==============================================================================
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(c)(2))
[ ] Definitive Proxy Statement
[x] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
RJR Nabisco Holdings Corp.
(Name of Registrant as Specified In Its Charter)
RJR Nabisco Holdings Corp.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-
11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[x] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
1
==============================================================================
==============================================================================
In The Matter Of:
RJR NABISCO HOLDINGS CORP. v.
BENNETT S. LEBOW et al.
----------------
ARNOLD I. BURNS
Vol. 1, January 23, 1996
----------------
CLASSIC REPORTING, INC.
13 WEST 36th STREET
NEW YORK, NY 10018
(212) 268-2590
Original File ab012396.asc, 123 Pages
Min-U-Script[Registered] File ID: 0082207275
Word Index included with this Min-U-Script[Registered]
==============================================================================
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
-------------------------------------x
:
RJR NABISCO HOLDINGS CORP., :
:
Plaintiff, :
:
-against- : 6:95CV00812
:
BENNETT S. LEBOW, BROOKE GROUP LTD., :
And CARL C. ICAHN, :
:
Defendants. :
:
-------------------------------------x
January 23, 1996
10:40 A.M.
Deposition of ARNOLD I. BURNS,
taken by plaintiff pursuant to subpoena, at
the law offices of Wachtell Lipton Rosen &
Katz, 51 West 52nd Street, New York, New York
10019, before Donna Brunck, a Certified
Shorthand Reporter and Notary Public within
and for the State of New York.
CLASSIC REPORTING, INC. (212) 268-2590
2
1
2 A P P E A R A N C E S:
3 WACHTELL LIPTON ROSEN & KATZ
Attorneys for Plaintiff
4 51 West 52nd Street
New York, New York 10019
5
BY: RACHELLE SILVERBERG, ESQ.
6
7 MILBANK, TWEED, HADLEY & McCLOY
Attorneys for Defendants
8 and the Witness
1 Chase Manhattan Plaza
9 New York, New York 10005-1413
10 BY: DUNCAN J. LOGAN, ESQ.
11
PROSKAUER ROSE GOETZ & MENDELSOHN, L.L.P.
12 Attorneys for the Witness
1585 Broadway
13 New York, New York 10036-8299
14 BY: GREGG M. MASHBERG, ESQ.
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
3
1
2 IT IS HEREBY STIPULATED AND AGREED by
3 and among the attorneys for the respective parties
4 herein that the sealing, filing and certification
5 of the within deposition be waived; that such
6 deposition may be signed and sworn to before any
7 officer authorized to administer an oath, with the
8 same force and effect as if signed and sworn to
9 before a judge of this court.
10 IT IS FURTHER STIPULATED AND AGREED
11 that all objections, except as to the form, are
12 reserved to the time of the trial.
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
4
1 Burns
2 A R N O L D I. B U R N S,
3 having been first duly sworn by the
4 Notary Public (Donna Brunck), was
5 examined and testified as follows:
6 EXAMINATION BY MS. SILVERBERG:
7 Q. Could you please state your name
8 and address for the record?
9 A. Yes. My name is Arnold I. Burns,
10 and I live at 25 Sutton Place South in New
11 York City. Zip code is 10022.
12 Q. Could you please state your
13 business address?
14 A. My business address is 1585
15 Broadway in this city. Zip code 10036.
16 Q. Are you an attorney?
17 A. Yes.
18 Q. Have you ever given a deposition
19 before?
20 A. Yes, I have.
21 Q. How many times?
22 A. This will be my third deposition
23 in 43 years.
24 Q. What was the first deposition you
25 have given?
CLASSIC REPORTING, INC. (212) 268-2590
5
1 Burns
2 A. Must have been 10 or 12 or 15
3 years ago in a case captioned Mermelstein
4 versus a bunch of people, a dispute arising
5 out of his partnership, Mermelstein's
6 partnership in a law firm with which I was
7 previously associated.
8 Q. Were you a party to that
9 litigation?
10 A. I don't know. I simply don't
11 remember. I was surely a witness. May not
12 have been a party, may have been, I just don't
13 remember. I was in government service, I
14 think, at the time that I gave the deposition.
15 MR. MASHBERG: Just answer the
16 question.
17 Q. What was the second deposition
18 you gave?
19 A. About three weeks ago and that
20 was in connection with a bankruptcy proceeding
21 pending in the bankruptcy courts of the United
22 States.
23 Q. In what district?
24 A. In Vermont.
25 Q. Are you a party in that
CLASSIC REPORTING, INC. (212) 268-2590
6
1 Burns
2 litigation?
3 A. No, I don't believe -- I don't
4 think so. I don't know.
5 Q. Who is the debtor in that case?
6 A. A man by the name of Arthur
7 Boroff, B-O-R-O-F-F.
8 Q. Are you here today pursuant to a
9 subpoena?
10 A. I don't know.
11 Q. Have you ever seen a subpoena
12 addressed to you in this litigation?
13 A. I'm not sure. I may have, I may
14 not have. Actually, I was never served with a
15 subpoena, I don't believe.
16 Q. Do you know whether or not your
17 counsel agreed to accept service of a subpoena
18 on your behalf?
19 A. No, I don't, but I would have
20 been very happy for him to have done so.
21 Q. Did your counsel ever request
22 whether or not he could accept service of a
23 subpoena on your behalf?
24 A. At one point, of course I don't
25 know whether this is privileged or not, at one
CLASSIC REPORTING, INC. (212) 268-2590
7
1 Burns
2 point, I did authorize him to accept a
3 subpoena for me.
4 Q. You have no way -- you don't know
5 whether he did so or not?
6 A. I would have no way of knowing
7 that.
8 MS. SILVERBERG: I would like to
9 mark as Exhibit 1, a subpoena and
10 attachment addressed to Arnold I.
11 Burns, 25 Sutton Place South.
12 (Subpoena marked Burns Exhibit 1
13 for identification, as of this
14 date.)
15 Q. I have placed before you what's
16 been marked as Burns Exhibit 1 and ask you
17 whether or not you can identify that document?
18 MR. MASHBERG: From his
19 recollection or can he read what it is?
20 Q. What does the document appear to
21 be to you?
22 A. It clearly is a subpoena in a
23 civil case addressed to me in the matter
24 styled RJR Nabisco Holdings Corp. versus
25 Bennett S. LeBow, Brooke Group Ltd. and Carl
CLASSIC REPORTING, INC. (212) 268-2590
8
1 Burns
2 C. Icahn.
3 Q. Have you ever seen that document?
4 A. Yes, I believe I have.
5 Q. Do you see that there is an
6 attachment attached to the subpoena?
7 A. Yes.
8 Q. Have you ever seen that
9 attachment before?
10 A. Yes, I have.
11 MR. MASHBERG: Maybe we can cut
12 through this very quickly. As Mr.
13 Burns's counsel in this matter, I have
14 taken all the documents in his
15 possession that are responsive to that
16 subpoena and I produced them to your
17 firm this morning. I have undertaken
18 to do that, and I have also given you a
19 privilege log for one document held
20 back on the grounds of privilege. All
21 documents in Mr. Burns's possession
22 that are responsive to the subpoena
23 have now been produced.
24 MS. SILVERBERG: I am going to
25 ask some brief questions to get some
CLASSIC REPORTING, INC. (212) 268-2590
9
1 Burns
2 sort of understanding of what that file
3 consists of, what type of documents are
4 in there and whether or not all
5 documents that he might have received
6 relating to RJR would still be in that
7 file.
8 MR. MASHBERG: Okay.
9 MS. SILVERBERG: Bear with me for
10 a few moments.
11 THE WITNESS: By all means.
12 Q. I take it you read the document
13 request?
14 A. No, I did not.
15 Q. At the time you received it?
16 MR. MASHBERG: Objection to the
17 form.
18 A. No, I did not.
19 Q. Did you understand that the
20 attachment called for the production of
21 certain documents?
22 A. Of course.
23 Q. What did you do upon receiving
24 the document request?
25 A. I instructed Mr. Mashberg and my
CLASSIC REPORTING, INC. (212) 268-2590
10
1 Burns
2 secretary to get my file and for Mr. Mashberg
3 to go through every single document in that
4 file so that we could be 100 percent
5 responsive to this subpoena.
6 Q. I take it Mr. Mashberg is your
7 attorney?
8 A. Mr. Mashberg is my attorney. Mr.
9 Logan is my attorney. And Mr. Mashberg is my
10 partner, my law partner.
11 Q. The file that you gave to Mr.
12 Mashberg to go through, did that file have a
13 label?
14 A. I do not know.
15 Q. What was the purpose of that
16 file?
17 A. The purpose of that file was to
18 be the repository of every document that I
19 received with respect to New Valley
20 Corporation.
21 Q. Were there any other files that
22 you have in your possession in which you put
23 documents relating to New Valley?
24 A. No.
25 Q. Does every document that you
CLASSIC REPORTING, INC. (212) 268-2590
11
1 Burns
2 receive regarding -- relating to New Valley go
3 into that file?
4 A. That's correct.
5 Q. Are there documents you received
6 from New Valley that you may have discarded?
7 A. Highly unlikely, but possible,
8 yes.
9 Q. Are there documents relating to
10 New Valley that you may have destroyed rather
11 than filed?
12 A. You just asked me that question.
13 MR. LOGAN: Objection to form.
14 Q. Do you know whether or not any
15 documents that were in that file were not
16 produced in this document production other
17 than the document that's identified on this
18 privilege log that I just received?
19 A. Mr. Mashberg has just made a
20 representation to you that all of the
21 documents responsive to this subpoena have
22 been delivered and that is my understanding.
23 Q. So you don't know whether or not
24 there were documents relating to New Valley
25 that were deemed unresponsive to the subpoena
CLASSIC REPORTING, INC. (212) 268-2590
12
1 Burns
2 that were not responsive?
3 A. No, I do not know that of my own
4 knowledge.
5 Q. Do you know who is paying Mr.
6 Logan's firm in this matter?
7 A. No.
8 Q. Are you paying Mr. Logan's firm?
9 A. No.
10 Q. Can you briefly describe your
11 educational background?
