Free Motion for Summary Judgment - District Court of Federal Claims - federal

Case 1:06-cv-00407-ECH
Witness: Brian

Document 106-4
Czerwinski

Filed 07/02/2008

Page 1 of 47

Page 1 2 3 4 Plaintiffs, 5 V. 6 UNITED 7 8 9
i0 W_WWWW_W_W_WWWWWWWWW*_WWWWWW_W_WW_WWW_WWWW_W_W_WW

1

UNITED ALPHA I, L.P., BY AND THROUGH ROBERT SANDS, A NOTICE PARTNER,

STATES

COURT

OF

FEDERAL

CLAIMS

CONDENSED

TRANSCRIPT

No. STATES OF AMERICA,

06-407-T

Defendant.

ii 12 13

ORAL DEPOSITION BRIAN CZERWINSKI

OF

AUGUST 28, 2007 VOLUME I
WWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWW

14 15 16 17 18 19 20 21 22 23 24 25 as a witness was 28th

ORAL at taken day

DEPOSITION the in of instance the August, R.

OF

BRIAN of the

CZERWINSKI, Defendant, and from in 9:06 for the numbered a.m. the

produced and duly cause to 2:49 of of

sworn, on the

above-styled 2007, CSR

p.m., Texas,

before reported of

Stacey by

Cruz,

and at

State

machine Tax Suite United

shorthand, Division, 400, States stated

offices at 717 in

Department North Harwood

Justice, Street, the

located

Dallas, Court on the

Texas, of Federal

accordance Claims attached and

with the

provisions

record

or

hereto.

214-220-1122 HUNDT REPORTING

Case 1:06-cv-00407-ECH
Witness : Brian

Document 106-4
Czerwinski

Filed 07/02/2008

Page 2 of 47

7 Page 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 A Specifically or generally9 Q. Let's start with generally. A Generally, we would have been presenting to them - or showing them strategies related to capital gains tax mlmmizatlon. Q. Do you remember any specific conversations at these meetings? A. No Q Were you -- when you became m- - when you were invited to go along to these personal face-to-face meetmgs with the Sands, was thin only after the Sands had agreed to enter into a transaction w,th Heritage? A. That was typically the case I wouldn't see 22 1 2 3 4 5 6 7 8 9 10 11 12 13

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Page A I don't remember, specifically. Q. Do you remember any general9 A I mean, I guess, m -- m general, anyone could -- talking about estate taxes is looking to la-ansferwealth to the next generation at the least

amount of cost that they can, under the -- the tax rules. But I don't recall specifically if they conveyed exactly what they were wanting to accomphsh. Q. Okay Do you recall whether there was a discussion at these meetings about the basis of the Constellation stock being low compared to the relative value the stock'_ A Yes Q. And what was the conversation about the basis9 A. I think, m -- m -- I mean, 1 think that It was near zero, if I remember, and the stock had -- at thattlme, was worth substantmlly more than zero Q. Okay. At these meetings with the Sands, who from Heritage did most of the talkmg9 A Mr. Kornman. MR CULLINAN Michael or -Can 1 clarify? Is that

potentml chents I would only be present once the 14 engagement agreement was signed, or that it was going to 15 be signed at that given meeting that I was attending. 16 Q Okay A But I don't recall spec,fically m the Sands case, whether that -- whether 1 was there at the ttme they mgned or afterwards Q In -- during the mmal meetings w_ththe Sands that we've just talked about, what was the emphasis ofHentage's presen- -- presentation to the Sands? A The possible ehmmatlon of capital gams tax. Page 23 17 18 19 20 21 22 23 24 25

MS. JOHNS Oh, good point A Gary Kornman. Q (BY MS. JOHNS) Do you recall, at these Page 25

1 2 3 4 5 6 7 8 9 10 11

Q Okay. In these meetings with the Sands, did the Sands ever tell you what their goals were for the transactions9 A. I don't recall Q Do you recall whether-- at these meetings, whether the Sands had a desire to sell Constellation brand stock9 A Yes Q And do you recall whether it was their goal to ehminate the capxtal gains that would result from the sale of the Constellation brand stock'_

1 meetings with the Sands, how much time at the meeting 2 was devoted to the tax strategies to ehmmate capital 3 gains versus the non-tax or financial aspects of the 4 strategms9 5 A I don't recall 6 Q Was there any discussion at these meet,ngs 7 about assunng the Sands that they would have thc 8 desired tax savings that they were seeking9 9 Arm sorry, what's -- what were 9 10 Q Did anyone at the meetings discuss w_th the 11 Sands that they would be guaranteed the desired tax 12 savings that they were seeking as a result of these 13 strategies? 14 A No 15 16 17 18 19 Q Do you recall whether anyone discussed anything about audit risk with the IRS, and how to ehmmate an audit risk? A. 1 don't recall Q D_dyou recall -- do you recall whether there

12 A. Yes 13 Q Do you recall whether they wanted to minimize 14 the cap_tal gains that would result from the sale, or 15 16 17 18 19 totally chromate the capital gains tl'mtwould result from the sale? A I don't recall Q Okay Other than the capital gains tax issue, were any other tax _ssues discussed at these meetings,

2 0 that you recall? 21 A Yes 22 Q And what were those9 23 A Estatetax 24 25 Q. And what were their goals, as far as estate tax? HUNDT

