smith crossexamination

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA FORT LAUDERDALE DIVISION CASE NO. 12-20901-CR-WPD

UNITED STATES OF AMERICA, . . Plaintiff, . Fort Lauderdale, Florida . July 1, 2013 v. . 9:31 a.m. . CRAIG STANLEY TOLL, . . Defendant. . . . . . . . . . . . . . . . . .

- - - - - Transcript of Trial Proceedings had

before the Honorable William K. Dimitrouleas, United States District Judge, and a jury.

- - - - - DAY 6

- - - - - APPEARANCES: For the Plaintiff: Lois Foster-Steers, Esq. Kimberly A. Selmore, Esq.

Assistant U.S. Attorneys 99 N.E. 4th Street Miami, Florida 33132 For the Defendant: Richard A. Sharpstein, Esq. Jacqueline M. Arango, Esq. Ari Gerstin, Esq. Akerman Senterfitt

One SE 3rd Avenue, 25th Floor Miami, Florida 33131

Court Reporter: Francine C. Salopek, RMR, CRR

Official Court Reporter United States District Court 299 E. Broward Blvd., Room 205F Fort Lauderdale, Florida 33301 (954)769-5657

- - - - - Proceedings recorded by mechanical stenography, transcript produced by computer.

FRANCINE C. SALOPEK, OFFICIAL COURT REPORTER(954)769-5657

Case 1:12-cr-20901-WPD Document 198 Entered on FLSD Docket 10/29/2013 Page 1 of 185

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1 MONDAY, JULY 1, 2013, 9:31 A.M. 2 (The Judge entered the courtroom) 3 THE COURT: All right. We're back on the record. 4 Counsel are present. Mr. Toll's present. 5 Anything to come before the Court before we bring the 6 jury in? 7 MR. SHARPSTEIN: No, your Honor. 8 MS. FOSTER-STEERS: No. 9 THE COURT: I guess we need to get Mr. Smith back in.10 I had some hearing set for nine o'clock this morning.11 I had it postponed for this afternoon. So, we won't be12 starting up this afternoon until two. And then tomorrow we'll13 start at 9:30.14 Mr. Smith, you understand you're still under oath?15 THE WITNESS: I do.16 THE COURT: All right. Let's bring in the jury.17 (The jury entered the courtroom) 18 THE COURT: Counsel concede the presence of the jury19 and waive its polling?20 MS. FOSTER-STEERS: Yes, your Honor.21 MR. SHARPSTEIN: Yes, your Honor.22 THE COURT: And did everyone follow my admonition not23 to discuss the case or allow it to be discussed in your24 presence?25 All right. Tomorrow we're going to start at 9:30. I



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1 think I said nine o'clock last week, but we'll start at 9:30 2 tomorrow. I have to break a little bit early tomorrow night, 3 at about 4:30, and then Wednesday we'll start at 10:30. But 4 I'll remind you today and tomorrow about those start-up times. 5 All right. I think we're ready to resume. 6 Ms. Foster-Steers, you may proceed. 7 MS. FOSTER-STEERS: Thank you, your Honor. 8 DIRECT EXAMINATION (CONTINUED) 9 BY MS. FOSTER-STEERS: 10 Q. Mr. Smith, when we left off on Friday, we had talked about11 a financial statement that was submitted to OPIC during the12 period of time that you were negotiating with Cameron Alford13 with respect to a $10 million loan. Do you remember that?14 A. Yes.15 Q. And, in fact, sir --16 (Discussion had off the record between counsel) 17 MS. FOSTER-STEERS: May I approach the witness, your18 Honor?19 THE COURT: Okay.20 BY MS. FOSTER-STEERS: 21 Q. I'm handing you back what has been admitted into evidence22 as Government's Exhibit C(4), which is an e-mail from Craig23 Toll, dated January 28, 2010, to Lynn Tabernacki, attaching24 consolidated unaudited September 30 financials. Do you see25 that, sir?



SMITH - DIRECT/FOSTER-STEERS 4

1 A. Yes. 2 Q. Had you seen those financials, Mr. Smith, during your 3 negotiations with OPIC in that time period? 4 A. I'm honestly not sure. 5 Q. Well, these are financial statements, sir, for the period 6 ending September 30, 2009, and December 31, 2008. Do you see 7 that, sir? 8 A. Yes. 9 Q. And if we look at the loan agreement, sir, under the10 section called "Representations and Warranties," Section 303 --11 I'm sorry -- 301(c), this particular section references a12 financial statement which had been sent to OPIC for the period13 ending September 30, 2009. Do you see that?14 A. Yes.15 Q. Okay. Were those, those same financials that we see in16 Exhibit C(4)?17 A. They would appear to be.18 Q. Now, the financial statements that were submitted to OPIC,19 Mr. Smith, they had to be complete and correct and fairly20 present its financial condition -- when I say "its," I'm21 talking about InnoVida -- as of the period then ended, correct,22 sir?23 A. Yes.24 Q. Was it your understanding, Mr. Smith, that the financial25 statements reflected in Exhibit C(4) were, in fact, the true,




1 correct, and complete financial statements for InnoVida for the 2 periods ending December 31, 2008, and September 30, 2009? 3 A. That would be my understanding. 4 Q. Okay. Now, also, the financial statements that were 5 submitted to OPIC were to have been done according to GAAP, 6 right -- 7 MR. SHARPSTEIN: Objection. 8 BY MS. FOSTER-STEERS: 9 Q. -- GAAP?10 MR. SHARPSTEIN: This is repetitious from exactly what11 we did on Friday.12 THE COURT: I'll allow some latitude.13 BY MS. FOSTER-STEERS: 14 Q. They were supposed to have been submitted according to15 GAAP, correct, sir?16 A. Yes.17 Q. All right. And it's set out in the loan agreement very18 clear. We're looking now at Section 6.05, right? 19 "The parent company and the project company 20 shall... prepare its financial statements in 21 accordance with GAAP." 22 Do you see that?23 A. Yes.24 Q. Was it your understanding, Mr. Smith, back in the period25 when you were negotiating with OPIC, that the financial




1 statements set forth in Government's Exhibit C(4) were, in 2 fact, prepared according to GAAP? 3 A. That would be my understanding. 4 Q. You dealt with Cameron Alford, correct, sir? 5 A. Yes. 6 Q. And you submitted -- or, rather, several different 7 financial statements were submitted to OPIC during your 8 negotiations with OPIC, correct, sir? 9 A. It's -- I believe at least one set of financials were10 submitted during our period of representation, perhaps more.11 Q. Okay. And even afterwards, InnoVida was required to submit12 financial statements, correct, sir?13 A. That was a requirement of the loan agreement.14 Q. In fact, if we look at Section 6.06 of Government's15 Exhibit C(7)(a), we see that InnoVida was required to submit16 financial statements -- and let's look directly at this17 section, 6.06(a)(i) -- "within 90 days after the end of each18 fiscal quarter (other than the fourth fiscal quarter) of each19 fiscal year, unaudited consolidated financial statements for20 the parent company and a comparison between such financial21 statements and the budget for such fiscal quarter, furnished22 pursuant to 6.06(e), all certified by the chief financial23 officer of the parent company as being complete and correct,24 together with such officer's certificate."25 Do you see that?




1 A. Yes. 2 Q. So, did InnoVida, in fact, submit financial statements 3 pursuant to this particular section? 4 A. Yes. 5 Q. And what was your understanding of those financial 6 statements that were submitted pursuant to this section of the 7 loan agreement, Mr. Smith? 8 A. The -- I would have to see them again, but my understanding 9 is they were a set of unaudited financials that set forth a10 balance sheet and an income statement for 2009, year-end of11 2009 and the year-end of 2008.12 Q. Let's look at Exhibit C(11), Bate ending '3055. Do you see13 that?14 A. Yes.15 Q. Are you familiar with this document?16 A. That appears to be the financial statements that were sent17 during the term of our engagement.18 Q. Okay. For InnoVida, correct, sir?19 A. Right.20 Q. And we see here that it's for the period ending21 December 31, 2009, and December 31, 2008, right?22 A. Yes.23 Q. Now, did these financial statements meet the requirements24 of the loan as negotiated between InnoVida by you and OPIC?25 A. I'm not in a position to answer that.




1 Q. You're not in a position to answer that? 2 A. No. I mean -- the requirements of the loan are that these 3 financials be true and correct in all respects. I'm not in a 4 position to know whether they are or are not. 5 Q. Who would? Who would be? 6 A. Presumably the company. 7 Q. Okay. But did you gather financial statements from the 8 company and submit them to -- 9 A. I received these from the company, and I submitted them to10 OPIC.11 Q. Okay. And in submitting the financial statements that you12 obtained from the company to OPIC, was it your understanding13 that these financial statements met the requirements of the14 loan agreement?15 A. It was.16 Q. In looking at Exhibit C(11) here, what does it say as the17 cash and cash equivalents for the period ending December 31,18 2009?19 A. $39,296,232.20 Q. Okay. And for December 31, 2008?21 A. $37,044,439.22 Q. Okay. Now, looking, sir, at the words "pro forma" at the23 top, what did you think -- or did you even look at those two24 words back in 2010?25 A. I assumed that it meant that it was a pro forma combination




1 of balance sheets for various members of the InnoVida group. 2 Q. Okay. And what does "pro forma" mean to you? 3 A. In this case, it was -- be an addition of all those numbers 4 together. 5 Q. An addition of all those numbers? Okay. 6 Now, the word "pro forma," sir, you said -- does it -- 7 does -- "pro forma" means that any information has been -- 8 MR. SHARPSTEIN: Objection to the form of the 9 question, but to the line of questioning, which was done10 extensively on Friday.11 THE COURT: Overruled.12 BY MS. FOSTER-STEERS: 13 Q. Mr. Smith, does the term "pro forma" to you mean that any14 information has been excluded?15 A. I'm not sure I understand the question.16 Q. Okay. When we look at this balance sheet, Exhibit C(11),17 Bate Number ending '3055, can you tell whether or not any18 information has been excluded?19 A. No.20 Q. Do you see, sir, anywhere here where there are any21 disclosures, sir?22 A. I understand you're using the term "disclosure" to mean23 some description of what's the components of this balance24 sheet?25 Q. Yes.




