into the so-called bonds, unfortunately, yes. Q. And the so-called bonds were the fraud that you pled guilty to, correct? A. Yes. Q. So for all of this six weeks of running around, going down to Westport, advising people on the documents, walking people through the documents, dealing with Frisk, dealing with Boosalis, the church got almost a million dollars and then it ended up in your account, correct? A. Eventually they put it in, I think quickly after it came, instead of sitting at, you know, whatever, no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 72 of 104 72 interest or low interest, I'm not sure whose decision it was but the decision was made to put it into the bonds. Q. So in fact you ended up getting something for all your work, correct? You got the million dollars, didn't you, the $987,000? A. It eventually came to Apeiron, Mr. McGarry. It could have gone directly to Apeiron and then me turn it over, but I thought I was doing a good thing. I'm sorry if it came out that it was yet another bad thing. I've done a lot of very, very poor decision-making, obviously, in my life. I thought that this was something that I was pretty proud of. I'm sorry. And the 21 people that did take these loans, obviously -- Q. I don't believe there's a question pending. A. Sorry. Q. And in fact there was an announcement that went out to the church, didn't it, after this million dollars came in? A. I think there was some people organized -- I don't know if it was the president at the time, who I believe was Mr. Bazonis (phonetic), they put this silly ad, that obviously I wasn't at all interested in, thanking for the contribution. I believe they mention myself and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 73 of 104 73 Nelson, as we always did a lot of our activities together. Like he said, many people considered him, as I did, like my father. I did everything with Nelson. Q. And the money was to go to the building fund, correct? It was first put into the building fund, correct? A. The idea was we were in the midst of this of designing this building that was getting more and more expense. So yes, the money was going to be used for the building fund. Q. I think you testified that the building that the community must build first was a gymnasium for the children, correct? A. That was my personal opinion. Q. And I believe you testified on page 88 of your testimony regarding the ad. Do you recall this testimony: I think that what he was trying to do was recognize that, you know, Greg worked his bottom off for the community to make this happen with no personal upside. And I believe you said the president wanted that to be acknowledged, correct? That's what you testified to the SEC, correct? A. Yes. Q. But you ended up with the million dollars, correct? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 74 of 104 74 A. The church got the money and then they put it into the bonds. Q. So you were working on behalf of the church to get the money, the church got the money, and then shortly after that it went to Apeiron? A. It was transferred -- it was sent to Apeiron for bonds, absolutely yes. Q. And the bonds didn't exist, correct? A. The bonds, as we all know, they did not exist. Q. And it went into that one big account that we talked about, the metaphorical one big account? A. Yes, it did. Q. But in reality, it got moved between accounts, correct? From Apeiron to Farnbacher Loles when needed, correct? A. It went into that account. Q. Okay. In fact, in addition to -- in addition to doing this, you also, I believe -- in addition to this ad -- do we have the ad? MR. McGARRY: I'm going to mark this, Your Honor, which we got this morning, Government's Exhibit 65. And maybe I'll ask the agent to sticker the other ones 66 and 67. May I approach, Your Honor? THE COURT: You may. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 75 of 104 75 BY MR. McGARRY: Q. I'm handing you a copy. Is this The Ministry, the church's newsletter? A. Uh-huh. Q. There's a flag marking -- Does it read, We received a extremely generous $1 million cash donation from the Nelson and Loles families to be dedicated to our new gymnasium building. That's the ad or announcement? A. Apparently, yes. Actually, this is just the text. I think they actually had something even more profound than this. I don't recall. I wasn't particularly interested in that, but -- Q. And in addition to that appearing in The Ministry in the winter of '09, you also had an ad in The Ministry that said Apeiron Capital Management, investment management brokerage services, Gregory Loles? A. Yes. I think we've discussed this ad. Q. And what's the date on that copy of The Ministry? A. The date on this copy it says winter '08. Q. Winter '08 or Winter '09? A. On the bottom it says Winter '08. And I think you asked me about this several times and I told you that this ad -- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 76 of 104 76 Q. Let me ask you: Do you recognize that ad? A. Yes. Q. And that's your company, correct? A. That was -- yes, that was my company. Q. And that's running in The Ministry in winter of '08 or winter of '09? A. This one says winter of '08. Q. And also we have -- MR. McGARRY: Let me mark this Government's Exhibit 66. Do you recognize this? May I approach? THE COURT: You may. BY MR. McGARRY: Q. Do you recognize this document? A. It's the dinner ad, yeah. Q. That's the dinner ad; is that correct? A. I mean, yes. They would do a book. Do you want me to turn to the blue marker? Q. If you turn to the blue marker -- A. Uh-huh. Q. -- is that -- why don't you read that page, that full-size page ad there. A. It's the same information as the ad in the newsletter. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 77 of 104 77 Q. And what does it say? A. It says Apeiron Capital Management, 575 Fifth Avenue, New York, New York, 10017. Q. So that was your old company, correct? A. That was my company until 2000. Q. And then -- A. And so is the phone number, as you know, as you've asked me. Q. And here in '08, that's your new phone number, correct? A. No, no. That 888 number is -- was the number in New York. That's not a new phone number. What I'd like to -- Q. Fair to say that these ads are running -- this ad is running in the church bulletin in the winter of 2009, correct? A. I remember the conversation very accurately. If you'd like -- Q. Is it fair to say that this ad for Apeiron Capital is running in the church Ministry in the winter of 2009? A. Yes, it is. Q. Okay. A. Can I say why it's in there? Q. I'll ask the question. A. Okay. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 78 of 104 78 MR. McGARRY: I'm going to mark this Government's Exhibit 67. BY MR. McGARRY: Q. And you were asked by the SEC, were you not, if you were doing any active marketing. Do you remember being asked if you were doing any active marketing? A. Yes. Q. But I believe you testified that you were not doing any active marketing after 2000; is that correct? A. Yes. Q. And then they ask you, After 2000, did you engage in any marketing whatsoever? And by that I mean ads you represented to people that, you know, have an entity that provides financial services, pamphlets, fliers? Answer: No, no active marketing. A. Yes. And if I can explain? Q. Let me ask the question. A. Okay. Q. Is your explanation going to be that that was an old ad. You weren't actively marketing. It was just an ad in the church bulletin? A. My explanation is, as you can see here, there's two blanks. And I remember Lea, the church secretary who would organize these things, I think it was like $300 a year or some nominal amount to be here. But since there 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 79 of 104 79 were blanks, I told her, Don't take the ad out until obviously you have other things to put in. I'm happy paying the $300. What I wanted to point out -- and we've discussed this in our conversations -- is that all this information is from 2000 when we were in New York, because the phone number is the phone number in New York in 2000. If this was an ad that after 2000 was truly trying to solicit -- and obviously, in late '90s, 2000, we were still operating, I was operating -- why would it have a number that is not functioning to me anymore? So that is my explanation why that is there. Every opportunity I had I tried to give to the community. Q. Did that include -- did giving to the community include taking the nearly million dollars that had been donated from Old Financial? A. The million dollars was not donated by Old Financial. It was a fee. We've had the conversation, Mr. McGarry. Obviously you can choose, as anyone, to see it the way you like. I thought I was doing a good thing. I'm sorry. Q. Do you remember Ms. Joanna Nictas? A. Yes. Q. She's one of the parishioners, correct? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 80 of 104 80 A. Actually, not a parishioner of ours, but from a another church close to ours. Q. And do you see where it says -- do you recognize your signature on the bottom of what's been marked Government's Exhibit 44? A. Yes. Q. And beneath that where it says investment professional's signature, if applicable, do you see that? A. I'm not sure what this form is, but obviously it's some kind of an account form, I believe. Do you have the top of this form? Q. Is that your signature on the bottom -- A. Yes. Q. -- above the words "investment professional"? A. Yes, that is my signature. Q. We've redacted the personal information. Where it says financial organization, I hereby designate Apeiron Capital Management as the financial organization. Do you see that up on top? A. Yes. Q. Mrs. Nictas was a customer of yours? A. Mrs. Nictas invested in the bonds, yes. Q. And this is the bonds that did not exist, correct? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 81 of 104 81 A. The bonds that did not exist, yes. Q. And this is her account? A. That's hers. MR. McGARRY: Just for the record, we did not redact the account number because there was really no account. So save time for the paralegals. BY MR. McGARRY: Q. It says investment advisor, Apeiron Capital Management, Inc., correct? A. It does say so, yes. Q. And she believed she was holding $436,000, correct? A. Yes, she did. Q. And she believed she was holding GE Arbitrage bonds, correct? A. Yes. Q. Travelers Arbitrage bonds, correct? A. Yes. Q. Knightsbridge Arbitrage bonds, correct? A. Yes. Q. And this was in 2007, correct? A. Yes. Q. And May 1 st to May 31 st . Did you think you were doing a good thing for the community when you sent Ms. Nicholson for her IRA this fraudulent statement? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 82 of 104 82 MR. DONOVAN: Objection. Argumentative. THE COURT: I'll allow it. MR. DONOVAN: Thank you, Your Honor. A. Mr. McGarry, my statement about doing a good thing was working for the 987. I'm not proud at all of these things obviously. BY MR. McGARRY: Q. And turning to page 4 of Government's Exhibit 44, Louis Basel and Marie Basel, do you recognize them? A. Absolutely. Q. And they were invested in Knightsbridge Arbitrage bonds? A. Correct. Q. Bonds which didn't exist? A. Correct. Q. And turning to Government's Exhibit 45, is this a letter to Father William Kehayes with your signature? A. Yes. Q. You talked about interest payments will be mailed monthly. Do you see where you wrote that? A. Yes. Q. There were no interest payments, were there? A. No, sir. Q. And on the second page it says advisor, Apeiron Capital Management and that's William Kehayes and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 83 of 104 83 Christine Kehayes. Do you see that? A. Yes. Q. And so they were both on this statement, were they not? A. Yes, they were. Q. And Peter and Maria Anastasian. They thought they were invested in the bonds as well, correct? A. Yes. Q. And talk about that for a second. Turning to Government's 48, tell the Court, if you will, what this document is? A. This was basically giving them the interest that they earned supposedly during the year in a document so they can do their taxes. Q. So they could pay the taxes on what they thought was interest income, correct? A. What they thought and, regardless, what I hoped was going to be interest income but eventually it was not interest income. Q. But there were no bonds, correct? A. There were no bonds. What I mean by -- if I was able to make them whole, then this would have been interest on their money. But as we all know, that's not what happened. Q. And so they would have presumably reported to the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 84 of 104 84 IRS that they made interest and paid taxes on that, correct? A. Yes. Q. Did you create this document? A. Yes, I did. Q. And that was to create the appearance that there was in fact interest? A. Well, it was to give them the amount that they would have to report in their taxes. MR. DONOVAN: I'm sorry. Give them? THE WITNESS: To give the person. In this case Peter Anastasian. BY MR. McGARRY: Q. And his wife was on the account statement as well, wasn't she? A. I don't recall if she was. You had a previous document that I think showed her name as well. So I -- but I think for this purpose it was only one tax, one Social Security used. Q. Let me turn your attention to Government's Exhibit 52. Do you recognize your signature on this letter? A. Yes. Q. And this is a letter to Marya Grossman. Do you see that? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 85 of 104 85 A. Yes. Q. And you write, Included are the documents you requested. Originally when you started investing with my firm you opened two accounts, one with Marya and one with John, both held jointly with you. The two accounts were established as mirror images. The objective was to preserve capital. In July of 2004 I was notified by Nelson that an annuity you were receiving from a source unrelated to me had been terminated. After consulting with Nelson and you, we decided to withdraw $100,000 from each account and establish two additional accounts mirroring the initial account. The additional income from these accounts is U.S.D. $1,158 per month. There was no interest income, was there? A. No. This was the bonds. Mrs. Grossman was a client when the firm was in New York, an acquaintance of Nelson. And as you can see in the letter, Nelson handled her affairs. Q. This is a letter where you are moving her money from a real account to a fraudulent Apeiron account; is that correct? A. Nelson obviously, having invested in the bonds, decided that Marya should also invest in the bonds. Q. And you didn't tell her no, correct? A. Excuse me? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 86 of 104 86 Q. You didn't tell her no, she couldn't invest. You took her money, didn't you? A. I did not tell her she could not invest. Q. You close with wish you all the best. And then you say Popi and the kids send their love. A. We had met Marya on several occasions. Very, very nice lady. Q. And she trusted you, didn't she? A. She trusted Nelson. And obviously, when she saw Nelson was comfortable with me, she obviously then trusted me as well. Q. As did other people in the church, correct? A. Yes, absolutely. Q. Because you had made a lot of money for the church, correct? A. I think the people on the Endowment Fund would agree, yes. Q. Including making almost a million dollars on the New Haven Savings Bank, correct? A. Yes. Q. Which went to your Apeiron account, didn't it? A. The Building Fund decided -- MR. DONOVAN: Objection. THE COURT: One second. We have an objection. MR. DONOVAN: Asked and answered. I'll 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 87 of 104 87 withdraw the objection because we know what the answer will be. A. The Building Fund decided to put the million dollars into Apeiron, yes, they did. BY MR. McGARRY: Q. And this is Marya and John's account statement, Government's Exhibit 53. Do you see that? A. Like the letter said, there's two mirror accounts. $100,000 each. Q. And this is 55 is the mirror account. An additional account, correct? This is Marya and Marja? A. Her daughter. Q. And they got tax statements as well, correct? Take a look at Government's Exhibit 57. A. Everybody did. Or almost everybody. Q. I want to go back briefly. I know we're coming right up on the lunch hour, Your Honor, so I will finish up. I want to go back quickly to Fantasma Toys. I don't see Mr. Nicholson here, but do you recall his testimony? Do you recall his testimony? A. From the other day, yes. Q. Do you recall where the first part of his testimony, your attorney, Mr. Donovan, was asking him questions that tended to imply that the cash from 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 88 of 104 88 Apeiron was money that he directed you to send to Fantasma Toys on his behalf. Do you remember those questions? A. Yes, I remember that, yeah. Q. Those questions, which Nelson got fairly upset about, correct? A. Yes. Q. And Nelson was instructed to go home and get documents proving that he sent money from his other accounts directly to Fantasma Toys. Do you remember that? A. His 750 or so thousand dollars, yes. Q. And in fact, he did send his 750 from his other accounts, didn't he? A. I never said that he didn't. Q. You sat there when he got cross-examined about that, didn't you? A. I was there. Was there a situation that I could have stopped it? I mean, you have to understand that -- Q. You knew -- let me ask the questions. You knew when he was getting cross-examined that he had in fact paid the money from money outside of Apeiron, correct? A. There's no question that he had put in $750,000. I can't say where all of it came from. It's been a very 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 89 of 104 89 long time. Q. Right. And whether it's little photocopies of pictures or big copies of checks, the money came from his own money from non-Apeiron sources, correct? A. If now he has that, all of it came from that, I wouldn't know. If he would have asked me to send something on his behalf, I would have. But he put up $750,000 or so, and I -- and again, this was over time. So it wasn't -- it wasn't one big transaction. But eventually -- Q. And you put $750,000 of money that was in Apeiron, correct? A. I think almost all of my money came, I would think, from Apeiron. I think Mrs. McCartney probably knows better than I. Q. Was that your money or was that other people's money? A. Mr. McGarry, we've -- we're saying the same thing. That account held all of our family's money, the money that I directed to come from Milbury, and unfortunately the money of a lot of very good people. So to say that that account was the source, absolutely, that was the source. To imply that it was only their money I think is inaccurate. Q. Let me take your answer from last week. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 90 of 104 90 Question: Now, of the $740,000 that Apeiron sent to Dwyer, sent to the toy company, how much do you think was yours and how much was Nelson's? Now, we've already established that Nelson sent his money separately, correct? He had his own 700-plus, correct? A. We eventually had a million-five in that company and it was half and half. Q. And he sent separate, correct? A. If you have documents that it was all separate. I don't remember. It was many years. He could have told me to send something on his behalf, or maybe he funded it totally on his own. But I would not be surprised if he funded it totally on his own. Q. And that's what he testified to, wasn't it? A. And that's what he said, yes. Q. And then you testified, Of the money that came out, that's a tough question because I don't have any documents. But the money that came out of Apeiron accounts I believe was primarily my money because it was coming out of -- and again, did you find it mostly coming out of Pershing? So again, you answer with a question. But it really wasn't primarily your money, was it? It was other individuals', wasn't it? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 91 of 104 91 A. It was not primarily other individuals. We had all our money in that account. If it was from the Pershing account, I would say that's even more sort of our funds. But I don't know. You understand in what context I said "mine," "mine" being from Apeiron. Q. Fantasma Toys, unlike Knightsbridge Capital, was a real company, correct? A. Yes, it was a real company -- is a real company, I believe. Q. And in fact -- and you told the FBI about it, didn't you? A. About Fantasma? Q. Yes. A. I believe it came up, yes. Q. And in fact, you remember talking to them in 2008 -- I'm sorry, 2010, after you were incarcerated? A. I remember there was meetings in New Haven and I believe there was one meeting up in Central Falls. Q. And you told them in 2010, this company still exists and Loles and Nicholson each own 50 percent of the stock of Fantasma Toys, didn't you? A. That was the -- that was the transaction. Nicholson came up with the idea of creating Fantasma Toys. Right. So this is the Fantasma Toys that Nelson created that I think you had some tax document, the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 92 of 104 92 50/50. Q. Right. In 2010, you told the FBI that you each owned 50 percent? A. That's what he created, yes. Q. Right. Because that was the situation. You each owned 50 percent? A. I think Mr. Nicholson explained it well. Q. Okay. A. So he created this because this was going to be where we were going to have the funds returned to us. Q. Right. And as a matter of fact, at one point you told the FBI that you wanted to make people whole, correct -- if you can read that. You stated you wanted to make people whole, the investors? A. I wanted to make people whole. Q. And you also said that you believed you have a interest in Fantasma Toys and explained how if Fantasma Toys could take off, maybe you would get some money to pay people back, correct? A. I don't think there was all that elaboration, but I explained that there was this Fantasma Toys entity. Q. Which, perhaps if things went well with Wal-Mart and with China, that you would be able to use your half to maybe pay some people some of their money back, words 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 93 of 104 93 to that effect, correct? A. I don't -- yes, go ahead. Q. You answered my question. A. I said I wanted to make people whole. And we discussed that there was this entity that I still had a interest in, this 50/50 entity in Connecticut. Q. Right. A. But the money didn't go to that entity. Q. That was in 2010 you still had the interest, correct? A. Well, Nelson created the entity and put us both down, but as you saw, there were two transfers from that entity to me, and I can't even recall what the situation was that I then sent the money back to the entity. The two wires for $135,000 each. Q. But in 2010 you told the FBI you wanted to make people whole and you had -- you had -- he has -- you still had and you just said you still had an interest in Fantasma Toys, correct? A. This is what is written here, but, I mean, Nelson himself said that he owned all of Fantasma Toys. So there's conflicting opinions or things on both sides here. Q. And you told the FBI -- A. Yes. I told the FBI that anything I have I want 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 94 of 104 94 obviously to be able to start as soon as possible the process of making people -- Q. Fair enough. And included in that you included your share of Fantasma Toys, which, as you can see on the screen, you testified it still exists and Loles and Nicholson each own 50 percent. And this is after you were in custody, correct? A. Yes. The Connecticut entity was a 50/50 entity. Q. Right. Because Nelson never bought you out, did he? A. That's incorrect. And he himself told you that he owned all of the interest in Fantasma. Q. He never told you he was buying you out? A. Yes, he did. He told me the -- Q. So let's stay with that thread for a minute. So then when you told the FBI that you each owned 50 percent of the stock, was that not true? A. There's two entities here. There's this Fantasma, LLC Connecticut entity that Nelson had me also as 50 percent interest in it. And then there was the money that was obviously put into the New York entity. At some point in '05, Nelson said, I know you need more money for Farnbacher Loles. Take the 700 and I will have the full interest. If something comes of it -- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 95 of 104 95 Q. If I could stop you there. A. Okay. Q. So therefore, when you told the FBI that you owned 50 percent of the stock in Fantasma Toys, that wasn't true, was it? A. I'm still listed. I think he still has me listed as 50/50. But as you saw, whenever there was a distribution, he took the full distributions. Q. Well, you owed the man a couple million dollars, didn't you? A. Well, today. I mean, it was 400 two weeks ago and now you have it at $3 million. For four years you had it at $400,000, sir, and now it's $3 million. I haven't seen the documents yet. Q. You owed the man -- A. You had it as $400,000 for four years, sir. And now, a week before my sentencing, it became $3 million. With all due respect, I think I can at least see these documents and try to understand how your $400,000 became $3 million after four years of -- MR. McGARRY: Your Honor, I know we have a lunch break, but I have about two minutes of questions and then I'm done. BY MR. McGARRY: Q. I want to ask you about another topic. I want to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 96 of 104 96 ask you about a construction loan that you helped negotiate with New Haven Savings Bank for approximately $3 million. Do you remember that? A. Not New Haven Savings. It was another bank. Milford something bank, I believe. Q. And it was a couple million dollars, a construction loan, correct? A. I think it was three. I think you're right. Q. You went to the bank and you negotiated to try to get a good rate, correct? A. I think -- I don't recall ever going to the bank, but -- Q. There was a discussion that they wanted some security, correct? You remember negotiating the construction loan, correct? A. I did not negotiate the construction loan, but they -- I remember them coming to the Endowment Fund and they were nervous about just having the building, I believe. So when they came to the Endowment Fund we said, Well, there's the Endowment Fund as well. Q. And in fact, the bank, be it Milford Savings Bank, wanted to have some more security, so what was pledged to that bank was the money in the Endowment Fund, correct? A. I believe that's what the Parish Council decided to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 97 of 104 97 do. I was not on the Parish Council or party to that. Q. But you, through Apeiron, had the Endowment Fund, didn't you? A. What do you mean I had the Endowment Fund? Q. You had all the money that was left in your Citibank account. A. The Endowment Fund obviously had some stocks and a fair amount in the nonexistent bonds. I believe what they did is they went into some sort of limited support of the actual loan. Q. So the nonexistent bonds only did a limited support of a bank loan for a construction loan, not a full support? A. Sir, the community, the leaders of the community at the time did not know that those were not real bonds. Q. But you knew? A. So in good faith, in good faith they pledged the Endowment Fund, or some part of the Endowment Fund. Again, I wasn't party. Q. I understand. A. I think insinuating that I negotiated something is inaccurate. Q. But you knew that -- MR. DONOVAN: May I object? It's just argumentative and it's irrelevant. It doesn't have 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 98 of 104 98 anything to do with the amount of loss. THE COURT: I'll figure out whether it's relevant later once I see the whole picture. BY MR. McGARRY: Q. You knew that there were no bonds? A. From day one I knew there were no bonds, sir. Q. Yet you stood by while the church pledged, unknowingly, part of the Endowment Fund to a bank for a construction loan, didn't you? A. I believe the final document, which I didn't see, included that if the bank -- if the community couldn't live up to its obligations, that they would also have a fall-back to the Endowment Fund. I didn't have the ability -- Q. Which was held in nonexistent bonds, correct? A. Some of it was held in nonexistent bonds. Q. And you knew that, didn't you? A. I knew it from day one, sir. Q. And you didn't tell anybody, did you? A. I don't understand the context that I would tell them all of a sudden that don't pledge those bonds because they are nonexistent. I should have never done it, sir, and then I wouldn't be in this situation. Q. To use your words, you never told the folks at the church, the people who were working on the construction 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 99 of 104 99 loan, Don't pledge those bonds? A. Don't pledge. I didn't say "don't pledge," absolutely I didn't say. Why would I -- and it wasn't my word to say yes or no. If they wanted to pledge the Endowment Fund, I believe they even had to go to the parish -- to the community. Q. But you were the only one who knew the bonds didn't exist. A. Exactly. Q. And you didn't tell anyone? A. No. Q. So the church took out this $3 million construction loan in part on your say so that there was money in the Endowment Fund? A. No, sir. Q. Just like Ms. Nictas took her IRA and gave it to you? A. The church needed $3 million to complete their building. I think it's inaccurate to say -- they needed $3 million or else the building couldn't happen. That's why they took a $3 million loan. Q. The last area is you made a point through questions to your lawyer that you made sure that Father Peter got a slightly different deal on the interest rate than other people who purchased stock in New Haven Savings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 100 of 104 100 Bank. Is that fair to say? A. The interest was zero. Q. And he didn't know what other people were getting and other people didn't know what he was getting, correct? A. His business was his business. I wasn't going to talk about it. Q. So he ended up with a little bit more money than he would have but for your going to bat for him with Old Financial, correct? Fair to say? A. Just taking it off the top. Not going to bat. He didn't pay -- he wasn't charged what -- Q. The interest? A. That 72 -- which would have been $72,000 of his $100,000. Q. So he got a little bit more money than he otherwise would have? A. He got -- yes. Instead of 20-some thousand he got a $100,000. Q. And he took that money and he invested it with Apeiron, didn't he? A. And he gave it to me. Q. And he didn't get it all back, did he? A. He got roughly half of it back. Q. But he didn't get it all back, did he? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 101 of 104 101 A. He didn't get it all back. Q. So to the extent that you went to bat -- my word -- for the parish priest so he could get a little bit more money, you ended up getting a little bit more money? A. No. No one got more money because Frisk deducted it from the 980. That's how we got the 987. It would have been a million 40, or whatever. Something a little bit more. Q. Which you would have gotten anyway because you kept that other check? A. Sir, once they decided to put it into -- once the money went to the community and the community decided to put it in the fictitious bonds, it obviously came to Apeiron, sir. I think we established that. Q. So it was either going to the community from Frisk as a donation and go to you, or go to Father Peter and then go to you. But either way, you end up with the money? A. Sir, you know that they invested the Building Fund money with -- and not that it's worth anything, but obviously the building fund got back substantially more than what they put in. MR. McGARRY: May I have a minute, Your Honor? THE COURT: You may. (Pause.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 102 of 104 102 MR. McGARRY: I have no more questions, Your Honor, but just a point of housekeeping. Ms. McCartney told me that she can testify, if necessary, about the joint accounts so I won't go through them. It might be more efficient, rather than showing them all to Mr. Loles, to have her just put them in so we can have an accurate count of joint accounts. THE COURT: Great. MR. McGARRY: Thank you. No more questions. THE COURT: We'll take our lunch break. (End of transcript excerpt.) * * * * * 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-5 Filed 02/20/14 Page 103 of 104 103
C E R T I F I C A T E
UNITED STATES V. GREGORY LOLES 3:10CR00237(AWT)
I, Corinna F. Thompson, RPR, Official Court Reporter for the United States District Court for the District of Connecticut, do hereby certify that the foregoing pages, pages 1 - 102, are a true and accurate transcription of AN EXCERPT OF my shorthand notes taken in the aforementioned matter on November 25, 2013, to the best of my skill and ability.
/s/__________________________
CORINNA F. THOMPSON, RPR Official Court Reporter 450 Main Street, Room #225 Hartford, Connecticut 06103 (860) 547-0580
ATTACHMENT E (PART 2) Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 1 of 48 UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
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UNITED STATES OF AMERICA 3:10CR00237(AWT)
vs.
GREGORY P. LOLES HARTFORD, CONNECTICUT Defendant NOVEMBER 25 , 2013
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EXCERPT OF SENTENCING HEARING - VOLUME III REDIRECT & RECROSS-EXAMINATION OF GREGORY LOLES
BEFORE:
HON. ALVIN W. THOMPSON, U.S.D.J.
APPEARANCES:
FOR THE GOVERNMENT:
OFFICE OF THE UNITED STATES ATTORNEY 157 Church Street, 23rd Floor New Haven, Connecticut 06510 BY: MICHAEL S. MCGARRY, AUSA
FOR THE DEFENDANT:
LAW OFFICE OF JEREMIAH F. DONOVAN P. O. BOX 554 Old Saybrook, Connecticut 06854 BY: JEREMIAH DONOVAN, ESQ.
Corinna F. Thompson, RPR Official Court Reporter Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 2 of 48 2 TABLE OF CONTENTS
WITNESS DIRECT CROSS REDIRECT RECROSS GREGORY LOLES BY MR. DONOVAN: 3 BY MR. McGARRY: 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 3 of 48 3 (Transcript excerpt follows.)
GREGORY LOLES, called as a witness, having been previously testified as follows:
REDIRECT EXAMINATION BY MR. DONOVAN: Q. With respect to you telling the agents the various accounts, the Apeiron account, the various Farnbacher Loles account, your personal account and the Knightsbridge accounts all merged into one, did you mean that literally, that they all became simply one single account at Citibank? A. No. It was three accounts. I mean, there's no way to merge them. Q. Well, more than three, weren't there? You had a personal -- A. Well, Farnbacher Loles, the different departments had like sort of street, performance and things. But the -- what I'm saying is that the money was flowing, but no, it was separate accounts. Q. Fair to say you didn't keep very good track of who was giving what money to whom; is that fair enough? A. Well, I think -- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 4 of 48 4 Q. Let me ask you this: Is there a capital account -- did Farnbacher Loles have a capital account that listed the contributions of capital from Apeiron? A. No, it wasn't done that formally, no. Q. Fair enough. Now, with respect to the information that you gave concerning the attempt to bribe Greek officials in order to get medical devices sold there, did you have anything to do with that plot? A. No. It was described to me by my lawyer's client who -- my lawyer who passed away, his son told me as sort of a family sort of acquaintance, You have to talk to these people. They're telling me things that dad was doing for them or with them and they wanted to continue. So on a trip to Greece, I think it was for his -- not for the funeral, but there's something that happens three months after the funeral, I actually sat down with these Karayanis people and they described in great detail -- I gave as much detail as, if you will, the government wanted to listen to about how they were doing what they were doing. But no, I was not involved. I didn't even know that this was happening. I hadn't met these people. Q. Okay. Did you learn that several years after you gave this information an indictment was returned on one 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 5 of 48 5 of the companies that you talked about had actually pled? A. The two companies were Smith & Nephew and Medtronic that this family spoke to me about, the Karayanis family spoke to me about. And a couple of years after our conversations, Smith & Nephew did pay, I think, about a $22 million fine specifically for their activities in Greece. I'm not aware that Medtronic has also had anything done. Q. And you don't know the extent to which what you told the agents was forwarded to the prosecutors in that case? A. I was simply told that it was passed on. I don't know if it -- I don't know how it was used, no. Q. Now, with respect to Milbury Holdings, remember I asked you the question: Was there a capital account set up with respect to monies that Apeiron gave to any of the Farnbacher Loles entities? With respect to Milbury Holdings, was there any kind of a document that established what the money from Milbury Holdings -- was there a capital account at Farnbacher Loles for Milbury Holdings? A. No. Q. Was there a capital account at Apeiron for Milbury Holdings? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 6 of 48 6 A. No. Q. The money that came over from Milbury Holdings, I mean, it belonged to Milbury Holdings, but who owned Milbury Holdings? A. Milbury Holdings, upon his passing, was John Missailidis was the owner of Milbury Holdings. Q. Did that money really belong to John Missailidis? A. No. Q. Who did it belong to? A. The money that came is money that I earned with John over the years primarily in trading over the Greek stock. Q. Essentially, it was you're money? A. Well, yeah. That's why it came in the fashion it came. It was just sort of on demand. THE COURT: Can you explain that a little more? BY MR. DONOVAN: Q. Why don't you explain that a little bit more. Tell us how that money was earned? THE COURT: How it's his money if it's Milbury Holdings money? BY MR. DONOVAN: Q. Why was Milbury Holdings money really yours? A. Milbury Holdings was the investor for most of the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 7 of 48 7 investing that he and I did in the Greek -- Greece was an emerging market in the early '90s and so forth. So there was huge interest and appreciation in the market. Q. Remind us who "he" was? A. He was Mr. Missailidis who passed away, who was a friend and lawyer that represented -- because we lived in Greece, as you know, for a number of years and that's where I met him. So when the Greek markets started doing well and there was a lot of investing, I was sort of already in the investment business and here we had a emerging market at our feet. A lot of new capitalization and so forth. So a lot of money was made. And the investment vehicle in the Greek markets, he chose for it to be Milbury Holdings. So we both put some seed money and then just started trading, mostly in new capitalizations. And it just -- and it grew substantially as the whole market grew. Q. What was Milbury Holdings? Was it a company or an LLC? A. It was -- I believe it was Panamanian. It was a company that he basically was running his finances through. So the way these capitalizations were working in the Greek market system is an entity would actually ask 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 8 of 48 8 for a certain amount of stock, let's say, in an offering and then it would be granted. And if it was over-subscribed, everything would be prorated. It was unlike here where the stock is given to individuals. There you actually -- there was a proration done. And then there's a lot of secondary trading that we did. I mean, I lived in Greece. Q. You don't have to go through all the details. THE COURT: I guess I'm getting the impression from what your client is saying is that he's saying he put money into Milbury Holdings, Mr. Missailidis put money in, and that money was invested and he subsequently got a return of his investment with earnings. I guess what I'm interested in is when did he put money in and how much? Does that come out? Is that somewhere in the record? BY MR. DONOVAN: Q. Could you tell us that? A. Let's see. My contributions would have been -- now we're talking in the late '80s. I can go to the bank records and probably try to -- well, not bank records here. Q. Just roughly? A. I would say a total of a million euro, a little 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 9 of 48 9 more than a million euro. Q. And that was an investment made in the late '80s? A. Yeah. That's way, way early. My dad had some property. We had sold some things. And everybody in Greece was investing in the market. And we had done -- and that was sort my contribution. And then he kept his ledger about sort of what was mine, what was his. I was, if you will, the more market knowledgeable person. But again, it was a roaring bull market. So it was more just being in the right place at the right time. Q. And what period of time did the trading take place, the initial public offerings and the investment in companies? A. Well, when Greece was granted the Olympics for 2004, it was the 10 years, if you will, before that was the big sort of financial boom. And Greece had just entered into the European community. So suddenly, borrowing in Greece went from 8, 9 percent to 4 percent, overnight literally, which is what's created obviously the huge financial problems that Greece has now. But yeah, it was in that period sort of from the late '80s it started as Greece was sort of an emerging market and then it became a developed market. And then obviously came the huge crash like all the emerging markets in I think the early 2000s. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 10 of 48 10 Q. Where were you living when you were doing this trading? A. Well, we were living mostly in Greece. And that's where he and I sort of met and solidified our relationship. And then we continued, even when I came back to the U.S. in -- came back -- I'm sorry -- came back to the U.S. in '91 we obviously continued. There was no need for me to be there. Through various sort of computer systems, I was able to see the Greek market live. So I was able to continue doing whatever trading we needed to do. Q. One of the documents that the government has introduced is a document that appears to be between you and Mr. Nicholson concerning an investment in Farnbacher Loles, but it also appears to be the -- it looks like it's the establishment of an LLC that didn't exist before. Can you explain how that document was produced? A. When Christian Zugel made his decision to invest, he had his lawyers draw up the document you're referring to. Obviously we looked at it a bit more today. And I recall now that what Christian said at the time is -- because Farnbacher Loles was there for two or three years. He basically said, Just to make it easier, especially since now I'm also coming in, let's create 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 11 of 48 11 new LLCs. And actually, it's in that document that you see all these LLCs that became all -- each one had a account at Citibank that were created. Because before there was only one Farnbacher Loles account at Citibank. Q. What did you do with that document when it was time for Mr. Nicholson to invest? A. When Nelson decided that -- and it wasn't for his benefit. He really wanted it for his nephew that he wanted to get 10 percent of Farnbacher Loles for him, I gave him the document and basically said -- obviously, put his name in it -- and said this is the Zugel document that the whole company started with. And again, as you can see, Nelson and I were very informal in both directions. Q. And who was it who changed -- it appears as though where Zugel's name appears, Nelson Nicholson Holdings was replaced; is that right? A. That's all that was done. Q. Who did that? A. Probably I'm assuming I must have done that. Q. What I'm curious about is the typeface and everything seems the same. It doesn't seem as though you wiped it out? A. I believe Christian's lawyers had sent the document electronically so it was able to just change. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 12 of 48 12 Q. So you just searched and replaced Zugel's name with -- A. Basically. Not even doing it correctly. But I think from what Nelson says, I mean it's clear that he made the decision that he wanted to get involved with Farnbacher Loles. He was obviously very proud of Farnbacher Loles. Q. You recognize something different about Mr. Nicholson's buying a 10-percent interest in an LLC that's already formed and this document here that seems to have to do with the formation of a brand new LLC. Do you understand that now? A. Now, obviously. Because it wasn't reformed for Nelson. He became part of the existing Farnbacher Loles. Q. So without looking at this LLC, what was the deal between you and Mr. Nicholson that got him into Farnbacher Loles? A. Well, he basically agreed that I will pay the same valuation as Mr. Zugel. Q. And he was going to pay how much? A. It was $1 million. Q. And then what would he get? A. He would get 10 percent. And actually, Christian Zugel and Nelson, or the entity that the Nelson wanted 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 13 of 48 13 it to be, I'm not sure if he used his nephew's name or some entity. Q. Nicholson Holdings? A. They would be getting a distribution based on revenues as described by the Zugel document. Q. And did he pay a million dollars for the investment? A. No. He never -- we never consummated the whole million. There's the number of $200,000 that he mentioned and it does ring a bell. I think it was more folding in maybe some other things that he had helped me along the ways. Always helpful with the growing of Farnbacher Loles. But the 800 was still outstanding when obviously everything came crashing down. Q. Okay. We talked a little bit about cherry picking. A. Yes. Q. About the term "cherry picking." And you would agree with me, would you not, that that's an illegal action by which someone doing trading attributes profitable trades to one client and unprofitable trades to another, no matter who it was who actually -- in whose name he actually made the trade, fair enough? A. No question. If one is giving losing trades here and winning trades there, that wasn't what exactly 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 14 of 48 14 what's going on. Q. Why was what you were doing with respect to day trading not cherry picking in the way that it's used to mean a SEC violation? A. Well, because the trading was all done in what I call the principal account, my account. Q. It was your money? A. The opening and the closing of those transactions would all be in my account, unless posted differently at the close of the day. So when there was a particularly profitable day, I would simply move whatever can fit -- and obviously looking at my profit and loss, because if I had a bad day I might have to keep a good day's profits to keep my account in balance -- but eventually we were able to create I think 280-some thousand dollars that was put into the Endowment Fund account where there was no risk involved. And again -- Q. So it was not a situation where you were giving the church -- you were assigning to the church trades that you could have assigned to some foreign Greek investor or some New York City investor. It was just your trades essentially? A. No. Those trades either had to be put into either the church account when I designated it, or they would 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 15 of 48 15 be in my account. Q. Now, with respect to the tax ramifications, by assigning the trade to the church's account, you didn't realize -- you didn't personally realize any profit, right? A. Well, there would be a short-term capital gain. Q. By assigning the trade to the church, you yourself wouldn't realize any profit? A. No, obviously not. Q. If you hadn't assigned it to the church, say you made $2,500 on a trade, okay? So there's a $2,500 short-term capital gain, right, that would have had to have been reported on your income tax return, right? A. As ordinary income, I believe. Q. Okay. And it would go to either -- it would either be a short-term or a long-term capital gain, but it would go to your -- what's it called -- what's that final line on the first page of your tax return? Your net income anyway, right? And if you had then contributed that money to the church, you could have deducted that as a charitable contribution, right? A. Yes. In theory, the church office for some people when they would ask they would get a letter or something saying that they donated, yeah. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 16 of 48 16 Q. So whether you attributed the trade to the church or whether you attributed it to yourself and then donated the money to the church, the tax consequences are still the same, right? A. I'm not an accountant, but I don't see the advantage since it's a dollar-for-dollar deduction, I believe. But I don't want to say that -- obviously, my intent or the ends that I was trying to achieve was to put money into the Endowment Fund. THE COURT: I'll just say, I stopped listening when he said he's not a accountant because the answer didn't really make sense to me. But we'll -- just so you know. A. I don't want to say that I know how. BY MR. DONOVAN: Q. In any case, you didn't view -- you didn't believe that you would get any tax advantage out of doing it that way rather than -- rather than attributing the trades to yourself, taking the money from the trade and contributing the trade directly to the church? A. My motive -- Q. Did you see any tax advantage? A. I didn't see any tax advantage. Q. In fact, why were you doing that? Why didn't you did it the other way? Why didn't you just take the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 17 of 48 17 money and then contribute it to the church? A. Well, because first of all, because as you can see, it ended up being a lot of money. I mean, I can think of a lot of reasons. Just nobody did that. Nobody was writing 20, $30,000 a year checks to the church. At least -- maybe certain people. But it just didn't seem like something sort of -- I thought that this was an easier way where if I had, in my mind, if I had a good day, when the Endowment Fund decided to go to Pershing and the accounts were in the same place so this can actually happen, I would just tell Pershing that of the 20,000 shares bought and sold today, 4,000 -- and always for whatever -- and always for whatever the years of the trading -- there was never a flat or down trade, because that's not -- there was no reason to ever give them a flat or a down trade. Q. With respect to Fantasma, this is kind of a muddle and I want to go through this piece by peace, okay? Fantasma is a company that is run in New York, right? A. Fantasma Toys, when it was introduced to me and Nelson, was this Dwyer person in New York. Q. And Dwyer was an old friend of Nelson's? A. Yeah. They shared sort of a magic fraternity. They were both interested in magic. I think they met at 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 18 of 48 18 magic conventions and they were friends. Q. And Fantasma Toys needed some capital; is that right? A. Fantasma Toys originally had some orders that needed to be manufactured in China where they were doing their manufacturing and they needed money because these companies that they were selling their products to were paying 120, 160 days. So obviously they needed, to be able to fulfill those orders, they needed sort of working capital. Q. And Nelson discussed it with you and the two of you decided you would invest; is that right? A. We went and we met, the first meeting I remember -- Q. Let's cut to the chase. I want to get -- A. Yes. We started giving Mr. Dwyer money so he can build his product. Q. Was it all in one big lump sum? A. No. It was as needed over a period of months and maybe even more than just months. Q. What was the approximate amount of money that you furnished to Dwyer? A. I believe we both did roughly the same amount, about $750,000. I think I heard a number of $740,000. Q. You didn't check on Nelson's checks and things to make sure that he actually did give $750,000, roughly? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 19 of 48 19 A. When Nelson tells me he did something, he did it. Q. And $740,000 came from Apeiron; is that right? A. I believe that's the amount, 740. Q. What were the terms that these monies were given to Dwyer and Fantasma of New York? A. Well, the loans, if you will -- Q. Is that what they were? They were loans? A. Well, they were loans so he can build his product. Q. Were they loans from you to Fantasma? A. Again, it was me and Nelson, right, sort of going -- sort of matching. So when he would give 100, I would give a 100 and so forth. Q. Who kept the documents with respect to this? A. Nelson kept the documents. Q. What were the terms of the loan to Fantasma? A. It was very simple. I think it was 10 percent simple interest. So when he supposedly would get paid in 120 days, 160 days, he would pay us the interest. And if he had another order, he would keep the money or he would return the principal. That was the concept. Q. Did there come a time when Nelson suggested to you setting up another company? A. Yes. But before that, one of the first orders, one of the first big orders, if not the first order, ended up being devastating for Fantasma because it was with 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 20 of 48 20 FAO Schwartz -- Q. And FAO Schwartz went bankrupt? A. So now I think it was four or five hundred thousand dollars at the time and now it's lost or tied up in that bankruptcy. So now -- and this will go to your question of why this 50/50 LLC in Connecticut. So now Dwyer comes back and he says, okay, I'm finished unless you guys want to put more money in -- Q. All right. A. -- because there are other clients. We eventually will get some money from FAO Schwartz and so forth. So at that point that's how we ended up at the big number of a million five. To show his good faith, Dwyer says, Okay, for this money on top of the lost money, if you will, I pledge to you two the stock of Fantasma in New York. Q. So if he didn't repay the money you would own all the stock? A. If the whole thing blew up, at least you guys will own Fantasma. Obviously, if it blew up, what that would really mean is we would own the tax loss. Q. So what did -- tell me, was it you who decided to start an LLC in Connecticut? A. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 21 of 48 21 Q. Who decided that? A. It was Nelson. Q. And why -- how was that explained to you? A. Well, so that entity was going to be the entity that would start getting paid back our million five. Q. Rather than you individually? A. Rather than us individually. And Dwyer started making some payments and I think continued, from what Nelson said the other day, making payments. He just told Dwyer, When you want to pay us back, principal or interest, we've created this entity. I guess Nelson felt that the accounting would be easier that way. But he created that entity where we were 50/50. Q. Okay. All right. And then -- tell us how your interest in Fantasma was closed out? A. Mr. McGarry showed where I talked about 50 percent interest in Fantasma, which does continue through today. But there's two things: There's loans or debt to Fantasma New York, and then there's this idea that we own its equity. So when Nelson said take the $700,000, he was basically taking me out of the debt, which was the $740,000 or what I put in. And the understanding -- and the reason he didn't take me off of the equity is that now -- and he obviously believed in Dwyer, that Dwyer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 22 of 48 22 would be able to be successful and pay back these loans -- he would take the million five. But since I was there from day one, if there would have been some kind of upside, Nelson being Nelson would say then we can decide what we're going to do if our equity ever has any value. Because there was no contract that said as soon as he paid us back we would necessarily have to give him all the equity. As a matter of fact, Dwyer was saying perhaps that for your help you guys would keep -- just complicated conversations. But by 2009, there had been a couple of transfers. And if you noticed, some monies that did come to me, I don't know if he needed it again or whatnot. I see that I transferred $135,000 twice back into Fantasma Toys. And I think sort of netting out what I was given, putting it back after I was taken out of the, if you will, the loan. So my net contribution or receipt from the Connecticut LLC I think, you know, Nelson engineered it to be zero. Obviously, when he took me out, I think that's when I had to put the money back, because that's his at that point. Q. And would it be fair to say that between you and Nelson you hardly ever actually kept any kind of formal agreements? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 23 of 48 23 A. It was -- yes. I mean, that's my fault and perhaps a little bit his. But I should have kept better records. MR. DONOVAN: May I just a moment, Your Honor? THE COURT: Certainly. (Pause.) BY MR. DONOVAN: Q. Just to make this clear: Those ads that appeared in the parish bulletins, those had telephone numbers that were no longer assigned to Apeiron, right? A. Well, those were the numbers when we had our offices in New York. That's when that ad was put in. It was never taken out. But if it was truly advertising, I think I would have had a number that I can be reached. Q. And the numbers weren't working, right? If you called that number you wouldn't reach you? A. If you notice, it's an 800 number and 800 numbers point at a regular number. And those were pointing obviously to when we were in New York. That was I think one of our 800 numbers in New York when we had the RIA. Q. I still don't understand. If I picked up the number and dialed the phone -- A. Yes. Q. -- would it get to you? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 24 of 48 24 A. No. Q. Would that call reach you? A. Not after year 2000 when the lease expired in New York, I was out of that space. So it would not have anything to do with me. Q. So far as you know, no one ever contacted you as a result of reading those ads? A. They couldn't. Q. Anything else that I've missed that might explain a little bit the financial aspects of this proceeding? A. I don't have anything off -- Q. Okay. MR. DONOVAN: Thank you, Your Honor. THE COURT: Mr. McGarry. MR. McGARRY: Yes, sir.
RECROSS-EXAMINATION BY MR. McGARRY: Q. I might actually save time if I -- Do you remember, Mr. Loles, do you remember speaking with the FBI on a couple of occasions including at the detention center in Rhode Island? A. Yes. Q. And do you remember that Milbury Holdings was the topic of discussion? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 25 of 48 25 A. I'm sure -- yes, it definitely came up, yes. Q. Let me, in the interest of time, go right to page 4 of the memorandum directing your attention to the third paragraph. MR. McGARRY: I believe, Your Honor, this is Government's Exhibit 32 and it was also an attachment to the sentencing memo filed last year. THE COURT: I have the attachment. BY MR. McGARRY: Q. On page 4, second full paragraph, do you remember telling the FBI that there was no formal agreement from George to invest in Farnbacher Loles but simply take the money off his hands, but it was the Missailidis' family's money. Do you remember saying that? A. I don't see what context that would have been in. There was no formal agreement for -- can I read this? This is the beginning of the Wall Street Journal? Q. Do you remember telling the FBI that it was Missailidis' family money? A. That the 14 million was their money? Q. Correct. Do you remember telling that to the FBI? A. I do not remember saying that and saying that George was afraid it would be seized by the authorities in the UK. I think George was afraid because of the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 26 of 48 26 Karayanis situation. Q. There's no question pending, Mr. Loles. A. Sorry. Q. Your answer is you don't remember telling that to the FBI? A. I don't understand the context of what we were discussing. When Mr. Missailidis passed away, George, who's his son, suddenly gets these accounts that have a lot more than just the $14 million in it. And I don't know if we were talking about what George -- I think George was concerned -- Q. Do you remember telling the FBI that the intent was that Loles was growing the Farnbacher Loles business and he would reconcile with George later? Do you remember telling the FBI that, that you would pay George his money back later? A. Well, I think reconcile with George -- it wasn't George's money. It was sitting in Milbury Holdings. Q. It was the Missailidis' family's money, correct? A. No, it was not. Not what came here. If there was more money in Milbury Holdings, that could be theirs, but that's not accurate what you're saying. Q. I'm just quoting you back to you. So if it's not accurate, which time were you not accurate? When you talked to the FBI for four hours in 2010, or when you 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 27 of 48 27 talked to this judge for two hours today? Which time was it not accurate? A. Mr. McGarry, George was afraid that the $14 million would be seized. Medtronic -- Q. Let me put it this way: George would have no reason to worry about the $14 million if it was your money, would he? But he was worried about it being seized because it was not your money, correct? A. Because it was in their family entity. I didn't have direct link. He knew his father and I had dealings, but I didn't have -- I couldn't go and physically take the money out. So obviously I assumed that in this context we're talking about -- because George was very worried and that's how I even heard about all this Karayanis stuff because he brought me in and he said Medtronic is being investigated, Smith & Nephew is being investigated. Eventually are they going to try to implicate my father? We sort of pieced together what exactly was going on. I mean, I'm sorry that I'm confused. Q. Let me direct your attention to page 2. Do you remember telling the FBI Milbury Holdings is a Panamanian company and is Missailidis' personal company comprised of his personal money? A. The most -- most of the money in Milbury Holdings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 28 of 48 28 was his, but what we did in trading together and was therefore then allowed to come to me was obviously my part of profits with George's father. Q. And this, today -- put the question this way: How many times did you meet with the FBI? A. I think three or four times. Q. Maybe five? Maybe six? How many hours did you spend talking with the FBI? A. Whatever you all wanted to talk, obviously I was willing to talk. Q. And today is the first time that you've ever said that the $14 million was from some kind of trading profits that you made trading in Greece which you could see live on your computer, which would presumably be a about 2:00 or 3:00 in the morning, correct? MR. DONOVAN: I'm sorry? A. You guys were asking the questions. You weren't asking me -- whatever I was asked, I answered to the best of my ability. THE COURT: I guess I'd like to understand something. THE WITNESS: Yes. THE COURT: We're talking about $14 million. You say you put in, I think, a million euros originally back in 19 -- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 29 of 48 29 THE WITNESS: In the '80s. THE COURT: So just explain to me -- THE WITNESS: The growth -- THE COURT: -- what happened to that money and how much was in at the time we're talking about when we're talking about the $14 million? How much was in Milbury Holdings and who did it come from? THE WITNESS: I only knew what I had an interest in. So I don't know the total balance of Milbury Holdings. THE COURT: Okay. THE WITNESS: Because again -- THE COURT: So just give me a rough approximation over the years, so far as you can, from the 1980s to the point in time we're talking about, about how much money you had in Milbury Holdings? THE WITNESS: Well, eventually it grew to that full amount. THE COURT: What full amount? THE WITNESS: The 14. THE COURT: Okay. THE WITNESS: There was over, I would say, 12 years of active trading. And then there was a period where the Greek market was not doing anything. And then obviously, unfortunately John just passed away all of a 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 30 of 48 30 sudden and it created the confusion. George sees all these investigations and his father's name being mentioned and so forth. As you can see, if there was a fear that something was happening. THE COURT: I'm not -- I'm just interested in the amounts of money and when. That's all I want to know. THE WITNESS: Yes. So that would be the total. And I would draw in -- THE COURT: And you don't have any recollection as to the growth from a million euros to $14 million? THE WITNESS: Oh, no. There was 12 years. I could sit and sort of put something to show you, but there was years and years of investing. And obviously, with the big capitalizations, just like when the market was growing here, these things were coming public at 120 percent. Big increases as new companies were being capitalized. And we, like everyone -- THE COURT: I guess what I'm trying to get a sense for is at what rate did the value of your investment in Milbury Holdings grow? THE WITNESS: I guess it was compounding -- we can sit and calculate. I think it was about 12 years of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 31 of 48 31 active trading. So it was compounding at 25 percent. THE COURT: 25 percent a year on average? THE WITNESS: Maybe a bit more. Obviously, by leaving the money in and taking bigger and bigger allocations, I mean, some of these -- THE COURT: I'm only interested in numbers. THE WITNESS: Yes. THE COURT: I think you're supposed to be financially astute. 