2 0 were any discussions at these meetings about the profit 21 potentml that could be generated from entenng into 22 these transactions with Heritage? 23 A Specifically, no 24 25 Q. Specifically, you -- no, you don't recall, or--

REPORTING

214-220-1122

Case 1:06-cv-00407-ECH
Witness: Brian

Document 106-4
Czerwinski

Filed 07/02/2008

Page 3 of 47

8 Page 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 A Yeah, specifically, I don't recall. Generally, but I don't 26 1 2 3 the Sands ever motave 4 5 6 7 8 9 10 11 12 Were there ever &scussmns at these from 13 14 15 16 what the specifics of those 17 18 generally, 19 20 21 22 23 24 No, that's -Page 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 object A. -- how I need to answer Q. That's fine. A Okay Q. Would you agree that the primary benefit to the short sale of treasury notes was the anticipated benefit that could result 9 A. Yes MR CULLINAN Well, I'm -- I'm going to tax 27 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 A I don't recall. 25 SOn of the package Q

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29 28

Page that was shown to them.

there would have been those conversatmns, re- -- I don't recall them. Q. Okay. mentmned Do you recall whether

Would you have recommended

the short sale of vehicle with 10

la'easury notes to someone if there were no tax benefits

as a pure investment at all associated

m these meetmgs

what their primary

A. Well, I don't -- I'm not a registered investment advasor, so I don't think I could make that to anybody.

was for entenng A

into these transactions

with Hentage9 I

I don't remember.

recommendatton

Q. I'm not sure whether you remember this, but _e two -- the Sands entered into two strategms with Heritage, notes A. Yes Q Okay meetmgs they both mvolved short sales of treasury j I

Q. Okay Do you know how much the Sands ultimately paid to Heritage as a fee to pamclpate m these strategies? A. I don't recall. Q. And do you recall whether percent whether fee that Heritage recewed, - besides the 25

Do you recall that?

do you recall

with the Sands about the profit potential notes'_

there were any other fees that were paid by the

the short sale of treasury A Ibehevetherewere. Q. Do you remember conversatmns A would be?

Sands for this transactaon9 A. Not that l recall. Q Do you recall whether there were any fees paid

for a tax oplmon letter9 A Yes Q Okay were9 A No Q that'_ Page 29 What about for an appraisal Do you recall ffthere of some parmershlp Do you recall how much the -- those fees

Well, 1 mean, I guess I remember, presented

how Hentage

the stuff, but I don't remember to the Sands Famdy.

that presentanon Q A to -Q Okay

specifically

So I don't -- 1don't know how you want me

interests?

was a fee prod for

Q. Now, both of these transactions entered into with Hentage, partnerships. A Yes

that the Sands

involved a series of tiered

Are you famthar with that 9

Q We mentmned of those partnership A Yes Q Okay partnerships transactmn9 A Yes

Alpha and Beta being one of-- one structures

I mean, maybe you can answer from your personal

Would you agree that all of these were set up for purposes of the Heritage

view, but I don't think he can answer as to how the Sands vmwed the pnmary benefit Q (BYMS JOHNS) You can go ahead and answer as

to bow you viewed the transaction A Yes Q. Okay clear record Would you agree that the primary benefit to these short sales strategies was the annclpated benefit that could result 9 A Yes Q Do you know whether that's how it was promoted to chents9 A. I mean, _twas packaged up as part of a of the affmrs m such a way that the tax ffthmgs were structured m HUNDT tax So let me repeat lljust so we have a

MR CULLINAN clanficatton'_ MS JOHNS

Can I just ask for

Uh-huh What is the "Hentage

MR. CULL1NAN transactmn"9 MS JOHNS

Well, when I'm talking about there were two of them that

the "Heritage transactions," they entered into

The first one we'll call Alpha Beta,

and the second one, rll refer to it as the R,R,M & C Group But he sa,d he wasn't even-that one, so. Your questmn, I thought, set up didn't really

remember

2 4 structunng

MR. CULLINAN was confusing

2 5 sawngs were a posslbthty

You asked, were the partnerships

REPORTING

214-220-1122

Case 1:06-cv-00407-ECH
Witness : Brian

Document 106-4
Czerwinski

Filed 07/02/2008

Page 4 of 47

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aspart of the Heritage transactaon. Well, ffthe Heritage Iransactaon encompasses the partnership, your question's hnd of clrcular, that's why I didn't understand your question MS. JOHNS. Well, he -- he answered 1% so...

show9 A Yes Q. Do you recall whether it was ever presented to the Sands? A Specifically, no, but I can't imagine that it wouldn't have been.