1 A. Yeah, there's the word "unaudited pro forma." 2 Q. I'm sorry? 3 A. There's the word "unaudited pro forma." That would be the 4 disclosure. 5 Q. Okay. Did you explain to any member of OPIC your 6 understanding of the term "unaudited pro forma" back then? 7 A. No. 8 Q. Did you submit these forms, Mr. Smith, as being financial 9 statements that met the requirements of the agreement?10 A. I submitted these financials as the ones provided by the11 company in response to my request for financials that met the12 requirements of the loan agreement.13 Q. Okay. So, you did, in fact, request financial statements14 that met the terms of the loan agreement, correct, sir?15 A. Yes.16 Q. Okay. And who did you make that request of?17 A. Craig Toll.18 Q. Okay. And in response to your request, what was provided?19 A. These financial statements.20 Q. Okay. And those statements having been provided to you,21 what did you do with these statements?22 A. I forwarded them to OPIC.23 Q. And if we look at the combined statement, the operations,24 from the same exhibit, C(11), Bate Number ending '3057,25 combined statement of operations for the same period ending




1 December 31, 2009, and December 31, 2008, at the bottom, the 2 net income, how much is that? 3 A. $15,605,029. 4 Q. And for the period ending December 31, 2008, what is that 5 number? 6 A. $6,615,640. 7 Q. What do those figures mean to you, Mr. Smith? 8 A. They represent the net income of the company on a combined 9 basis.10 Q. And do they show profits?11 A. Yes.12 Q. I want you to look at Government's Exhibit C(22). This is13 now the consolidated balance sheet for the period ending14 March 31, 2010.15 Have you seen that document before?16 A. I may have. I don't recall.17 Q. This is the front of Exhibit C(22), which is an e-mail18 dated September 8, 2010, from Craig Toll.19 Are you cc'd on this e-mail, sir?20 A. I am.21 Q. This is now the same page I was showing you before, which22 is the consolidated balance sheet for the period ending23 March 31, 2010.24 Had you seen that document, sir?25 A. If it was attached to that e-mail, I -- I probably saw it.




1 Q. Okay. Now, was this, sir, a financial statement that you 2 had requested from Craig Toll as -- that you requested from 3 Craig Toll? 4 A. I don't recall. 5 Q. Okay. Would this have been a financial statement that was 6 required to be provided according to Section 6.06 of the loan 7 agreement? 8 A. Yes. 9 Q. Okay. Now, just looking back at that statement, sir,10 looking here (indicating), are there any disclosures made on11 here as to the balance sheet?12 A. Other than the words "unaudited pro forma," no.13 Q. And the disclosure that you say are reflected in the words14 "unaudited pro forma," what is that?15 A. Once again, my understanding was that this was a combined16 balance sheet of the various companies in the InnoVida group.17 Q. And being the combined balance sheet of various other18 InnoVida companies, was it your understanding that any19 information had been omitted from this balance sheet?20 MR. SHARPSTEIN: Objection to the form of the21 question, vague.22 THE COURT: Overruled.23 A. Assuming I looked at this financial statement, I would have24 assumed that there was no information excluded from it.25 Q. That there was no information excluded from it?




1 A. That's right. 2 Q. Okay. And why do you say that? 3 A. Why do I say which part of that? 4 Q. Okay. Why do you say, just looking at this balance sheet, 5 that you would have assumed that no information had been 6 excluded from this particular document? 7 A. Well, there's no reference to any exclusion. 8 Q. Sorry? 9 A. There's no reference to any exclusion.10 Q. Okay. All right. So, my question to you then, if there11 had been information excluded from this balance sheet, would12 you have expected that there would have been a reference to the13 excluded information?14 A. Yes.15 Q. Do you see that here?16 A. No.17 Q. And looking now at Bate Number '1788 from Exhibit C(22),18 this is a combined statement of operations for the period19 March 31, 2010.20 Do you see here, sir, anywhere, any reference that any21 information was excluded from this combined statement of22 operations for the period ending March 31, 2010?23 A. No.24 Q. Would you have expected that if any information was25 excluded, it would have been referred to here?




1 A. Yes. 2 Q. Why is that? 3 A. (No response) 4 Q. Why -- well, let me ask you this question. 5 In your dealings with InnoVida with other clients, 6 have you looked at financial statements? 7 A. Yes. 8 Q. Okay. And if a financial statement excludes information, 9 is it your experience that it is referenced on the documents?10 A. Yes.11 Q. Okay. And why is that?12 A. Otherwise, the information would be incomplete.13 Q. It would be incomplete?14 A. (No response)15 Q. Yes?16 A. Yes.17 Q. Would it be misleading?18 A. Yes, I believe it would be misleading.19 Q. And here, where there's no reference to any excluded20 information, would this document be misleading?21 A. Pardon?22 MR. SHARPSTEIN: Objection to the form of the23 question.24 THE COURT: Sustain.25 MS. FOSTER-STEERS: Okay.




1 BY MS. FOSTER-STEERS: 2 Q. Looking now at Exhibit C(26) -- and if you want the e-mail, 3 I can show it to you -- is this another balance sheet, 4 Mr. Smith? 5 A. Yes. Can you show me the e-mail? 6 Q. Sure. 7 (Discussion had off the record between counsel) 8 BY MS. FOSTER-STEERS: 9 Q. This is Exhibit C(26). See? And it's an e-mail dated10 Tuesday, September 28, 2010. Do you see that?11 A. Yes.12 Q. And you are copied on this e-mail. Do you see that, sir?13 A. Yes.14 Q. Attached to the e-mail is a consolidated balance sheet, and15 it's Bate Number '2280 from the same exhibit.16 Had you seen that?17 A. I was copied on the e-mail. I probably looked at it.18 Q. Okay. And with respect to this particular balance sheet,19 Mr. Smith, are there any references here to any information20 excluded from this balance sheet?21 A. No.22 MR. SHARPSTEIN: The -- I'm objecting and moving to23 strike. I don't understand the question "excluded," was24 anything excluded. He --25 THE COURT: Overruled.




1 MR. SHARPSTEIN: It's confusing to the jury. 2 THE COURT: Overruled. 3 BY MS. FOSTER-STEERS: 4 Q. This is now the statement of operations, Bate Number ending 5 '2283, for the period ending June 30, 2010. 6 What is the net income reflected on this particular 7 statement of operations, Mr. Smith? 8 A. $5,903,169. 9 Q. Is that a profit for InnoVida?10 A. Yes.11 Q. And just looking on this particular page, are there any12 references to any other information on this document, sir?13 MR. SHARPSTEIN: Objection to the form of the14 question.15 THE COURT: Overruled.16 BY MS. FOSTER-STEERS: 17 Q. Do you see anything?18 A. Yeah, other than the reference to the fact that the balance19 sheet is an unaudited pro forma -- excuse me -- income20 statement, unaudited pro forma income statement.21 Q. Now, did you have any discussions, Mr. Smith, about the22 term "unaudited pro forma" with anyone at OPIC?23 A. No.24 Q. In your mind, sir, the financial statements as submitted to25 OPIC, did they comply with the Section 6.06 of the loan




1 agreement? 2 A. Well, I think the answer to that question would be no. 3 Q. No, they did not comply? 4 A. Well, the definition of the term "financial statement" in 5 the loan agreement was the financial statement prepared in 6 accordance with GAAP. As I said previously, in my experience, 7 GAAP requires the inclusion of a footnote disclosure. None of 8 these financial statements had that. It was evident on their 9 face they did not have that. So, from that perspective, they10 did not comply with GAAP.11 Q. Okay.12 A. Just to move this along, they would have fallen within the13 representation of warranty set forth in the loan agreement that14 they be -- fairly present the information set forth. That part15 of the representation would have applied to what was provided.16 Q. What part of what representation, sir?17 A. The representation that the unaudited pro forma income18 statement and balance sheet should have fairly presented the19 information it purported to represent.20 Q. Okay. So, they were not.21 A. I don't know if they are or are not, but that was what they22 were purported to be, and they on their face would have23 appeared to have complied with that requirement.24 Q. I'm not following you, sir.25 The representation and warranties provided that the




1 financial statements be prepared according to GAAP, correct? 2 A. Yes. 3 Q. Okay. And the financial statements that we've just looked 4 at you're saying did not comply with that particular section of 5 the loan agreement? 6 A. They were not, in my experience, be viewed as GAAP 7 financials, that they lacked footnote disclosure. 8 Q. Okay. So, did they comply with the terms of the loan 9 agreement?10 A. No.11 Q. Okay. And did you submit these financial statements to12 OPIC as being compliant with the loan agreement?13 A. I submitted them as the company's -- the document the14 company proposed to submit to fulfill that particular15 condition. I was aware that they did not contain un --16 footnote financial statements and were not prepared in17 accordance with GAAP for that reason. 18 Frequently lenders waive conditions to funding, and I19 assumed that the OPIC would make its own decision regarding20 whether it would fund or not based on looking at those21 financials.22 Q. Okay. Well, wasn't this a term that you had negotiated23 with Cameron Alford? The section that says that the financial24 statements should be made according to GAAP?25 A. Yes.