25 percent a year or more compounding? THE WITNESS: Right. THE COURT: That answers my question. And then at the end of this time period your total -- the total value of your investment was $14 million? THE WITNESS: Thereabouts. THE COURT: That was everything? THE WITNESS: That was everything. And obviously, when it was all brought -- THE COURT: That answers my question. Thank you. THE WITNESS: Sorry, sorry. BY MR. McGARRY: Q. Yet at no point in the multiple hours that you sat with the FBI did you talk about your $1.6 million euro 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 32 of 48 32 investment compounding -- THE COURT: $1.6 million. BY MR. McGARRY: Q. So one million euros roughly? THE COURT: Depends on when. A. 1.3, 1.4. BY MR. McGARRY: Q. I remember it was 1.65 the last time I could afford to go to England, but that was well before this job. You never told the FBI anything about compounding. In fact, you told them that it was the Missailidis family money, didn't you? Take a look at the screen if it helps refresh your recollection. And George was afraid the $14 million would be seized by the authorities in the United Kingdom. A. But again, I'm not sure of the context at this point. As you can see, it was not transferred in one lump sum. It was in smaller amounts as needed by Farnbacher Loles that it was transferred. So I guess -- Q. I think you told -- you told the FBI that they did not want to do one big wire but multiple smaller transfers. You spoke to George and he understood that Loles was trying to grow Farnbacher Loles' business. A. That's right. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 33 of 48 33 Q. The purpose was to get the money out of London. A. I understand that you want to look at it that way. There was an investigation, which is what drew me in to talk with these people. He was concerned. I think their father had a lot of his net worth in Milbury Holdings and so forth. Q. And in fact, I believe you told the FBI that it was comprised of his personal money. A. That's just not accurate. What can I tell you? Q. So when you told that to the FBI you were not being accurate? A. No. Milbury Holdings, obviously I described Milbury Holdings, which was the company that John would do a lot of his personal finances through, including our mutual trading. Q. Moving to the day trading -- and I'm just going to be brief because I know the hour is late -- is it your testimony that it was easier to loan the money to the church and trade on the church's -- to match the trades for the church when they were winning trades and donate money that way rather than just to write a check? I just want to make sure that's your testimony. A. I found it easier at the end of a good day of trading to be able to post some profits to the church account. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 34 of 48 34 Q. And it's your testimony that it had nothing to do with the tax consequences and the difference between short-term capital gains and ordinary income and ordinary deductions? A. I wanted to give money to the church. I wasn't -- I mean -- Q. So when Nelson sat here and told the Judge that it was done that way for tax purposes, he was mistaken? A. No. What Nelson, I believe, said was that the church didn't pay any tax. So perhaps that the impact of the contribution was bigger if it went straight to them. Mr. McGarry, I could have kept those trades. I think, or I assume you agree that I could have kept the trades. I wanted to give money to the church account. Q. Okay. A. I don't see what other motive I could have had. Why give it then at all? Q. As far as Fantasma Toys, you were asked a number of questions this afternoon about the money, quote, I put in; what, quote, I put in. In fact, that wasn't your money. That was the money that was in Apeiron, correct? A. I believe all checks for my contributions to Fantasma, the so-called 740, was from the Apeiron 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 35 of 48 35 account. Q. And that was an account that had other people's money in it, wasn't it? A. It also had other people's money in it, absolutely. Q. So in fact, you didn't put any of your own money in. It was either money that you got from investors or maybe some small amount of money you might have got from your wife's family, correct? A. You're implying that I've never made any money or had any money. That's not accurate. Any monies during the operation of Apeiron Capital in New York City, all that money would have been either in the principal account or in the Citibank account. And that's where eventually, unfortunately, other people also had me deposit their money. So yes, all of the money ended up in that one place. Q. And in 2010, you told the FBI that you and Nelson each owned 50 percent of the stock and that it still existed, correct? A. To the best of my knowledge it still existed and we had the 50 percent. And then there was the debt. Q. And it wasn't until I guess this afternoon that you came up with the difference between the debt and the equity and this somehow forgiving? 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 36 of 48 36 A. There was never any purchase of the equity. The equity was given to us by Dwyer for us to continue funding. And actually, Nelson should have the documents. You should ask Mr. Nicholson to show you, because I know they drew up documents on how this pledging or transfer of the equity would happen. THE COURT: Let me just ask a question. I just want to follow up on one point the witness made. Mr. Loles, you were talking about the Apeiron account. THE WITNESS: Yes. THE COURT: And you said that's the account where, unfortunately, other people had me deposit their money. I didn't quite follow that. Other people had you deposit their money? THE WITNESS: People that ended up investing in the bonds, their money was deposited in that Citibank Apeiron account, that that is the same with the account, since there was only one, that did -- THE COURT: The point of my question is I didn't understand why you said "other people had me." THE WITNESS: No, no, no. I on behalf of other people. I misspoke. Nobody -- THE COURT: All right. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 37 of 48 37 BY MR. McGARRY: Q. You testified earlier that you had a buyer for the Carlisle car. Do you remember when you testified about that? MR. DONOVAN: Objection. THE COURT: Yes. BY MR. McGARRY: Q. Who bought the Carlisle car? MR. DONOVAN: Objection. Beyond the scope. It's beyond the scope of my redirect. THE COURT: Well, I guess I'm interested, so -- A. The situation with the Carlisle car -- BY MR. McGARRY: Q. We're trying to keep it brief because it's late. Who bought the Carlisle car? A. It was a person that contacted us from somewhere in the Midwest. I can't tell you his name. I don't remember his name. Q. Do you remember the state? A. I want to say something like Iowa or something. Some Midwestern state. Q. How much did he pay? A. He was looking for a car in the area of about $130,000 or $125,000, something in that area. I forget 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 38 of 48 38 the exact thing. We've discussed the Carlisle car situation. The Carlisle car was a better fit for this person. Q. My question is: Who bought it? And your answer is you don't remember? A. Yes, I don't remember exactly the person's name. But I know it was somewhere in the Midwest. Because people would contact us and say, I want the car, I'm going to pay you this. Q. Why don't we just take a look at your SEC testimony going to when they ask you: Can you just tell us what you have been doing in terms of employment for the last 10 years? A. Where are you now? Q. Lines 11 and 12 with the answer. Now, this is in, I believe, 20 -- A. '04, '05. Q. -- '05 you gave your testimony. Um, the last ten years, you know, various things. Typically, self-employed. Um, our family is Greek in descent and we have from, um, my wife's side of the family we have business interests in Greece that has been a primary, if you will, business. Um, you know, Apeiron Capital Management was mentioned. It was an investment -- it was a investment advisory company. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 39 of 48 39 A. Correct. Q. And in the last couple of years, um, there's Farnbacher Loles Motorsports, which is motor sports related activities business that I have gotten into. THE COURT: Is that page 15? MR. McGARRY: I believe that's page 7 of the SEC testimony. THE COURT: I was just trying to place that. Okay. BY MR. McGARRY: Q. So you speak about Apeiron Management in the past tense, correct? A. Yes. Obviously if it's 2004. Q. But people's money were still going into there at that point, wasn't it? A. Well, Apeiron Capital Management's account, or the Apeiron account, was the account that people that wanted to invest in these bonds, their money was deposited into that Apeiron account. Q. And you told -- let's see if I have a minute. (Pause.) BY MR. McGARRY: Q. And on page 66 of your testimony you told them, It's not -- you know, Apeiron Capital is not really doing anything, which is talking about the ad. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 40 of 48 40 Do you see that? A. Right. Saying that the 800 number was in New York, right? Q. Right. But then you went on to add that the Apeiron Capital is not really doing anything. Do you see that? A. Well, in the context I think they were asking if it was in the investment advisory business. Isn't that what they were asking? Q. You said it's not really doing anything. Do you think that taking in $12 million from parishioners and the Endowment Fund and using it for your car racing business is not really doing anything? A. I think the context of this question was is Apeiron Capital operating as a investment advisor? Obviously I used the Apeiron Capital account for a terrible other reason. Q. I'll try and just show the Court. It's not the best use. It's a little crooked. Question: If we take a look at this. It's been marked Exhibit 4. That's in their interview. Take a second look and look at it. It's the newsletter. This is The Ministry, correct? If you go to page 10, which is similar what was introduced today, Answer: Apeiron Capital Management. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 41 of 48 41 A. Well, that's what the ad says, yes. Q. And you say this is the ad that's been there for a really long time, since Apeiron was created. And then you go on to say, It's not -- you know, Apeiron Capital is not really doing anything. Do you see that? A. Well, I believe their questions were is it an ongoing registered investment advisor. Q. Regardless of that question, you said Apeiron Capital is not really doing anything, didn't you? A. Yes. Again, in the context that they were asking is it a working -- Q. And my question -- A. -- because they saw the ad, they assumed that it was -- that the RIA was still working. Q. And my question to you is: That statement is not true, is it? Apeiron Capital was doing a lot of things, wasn't it? It was running $14 million from Milbury Holdings through its accounts, it was running over $12 million of investor money through its account, wasn't it? I see you nodding? A. Mr. McGarry, that account was used to deposit people's money. That's a fact. Q. And the money went -- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 42 of 48 42 A. This question -- as you know, this question was in reference to it being an investment advisory at the time. The account was used for those terrible reasons that you mention, yes, for the deposit of people that were buying these bonds. Q. Just so the Court is clear, this question is about the ad in the newsletter? A. Yes. I believe -- Q. We had a roomful of parishioners earlier today. You had an ad in the newsletter. And this is, I believe, March 23, 2006, in the middle of the fraud, correct? A. That the ad was still there. Q. Right. And March of 2006 is the middle of the fraud to which you pled guilty to, correct? A. Yes, yes. Q. And the ad was still there? A. Correct. The ad was there till 2008 you had earlier. Q. And the SEC asked you about the ad, correct? A. Yes, and I told them that -- Q. And you told them that Apeiron is not really doing anything, didn't you? A. In the context that they were asking to see if it was still an investment advisor, as it was in New York, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 43 of 48 43 I believe that my answer was accurate. THE COURT: Is this an exhibit, this transcript? MR. McGARRY: We can make it an exhibit. THE COURT: Why don't we do that. I'll read it myself and I'll draw my own conclusions. MR. McGARRY: Very good. I forget what number we're up to. We'll give it a sticker and submit it. THE COURT: Sure. MR. McGARRY: And you'll have a clean version of it. And also, Your Honor, just so you're aware, the 302s about which we were discussing are also exhibits. THE COURT: Okay. The courtroom deputy is going to make an exhibit list for me in the morning she said. So I'll ask her to share that with everyone and make sure I have copies of all the exhibits and we haven't missed anything on the list. MR. McGARRY: We'll print this out. Mr. Donovan has a copy of it already. But we will give him a clean copy with the matching exhibit sticker. And I think with that, Your Honor, I have no more questions. THE COURT: You may step down. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 44 of 48 44 (Whereupon, the witness was excused.) THE COURT: I think there are a couple of other points we have to put things on the record, but I think we've probably used up the court reporter's allotted hours for the day. There were a couple of objections maybe to soliciting on behalf of a charitable institution or church? MR. McGARRY: Correct. I think there are probably two areas. One is acting on behalf of a religious or charitable organization. I think to a large extent Mr. Loles told us about his conduct acting on behalf of the church, certainly in raising that million dollars today. But I think, if necessary, Mr. Stamos, who has been patiently here, could tell us on another day some of the other activities that Mr. Loles did as far as with the church. And then I think the other issue is vis-a-vis number of victims. And not to be overly technical -- THE COURT: Why don't we talk about this at the sidebar so the court reporter can have a break, because I think I know what you're going to tell me, but the real question is when do we address this? (Discussion at sidebar off the record.). THE COURT: So we will get the outline of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 45 of 48 45 cases before Thanksgiving and what other things for the record for Monday. We'll come back on Monday, put those things on the record. If there's questions about the cases, I'll ask them. Counsel will do written submissions for the record on the briefing of the cases. MS. HUNT: I will file my addendum tomorrow, which will include Mr. Loles' written statement, his financial statement, and the new loss chart. THE COURT: Okay. And then we can pick the date for the sentencing the week after next. MR. McGARRY: Okay. THE COURT: Actually, you can pick that right now. Do you have your calendars? MR. McGARRY: This will probably trump everything. If I can turn my phone on -- THE COURT: Okay. I'm going to use mine. (Pause.) THE COURT: Sentencing will be on the 12 th at 1:00. And we'll have the hearing on the 2 nd . We'll pick up on Monday at 10:00 and then sentencing will be 12 th at 1:00. MR. McGARRY: Very good. MR. DONOVAN: Thank you, Your Honor. MS. HUNT: Thank you, Your Honor. MR. McGARRY: Thank you for your time. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 46 of 48 46 THE COURT: All right. We will adjourn. (Proceedings adjourned at 5:50 PM.)
I, Corinna F. Thompson, RPR, Official Court Reporter for the United States District Court for the District of Connecticut, do hereby certify that the foregoing pages, pages 1 - 46, are a true and accurate transcription of AN EXCERPT OF my shorthand notes taken in the aforementioned matter on November 25, 2013, to the best of my skill and ability.
/s/__________________________
CORINNA F. THOMPSON, RPR Official Court Reporter 450 Main Street, Room #225 Hartford, Connecticut 06103 (860) 547-0580
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Case 3:10-cr-00237-AWT Document 163-6 Filed 02/20/14 Page 48 of 48 Attachment F Case 3:10-cr-00237-AWT Document 163-7 Filed 02/20/14 Page 1 of 3 Case 3:10-cr-00237-AWT Document 163-7 Filed 02/20/14 Page 2 of 3 Case 3:10-cr-00237-AWT Document 163-7 Filed 02/20/14 Page 3 of 3 Attachment G Case 3:10-cr-00237-AWT Document 163-8 Filed 02/20/14 Page 1 of 6 Case 3:10-cr-00237-AWT Document 163-8 Filed 02/20/14 Page 2 of 6 Case 3:10-cr-00237-AWT Document 163-8 Filed 02/20/14 Page 3 of 6 Case 3:10-cr-00237-AWT Document 163-8 Filed 02/20/14 Page 4 of 6 Case 3:10-cr-00237-AWT Document 163-8 Filed 02/20/14 Page 5 of 6 Case 3:10-cr-00237-AWT Document 163-8 Filed 02/20/14 Page 6 of 6 Attachment H Case 3:10-cr-00237-AWT Document 163-9 Filed 02/20/14 Page 1 of 3 Case 3:10-cr-00237-AWT Document 163-9 Filed 02/20/14 Page 2 of 3 Case 3:10-cr-00237-AWT Document 163-9 Filed 02/20/14 Page 3 of 3
ATTACHMENT I
Case 3:10-cr-00237-AWT Document 163-10 Filed 02/20/14 Page 1 of 3 Case 3:10-cr-00237-AWT Document 163-10 Filed 02/20/14 Page 2 of 3 Case 3:10-cr-00237-AWT Document 163-10 Filed 02/20/14 Page 3 of 3
ATTACHMENT J
Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 1 of 27 cux lJ;\lLEIT WJLK.IKSON m:U.zlez: honse I8 parliament street p.o. box hill lSI;l hamilton hm fx bermwla telepho:l.e: { u1) 2!1s- 4!130 fax: (441) 292-7880 website: www.ehw.com EXEMPrEri COMPANY FORMATION QUESTIONNAIRE Please e<>m:plete the following in detail, in OJder to expedite the incorporation process and enable 11$ to provide an efficient service to you. ruent coatadName: {; 12 y Mailing Address: 4 s ,q HI /l y P Lot-6"5 13/looK- f2oJ91J PhoneNumbt;r:a>t?/ Zb3 30o 6fJ5/ FaxNumber.Oo/ 26/ 7/08 E .. mailAddreas: F.lf 1'1 B IJC..Ht;RLot..B"S' L.OM 1. PROPOSED NAME FOR COMPANX Name of Company (Please give at least two aJternative names): fflR::TN .. _LT /:J. (i) 07 I NJI&SToR...S) Lrl> . I lls?OcJATes. LTIJ. (ii) (iii) LIMITED OR LTD. (Please indicate your preference). Note: Bermuda Law requires companies to include either 11 Limited" or "Ltd." as the last word of their names. 2. INTENDED TYPE OF BUSINESS OF THE COMPANY Give details of the precise nature and fields of operation of the business intended to be carried on by the Company. Details of the objeds and powers wbich may be taken by reference are enclosed. Special ProVisions will be drafted as appropriate for inclusion in the Companys Memorandum of Association. If the Company is insurance/insurance-related, please refer to and complete the related questionnaire entitled, "Pre-Incorporation Information Form". 1-lot.,i) /lntL'/' J I . - 1- ---------- ---------------------------- MIS 00025 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 2 of 27 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 3 of 27 Address: (Jnaillng)
DateofBirtll: --r-------------------------- (percentage) ------ 5. BMA DECLA.RA.TIONFORMS Please provide a com.p1ete<l BMA Declara1ion Form (attached) on each proposed beneficial owner of 5% or more share& in the new company. If the proposed beneficial owner is a company. Please supply: (i) if pubHcly quoted, a copy of the latest Annual Report to Shareholders; (ii) if privately held, a copy of the latest financial statements together with the names, addresses, nationalities, occupations and percentage of ownership of all of tbose sbateholders owning 5% or more in. the private company together with a completed BMA Declaration Form for each. 6. ISSUANCE OF SHARES (i) Are the shares to be registered in the name of the beneficial owners or are they to be registered in the name of a nominee? Cason Corporate Services Limited provides a nominee company, Coson Company Limited, for this purpose if required. Please consult the enclosed table of fees. Signature of our standard nominee agreement will be required. Note: It is the policy of Coson Corporate Services Limited to require the capital to be fully paid at inception if Coson Company Limited is to act as nominee shareholder. To 0/tVro/EJ2 (ii) If a nominee is to be used, is there any objection to the name of the ultimate beneficial owner(s) being furnished to the auditors? -4- ----------------------- ... ------- .. -------------- MIS 00027 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 4 of 27 7. FULLY PAID SHARES If other than 100%, please incli<:a.ll! the amount to be paid upon the initial allotment. Fvuy ?A1b s. REGISTERED omCE The registered office of the Company is normally supplied by Cox Hallett Wilkinson through Coson Corporate Services Limited. Please advise if you desire an alternative location in Bemmda. 9. OFFICE REOUlREMENTS IN BERMUDA Please state whether the Company 'Will be setting UE yes, e ~ to know: (i) (ii) (ill) employees will require a work permit. in what capacity: ------ 10. PJRKTORS &ALTERNATED:qwcTORS OF THE COMPANY Names, addresses, nationalities and occupations of D:irectots and any alternate Directors are required. The :minimum number of Directors is two. Bermuda a w ~ a company to: (i) have a minimum of two Directors, other than alternate Directors, both of whom are ordinarily resident in Bermuda; or (il) have a Secretary who is ordinarily resident in Bermuda and a Director, other than an alternate Director, who is ordinarily resident in Bermuda; 6r have a Secretary who is ordinarily resident in Bermuda and a Resident Representative. A Resident Representative is entitled to receive notice of, and to attend and be heard at, all meetings of Directors and Shareholders and must act as agent for the service. of process in Berntuda. ~ Resident Representative has a duty under the Act to inform the Registrar of Companies if the Company commits any :tnaterial breach of any provision of the Company Act, 1981 or issues or transfers any shares in contravention of any applicable laws or regulations. Please advise which of the abooe options you requite. -6- MIS 00028 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 5 of 27 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 6 of 27 14. ACCODN:rlNG (i} Name and address of person who will be responst"ble for keeping day-to-day accounting records ot the Company. (ii) Name and addresa of Managers; (H any) Accountants, Principal Representative {for insurance companies).
(iii) Details of management and/ or accounting services to be provided. {iv) Name and address of auditors {please indicate if audit will be waived). \a)fl\\lj:J 15. BYE-LAWS We recomm.end that the Company adopt this firm's standard Bye-laws (a copy of which can be provided upon request), subject to the insertion of such special provisions as may be required. Please list any such requite.ments.