7 MR. CULLINAN: Okay. 8 MS JOHNS. I might get back to _tlater. 9 Q (BY MS JOHNS) Was there was ever any 10 dmcusslon at the meetings vath the Sands regarding 11 whether the IRS might subsequently challenge the 12 transactaons entered mto by the Sands wath Heritage 9 13 A Imean, l don't recall, speclfically. That 14 15 16 17 18 19 20 21 22 23 24 25 was -- typically, again, that would have be addressed in meetmgs Q. I'm going to -- your - you have your binder next to you that has all your exhibits. I'm going to go ahead and have you look at Exhibit No 1, which Is the first one m your - m your book (Witness reviewed document ) Q All right. Have you seen this document before, or _s th_sfamthar to you 9 A Yes. Q Is thJs something you would have prepared at Page 1 2 3 Heritage 9 A. It would have been prepared by the analytical department 31

7 Q Were you - you don't recall being present when 8 _twas presented to the Sands? 9 A. I mean, I just don't recall the meetings, 10 themselves. 11 Q Okay. 12 A. But I know they took place, and that would be a 13 typlcal pattern of what would have transplred m the 14 15 16 17 18 19 20 21 22 23 24 25 meetings. Q So typically, pnor to anyone semng up a partnershtp or executing a short sale, these graphical presentations would be prepared and shown to the chents9 A Yes Q So would you agree, that based on this Exhthlt No 1, tins graphical presentation, that there was a plan m place to xmplement all of these steps prior to the t_me that anything was ever actually executed? A. I thmk lt was all sort oflmd out and discussed to as to _fyou went through each one of Page 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 33

these, as they're _dentlfied here on stages, that at the end, the result could be that you -- you might have tax sawngs from domg _t Q Would you agree that m the Sands case, that th_sgraphical presentation or plan was followed through prectsely from the beg,nnmg to the end'_ A I don't know ffl could recall flit was precisely followed through They d,d unplement something with Her- -- or they _mplemented strategtes that were presented by Heritage. Q And th_sPowerPomt presentation _s an example of a strategy that the Sands would have Implemented9 A Well, I guess the -- the essence of what's m here, they would have unplemented Q Okay Now, ,fthe-- the Sands wanted to devmte at all from th_sproposed structure, would they have been able to beheve do that w_thout Heritage's, approval'_ A. Yes, because they -- 1mean, they could have -their lawyers that were gwmg them legal advice on this, they could have dewated from th,s ,f their lawyers had told them -- you know, ff the lawyers had structured _td_fferently, or advised them to do something d_fferently than they could have. Q Was there a concern that ff they dewate at all

4 Q Which you were a part of, nght9 5 A Yes 6 Q Did you direct, then, the preparation of this, 7 ffyou didn't, m fact, prepare it yourself 8 Alfs possible 9 Q. And can you tell me what this document 1s9 10 A Th_s _s a graphical representaUon, a general 11 explanation of structunng -- pumng the structures m 12 place to reahze possible tax sawngs 13 14 15 16 17 18 19 20 21 22 23 24 25 Q When were these graphics typically preparedq My question _s -A Iguess, they're -- they would typ_cally be prepared after the chent had s_gned the engagement agreement w_th Heritage, and typ,cally after there had been some commumcat_on of, I guess, what the specific sltuataon was wath regards to that chent Q So prior to the actual transactaons bemg consummated, this graphical presentation would be prepared 9 A Yes Q Okay Was th_s presentation ever presented to the chents m a meenng as sort of a PowerPomt shde HUNDT

REPORTING

214-220-1122

Case 1:06-cv-00407-ECH
Witness : Brian

Document 106-4

Filed 07/02/2008

Page 5 of 47

Czerwinski 10 Page 34 1 2 3 4 5 6 7 8 9 Was Hentage concerned, that if 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 35 1 the strategy, 2 3 4 5 A (Pages 34 to 37 36

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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

from tins structure, that they might not aclueve the tax results that they were seehng 9 MR. CULLINAN: MS JOHNS Who was concerned? Was there --

Q

Thank you. If the Sands had merely entered

mto the short sales m their mdlvadual brokerage accounts, and without transfemng the partnerships, the short sales to the increased

The Sands

would they have received stock?

MR. CULLINAN. MS JOHNS

I'll obJeCt.

basra m their ConstellaUon A. I don't believe so.

I'm sorry He can answer if he knows.

MR. CULLINAN: MS. JOHNS: say was -Q. (BY MS. JOHNS)

Q. Do you recall or do you know why the use of partuerslups m this transaclaon was cnUcal to the structure? of what a

Yeah, no. What I was going to

Heritage plannmg

A. It t_ed mto the interpretation

the Sands deviated from tins structure, that they weren't going to achieve the tax results that the Sands were seelong9 A Not that l recall

hablhty was under Code Section 752 Q Okay. Exhibits Would you agree that the transacnons m Deposmon

shown m these graphmal presentations

1 and 2 were entered mto just to genemte a stock 9

Q. Okay. Take a look at Exhibit No 2, also This _s a s_milar grapincal presentatmn. lake a look at that and see tfyou're document (Witness A Yes. Q. And is th*s the same sort of grapincal presentatmn A. Yes. Q And tins would have been prepared by the analytmal department, as well, at Hentage? as we looked at, Exinint No I? Wdl you just

basis increase m the Constellatmn A. That was a component

of it, yes

farmhar wlth that

Q. l'm gomg to ask you to turn to -- let me see what exh,blt It's at Let's look at Exhthlt 14 -- hold on, not 14. Sorry, 15 A Q (W_mess compiles ) Do you -- can you take a look at this document

rewewed document.)

and tell me ff you are famdmr with It (Wlmess rewewed document )

I guess -- I don't remember

,t, but I recog- --

I mean, 1 see what it is Page Q The first page shows that Ws a -- it's a fax from you to Jmme Mendez 9 A Yes Q All nght Who's Janne Mendez 9 37

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

A Yes. Q And once again, did tins outhne, that was to be tmplemented

for the Sands to recewe the

tax results that they -- that they desired 9 A. Yes. Q Okay presentatJon And once again, was this graphmal prepared m advance of the Sands execut,ng agreement m this