12 A. Yes. I attended grammar school
13 and high school in Lynbrook, Long Island,
14 Lynbrook public schools. I thereafter
15 attended Union College in Schenectady, New
16 York, and earned a bachelor of arts degree
17 which was awarded to me in 1950. Thereafter,
18 I went on to the Cornell Law School where I
19 earned a J.D. Degree, then called an L.L.B.,
20 in 1953. Thereafter, in the early '60s, I
21 attended the Parker School of International
22 Law which is part of Columbia University
23 School of Law. Took some graduate credits
24 there.
25 I think that pretty much sums up
CLASSIC REPORTING, INC. (212) 268-2590
13
1 Burns
2 my formal education.
3 Q. I'd actually like to go back to
4 the topic we were just discussing about your
5 files. I think you mentioned that you might
6 have discarded some documents relating to New
7 Valley rather than file them?
8 MR. LOGAN: Objection to form.
9 MR. MASHBERG: Objection. He was
10 speculating.
11 Q. Is it correct that there's a
12 chance that you may have discarded certain
13 documents rather than placing them in your New
14 Valley file?
15 A. What I said to you was there's
16 always a chance. It's highly unlikely.
17 Q. Do you have any criteria you use
18 to determine whether or not you will keep a
19 document or discard it?
20 A. I have no formalized criteria but
21 that of common sense, and if it's a material
22 document, it would be preserved and filed. If
23 it was some kind of a notice or a cover sheet
24 to a fax or something, it might be thrown out.
25 Q. Now I believe you ended your
CLASSIC REPORTING, INC. (212) 268-2590
14
1 Burns
2 chronology of your educational background by
3 saying that the Parker School of International
4 Law ended your formal education?
5 A. Yes.
6 Q. Was there informal education
7 afterwards?
8 A. Yes.
9 Q. Can you describe it?
10 A. Well, I practiced law for 43
11 years.
12 Q. Can you describe your employment
13 background?
14 A. Yes. When I graduated from law
15 school, I volunteered for the draft, the
16 Korean War was on. And I was selected after
17 serving as an enlisted man, I was selected to
18 become the judge advocate general of the
19 United States Army. I served there for more
20 than three and-a-half years as a lawyer I went
21 through the infantry school at Fort Benning,
22 went through the judge advocate general school
23 and served at the Pentagon for, as I said, in
24 excess of three and-a-half years arguing cases
25 for the United States before the United States
CLASSIC REPORTING, INC. (212) 268-2590
15
1 Burns
2 Court of Military Appeals.
3 When I finished my army service
4 in May, I think, of 1957, I became an
5 associate in the law firm of Dewey Ballantine
6 Bushby Palmer & Wood. That name has since
7 been changed, as you know, but that was the
8 name of it then, and I practiced law there
9 from the time I entered until September of
10 1960. In September of 1960, an army buddy of
11 mine and a colleague at Dewey Ballantine
12 started our own law firm under the style of
13 name of Burns & Lesser with our offices at 55
14 Liberty Street. That firm grew over the years
15 and in 1985, just 25 years after it started, I
16 left that firm then called Burns Summit Rovens
17 & Feldesman. Had grown to a 120-man law firm,
18 and I left that firm to work for the United
19 States Department of Justice.
20 Q. Following your stay at the
21 Department of Justice, you then --
22 A. I served in the Department of
23 Justice as deputy Attorney General of the
24 United States and that meant chief operating
25 officer of the department until May of 1988
CLASSIC REPORTING, INC. (212) 268-2590
16
1 Burns
2 when I came home to New York to resume my life
3 in the private sector. On September 1, 1988,
4 I joined the firm of Proskauer Rose Goetz &
5 Mendelsohn as a member of the firm and I live
6 happily ever after.
7 Q. Do you currently serve on the
8 boards of any public companies?
9 A. Yes, I do.
10 Q. Which companies?
11 A. I serve on the board of New
12 Valley Corporation.
13 Q. Do you serve on the board of any
14 other public companies?
15 A. Not in the private sector.
16 Q. Since 1988, have you served on
17 the boards of any public companies?
18 A. I don't think so.
19 Q. Do you serve on the boards of any
20 private companies?
21 A. No. I serve on the board of
22 charitable enterprises, eleemosynary
23 institutions.
24 Q. Which institutions are those?
25 A. I am vice chairman -- member of
CLASSIC REPORTING, INC. (212) 268-2590
17
1 Burns
2 the board and vice chairman of the board of
3 Boys and Girls Clubs of America. I am vice
4 chairman and a member of the board of Freedoms
5 Foundation at Valley Forge. For a number of
6 years I was chairman of the board.
7 I am on the board of trustees of
8 Union College, my alma mater, for a number of
9 years. I was chairman of that board.
10 I am on the board of the National
11 Victims Center.
12 I am on the board of the National
13 Center for Missing and Exploited Children, and
14 I am a member of the National Commission of
15 ADL.
16 I am a member of the board of the
17 Visiting Nurses Services of New York, VNS, and
18 other such organizations.
19 Q. Since 1988, have you been asked
20 to join the board of any publicly held
21 companies other than New Valley?
22 A. No, with the exception of my
23 being asked to serve on the slate of directors
24 for RJR Nabisco in the event that certain
25 circumstances occurred.
CLASSIC REPORTING, INC. (212) 268-2590
18
1 Burns
2 Q. Have you ever been sued
3 personally?
4 A. No, I have not, with the possible
5 exception of a case I mentioned and I didn't
6 remember whether I was a party or not.
7 Q. Have you ever been a plaintiff in
8 any litigation?
9 A. Yes, I was, once.
10 Q. In what type of litigation was
11 that?
12 A. It was a dispute over property
13 rights.
14 Q. Just so the record is clear, have
15 you ever been sued in any capacity?
16 MR. MASHBERG: I don't understand
17 what you mean by that.
18 MS. SILVERBERG: My previous
19 question I had asked whether or not he
20 had ever been served personally. It's
21 possible he had been served in a
22 different capacity, and I want to make
23 clear he has never been nailed as a
24 defendant in any litigation.
25 MR. MASHBERG: The problem with
CLASSIC REPORTING, INC. (212) 268-2590
19
1 Burns
2 your question is that if it was a suit
3 against a partnership and he was a
4 member of a partnership, you may be
5 asking whether or not he was a
6 defendant by virtue of being a partner.
7 MS. SILVERBERG: That would be
8 encompassed in my question.
9 MR. MASHBERG: Also I don't know,
10 but as an official of the Justice
11 Department, the question is, the
12 capacity?
13 Q. Putting aside the time you spent
14 working at the Justice Department, to your
15 knowledge have you ever been sued in any
16 capacity?
17 A. Yes, I don't believe so.
18 Q. To your knowledge, have you ever
19 been the target of an S.E.C. investigation?
20 A. To my knowledge, I have never
21 been such a target.
22 Q. To your knowledge, have you ever
23 been the target of any government or law
24 enforcement proceeding, investigation?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
20
1 Burns
2 MR. MASHBERG: Wait, hold it.
3 The context is clearly kind of
4 accusatory, but does your question also
5 include any background check for the
6 purposes of gaining employment in a
7 position --
8 MS. SILVERBERG: No.
9 MR. MASHBERG: -- at the Justice
10 Department? I wanted to make that
11 clear.
12 MS. SILVERBERG: I meant to
13 exclude from that answer any
14 investigation to get clearance to serve
15 in the Justice Department.
16 A. Thank you. And top secret
17 clearance when I was in the army and the
18 Justice Department and so forth.
19 Q. What did you do to prepare for
20 today's deposition?
21 A. I would say nothing except that I
22 met with my counsel now 40 minutes ago, a
23 half-hour ago. I had virtually no preparation
24 for this deposition except my formal education
25 and informal education to which I have
CLASSIC REPORTING, INC. (212) 268-2590
21
1 Burns
2 heretofore adverted.
3 Q. You previously mentioned you
4 served as the director of New Valley?
5 A. Yes.
6 Q. When did you begin serving as a
7 director of New Valley?
8 A. I can't give you the precise
9 date, but pretty clearly at the tail end of
10 the, of 1994.
11 Q. How did it come about that you
12 became a director of New Valley?
13 A. I was asked to become a director
14 by then Bennett LeBow and/or Howard Lorber --
15 I would say "and" Howard Lorber, both of them.
16 Q. What were you asked by either Mr.
17 LeBow or Lorber to join the --
18 A. Counsel, it would have been at or
19 about that time, I would say in, I said the
20 tail end, probably November of 1994.
21 Q. At the time that you were
22 approached by either Mr. LeBow or Mr. Lorber,
23 had you known either of those individuals?
24 A. Yes, I had.
25 Q. When was the first time you met
CLASSIC REPORTING, INC. (212) 268-2590
22
1 Burns
2 Bennett LeBow?
3 A. I can't tell you that, simply
4 because my memory is not that good, but I
5 surely have known him for five years or more.
6 Q. Have you known him in a personal
7 or professional capacity?
8 A. He was introduced to me, I will
9 help you, by Howard Lorber with whom I have
10 been acquainted for over 20 years, maybe even
11 longer than that, and I became friendly with
12 him.
13 Q. When, in what capacity did you
14 first meet Mr. Lorber?
15 A. Oh, it's a long time ago and I
16 think that he was a client of our law firm
17 represented by one of my law partners.
18 Q. Have you had a professional
19 relationship with Mr. Lorber through these 20
20 years?
21 A. No, not really, although bits and
22 pieces of my law firm did continue
23 representing him, and then at Proskauer, I
24 think we were retained to do some small things
25 for him.
CLASSIC REPORTING, INC. (212) 268-2590
23
1 Burns
2 Q. Do you have a social relationship
3 with Mr. Lorber?
4 A. I would say yes.
5 Q. Over the past 20 years, have you
6 had any business or financial dealings with
7 Mr. Lorber?
8 A. Other than what I have mentioned,
9 doing some minor things, with the exception of
10 New Valley Corporation, I would say no.
11 Q. Do you or your law firm have any
12 business or professional dealings with any
13 companies that Mr. Lorber is employed with?
14 A. With the exception of New Valley
15 Corporation, I would say no.
16 Q. Do you recall the context in
17 which Mr. Lorber introduced you to Mr. LeBow?
