Free Response to Motion - District Court of Federal Claims - federal

Case 1:06-cv-00245-EJD

Document 81-2

Filed 08/01/2008

Page 1 of 5

IN THE UNITED STATES COURT OF FEDERAL CLAIMS
Nos. 06-245T, 06-246T, and 06-247T (Consolidated)

MURFAM FARMS, LLC, §
By and Through Wendell H. Murphy, Jr., §
a Partner Other Than Tax Matters Partner, §

PSM FARMS, LLC, §
By and Through Stratton K. Murphy, §
a Partner Other Than Tax Matters Partner, §

§

MURPHY PORK PARTNERS, LLC §
By and Through Wendell H. Murphy, Jr. §
a Partner Other Than Tax Matters Partner, §

§

v. §

Plaintiffs, §
§
§

§

UNITED STATES OF AMERICA, §

Defendant. §
§

APPENDIX TO UNITED STATES' MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFFS' MOTION TO CONFIRM JURISDICTION

#

Description
. Various pages of the Deposition of

Pages
001-004

Al

Wendell H. Murhy, Sr.

-v-

3212853.1

Case 1:06-cv-00245-EJD

Document 81-2

Filed 08/01/2008

Page 2 of 5

WENDELL MURPHY, SR.

Page i
IN THE UNITED STATES COURT OF FEDERAL CLAIMS
IN RE:

COBRA TAX SHELTERS LITIGATION
MURPHY FARMS,

Murphy, Jr. ,

LLC, by and through Wendell H.

)
)

partner

) )
)

other than tax matters partner; PSM FARMS, LLC, by and through Stratton K. Murphy, a partner other

No. 0624ST

) ) ) )
)

than tax matters partner;

No. 06246T
No. 06247T

MURPHY PORK PARTNERS, LLC, by and through Wendell H. Murphy, Jr. , a partner other than tax matters

)
) )

(Consolidated)

partner,
v.

Plaintiffs,
UNITED STATES OF AMERICA,

) )
)

) ) ) ) )

Defendant.

* * * ** * * * * * * * * ***** * * * *** * * * *** * * * * ** *** *** * ** * *

ORAL AND VIDEOTAPED DEPOSITION OF

WENDELL H. MURPHY, SR.
June 26, 2007
* * * * * * * * * * * * * ** * * * * * * * ** * * * * * * * * * * * * * * * * * * * * * * *

ORAL AND VIDEOTAPED DEPOSITION OF WENDELL H. MURPHY, SR., produced as a witness at the instance of the Defendant, and duly sworn, was taken in the above-styled and numbered cause on the 26th day of June, 2007, from 11:20 a.m. to 3:41 p.m., before Dawn K. Larson, Registered Diplomate Reporter and CSR in and for the State of Texas, reported by machine shorthand, at 5752 Highway 117 South, Wallace, North Carolina, pursuant to the Federal Rules of Civil Procedure and the provisions stated

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Case 1:06-cv-00245-EJD

Document 81-2

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Page 3 of 5

WENDELL MURPHY f SR.
Page 30
1

Page 32
1

A. I mean, well, I remember -- I don't

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remember what they were actually now. At that time I'm sure -- I mean, I would have known that fees were what they said they were going
to be.

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4

2000 with respect to you, your family and your businesses? A. He was our chief financial officer and in charge of all of our accounting.

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Q. Do you recall whether you were involved in any decision making with respect to
the strategy, investment strategy after you

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8

MR. LINQUIST: Before we star into
the exhibits, when is lunch going to be ready? MR. CROUCH: What did they say, 12:15?

MR.DADDINO: 12:15.
MR. LINDQUIST: I need to tae a
break. So let's go off

9

10 11 12 13 14 15 proposed -16 A. Yes. 17 Q. -- in December of i 999? 18 A. Yes. 19 Q. And when was that? 20 A. I don't remember. 21 Q. Was there any type of a change to the 22 strategy that had originally been proposed by 23 Mr. Knight in December of i 999 that was 24 discussed in early 2000? 25 A. I don't recall any.
Q. After -- you indicated that there was

decided to go ahead with it? MR. CROUCH: Objection, vague. Q. (BY MR. LINDQUIST) Well, I'll ask it this way to clarify. Did you at some point make a decision to go forward with this investment strategy that Mr. Knight had

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

the record.

THE VIDEOGRAPHER: This concludes tape
1 of the deposition of

Wendell Murphy, Sr. The

time is 11 :57 a.m.

(Recess taen from 1 i :57 a.m. to
11 :59 a.m.)