A He _s a lawyer at Lewis, Race & Fmgersh Q. Okay is the next page, winch is the Sands --

6 7 8 9 10 11 12 13 14 the tax 15 16 17 18

,t's called the Sands Transactmn Calendar, _s that sometinng that _s normally prepared by Heritage? A I don't know if-- _f"normally" -- I don't

any sort of short sale or partnersinp transactmn9 A I beheve it would have been Q. Okay

recall ff this was prepared on a regular basis, or ,f-who prepared tins Q So you don't recall prepanng _t" A No Q Okay. And do you re- -- do you know whether or the analytmal department of

Do you recall whether if the Sands had

entered into just the short sale of treasury notes w_thout contributmg those treasury notes to all of that are shown m tins would they have recewed

these -- the parmersinps graphical presentation,

not this is someth,ng

results that they desired? MS. JOHNS quest,on 9 Q (BY MS JOHNS) If the Sands had merely entered and I'm sorry. Can you repeat your

Hentage might have prepared? A It's possible. Q If you turn to the next two pages, ,t's a fax cover sheet and then another Sands Transactmn (Wlmess rewewed document ) Calendar.

19 20 21 22 23 24 25

into short sales of treasury notes, mdwldually, they hadn't contributed parmerstups, those short sales to the

Q Do you recogmze that handwntmg 9 A No Q It's not your handwntmg '_ A. I don't beheve so. Q. Okay. Do you have any idea when tins

as set out m this graphmal presentation,

would they have rec- -- acineved the desired tax results that they were seeking 9 A. I don't beheve so HUNDT

REPORTING

214-220-1122

Case 1:06-cv-00407-ECH
Witness: Brian

Document 106-4
Czerwinski

Filed 07/02/2008

Page 6 of 47

ii Page 1 2 3 4 5 6 7 8 9 10 11 38 1 2 3 4 5 6 7 8 9 10 11

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transactaon calendar would have been prepared? My question is. Would It have been prepared pnor to the transactaons being entered into9 A Yes. Q Okay. Both of these fax cover sheets indicate that _t's at a fax to Jalme Mendez who was wath Lew_s, Race, you testafied, correct? A. Yes Q Would Lewas, Race have been apprised of the various steps set out m this calendar at the beginning of the transacnons?

also revolved some charitable -- charitable remainder unltrusts Is that familiar? A. Yes Q Okay Ijust want to make sure we know what we're talking about before I start asking you questions A. Okay. Q. That transacuon, this first transacuon, also revolved the short sale of treasury notes m approximately the amount of about $75 mdhon, are you famlhar with that9 A 1 don't recall that amount

12 A. Yes. 13 Q. Now, if you'll look at Exhibit 22, will you 14 take a minute and famlhanze yourself with it 15 (Witness rewewed document.) 16 A Okay 17 Q. Are you familiar with this document? 18 A. Yes. 19 Q Can you tell me what it is? 20 A It is a - an outhne of the events that 23. occurred regarding the implementation of the strategaes 22 by the Sands Famdy 23 Q Is this solnethmg that you would have prepared? 24 A Myself or someone m analytical 25 Q When was tins implementation list normally Page 1 2 3 4 5 6 7 8 9 30 3-312 3.3 prepared for a transaction like thls'_ A Either before or dunng, you know, while the transaction was being implemented Q. Was it something where -- you see there's a column called, "Date of Event''9 Were the steps set up m advance, and then maybe a date put In as the steps were implemented'_ How did that normally work9 A Well, the -- the structunng -- or, 1 guess, the -- the structunng of the entities and things were, you know, already laid out in the graphical presentation, and so I guess this -- this would have been sort of the consummauon of whatever was ultimately dec_dedon from, you know, back what we looked at 39

12 Q Do you -- let me ask you thls: Do you know how 13 the amount of the short sale was determ,ned? 14 A. I don't remember 15 Q. Do you recall whether it had any relationship 16 tothebaslsoftheConstellattonstock9 17 A The basis of the stock9 18 Q. Uh-huh. 19 A I mean, I don't -- I don't recall, 2 0 specifically, m this s_tuatlon 21 Q. Do you recall generally m these sort of 22 transactions using the short sale of treasury notes how 2 3 the short sale amount was normally determmed9 24 A. Usually, the amount of short sale that was 2 5 amved at was, you know, based on the -- the amount of Page 3. 2 3 4 5 6 7 8 9 3-0 3.3. 3.2 3.3 41

-- of, you know, the potential basis that could be apphed or used or somehow created through structunng like this Q So m this case, for example, let's say that the Sands wanted to sell $75 mdhon In Constellauon stock, and _thad about a $10 mdhon bas_s, would the short sale usually have been decided to be about $65 mdhon because of that need to increase the basis? A Well, It would have been dependant upon, you know, whatever the client's ultimate goals were. If-ffthe client was wantmg to possibly eliminate all of the tax, then $65 mdhon plus 75 minus ten would be the size of the short sales