18 A. I think it was a social thing and
19 also -- principally a social kind of a thing.
20 He and Mr. LeBow are long-term close friends.
21 Q. Prior to November 1994, had you
22 had any professional or business dealings with
23 Mr. LeBow?
24 A. Yes, I had.
25 Q. Can you describe those dealings?
CLASSIC REPORTING, INC. (212) 268-2590
24
1 Burns
2 A. My firm, through me and one of my
3 junior partners, was asked to do a discreet
4 research project for Brooke Group, which we
5 did. In addition, we, our firm, my partner
6 Sarah Gold principally is handling some
7 litigations for the Brooke Group as we speak.
8 I think that's the sum and substance of it.
9 There might be some other things, but nothing
10 of such significance that I would talk about
11 them.
12 Q. I think that my question was
13 whether or not you have had any professional
14 dealings, business or professional dealings,
15 with Mr. LeBow. I take it in your answer you
16 included companies with which Mr. LeBow is
17 affiliated?
18 A. Exactly. I have not represented
19 Mr. LeBow personally.
20 Q. Have you or your law firm had any
21 business or professional dealings with Liggett
22 Group?
23 A. No.
24 Q. Would you say that you have a
25 social relationship with Mr. LeBow?
CLASSIC REPORTING, INC. (212) 268-2590
25
1 Burns
2 A. Yes.
3 Q. When Mr. LeBow approached you or
4 I guess Mr. LeBow or Mr. Lorber approach you
5 to see if you would be interested in being a
6 director of New Valley, was that at the time
7 when New Valley was coming out of its
8 bankruptcy?
9 A. Yes, it was.
10 Q. Were you or your firm involved at
11 all in the bankruptcy proceedings?
12 A. The answer is no, but. The but
13 is that quite coincidentally our firm had done
14 some labor work for Western Union in its prior
15 incarnation, and we, and that work went
16 through, continued I think during the
17 bankruptcy, and I say I think because I was
18 not directly involved in it. It really had --
19 I really had nothing to do with it.
20 Q. Do you have any understanding as
21 to why you were approached to join the New
22 Valley board?
23 MR. MASHBERG: Was he told why?
24 MR. LOGAN: Objection to form.
25 MR. MASHBERG: Are you asking him
CLASSIC REPORTING, INC. (212) 268-2590
26
1 Burns
2 to speculate what was in their minds or
3 are you asking him for facts as to what
4 he was told?
5 MS. SILVERBERG: Whether or not
6 he has an understanding as to why he
7 was asked to join the board.
8 MR. MASHBERG: Objection to form.
9 A. I think I do.
10 Q. What is that understanding?
11 A. That someone had made an
12 assessment of my background and credentials
13 and experience and education and thought that
14 I had experience and expertise that would be
15 helpful in constituting a board of substantive
16 and substantial people.
17 Q. Did anyone ever tell you this?
18 A. No, but this is something that
19 one picks up through body language and people
20 don't usually say those things to one another.
21 Q. Did you agree to serve on the New
22 Valley board?
23 A. Yes, I did.
24 Q. Why did you agree to serve on the
25 board?
CLASSIC REPORTING, INC. (212) 268-2590
27
1 Burns
2 A. I thought it would be, you know,
3 an extraordinarily interesting thing to do,
4 and I have high regard for Ben LeBow and for
5 Howard Lorber, and I thought this would be a,
6 to be blunt about it, an exciting and
7 challenging and fun kind of a thing to be
8 engaged in, taking a corporation which was
9 really a shell with a substantial amount of
10 money to start with and to build it into
11 something, and I would like to think of the
12 fact that I was a builder all my life and I
13 thought I would enjoy it.
14 Q. Did anyone else from Proskauer
15 join the New Valley board when it came out of
16 bankruptcy?
17 A. Yes and no. It depends on your
18 definition of what you mean by anyone else
19 from Proskauer. No other lawyer or member of
20 the firm have joined the board, but Henry
21 Beinstein who was employed as our
22 administrative director at the firm, did join
23 the board of New Valley Corporation, not
24 because --
25 MR. MASHBERG: Just answer the
CLASSIC REPORTING, INC. (212) 268-2590
28
1 Burns
2 question.
3 A. Period.
4 Q. Do you know how it came about
5 that he joined the board?
6 A. Yes.
7 Q. How was that?
8 A. He was elected by a class of
9 shareholders.
10 Q. Is he an attorney?
11 A. I do not think so.
12 Q. How often does the New Valley
13 board meet?
14 A. Oh, I would say over the last
15 year, it's been just over a year that I have
16 been a member of the board, we probably met
17 probably eight times, but I would refer you to
18 the records of the corporation.
19 Q. Do you have New Valley board
20 minutes in your files?
21 A. I may have.
22 Q. As a director, do you receive
23 copies of the New Valley board minutes?
24 A. Oh, yes, yes, I do.
25 Q. The meetings of the New Valley
CLASSIC REPORTING, INC. (212) 268-2590
29
1 Burns
2 board that occurred over the past year, were
3 they all regularly scheduled meetings of the
4 board?
5 A. Some were and some weren't.
6 Q. Were there any special meetings
7 of the New Valley board called?
8 A. Yes, I believe there were.
9 Q. How many of those were called?
10 A. I can't tell you.
11 Q. Do you know how many regular
12 meetings, how many regularly scheduled
13 meetings there normally are of the New Valley
14 board per year?
15 A. No, I do not know that.
16 Q. Is there a document that would
17 contain that information?
18 A. I do not know.
19 Q. How long did the meetings usually
20 last?
21 A. I'm thinking back on them, I
22 would say they ranged from half-hour to two
23 hours, maybe a little longer at times.
24 Q. Is there a procedure that's
25 usually followed for the conduct of a New
CLASSIC REPORTING, INC. (212) 268-2590
30
1 Burns
2 Valley board meeting?
3 MR. MASHBERG: I object to the
4 form and also ask that we kind of move
5 on to something that's pertinent to the
6 subject matters of this litigation. I
7 will let you go a little bit more here,
8 but this is really far afield. If you
9 want to ask him a specific question
10 about RJR and a New Valley board
11 meeting, do that.
12 MS. SILVERBERG: I am entitled to
13 get the understanding of how the board
14 meetings are conducted before I go into
15 specific topics.
16 MR. MASHBERG: I don't know how
17 that can conceivably matter, but let's
18 try to move on, please.
19 MR. LOGAN: Objection to form.
20 A. Meeting proceeds with the
21 business at hand for which the meeting was
22 called and then other business, if any, and
23 then just a little chitchat and the meeting is
24 over.
25 Q. Do you regularly receive an
CLASSIC REPORTING, INC. (212) 268-2590
31
1 Burns
2 agenda prior to a meeting?
3 A. I don't remember. I think at
4 times yes and at times the agenda is
5 communicated orally.
6 Q. Following a meeting, do you
7 receive minutes of the meeting?
8 A. Oh, yes.
9 Q. Do those minutes reflect matters
10 that were discussed during the meeting?
11 A. Oh, surely.
12 Q. Do you serve on any committees of
13 the New Valley board?
14 A. I serve on the executive
15 committee.
16 Q. What is the purpose of the
17 executive committee?
18 A. The purpose of the executive
19 committee is to take action, you know, if it's
20 required, because of emergent circumstances or
21 lack of time, between board meetings.
22 Q. How many times has the executive
23 committee met since you have been on the
24 executive committee?
25 A. I would say probably four or five
CLASSIC REPORTING, INC. (212) 268-2590
32
1 Burns
2 times.
3 MR. MASHBERG: Just so the record
4 is clear, I don't know if you got the
5 word that Mr. Burns used earlier, I
6 think it was "emergent," not emergency.
7 Q. Do you serve on any other
8 committees other than the executive committee?
9 A. No.
10 Q. Would that be at any time since
11 you have been on the New Valley board?
12 A. I think that's right.
13 Q. Did there come a time when the
14 New Valley board considered a possible
15 transaction with RJR?
16 MR. MASHBERG: Objection to form.
17 MR. LOGAN: Objection.
18 A. No.
19 Q. Did there come a time when the
20 New Valley board discussed the value of RJR?
21 MR. MASHBERG: Objection to form.
22 MR. LOGAN: Objection.
23 MS. SILVERBERG: Let me withdraw
24 that.
25 Q. Has the New Valley board ever had
CLASSIC REPORTING, INC. (212) 268-2590
33
1 Burns
2 a board meeting since you have been on the
3 board at which RJR was discussed?
4 A. Yes.
5 Q. What was the first such board
6 meeting?
7 A. I could not tell you.
8 MR. MASHBERG: Just so the record
9 is clear, when you say "I could not
10 tell you," you mean you don't recall?
11 A. I don't know. I do not know. I
12 don't remember.
13 Q. Do you keep a personal calendar?
14 A. No, I don't, but one is kept for
15 me.
16 Q. Would that calendar reflect New
17 Valley board meetings?
18 A. It might and might not.
19 Q. Was RJR a subject of discussion
20 at more than one New Valley board meeting?
21 A. Yes, I think the answer is yes.
22 Q. Do you recall what was discussed
23 at the first board meeting at which RJR was
24 discussed?
25 A. No, I do not.
CLASSIC REPORTING, INC. (212) 268-2590
34
1 Burns
2 Q. Do you recall any discussion of a
3 New Valley board -- withdraw that.
4 Do you recall any New Valley
5 board discussion regarding RJR?
6 A. Yes.
7 Q. What is your recollection?
8 A. Very simple. I mean I can't
9 parse it out, you know, first meeting, second
10 meeting, third meeting, but it was a very
11 simple kind of a thing and we discussed the
12 fact that in the opinion of our management,
13 the RJR shareholders were not getting maximum
14 value for their shareholdings, and that if
15 there were a spin-off, a separation of the
16 food company from the tobacco interests at
17 RJR, that shareholder value would be
18 substantially enhanced and unlocked, value
19 would be unlocked for shareholders.
20 Q. Do you have any recollection as
21 to when such a conversation took place?
22 A. No. It would have been --
23 MR. MASHBERG: Don't speculate.
24 A. Okay, no, I have no present
25 recollection of when it took place.