1 Q. Okay. And you saw financial statements that you've just 2 told us on its face did not appear to be prepared according to 3 GAAP, right? 4 A. It was evident on the face of the document that it wasn't 5 prepared in accordance with GAAP. 6 Q. Okay. Well, did you submit to OPIC any other financial 7 statements that complied with the -- 8 A. None of the financials that were submitted to the company, 9 to OPIC, had footnote disclosure.10 Q. None of them.11 A. That's right.12 Q. So, none of them complied with GAAP.13 A. That's right.14 Q. And none of them, therefore, complied with the terms of the15 loan agreement, correct?16 A. From a technical perspective, that's accurate.17 Q. Okay. When you say "technical," what are you talking18 about?19 A. The -- the conditions to the loan agreement, there's --20 every loan agreement contains numerous conditions to closing.21 Every borrower submits a series of documents in an attempt to22 establish that it's complied with the conditions to the extent23 deemed satisfactory by the lender. The lender has the ability24 to waive any and all of those conditions. In this particular25 instance, it's my understanding that OPIC waived the




1 requirement that the financials contained footnote disclosure. 2 Q. Who made that waiver? 3 A. I would presume it would be Lynn Tabernacki or someone at 4 OPIC. 5 Q. And who communicated that waiver to you? 6 A. The waiver was communicated to us by virtue of the fact 7 that the OPIC funded the initial tranche of the loan. 8 Q. You're -- okay. So, by OPIC funding the -- that 3.2 -- 9 3.3 million, are you saying that that constituted a waiver by10 OPIC as to whether or not the financial statements should be11 made according to GAAP?12 A. The requirement that the financials contain footnote13 disclosure clearly was waived by OPIC, because they didn't have14 those.15 Q. They didn't have them.16 A. They didn't have any footnote disclosure, so....17 Q. Well, did you, Mr. Smith, ever disclose to OPIC or tell18 them that the financial statements should have footnotes?19 A. No.20 Q. No.21 Okay.22 (Discussion had off the record between counsel) 23 BY MS. FOSTER-STEERS: 24 Q. Mr. Smith, other than, as you just had told us, the waiver25 for the disclosures, is it your information (sic) that the




1 information contained in the financial statements submitted to 2 OPIC contained true and accurate information -- 3 A. It was my understanding, yes. 4 MR. SHARPSTEIN: Objection to the repetitious line of 5 questioning on a direct line of questioning with their own 6 witness. 7 THE COURT: Overruled. 8 BY MS. FOSTER-STEERS: 9 Q. Did you hear the question?10 A. Can you repeat the question?11 Q. Yes.12 Other than the waiver of the disclosure that the13 financial statements not contain any footnotes, was it your14 understanding that the information in the financial statements15 were true, accurate, and complete?16 MR. SHARPSTEIN: That's the fifth time that question17 has been asked, your Honor. Move to strike.18 THE COURT: Overruled.19 A. Yes.20 MS. FOSTER-STEERS: May I have just one second, your21 Honor?22 THE COURT: Okay.23 (Discussion had off the record between counsel) 24 MS. FOSTER-STEERS: I have no further questions, your25 Honor.




1 THE COURT: Cross-examination. 2 MR. SHARPSTEIN: May it please the Court. 3 CROSS-EXAMINATION 4 BY MR. SHARPSTEIN: 5 Q. Good morning, Mr. Smith. 6 A. Good morning. 7 Q. I think you told the jury on Friday that you've been a 8 lawyer for 32 years with Shutts & Bowen. 9 A. That's true.10 Q. That's -- and for those 32 years, have you done the same11 type of work?12 A. Yes.13 Q. So, you've been involved in commercial transactions for14 three decades.15 A. That's true.16 Q. And you've represented many companies in very serious and17 large transactions, isn't that right?18 A. That's true.19 Q. As you did here with InnoVida, you represented a client in20 negotiating with another party a contract, correct?21 A. Yes.22 Q. I mean that's something you do every day. You've done it23 for 30 years plus, right?24 A. Yes.25 Q. And just so the jury understands, when there's -- you're a



SMITH - CROSS/SHARPSTEIN 23

1 lawyer for one party, there's a lawyer for the other side, as 2 well, is there not? 3 A. Yes. 4 Q. That would be Mr. Cameron Alford in this case, right? 5 A. Yes. 6 Q. He's a lawyer that works for OPIC, just like you work for 7 your client, to negotiate terms in a contract, right? 8 A. Yes. 9 Q. And either party, as Ms. -- the prosecutor has asked you,10 either party can object to particular clauses or parts of a11 contract, correct?12 A. Yes.13 Q. Either party, through their lawyer, can complain about, we14 don't want this, we don't want that, and then you come to a15 meeting of the minds, correct?16 A. Yes.17 Q. And when there's a meeting of the minds, there's a signed18 contract, both parties sign, both parties agree, correct?19 A. Yes.20 Q. And if, in fact, along the way a party decides that one of21 the parts of the contract, one clause wasn't complied with,22 that party can say, we're not going through with this. Right?23 A. That's -- that's true.24 Q. And that happens all the time, does it not?25 A. Yes.




1 Q. If during the course of negotiations or discussions one 2 party sees something and says, that's not what we agreed to, 3 they don't have to go with the contract, right? 4 A. That's true. 5 Q. I think you were trying to tell that to the prosecutor a 6 couple of times here, that they, OPIC, could have objected to 7 financial statements or things of that nature, if they believed 8 they didn't comport with the contract, right? 9 A. That's true.10 Q. So, let's go back now. And I'll focus you on some of the11 things the prosecutor talked to you about.12 And here InnoVida was your client, correct?13 A. Yes.14 Q. And InnoVida came -- and, by the way, Shutts & Bowen is a15 law firm -- one of the oldest law firms in Florida, isn't it?16 A. We were found in 1910.17 Q. 1910, over a hundred years ago. Right?18 A. Yes.19 Q. And it's a well-established firm with many well-established20 lawyers that have done some of the most serious work in all of21 Florida over these years, correct?22 A. That's true.23 Q. And so, this client, InnoVida, came to you through -- I24 think you said it was your partner, Harold Patricoff.25 A. That's true.




1 Q. Sometimes known as Ed Patricoff? 2 A. Yes. 3 Q. And Ed Patricoff brought you Mr. Osorio through a referral 4 that he got from former President Bill Clinton, correct? 5 A. That's my understanding. 6 Q. Patricoff came to you and said, former President Clinton 7 referred me a client, I'm gonna refer them to you, they have 8 some dealings, they're gonna be dealing with OPIC, right? 9 A. That's my understanding.10 MS. FOSTER-STEERS: Calls for hearsay, your Honor.11 Objection.12 THE COURT: I'm sorry?13 MS. FOSTER-STEERS: Calls for hearsay.14 MR. SHARPSTEIN: Just following up. She's the one15 that asked about Patricoff.16 THE COURT: I'll allow it for the fact it was said,17 not for the truth of the matter asserted.18 BY MR. SHARPSTEIN: 19 Q. Excuse me.20 And so, you got the client, you met, you talked to21 Mr. Osorio, correct?22 A. Yes, I spoke with Mr. Osorio.23 Q. I mean I think you said it was a phone call or something at24 first.25 A. There was an early call, I believe Mr. Osorio was on the




1 phone. 2 Q. And during that course, did you discover from him or learn 3 from him what type of business InnoVida was? 4 A. I don't recall whether it was him or Mr. Toll who described 5 the business to me. 6 Q. Eventually you learned that InnoVida was a business that at 7 that time, when it came to you, in 2009, that it was a business 8 that was selling, for lack of a better term, factories in a 9 box, isn't that right?10 A. Essentially, yes.11 Q. And so the jury understands that, the company was selling12 joint venture interests in building factories that produced13 these panels to build low-income housing, correct?14 A. That -- the exact nature of how they operate the business,15 other than with respect to the Haiti Project, I have no16 knowledge of that.17 Q. Okay. But you learned about "factory in a box." That was18 something that was said a lot around InnoVida.19 A. Yes.20 Q. And you knew that at that particular point in time, that21 the money that was made by InnoVida was being made by selling22 these joint ventureships, correct?23 A. I wasn't -- I didn't ask nor get any details regarding how24 they raised revenue specifically. I knew they were in the25 fabricated home business and generated revenues from that