THE VIDEOGRAPHER: On the record at
1 i :59 a.m.

Q. (BY MR. LINQUIST) At the time that
you made the decision to go forward with the investment strategy, did you understad it to have the name COBRA?
A. Did I understad what?

Q. Did you understand that the strategy had been given the name COBRA by Ernst & Young? A. I had heard that word.

Page 31
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Page 33
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a point when you made a decision to go forward with the strategy. After you made that 4 decision to go forward with the strategy, did 5 you have to make any further decisions with 6 respect to the strategy? 7 A. I don't remember any. 8 Q. Did you delegate any decision making 9 to anybody with respect to the strategy? 10 A. Well, that was with Ernst & Young, and 11 Brewer EzzelL. 12 Q. Was Brewer Ezzell in 2000 an employee 13 of Murphy Fars, Inc.? 14 A. I honestly don't remember. I know he 15 was with us and then he left for a while and 16 then came back, and I can't remember exactly 17 what the dates on that were. 18 Q. Okay. I've seen a card that has -19 purports to indicate that he was a 20 vice-president. Is it possible that he was at 21 that time a vice-president of Murphy Farms, 22 Inc.? 23 A. I just don't remember what his title 24 was. 25 Q. What were his duties when he was -- in
2 3

Q. And did you know what COBRA stood for? A. No, sir. Q. At the time that you decided to go

forward with the COBRA strategy, did you have
any understading as to how the strategy could

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7
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10 11 12 13 14 15 16 17 18 19 20 Q. You didn't? 21 A. I did not understad it. 22 Q. Was there anyone in your family who 23 you believe understood the COBRA strategy? 24 A. No. 25 THE VIDEOGRAPHER: Mr. Lindquist, put 9

generate money? A. No. Q. Was there any discussion that you had with Ray Knight where he told you what percentage of probabilty there might be that you would make money? A. Not that I recall. Q. Was there any discussion with Ray Knight concerning any percent or probability that you would lose your entire investment? A. I don't remember that. Q. What did you understad to be the risks associated with the COBRA strategy? A. I didn't understand it.

~

(Pages 30 to 33)

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Case 1:06-cv-00245-EJD

Document 81-2

Filed 08/01/2008

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WENDELL MURPHY, SR.
Page 70
1 2 3
4
MR. CROUCH: Yeah, 1617.

Page 72
1

You got it

right. 1617.

A. Oh, yeah. Q. (BY MR. LINDQUIST) There's some

2 3 4

form an entity LLC on your behalf? A. I don't recall.
Q.
If

you turn to Exhibit 1619.

income. Is that your handwriting? 8 A. It doesn't appear to be. 9 Q. Do you know whose handwriting that is? 10 A. I have no idea. 11 Q. Have you ever seen this document 12 before? 13 A. No, sir. 14 Q. It reflects here that MURF AM Fars, 15 LLC was going to be used to generate a capital

5 6 7

handwriting on this document on the left side, capital loss. And on the second page, ordinar

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8

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16 loss, and on the second page that Murphy Pork 17 Partners, LLC was to generate an ordinar loss. 18 Do you recall that division between 19 the two parterships? 20 Murphy Pork A. I've never heard of 21 Parners. 22 Q. You've never heard of it? 23 A. No, sir. 24 Q. It's Murphy Pork Parers, LLC. 25 You've never heard of it?
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1619 is a fax from Ira Axlerod of Proskauer to Ray Knight. Do you know who Ira Axlerod is? A. No, sir. Q. Do you recall ever having any discussions with a person by the name of Ira Axlerod? A. No, sir. Q. Did you ever have any discussions with the person who issued -- you understand issued
an opinion on the transactions known as COBRA ? A. No, sir. Q. Do you know whether Mr. Knight ever

referenced the law firm of Proskauer Rose to you? A. I believe that someone from Ernst &

Young did. Q. Do you know when? A. No. 23 Q. There's a name on here of David Parse

24 that's referenced. It says, "please prepare 25 and sign and then fax to David Parse."
Do you know who David Parse is?