CLASSIC REPORTING, INC. (212) 268-2590
35
1 Burns
2 Q. Do you recall whether or not it
3 took place at the first New Valley board
4 meeting you attended?
5 A. No, I do not, I do not.
6 Q. Do you recall whether or not it
7 took place during the summer months?
8 A. No.
9 Q. Do you recall anything else that
10 was discussed at that board meeting?
11 A. No.
12 Q. Do you recall any other topic
13 that came up that might be able to give you a
14 time of reference as to when this conversation
15 took place?
16 A. No, best bet is to refer to the
17 minutes of the meetings.
18 Q. Do you have the minutes of the
19 meetings?
20 A. I don't know. I think I may
21 have.
22 Q. Would the minutes of the meetings
23 reflect the discussion that was had regarding
24 RJR?
25 MR. MASHBERG: If you know.
CLASSIC REPORTING, INC. (212) 268-2590
36
1 Burns
2 A. I don't know. I'm not going to
3 speculate about that.
4 Q. Was the discussion about RJR a
5 substantive discussion?
6 MR. MASHBERG: Objection to form.
7 MR. LOGAN: Objection.
8 MR. MASHBERG: He just described
9 the discussion.
10 Q. Do you recall how much time was
11 spent discussing RJR at any of the New Valley
12 board meetings?
13 A. No, I do not, but I would say
14 this, that they were really brief updates as
15 opposed to extensive analysis and discussion.
16 Q. Who gave those updates?
17 A. Mr. LeBow and Mr. Lorber and
18 there I would say Mr. LeBow and/or Mr. Lorber.
19 Q. Is there anything, short of the
20 New Valley board minutes, that might refresh
21 your recollection as to these discussions?
22 A. Yes.
23 Q. What is that?
24 A. If one of my fellow directors sat
25 down here and told me that he remembered this
CLASSIC REPORTING, INC. (212) 268-2590
37
1 Burns
2 and that, I might remember.
3 Q. Are you aware of any documents
4 that might exist other than the New Valley
5 board minutes that might be able to refresh
6 your recollection as to this?
7 A. No.
8 Q. Why was it a matter of interest
9 at New Valley as to whether or not RJR
10 shareholders could get enhanced value for
11 their shares?
12 MR. LOGAN: Objection to form.
13 A. The question was whether or not
14 New Valley should make an investment in RJR
15 shares, and that was very relevant to that
16 issue.
17 Q. Did some of the New Valley board
18 discussions then regarding RJR take place
19 before New Valley invested in RJR?
20 MR. MASHBERG: Objection to form.
21 A. I do not remember. I can
22 speculate, but I don't remember precisely. I
23 can make certain deductions obviously, but I
24 don't want to testify as to something I don't
25 have a present, distinct recollection of.
CLASSIC REPORTING, INC. (212) 268-2590
38
1 Burns
2 Q. But did the New Valley board
3 discuss whether or not they should make an
4 investment in RJR?
5 A. Yes.
6 Q. And as part of that analysis,
7 they discussed whether or not RJR share value
8 would go up if RJR did a spinoff of Nabisco?
9 A. Yes.
10 Q. How many meetings -- new
11 question: At how many New Valley board
12 meetings was RJR discussed?
13 A. I don't remember.
14 Q. Was --
15 A. I would tell you more than one.
16 Q. Was it discussed at most of the
17 New Valley board meetings --
18 A. I cannot tell you.
19 MR. LOGAN: She didn't finish the
20 question. You have to let her finish
21 the question.
22 THE WITNESS: I thought she
23 finished it.
24 Q. I think that you were jumping to
25 answer before it finished. The court reporter
CLASSIC REPORTING, INC. (212) 268-2590
39
1 Burns
2 might have a hard time getting the dialogue
3 down.
4 Did the New Valley board ever
5 call a special directors meeting in order to
6 discuss RJR?
7 A. I do not remember.
8 Q. I believe you testified earlier
9 that there were occasions which special
10 meetings of the board of directors were
11 called?
12 A. Yes, yes.
13 Q. Do you remember why those
14 meetings were called?
15 A. No.
16 Q. They could have been called for,
17 to discuss RJR?
18 MR. MASHBERG: Objection.
19 MR. LOGAN: Objection.
20 MR. MASHBERG: Don't speculate.
21 He already answered that question.
22 Q. Do you know that they were -- let
23 me withdraw that.
24 You cannot testify, though, that
25 they were not called to discuss RJR; is that
CLASSIC REPORTING, INC. (212) 268-2590
40
1 Burns
2 correct?
3 MR. MASHBERG: Please, that's an
4 improper question.
5 MR. LOGAN: Objection to form.
6 MR. MASHBERG: He already
7 testified that he didn't know if any of
8 these special meetings were called for
9 the purpose of discussing RJR. That
10 answers your question.
11 Q. Did the executive committee ever
12 meet to discuss RJR?
13 MR. MASHBERG: You mean
14 separately from a board meeting?
15 MS. SILVERBERG: Yes.
16 MR. MASHBERG: For the sole
17 purpose of discussing RJR or
18 encompassed in some discussion they
19 discussed RJR, in that context? Object
20 to the form.
21 Q. Do you recall -- let me withdraw
22 that.
23 Was there a meeting of the
24 executive committee during the past year at
25 which RJR was discussed?
CLASSIC REPORTING, INC. (212) 268-2590
41
1 Burns
2 A. I don't remember. I do not
3 recall, period.
4 Q. Who else was on the executive
5 committee?
6 A. Bennett LeBow and Howard Lorber.
7 (Witness conferred with counsel.)
8 MR. MASHBERG: Why don't you
9 clarify that?
10 THE WITNESS: I will clarify
11 something for you to make it, put it in
12 proper perspective for you. I have not
13 been a member of the executive
14 committee since the inception of my
15 service on the board of New Valley
16 Corporation. I testified that I joined
17 the board sometime I think at the tail
18 end of 1994 and probably November of
19 1994. I did not become a member of the
20 executive committee until maybe three
21 or four months ago and I can't tell you
22 when.
23 Q. Thank you for clarifying that.
24 A. I say, I would have to refer to
25 records because I may be wrong by a month or
CLASSIC REPORTING, INC. (212) 268-2590
42
1 Burns
2 two, I just don't remember.
3 Q. I understand.
4 I believe you testified that
5 there were some New Valley board meetings at
6 which RJR was discussed. Had you personally
7 had any discussions regarding RJR prior to the
8 time at which it was discussed at the board
9 level?
10 MR. MASHBERG: I object to the
11 form.
12 Could you read that back, please?
13 (Record read.)
14 MR. LOGAN: Objection to form.
15 A. Yes.
16 MR. MASHBERG: With people at New
17 Valley?
18 MS. SILVERBERG: Yes.
19 Q. Does your answer remain?
20 A. My answer is yes.
21 Q. When did those meetings take
22 place?
23 MR. MASHBERG: Objection to form.
24 He said discussions. You said
25 discussions.
CLASSIC REPORTING, INC. (212) 268-2590
43
1 Burns
2 Q. Was there one discussion or more
3 than one discussion?
4 A. There was more than one
5 discussion.
6 Q. When did the first such
7 discussion take place?
8 A. In November of 1995, I think.
9 Q. Do you mean November 1994?
10 A. Do I?
11 Q. I'm asking you.
12 A. No, I think in November of 1995.
13 Q. Do you believe that the New
14 Valley board did not discuss RJR prior to
15 November 1995?
16 A. I think that's right. Could be
17 wrong, but that's my present recollection.
18 MS. SILVERBERG: I'm going to ask
19 the court reporter to mark as Burns
20 Exhibit 2, a document produced by
21 Brooke Group bearing Bates No. BGL 8660
22 to 8662.
23 (Document, bearing production
24 Nos. BGL 8660 to 8662, marked
25 Burns Exhibit 2 for
CLASSIC REPORTING, INC. (212) 268-2590
44
1 Burns
2 identification, as of this date.)
3 Q. I'm going to place before you
4 Exhibit No. 2 and ask you whether or not you
5 have ever seen this document?
6 A. I don't believe I have ever seen
7 this document.
8 Q. Turning to the second page, do
9 you see the schedule of New Valley Corporation
10 RJR Nabisco stock purchases and holdings,
11 transactions through November 9, 1995?
12 A. Yes, I do.
13 Q. Does that document refresh your
14 recollection at all as to when it was that the
15 New Valley board began to discuss RJR?
16 A. No, it does not.
17 Q. Going back to the board meetings
18 at which you believe RJR was discussed, have I
19 exhausted your recollection as to what was
20 said to the board regarding RJR?
21 A. I think you have. My memory
22 could be jogged, I suppose, but no, I can't
23 recall anything further now.
24 Q. Who led the discussions of RJR?
25 MR. MASHBERG: Objection to form.
CLASSIC REPORTING, INC. (212) 268-2590
45
1 Burns
2 A. I think I already answered that.
3 Q. Was that --
4 A. The answer is I said Mr. LeBow
5 and/or Mr. Lorber.
6 Q. Did the board ever receive a
7 report or presentation from any financial
8 advisor regarding RJR?
9 A. Yes. I think at some point we
10 received a fairness opinion having to do with
11 arrangements between RJR -- arrangements
12 between New Valley Corporation and Brooke
13 Group.
14 Q. Did New Valley receive any other
15 report or presentation from any financial
16 advisor?
17 MR. MASHBERG: Regarding RJR?
18 Q. Regarding RJR.
19 A. I don't remember, but if you
20 showed me documents, maybe that would refresh
21 my recollection. At the moment, I can't think
22 of any.
23 Q. Did the New Valley board ever
24 receive any presentation from a legal adviser
25 regarding RJR?
CLASSIC REPORTING, INC. (212) 268-2590
46
1 Burns
2 A. Yes.
3 Q. Who was that legal adviser?
4 A. Sullivan & Cromwell, the law firm
5 of Sullivan & Cromwell -- excuse me, my
6 testimony is incorrect. The answer to your
7 question is no, we did not. So far as I can
8 remember now, we did not receive any legal
9 opinion as such. We did receive legal advice
10 from time to time.
11 Q. Did you receive legal advice from
12 any law firm regarding RJR?