1 business. Whether it was in a joint venture or some other 2 form, I don't know. 3 Q. We'll get to a couple of issues on that down the road, 4 but.... 5 So, when you got the file that you were told, you knew 6 that InnoVida had already been approved by OPIC for a loan, and 7 you were gonna negotiate the terms of the loan, the contract, 8 correct? 9 A. That's correct.10 Q. So, by the time you already got it, InnoVida already had11 approval from Ms. Tabernacki for the loan pending the execution12 of the contract.13 A. That was my understanding.14 Q. This happens a lot in commercial loan transactions, doesn't15 it?16 A. Yes.17 Q. A lender, whether it be a bank or a private equity company,18 will meet with someone, take preliminary information, approve19 the loan, and then execute a contract.20 A. Yes.21 Q. It's typical.22 A. Yes.23 Q. There's nothing unusual about that here.24 A. No.25 Q. And eventually you sat with Mr. Toll, who provided you




1 information, correct? 2 A. I communicated with Mr. Toll almost exclusively by 3 telephone and e-mail. 4 Q. Telephone and e-mail. 5 A. Yeah. 6 Q. And he -- you needed information, he provided you 7 information, correct? 8 A. That's correct. 9 Q. If you had an issue with something you saw, you asked him,10 he provided it to you, correct?11 A. That's correct.12 Q. And then if you had -- and you communicated with OPIC13 through Mr. Alford and Ms. Tabernacki.14 A. Yes.15 Q. Who was your major contact at -- there? Was it Alford?16 A. Principally Cameron Alford.17 Q. Who was the lawyer.18 A. Right.19 Q. Representing them. Correct?20 A. Yes.21 Q. I mean you assumed, for the purpose of this, he worked for22 a large government agency, that he was a competent, qualified23 lawyer, correct?24 A. Yes.25 Q. You knew that OPIC was in the business of giving out large




1 commercial loans to multinational companies, American companies 2 doing business overseas, and they were in the business of 3 giving out large loans, correct? 4 A. Yes. 5 Q. I'm sure you assumed Mr. Alford was a very competent 6 lawyer. 7 A. Yes. 8 Q. Anything during the course of your relationship with him 9 give you any other reason to believe anything otherwise?10 A. No.11 Q. The prosecutor asked you a lot of questions about financial12 statements that were attached. So, just to clarify this point,13 the financial statements as a matter of course are provided by14 companies to lenders on a regular basis, correct?15 A. Yes.16 Q. And there was a term in this contract that required17 financial statements to be produced, correct?18 A. Yes.19 Q. You particularly negotiated the fact in the agreement that20 these financial statements would be -- that the company had21 provided unaudited financial statements, isn't that right?22 A. Yes.23 Q. As a matter of fact, that became an issue, because24 initially you became aware of the fact that OPIC required25 audited financial statements, correct?




1 A. Yes. 2 Q. And they specifically waived that requirement with you, 3 isn't that right? 4 A. That's not entirely accurate. 5 Q. Well, what it -- tell the jury what -- 6 A. They agreed to postpone the date on which the audited 7 financial statements were required to be produced. 8 Q. Postponed. 9 A. Yes.10 Q. In the future.11 A. Yes.12 Q. So, they didn't require audited financials before the loan13 was funded.14 A. No.15 Q. They understood, to the best of your belief, that they were16 getting unaudited financial statements, correct?17 A. Yes.18 Q. And, again, the jury's heard a lot about these terms, but19 audited financials are audited by an independent CPA firm or20 financial firm that looks at behind the information on the21 financials to verify it, correct?22 A. Yes.23 Q. And these were clearly not audited financials, correct?24 A. That's correct.25 Q. And the companies -- and OPIC specifically postponed that




1 requirement to a date in the future. I believe it was 2 August 31, 2009, correct? 3 A. Yes. 4 Q. Ten -- I'm sorry -- 2010. Correct? 5 A. I don't recall the precise date, but they were postponed. 6 Q. And the -- when the prosecutor showed you what I'll put up 7 as C(4), I think you told her on a number of occasions here 8 that the words in the corner of all of the financials that 9 we've seen say "unaudited pro forma," correct?10 A. That's correct.11 Q. I mean -- and you said to the prosecutor on a number of12 occasions that that's a disclosure to someone that's looking at13 this, right?14 A. Yes.15 Q. Because anybody -- a lawyer involved in a transaction, a16 commercial transaction, that would look at that would see17 clearly that that's a disclosure that these financials are18 unaudited and pro forma, right?19 A. Yes.20 Q. And you said to the prosecutor when she read the21 requirement in the contract that these comport -- that the22 financial -- the definition of "financial statements" requires23 that the financials presented comport with GAAP remember those24 questions?25 A. Yes.




1 Q. And I think you've told the jury now on a number of 2 occasions that clearly on their face these did not comply with 3 GAAP, correct? 4 A. That's correct. 5 Q. Because anybody that's been -- not anybody -- a qualified, 6 competent lawyer, or individual lender, that's been involved in 7 these transactions would know by looking at this and seeing 8 unaudited pro forma, it doesn't comply with GAAP, right? 9 A. Yes.10 Q. Did anybody -- did Mr. Alford or Ms. Tabernacki at any time11 communicate to you, these are unacceptable, we want GAAP12 financials, we're not gonna accept these unaudited pro forma13 financials?14 A. No.15 Q. Was it ever --16 A. Well, I take -- let me restate that. With respect to the17 second disbursement of the loan, one of the reasons that OPIC18 refused to grant the second disbursement was that the audited19 financial statements had not been completed.20 Q. The audit hadn't been done.21 A. Right.22 Q. That's way down the road here, though.23 A. In September.24 Q. September.25 But here, we're looking at the initial disbursement,




1 because I believe that's what the prosecutor was asking you 2 about. 3 A. She asked me about all of them, but -- 4 Q. Well, we're going -- here, we're -- this is C(4), so these 5 are the financials that were submitted, I think you said, 6 before you even got involved. 7 A. That's correct. 8 Q. So, you hadn't really seen these, but I'm -- you saw later 9 ones that I'll get to.10 The question is, this deals with the initial11 disbursement. This was before OPIC even provided the12 $3.3 million.13 A. That's correct.14 Q. So, again, you said something -- "pro forma" means a15 combination of companies, that this was the combination of the16 balance sheets of all of the InnoVida companies, correct?17 A. That's correct.18 Q. There were a number of companies in different parts of the19 world that owned all these factories, right?20 A. There were a large number of InnoVida subsidiaries.21 Q. And so, you're saying that they presented this unaudited22 pro forma by adding all the balance sheets together of all the23 different companies?24 A. That would be the ordinary interpretation I would have25 given the words "pro forma" in this situation.




1 Q. And you said something to the jury that might not be 2 meaningful to them, or to me, which is that they eliminated all 3 intercompany transfers, right? 4 A. Right. 5 Q. What does that mean? 6 A. Well, if one subsidiary owed money to another subsidiary, 7 when you added it all together, ordinarily those intercompany 8 transactions would be deleted. You wouldn't -- if company A 9 was owed a hundred million dollars from company B, and10 company B was owed a hundred million dollars from company A,11 you wouldn't put $200,000,000 of receivables, because you'd be12 double-counting in that situation.13 Q. Okay. Do you ever remember having any specific14 conversations with Mr. Alford or Ms. Tabernacki about the15 financial statements themselves?16 A. No.17 Q. Now, while we're on this, I have here -- that's my messy18 orange highlighting there -- but under "current assets, cash19 and cash equivalents," 35 million-plus dollars. Do you see20 that?21 A. Yes.22 Q. I mean that indicates that this company has in the bank23 somewhere cash in that amount. Do you know where that number24 came from?25 A. No.




1 Q. And that would be significant on this balance -- on this 2 asset sheet. That's the substantial amount of money in 3 relation to the total current assets of the company, correct? 4 A. Yes. 5 Q. Another thing, if you look at the final page of -- which is 6 '3031 on the Bates Number of this, the -- Ms. -- the prosecutor 7 asked you about revenues of this company. Again, under 8 "unaudited pro forma," factories -- "revenues from factories," 9 $30,000,000 plus. See that?10 A. Yes.11 Q. And so, that's revenues from the sale of factories?12 A. I don't know precisely what it was.13 Q. Well, what you can tell from this, though, if we look a14 little closer, is finished goods, go over here, zero. See15 that?16 A. Yes.17 Q. So, anybody, any lender, anybody looking at this, and18 particularly OPIC, would look at this company and see that they19 haven't made a penny selling the goods of the company by the20 end of September of '09, correct?21 A. That's correct.22 Q. And that's not -- that's very fundamental. I mean that23 OPIC would have an understanding -- or the lender, OPIC, would24 have an understanding that the company hadn't made any money25 selling any goods at that time, correct?