16. RETAINER FQR INCORPQRATION We require a retainer of US$5,300.00 for disbursements w be incurred on account of this firm's legal fees specified in the accompanying Table of Minimum Fees. 17. BILLING & RETAINER (i) From whom will Cox Hallett Wilkinson receive continuing instl'u.ctions in relation to the corporate administration and secretarial representation of the Company upon which the local direcwrs are authorised to rely? -10- MIS00030 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 7 of 27 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 8 of 27 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 9 of 27 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 10 of 27 MANAGED ACCOUNT APPLICATION AND AGREEMENT The tODowing.items attadled to tbis I!<Unt applicatioa: a Check for lnitial mVl:Bbllart (cbeck number ) a 1iusfu mrm r.r-.... &am IDIIIher Q Othet Oftarily oa....w. o OIS'RIDWI fOiliiiOI Siatt illlrida 6Ift W.S GiNa:----- I I Matlllf Ia WlliO 61ft. W.S Ginn: 0111151 alii 0 IIJ,IIMDIAL
Q UlU1Eil UAIHJl'f COIIPAIIY' 0 I.'STATP IItie 6Ift I'IS &lwei: I I Ap DesiglltM,. Ttrlliaale: ----- ......... takl hWf of tkAalmlll: Q Q hmMI hpca$ellldlft Q fxKulor llemNr AppNded to Accuat -- -- Q AUdalstJwler 0
o PW8Stlirr 0 IOII-PRSIIIUIBJDEIIJ AtCOIIIT 0 IOIPIOFIT 8IGAIIlA1IOI' o l'fiSIHII& uc IIA lWlllnl!, loiiMr, r SEP. SIIIPI.EJ' 0 Olllfll'fiSIIIIG UI IEIJIBHII' ADm {(a) pntfit shrill plel, (ij __, ,.m- plaa, ttl plaa, (d} .f81tlrl ,.., ltlildMWikll" 0 JIAIISFEI OUEATII'' Q 0HAIIIZI1IOIII IS 1HE rum All E11J11Y ORGAIIZED OUTSID OF TilE UIIITBl STlm? 0 Tes 11 0 It =A<UNT: o 01'1181111Ull1Ga CAB lfliH lrl4hlt, allier 1llaa-* IIIII, IIISt-ila .rpiUitld}. a IIAICIIII...._. IMt th - Jthilelestrt pttd., PAS lll.lls181e dlsallln lllliler th Ttnns .a CIUillns ef Yaar Cad alllllllqla ._, aad ...... Dlsdtsano Slalelnent. S.. SodiH Xlfl """XI). ADDD!OIW. FOlliS IEQIIIISI: t 11111liiiiDfilll ""-i-r """"'Arr-" '.lalaiACIIIIIII......,_. --Selnlaly t.rtlfbtlit .... Arlides of ......... Opaliag ....... r..-far LI.(CIMIIIsj t.liiW c. fllltai Cadllblt, Aftila'lilfl Daatit,fllllll.elllls....._,.l._ .., .. ......, r ""'-f-fp Cldll'ltda tf l'llnrl ....... ...-. 51111 Clrlllmlt.l r-dallmt -. hsllsee#lt . ......,.._.. ..... .,_ (o}Sialialdi'SP ........ ..._., lle!lpelal I'J Slaildllnlllld
.. n J....r.,. Deatltjgreema ft fdllsJIIpdud Ollslrle of6ellaledil$5 u A SIIIRfl Option Ag..-1 MIS 00034 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 11 of 27 AIXIIUIII 11111119: ; _ - .. l. - Wliaf1s tilt 0 "*"-lilnlilts o cnift osalufw- :Z: 0 0 lilnefy/Cimlwg 0 IIISIIOCI Ptamds lst/lis_., ........ llllilllllis .......... ISANIIIOrAc11 Ol'es rp4; lstllisnacantlerallnipWas..,...llllflr .... IISAPQDJAd? 011s a-t( Art tau ....... llilli Ill .... ill lllis _.., llnft1lr .. r...tr allher. (II A llliir illifllirt .---I,Jir JIO(ilkallfRdailn IIIII-II.S. 121 l1lsaf, assodiMd widl aa im .... fVIIIily _.., af sud! ., ollidQI? o Yes j;l'{e ldlllllfylllt-efiM.$dll.allbWI, IIIIIICOIIII:r. _________________ __,_ ___ _ NEIEICBAIIGE IIMSflll Please initial this liCdioo If you wish to - )'OW account iofOtmation via NctEx.dlange Investor. I 1llldeabDd lnl'eltOc is a service which will allow ma daily aa:as to my newP.AS account I authorize P.AS to establish the lnvestnrsetVia: and that I will be Ntnished with.a NetED:1aaage Invrstot ID . .I umierstand that I can authorize any third party I designate to view my la:Diint(s) by signiDg a separate authorizatiOn filf that pllipO&C. For Netflxrbangelmator identifialtion purpoces, please provide your mother' maiden name:------------ 1 wish to set up my ac.counts on NetF.xdwlge ------ I:rutial Here 1 wish to add this ICCOUnt to my exiSting NetExclwlgc lnYestor ID: -----,::-------- NctEn:banse Investor: ID Initial Here COISIIII TO lllaiOIIC DIMI\' You may eUoc:t to IIIXetlll trade confirmaCons, aount atatemeats, and other documents (in lieu them on paper) via NetExchange will need to log in 2nd elect this optioll. Please note: If )'Oil ded: online I'D m:cM: deamniCdelm:ry oftrule IXInfirmatiom, statementS, and other no lonp be eligible to RCeiw: paper- c:opies. of these documents via poai allliL You tqnesent that you have =d. and underslllnd the additional information fOwld in aubR:aioo 1, paragraph (f) ofSeaiotl XIII of' the: "Thms and Conditions ofYour Cash and Matgin Aa:ounts or thiS !.ccount .Agreell)Cilt, CDJJGCtJUng your con$cnt to elc:arook ddm:ry of trade confirmations, 1.IXOUilt './ ,,,.,,":>. <:, .. 4CCOOJtnru: $0N)2S67 /}$$f7C,J/{Te$i LTD &Al!Of'IIIIStlfAmlCABLf: I I 7 SOCIAL SKUIIlliUMIU: TAXPAYfiiO IQM11: llll'IIDAJE: I I COOIIJIY Of anzttsBIJI: mEPJIOIIl MIIMHIIIIOIIE): li:UPIIOIIE IIIIMIR lBUSIIIHSJ: E-MAil:
01y: Still: C:T Zlp/hsfi!Ceda: QbtJ/ Oly: _____ Stt11a: __ Zip/hsta!Code: __ _ FTII R.B (OIIIIIry:_ nmous 1101 srmr Atams co r.o.aom): CRY: ZIP CODE: PRE.YIOUS- SliER ANms (10 f.O.IOIES); OlY: srm: Zit tilDE: Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 12 of 27 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 13 of 27 . , ' :..-:' ACCOIIITIIIMJa:L_ __ t.,_
I I TAXPATIIII IIIMIB: ClllllY Of arJl815111P': JWI.IIIG ADIII5S (if differtat fmnligal adirtul MUtE ______________________________ _ Oir. Stele: __ .Zip/Pastil Cede:--- Caulllr7=_ "'f}'OU .... been at rru. address mc.fner than _,yean, pre- providi>all ot.ldrceeca 'Wh= you haft n:lidccl. fOr the pRW>us two yean:. I'IYIOIIS HC!IIf st1&l' &DIIIf5S (10 tO. Ions!: 01\': STAlE: ZIP CODE:
Pleatc c:omp1ete aD bddw. 1YPE Of JdSIIIm (If self-..,teyft, iaAimtt "-.-.of WaessJ: art: Please c:Omplcw this scaion. 1Yn tf IIEXI'IISI GOmJIIIflt I'IICJJO ID'": Q 60YRUBIT VISA ZIP COO: 0 UIIEMl'I.OYm !11911'1 Q stUDBiliSTDTJ YWS EMPLOYED: Zll/POSTAI. CODE: Q OlllflSOVBIIIM ISSUED ID: ___________ _ IDIIBMIB: COlJifm DF ISSUE: DAlE Of rSslrE: I I
Clearing, <Ustod)lother ........,_-.may l>e ....,.cdod by I'IHsh!ng uc; member FINM. N'ISE, SJPC. Pershing Adv!sol Solul!- rolla on its aftliiMe ,_;de .-ut1on services. Trademark($) belong to their l'l!sp!Ne ownen:. DAlE Of Wlwto.ll: I I MIS 00037 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 14 of 27 .A(COUIT ftMI1; . : . ..:: Q'fls QHo .. ;':'. ;,, ' j ....... - .... flit tcaiiiiW...S,., ... milllll? Q Q .,. Ir,a.,.,a ...... "'!JJIPP= ... .Additioaal Accouac HoJdcr Sappla&at iQrm. L PJe.e note that we will fumish. $bltemcli.Q and wnfinnationa to tbc You authorize PAS to maJtc awilable IICW'*st'&temCil!lland coofimladou& to yoUr .Ainhorizccl Adviso.r(s) as you direct. PAS Will also i:auac to be scm c.: .made uU!able duplicate-- tad tny otbor mtmested party that you indi.catc b!!l.ow. Your authcirizatioft abo permi5 your AuthoriBed Advi8or{s) to l'icw and dowuioad your IICCOUnt information tD their clectrcmic symm. PUASIIIOif: Azty additions or de1e!ions to intaesled. panics mast be in writing . . ....-.:--..:; "': .- ' .
COIIITliY: Zlf/I'OSlAL CODE: lTPf OF IGTIFIWIOI; QSialllllttll Q c..nn.llon " ', ACCOUIIT IWIE: IIAJUI& !!Jfii6S: OJJ: SlAT: COIIIITIY: Zll'/l'OSUL CODE: &!lila: I TYPE Of 1011fiWIOR: Q Slelemtll Q Cafinnltlatt (Add separmmeet fOr additional Interated Parties.) 11 PROXIES AND CORPORATE MAILINGS ........................ ________ MiS-Obll38 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 15 of 27 ACCOUfiT HUH: I To -m>atiorls. q }<iar'Wrapke IDa\18ged a<:coaot,_al ac:c:ountOW!iaS D'lll$t sign this section. In lleu.of separate requesr to PAS and at tbe .W:be JqlO.rted the bmki:rage aa:ount m=nent You cm.obla!n.
AUlliORIZDJI: I ofeech byiiplagbef-. I (we) di=t Penhing ILC 10 discoimoue moiling.,._ !nde to IDI: (us) lilr Illy r (we) llndentuid ami admowkclge thor: I {WI>) williiOf P*f li:e t.aed on my(_, decisioa 10 aocure this acction.. is Data condidoo ID my {Cillr) eatierlng into orcontinuiDgpor!icipcion in a wrap li:e pmgram. I("'\) dUs iaotmcO.oa io diocoabnuie Jllliliagoftzade ""1 time. All_--..-.....,..........__...,.w....r.. ACCoUIIf D\miV!JimFS, Jt. SI6IW8IE am Pleae chooR ibe lllO!IIe)' madoet fund or Olher cah invcstnu:nt vdUde in which ,oor cub bQmces in J"'W' llOJitl!timmml: aa:ounts should be automatieally Uolea iadiCated, aD cash balances tornoan:tiremcnt adlountswiH be autoinarlca1ly inw:sted in the Fcdaatl:d Capital Rese:ma (FCR) Fuud. FQr importm.t in&mation about each limcl, please l1!lid the fund p10SpeetUs. 11011: All cash baWw:e8 for retimnent ac:c:ounts will be in the Penbing Govoemm.ent Aceooat (PGR). TAXAilt ISSOO lllifill hrd.se) HOITWilf tSSOO hdllll Priasej O.r.Hreled c.,ni Q R1111m IBIUI (hfnlt Ftt ... lllir_. AaDHis) Q 11ft TtnliRilftlrdC4di T11151 C4di Sirles (fiiTO o ftHrlfed cmn...t._.,. tFGII o Ca1i1enii W Trvs1 Cash Serte.IFClll 01-.e f-.4 Dtpestt .-..IFIIJO...-.Vm AciOIIII 0 c.-tblllualrlpel Ca Tmt Cesil Slrils tFOCI o ,....,..... ,,.. .......... Slnka lfiiOSJ: {SJoa,eoo lllillllnl flllltll "-'-l o "-lw"1 MllildpGI Will l'nlst ca Serte. tFNJCJ C1 fllleniH "'-................ {fiii(J: ts5111.118 .._.lallllt illmiiiiiiJ o fqilil Muldpa/ UsiJ Tmt WI! Series (RAO olldler . . .._ ...... .,.. ......... ........... Ofi'SIIOIEilOilY fUiilt (aei ................. Unhll$1i1115) o FaUrat.d Short "fml U.$. Pri11t Fnds IDS QISS !lm.DJ 0 Fllltralld Slum Ter fud Ill$ Class!OGYDJ 0 Fedinlel Teno li..S.. Gotera-.t FtnuiiSDS (tau !OGSDJ Q ,...,_. S1Nri Tirai .S. Treamy rllild ISS Cliss IOTSSJ Pleaee COIIIIIIete this section in c.mli:r tn sa up Slllnding lOi: DDt-part)' fedenlliuid wire regucsa. CompJ.cang this iCdi.on .. you to ttlUISfi:c Nnas via wiR: nom this bcolrengi 8IXlOUilt to 811 aca>1IDt with at the fiimlcial OlgBIIization indicatM DCIOW. 'I"his in filll fol-ce and elfed: until DOCity PAS ofi revocation by tcftpbooc: oc in writmg and PAS bas had sufficiCIIttime to act on it. IAIJ(MI: IAI(CITf: tAll STATE: WIICOUmY: FOR lH 11fff Of: IE<BYII& lAIII ACCDUIIT KUMlER: FUQI!EI CREDII TO (If APPUCAILEt ACCOUIT IIIUfl (If APPUCABLEl: fOR FfiWI. Aid WilE$ 0111511 OF Tl na STAT5: CHIPS AlA (IIIJSIDl U.S. OI1.Y): SWifT CDOE (1111l518f U.S. OHlYI: tiC COD toUISIDf B.S. Oll1l'l< a u.s.Dtlm oDihr: __________ _ ----- --------------------------------- MIS 00039 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 16 of 27 ACCUIUUI!t ' ' . ACGIIII1' 11PI ........... kmlllt 1/l fiLl .... JCCOIIIJ- lt1IIUI. USE Olllf . llfllllloiiC-- MH1W14 ___,,.., MIS 00040 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 17 of 27 - '- *- -------- - ---- ............................................._,,..,.,,.. ,_ ......... --'"-- MIS 00041 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 18 of 27 ''''"''"'' .. "'''''''''''"Mo-MoooOM ------------ ------- MIS00042 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 19 of 27 ofded]ug.Orhetubmbroralpangpal other forms oa. .......,.. one haS aaintl:n:st m )IUIJraemunt{c) with I'AS.. i) JOlN'r ACCOUNTS--Unlr:stothcrwise 8edioa I joint Aec:oun beheld by. you to eitha-:m,. or to J'OIIC. llfiPOtlllatlie other . to Wie.n ac:tion on hiii or 11Cr.bdl1lf and to Jepll:Selltb_ or her.!fi.all PAs rbd be m sballnot to
m)MtiT'UAL aodseBingUIUlUal fund sbaRs. FWld rhua am be pmdoosed lllldaafd the fuliil without pa)'in_( feo:a. n) SEPARA8II.JTY-H or c:oaditicm. shall beheld to be Lmlld by any court, or cOndition. The Of cod coiidi:tiaa8 tball- be lflidecl. and this Apementshall be cmicd OUt .. if Ill}' such mv:n6 ra:abiC plVmiGD 01' cooclidoa. ""* not ClOI1lall>cd hm:m. o) HEADINGS ARE DESCRIPTIVE-The baeofis purposes only and shill not be deell'led to moclif1 ocquali4r any of me rigbtaor obllgationa lilt &.rth ouda p} RECORDING CONVEBSAnONS-Y011 uada:stBnd ud tpe thatmr potecrion. PAS may l!lemonically l'e<XliXI any of )'i>urtdephone with . q} the 1Wl and eotin: betwm:n the parties with.n:apea to proriaion$ hezzin, and rheae ue ao otiU or ia ClOidlict bezewitf.. r) 'ttRMINA'nON--You..., that PAS has therlgltt to IICCOWlt(a} at any lime by DDiice to you. The pnMsiom of this sarme the lamination afyour ac:Count(s). s) you. By amrirming 1o by J'l* indiCate to ofthesci c:haD&ei Jfl""!. do not ao;ept the !D12It notiv PAS Ja wntmg of aDd your aa:ouut{s) Will be dosed. Howeft:r, )'OU wil[ mnam liable in- my outstiadiDg debits audfor clwgcs on your lli:coum(s). t) THE LAWS OF1HE STATE OF NEW YORK GOVERN-Thia and its shaD be pemed by the laws of the State ofNcrw Yodt..nthout givingdlt.ct to ilB amfiids ofl:aws provisions. u) ARBITRAilON DISCLOSURES nilS AGREE'MENTCONI:AIN$ A CLAUSE. BY SIGNING AN ARBITRATIO'N AGREEMENT 'mE PARnES AGREE AS JIOLLOWS> AIL ARE GIVING UPTHERIGHTTO SUE EACH O'ffiERIN COUIIT, 1NCLUDJNG'I11E RIGRi:''l'O A 'l'RIAL BY JUR!lEXCEPT AS PltOVIDED BYTHE RULES OF mE ARBITRA.TION FORUM IN WHICH A CLAIM IS FILED. ARBITRATIONAWAIIDS ARE GENERAlLY FINAL AND BINp_!N..!.PARI'Y'S ABIUTYTO HAVE A COURT REVERSE OR MODIFY AN ARBrntATION AWARD IS VERY UMLt:rv. a THE ABILllY OF THE l'AKIIES TQ OBTAIN DOCUMENTS. WITNESS STATEMENTS, AND oniER DISCOVER\" IS GENERAlLY MORE LIMITED IN ARBI'l'RA1'ION1HAN IN COURT PROCttDINGS. THE ARBlTRAl'ORS 00 NOr HAVE TO EXPLAINTHEREASON(S) FOR TIIEIRAWARD .. 1HE PANEL OF ARBlTRATORS WIQ. TYPICAILYINCUIDE A MINORITY OF ARBITRIJ()RS WHO WERE OR ARE AFmLUm WITHTHE SECURmF.S INDUSTRY. THE RULES OF SOME ARBl'l'RAnON FORUMS MAY IMPOSE TIME IlMlTS FOR BRINGING A CLAIM IN ARBrrRATION.IN SOME CASES, A CLAIM mAT IS INEUGIBLE FORARBrrRATION MAYBE BROUGHT IN COUR'[ THE RULES OF 'mE ARBlTRATION FORUM IN WHICH THE CLAIM IS FILEP, AND ANY AMENDMENTS THERETO, SHAlL BE INCORPORATED INfO TillS AGREEMENT. v} ARBITRATION AGREEMENT ANY CONTROVERSY BETWEEN YOU AND US SHAlL :BE SUBMITTED TO ARBITRATION BEFORE TIIE NEW YORK STOCK EXCHANGE. INC. OR ANY oniER NATIONAL SECU1UTIES EXCHANGE ON WHICH A TRANSAC'nON GlVlNG RlS! TO THE CLAIM TOOK PLACE (AND oNLY BEFORE SUCH EXCHANGE) OR FINRA. NO PERSON SHAlL BRING A PUTATIVE OR CF.RilllED CLASS ACTION TO SEEK TO ENFORCE ANYPREDJSPUTEARBITRATION AGREEMENT AGAJNsr ANY PERSON WHO l1N> INmATED IN COURT A PUTATIVE CLASS ACTION OR WHO IS A MEMBER oF A P0TATIVE CLASS WHO HAS NOT OPTED OUT ANY CLAIMS BYTilJ!: PUTATIVE CLASS ACTION UNTIL (1)1HE CLASS CElmFJCATlON IS DENIED; CLASS IS DECEI01F!ED; OR {3)THE CUSTOMER IS EXCWDED FROM THE CLASS BY THE COURl: SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATESHALLNOTCONSTITUTEAWAIVEROFANYRIGliTSUNDERTinSAGJmEMENTEXCEPTTO THE EXTENT srATED HEREIN. 1HE LAWS OFTHE SfATE OF NEW YORK GOVERN. MIS 00043 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 20 of 27 AUIIOIIUUIIut ' ' ' ' . ..I ............ : '""''"' '"'"' """"''""""'"'""" """""""""""-""""""'"" ________ , ____ ,_, _____ ,, ___ , _____ """""""""""'''""' MIS 00044 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 21 of 27 ACCOIIIIT 1111111: : :-; # - "' ., ... ................ . 10 provide some b.&: liiCtl aboot.jllilCbaaug seaJriries on margin.llld to afertyou m the risks imolvQI with 1rlldias-m t.ll'llllpl Befin in a margin aecount, it is important 10 c:an:fully miew theM by Persbing.llld to C'ODIUltwlth your Aatbodzed Advisor(o) .tegan:liog any qucetiono or concerns you may-= '"6-llllllplllllllOU!ltL When ;ou,pan:J- -m.. of Jlll1ing Blr them in fidlor borrowiug pan of the pardwe price nom Ponbing.If you choose 10 fiom Penhiug.. you will Deed 10 open t llll1'gjn with PAS. which will introduce lllcb tcalmrt() m Pershing. -UIIid 86 the loan that was made tO )ioo.m.pun:hue the -nies or any other indebtedness arising afU;t the ini1_Dd tmn1n11::tion. '!f m JOIIr_acxowu{s} decline in va1Qe, so docs the value of the collatcnl supporting your ICian. As a msult, PenbiogC111. tab-. em Dlueamargin.callmd/or sell securitic:s other assets in any of your aa:ount(s) held -.ith PmbiDg, in onfec to maimain its .required cqui1 in the mqin IIIXiOWlt. It is importsnt t11at :pOll JUDy 1UidersbaiJd the ri&b imlolftd in ttading aecurities on Jiwgin. These tiska include the fo1Iowing: Y4* tr.n,_dcJ-itia thc.-giaueoaat. in value of seturitis that - purehuecl 011uwgift may mJUin: you (D provide additional funds 10 Pershing 10 avoid the fu=d sale of those iicurities or other Smitia or JOOI': ao:ount(a). Pcnhiaramim:e die nle of secmldes ill }"iiaraccounl(s). If the eqaityiii70W' bdmr PenbiDgc m........._ magin Perahiug can se.ll the securitieS or other 8JSCIB in any of your IICCOIJDt(s).belclat PenbiJigto cuverthe awgindeticimcy. You a1sowillbe responsible fur any short &II in the account{s) afiersuch a sale. Penhiagcaa eellJOW8eCIIriliellotodaer _.. , miltskcaly belic:oe ibat a lJIIISt COI:Itact tbcm fur call to be v.Wd, aad that the financial cmnot other llSds in their tcOOUDts to meet the call unlells the filllllicial bas contacted them tint. This is a.. Ml!et !inmcial 1rill attanpt to notifY their dicnw of but they- not rcquiRd to do so. However, cmt if a financial organiution bas amtadl:d a c6e.otand provided a specific date by wbicl> the cliCAt can meet a IIWgin call, the liiWII:ial JtilltUe11CCC811Sl)' steps to pti*Ct its 6nauCi.t mterem. including immediAtely selling the seeurities without notice to the client. . Penhiag...,. ................ . .,.u1imeperiodswilhautuotic&to,.,... In repro 1o house, maitw:nana:, and other margin dlllw, 1n IU:u Hquidations, Pershing may pent1k you a period of time to sati&IY .. call. This lime period sb.n not ill any .., waive or diminiab Penbl.,g's right ill its sole disaetion. to shorten the time period m which you mayaf:idt a call, iaduding ooe .w-ly oubliaDdiog, ot llC> demand that ,. c:all be satistic.l immediatidy. Nor does such waive or diminish the .right of.Pc:nhing m sell out PQiidons to atisfjr the call, which can be ao high u the fiill indebtedness owed by you. Matgin m&y llld c:haoged by Pez.biagill its ook diacretion and judgement. wlaida J;,pi1amJ ur!IOW to meet a magis calL Beauae the the margin 1om, Penbins hu the right to daide whic:h security t>C> sell ill order to protect its Pershing can inaase ita mpUmne$ at any time and is not mquirtd to provide you with advaocc written notice. These changes ill firm poliey often take cffec:t: iaunediatdy and ma.y IaUlt ill the mail1tenat= in&rgin call. Your f&tHe to .ims1y the tallm&y C!ll1Se Pershittg to liquidate ouell snrities in JIO!ll' 20:0Uilt(s). You a"Caoteadtled to--.ion oEiime onamargia call. Wbi1c an cxtCD8ion of time to meet be available to clien1s under certain conditions, adient does tiOt have a right to the cxtcasicm. Yoarwrittaa MatziaApementwidl Peahmgprorillcll folr cataia The Mmgin Agreement set .forth ill Section xm of this Aa:ount Appllation and Agreement is leg2lly binding agxeement, c=not be modified by condw::t. and no fiailu3 on the part ofPcmbiDg atany time to enf<m:e its rights \Hider the Mmgin Agreement t>C> the pateot permitted sba1l in any way be deemed to Wllive, l'llCNiifjl or adax any of the rights granted Pershing, including those riglrts vested in Pershing to dealovitb collateral on all loans advanced ro you. Also, the CODBdtnteo the fUll and endre betwt!en the parties with teSpeCt to the pto!lision of the Margin Agteemcnt, _. 8lell0 oml or m COilBict with the Maigin Agn:cmcnt unless you have advised in writing to Pmhing of IUdl tOnflid. mndifiatiob, amendmeot; oc sapp'lement to the ocmy indmduai provision of the Margin Agreement om oalybe ill writing signed by a of Pershing. You should cudUIIy review your Margin for the rights llld limiutioJIS gomning )'!lUl nwgin aa:ouot Jdatiousbip. MIS 00045 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 22 of 27 AOIIT IUIIEI: : - "L ' j .ACaJIIIf5 lhaeby request that PAS open a brokmge liauom iD. the uamea&s!:r4 u IIXXIW1t awnas on this Aa:ount App1iation and The to and lllldeapan hereof. Prior to irpllg .n:ptaeDt that I includes portions ciSecdoa XIll and the Mazgin Dllc:loam: Statement, SeaioaXIV, if applicab1e), and I agree to be bound bry the terms citheAgteement as amcndccUi.,111 time to time. I uodast.nd that PAS may aead 111e disclostna teg111ting 1111 aounm, and that PAS may modlf}: those c:lidosun:a to time by kndiDg 111e updmddiidosutes. I agree that PAS may p!VVide 1l:pldiDg this aa:mmtto the Authotized IUideataad llllli.ap:e tb.tJOU will q.ena F\mdibg.A.xoom. a Mumld Fund Acrounr, and a sepatate attount tOt cac:h iirfatmcnt lllaDap' or imacmcnts1fle .indicued in the Account Alloc:atio1118Cction, and tOt each Manager or investment style mat I may <:booee ill. the 1inu& I audtori:a: PAS to Ul bmstment lllllllllgers or imatmeai: styles and c:om:sponding &a:ow1u, in. by PAS fimu AutliatlzedAdwis!x(s). I undemmd that !his .Aaount App1icaaon and.Agleement Cmduding the liCXIJI2DI: pans each-opeaec1 pu;$iJIIItto !his Attoant Application mel Agteemem Cmduding atcounu opened in the fUtum & additio!W insttuctioas m:dved by PAS from the Authorlzcd.Advisor(s)). I willbe F\mding Aa:ount suhjed m my other aaounu pmsuant to the alloc:aliml iDsttw:dons u indiaiied &-in or as otherwise on file at PAS.