13 MR. MASHBERG: "You" meaning?
14 Q. Meaning the New Valley board.
15 A. Yes.
16 Q. From whom did you receive that
17 advice?
18 A. Would have come from Michael
19 Hirschfeld, a member of the firm of Milbank
20 Tweed.
21 Q. Did the New Valley board receive
22 legal advice regarding RJR from anyone other
23 than the law firm of Milbank Tweed?
24 A. Not that I can think of as we sit
25 here.
CLASSIC REPORTING, INC. (212) 268-2590
47
1 Burns
2 Q. Did the New Valley board receive
3 legal advice from Sullivan & Cromwell
4 regarding the Investment Company Act of 1940?
5 A. Yes. That was the basis of my
6 confusion earlier.
7 Q. Did the New Valley board's
8 discussions regarding RJR involve a possible
9 spin-off of Nabisco?
10 MR. MASHBERG: Objection to form.
11 MR. LOGAN: Objection to the
12 form.
13 MS. SILVERBERG: What's the
14 objection?
15 MR. MASHBERG: Asked and
16 answered.
17 A. Yes.
18 Q. Did the board discussions, the
19 New Valley board discussions regarding RJR
20 involve a possible merger of RJR with Liggett
21 Group?
22 A. No.
23 Q. Did the board at any time -- new
24 question: Did the New Valley board at any
25 time discuss a possible merger of RJR or any
CLASSIC REPORTING, INC. (212) 268-2590
48
1 Burns
2 of its subsidiaries with Liggett?
3 A. Sort of a misleading question.
4 The answer is really no, but at some point, we
5 were apprised of the fact -- I'm saying this
6 to help you -- of the fact that there had been
7 some earlier discussion between Mr. LeBow and
8 the Brooke Group and people at RJR concerning
9 a possible amalgamation, but that was all
10 ancient history.
11 MS. SILVERBERG: Can you read
12 back his answer, please.
13 (Record read.)
14 Q. When you said "we" in your
15 answer, I assume you mean the New Valley
16 board?
17 A. No -- maybe yes and maybe no.
18 It's hard for me to remember where I heard
19 this or heard that, but I think that my best
20 recollection is that the New Valley board had
21 been -- at some point -- had been apprised of
22 that. I'm not 100 percent sure of that.
23 Q. Were you apprised of this other
24 than at a New Valley board meeting?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
49
1 Burns
2 Q. Who apprised you of this?
3 A. I read about it in the consent
4 solicitation material.
5 Q. Did anybody ever tell you that
6 Brooke Group, that there had been discussions
7 between Brooke Group and RJR?
8 A. No, not prior to the time I read
9 it in the consent solicitation material.
10 Q. When did you read this in the
11 consent solicitation material?
12 A. Well, you can tell me if you look
13 at the date of it, that would tell us.
14 Q. Did you receive drafts of the
15 consent solicitation material?
16 A. If I did, I would have received
17 it the day before, so that date is pretty
18 solid.
19 Q. That date meaning?
20 A. The date on the consent
21 solicitation material.
22 Q. The final consent solicitation?
23 A. Yes.
24 Q. You do not recall whether or not
25 the board was apprised of these discussions
CLASSIC REPORTING, INC. (212) 268-2590
50
1 Burns
2 when they occurred?
3 MR. MASHBERG: He just --
4 A. My best recollection is that the
5 answer to that would be no, because I think
6 I've testified and if I didn't, I meant to,
7 that when I read about this in the consent
8 solicitation material, it was the first time I
9 had ever heard about it.
10 Q. I apologize if I repeat myself.
11 A. That's okay.
12 Q. I want to make sure that the
13 record is clear on this. Was there any time
14 during which the New Valley board discussed a
15 possible merger between Liggett and RJR or any
16 subsidiary of RJR in connection with any
17 transaction?
18 A. No, I don't think so.
19 Q. Just so the record is clear, when
20 I say discussed, it does not need to be a
21 lengthy discussion, even a passing reference
22 or any note of such a transaction. Is your
23 answer the same?
24 A. Yes. It's my best recollection
25 as we sit here today.
CLASSIC REPORTING, INC. (212) 268-2590
51
1 Burns
2 Q. At any time during New Valley's
3 discussion of a possible spin-off of Nabisco,
4 did LeBow discuss possible obstacles to upset
5 the spin-off?
6 A. Yes.
7 Q. What were those obstacles?
8 A. Thank you for refreshing my
9 recollection.
10 Q. If I keep asking, sometimes it
11 happens.
12 A. It happens. As I remember it,
13 there were three obstacles that had been put
14 forward by the RJR management. One obstacle
15 was that there might be some liability
16 attached to a spin-off, that someone could
17 claim that the spin-off was a transfer of
18 assets and fraud of creditors.
19 A second objection was that it,
20 that there might be tax consequences of some
21 sort, adverse tax consequences of shareholders
22 of RJR Nabisco.
23 And the third objection was
24 something about the fact that the management
25 of RJR Nabisco had told its bankers and
CLASSIC REPORTING, INC. (212) 268-2590
52
1 Burns
2 bondholders, I think, that they weren't going
3 to do this for a while.
4 That's my best recollection.
5 Q. Were these three issues discussed
6 by Mr. LeBow?
7 A. Yes, briefly.
8 Q. I believe the first issue you
9 mentioned was liability attached to a
10 spin-off?
11 A. Potential liability.
12 Q. Potential liability to whom?
13 A. To directors.
14 MR. MASHBERG: Don't -- remember
15 the question is what was said. You are
16 not here to talk about what your
17 opinion is or legal opinion, just what
18 was said.
19 A. Yes. What was said about the
20 potential -- who would be potentially liable?
21 Q. Yes?
22 A. The directors of RJR.
23 Q. Did Mr. LeBow or anyone else say
24 that RJR believed that there would be possible
25 liability?
CLASSIC REPORTING, INC. (212) 268-2590
53
1 Burns
2 A. Yes.
3 Q. Did Mr. LeBow say the basis for
4 that statement?
5 A. Yes. I mentioned it earlier,
6 that creditors of RJR Nabisco could take the
7 position that the spin-off of the food company
8 was a transfer of assets and fraud of
9 creditors.
10 Q. I understand that, but did Mr.
11 LeBow explain his reasoning, the reason for
12 his belief that RJR believed that there could
13 be a liability of the directors?
14 MR. MASHBERG: Objection to form.
15 MR. LOGAN: Objection to form.
16 MR. MASHBERG: Did he explain why
17 RJR --
18 MS. SILVERBERG: No. Let me ask
19 another question.
20 Q. Did Mr. LeBow say that RJR
21 management was concerned that there would be
22 personal liability for directors?
23 A. Repeat the question, please.
24 (Record read.)
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
54
1 Burns
2 Q. Did he say that RJR management
3 told him that they were concerned that there
4 would be personal liability for directors?
5 A. I don't think he did.
6 Q. Did he say what the basis was for
7 his belief that RJR management was concerned
8 that there would be personal liability for
9 directors?
10 A. Well, I think that --
11 MR. MASHBERG: Just answer the
12 question.
13 A. Yes.
14 MR. MASHBERG: She is asking you
15 did he say the basis?
16 A. Yes.
17 Q. What did he say?
18 A. I think just roughly that there
19 had been statements in the press by members of
20 management to that effect.
21 Q. Did Mr. LeBow discuss with the
22 board -- withdraw that question.
23 Did Mr. LeBow tell the New Valley
24 board that he believed a spin-off, an
25 immediate spin-off, was possible
CLASSIC REPORTING, INC. (212) 268-2590
55
1 Burns
2 notwithstanding these three issues?
3 A. Yes.
4 Q. Did he explain why he held that
5 belief?
6 A. Yes.
7 Q. What did he explain?
8 A. He said with respect to the fear
9 that there might be liability on the part of
10 directors in connection with a spin-off, that
11 that was an insubstantial issue, and that in
12 order for there to be any kind of a liability,
13 the company, RJR Nabisco, would have to be
14 insolvent in order to have a transfer in the
15 form of creditors and that the company was
16 anything but insolvent. Very strong company.
17 And that the objection of the directors in
18 this regard was really unfounded.
19 Q. Did he address the other two
20 issues?
21 A. Yes. He said that with respect
22 to the tax issue, that that, too, was wholly
23 insubstantial, and that he was very clear that
24 this would be a tax-free distribution of
25 securities. With respect to the third issue
CLASSIC REPORTING, INC. (212) 268-2590
56
1 Burns
2 which you are going to ask me about, he told
3 us that there was no real legal and binding
4 commitment on the part of the board to defer
5 or delay the spin-off, but that this was some
6 sort of a precatory notion that they had
7 expressed to bondholders or creditors, and
8 that the -- bankers, and that it was wholly
9 insubstantial.
10 Q. How long did this discussion
11 last?
12 A. I can't tell you. It was not a
13 long, lengthy thing.
14 Q. Do you have, having refreshed
15 your recollection with this conversation, do
16 you now have a better or do you have any
17 recollection as to when this board discussion
18 took place?
19 A. No, but --
20 MR. MASHBERG: The answer is no,
21 the answer is no.
22 A. The answer is no.
23 Q. Did the New Valley board take any
24 board action with respect to RJR?
25 A. I don't remember.
CLASSIC REPORTING, INC. (212) 268-2590
57
1 Burns
2 Q. Did the New Valley board
3 authorize New Valley purchases of RJR stock?
4 A. At some point, but I can't
5 remember the sequence, yes.
6 Q. Would that board authorization
7 have taken place before New Valley actually
8 began to purchase RJR stock?
9 MR. LOGAN: Objection.
10 MR. MASHBERG: Don't speculate.
11 A. I cannot speculate based on my
12 last answer.
13 Q. Can you now recall anything else
14 that was discussed with respect to RJR?
15 MR. MASHBERG: Objection to form.
16 MS. SILVERBERG: Let me rephrase
17 the question.
18 Q. Can you now recall any other New
19 Valley board meetings?
20 A. No.
21 Q. Regarding RJR?
22 A. No, but I think I testified
23 earlier that from time to time, there would be
24 an update as to what was going on, but that's
25 about it.
CLASSIC REPORTING, INC. (212) 268-2590
58
1 Burns
2 Q. Were any materials handed out at
3 any of these New Valley board meetings
4 regarding RJR?