1 A. That's correct. 2 Q. Now, if you even look further down the road -- this is 3 C(11), April 23rd, the prosecutor showed you -- I'm just trying 4 to show this to give it context -- now, we're in April. Just 5 so that the jury understands, C(4) was sent from Craig Toll to 6 Lynn Tabernacki January 28, 2010. Now, we're in April of 2010. 7 And if you take a look at the revenue page, which is 8 '3057, the revenue page on the financials, you see the 9 revenues, still unaudited pro forma, factories 40,000 -- 40 --10 $40,000,000, see that?11 A. Yes.12 Q. And finished goods, zero. Right?13 A. Yes.14 Q. So, OPIC would know -- well, Mr. Alford, Ms. Tabernacki15 would know that by the end of the year in '09, the company16 hasn't made a nickel selling panels, right?17 A. Yes. Excuse me.18 Q. And OPIC went -- you said that OPIC inevitably funded the19 loan, correct?20 A. Yes.21 Q. They approved it, correct?22 A. Yes.23 Q. During the course of your negotiations, did you gather an24 understanding from your negotiations with Mr. Alford and25 Ms. Tabernacki that OPIC was under pressure to fund this loan




1 quickly? 2 A. I believe I might have either -- probably Mr. Alford might 3 have mentioned that they were anxious to close the loan. 4 Q. Because they wanted to get the money into Haiti and to do 5 something down there at the time, correct? 6 A. That was one of -- yes. 7 Q. I mean they -- things moved along relatively quickly here 8 through the loan process prior to it being funded, correct? 9 A. Relatively speaking.10 MR. SHARPSTEIN: Excuse me, your Honor. I'm just11 looking for a particular page.12 THE COURT: Okay.13 BY MR. SHARPSTEIN: 14 Q. The prosecutor showed you C(7), C(7), and that's the actual15 contract. And showed you a section on -- it's actually on16 page 6 of the contract, but what is '1649 for the record here,17 it's this litigation section.18 These are warranties, I think, acknowledgments from19 the company that -- and you took a look at it -- that20 litigation, "no action, suit, or other legal or arbitral21 proceeding" -- that's arbitration, correct?22 A. That's correct.23 Q. -- "or investigation is pending."24 So, let's stop here. The prosecutor asked you -- this25 is in the spring of 2010, and there was -- to the best of your




1 knowledge, there was no litigation pending against the company 2 at that time when you were signing this agreement, isn't that 3 right? 4 A. To my knowledge. 5 Q. There was litigation later, isn't that right? 6 A. It is my understanding that litigation arose subsequently. 7 Q. But this requirement in the contract doesn't require no -- 8 doesn't require the company to notify as to any litigation that 9 might come up in the future, does it?10 A. Unless the litigation's been threatened.11 Q. And actually the jury saw, but I don't think the prosecutor12 asked you any questions about, you got involved in the time13 period when there was a default -- a notice of default sent by14 the OPIC against the company, correct?15 A. I believe I received a copy of that.16 Q. And you got involved in some discussions with OPIC at the17 time, isn't that right?18 A. We had some discussions, yes.19 Q. Actually, you, Ms. Tabernacki, and maybe Mr. Toll sat down20 and talked to them about lawsuits that had been filed in the21 fall of 2010 against the company, isn't that right?22 A. I don't recall the details of that conversation.23 Q. This is January 5, 2011. Do you remember a meeting on the24 phone with Ms. Tabernacki?25 If you don't....




1 A. I recall we had some conversations. I don't recall the 2 dates. 3 Q. But you do remember that those lawsuits were filed in the 4 fall of 2010, correct? 5 A. That's my understanding. 6 Q. Now, you told the jury about a discussion you had with OPIC 7 about postponing the unaudited financial requirements, correct? 8 A. Yes. 9 Q. You also had a negotiation with them as to how you would10 define the project to be as it was known in the contract,11 correct?12 A. Yes.13 Q. Because there was issues that arose in regard to the14 difficulties in Haiti as to executing the project exactly as15 the way it had been envisioned, correct?16 A. Yes.17 Q. There was a problem -- there were a lot of problems in18 Haiti that happened after January that made it very -- well,19 that affected this particular project, correct?20 A. I don't know about the problems in Haiti. I know that we21 notified the definition of the term "project."22 Q. You didn't go to Haiti, but there was some discussion about23 it couldn't build homes right away because of land issues. Did24 you become aware of that?25 A. I understood there was some difficulty in obtaining a site




1 for the factory. 2 Q. And there couldn't -- it was very difficult to buy -- they 3 had negotiated a lease for land to build a factory, but there 4 were issues there that had occurred, correct? 5 A. I was aware there was issues with obtaining a parcel to 6 build the factory. 7 Q. So, you actually negotiated a -- with them specifically 8 redefining what the project was, correct? 9 A. Yes.10 Q. Originally, it talked about they must build a factory and11 build a certain amount of homes, correct?12 A. I would need to look at the precise language.13 Q. Well, more than what it was. Let's take a look at what it14 is, what inevitably was negotiated, what inevitably was in C(7)15 on page 7 of the contract, '1680 Bate stamped, defining16 "project."17 Here, "project" means "the development, 18 construction, and operation of a manufacturing 19 facility to be owned and operated by the project 20 company, dedicated to the production of composite 21 structural panels to be used for rapid deployment, 22 energy efficient homes, and other structures in the 23 project company." 24 Do you remember that?25 A. Yes.




1 Q. So, there was discussion about how the company would be 2 involved in building other structures, not just the homes, 3 isn't that right? 4 A. Yes. 5 Q. I mean that was something that was very specifically 6 discussed with OPIC to their understanding and negotiated to 7 the extent that that section was changed from their original 8 vision of what OPIC -- of what InnoVida would do, correct? 9 A. I would need to see the original language to tell you10 exactly what was changed.11 Q. Okay. And the prosecutor asked you quite a few questions12 about, well, the -- for example -- and then I'll get to a13 question -- it said in the definition of "financial statement"14 that GAAP statements required, that financial statements made15 in accordance with Generally Accepted Accounting Principles16 were required. And these that they got, OPIC got, were not17 GAAP statements.18 And then she asked you, that would violate some19 form -- that would not comply with the contract, correct? Do20 you remember those questions?21 A. Yes.22 Q. So, if, in fact, the other side gets something that they23 don't think complies with the contract, they can refuse to lend24 the money, correct?25 A. Yes.




1 Q. They can, through their lawyer -- it happens all the time, 2 doesn't it? 3 A. Yes. 4 Q. Well, not every single time, but a lot of times in 5 commercial transactions a lender, a bank, an equity company 6 says, hey, you didn't give us -- we're not satisfied with these 7 statements, we're not funding your loan, right? 8 A. It does happen. 9 Q. Did they do that here?10 A. No.11 Q. They, getting everything they had in front of them, as it12 was, decided to fund the loan, right?13 A. Yes.14 MR. SHARPSTEIN: Excuse me for one second, your Honor.15 (Discussion had off the record between counsel) 16 MR. SHARPSTEIN: That's all I have, your Honor.17 THE COURT: Redirect?18 MS. FOSTER-STEERS: Yes, your Honor.19 REDIRECT EXAMINATION 20 BY MS. FOSTER-STEERS: 21 Q. Mr. Smith, Mr. Sharpstein asked you about the delayed22 audited financial statements that were to be submitted to OPIC.23 Do you remember that question?24 A. Yes.25 Q. Okay. Can you tell the members of the jury why it was that



SMITH - REDIRECT/FOSTER-STEERS 43

1 the audited financial statements were gonna be delayed? 2 A. I'm sorry, can you repeat the question? 3 Q. Do you know why it was that the audited financial 4 statements were delayed? 5 A. Mr. Toll told me that there was a delay in engaging the 6 auditors and that the scope and time to require the audit would 7 require more time than OPIC originally requested. 8 Q. So, the new date was gonna be August 31, 2010. Do you 9 remember that?10 A. I don't remember it, but there was a new date. I'd have to11 look at the loan agreement to see it.12 Q. Okay. Did he tell you who had been retained or was in the13 process of being retained by InnoVida?14 A. I understood it was one of the major accounting firms. I15 don't recall now the name of the firm.16 Q. Okay. Are you familiar with Ernst & Young?17 A. Yes.18 Q. Okay. Do you know whether or not that was the company that19 was --20 A. That sounds correct.21 Q. Now, do you know if Ernst & Young had been provided with22 financial statements by InnoVida?23 A. I don't know.24 Q. Mr. Sharpstein also asked you, Mr. Smith, about the25 litigation section of the loan agreement. I just want you to




1 direct your attention to this particular section, sir -- 2 Section 6.08, which says "notice of default and other matters." 3 Do you see that? 4 A. Yes. 5 Q. "The borrower shall notify OPIC immediately 6 of the commencement of any legal or arbitral 7 proceedings against the parent company that 8 involve claims that either individually or in the 9 aggregate at any given time exceed the equivalent10 of $500,000."11 Do you see that, sir?12 A. Yes.13 Q. Okay. You're aware of the litigation that was brought in14 the fall of 2009, right?15 MS. SELMORE: Ten.16 BY MS. FOSTER-STEERS: 17 Q. 2010, I'm sorry.18 A. Yes.19 Q. And in response to a question by Mr. Sharpstein, you were20 sitting down with OPIC in January, 2011, to talk about that21 litigation, correct?22 A. As I mentioned, I don't recall the exact dates that I spoke23 with OPIC.24 Q. Okay. But did OPIC -- did InnoVida provide immediate25 notification of any pending litigation to OPIC in the fall of




1 2010? 2 A. I don't know. 3 (Discussion had off the record) 4 BY MS. FOSTER-STEERS: 5 Q. Now, did you -- with respect to the OPIC matter, Mr. Smith, 6 in terms of the notification of any pending litigation, were 7 you approached by anyone at InnoVida and told about this 8 pending litigation in the fall of 2010? 9 A. No.10 Q. And with respect to the Ernst & Young retainer by InnoVida,11 do you know whether or not any financial statements provided to12 Ernst & Young were the same as those provided to OPIC through13 you?14 A. I don't know.15 Q. Would you expect that there would be?16 A. I'm sorry?17 Q. Would you expect that there would be?18 A. Yes.19 Q. Okay.20 MS. FOSTER-STEERS: No further questions, your Honor.21 THE COURT: Thank you, sir. You may --22 MR. SHARPSTEIN: Could I just ask one question based23 on a question she asked, your Honor?24 THE COURT: You should have objected being beyond the25 scope, but I'll allow it this one time. I'll allow it this one



