Free Memorandum - District Court of Federal Claims - federal

Case 1:05-cv-01223-FMA

Document 30-14

Filed 08/22/2007

Page 1 of 15

Page 16
11 : 1 6 : 1 3

1 firm.
2
3 4
Q

4:16:14
4 : 16 : 15

And -Or
the members of the firm at that

A
Q

4:16:16
4:16:17

5 time, letls just be clear, were you, Jeremy
6 Nerenberg and Robert Bloink here in Dallas?
7
8 9

4:16:21
4:16:24

A
Q

And John Ivsan.
In North Carolina?

4:16:26

4:16:27

A

In North Carolina. And Beckett
I

4 : 16 : 2 8 10 Cant 1 ey .
4:16:29 11
4:16:30 12
Q

In Atlanta?

A

In Atlanta or -- or Florida, wherever
I

4:16:33 13 he was.

4:16:36 14 4:16:36 15

Q

Okay.
We would receive a call, just like

i

A

4 : 16 : 37 16 any lawyer or law firm would recei ve a call
4: 16: 40 17 saying - - you know, the call could have gone to

4: 16 :44 18 Beckett or it could have gone to Robert Bloink or
4:16:4819 John Ivsan or myself and saying: We have a client

4: 16 :51 20 that would like to meet with you.
4:16:55 21

(Mr. Leonard entered the

4:17:20 22 deposition proceedings.)
4:17:21 23 BY MR. SORENSEN:
4:17:21 24
Q

You want to go on?

4:l7:23 25

A

Sure.
338
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Case 1:05-cv-01223-FMA

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Page 1 7

4:17:24

1

We obviously inquire into
what the cl ient was interested in speaking

4:17:28

2 wha t

4:17:32
4:17:39 4:17:40
.4:17:43

3 with us about, and we would -- we would make

4 arrangements for that client to have an
5 opportunity to speak wi th one of the lawyers in

6 the firm. The client was in -- the client was
7 usual ly accompanied by his or her other

4:17:53

4:17:57
4:18:01

8 professional advisors, tax advisors, lawyers i and

9 they would basically ask -- and if it was about

4:18:0810 the MLD, they would ask about the MLD, and we

4 : 18 : 12 11 would explain the - - the legal issues and
4: 18 : 14 12 technical issues behind the MLD, and then we
4:18:24 13 would
4:18:24 14
Q

would leave.
Are you familiar with the term a

4 : 18 : 27 15 11 LeMans sheet II that was used in your off ice?
4:18:34 16
A

I - - the word II LeMans sheet II rings no

1:18:39 17 bell.
4:18:40 4:18:45
18
Q

Exhibi t

B

in the packet.
you recognize a document

19

Do

4:18:48

20

like

tha t ?
A

4:18:55 4:18:58

21

I

believe I

do

recognize this,

a

22 document
Q

like this.
What iS this document?
This document is if - - if somebody

4:18:59 23
L4:19:04 24

A

t4:19:06 25 said:
I

Yes, I want to enter into a Market Linked
339
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Case 1:05-cv-01223-FMA

Document 30-14

Filed 08/22/2007

Page 3 of 15

Page 18

4:19:10
4:19:14

1
2

Depos i t

transaction, they would ask us to create the entities that were involved in the execution.

4:19:20

3 4 5 6
7

And

4:l9:22 4:l9:25
4:19:30
4 : 19 : 32

in order to crea te the entities, you have to have the appropriate information to do so _
Q

Can you

tell

me

what the bottom

en try

is, the last
A
Q
Pi.

first
It says:
What does

page, bottom entry?
Deal

size.
mean?

4:l9:33
4:19:39

8
9

that

That would be the size of the

4:l9:41 10 investment in the Market Linked Deposit, I -- I

4: 19 :43 1l believe, that they were -- that they were going to
4:l9:47 l2 be executing.

4 : 19: 48 13 Q Would that also equate to the size
4:19:50 14 loss they would generate -- tax loss?