5 MR. LOGAN: Objection to form.
6 MS. SILVERBERG: Let me rephrase
7 that.
8 Q. Were any board materials
9 distributed regarding RJR?
10 A. I honestly do not remember.
11 Q. If board materials were
12 distributed, would you have kept them?
13 MR. MASHBERG: Objection to form.
14 MR. LOGAN: Objection to form.
15 A. Yes, if I had, if I had actually
16 been handed them. There were some meetings
17 that I came in late or early and had to leave
18 early, but if I had actually received
19 something, I would have retained it.
20 Q. Is it your practice to retain
21 board materials that you are handed?
22 A. Oh, yes, yes, it is.
23 Q. Would those board materials have
24 gone into your New Valley folder?
25 A. Oh, absolutely.
CLASSIC REPORTING, INC. (212) 268-2590
59
1 Burns
2 Q. I believe you testified earlier
3 that the first discussion that you recall
4 regarding RJR was a discussion in November of
5 1995; is that correct?
6 MR. LOGAN: Objection to form.
7 A. Yes, and when I say November, due
8 to the passage of time, it could have been
9 October. Around there.
10 Q. I just want to confirm now that
11 we have refreshed your recollection somewhat
12 on the content of some of the board
13 discussions that you believe that that
14 discussion that you had took place before the
15 board discussions regarding RJR?
16 MR. LOGAN: Objection to form.
17 A. Yes, that's -- if I understand
18 the question, I think that was my testimony.
19 I think that's correct.
20 Q. Now this first discussion that
21 you had regarding RJR, with whom did you have
22 it?
23 A. I don't remember whether it was
24 with Ben LeBow or Howard Lorber or both. My
25 best recollection is that vague, but it was
CLASSIC REPORTING, INC. (212) 268-2590
60
1 Burns
2 with Lorber, but didn't much matter, one or
3 the other.
4 Q. Where was this discussion?
5 A. It was a telephone conversation.
6 Q. Who called whom?
7 A. I was called by whoever it was
8 that called, whichever one called me.
9 Q. And what did they say?
10 A. They asked me if I would meet
11 with Michael Hirschfeld and have him brief me
12 on this whole RJR Nabisco situation, because
13 they would like to chat with me about it and
14 they would like him to bring me up-to-date.
15 Q. Did you have an understanding at
16 that time as to what the RJR Nabisco situation
17 was?
18 A. No, not really anyway other than
19 what you read in the papers or something.
20 MS. SILVERBERG: Let's take a
21 quick break.
22 (Recess taken.)
23 MS. SILVERBERG: Could you just
24 read back the last answer?
25 (Record read.)
CLASSIC REPORTING, INC. (212) 268-2590
61
1 Burns
2 Q. Did you ask either Mr. LeBow or
3 Mr. Lorber what the RJR Nabisco situation was?
4 A. I don't remember. It was a brief
5 conversation and how much they told me or
6 didn't tell me, I simply do not recall at the
7 moment.
8 Q. Could you tell from the
9 conversation whether they assumed that you
10 knew what the RJR Nabisco situation was?
11 MR. MASHBERG: Objection, calls
12 for speculation.
13 MR. LOGAN: Objection to form.
14 Q. Did they say anything that led
15 you to believe that they -- let me rephrase
16 that. Did they explain to you what the RJR
17 Nabisco situation was?
18 A. I don't think so. Not in any
19 great -- very brief conversation.
20 Q. When was the next conversation
21 you had regarding -- with Mr. Lorber or LeBow?
22 MR. LOGAN: About anything?
23 Q. Regarding RJR?
24 A. I had a conversation, my next
25 conversation on the subject was with Mr.
CLASSIC REPORTING, INC. (212) 268-2590
62
1 Burns
2 LeBow, of those two people, and it may have
3 been a week or two weeks thereafter, somewhere
4 in that time frame. Again, my recollection is
5 very hazy and I can't swear that it was two
6 weeks and not three weeks or one week and not
7 days, I don't remember.
8 Q. During that first conversation,
9 did you agree to meet with Mr. Hirschfeld?
10 A. Oh, yes.
11 Q. Did you set up a time during that
12 conversation or did you agree to call Mr.
13 Hirschfeld?
14 MR. MASHBERG: Objection to form.
15 Q. During that conversation --
16 A. Neither one.
17 Q. Did they ask you to contact Mr.
18 Hirschfeld?
19 A. No.
20 Q. Did they say that Mr. Hirschfeld
21 would be in contact with you?
22 A. Yes.
23 Q. Did Mr. Hirschfeld call you?
24 A. Yes, he did.
25 Q. When did Mr. Hirschfeld call you?
CLASSIC REPORTING, INC. (212) 268-2590
63
1 Burns
2 A. Shortly thereafter.
3 Q. Before Mr. Hirschfeld called you,
4 did you discuss RJR with anybody?
5 A. No.
6 Q. After --
7 MR. LOGAN: Other than what he
8 already testified to?
9 MS. SILVERBERG: I don't think he
10 testified to anything happening between
11 that first phone call and the call from
12 Mr. Hirschfeld.
13 MR. LOGAN: I don't think your
14 question was so limited, but that's
15 fine.
16 Q. Following that conversation, did
17 you do any research on RJR Nabisco?
18 A. No.
19 Q. Did you do --
20 A. When you say the first
21 conversation?
22 Q. With Mr. Lorber and Mr. LeBow?
23 A. No.
24 Q. Did you do any follow-up at all
25 from that first conversation with Mr. Lorber
CLASSIC REPORTING, INC. (212) 268-2590
64
1 Burns
2 and Mr. LeBow?
3 MR. MASHBERG: Objection to form.
4 MR. LOGAN: Objection.
5 MR. MASHBERG: What do you mean
6 by follow-up?
7 Q. Did you take any action at all
8 with respect to RJR following that first phone
9 call with Mr. Lorber and Mr. LeBow?
10 MR. MASHBERG: Objection to form.
11 MR. LOGAN: Objection to form.
12 A. Yes.
13 Q. What did you do?
14 A. I took a phone call from Mr.
15 Hirschfeld and agreed to meet with him.
16 Q. What did Mr. Hirschfeld say when
17 he called -- during your first phone
18 conversation with Mr. Hirschfeld, what did Mr.
19 Hirschfeld say?
20 MR. MASHBERG: Objection to the
21 form and also -- go ahead.
22 A. I do not remember.
23 MR. LOGAN: We object and we
24 direct the witness not to disclose the
25 substance of confidential
CLASSIC REPORTING, INC. (212) 268-2590
65
1 Burns
2 attorney-client communications.
3 Q. Did you understand that Mr.
4 Hirschfeld was your counsel at that time?
5 MR. LOGAN: Mr. Hirschfeld is
6 counsel to New Valley Corporation.
7 A. He is not my counsel, he was
8 counsel to New Valley Corporation and its
9 board of directors of which I was a member.
10 Q. How long has Mr. Hirschfeld been
11 counsel to New Valley Corporation?
12 A. I don't know.
13 Q. Did Mr. Hirschfeld, did that
14 conversation with Mr. Hirschfeld involve --
15 let me withdraw that.
16 Were you seeking legal advice
17 from Mr. Hirschfeld at the time he called you?
18 A. I wasn't seeking it. He was
19 giving it.
20 MR. LOGAN: Objection to the
21 form.
22 Q. Was Mr. Hirschfeld giving legal
23 advice to you during that conversation?
24 A. Yes, he was.
25 Q. Did you discuss anything with Mr.
CLASSIC REPORTING, INC. (212) 268-2590
66
1 Burns
2 Hirschfeld during that conversation that would
3 not be considered legal advice?
4 MR. LOGAN: Objection to form.
5 MR. MASHBERG: First of all --
6 A. I don't understand your question.
7 Let me share with you my difficulty so I can
8 make it easier for you. I don't know what you
9 mean when you say that first conversation.
10 Q. You said that Mr. Hirschfeld
11 phoned you approximately a week after your
12 conversation with Mr. Lorber and Mr. LeBow?
13 MR. MASHBERG: He didn't.
14 A. I didn't specify the week.
15 Q. I believe you said it was
16 approximately a week or so?
17 A. Give or take, I would have no way
18 of remembering that, yes.
19 And let me just make it clear to
20 you, my conversation with him on the telephone
21 was very brief indeed. It was for the purpose
22 only of scheduling a meeting.
23 Q. Did you schedule a meeting with
24 Mr. LeBow?
25 A. Yes, we did.
CLASSIC REPORTING, INC. (212) 268-2590
67
1 Burns
2 Q. When did you schedule a meeting
3 for?
4 A. Shortly thereafter. Again, I
5 cannot give you a time frame.
6 Q. Where was the meeting to be held
7 with him?
8 A. At my office.
9 Q. Who attended that meeting?
10 A. Mr. Hirschfeld and me.
11 Q. Did anyone else attend?
12 A. I don't recall anyone else being
13 present.
14 Q. Did anyone send you information
15 regarding RJR prior to that meeting?
16 A. No.
17 Q. Between the time Mr. Hirschfeld
18 called and the time of that meeting?
19 A. No, no one did.
20 Q. Did you speak to anyone about RJR
21 between the time of your first conversation
22 with Mr. Hirschfeld and your first meeting?
23 A. I don't recall speaking to anyone
24 else.
25 Q. Did you do anything to prepare
CLASSIC REPORTING, INC. (212) 268-2590
68
1 Burns
2 for that meeting with Mr. Hirschfeld?
3 A. No, not that I remember.
4 Q. How long did that meeting last?
5 A. Oh, I would say that the meeting
6 lasted a good half-hour, 40 minutes. Could
7 have been an hour.
8 Q. What was discussed at that
9 meeting?
10 MR. LOGAN: Objection. Direct
11 the witness not to answer on the
12 grounds of attorney-client privilege.
13 Q. Did Mr. Hirschfeld give you any
14 written materials during that meeting?
15 A. No, he did not.
16 Q. Was anyone present at any point
17 during that meeting?
18 A. I don't recall.
19 MR. LOGAN: Other than --
20 Q. Other than yourself and Mr.
21 Hirschfeld?
22 A. I don't recall whether anyone
23 else was present.