46

1 time. 2 RECROSS-EXAMINATION 3 BY MR. SHARPSTEIN: 4 Q. Mr. Smith, I assume that you're -- this is -- a lot of 5 things have happened in your law practice in the last few years 6 that makes you forget or it's incapable to remember certain 7 things about these transactions, correct? 8 A. Yes. 9 Q. Do you remember you gave an interview to the -- in December10 of 2012, you gave an interview to the prosecutor and to the11 FBI. Do you remember that?12 A. Yes.13 Q. Remember during the course of that statement telling them14 that in or around the fall of 2010, several lawsuits were filed15 against Osorio and InnoVida, which alleged certain conduct,16 that both Osorio and Toll told you that the lawsuits and the17 allegations were filed and that their allegations were false?18 Do you remember that?19 MS. FOSTER-STEERS: Objection. Hearsay, your Honor.20 THE COURT: Overruled.21 A. I'm sorry, what was the question?22 Q. Do you remember telling the FBI and the prosecutor when you23 were interviewed that in the fall of 2010, you were alerted to24 the lawsuits by both Osorio and Toll, who told you they were25 false?



47

1 A. I don't recall the precise order of which I heard about the 2 lawsuit. 3 MR. SHARPSTEIN: That's all I have. 4 THE COURT: Anything further, Ms. Foster-Steers? 5 MS. FOSTER-STEERS: No, your Honor. 6 THE COURT: Thank you, sir. You may step down. 7 You're excused. 8 THE WITNESS: Thank you. 9 (Witness excused) 10 THE COURT: All right, members of the jury, we're11 going to take a 15-minute recess. Remember my admonition not12 to discuss the case or allow it to be discussed in your13 presence. We'll see you back in the jury room in about14 15 minutes.15 COURTROOM SECURITY OFFICER: Please rise for the jury.16 (The jury exited the courtroom) 17 THE COURT: And if there's nothing else to come before18 the Court, we'll be in recess for 15 minutes.19 (The Judge exited the courtroom) 20 (Recess taken at 10:47 a.m. until 11:10 a.m.) 21 (The Judge entered the courtroom) 22 THE COURT: Be seated.23 Counsel is present. Mr. Toll's present.24 Anything to come before the Court before we bring the25 jury in?



48

1 MS. FOSTER-STEERS: No, your Honor. 2 THE COURT: Ready, Mr. Sharpstein? 3 MR. SHARPSTEIN: Yes, your Honor. 4 THE COURT: All right. Let's bring in the jury. 5 (The jury entered the courtroom) 6 THE COURT: Counsel concede the presence of the jury 7 and waive its polling? 8 MR. SHARPSTEIN: Yes, your Honor. 9 MS. FOSTER-STEERS: Yes, your Honor.10 THE COURT: And did everyone follow my admonition not11 to discuss the case or allow it to be discussed in your12 presence?13 All right. The government may call its next witness.14 MS. FOSTER-STEERS: The United States calls Mark15 Hobson.16 THE COURT REPORTER: Please raise your right hand.17 (MARK HOBSON, GOVERNMENT'S WITNESS, WAS SWORN) 18 THE COURT REPORTER: Please have a seat. Please get19 right in front of the microphone, state your full name for the20 record, spelling your last name.21 THE WITNESS: Mark Hobson, H-O-B-S-O-N.22 DIRECT EXAMINATION 23 BY MS. FOSTER-STEERS: 24 Q. Mr. Hobson, are you employed?25 A. Yes, I am.



HOBSON - DIRECT/FOSTER-STEERS 49

1 Q. Where do you work, sir? 2 A. I work at a firm, Devine, Goodman, Rasco, 3 Watts-Fitzgerald & Goodman (sic). 4 Q. And what is your occupation, Mr. Hobson? 5 A. I'm a business lawyer. 6 Q. How long have you been a lawyer? 7 A. I was admitted to the bar in '94. 8 Q. 1994? 9 What law school did you go to?10 A. I went to Florida State University.11 Q. Now, after leaving law school, where did you work?12 A. After, I went to Belgium, got a master's of law in13 international law. And I came back, I did some pro bono work14 in D.C. for the ABA. And I came back to Florida, took the15 Florida bar, worked for a friend for a few months, and then I16 went to Brazil for almost five years.17 Q. Okay. And when you came back, did you work?18 A. And I came back, and I worked for Shutts & Bowen for almost19 12 years.20 Q. Okay. When did you begin working at Shutts & Bowen?21 A. I believe it was October, 1999.22 Q. Did you work in a particular division?23 A. I was in the corporate department. 24 Q. What did you do, sir?25 A. I did various, you know, business, legal matters, start-up




1 companies to filings with the SEC. And I also did a lot of 2 secured lending matters. 3 Q. Security-related matters? 4 A. Secured lending matters. 5 Q. Secured lending matters. 6 If you could just speak up a little bit -- 7 A. Sure. 8 Q. -- because your voice trails off at the end of your 9 responses.10 Mr. Hobson, did you work with an individual by the11 name of Alfred Smith?12 A. Yes. He was one of my bosses.13 Q. All right. And in August, 2010, did you have occasion to14 work on a legal matter involving a company by the name of15 InnoVida?16 A. Yes.17 Q. Can you tell the members of the jury how it is that you18 came to work on that particular matter?19 A. Well, I actually worked on it in two separate occasions --20 in March of that year, 2010 --21 Q. Yes.22 A. -- and then in August of 2010. And both times I pretty23 much got called in when Al went on vacation.24 Q. What did you do with respect to the InnoVida matter in25 March, 2010?




1 A. I helped prepare some of the underlying loan documentation 2 and helped organize some entities and get their registered 3 agents. 4 Q. Okay. Did you work with anyone at InnoVida? 5 A. The only person I really worked with would have been Craig 6 Toll. 7 Q. And did you work with him in March, 2010, when you worked 8 on the matter involving InnoVida? 9 A. I don't recall specifically. I may have corresponded via10 e-mail a couple times.11 Q. Okay. Now, when it came to August, 2010, you again worked12 on the same matter -- or, rather, a matter related to InnoVida,13 correct?14 A. Correct.15 Q. And what was that matter, sir?16 A. That was in connection with a loan from OPIC.17 Q. What did you have to do?18 A. I recall that I helped prepare some documentation for a19 second withdraw under the loan agreement.20 Q. Second disbursement?21 A. Yes.22 Q. Okay. Did you work or -- work with anyone from InnoVida in23 doing what you had to do in August, 2010?24 A. Well, I corresponded with Craig, and I believe we --25 there's also a conference call one time with the OPIC people




1 and Craig and Claudio Osorio. 2 Q. Okay. Now, did you have to gather documents in order to go 3 ahead or go forward with that second disbursement? 4 A. Yes. I recall to get the second disbursement certain 5 things had to be submitted to show that they were at that 6 stage. 7 Q. Okay. Do you recall what those things were? 8 A. I believe it was a form of -- of an affidavit of sorts that 9 simply had disbursement requests. I forget the exact title.10 Q. Okay. Did you -- or, rather, who did you obtain the11 information from?12 A. Well, Al Smith was on vacation, so I was working mostly13 with Craig Toll.14 Q. Had you ever met Mr. Toll in person?15 A. I'm not sure that I did. When I started Shutts & Bowen, he16 was I believe the CFO with CHS Electronics. So, I dealt with17 him on a couple occasions back in 1999, 2000, but I didn't meet18 him in 2010 --19 Q. Okay.20 A. -- personally.21 Q. Okay. So, how did you communicate with Mr. Toll?22 A. It was primarily by e-mail. And I think I spoke to him on23 the phone a couple times.24 Q. Okay. Now, when you requested information from Mr. Toll,25 was that information provided, Mr. Hobson?




1 A. I believe it was, yes. 2 Q. I'm gonna show you what has been admitted into evidence as 3 Government's Exhibit C(18) and ask you whether or not you 4 recognize these documents? 5 MS. FOSTER-STEERS: And may I approach the witness, 6 your Honor? 7 THE COURT: All right. 8 (Pause) 9 BY MS. FOSTER-STEERS: 10 Q. Are you familiar with those documents, Mr. Hobson?11 A. Yes, I'm familiar with the e-mail I sent to Cameron Alford12 with OPIC.13 Q. Okay. Who was Cameron Alford?14 A. He is the in-house lawyer -- one of the in-house lawyers15 with OPIC.16 Q. Okay. Did you deal with any other lawyers besides17 Mr. Alford from OPIC?18 A. No.19 Q. C(18), Bate Number ending '0402, this is an e-mail from you20 to Cameron Alford. Do you see that?21 A. I do.22 Q. Okay. And copied is Craig Toll and Alfred Smith, right?23 A. Correct.24 Q. And below there is another e-mail from you sent Wednesday,25 August 4th. Do you see that?