U.ru- otberwDe iodicat1:d to PAS, I authorize PAS to c:aiculate lmt&tmenr gains and losses in m.y sc:rount utili2ing the lim-in-first-out (F1FO) method fbr all secmities. fib 1.........._, lli.tmy Pia Spo.ar.,...,._ Piau Sporuor .fiwmoreiafilrmacien. I hcJcby aud>orizC PAS to deduct my inR$tment advismy &eo fimu my aa:oum: widloutmy duty by PAS to inquire as to their accuracy or pmpriet}t I fiutb authorize PAS to deduct ias fees 1iom U1fiiXOW11S and c:n:dit such oitber dha:tly (or indim:rly through the Plan Sponsor. in which. cue who .tW1 be aolely responsible tOt nMewing such fees fOr aa:macy and pmpriety) to PAS. PAS may cb2nge its &eo at any time. I undentand that the Au!horizcdAdvilor(s) may trlCXliDIDeDd that I pw:a.- mutual funds or other imestmcnt sponson:d by or PAS or its that m:ot, PAS or itsafliliau:s wiB..m:civc addidooai fees from those mutual funds or proih,ias. In addition, PAS or its af6liata may .rec:eiw aerricing, clistnbntion, or other -UCil fimu any mirtaal imdil (whether affi1iatl:d with PAS or 1101;) that my Autborized.AdYilor(a) n:c;ommc:nds 1hat I pun;bue.lUilde!mnd tlmt PAS is llding solely as and not as an inveatma'lt will only caayout in the 1!81fing aJithorlzaiOn sc:CMn hcn:in. PAS' fcea ue scpatate from the id.Wiaq fcea .dwged by Advi.or{s}. I undmtaad 1hat I am DOt Cllli&d to ldlatc (I( any fcea if my IClCO<IAtll ate cana:lcd duMg a pcrlodforwbich I have been ahady -S'P'IS I hl!l'llby audlorize PAS hhing to: (1) disbume a.eta fOr inYatmcnt pmposea tOt rtxr benefit or to me pe:rsonal1y. as instructl:d by my Plan Sponsor, (2) to Ielllit checlts to me at my acidless M teaml; (3) Wi.te fimds aild otherwise: to make disbursement. of funds held in my account(&) per the Blmding iostruaions on file with PAS; and (4) tD make futJd toll!sfera between my acmunt(s) at the cfuection of my Plan Sponsoe Ifi want funds dilbuncd from. my acx:ount(s) to a financial Olpflization nor on file with PAS or tn a I hereby agree to provide PAS on -=h O<allll!llCe with writiJon lettBr to disbwse such funds out (I( my aalOWlt(s) by check, wU-c, or other furm to l!llch financlal OlpDizatiQn or a third pny.l acknowlalge and agree that PAS may contact 111e to verify anNor confirm niy authorizo.tion prioc to making such clls&umelnent ..... Ifl have, or my repesentati'fe bu. cbeclrM the box oopage l. of this Acc:ouut Application indicating that I would 1i1ce mugin privileges extended to -,then that the prlvilega- gnn!M by Penbing in its sole dia::n:tion under the 1Ims of the Custnmcr andMAJBin 1Jlsclosute Sta1Hient, Ill of which I have read and undemand. I understand that, in a margin IAXOQilt, I may lose more thm .neely my iDidal investment. Bysipia!thh.Apemear, I IICbowleclp111atsemritiesnocfallypd m ,... or '-'eel by,-to 01bets. 1UDIII6 AIIIOIII8 I.admowledge rca:ipt of mel I have and undenmnd the trading authorization t=ns of this Aa:ount Application and .Ag=ment and I hca:by consent to those rpecifie tern'lS, granting trading authorization as ddincd in this Aa:owrt Applicalion and .Agieanent. fiiE110Fl4
MIS 00046 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 23 of 27 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 24 of 27 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 25 of 27 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 26 of 27 Case 3:10-cr-00237-AWT Document 163-11 Filed 02/20/14 Page 27 of 27
ATTACHMENT K
Case 3:10-cr-00237-AWT Document 163-12 Filed 02/20/14 Page 1 of 4 Case 3:10-cr-00237-AWT Document 163-12 Filed 02/20/14 Page 2 of 4 Case 3:10-cr-00237-AWT Document 163-12 Filed 02/20/14 Page 3 of 4 Case 3:10-cr-00237-AWT Document 163-12 Filed 02/20/14 Page 4 of 4
ATTACHMENT L
Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 1 of 15 Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 2 of 15 FD-302a (Rev. I 0-6-95)
318-NH-46690 Continuation ofFD-302 of , On 12/11/2 0 0 9 . Page _.....:2=---
LOLES' father wanted to go back to Greece in the early 1970's and eventually moved LOLES back to Greece. LOLES studied at the American Community school with other American military kids. He went to high school in Greece and did not have any other siblings. LOLES was an only child. In Greece, LOLES learned how to be an American. After finishing high school, LOLES had an interest in engineering. LOLES returned to the United States and attended Purdue University to study mechanical and industrial engineering. His first job after college was in Norfolk, Virginia for Newport News Shipping as an engineer in new technology. During this time, his parents (father and aunt) went back and forth between the United States and Greece. LOLES was not very happy with his first job in Virginia and his supervisor at the time recommended going back to New York. In New York, LOLES met two guys running a computer management consulting company out of their apartment. They worked in a very "high risk, high reward" business and they told LOLES he could be out of a job soon if business did not work out. Their business was primarily computer simulation consulting for brokerage companies. His first big project was the simulation of a stock brokerage branch on Wall Street. LOLES initially thought the guys who worked on "Wall Street" were geniuses, but he later determined that they were basically "glorified used car salesmen." At that time, LOLES became intrigued with the financial industry as all of his computer consulting clients were brokers or somehow affiliated with the financial industry. Chase had used his company's computer program as a training tool. LOLES married his childhood sweetheart and had a couple of children. His wife was a close family friend whom he knew for many years. LOLES moved to Greece in the mid to late 1980's with his family. His third child was born in Greece in 1991. All three children were United States citizens. By this time, LOLES and his wife had to make a decision on where to they raise their children, either Greece or the United States. He came to the United States to settle and his management consulting business fizzled. However, LOLES had the exposure to the financial industry in working in the Wall Street climate. He made client contacts and asked how he could get information on how to enter the financial industry as an actual broker. LOLES spoke with a contact at Paine Webber who advised LOLES that he (LOLES) Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 3 of 15 FD-302a (Rev. I 0-6-95)
318E-NH-46690 Continuation of FD-302 of _ __,G"'"'r""""e""-g=o-""r_.y---"P"""'.'---'L"'"o=l-"'e""'s'------------- , On 12 I 11 I 2 0 0 9 , Page --'3"---
would have to jump through hoops to enter the business despite having more experience than most new employees. This colleague at Paine Webber recommended seeking employment at a smaller firm and getting his Series 7 license. LOLES managed to find a job at "Investors Associates" and eventually received his Series 7 license scoring a 97% on the exam. Many people teased LOLES that he scored such a high number as he only needed to score 80% to pass, but he studied hard for the test as he wanted to learn the business. LOLES did not like the environment at Investors Associates and left the firm. After working at Investor Associates, LOLES went to work at a branch of AG Edwards in Hamden, Connecticut in the early 1990's, perhaps 1993 or 1994. AG Edwards was a nice facility. His manager asked LOLES if he was Greek and whether he spoke Greek. LOLES told him that he was Greek and did speak the language fluently. His manager told him that there was a large Greek church in Orange named St. Barbara's (hereinafter referred to as "the church"). His manager also recommended to him not telling too many people that he was a stock broker and not to try to market his services too aggressively around the church. He thought that giving business cards out to parishioners was very shallow. LOLES eventually became a member of the St. Barbara's church community. He and his family attended the festival every year and he was embraced by the community. One of the parishioners mentioned the Endowment Fund to LOLES and he (LOLES) was invited to a meeting. Later, LOLES became a member of the Endowment Fund board. LOLES explained that the brokerage firm that was handling the account for the Endowment Fund was not going well. LOLES did not like commission based earnings, and preferred a fee-based earning structure. He mentioned this to his manager at AD Edwards, but his manager told LOLES that they only did commission based fee structures. LOLES received substantial financial support from his wife's family. LOLES eventually left AG Edwards and started his own investment advisory company named APEIRON CAPITAL MANAGEMENT. LOLES needed a custodian for his company and used DLJ Pershing along with some family money that was provided to him. LOLES had accounts at Pershing so he could take a fee to compensate his firm. At this point, LOLES had something to offer his church. The parishioner handling the Endowment Fund account at the time was charging too much. LOLES asked whether the oversight of the Endowment Fund could be moved to APEIRON, but LOLES would not Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 4 of 15 Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 5 of 15 Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 6 of 15 Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 7 of 15 Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 8 of 15 Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 9 of 15 Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 10 of 15 Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 11 of 15 Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 12 of 15
FD-3Q2a (Rev. I 0-6-95)
318E-NH-46690 Continuation ofFD-302 of , On 12 I 11 I 2 0 0 9 , Page --=1-=2 __
photos of his children and left a note. He knelt down in the rear of the car and fell asleep. LOLES' son DINO was looking for LOLES and called his mother to find out where he was. DINO came to the house to look for him. DINO understood that LOLES was under financial pressure and DINO found LOLES laying at the rear of the car in the garage. DINO told LOLES something profound that set LOLES back. DINO told LOLES that "we have more good to do in life." LOLES hopes to be able to do some work to help these people and there are two or three people he is very concerned about. LOLES felt that these individuals were his family. Regarding the execution of wire transfers, LQLES advised the wires were on Citibank online auto payments each month depending on how much interest was calculated. Once in a while, LOLES would use the mail but he would usually say, "these things are what they are." Typically, he would hand deliver statements, but he also mailed them at times. LOLES advised the level of trust between LOLES and church parishioners was very high . LOLES explained that the funds which he managed were private and commingled. LOLES used a "minimum to participate" pitch to encourage people to invest with him. He did not tell people "you got to invest in this." That type of pitch was not his style. LOLES' success was taking advantage of the market at the time. Some were concerned that LOLES made money on the New Haven Savings Bank initial public offering (IPO). If people met the initial threshold, they could invest in the New Haven Savings Bank IPO. Many investors were in the higher return funds, but some wanted to diversify. Some individual investors wanted to have more funds. LOLES created the fal.se account statement forms representing holdings that did not exist (similar to what was displayed to him earlier in the interview) using Excel on his laptop computer. LOLES did not know where the laptop was but it would either be in his home office or his office in Danbury at FARNBACHER LOLES. LOLES denied receiving assistance from any other person in this scheme. He created these false accounts on his own and no one else participated with him, including anyone at a bank or financial institution . Regarding selling stocks, LOLES did not buy, sell, or hold stocks. He knew the rules if he were found to control stocks. Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 13 of 15 Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 14 of 15 Case 3:10-cr-00237-AWT Document 163-13 Filed 02/20/14 Page 15 of 15
ATTACHMENT M
Case 3:10-cr-00237-AWT Document 163-14 Filed 02/20/14 Page 1 of 9 Case 3:10-cr-00237-AWT Document 163-14 Filed 02/20/14 Page 2 of 9 Case 3:10-cr-00237-AWT Document 163-14 Filed 02/20/14 Page 3 of 9 Case 3:10-cr-00237-AWT Document 163-14 Filed 02/20/14 Page 4 of 9 Case 3:10-cr-00237-AWT Document 163-14 Filed 02/20/14 Page 5 of 9 Case 3:10-cr-00237-AWT Document 163-14 Filed 02/20/14 Page 6 of 9 Case 3:10-cr-00237-AWT Document 163-14 Filed 02/20/14 Page 7 of 9 Case 3:10-cr-00237-AWT Document 163-14 Filed 02/20/14 Page 8 of 9 Case 3:10-cr-00237-AWT Document 163-14 Filed 02/20/14 Page 9 of 9
ATTACHMENT N
Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 1 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 2 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 3 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 4 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 5 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 6 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 7 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 8 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 9 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 10 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 11 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 12 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 13 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 14 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 15 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 16 of 17 Case 3:10-cr-00237-AWT Document 163-15 Filed 02/20/14 Page 17 of 17
ATTACHMENT O
Case 3:10-cr-00237-AWT Document 163-16 Filed 02/20/14 Page 1 of 5 Case 3:10-cr-00237-AWT Document 163-16 Filed 02/20/14 Page 2 of 5 .FD-302a (Rev. I 0-6-95) 4lt 318E-NH-46690-302 Continuation ofFD-302 of _ _,L,.._O""'L,.._E=S __________ , On 12/0 7 /2 010 , Page --=2 __ 4lt 4lt $35,000 and the judgment is now worth $1.7 million. COUTU's lawyer up until the plea was a local attorney, but he wanted a good lawyer. COUTU was afraid of a conflict of interest, bu\ now he is represented by JIM FELMAN who is also GURIAN's attorney. FELMAN did everything for GURIAN. FELMAN handled the COUTU plea. FELMAN wanted COUTU to settle the case. COUTU told LOLES that GURIAN is not a good guy. GURIAN bragged about setting up a Christmas tree and gift operation where people come in and buy cheap presents that are broken. COUTU found his way onto the board of directors of one of GURIAN's "shell" companies. These shell companies are used in a "pump and dump" stock fraud run by GURIAN. One of the shell companies may have been named Nano Sound. The names of the shell companies change. COUTU was the beneficiary of a shell company, and COUTU received large amounts of stock, which would be sold for profit. GURIAN lives in Florida. While COUTU has not seen GURIAN's bank account statements, COUTU said GURIAN is "good for $30 million." LOLES' son DINO is now in Atlanta studying the foreclosure market. DINO bought a small house from Sun Trust bank for about $15,000. It was mortgaged by Sun Trust for $135,000. The bank told DINO that he had to wait one year at which time he could apply for a $75,000 mortgage. DINO is working with a developer. LOLES had conversations about the mortgage market with COUTU. COUTU told LOLES that he had a guy, and "GURIAN will back this stuff." LOLES did not want to have DINO get involved with GURIAN even though COUTU asked LOLES if he wanted to put them in touch. According to COUTU, GURIAN would speak with LOLES. GURIAN has been checking in with COUTU's third wife on the telephone. COUTU does not speak with GURIAN directly. GURIAN told her that as soon as he (COUTU) is out, that he will be fine. LOLES advised that GURIAN is currently involved in a "pump and dump" stock scam involving Russia. GURIAN has made six or seven trips to Russia and COUTU would become the beneficiary of this scam because he has the "paper" or stock certificates. LOLES did not think COUTU was "bull shitting" him. According to LOLES, Russia is a "hot bed" for these scams. A shell company is either bought or created and the business may be out of Russia. People are sought to invest in the company. The shell company is a United States company traded on a U.S. exchange using Russia as a means in the scheme. GURIAN fronted for Russian stock scammers in New York, one of whom may have been named ABRAMOFF. GURIAN may have flipped on ABRAMOFF and other people in New York. Case 3:10-cr-00237-AWT Document 163-16 Filed 02/20/14 Page 3 of 5 . , FD-302a (Rev. I 0-6-95) 318E-NH-46690-302 Continuation ofFD-302 of _ .... , On 12/ 0 7 /2 0 1 0 , Page _ _:3:::..___