Page 73
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4

2 3 4

A. I don't recall it. Q. If you take a look at Exhibit 1638, 1638. A. 1638. Let's see. Is this way in the

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back of the book? Q. There's an entity referenced here, Formation ofWHM Ventures, "Certificate of LLC." Do you know what WHM Ventures, LLC is?
A. I'm not certin. Q. Can you hazd a guess --

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

MR. CROUCH: Objection. Calls--

Q. (BY MR. LINQUIST) --based upon any

type of other than mere speculation? A. Well, obviously WHM stands -- could
stad for Wendell Holmes Murphy, and that would

be me, but I have no knowledge of this. Q. There's a person listed there who's a

Matthew Sablauf. . Do you know who Matthew Sablauf is? A. Absolutely not. Q. Did you ever have any discussions with Matthew Sabloff?
A. Not that I recalL. Q. Did you authorize Matthew Sabloff to

this document, there's some handwriting. 8 Is any of this your handwrting? 9 A. It doesn't appear to be. 10 Q. Have you ever seen an opinion letter 11 that was written to Deutsche ban with respect 12 to your COBRA transaction? 13 A. No, sir. 14 Q. Did you ever have any discussions with 15 anyone from Deutsche ban with respect to your 16 COBRA transaction? 17 A. No, sir. 18 Q. There's a person, Alex Alexander 19 referenced here. 20 Did you ever have any discussions with 21 Alex Alexander? 22 A. I don't recognize that name. 23 Q. If you turn to Exhibit 1621. 24 Burroughs & Hall is The law firm of 25 writing a letter to you and your brother and to
pages of

5 6 7

A. No, sir. Q. Have you ever seen this fax before? A. No. Q. If you turn to the second and third

19 (Pages 70 to 73)

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Document 81-2

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WENDELL MURPHY, SR.
Page 78
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Page 80 ~
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10 11 12 13 14 15 16 17 18 believe it was here. I believe that's my 19 signature, but I'm not absolutely certin. 20 practice where Q. Was there any type of 21 you had authorized people to sign your name? 22 A. No. 23 Q. Was Brewer Ezzell authorized to sign 24 your name? 25 A. No.
Q. Now, the reason why I ask is because the two signatures appear a little bit different. A. That's what I was looking at. They're

which has the reference number at the top of EX24631. On the third page of that -MR. CROUCH: Just a second, counseL. Do you see where he's talking about? A. No. Where are you looking? Q. (BY MR. LINDQUIST) For speed, I'll point. There's the reference number. A. Okay. Q. If you turn to the third page ofthat confirmation, is that your signature? A. Yes, it appears to be. Q. Well, is it your signature or is it not? A. It looks like it to me. Q. Did you have anybody else signing your signature on your behalf? A. Well, that has been done, but I don't

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4

hiring them. Q. Do you recall whether they -- whether you or anyone on your behalf ever hired them? I mean, they could have been hired by somebody
else. So do you recall whether you ever hired

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8

them?
A. I'm not sure just exactly how you're asking what you're asking. But the answer I'm

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Page 79

trying to give you is -- what was the name -Proskauer Rose -- they were recommended to us by Ernst & Young, and I was aware of that, but I never talked to anybody at Proskauer Rose, never. Q. Did you ever see a draft of their opinion? A. No. Q. Were you ever told that there was a draft of their opinion? A. I don't recall. I mean, I don't
recall being told.

Q. Did you ever rely upon a draft of their opinion?
A. Not that I recalL. Q. Do you have any knowledge as to how it

would be determined as to whether or not these

Page 81
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options that you were purchasing, whether they would or would not be in the money, how that was going to be determined? A. No, sir.
Q.
And Mr. Ezzell, he didn't have any

probably the same. 6 Q. SO you have reason to question whether 7 that's your signature on the left or the right? 8 Which one do you think is your signature? 9 A. I think they both probably are, but 10 the one on the right looks more like the way I 11 usually would sign it. 12 Q. Do you recall signing this document? 13 A. No, sir. 14 Q. Was there any type of document signing 15 ceremony where a whole bunch of documents were 16 put in front of you to sign for purposes of 17 implementing this transaction? 18 A. None that I recall. 19 Q. Do you know if you ever engaged the 20 law firm of Proskauer Rose to -- with respect 21 to the COBRA transactions? 22 A. Yeah. Well, I heard their name 23 mentioned. 24 Q. Well -25 A. My -- personally was not involved in
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10 11 12 13 14 15 16 17 18 19 the COBRA transactions? And I'll say during 20 1999 through 2001. 21 A. No, sir, none that I recall. 22 Q. If you tae a look at Exhibit 1627. 23 This is an assignment agreement that's 24 been marked up. 25 Is this your handwrting?

prior experience in currency options, did he? A. Limited, if any. Q. SO you weren't relying upon Brewer Ezzell? A. I relied on him in his conversations with Ernst & Young. Q. Do you know if -- whether you asked anybody to review these currency options for you? A. I do not recall. Q. If you tae a look at -- well, before we go on, besides Ernst & Young, was there anybody else that you ever consulted concerning

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