3.4 earlier on the graphical stuff 15 So _twould lmve been -- this would have 16 been used to keep track of-- of where we were at in the 17 process of_mplementing the strategies 18 Q. Okay One ofthe -- the first strategnes that 19 the Sands entered ,nto with Heritage involved -- It took 2 0 place in about August of200h ls that fmmhar to you9 21 A 2001 sounds familiar 22 Q Okay. And the first strategy Involved the sale 2 3 of Constellation brand stock Does that sound farmhar9 24 A Yes 25 Q Okay It involved some partnerships, and _t HUNDT

3.4 Q Okay. In this transaction, the Sands entered 1 5 into these short sales in their ,ndlv,dual brokerage 1 6 accounts, and then they contribute them -- contributed 17 these accounts that held the short sales to certain 18 19 20 2 3. 22 23 24 25 parmershlps; one of them ls R,R,M&CGroup. Do you know why the contribution of those brokerage accounts with the short sales were contributed to the partnership, R,R,M & C Group? A I mean, it was all part of the -- the structuring of their affairs ,n this manner. Q. It was part of the plan _ A. Yes

REPORTING

214-220-1122

Case 1:06-cv-00407-ECH
Witness: Brian

Document 106-4
Czerwinski

Filed 07/02/2008

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to determine whether or not they were makang money or losing money? A Typmally, someone within Heritage did, whether _twas me or I think there was a bond consultant, at one point, and then the chents, themselves, would have been determm- -- you know, would have been contactang to find out if they were makJng money or losing money Q. If you'll look at Exhibit 23 You want to take a minute to read lt9 (Witness revmwed document ) A Okay. Q. Are you famihar with th,s letter? A. I don't remember tt Q. Is this -- the letter speaks to the current gain and the posmon being approximately $54,000? A Yes. Q. Is this -- m -- is this letter an mthcatlon that maybe you were momtonng the short sales to determine what the gain or loss m the transactron was9 A It mdlcates that, yeah, lt was at least one of the people doing tt

Heritage designed? A I beheve so Q Are you famthar with someone named Jonathan Blattrnachr? A Yes. Q. Was Heritage maybe working with Jonathan Blattmachr m the CRUT part of th_stransaction9 A Yes. Q Okay What role &d Heritage play w_th respect to the charitable rema,nder unltrusts 9 A I don't really remember Q Do you recall whether you specifically had any involvement with the charitable remainder umlrusts m setting them up? A. I mean, Ws -- it's hkely that I was conmmmcatmg to someone, or revolved somehow m the process, but I guess the -- the entttles would have been set up probably by Mr Blatmaachr. Q. Okay. What role would he, Mr. Blattmachr have hadlnthesemnguportheformmgofthechantable remainder unltrUStSq

22 Q. Okay. Is this normal, m these sort of 2 3 transactaons, where you might write the chent a letter 2 4 and say how the -- how the posmons were domg9 25 A. I don't recall. This -- I mean, th_smay have Page 47

22 A Well, he would have been the Sands legal 2 3 representatton regarding their charitable actlwty 2 4 there 25 Q Prior to the Sands transacuons, had you met Page 1 Mr Blattmachr before'_ 2 A Yes 3 Q. And &d he have a regular business relat,onshlp 4 with Heritage'_ 5 A 1beheve so 6 7 8 9 10 11 12 13 14 15 16 17 Q If you'll take a look at Exhibit I I. A (Witness comphes) Q Now, th_sexhlb, contains a bunch of handwritten notes Can you flip through them, take five n-anutes, and -- because I'm going to ask you ff tt's your handwriting, or ffthey're famdmr to you at all. And then a have a specific question about some of them (Witness reviewed document ) MR CULLINAN. Let's go off the record while he's doing that MS JOHNS. Yeah. (Offthe record from 10 13 to 10 25 a m ) 49

1 been something that R,chard asked for on a regular bas_s 2 orsomethmg 3 Q. Okay We mentioned Gloria Robinson being a 4 partner m R,R,M & C Partners 5 Was ,t determined m advance of these 6 7 8 9 10 11 12 13 14 15 16 17 transactaons that her interest would be bought out9 MR CULLINAN ObjecUon, vague Determined by who9 Q (BY MS. JOHNS) Determmed by Heritage as part of the structure, as part of the plan that's set out in these graphical presentations A Well, I think, yes, it would have been -- it would have been dlustrated that the redemption or the buyout or -- or some &sposal of that third party's interest would have been a -- I guess, a triggering event or something that would allow for the potent,al tax savings

18 Q Okay Now, we mentioned that m th,s 19 transaction mvolvmg R,R,M & C Group and R,R,M & C 2 0 Partners, that there were also charitable remamder 21 umtmsts revolved mth_s transaction 22 Were you famihar -- are you famflmr w_th 2 3 this charitable remainder unltrosts9 24 A Vaguely 25 Q. Was this part of the transactmn something that HUNDT

18 Q (BY MS JOHNS) Mr Czerwmskl, you've had a 19 chance to rewew what's been marked as Exhibit 11, which 2 0 ,s pages of handwritten notes. 21 It'd probably be easmr for you to tell us 2 2 which pages of these are not your notes 23 A Okay I beheve 712 24 Q Okay 25 A 724, 725, part of 741, and 748 are not my