Pink sheets are used in the pump and dump scheme, or the lowest level of trading to stay on the bulletin board. Press releases are used, as well as the creation of anticipation to pump up a stock. LOLES stated substantial funds are believed to be in Panama. COUTU is convinced GURIAN is doing this. LOLES believes he can get the identity of the stock by meeting with GURIAN to know what is getting pumped. GURIAN knows COUTU could have gotten him (GURIAN) in trouble by now if he (COUTU) spoke to law enforcement about GURIAN. GURIAN understands that he "has to give to take." LOLES made it clear that he has no intent on engaging in business with GURIAN, but if he is paying a penalty of $7.5 million, there must be a lot of money involved. LOLES advised there is a large group of people working with GURIAN in his pump and dump scam, not just one person. DOUGLAS BOONE, a white male, came into Wyatt as an inmate. He was arrested and believed to have been a bookie in a RICO case. The case was dropped and he was charged federally with having video of him and a 13 year old girl on his computer. BOONE told LOLES that the "idiots did not find the floor safe" with $412,000 in his Florida residence when law enforcement conducted a search warrant. LOLES recently met CHRISTOPHER PLUMMER who came to Wyatt in the last few days. PLUMMER told LOLES that he has been charged in a $1.5 million indictment. PLUMMER further explained that there was a women also involved in the case and "everything is her fault". PLUMMER told LOLES that he only received $80,000 from the project and that $300,000 went for salaries of people involved in the project. The $1.5 million came in from three separate groups of investors who each gave $500,000. One of the investors was PLUMMER's neighbor. PLUMMER also told LOLES that he runs an energy company and that he was preparing to leave for Indonesia when he was arrested. He needed to go to Indonesia to sign contracts for his energy business. LOLES mentioned ROBERT PONTE as another inmate at Wyatt. PONTE sold real estate in Florida and he tried to get out of prison on bond, but he did not have the necessary real estate for the bond package. PONTE's parents have a bankruptcy lawyer who would not allow them to put up their home as collateral. Case 3:10-cr-00237-AWT Document 163-16 Filed 02/20/14 Page 4 of 5 ., (Rev. 10-6-95)
318E-NH-46690-302 Continuation ofFD-302 of _________ , On 12/0 7 /2 010 , Page __ 4.:.___
During the interview, LOLES mentioned that he has a bulging disk in his back and had not seen a physician . Case 3:10-cr-00237-AWT Document 163-16 Filed 02/20/14 Page 5 of 5
ATTACHMENT P
Case 3:10-cr-00237-AWT Document 163-17 Filed 02/20/14 Page 1 of 10 Case 3:10-cr-00237-AWT Document 163-17 Filed 02/20/14 Page 2 of 10 Case 3:10-cr-00237-AWT Document 163-17 Filed 02/20/14 Page 3 of 10 Case 3:10-cr-00237-AWT Document 163-17 Filed 02/20/14 Page 4 of 10 Case 3:10-cr-00237-AWT Document 163-17 Filed 02/20/14 Page 5 of 10 Case 3:10-cr-00237-AWT Document 163-17 Filed 02/20/14 Page 6 of 10 Case 3:10-cr-00237-AWT Document 163-17 Filed 02/20/14 Page 7 of 10 Case 3:10-cr-00237-AWT Document 163-17 Filed 02/20/14 Page 8 of 10 Case 3:10-cr-00237-AWT Document 163-17 Filed 02/20/14 Page 9 of 10 Case 3:10-cr-00237-AWT Document 163-17 Filed 02/20/14 Page 10 of 10 ATTACHMENT Q Case 3:10-cr-00237-AWT Document 163-18 Filed 02/20/14 Page 1 of 3 Case 3:10-cr-00237-AWT Document 163-18 Filed 02/20/14 Page 2 of 3 Property Questidnj Release 'Schedule
Sepnte SocW s:tell:u$ Tiwlsadi Case 3:10-cr-00237-AWT Document 163-18 Filed 02/20/14 Page 3 of 3
ATTACHMENT R
Case 3:10-cr-00237-AWT Document 163-19 Filed 02/20/14 Page 1 of 3 HCLS-000001 Case 3:10-cr-00237-AWT Document 163-19 Filed 02/20/14 Page 2 of 3 HCLS-000002 Case 3:10-cr-00237-AWT Document 163-19 Filed 02/20/14 Page 3 of 3
ATTACHMENT S
Case 3:10-cr-00237-AWT Document 163-20 Filed 02/20/14 Page 1 of 2 Case 3:10-cr-00237-AWT Document 163-20 Filed 02/20/14 Page 2 of 2
ATTACHMENT T
Case 3:10-cr-00237-AWT Document 163-21 Filed 02/20/14 Page 1 of 4 Euro banknotes Home 1 Euro 1 Banknotes and coins I Banknotes The Bank Payment & Settlement Systems Markets Euro Banknotes and coins Cash Changeover EU enlargement Banknotes Europa Series Coins Commemorative Collector coins Protection of euro Counterfeiting Exchange of mutilated or damaged euro banknotes Banknotes Reproduction VVithdrawal of euro bank notes Cash Services Recycling of euro banknote Drachma banknotes Research and Publications Statistics Monetary Policy and Eurosystem Banking Supervision Supervision of Private Insurance Euro banknotes On 1 January 2002 euro banknotes were put into circulation in the 12 euro area countries. There are seven denominations of different sizes and colours each: 5, 10, 20, 50, 100, 200 and 500. Banknotes are legal tender throughout the euro area. Euro banknotes feature the architectural styles from seven different periods in Europe's cultural history- classical, Romanesque, Gothic, Renaissance, baroque and rococo, the age of iron and glass and modern 20th century architecture- without depicting any specific monument of any EU country. The architectural styles from the seven periods in Europe's cultural history are represented as follows: Classical: 5 banknote; Romanesque: 10 banknote; Gothic: 20 banknote; Renaissance: 50 banknote; Baroque and rococo: 100 banknote; Age of iron and glass: 200 banknote; Modern 20th century architecture: 500 banknote Design ~ Design The windows and gateways on the front of the banknotes symbolise the spirit of openness and cooperation within the EU. The bridges on the back symbolise close cooperation and communication between the people of Europe and between Europe and the rest of the world. Bridges are stylised illustrations, not images of, or from, actual constructions. The 12 stars of the EU represent the dynamism and harmony of European nations. Other design elements include: the name of the currency in both the latin (EURO) and the Greek (EYPQ) alphabets; the initials of the European Central Bank (ECB) in five linguistic variants (BCE, ECB, EZB, EKT and EKP) covering the 11 official languages of the EU before its enlargement; the symbol indicating copyright protection; the EU flag; and the signature of either Willem F. Duisenberg, Jean-Claude Trichet or Mario Draghi - the first, second and third Presidents of the European Central Bank respectively. These banknotes are all equally valid. ~ Willem F. Duisenberg Jean-Claude Trichet ICE EC8 EZI EICI IKP >o ~ " : .:a " Cl 0 Mario Draghi Soecial features have been incorporated in order to facilitate blind and partially sighted persons. Back to Top Images by denomination The euro is one of the strongest tangible symbols of the common identity of Europe, euro area countries and their citizens. http://www.bankofgreece.gr/Pages/en/Euro/Notes-coins/Notes/default.aspx Page 1 of2 12/5/2013 Case 3:10-cr-00237-AWT Document 163-21 Filed 02/20/14 Page 2 of 4 Greece and the euro - European Commission Page 1 of2 European Commission The euro Policy and surveillance Databases and indicators Publications News and Events Greece and the euro Greece joined the European Union in 1981, and adopted the euro in 2001 in time to be among the first wave of countries to launch euro banknotes and coins on 1 January 2002. Last update: 4 may 2009 Greece at a glance Surface area: 131960 km 2 Population: 11 262 539 (Eurostat 2009) Joined the European Union: 1 January 1981 Currency: Euro since 1 January 2001 (formerly Greek drachma, GRD) Euro information Status: Euro-area member since 1 January 2001 Fixed conversion rate: 1 = 340.750 GRD Adoption of the euro: The euro banknotes and coins were introduced in Greece on 1 January 2002, after a transitional period of one year when the euro was the official currency but only existed as 'book money' . The dual circulation period - when both the Greek drachma and the euro had legal tender status - ended on 28 February 2002. Exchange of former national currency: The Tp6nE(a TOC EM60oc (National Central Bank of Greece) exchanged drachma coins until 1 March 2004 and will continue to exchange drachma banknotes until 1 March 2012. Documents and publications Documents from the euro changeover are available on the Bank of Greece website (also in English) Opinion polls and surveys Public opinion and the single currency (Eurobarometer website) Downloads http:/ I ec. europa.eu/ economy_ finance/ euro/ countries/ greece_ en.htm 12/5/2013 Case 3:10-cr-00237-AWT Document 163-21 Filed 02/20/14 Page 3 of 4 Greece and the euro - European Commission Page 2 of2 National sides of Greek euro coins Greek commemorative coins Websites Euro websites The euro on the Bank of Greece website (also in English) Archived websites on the euro Institutions Toam:C:a Toe Ef..f..aooc (Bank of Greece, also in English) Ynoupyio OIKovouiac Kal OIKOVOUIKWV (Ministry of Economy and Finance, also in English) Business Euro Info Centres in Greece (in English only) Athens Chamber of Commerce and Industry (also in English) Hellenic Centre for Investments (also in English and German) Consumers K.E.n.K.A. (Consumers Protection Center, also in English) http: / I ec.europa. eu/ economy_ finance/ euro/ countries/ greece_ en.htm 12/5/2013 Case 3:10-cr-00237-AWT Document 163-21 Filed 02/20/14 Page 4 of 4
ATTACHMENT U
Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 1 of 15 CRD or IARD(TM) System Current As Of: 12/16/2013 Snapshot - Individual CRD or IARD(TM) System Report provided to: MEMBERREG Request Submitted: 12/17/2013 4:01:44 PM Page 1 of 14 Notice CRD or IARD(TM) Information: This report contains information from the CRD (Central Registration Depository) system, or the lARD system (Investment Advisers Registration Depository), which are operated by FINRA, a national securities association registered under the Securities Exchange Act of 1934. The CRD system primarily contains information submitted on uniform broker-dealer and agent registration forms and certain other information related to registration and licensing. The lARD system primarily contains information submitted on uniform investment adviser and agent registration forms and certain other information related to registration and licensing. The information on Uniform Forms filed with the CRD or lARD is deemed to have been filed with each regulator with which the applicant seeks to be registered or licensed and shall be the joint property of the applicant and such regulators. The compilation constituting thE CRD database as a whole is the property of FINRA. Neither FINRA nor a participating regulator warrants or guarantees the accuracy or the completeness of the CRD or lARD information. CRD information consists of reportable and non- reportable information. FINRA operates the CRD system in its capacity as a registered national securities association and pursuant to an agreement with the North American Securities Administrators Association, Inc. (NASAA). FINRA operates the lARD system as a vendor pursuant to a contract with the Securities and Exchange Commission and undertakings with NASAA and participating state regulators. Reportable Information: Information that is required to be reported on the current version of the uniform registration forms. Non-Reportable Information: Information that is not currently reportable on a uniform registration form. Information typically is not reportable because it is out-of-date; it was reported in error; or some change occurred either in the disposition of the underlying event after it was reported or in the question on the form that elicited the information. Although not currently reportable, this information was once reported on a uniform form and, consequently, may have become a state record. Users of this information should recognize that filers have no obligation to update non-reportable data; accordingly, it may not reflect changes that have occurred since it was reported. Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 2 of 15 CRD or IARD(TM) System Current As Of: 12/16/2013 Snapshot - Individual CRD or IARD(TM) System Report provided to: MEMBERREG Request Submitted: 12/17/2013 4:01:44 PM Details for Request#: Report: Requested By: Parameter Name Request by CRD# or SSN: Individual CRD# or SSN Include Personal Information? Include All Registrations with Employments: 12746147 Snapshot - Individual TC Include All Registrations for Current and/or Previous Employments with: Include Professional Designations? Include Employment History? Include Other Business? Include Exam Information? Include Continuing Education Information? {CRD Only) Include Filing History? {CRD Only) Include Current Reportable Disclosure Information? Include Regulator Archive and Z Record Information? {CRD Only)
CRD# 2332843 Yes Page 2 of 14 Both Current and Previous Employments All Regulators Yes Yes Yes Yes Yes Yes Yes Yes CRD or IARD(TM) System Report -- See notice regarding CRD Data on cover page. Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 3 of 15 CRD or IARD(TM} System Current As Of: 12/16/2013 Snapshot -Individual CRD or IARD(TM} System Report provided to: MEMBERREG Request Submitted: 12/17/2013 4:01:44 PM Individual 2332843 - LOLES, GREGORY PETER Administrative Information Composite Information Full Legal Name LOLES, GREGORY PETER State of Residence CT Active Employments No Current Active Employments found for this Individual. Reportable Disclosures? Yes Statutory Disqualification? SDRQRSRVW Registered With Multiple Firms? No Material Difference in Disclosure? No Personal Information Individual CRD# Other Names Known By Year of Birth 2332843 No Other Names found for this Individual. 1959 Registrations with Current Employer(s} No Registrations with Current Employer(s) found for this Individual. Registrations with Previous Employer(s} From 08/25/1995 To 06/03/1997 APEIRON CAPITAL MANAGEMENT, INC.(41053) Reason for Termination Unknown Conversion Termination Comment PER DISTRICTS REQUEST Regulator Registration Category Status Date CT AG 05/07/1997 Registration Status T_NOREG FINRA GP 06/03/1997 T _NOREG FINRA GS 06/03/1997 T _NOREG FINRA MP 06/0311997 T _NOREG FINRA OP 06/03/1997 T _NOREG From 07/01/1994 To 08/18/1995 A. G. EDWARDS & SONS, INC.(4) Reason for Termination Voluntary Termination Comment Regulator Registration Category Status Date Registration Status ARCA GS 08/29/1995 TERMED CBOE GS 08/29/1995 TERMED CT AG 08/29/1995 TERMED FINRA GS 08/29/1995 TERMED FL AG 08/2911995 TERMED MA AG 08/29/1995 TERMED NJ AG 08/29/1995 TERMED NY AG 08/29/1995 TERMED NYSE GS 08/29/1995 TERMED NYSE-MKT GS 08/29/1995 TERMED CRD or IARD(TM} System Report -See notice regarding CRD Data on cover page. Page 3 of 14 Approval Date Approval Date 07/12/1994 07112/1994 07/05/1994 07/0511994 11/03/1994 10/24/1994 07/05/1994 07/05/1994 07/05/1994 07/12/1994 Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 4 of 15 CRD or IARD(TM) System Current As Of: 12/16/2013 Snapshot - Individual CRD or IARD(TM) System Report provided to: MEMBERREG Request Submitted: 12/17/2013 4:01:44 PM Individual 2332843 - LOLES, GREGORY PETER Administrative Information Registrations with Previous Employer(s) Regulator Registration Category Status Date Registration Status PHLX GS 08/29/1995 TERMED From 03/08/1993 To 06/30/1994 INVESTORS ASSOCIATES, INC.(958) Reason for Termination Voluntary Termination Comment Regulator Registration Category Status Date Registration Status CA AG 07/13/1994 TERMED CT AG 07/13/1994 TERMED FINRA GS 07113/1994 TERMED FL AG 07/1311994 TERMED GA AG 07/13/1994 TERMED HI AG 0711311994 TERMED IL AG 07/13/1994 TERMED LA AG 07/13/1994 TERMED MA AG 07/13/1994 TERMED MD AG 07/1311994 TERMED Ml AG 07/13/1994 TERMED MN AG 07/13/1994 TERMED NJ AG 07/13/1994 TERMED NY AG 07/1311994 TERMED OH AG 07/13/1994 TERMED PA AG 07/13/1994 TERMED TX AG 07113/1994 TERMED WA AG 07/1311994 TERMED CRD or IARD(TM) System Report -- See notice regarding CRD Data on cover page. Page4 of 14 Approval Date 07/12/1994 Approval Date 05/15/1993 06/07/1993 04/30/1993 06/10/1993 05/15/1993 06/24/1993 06/07/1993 05/18/1993 06/07/1993 05/15/1993 01/13/1994 09/20/1993 06/08/1993 05/03/1993 06/08/1993 05/1511993 01/14/1994 06/0711993 Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 5 of 15 CRD or IARD(TM) System Current As Of: 12116/2013 Snapshot -Individual CRD or IARD(TM) System Report provided to: MEMBERREG Request Submitted: 12117/2013 4:01:44 PM Individual 2332843 - LOLES, GREGORY PETER Administrative Information Professional Designations No Professional Designations found for this Individual. Employment History Page 5 of 14 From 08/1995 To 06/1997 Name APEIRON CAPITAL MANAGEMENT, INC. Location WESTPORT, CT Position NOT PROVIDED Investment Related Yes From 0711994 To 0811995 Name A. G. EDWARDS & SONS, INC. Location HAMDEN, CT Position NOT PROVIDED Investment Related Yes From 03/1993 To 06/1994 Name INVESTORS ASSOCIATES, INC. Location N.Y., NY Position NOT PROVIDED Investment Related Yes From 1 011992 To 03/1993 Name UNEMPLOYED Location WESTPORT, CT Position OTHER - NOT GIVEN Investment Related No From 0611980 To 01/1993 Name ACTIVE MANAGEMENT LIMITED Location LONDON, England Position OTHER - PARTNER Investment Related No From 06/1982 To 09/1992 Name ACTIVE MANAGEMENT INC Location EKALIIWESTPORT Position OTHER - SR. MGMT CONSUL TANT;MGMT CONSU Investment Related No Office of Employment History From 08/1995 To 06/1997 Name APEIRON CAPITAL MANAGEMENT, INC.