4: 19 : 56 15 A The Market Linked Deposit itself did
4:20:02 l6 not you know, it didnrt -- it didn't it

4 : 20 : 04 l7 didn't generate an absolute loss i if - - if as a
4:20:10 18 result of actions on behalf of the investor, that

4: 20: l4 19 could be the size of the loss that resulted from 4: 20: 16 20 that. It could be something other than that.
4 : 20 : 16 21 BY MR. ALETTA:
4:20:2l 22
Q

Excuse me. Did it correspond to the

4: 20: 23 23 amount of increase in outside partnership basis?

4:20:2824

A

Yes. Well, the - - the transaction
340

4: 20: 30 25 if you purchased a million dollar Market Linked
,:~~~"~~i:"'i:", -

Case 1:05-cv-01223-FMA

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Page 4 of 15

Page 19

1l:20:31l

i Deposit -- and you're -- you're familiar with
2 Section 752.

4:20:35
4:20:1l2

Under Section 752 is if your outside

3 basis would be increased by the amount of the --

4:20:49
4:20:53
4:20:53

4 the investment in the Market Linked Deposit, that
5 was contributed as property to the partnership
6 itself.
7

1:20:57
4:21:01
4:21:04

So if the -- if the -- if the

8 client invested - - in fact, invested a million

9 dollars in it, then the partnership basis would be

4: 21: 08 10 increased by that million dollars. If they 4 : 21: LO 11 invested something other than a million dollars,
4: 21: 12 12 then that i s what their - - that r s what their

4:21:14 13 increase in the outside basis would be, and that's

4:21:1714 my understanding of the -- of the interpretation
4:21:20 15 of Section 752.

L4:21:21 l6

Q

In a typical situation, who would

4:21:2417 convey to you the deal size that was involved for
4 : 21: 27 18 each investor? Who would be that person? Would
4 :21 :29 19 it be the investor or would it be somebody else

4:21:3120 that would convey to you that amount?
4:21:32 21
A

Well, each investor would

would --

4: 21: 35 22 would decide how much they want to invest in any

4:2l:37 23 particular -- in the Market Linked Deposit. And

4: 21: 42 24 the actual execution of those investments, as I
4:21:44 25 stated earlier, would -- I was not involved or
~.:~.~¡;~~;.~~'",'~"-~';î''=':':.e=,~~':;

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Case 1:05-cv-01223-FMA

Document 30-14

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Page 5 of 15

Page 2 ()

4:21:48

1 included in that.
2
Q

4:21:49
4:21:53

vJho was?
vJ ell, i t

4:21:51 3

A

my - - my understanding

4 lS, is that was all done with Dan Brooks.

4:21:56 4:21:58
4 : 22 : 02

5 Now, could they have gone to
6

other inves tment advisors?
was aware of were done
Q

The - -

the ones that I
I'

7
8

with

Dan Brooks.

4:22:04 4:22:09

9

did your firm, Cantley & Sedacca, refer the investors to Dan Brooks with
Did
- I

4 :22 :13 10 executing the Market Linked Deposit transactions? 4:22:16 11 A I don i t recall how that relat ionship 4:22:19 12 was fostered.
4:22:30 13
Q

But they - - did all the investors use

4: 22: 32 14 Dan Brooks r assistance in engaging the Market

4: 22: 35 15 Linked Deposit transactions?
4:22:36 16
A

The ones that I i m aware of, I
MR. WELTY: And Market Linked

4:22;37 17 believe, did.
4:22:38 18

4 :22 :40 19 Deposit was a Deutsche Bank product essentially
4: 22 : 42 20 and Dan Brooks worked for Deutsche Bank.

4:22:45 4:22:45
4:22:45

21 22

THE WITNESS: Yes.

MR. WELTY: Isn i t that the
THE WITNESS: Yes.
BY MR.

4 :22 :45 23 connection?
24 25
SORENSEN;
342
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Case 1:05-cv-01223-FMA

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Page 6 of 15

Page 21
i I

4:22:47

1

Q

Well r that raises the question.

You

l4:22:48 4:22:53 4:22:54
4:22:55

2 don i t recall whether the clients came from Dan

3 BrooKs or you referred
4

A

We 1 l, no, no, no.