REPORTING

214-220-1122

Case 1:06-cv-00407-ECH
Witness: Brian

Document 106-4
Czerwinski

Filed 07/02/2008

Page 8 of 47

14 \ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2 0 bottom, 21 22 23 24 25 A Q notes Q. If you'll look at 741, _s the part that's not your handwriting note from Lisa? A Yes. Q Okay handwriting? A I beheve Q Okay. &scussed, Government handwritten so. So other than the pages we've just pages contained Exhibit m I Is everything else on this page your J part that says "Brian," and there's a Page 50 1 2 3 4 5 6 7 8 9 10 11 12 13 notes have been 14 15 16 17 18 19 16th, 2001. 20 21 22 Andthts--lsthlsapageofnotesthat revolving the Sands 23 24 25 Page 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 A Q Yes Okay Do you happentorec_dl would have who 51 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 MR CULL[NAN and it's dated August

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Page Q. Let me show you -- if you'll turn to page THO 719 A. (Witness complies ) Okay Q. And this, once again, is a -- called Sands Meeting 10/10/01. And th,s -- you'll see under the organ_atton,"

arrow that says, "Supporting

there's two

more arrows, one of them says, "Purchase remainder interest m mid-January, then gwe interest to them th_s

year, buy back next year" [as read]. A. Yes, 1see it Q. Okay. A. No Do you recall what that note means? remainder

these handwritten -- or Deposmon notes? so

11 are your

A I beheve

Q He -- ,n th_s case, the charitable trusts that were created m February, purchased remamder theCRUTs. A. Okay the remainder

Q. Now, would these handwritten taken at meetings A. It's hkely. Q. Okay specific pages.

the Sands

wath the Sands Famdy?

interest m the charitable tenmnated the trust,

trust, which effect,vely

l'm golng to refer you to a couple of

The first one is, ff you look at the it's THO-713, Yes. Okay.

Q. Do you recall whether or not the -- at these meetmgs, there was a &scusslon remainder interest of the CRUTs'_ A I don't remember Q Ifyou - do you recall whether purchasmg remainder the about purchasing this

Do you see that at the top 9

you would have taken at a meeting transacnon?

interest m the CRUTs was part of the Heritage

plan from the begmnmg9 Page ObjecUon, vague I don't 53

understand whatthe"Henmge plan" is Q (BYMS JOHNS) The use ofthe R, R,M&CGroup

beenatthlsmeetmgonAugustl6thof'01') A Well, with certmnty, Gary Komman, and hkely, Richard and Robert, but beyond that, no Q Can you tell by loohng at these notes whether this meetmg took place m Dallas or m New York'_ A Q From looking at the notes, no, but -From your memory9

parmershtp, the use of the R,R,M & C Partners, partnersh*p, the short sale of the treasury notes, the use of the CRUTs A 1just don't remember much at all about th_s CRUT -- ttus CRUT piece of flus Q These notes of yours, ffyou were present at the meeting and you were takang notes, is _t fa,r to assume that your notes were an accurate note of what occurred at the meetmg9 A Well, my notes could have been conversahons that were occumng, or they could have been thoughts m my head resullang from conversalaons occumng So

A From my memory, I don't think there were any meelmgs that took place m Dallas with the Sands Q D_d Jonathan Blattmachr attend any of the

meetmgs that Heritage had with the Sands 9 A 1 don't remember Q Now, we had talked prior to om break about the charitable remainder umtrusts, which _s 1'11 just call thean CRUTs for short, and the CRUTs were formed, m this case, m September of 2001, and they were termmated five months later m February of 2002 If you look at the first -- your first handwritten hne here, which -- m your notes, which

there could be somethmg on here that's -- that's me wntmg somethmg that's not necessarily bemg &scussed Q Is It -- is ,t fmr to say, then, that there

2 0 was some thought or some &scusslon m August of 2001 21 22 23 24 and I'm back to that other page, wbach is 713 Is ,t fmr to say that m August 200 I, there was some thought or some &scussmn of purchasing the remainder mterest of that charitable remainder

2 2 says, "Can pay off purchase of remainder mterest with 23 24 25 six-month note to pmwde hqu,dlty for Rich and Rob," [as read] A No Do you recall what that sentence refers to'_

2 5 umlrust, because Ws in your notes9

HUNDT REPORTING 214-220-1122

Case 1:06-cv-00407-ECH
Witness: Brian

Document 106-4

Filed 07/02/2008

Page 9 of 47

Czerwinski 15 (Pages 54 to 57 56

\ i 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Page MR CULLINAN: Objectlon; compound quesuon. A. I mean, I tlunk it's safe to assume that there was you know, at least that -- the possthlhty of purchasing it would have been discussed Q. Okay Thank you.

54 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

Page Yahoo stock and the Commg stock. Do you know who made the decimon to use Yahoo stock? A Well, ultimately -- I guess the ultimate decision was Richard and Robert, because they were buying it with thetr money

And there were two meetings; there's the meeting that is referenced on seven - the date is August 16thof'01, and that's the Bates No. 713, and then there is the meeting of October 10th of'01, whmh is Bates No. 719. Were the Sands present, Richard and Robert, were they present at each of these meetings; do you recall9 A Not specifically, but I think Richard and Rob were always at the meetings together Q Okay And l'm gomg to ask you the same question about this 719 page, which I think is in front of you A Okay. Q Is it safe to assume, then, at this October 10th, 200t meetmg, there was some thought or some thscusslon about purchase be the remainder interest of the CRUT m mid-January9 A Yes Page 55