(41053) Independent Contractor No Office of Emplovment Address CRD NYSE Branch Firm Billing Registered Private Address Address Type of Branch# Code# Code Location? Residence? Start Date End Date Office CRD or IARD(TM) System Report -- See notice regarding CRD Data on cover page. Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 6 of 15 Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 7 of 15 CRD or IARD(TM) System Current As Of: 12/16/2013 Snapshot -Individual CRD or IARD(TM) System Report provided to: MEMBERREG Request Submitted: 12/17/2013 4:01:44 PM Page 7 of 14 Individual 2332843 - LOLES, GREGORY PETER Administrative Information CE Regulatory Element Status Current CE Status NOCEST A TUS CE Base Date CE Appointments No CE Appointments found for this Individual. CurrentCE No Current CE found for this Individual. NextCE No Next CE found for this Individual. CE Directed Sequence History No CE Directed Sequence History found for this Individual. Inactive CE History Dates No Inactive CE History Dates found for this Individual. Previous CE Requirement Status No Previous CE Requirement Status found for this Individual. Filing History Filing Date Form Type Filing type Source 09/09/2011 U6 CRD Individual FINRA 09/08/2011 U6 CRD Individual SEC 07/0S/1999 us Conversion APEIRON CAPITAL MANAGEMENT, INC. (410S3) 07/0S/1999 U4 Conversion APEIRON CAPITAL MANAGEMENT, INC. (410S3) 07/0S/1999 us Conversion A. G. EDWARDS & SONS, INC. (4) 07/0S/1999 U4 Conversion A. G. EDWARDS & SONS, INC. (4) 07/0S/1999 us Conversion INVESTORS ASSOCIATES, INC. (9S8) 07/0S/1999 U4 Conversion INVESTORS ASSOCIATES, INC. (9S8) CRD or IARD(TM) System Report -- See notice regarding CRD Data on cover page. Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 8 of 15 CRD or IARD(TM) System Current As Of: 12/16/2013 Snapshot - Individual CRD or IARD(TM) System Report provided to: MEMBERREG Request Submitted: 12/17/2013 4:01 :44 PM Individual 2332843 - LOLES, GREGORY PETER Reportable Events Number of Reportable Events Bankruptcy 0 Bond 0 Civil Judicial 0 Criminal 1 Customer Complaint 0 Internal Review 0 Investigation 0 Judgement/Lien 0 Regulatory Action 1 Termination 0 Occurrence# 1578382 FINRA Public Oisclosable Yes Material Difference in Disclosure No Disclosure Type Reportable Page 8 of 14 Regulatory Action Yes Filing ID 30942261 Form (Form Version) U6 (05/2009) Filing Date 09/08/2011 Source United States Securities and Exchange Commission Disclosure Questions Answered Regulatory Action DRP 1. Regulatory Action initiated by: A. Initiated by: B. Full name of regulator: 2. Sanction(s) sought: 3. Date initiated/Explanation: 4. Docket/Case#: 5. Employing firm: 6. Product type(s): 7. Allegation(s): DRP Version 05/2009 Securities and Exchange Commission UNITED STATES SECURITIES AND EXCHANGE COMMISSION Other: N/A 09/06/2011 3-14529 APEIRON CAPITAL MANAGEMENT, INC. No Product SEC ADMIN lA RELEASE 3272, SEPTEMBER 6, 2011: THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST THAT PUBLIC ADMINISTRATIVE PROCEEDINGS BE INSTITUTED PURSUANT TO SECTION 203{F) OF THE INVESTMENT ADVISERS ACT OF 1940 ("ADVISERS ACT') AGAINST GREGORY P. LOLES f'RESPONDENT'). THE COMMISSION FOUND THAT ON JULY 26, 2011, LOLES PLEADED GUlL TV TO ONE COUNT OF MAIL FRAUD IN VIOLATION OF TITLE 18 OF THE UNITED STATES CODE, SECTION 1341, ONE COUNT OF WIRE FRAUD IN VIOLATION OF TITLE 18 OF THE UNITED STATES CODE, SECTION 1343, ONE COUNT OF SECURITIES FRAUD IN VIOLATION OF TITLE 15 OF THE UNITED STATES CODE, SECTIONS 77Q(A) AND 77X, AND ONE COUNT OF MONEY LAUNDERING IN VIOLATION OF TITLE 18 OF THE UNITED CRD or IARD(TM) System Report -- See notice regarding CRD Data on cover page. Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 9 of 15 CRD or IARD(TM) System Current As Of: 12/16/2013 Snapshot - Individual CRD or IARD(TM) System Report provided to: MEMBERREG Request Submitted: 12/17/2013 4:01:44 PM Individual 2332843 - LOLES, GREGORY PETER Reportable Events Regulatory Action DRP DRP Version 05/2009 Page 9 of 14 STATES CODE, SECTION 1956 BEFORE THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT, IN UNITED STATES V. GREGORY P. LOLES CRIM. ACTION NO. 3:10CR247 (MRK). 8. Current status: 9. Limitations or restrictions while pending: 10. If on appeal: A. Appealed to: B. Date appealed/Explanation: C. Limitations or restrictions while on appeal: 11. Resolution details: A. Resolution detail: B. Resolution date/Explanation: 12. Final order: 13. Sanction detail: A. Sanctions ordered: B. Other sanctions: Final Order 09/06/2011 No Bar {Permanent) C. Willful violation or failure No to supervise: i. Willfully violated: ii. Willfully aided, abetted, counseled, commanded, induced, or procured: iii. Failed reasonably to supervise another person: D. Sanction type details: Sanction type: Bar {Permanent) Registration capacities affected: ASSOCIATION WITH ANY INVESTMENT ADVISER, BROKER, DEALER, MUNICIPAL SECURITIES DEALER, MUNICIPAL ADVISOR, TRANSFER AGENT Duration (length of PERMANENT
CRD or IARD(TM) System Report -- See notice regarding CRD Data on cover page. Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 10 of 15 CRD or IARD(TM) System Current As Of: 12/16/2013 Snapshot - Individual CRD or IARD(TM} System Report provided to: MEMBERREG Request Submitted: 12/17/2013 4:01:44 PM Page 10 of 14 Individual 2332843 - LOLES, GREGORY PETER Reportable Events Regulatory Action DRP DRP Version 05/2009 Start date/Explanation: 09/06/2011 End date/Explanation: Sanction type: Bar (Permanent} Registration capacities affected: ASSOCIATION WITH ANY NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION Duration (length of PERMANENT time)/Explanation: Start date/Explanation: 09/06/2011 End date/Explanation: E. Requalification type details: F. Monetary related sanction type details: 14. Comment IN ANTICIPATION OF THE INSTITUTION OF THE PROCEEDINGS, RESPONDENT SUBMITTED AN OFFER OF SETTLEMENT (THE "OFFER") WHICH THE COMMISSION DETERMINED TO ACCEPT. SOLELY FOR THE PURPOSE OF THESE PROCEEDINGS AND ANY OTHER PROCEEDINGS BROUGHT BY OR ON BEHALF OF THE COMMISSION, OR TO WHICH THE COMMISSION IS A PARTY, AND WITHOUT ADMITTING OR DENYING THE FINDINGS, EXCEPT AS TO THE COMMISSION'S JURISDICTION OVER HIM AND THE SUBJECT MATTER OF THESE PROCEEDINGS AND THE FINDING, WHICH ARE ADMITTED, RESPONDENT CONSENTS TO THE ENTRY OF THIS ORDER INSTITUTING ADMINISTRATIVE PROCEEDINGS PURSUANT TO SECTION 203(F) OF THE INVESTMENT ADVISERS ACT OF 1940, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS ("ORDER"). THE COMMISSION DEEMS IT APPROPRIATE AND IN THE PUBLIC INTEREST TO IMPOSE THE SANCTIONS AGREED TO IN RESPONDENT LOLES'S OFFER. ACCORDINGLY, IT IS HEREBY ORDERED PURSUANT TO SECTION 203(F) OF THE ADVISERS ACT, THAT RESPONDENT LOLES BE BARRED FROM ASSOCIATION WITH ANY INVESTMENT ADVISER, BROKER, DEALER, MUNICIPAL SECURITIES DEALER, MUNICIPAL ADVISOR, TRANSFER AGENT, OR NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION. ANY REAPPLICATION FOR ASSOCIATION BY THE RESPONDENT WILL BE SUBJECT TO THE APPLICABLE LAWS AND REGULATIONS GOVERNING THE REENTRY PROCESS, AND REENTRY MAY BE CONDITIONED UPON A NUMBER OF FACTORS, INCLUDING, BUT NOT LIMITED TO, THE SATISFACTION OF ANY OR ALL OF THE FOLLOWING: (A) ANY DISGORGEMENT ORDERED AGAINST THE RESPONDENT, WHETHER OR NOT THE COMMISSION HAS FULLY OR PARTIALLY WAIVED PAYMENT OF SUCH DISGORGEMENT; (B) ANY ARBITRATION AWARD RELATED TO THE CONDUCT THAT SERVED AS THE BASIS FOR THE COMMISSION ORDER; (C) ANY SELF-REGULATORY ORGANIZATION ARBITRATION AWARD TO A CUSTOMER, WHETHER OR NOT RELATED TO THE CONDUCT THAT SERVED AS THE BASIS FOR THE COMMISSION ORDER; AND (D) ANY RESTITUTION ORDER BY A SELF-REGULATORY ORGANIZATION, CRD or IARD(TM) System Report -- See notice regarding CRD Data on cover page. Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 11 of 15 CRD or IARD(TM) System Current As Of: 12/16/2013 Snapshot - Individual CRD or IARD(TM) System Report provided to: MEMBERREG Request Submitted: 12117/2013 4:01:44 PM Page 11 of 14 Individual 2332843 - LOLES, GREGORY PETER Reportable Events Regulatory Action DRP Occurrence# FINRA Public Disclosable Material Difference in Disclosure FilingiD Filing Date Source 30946365 09/09/2011 FINRA Disclosure Questions Answered Criminal DRP 1. Organization: A. Organization name: B. Investment-related business: c. Position: 2. Formal action was brought in: A. Name of court: B. Location of court: c. Docket/Case#: 3. Event status: A. Current status: B. Event status date/Explanation: DRP Version 05/2009 WHETHER OR NOT RELATED TO THE CONDUCT THAT SERVED AS THE BASIS FOR THE COMMISSION ORDER. 1579069 Yes No Federal Court Disclosure Type Reportable Criminal Yes Form (Form Version) U6 (05/2009) DRP Version 05/2009 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT NEW HAVEN, CT 3:10CR237 Final 07/26/2011 4. Event and disposition disclosure detail: A. Date first 11/30/2010 charged/Explanation: B. Event and disposition detail: Formal charge description: No. of Counts: Felony or misdemeanor: Plea for each charge: Disposition of charge: Explanation: Date of amended charge: Amended charge: No. of Counts: Amended felony or misdemeanor: Pleas for amended charge: FRAUDS AND SWINDLES (1-3); FRAUDS AND SWINDLES (4); FRAUDS AND SWINDLES (5-7) 7 Felony NOT GUILTY Pled guilty PLED GUll TY TO COUNT #4 CRD or IARD(TM) System Report -- See notice regarding CRD Data on cover page. Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 12 of 15 CRD or IARD(TM) System Current As Of: 12/16/2013 Snapshot - Individual CRD or IARD(TM) System Report provided to: MEMBERREG Request Submitted: 12/17/2013 4:01:44 PM Individual 2332843 - LOLES, GREGORY PETER Page 12 of 14 Reportable Events Criminal DRP DRP Version 05/2009 Disoosition of amended charae: Explanation: Formal charge description: No. of Counts: Felony or misdemeanor: Plea for each charge: Disposition of charge: Explanation: Date of amended charge: Amended charge: No. of Counts: Amended felony or misdemeanor: Pleas for amended charge: Disposition of amended charge: Explanation: Formal charge description: No. of Counts: Felony or misdemeanor: Plea for each charge: Disposition of charge: Explanation: Date of amended charge: Amended charge: No. of Counts: Amended felony or misdemeanor: Pleas for amended charge: Disposition of amended charge: Explanation: Formal charge description: No. of Counts: Felony or misdemeanor: Plea for each charge: Disposition of charge: Explanation: FRAUD BY WIRE, RADIO, OR TELEVISION (8); FRAUD BY WIRE, RADIO, OR TELEVISION (9); FRAUD BY WIRE, RADIO, OR TELEVISION (10-17) 10 Felony NOT GUILTY Pled guilty PLED GUlL TY TO COUNT #9 MANIPULATIVE AND DECEPTIVE DEVICES (18-19); MANIPULATIVE AND DECEPTIVE DEVICES (20); MANIPULATIVE AND DECEPTIVE DEVICES (21-26) 9 Felony NOT GUILTY Pled guilty PLED GUlL TY TO COUNT #20 ENGAGING IN MONETARY TRANSACTIONS (27-30) 4 Felony NOT GUILTY Dismissed CRD or IARD(TM) System Report - See notice regarding CRD Data on cover page. Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 13 of 15
CRD or IARD(TM) System Current As Of: 12116/2013 Snapshot - Individual CRD or IARD(TM) System Report provided to: MEMBERREG Request Submitted: 12117/2013 4:01:44 PM Page 13 of 14 Individual 2332843 - LOLES, GREGORY PETER Reportable Events Criminal DRP C. Date of disposition/Explanation: D. Sentence/Penalty details: 5. Comment: DRP Version 05/2009 Date of amended charge: Amended charge: No. of Counts: Amended felony or misdemeanor: Pleas for amended charge: Disposition of amended charge: Explanation: Formal charge description: No. of Counts: Felony or misdemeanor: Plea for each charge: Disposition of charge: Explanation: Date of amended charge: Amended charge: No. of Counts: Amended felony or misdemeanor: Pleas for amended charge: Disposition of amended charge: Explanation: 07/26/2011 SENTENCING SET FOR 10/14/2011 LAUNDERING OF MONETARY INSTRUMENTS & AIDING/ABETTING (31); LAUNDERING OF MONETARY INSTRUMENTS & AIDING/ABETTING (32) 2 Felony NOT GUILTY Pled guilty PLED GUll TY TO COUNT #32 ON JULY 26, 2011, LOLES PLEADED GUlL TV TO ONE COUNT OF MAIL FRAUD IN VIOLATION OF TITLE 18 OF THE UNITED STATES CODE, SECTION 1341, ONE COUNT OF WIRE FRAUD IN VIOLATION OF TITLE 18 OF THE UNITED STATES CODE, SECTION 1343, ONE COUNT OF SECURITIES FRAUD IN VIOLATION OF TITLE 15 OF THE UNITED STATES CODE, SECTIONS 77Q(A) AND 77X, AND ONE COUNT OF MONEY LAUNDERING IN VIOLATION OF TITLE 18 OF THE UNITED STATES CODE, SECTION 1956 BEFORE THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT, IN UNITED STATES V. GREGORY P. LOLES GRIM. ACTION NO. 3:10CR247 (MRK). THE FOUR COUNTS OF THE INDICTMENT TO WHICH LOLES PLEADED GUlL TV ALLEGED, INTER ALIA, THAT LOLES DEFRAUDED INVESTORS AND OBTAINED MONEY BY MEANS OF MATERIALLY FALSE AND MISLEADING STATEMENTS WHILE OPERATING AN UNREGISTERED INVESTMENT ADVISER, THAT HE CAUSED INVESTORS TO WIRE TRANSFER FUNDS TO THE UNREGISTERED INVESTMENT ADVISER'S ACCOUNT FOR CRD or IARD(TM) System Report - See notice regarding CRD Data on cover page. Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 14 of 15 " CRD or IARD(TM) System Current As Of: 12116/2013 Snapshot -Individual CRD or IARD(TM) System Report provided to: MEMBERREG Request Submitted: 12117/2013 4:01:44 PM Page 14 of 14 Individual 2332843 - LOLES, GREGORY PETER Reportable Events Criminal DRP Regulator Archive and Z Records DRP Version 05/2009 INVESTMENT PURPOSES, WHICH HE THEN DIVERTED FOR HIS OWN PERSONAL USE AND BENEFIT, AND THAT HE USED THE UNITED STATES MAILS AND PRIVATE COMMERCIAL INTERSTATE CARRIERS TO DELIVER CHECKS TO INVESTORS AS PURPORTED INTEREST FROM INVESTMENTS IN ORDER TO PERPETUATE HIS FRAUD. No Regulator Archive and Z Records found for this Individual. CRD or IARD(TM) System Report - See notice regarding CRD Data on cover page. Case 3:10-cr-00237-AWT Document 163-22 Filed 02/20/14 Page 15 of 15
ATTACHMENT V
Case 3:10-cr-00237-AWT Document 163-23 Filed 02/20/14 Page 1 of 2 Amount Sender 500,000.00 MHL- EFG London 681,750.00 MHL- EFG London 678,500.00 MHL- EFG London 400,000.00 MHL- EFG London 500,000.00 MHL - EFG London 500,000.00 MHL - EFG London 490,000.00 MHL- EFG London 500,000.00 MHL- EFG London 500,000.00 MHL - EFG London 521,325.00 MHL- EFG London 800,000.00 MHL- EFG London 810,000.00 MHL- EFG London 500,000.00 MHL- EFG London 500,000.00 MHL - EFG London 250,000.00 MHL - EFG London 700,000.00 MHL- EFG London 1,000,000.00 MHL- EFG London 500,000.00 MHL - EFG London 46,853.92 MHL- EFG London 116,427.00 MHL- EFG London 219,000.89 MHL- EFG London 53,500.00 MHL- EFG Greece 289,000.00 MHL - EFG Greece 69,200.00 Space- EFG Greece 73,250.00 MHL - EFG Greece 200,000.00 MHL - EFG London Total USD Total EUR Total GBP Total CHF 4,878,2 50.89 6,420,202.00 46,853.92 53,500.00 Receiver Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Apeiron Capital Management Knightsbridge Holdings Inc Knightsbridge Holdings Inc Knightsbridge Holdings Inc Knightsbridge Holdings Inc Autohaus Farnbacher Date Currency Aug. 13, 2007 USD Aug. 30, 2007 USD Sep.5,2007 USD Nov. 23, 2007 USD Jan. 11, 2008 EUR Feb.13,2008 USD Feb.15,2008 EUR Mar. 7, 2008 EUR Mar. 27, 2008 EUR Apr. 7, 2008 EUR Jun. 23, 2008 USD Jun. 30, 2008 USD Jul. 16, 2008 EUR Jul. 22, 2008 EUR Aug. 14, 2008 EUR Aug. 20, 2008 EUR Dec. 9, 2008 EUR Jan. 23, 2009 EUR Feb.16,2009 GBP Feb.17,2009 EUR Feb.17,2009 USD Mar. 27, 2009 CHF Mar. 27, 2009 USD Apr. 2, 2009 EUR Apr. 16, 2009 EUR Jun. 8, 2009 EUR ~ 1 1 . . - } l l l l ~ Case 3:10-cr-00237-AWT Document 163-23 Filed 02/20/14 Page 2 of 2
Laborers Health and Welfare Trust Fund for Northern California Laborers Vacation-Holiday Trust Fund for Northern California Laborers Pension Trust Fund for Northern California Laborers Training and Retraining Trust Fund for Northern California v. Westlake Development, a Corporation First Doe Second Doe Third Doe Black Corporation White Corporation Blue Co. And Grey Company, a Corporation, Westlake Development Company, Inc., Petitioner-Counter-Respondent-Appellee v. Local 389 Laborers Union Northern California District Council of Laborers, Respondents-Counter-Petitioners-Appellants, 53 F.3d 979, 1st Cir. (1995)
United States v. Yvonne Melendez-Carrion, Hilton Fernandez-Diamante, Luis Alfredo Colon Osorio, Filiberto Ojeda Rios, Orlando Gonzales Claudio, Elias Samuel Castro-Ramos and Juan Enrique Segarra Palmer, 804 F.2d 7, 2d Cir. (1986)