24 Q. Did you discuss that meeting with
25 anyone?
CLASSIC REPORTING, INC. (212) 268-2590
69
1 Burns
2 A. Yes.
3 Q. Who did you discuss that meeting
4 with?
5 A. Thereafter had the occasion to
6 discuss it with Mr. LeBow.
7 Q. Did you discuss that meeting with
8 anyone else?
9 A. I don't recall discussing it with
10 anyone else at around that time frame.
11 Q. During any time frame?
12 A. I just don't recall ever
13 discussing the meeting with anybody.
14 Q. Following that meeting with Mr.
15 Hirschfeld, did you agree to meet with him at
16 a later date?
17 A. No.
18 Q. What was the next action that you
19 took with respect to RJR following your
20 meeting with Mr. Hirschfeld?
21 MR. LOGAN: Objection to form.
22 A. I took no action.
23 Q. Did you meet with Mr. LeBow or
24 Mr. Lorber following that meeting with Mr.
25 Hirschfeld?
CLASSIC REPORTING, INC. (212) 268-2590
70
1 Burns
2 A. Yes, I did.
3 Q. Just trying to pin down, do you
4 have a recollection as to when that meeting
5 with Mr. Hirschfeld was?
6 A. I think I have put it in the time
7 frame of November or October of 1995.
8 Q. Following that meeting you said
9 you met with Mr. LeBow?
10 A. Yes, I did.
11 Q. Where did you meet with Mr.
12 LeBow?
13 A. I met with him at the Rihga Hotel
14 in the 50s on the West Side of New York and we
15 met for a glass of wine.
16 Q. How long following your meeting
17 with Mr. Hirschfeld did this meeting with
18 LeBow take place?
19 A. I cannot tell you that. But it
20 was shortly thereafter is what I testified to.
21 Whether it was days or a week, I just don't
22 remember.
23 Q. Did anyone else attend other than
24 you and Mr. LeBow?
25 A. No, it was just the two of us.
CLASSIC REPORTING, INC. (212) 268-2590
71
1 Burns
2 Q. What was discussed at this
3 meeting?
4 MR. MASHBERG: I would just
5 caution you in answering the question
6 not to relate anything that was
7 discussed between you and Mr.
8 Hirschfeld, not to disclose any
9 attorney-client communications with Mr.
10 Hirschfeld when you relate what was
11 discussed at the meeting.
12 A. The purpose of the meeting was
13 for Mr. LeBow to seek my advice and my opinion
14 as to whether or not it would be sensible for
15 him to make a substantial investment in RJR
16 Nabisco and whether it would be sensible for
17 him to try to urge shareholders to unlock
18 shareholder value by dividing the company into
19 tobacco and food. That was the purpose of the
20 meeting. He wanted my advice. I would use
21 the word "counsel," but he wasn't seeking
22 legal counsel. He was seeking business
23 counsel. He wanted to talk with me.
24 Q. To the best of your recollection,
25 this conversation took place somewhere in
CLASSIC REPORTING, INC. (212) 268-2590
72
1 Burns
2 October, November 1995?
3 A. Yes, in that time frame. If we
4 could find the starting point, then we could
5 logically go forward, but it's in that area.
6 Q. Did you know whether or not Mr.
7 LeBow had already made an investment in RJR
8 Nabisco stock?
9 A. No.
10 Q. No, he did not or no, you don't
11 know?
12 A. No, I don't know which answers
13 your question. And I do not remember whether
14 at that meeting he apprised me of the fact
15 that he had or he hadn't. I don't recall the
16 subject coming up, to be honest with you.
17 MR. MASHBERG: Just answer her
18 question.
19 Q. Had New Valley made any
20 investment in RJR Nabisco stock?
21 A. I do not know.
22 Q. During this conversation with Mr.
23 LeBow --
24 A. When I say I do not know, I do
25 not remember.
CLASSIC REPORTING, INC. (212) 268-2590
73
1 Burns
2 Q. During this conversation with Mr.
3 LeBow, did Mr. LeBow discuss the possibility
4 of merging Liggett with RJR or any of its
5 subsidiaries?
6 A. Absolutely not, no.
7 Q. Did you discuss anything else at
8 this meeting?
9 A. I'm sure we may have, like the
10 quality of the wine and things like that.
11 Q. Do you recall anything else that
12 was discussed at the meeting?
13 A. No. Essentially it was a short
14 meeting and he really wanted to pick my brain
15 and find out what I thought about this.
16 Q. What did you tell him?
17 A. I told him that I thought it was
18 a good idea and that while he had been a
19 controversial figure, that I thought that his
20 recent successes really qualified him to
21 undertake this project, this program, and I
22 encouraged him to do it. I encouraged him
23 very strongly to go forward.
24 Q. When you say you encouraged him
25 to go forward, to go forward with what?
CLASSIC REPORTING, INC. (212) 268-2590
74
1 Burns
2 A. With acquiring, making an
3 investment in RJR Nabisco and in undertaking
4 to get the ensconced management to divide the
5 company into tobacco and food.
6 Q. Did you discuss what actions Mr.
7 LeBow might take in order to get management to
8 divide the tobacco and food companies?
9 A. No, we didn't. We didn't get
10 into any mechanics or procedure.
11 Q. Did you discuss a possible
12 consent solicitation?
13 A. My present recollection is that
14 we did not.
15 Q. Did you discuss a proxy fight?
16 A. I don't think we -- as I say,
17 there was no real discussion of mechanics or
18 procedure.
19 Q. Was there any discussion of
20 getting other investors to invest in RJR?
21 A. No.
22 Q. Did you take any notes of this
23 meeting?
24 A. No.
25 Q. Did Mr. LeBow take any notes of
CLASSIC REPORTING, INC. (212) 268-2590
75
1 Burns
2 this meeting?
3 A. No.
4 Q. Did this meeting take place
5 before or after any of the New Valley board
6 meetings that we discussed earlier today at
7 which RJR was discussed?
8 A. I believe that this took place
9 before.
10 Q. How long did this meeting last?
11 A. I would say it lasted half-hour,
12 40 minutes.
13 Q. Did you discuss this meeting with
14 anyone?
15 A. I don't recall discussing it with
16 anyone.
17 Q. Did you, during this meeting, did
18 you schedule a future meeting with Mr. LeBow
19 or Mr. Lorber?
20 A. No.
21 Q. Have I exhausted your
22 recollection of everything that was discussed
23 at that meeting?
24 A. At the moment my present
25 recollection is pretty well exhausted, yes.
CLASSIC REPORTING, INC. (212) 268-2590
76
1 Burns
2 Q. Did you discuss any of the, any
3 obstacles to a possible spin-off of Nabisco
4 from RJR?
5 A. We may have. We may have. I
6 don't remember honestly, but that may have
7 come up. So you have indeed exhausted my
8 recollection.
9 Q. At any time did the New Valley
10 board discuss a possible merger of Liggett
11 with any other company?
12 MR. MASHBERG: I think you asked
13 him that question before.
14 MS. SILVERBERG: I asked whether
15 or not they discussed a merger with RJR
16 or any of its subsidiaries.
17 MR. MASHBERG: I stand corrected.
18 A. Never was privy to any such
19 discussion.
20 Q. Did you have any discussions
21 outside of the New Valley board room or not in
22 the context of the New Valley board regarding
23 a possible merger between Liggett and any
24 other company?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
77
1 Burns
2 Q. What was the next conversation or
3 discussion you had with anybody regarding RJR
4 following your meeting with Mr. LeBow at the
5 Rihga Hotel?
6 A. I'm not sure, but I think, my
7 present recollection is the next time I
8 addressed this issue at all was I had a
9 telephone call from Mr. LeBow and Mr. Lorber
10 both.
11 Q. Do you recall when this phone
12 call was?
13 A. I would fix it at mid-November
14 1995.
15 Q. What was discussed during that
16 phone call?
17 A. I don't remember, but it was, the
18 phone call had to do with matters other than
19 RJR Nabisco. We were discussing something
20 else. I don't remember what it was.
21 Q. Was there any discussion during
22 this conversation of RJR?
23 A. Yes, there was.
24 Q. What was discussed?
25 A. In passing, en passant, Mr. LeBow
CLASSIC REPORTING, INC. (212) 268-2590
78
1 Burns
2 and/or Mr. Lorber or both, I forget which one,
3 said "Incidentally, Arnie, we are putting
4 together a slate of directors for the RJR
5 situation in the event that there's no
6 spin-off, and we want you to know that we have
7 not asked you to be on the slate. I just
8 wanted you to understand that."
9 Q. Was this the first time that you
10 heard that they were putting together a slate
11 of directors?
12 A. Yes.
13 Q. Did they say during this phone
14 call that it was not yet certain that the
15 slate of candidates will indeed run for
16 election at the next RJR annual meeting?
17 A. My understanding, I don't
18 remember what was said precisely, my
19 understanding was that this was a shadow slate
20 in the event that certain things didn't
21 happen.
22 Q. But it was not a certainty at the
23 time that the slate would in fact run for
24 election?
25 A. That's right, that's right.
CLASSIC REPORTING, INC. (212) 268-2590
79
1 Burns
2 Q. Has there been a determination
3 yet as to whether or not that slate will run
4 for election?
5 A. So far as I know, the present
6 plan is that they will not run unless our
7 calculation was wrong and the RJR board
8 refuses to make the spin-off even if
9 shareholders want it.
10 Q. Was anything else discussed
11 during this conversation about RJR?
12 A. Yes.
13 Q. What was that?
14 A. Well, they explained to me why
15 they did not ask me to join the slate.
16 Q. Why was that?
17 A. They said they did it out of
18 respect for me and out of my, what might be a
19 sensitive position, they said that they fully
20 expected that I might be a candidate for
21 Attorney General of the United States should
22 we have a new Republican administration after
23 the November 1996 elections, and that they as
24 my friends felt that it might be politically
25 incorrect to be associated with a tobacco
CLASSIC REPORTING, INC. (212) 268-2590
80
1 Burns
2 company.
3 MR. LOGAN: Off the record.
4 (Discussion off the record.)