Q. Would that answer be the same with respect to the Cornmg stock9 A. Yes Q. Do you recall whether Heritage had any role ,n choosing Yahoo and Cornmg stock9 A. Yes. Q And what would that role have been? A. 1 think that, ff I remember right, we looked at -- we looked at different stocks that were businesses that, you know, had been high flyers at one point, and then had had thelr share values depressed at that tlme I think this was after -- well, this would have been after 9/11 and stuff So there were opportanmes to buy stocks at low values. Q The second transaction with Alpha and Beta also revolved some short sale of treasury notes Do you recall -- it was about $44 mdhon m short sales Do you recall why that amount was chosen9 A I don't remember Page 57

1 2 3 4

Q Do you have any recollectmn ofwhy the use of the CRUTs was necessary in this transaction9 MR CULLINAN Objectmn, assumes facts not In ewdence

1 2 3 4

Q Do you recall how much was pald for each share of Cornmg and each share of Yahoo9 DOyou recall, apprommately? A I think they were less than ten bucks a share

5 Q (BY MS JOHNS) Do you have any recollectmn of 6 why the CRUTs were used m th,s transaction '> 7 A No, I mean, 1 think -- well, no 8 Q Okay The second transactmn m tlus case was 9 done in about December of 2001, and that transaction 10 revolved the entrees called Alpha and Beta that we've t 1 already bnefly mentioned 12 A Yes 13 14 15 16 Q And Jtrevolved Coming stock and Yahoo stock Is that stock tmnsacuon famthar to you'_ A Yes Q Do you recall why the Sands entered into this

5 Q DOyou recall whether the purpose of this Alpha 6 Beta transaction and the Cornmg and stock transacUon, 7 do you recall whether the purpose of this was to 8 increase the bas_s m the Coming and the Yahoo stock? 9 10 11 12 MR. CULLINAN" Objection; vague Whose purpose 9 Q (BY MS JOHNS) Hentage's purpose, the Sands' purpose

13 A I mean, again, it was a component of 14 structunng everything m that way that would create 15 that possibility, but the shares of those stock could 16 have a higher basis 17 Q How dld this transaction, the Alpha Beta 18 transaction, how did it operate to increase the barns of 19 the Coming and Yahoo stock9

17 second transaction with Heritage? 18 MR CULLINAN I'm going to object to the 19 extent you're asking him the Sands' personal knowledge

2 0 Unless the Sands told him I'm not sure how he could know 2 0 A. The -- the shares of Yahoo and Com,ng would 21 why the Sands did something 21 have been placed into an LLC along with open short 22 Q Did the Sands tell you why they were entenng 2 2 positions in U S. treasuries, and then there would have 2 3 mto this second transaction with Heritage? 2 3 been some -- some event that resulted In that LLC 24 25 A I don't recall Q And this transaction revolved we mennoned the HUNDT 2 4 becoming a smgle member LLC, and then the -- the 2 5 allocation of the outside basis in the parmershtp would REPORTING

214-220-i122

Case 1:06-cv-00407-ECH
Witness: Brian

Document 106-4
Czerwinski

Filed 07/02/2008

Page 10 of 47

48 _ / 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Page MR CULLINAN. I've got about a mmute-and-a-halfoffollow up. MS. JOHNS: It'll never end. MR. CULLINAN. Yeah, never end. FURTHER EXAMINATION BY MR. CULLINAN: Q. What - m response to Ms John's questions about knowledge about the tax code, might the Sands brothers -- well, I don't thmk that you actually specified then. level of knowledge, but with respect to knowledge that they did have of the tax code, might that not have been obtained from then"adv,sors, Lewis, Race, Jonathan Blattmachr, even from Heritage organization's own presentahons 9 A Yes 186 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 recall that? A Yes

(Pages

186

to

189 188

Page

Q Okay. With respect to this shde show in ExhthJt 2 that's got a copyright at the bottom of 2002, is there any reason to believe that that was shown to the Sands anytune earlier than 2002? A I mean, the specialty presentation, no Q. Okay MR. CULLINAN: That -- that's it MS. JOHNS I don't have anything else. (Proceedings concluded at 2:49 p.m )

16 Q Okay Their uestlons the q about first two 17 exhiblts, Exhthtt asofthe I, bottom ofthe page, a 18 copynght 001ts 2 runmngthroughout it 19 A Yes 20 Q. Was theHerltage's organmatlon andMr Komman 21 pretty careful about theseopyrights, c stamping on thls 2 2 all their matenals9 23 A It was standard practice that we'd put a 2 4 copyright on the bottom of any types of presentations 25 IIkethls Page 1 Q What's the hkehhood of something being 2 stamped, copyright 2002, ff we were still in the 2001 3 year? 4 A 1mean tt's possible, because the files would 5 6 7 8 9 i0 11 12 13 14 15 16 17 have been the -- they could have been bemg created from a file that was -- you know, a file created In '02 may have been created from a file m '01 and the copynght was never changed Q But then how -- wouldn't it have a copyright of '01 on it? I'm askmg both -A. Oh, you're gomg the other direction_ Q I'm gomg the other way, yeah Would you ever state -A That would -- it'd be much harder to mistake being a year forward than a year backwards Q Allnght I'llrepresent to you that m 2002 -- well, let'sback up. 187