1 A. Yes, I do. 2 Q. Okay. And then there's a list of items, right? 3 A. (No response) 4 Q. Were these the documents attached to this particular 5 e-mail? 6 A. (No response) 7 Q. The list? 8 A. Yes, I see the list. 9 Q. Okay. My question to you is, were these documents10 attached -- the list that we see here, were those the11 attachments to the e-mail, C(18)?12 A. That's my understanding, correct.13 Q. Okay.14 A. With the exception of, in my follow-up e-mail where I said15 one of the attachments was a mistake. So, I corrected that in16 my follow-up e-mail.17 Q. Okay. Now, attached to your e-mail, Mr. Hobson, was there18 a financial statement from InnoVida?19 A. I believe so. I believe that was one of their20 requirements.21 Q. All right. And did you obtain this financial statement22 from Craig Toll?23 A. I would have had to have.24 Q. Because did you get any information from anyone else at25 InnoVida, Mr. Hobson?




1 A. Well, the only one I dealt with was Craig, and then we had 2 the one conference call with the OPIC, and that was when 3 Claudio was involved, as well. 4 Q. Okay. 5 A. But -- 6 Q. Did you get any documents from Claudio Osorio? 7 A. No, not personally. 8 Q. Okay. Looking at Bate Number ending '0410, this is a 9 progress report on the Haiti Project, correct?10 A. Correct.11 Q. Okay. And the date on the report is August 4, 2010, right?12 A. That is the date on this document.13 Q. Okay. And looking now at Bate Number '000429, what is14 this?15 A. It appears to be a bank reconciliation for the Haiti16 Project.17 Q. Okay. Provided to you by Mr. Toll, right?18 A. Yes. It would had to have been provided by him.19 Q. And looking now at Bate Number ending '0430, this is an20 invoice dated April 30, 2010, right?21 A. Correct.22 Q. And July 16, 2010, Bate Number ending '0431, right?23 A. Correct.24 Q. And another invoice dated August 3, 2010, Bate Number25 ending '0432, right?




1 A. Correct. 2 Q. And then an e-mail at the top from Claudio Osorio -- well, 3 at the very, very top is the name "Craig Toll," right? 4 A. At the very, very top left-hand corner, yes. 5 Q. Yes. 6 And it says e-mail dated Wednesday, August 4, 2010, 7 from Claudio Osorio to Craig Toll, right? 8 A. Correct. 9 Q. And in the body of the e-mail, it has from "Lisa Gutierrez10 Brito (emergency relief station head for WV)."11 Do you know anything about this e-mail, Mr. Hobson?12 A. Not really the specifics.13 Q. Okay. But this is an e-mail that you obtained from14 Mr. Toll again, correct?15 A. I honestly don't recall it, but it (sic) very possible that16 I did.17 Q. Okay. And then this is the August 2, 2010, second18 disbursement request, right?19 A. Yes.20 Q. Okay. And the documents that we have looked at, they --21 were they in support of the second disbursement request?22 A. Yes.23 Q. For $6.7 million, right?24 A. I believe so, yes.25 Q. Signed by Craig Toll, right?




1 A. It -- it appears to be his signature. 2 Q. Who did you provide these documents to, Mr. Hobson? 3 A. The documents I provided to OPIC. I believe Lynn -- was 4 her last name Ziegler? 5 Q. Tabernacki, is that -- 6 A. Tabernacki. And, also, Cameron Alford. 7 MS. FOSTER-STEERS: I have no further questions, your 8 Honor. 9 THE COURT: Cross-examination.10 MR. SHARPSTEIN: I have no questions of the witness,11 your Honor.12 THE COURT: Thank you, sir. You may step down.13 You're excused.14 THE WITNESS: Thank you.15 (Witness excused) 16 THE COURT: The government may call its next witness.17 MS. SELMORE: Your Honor, the United States will call18 Gabby Fudally.19 THE COURT REPORTER: Please raise your right hand to20 be sworn.21 (GABRIELA FUDALLY, GOVERNMENT'S WITNESS, WAS SWORN) 22 THE COURT REPORTER: Please sit down. Please state23 your full name for the record, spelling your last name.24 THE WITNESS: Gabriela Fudally, F, as in "Frank," U-D,25 as in "David," A-L-L-Y.



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1 THE COURT REPORTER: First name? 2 THE WITNESS: Gabriela, G-A-B-R-I-E-L-A. 3 DIRECT EXAMINATION 4 BY MS. SELMORE: 5 Q. Good morning, Ms. Fudally. 6 A. Good morning. 7 Q. Are you employed, ma'am? 8 A. Yes. 9 Q. How are you employed?10 A. By Wells Fargo.11 Q. And what do you do for Wells Fargo?12 A. I am a market support consultant.13 Q. And what does a market support consultant do?14 A. We are -- I am in charge of 14 stores in Broward County,15 and we make sure that they are operationally sound, they comply16 with policies and procedures, we -- a support service, and we17 mitigate all losses and risks for the branch.18 Q. And how long have you been performing that function?19 A. This is my 27th year with Wells Fargo.20 Q. Now, at some point in time did you work for Wachovia?21 A. I did.22 Q. When did you stop working for Wachovia?23 A. July of 2011 is when we converted, so....24 Q. And when you say "we converted," what do you mean?25 A. Wachovia converted to -- well, Wells Fargo bought Wachovia.



FUDALLY - DIRECT/SELMORE 59

1 Q. So, Wells Fargo took you on as their employee. 2 A. Absolutely, yes. 3 Q. Now, during that 27 years of working with Wachovia, are you 4 familiar with what their bank statements look like? 5 A. Yes. 6 Q. Ms. Fudally, I'd like to show you a document that has 7 previously been introduced as Government's Exhibit C(9). 8 A. Okay. 9 Q. Based on your experience, too, in working with Wachovia,10 does that appear to be a Wachovia Bank statement?11 A. Yes, it does.12 Q. And I also show you a document that has been introduced13 into evidence, Government's Exhibit C(42). Do you see that?14 A. Yes, I do.15 Q. Does that appear to be a Wachovia Bank statement?16 A. Yes, it does.17 Q. Now, I've highlighted a line here for August 11, 2011, and18 it says "funds transfer advice," and there's a number. Do you19 see that?20 A. Yes, I do.21 Q. What does that line mean?22 A. That is an incoming wire transfer with an advice number.23 That's a transaction number.24 Q. And if you could, speak directly into the microphone.25 A. Sorry.




1 Q. That number, is it used -- or was it used in Wachovia for 2 identification purposes? 3 A. Yes, it was. 4 Q. And different wires, are they assigned different numbers? 5 A. Yes. There -- that advice number is systematically 6 assigned. 7 Q. I'd also like to show you a document that has been 8 introduced as Government's Exhibit C(20). Do you see that 9 document?10 A. Yes.11 Thank you.12 Q. Now -- I'm sorry, it got too big. 13 Now, Ms. Fudally, this appears to be a -- what we14 commonly call a "screen shot." Are you familiar with that15 term?16 A. Yes.17 Q. And what do I mean by "screen shot"?18 A. That is, if you have a computer screen, somebody hit the19 "print" button, and it prints whatever is on your computer20 screen.21 Q. Is this a bank statement like we've looked at previously?22 A. No, it's not.23 Q. Now, on this particular screen shot, what is the account24 number for this particular account?25 A. '8744.




1 Q. And what is the date of the transaction purportedly 2 reflected there? 3 A. It looks like August-11-2010 (sic). 4 Q. And next to that, we see that terminology, "funds transfer 5 advice," and a number. Do you see that? 6 A. Yes, I do. 7 Q. And, again, what is that terminology? What does it 8 represent? 9 A. That is an incoming wire transfer with the advice number.10 Q. And what is the number that is reflected there?11 A. That's 2010081100051248.12 Q. And what is the amount of the wire transport -- transfer13 reflected on this document?14 A. $2.5 million.15 Q. Now, Mrs. Podalski (sic), I'd like to direct your attention16 back to -- Fudally, I apologize -- direct your attention back17 to a bank statement. And for what period is this bank18 statement?19 A. 7-31-2010 through 8-31-2010.20 Q. And, again, what is the account number?21 A. You're gonna have to make that bigger, but it's two,22 followed by four zeros, 21398744.23 Q. Now, what is the date?24 A. August 11th.25 Q. And how much is the wire indicated on this particular




1 statement? 2 A. That is 500,000. 3 Q. Now, does the wire transfer screen shot contain the same 4 advice number as indicated on the statement I introduced as 5 Government's C(42)? 6 A. Yes. 7 Q. Would you like to see them up close? 8 A. Yes. I saw that one. 9 Yes, it does.10 Q. And is it possible for two wires for different amounts to11 have the same wire transfer advice number?12 A. No, it's not.13 Q. At our direction, did you conduct an investigation within14 your system of records to determine the correct amount for the15 wire transfer advice number 2010081100051248?16 A. Yes.17 Q. And what was the true amount of that wire?18 A. It's the ones on our official bank records, which is the19 500,000.20 Q. And that would be the amount of $500,000?21 A. Um-hum, yes.22 Q. Based on what you discovered in your records as to the true23 amount of the funds transfer advice wire ending in '1248, does24 this document -- is it true?25 A. No. I -- I mean I can't even testify to the -- this