I f Dan Brooks got

5 a call J he would say:

I got a call from somebody

4:22:58 4:22:59

6 who's interes ted in talking about the Market

7 Linked Deposi t. And he would call one of the
8 lawyers in the firm.

4:23:01
4:23:06

So yeah, he probably did

9 I don i t

I mean, you i ve got to remember John

4 : 23 : 08 10 Ivsan was in North Carol ina, and Beckett was here

4: 23 : 12 11 and I was here. Anà so I didn' t always know what
4: 23 : 15 12 necessarily Robert or Beckett or John were doing.

4:23:1813
4:23:20 4:23:21 4:23:22
4:23:24 4:23:26
14 15
16
1 imi t

Q

But here in the Dallas office.

Let r S

it
A
Q

to that.
h'hat i s
Limi t

that?

17
18

here to in the Dallas office. Do you recall here the clients you had in Dal las, whether they were ref erred to you by
Brooks or from you to Brooks?
A

it

4:23:29 4:23:33

19
20

I

doni t

- -

I

don't recall

how

that

4:23:37 4:23:37

21

transpired.
Q

I mean, I - - I

truly

donI t.

22 BY MR. ALETTA:

4:23:40 23

Did it just simply vary from investor

4: 23 : 43 24 to investor on how you became involved with these

4:23:43 25 investors?
I

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Case 1:05-cv-01223-FMA

Document 30-14

Filed 08/22/2007

Page 7 of 15

r.6

Page 22
1

A

14:23:47
~4:23:50

t4023047

2 Q 4 A
3 rìght?
6
Q

Yes.
It came from different sources,

Yes.

4:23:52

5 BY MR. SORENSEN:

4:23:52
4:23:52
4:23:53

Well, just -I don i t mean to - ~ I don 't - - I don 't
MR. ALETTA: Do you want to

7

A

8 want to frustrate you.
9

4:23:53

4: 23: 55 10 talk about Mr. Bevan, maybe?
4:23:56 11
4: 23: 57 12 BY MR. SORENSEN:

MR. SORENSEN:

In a minute_

4:23:58 13

Q

It iS just interesting that all of

4:23:59 14 your clients had Mr. Brooks for a financial

4: 24 : 04 15 advisor i how that i s a coincidence or if that was a
4:24:07 l6 referral process that you -A

Wel 1 --

t4:24:07 17
Q

- - only referred them to Mr. Brooks

t4:24:0B 18

t4 ; 24 : 10 19 or he only referred them to you?
t4 : 24 : l2 20 A - - somebody came in - - okay.

If a

4 : 24 : 14 2 1 client came in and asked about the Market Linked
4:24:17 22 Deposit or the specific legal issues that are

4 :24 :22 23 attached to the Market Linked Deposit, we made it
4:24:2724 very, very clear that they were not walking into

4: 24: 3 0 25 the room on any confidential basis i nor did we
344
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Case 1:05-cv-01223-FMA

Document 30-14

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Page 8 of 15

Page 23

4:24:39 4:24:39
4:24:40

1 have anything proprietary in regard to this Market
2 Linked Depos it.
3

So if they walked out of the

4:24:41
4:24:44 4:24:48

4 off ice and they wanted to use somebody el se, then

5 by golly - - or if they you could go on Deutsche
6 Bank's website and -- and go 100k on their

4:24:50
4:24:53
..4:24:53

7 webs i te . I t says Market Linked Depos it. 8 there's nothing -9

I mean,

So what I'm trying to say iS

4:24:55 JO that all I know is about the transactions that I

4: 24: 57 11 know about.

I don i t know about any transactions

4:25:00 12 that I don't know about. And -- and 11m not

4: 25 : 03 13 trying to be crass or anything.
1:25:06
14
Q

Well,
11m

weT re
- -

not

- -

4:25:07 l5
4:25:08 l6
4:25:08
17

A
Q

just

We're not ei ther .

We're not

trying

to

- -

4:25:08 l8

A
Q

Yeah.
- -

4:25:l0

19

hide anything.

But of

the

150

4:25:13 20 Market Linked Deposits that we've identified, 150

4: 25: l5 21 of them had Cantley & Sedacca as the law firm and

4: 25: l8 22 l50 of them had Dan Brooks as the advisor.
4:25:2l 23
A

Correct.
MR. WELTY: Are you - - you're

4:25:21 24

4:25:22 25 saying thatTs an absolute? YouTre -- are you

-

345

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Document 30-14

Filed 08/22/2007

Page 9 of 15

Page 24

4:25:24
4:25:24
4:7.5:24

i saying that -2

MR. SORENSEN: Well, to my

3 knowledge --

4:25:25

4 MR. WELTY: - - other people
5 didn i t do the Market Linked Deposi t transaction?
6

4:25:26

4:25:28
4:25:29
4:25:33 4:25:33

MR. SORENSEN: No.