Page i CHANGES ANDSIGNA'I URE 2 WITNESS CItANGE NAME DATE OFDEPOSITION __ 3 PAGE LINE REASON 4 5 6 7 s 9 1o 11 12 13 14

189

I,BRIAN CZERWINSKI, haveread theforegoing 15 deposmon alldhereby myslgrmture sameis alTtx that trueandcorrect, exceptsnoted a above x6 17 is 19 BRIANCZERWINSKI

THESTATE OF__) 18 In 2001, the Sands gifted their mterest ,n 20 COUNTY F O ) 19 R,R,M & C Group to a series of four CRUTs; do you recall Subscribed andsworn tobefore by thesaid rrle 2 0 that9 21 w_mess, BRIAN CZERW1NSKI, on flusthe__ dayof ,2007 21 A l'm begmnmg to, yes 22 22 Q And m 2002, they bought back their interest, 23 2 3 or that they actually bought back the remamder interest 24 NOTARYUBLIC P INAND FOR 2 4 from the charitable orgamzauon that had been THE STATE OF 2 5 des,gnated to receive the remainder interest Do you 25 COMMISSION EXPIRES HUNDT REPORTING

214-220-1122

Case 1:06-cv-00407-ECH
Witness : Brian

Document 106-4
Czerwinski

Filed 07/02/2008

Page 11 of 47

49 , 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 STATE OF TEXAS ) COUNTY OF DALLAS) Page 190

(Pages

190

to

191

I, Stacey R. Cruz, a Certified Shorthand Reporter m and for the State of Texas, hereby cemfy that, pursuant to the agreement hereinbefore set forth, there came before me on the 28th day ofAugust, AD, 2007, at 9 06 am_, at the office of Department of Justice, Tax Dlvmmn, located at 717 North Harwood Street, Stute 400, in the Cay of Dallas. State of Texas. the following named person, to-vat BRIAN CZERWINSKI, who

was by me duly cautioned and sworn to testify to the truth, the whole Iruth, and nottung but the truth ofhm knowledge touchmg and concerning the matters m controversy m this cause, and that he was thereupon carefully examined upon hm oath and hm exammatmn reduced to wntmg under my supervision, that the deposmon _sa true record of the testimony gwen by the witness, same to be sworn and subscribed by stud wlmess before any Notary Pubhe, pursuant to the

2 0 agreement of the parties, and that the amount of time 21 22 23 24 25 used by each party at the deposmon is as follows MS JOHNS - 2 hours, 33 minutes, MR HERRIN - 0 hours, 0 nunutes MR CULLINAN - 2 hours, 31 minutes I farther cemfy that I am neither attorney nor Page 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Taxable Cost' 24 25 $ HUNDT REPORTING, LLC Firm Reglstratmn No 347 703 McKmney Avenue, State 207 Dallas, Texas 75202 214 220 1122 191

counsel for, nor related to or employed by, any of the pames to the actmn m wtuch flus deposmon _s taken, and further, that I am not a relatwe or employee of any attorney or counsel employed by the parties hereto, or financmlly interested m the actmn I further cerhfy that before the compleuon of the deposmon, _ X the Deponent, and/or the Plaint,if/Defendant, X d,d did not request to rewew the transcript In w.ness whereof, I have hereunto set my hand and affixed my seal th_s __ day of , A.D. 2007

STACEY R CRUZ, CSR Texas CSR No 8209 Expiration Date 12/31/07

HUNDT

REPORTING

214-220-1122

Case 1:06-cv-00407-ECH

Document 106-4

Filed 07/02/2008

Page 12 of 47

A Group

of Strategies

to Maximize 7/30/02

Capital

Preservation

and Provide Investment Profits for The Sands Family
Paqe No, 1 2 3-5 6 Cover Page Disclaimer Acknowledgment Index

PLAN GRAPHICS 7 8-9
10 11 - 17 18 19 20 21 22 23 24

COVER PAGE BUSINESS PURPOSESOF TRANSACTIONS Sta_Lag_t
Open Margin Accounts Execute Securities Transactions Utlhzing a Short Sale Strategies Related to a Short Sale Transaction - Text Strategies Related to a Short Sale Transaction - Summary

a_ta.g____ st
Contributions Into CWC-I Formation of Alpha I, L.P. Ownership Summary Overview of Effect on Limited Partner's Bases Strategies Related to an Investment Strategies Related to an Investment Control Enitity - Text Control Enitity - Summary

25 26 - 28 29 30 31 32

Purchase of Shares of Coming, Inc. and Yahoo, Formation of Beta Partners, L.L.C.

Inc. by Alpha

I, k,P.

Overview of Effect on Alpha l, L.P.'s Basis Summary of Plan Structure Strategies Related to an Investment Trading Entity - Text Related to Investment Summary Strategies an Trading Entity -

sta_t_t_t_t_t_t_t_A4
33 34 - 35 36 Purchase U.S. Treasuries to Cover Settlement Obhgations Strategies Related to Covering Settlement Obligations - Text Strategies Related to Covering Settlement Obligations - Summary

sta_ta.g#__
37 38 39 40 41 Purchase of Gloria Robinson's Interest Results of Termination of Beta Partners, L.L.C. -, ___,n,-o_luu=kllt Overview of Basis Allocation at TerminatLon of Beta Partners, L.L.C. Strategies Related to Termination of Beta Partners, L.L C. - Text Strategies Related to Termination of Beta Partners, L.L C.- Summary

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Case 1:06-cv-00407-ECH

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