1 document, because it's not our official bank records. That is 2 something somebody would see on a personal account on their 3 personal online screen. 4 Q. Well, was the wire ending in '1248 for $2.5 million? 5 A. According to this document, but not -- that's not our 6 official bank records. 7 Q. So, Wachovia did not receive a wire with that transfer 8 advice number in the amount of $2.5 million. 9 A. No.10 MS. SELMORE: That's all I have, your Honor.11 THE COURT: Cross-examination.12 (Discussion had off the record between counsel) 13 MR. SHARPSTEIN: Excuse me, your Honor. I just need14 to get something here.15 K(1).16 (Discussion had off the record between counsel) 17 MS. SELMORE: Mr. Sharpstein, we've got several boxes18 of documents. Do you want a specific document?19 MR. SHARPSTEIN: K(1)(j), K(1)(j), it's labeled20 separately.21 Excuse me. I apologize, your Honor.22 (Discussion had off the record between counsel) 23 MS. SELMORE: No objection, your Honor. We'd move to24 introduce K(1)(j). Here.25 MS. HA: That's not --



64

1 (Government's Exhibit Number K(1)(j) marked for 2 identification) 3 THE COURT: You're moving in K(1)(j), Ms. Selmore? 4 MR. SHARPSTEIN: We would move -- if the government is 5 moving it, then we'll just not object. 6 MS. SELMORE: We can move it as a joint movement with 7 stipulation, no objection, your Honor. 8 THE COURT: K(1)(j) will be received. 9 (Government's Exhibit K(1)(j) admitted into evidence) 10 CROSS-EXAMINATION 11 BY MR. SHARPSTEIN: 12 Q. The -- good afternoon -- I'm sorry.13 MR. SHARPSTEIN: May it please the Court.14 BY MR. SHARPSTEIN: 15 Q. Good morning.16 A. Good morning.17 Q. What was your last name, I'm sorry?18 A. Fudally.19 Q. Ms. Fudally.20 Now, as part of -- you're here as a custodian or as an21 employee of Wachovia, former -- Wells Fargo, formerly Wachovia.22 And you provided documents to the government, isn't that23 correct?24 A. Yes.25 Q. You provided a number of documents to the jury --



FUDALLY - CROSS/SHARPSTEIN 65

1 A. Okay. 2 Q. -- upon request, upon subpoena, correct? 3 A. Yes. 4 Q. And I'm gonna show you what's now in evidence as -- 5 MR. SHARPSTEIN: May I approach, your Honor? 6 THE COURT: Yes. 7 BY MR. SHARPSTEIN: 8 Q. -- K(1)(j). 9 (Discussion had off the record between counsel) 10 BY MR. SHARPSTEIN: 11 Q. Those are a series of bank records that you provided to the12 government, correct?13 A. Okay. I mean the bank did. I didn't personally provide14 them; our bank did.15 Q. Well, do those appear to be official bank records of16 Wachovia?17 A. I mean this -- yeah, they appear -- they're not -- I don't18 see the documents. I just see statements that these are the19 documents.20 Q. Take a look through the documents.21 A. Oh, I'm sorry.22 Q. I believe what it's going to represent to you -- and I'll23 cut to the quick --24 A. Okay.25 Q. -- is you provided a series of accounts that were owned and




1 operated by InnoVida, including the signature cards for the 2 accounts, the authorized signatures -- 3 A. Um-hum. 4 Q. -- on the accounts, correct? 5 A. It looks that way. These are corporate resolutions. 6 Um-hum. 7 Q. The -- for example, why don't you -- I'm gonna -- I'll call 8 your attention to things one at a time. 9 A. Okay.10 Q. At the bottom, there are Bates Numbers, you see in the11 bottom right-hand corner, stamped "GJW"? You see those12 numbers?13 A. Yes.14 Q. There's one GJWB, four zeros, 15. Why don't you grab hold15 of that one. 16 Now, so the jury understands, when someone opens an17 account with the bank, there's a signature card that's placed18 in the record that authorizes certain people to sign on the19 account, correct?20 A. Correct.21 Q. That would be to make transactions such as checks, right?22 A. Yes.23 Q. Wire transfers, correct?24 A. Yes.25 Q. You would need someone who's authorized on the account to




1 make a wire transfer, correct? 2 A. Yes. 3 Q. So, you've shown the jury -- or I'm gonna just focus your 4 attention just briefly here to a page from C(9) that the 5 prosecutor sent -- showed you. This one you have to look on 6 the screen. 7 This is an account number that ends in '44. 8 A. Yes. 9 Q. And that's where you looked at the wire transfer, and you10 discussed certain things that she asked you.11 Now, if you look at K(1)(j), that page that I referred12 you to, does this appear to be the signature card for that '4413 account number?14 A. Yes.15 Q. And if you look closely -- we'll zero in for the jury --16 the authorized signators or depositors on this account are17 Claudio Osorio, Amarilis Moran-Osorio, and Elba Gamboa. Do you18 see that?19 A. Yes, I do.20 Q. There's nobody else listed here on this account, correct?21 A. Correct.22 Q. So, one of those individuals would be authorized to make23 that transfer you referred to, a wire -- would be authorized to24 make a wire transfer on that '44 account, correct?25 A. Yes.




1 Q. Take a look at -- there are several other accounts in 2 there, are there not? In K(1)(j)? If you just thumb through 3 it, you see there are several accounts -- 4 A. Um-hum. 5 Q. -- for InnoVida under different company names, correct? 6 A. Yes. 7 Q. I'm gonna show you two pages of it, which are GJWB19 and 8 18. If you just pull those out. I'll show them on the screen, 9 but you have them there in front of you.10 Here's an account that's -- let's zero back so the11 jury understands. Here's -- this is -- the date on this is12 1-7-2009, another InnoVida account, two numbers that end in '7013 and '89.14 Do you see that?15 A. Yes.16 Q. And if you look down here, there are signators -- Claudio17 Osorio, Craig Toll, Amarilis Osorio, and Elba Gamboa. Do you18 see that?19 A. Yes.20 Q. Now, turn to 18 that was right in front of it. This21 appears to be an updated signator depositor authorization on22 those two accounts (indicating), dated 2-9-09. Do you see23 that?24 A. Yes, I do.25 Q. And the people on the account are Claudio Osorio, Amarilis




1 Osorio, Herb Margolis, and Elba Gamboa. Do you see that? 2 A. Yes. 3 Q. So that would replace the one right before it, correct? 4 A. That's correct. 5 Q. Because it has a date later in time. 6 A. That's correct. 7 Q. So, as of 2-9-09, these four people are the authorized 8 people on that account. 9 A. That's correct.10 Q. If you turn -- if you could pull the documents from there11 labeled 6 through 9. 12 MR. SHARPSTEIN: I'm putting it up for the jury's13 benefit.14 BY MR. SHARPSTEIN: 15 Q. Here we have another Wachovia account under "InnoVida16 Southeast, LLC." And here the date is -- on this, 06, is 5 --17 let's zero in so we can just see it -- it looks like May 20,18 2010.19 A. Okay.20 Q. And the authorized signators on this account -- and it ends21 in a '91 under "InnoVida Southeast" -- are Claudio Osorio,22 Amarilis Osorio, Elba Gamboa, and a gentleman by the name of23 Horacio Alvarez, correct?24 A. That's correct.25 Q. Those are the authorized signators on that account as of




1 May 20, 2010, correct? 2 A. Yes. 3 Q. Behind it, if you look, there are other cards from prior 4 dates, 2-9-09. Now, these were -- these came before. They're 5 in the account. But the one May 20th is the one as of May 20, 6 2010, correct? 7 A. Yes. 8 Q. That's the latest one in there. 9 A. Yes.10 Q. So, the one before it, which is 2-9-09, the same date that11 we just looked at, the updated card on the '44, correct?12 A. Yes.13 Q. Has Claudio Osorio, Amarilis Osorio, Herb Margolis, and14 Elba Gamboa.15 A. (No response)16 Q. Do you see that?17 A. Yes.18 Q. And there's one back here now, which is 12-9-08 (sic).19 A. 12-20 (sic).20 Q. Which, if you look down, has -- it's the same account, the21 '91, but it's a previous card where previously there was Herb22 Margolis, Claudio Osorio, Amarilis Osorio, Elba Gamboa, and23 Craig Toll. Do you see that?24 A. Yes.25 Q. But now go back to '07, Mr. Toll is taken off as of 2-9-09.




1 Do you see that? 2 A. Um-hum, yes, I do. 3 Q. And definitely not on there on the latest one, 5-20-10, 4 correct? 5 A. Correct. 6 Q. That's Osorio, Osorio, Claudio and Amarilis, Elba Gamboa, 7 and Horacio Alvarez, correct? 8 A. Yes. 9 MR. SHARPSTEIN: Excuse me for a second.10 THE COURT: All right.11 (Pause) 12 BY MR. SHARPSTEIN: 13 Q. Take a look at 16 through 21. Actually, 17 through 21, I'm14 sorry. I apologize. Just 17 through 21.15 Here's another account. This one ends in '4270. This16 is InnoVida Services, Inc., also dated 5-20-10. Do you see17 that?18 A. Yes.19 Q. And we'll scan down to the signature card. This is Claudio20 Osorio, Amarilis Osorio, Elba Gamboa, and Horacio Alvarez21 again. Do you see that?22 A. Yes.23 Q. So, these are the authorized depositor

smith crossexamination

Documents