I ' m saying

7 the ones that we i re looking at on the abusive

8 Market Linked Deposit scheme - - I know you love
9 that word - - all of them had Cantley & Sedacca as

4:25:35

iO

the law firm and all of them had Daniel Brooks as
MR. WELTY:
- -

4:25:35 II the

4:25:35

12

I

just
- -

want

to

4:25:35 l3 make sure 4:25:40 l4
4:25:42 l5 advisor.

MR.

SORENSEN:

financial
want to
no

4:25:42 4:25:43

16

MR. WELTY:

I

just

17 make

sure:

Are you saying

that there are

4: 25: 46 18 Market Linked Deposi t transactions not executed by

4:25:49 19 Dan Brooks or not involved in Cantley & Sedacca?
4:25:5l 20

MR. SORENSEN: No.

11m

4:25:52 21 saying 4:25:52 22
4:25:53 23

MR. WELTY: Okay.

MR. SORENSEN: the ones

4:25:53 24 that we have identified as being within the
4:/.5:5525 parameters of -- of what we've identified as this
346
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Case 1:05-cv-01223-FMA

Document 30-14

Filed 08/22/2007

Page 10 of 15

Page 25

4:25:58

1 tax shel ter -2

4:25:59 4:26:00 4:26:01

MR. WELTY: What you i ve been

3 assigned to.
4

MR. SORENSEN: No. What we've

4: 26: 02 5 identified as being the Market Linked Deposits

4:26:05 6 related to this transaction, this shelter, this
4: 26: 07 7 transaction, have all been identified through
4: 26: 09 8 Deutsche Bank and Societe Generale as having
4 : 26 : 11 9 Cant 1 ey & Sedacca as the law firm and Dani el

4:26:14
4:26:18
4:26:18

10

Brooks as the

financial advisor.
MR.

That 1 s what I1m

11
12
13

saying.
WELTY:

If

that i s your

4:26:19
4:26:19 4:26:21

knowledge
A

bas is.

14

Yeah.

I

can't confirm or deny that.

15 BY MR. SORENSEN:

4: 26: 21 16 Q Okay. Tell me how you were paid -4:26:25 17 well, no. Let1s back up for a minute.
4:26:27 18

How would someone know to call

4 :26 :29 19 your law firm -4:26:29 20
4:26:30 21 a second.

MR. ALETTA: Excuse me, Dave,

I i m sorry. Can I take that exhibi t
THE WITNESS: Yeah.

4: 26: 32 22 back, my pile here?
4:26:33 23

4:26:34 24

MR. ALETTA: I don i t want

4:26:34 25 to -347
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Case 1:05-cv-01223-FMA

Document 30-14

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Page 11 of 15

Page 117

5:50:25
5:50:28
5:50:31

1 for that. We can talk about that later, Todd.

5 : 50 : 25 2 BY MR. ALETTA:
3
Q

Are you in contact with Mr. Cantley

5:50:31 4 presently?
5

A

Onl y- - only as it pertains to any

5:50:34
5:50:42 5:50:42

6 ongoing acti vi ties from the - - my tenure at
7 Cantley & Sedacca.
8
Q

Okay. But you don 1 t know where he is
I do

5:50:44

9 right now?

5:50:44 5:50:45

lO

A
Q

not.
he's located?

11

Or where

5:50:46 l2
13

A
Q

I do not.
Do

you know

if he's

travel ing

5:50:50 l4 presently? rs,OO47 15 A 5:50:50 5:50:50 l6
Q

(Witness shakes head. )

Is that

a no?

5:50:51
5:50:53 5:50:57

17 18 Mr. 19

A

I don1t know

anything

abou t

Cantley other than what
Okay.
--

communi ca t ions

have
--

transpired in regard to our resolving any
Q

5:50:59

20

5:51:00 2l 5:51:02 22
5:51:02
23

A
Q

outstanding i ssues in 2001.

Okay.
And

that answer woul d be consistent 5: 51: 04 24 with any other lawyer in the firm.
A

i5:51:0425 Q Okay.
I

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Case 1:05-cv-01223-FMA

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Page 12 of 15

Page 118

5:51:10

1 BY MR. SORENSEN:
2
Q

5:51:10 5:51:12
5:51:14

I want to go back to one area we

3 skipped over too fast, and that was the fees.
4

Did the firm pay referral fees

5:51:17 5:51:24 5:51:25
5:51:26

5 for clients who were referred to it?
6 7
8

A

There were

--

the firm paid
whom?

consul t ing fees.
Q

Consulting fees to

5:51:28

9

A

If

you - -

if

--

it

wasn It unusual for

5: 51: 32 10 an engagement letter to specify that we would
5: 51: 38 11 part of their fee was being paid to a - - to a

5:51:40 12 third party.
5:51:41 13
5: 51: 46 14 someone who brought

Q

And that third party would have been
the client to you?

5:51:4915 A They were involved in the client
5:51:53 16 representation, yes.
,

5:51:53 17 Q Okay. I was just wanting to ~now if
5:51:53
5:51:58
5:51:58
18

you knew

that the firm paid

Mr. Bevan money

for

19
20

referrals.
MS. McNULTY:

I ob j e c t to

that

5:51:59
5:51:59 5:52:00

21 quest ion. 22 23
A

MR.

SORENSEN:

Tha t's

okay.

I didn It wr i t e any of those checks i

5:52:00 24 so

5 : 52 : 00 25 BY MR. SORENSEN:
',,~--,~

349

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Page 13 of 15

Page 119

5:52:07
5:52:12
5: 52 : 13

1

Q

So you i re not aware that the firm

5:52:09 2 paid Mr. Bevan $167¡OOO?
3

MS. McNULTY: That 1 S a fact

4 that has not been established. You Ire assuming a
5 fact that hasn1t been established.
6 BY MR. SORENSEN:
7
Q

5:52:16
5:52:16
l-5:52:18

Well ¡ you're not aware that the

5:52:20
5:52:22

8 records for Cantley & Sedacca show payment of
9 referral fees to Mr. Bevan?

5:52:25 10

MR. WELTY: Do you know?
A

5:52:26 11

I don i t know.
Okay.

5: 52: 26 12 BY MR. SORENSEN:

5:52:27 5:52:27
_5:52:31

13
14

Q

Th at' s

all

I wanted to know.

A
Q

I don't know.
And

I -up

15
16

just following
don't
know how

and

this is

5:52:33

from

agaiD,

we

this happened.

5:52:36

17 18

Are you aware how Mr. Brooks would obtain signed

5:52:39

but undated documents from

Mr. Bevan?

5:52:44 19

MS. McNUTY: What are you

5:52:45 20 looking at?
5:52:46 21
MR. SORENSEN:

I'm afraid I

5: 52 : 46 22 don i t have mul tiple copies of this, but these are

5:52:49 23 the documents in Mr. Bevan's case, the tabs that

5: 52: 53 24 we went through earlier
5:52:54 25
i i I

MR. WELTY:
350

From?

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Case 1:05-cv-01223-FMA

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Page 14 of 15

Page 128

6:00:34

1 have.

6:00:35 2

THE WITNESS: That i s it? I

6: 00 : 36 3 thought you guys were going to, like, chew - - you
6:00:38 4 know, like, beat me.

6:00:43

5

MR. SORENSEN: Well, we i re

6:00:43
6:00:43 6:00:43

6 trying to be -7

THE WITNESS: Well, I i m trying
MR. WELTY: I guess we i re off

8 to be -9

6:00:43 6:00:44

10

the record.
(Off the record at 4: 00 p.m.)

11
12
13

14

15
16

17
18
19

20

2l
22
23

24

25
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351

CH I EF COUNSEL JUN-13-2007 09: 33 Case 1:05-cv-01223-FMA Document 30-14

tib~¿'j~4~'j'j

l-. L1¿

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Page 15 of 15

129

1

THE STAT~ OF TEXAS
COUNTY OF nALLAS

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