5 Q. Did Mr. LeBow or Mr. Lorber give
6 you any other reason as to why they were not
7 going to put you on the slate?
8 A. No, that was it.
9 Q. Was there anyone else on this
10 phone call?
11 A. No.
12 Q. Did you discuss anything else on
13 this phone call regarding RJR?
14 A. Yes.
15 Q. What else did you discuss?
16 A. I just said to them that I
17 genuinely appreciated their concern for me but
18 that they should know me well enough to know
19 that that's not how my mind works, and that
20 they are my good friends and I have high
21 regard and respect for both of them, and that
22 my initial reaction is to want to be involved
23 with them on this project, but I would have to
24 think about it, you know, and they were, you
25 know, very happy to hear that and I said I
CLASSIC REPORTING, INC. (212) 268-2590
81
1 Burns
2 would think about it.
3 Q. Did they mention the names of any
4 other candidates who would be on the slate?
5 A. At some point I learned of course
6 who they were, but I don't think that was
7 mentioned on this occasion. I could be wrong,
8 but certainly they didn't give me a whole list
9 of names and I don't think they really
10 mentioned it, to be honest with you.
11 Q. Why did you want to be involved
12 with this?
13 A. I just explained it to you. I am
14 an active lawyer, practicing law for 43 years,
15 and this is, this seemed to be a challenging
16 project, one that had intrinsic merit, and as
17 I said, if you had called me and asked me, I
18 would have said no, but these people were
19 friends of mine and they asked me, they wanted
20 me, and were really reticent about asking me
21 is what it amounted to.
22 Q. When you said an interesting
23 project, what did you have in mind as the
24 project?
25 A. Well, I mean I saw instantly that
CLASSIC REPORTING, INC. (212) 268-2590
82
1 Burns
2 there was merit in this notion that the value
3 of shareholders' investment would be enhanced
4 mightily if the two aspects of this company
5 were divided.
6 Q. On what did you base that
7 opinion?
8 A. It was based on some reading I
9 had done. It was based on my conversation
10 with Michael Hirschfeld. It was based on my
11 conversation with Ben LeBow which had taken
12 place prior to this.
13 Q. Did you --
14 A. And, you know, Michael --
15 MR. MASHBERG: Don't go into --
16 A. I'm not going to go into what he
17 said, but he is a very logical, coherent,
18 persuasive, articulate human being and was
19 able to, you know, to give me the lay of the
20 land which I built on when I met with Ben and
21 so forth.
22 MS. SILVERBERG: Off the record.
23 (Discussion off the record.)
24 Q. Did your opinion take into
25 account the possible -- the potential
CLASSIC REPORTING, INC. (212) 268-2590
83
1 Burns
2 obstacles that were discussed by Mr. LeBow at
3 the New Valley board meeting?
4 A. Again, I don't want to confuse
5 you or confuse myself. As I sit here now, I'm
6 not at all sure there was any such discussion
7 prior to this, prior to this tete-a-tete I'm
8 describing to you.
9 Q. Were you aware of these potential
10 obstacles?
11 A. Absolutely.
12 Q. At the time you had this
13 conversation with Mr. Lorber and Mr. LeBow?
14 A. Yes, I was.
15 Q. Did you take into account in your
16 opinion the merits of the potential obstacles?
17 A. I certainly did.
18 Q. Did you conclude that these
19 obstacles would not be obstacles to a
20 spin-off?
21 A. That's my conclusion then and
22 now.
23 Q. On what do you base that?
24 A. Years of experience and common
25 sense.
CLASSIC REPORTING, INC. (212) 268-2590
84
1 Burns
2 Q. Have you done any research into
3 the matter?
4 MR. MASHBERG: Objection to form.
5 A. No.
6 Q. Have you spoken with any
7 financial advisers on the issue?
8 A. No, other than people who are on
9 the New Valley board.
10 Q. Have you spoken to any legal
11 advisers on the issue?
12 MR. MASHBERG: Other than Mr.
13 Hirschfeld?
14 Q. Other than Mr. Hirschfeld?
15 A. No. Not that I can remember. I
16 can't think of any at the moment.
17 Q. We have talked about this concept
18 of a spin-off of Nabisco. When we talk about
19 this concept, do you envision an immediate
20 spin-off of Nabisco, or eventual? I want to
21 clarify what we are talking about here.
22 MR. MASHBERG: Objection to form.
23 MR. LOGAN: Objection to form.
24 A. I really can't answer that
25 question. Let me put it in perspective for
CLASSIC REPORTING, INC. (212) 268-2590
85
1 Burns
2 you. I anticipate a fairly immediate spin-off
3 if the shareholders of the company ask the
4 board of directors to do so. As you know by
5 now, the shareholders vote. This referendum
6 is precatory; it's not binding on the board.
7 It is my view and the view of others that I
8 have spoken with that the board will indeed do
9 a spin-off if the shareholders demand it,
10 period. So in that situation, there would be
11 a fairly immediate spin-off. If the board
12 should, the board of RJR Nabisco should flout
13 the wishes of shareholders, and if a proxy
14 fight then ensues, and if a new board is
15 elected, which I would be a member, then it
16 would stand to reason that at such time the
17 matter would be taken off de novo, tabula rasa
18 to decide whether in the circumstances then
19 obtaining and then pertaining it would be
20 appropriately wise to do that in the discharge
21 of newly acquired fiduciary responsibilities.
22 Q. And once you are a member of the
23 board, you would exercise your fiduciary
24 duties in determining whether or not to
25 approve the spin-off of Nabisco; is that
CLASSIC REPORTING, INC. (212) 268-2590
86
1 Burns
2 correct?
3 A. That's what I just said, I think.
4 Q. Just wanted to clarify the
5 record.
6 Do you have any reason to believe
7 that the current RJR board of directors are
8 not exercising their fiduciary duties?
9 MR. MASHBERG: I think you are
10 calling for a legal conclusion here. I
11 think you are really getting far
12 afield.
13 MR. LOGAN: Objection.
14 Q. Going back to the telephone
15 conversation, the last one that we have been
16 discussing with Mr. Lorber and Mr. LeBow, I
17 believe you testified that you told them that
18 you would have to think about their offer and
19 get back to them?
20 A. Yes.
21 Q. First, was any --
22 MR. LOGAN: Objection to form.
23 Q. During this phone conversation we
24 were discussing, did you discuss anything else
25 regarding RJR?
CLASSIC REPORTING, INC. (212) 268-2590
87
1 Burns
2 A. I don't believe so.
3 Q. Did you agree to think about
4 their offer and get back to them?
5 A. Yes.
6 Q. Did you discuss that phone
7 conversation with anyone?
8 A. Yes.
9 Q. With whom did you discuss the
10 phone conversation?
11 A. I do not now remember, but I
12 discussed it with partners of my firm, members
13 of my firm, partners of mine, because this
14 is --
15 MR. MASHBERG: Not because.
16 A. Period.
17 Q. What did you tell the partners of
18 your firm?
19 A. I cannot remember, you know, the
20 actual words, but the message was that I have
21 this opportunity to join a slate of board of
22 directors of RJR in certain circumstances and
23 that I am disposed to do that, but I wanted to
24 be sure that the firm would have no objection
25 to my doing so. That's how it is in a
CLASSIC REPORTING, INC. (212) 268-2590
88
1 Burns
2 partnership.
3 Q. Is that the substance of the
4 entire discussion you had with your partners?
5 A. That would be it.
6 Q. Did you discuss with any of your
7 partners potential liability for the law firm
8 for acts you might take as a director of RJR?
9 A. Yes, yes, I did.
10 Q. What did you discuss in that
11 context?
12 A. It was very brief. I told them
13 that a condition of my undertaking to do this
14 would be that I would be indemnified.
15 Q. That you personally would be
16 indemnified?
17 A. Right.
18 Q. Was there any question about
19 indemnification for any of the other partners
20 of the law firm?
21 A. At one point, I asked for it. I
22 had -- what I did was I assigned someone in
23 the firm to handle this issue.
24 Q. Was there a discussion with any
25 of your partners of a possible personal
CLASSIC REPORTING, INC. (212) 268-2590
89
1 Burns
2 liability to you resulting from a spin-off of
3 Nabisco?
4 A. No, there was never any
5 discussion with that kind of a finite point as
6 to whether or not it was a spin-off that would
7 produce -- it was a question of liability of
8 being a director.
9 Q. Have you received an
10 indemnification agreement?
11 A. Yes.
12 Q. Does that indemnification
13 agreement extend to other members of your law
14 firm?
15 A. I do not know.
16 Q. Is there any indemnification
17 agreement right now that extends to the other
18 members of your law firm?
19 MR. MASHBERG: Talking obviously
20 with the RJR?
21 Q. Right, relating to the RJR
22 matter?
23 A. No, I don't know. The reason I
24 don't know is I said to you that I assigned a
25 member, a colleague of mine in the firm to
CLASSIC REPORTING, INC. (212) 268-2590
90
1 Burns
2 handle that. He did and he worked it out to
3 his satisfaction.
4 Q. Did you discuss your telephone
5 conversation with Mr. Bennett LeBow with
6 anyone else other than the partners at your
7 firm?
8 A. I have no present recollection of
9 having done that now.
10 Q. Did you discuss it with any
11 friends?
12 A. I don't think so.
13 Q. Any colleagues other than your
14 partners?
15 A. Maybe, but I don't think so. I
16 can't bring it to mind.
17 Q. Were you aware yet of any of the,
18 the names of any of the other candidates for
19 the slate?
20 MR. MASHBERG: Objection to form.
21 A. At that -- at the point when I
22 said yes, but I must be indemnified, I may
23 have known, may have known one or two names.
24 I can't remember which ones or whether I
25 really did, but kind of think I did.
CLASSIC REPORTING, INC. (212) 268-2590
91
1 Burns
2 Q. Do you know what criteria were
3 used to select who would be the candidates
4 that would be put on what you've called the
5 shadow slate?
6 MR. MASHBERG: Did anybody tell
7 him?
8 MS. SILVERBERG: I'm asking him
9 if he knows.
10 MR. MASHBERG: I interpret that
11 as if anybody told him as opposed to
12 speculating.
13 MR. LOGAN: I object to the form
14 of the question.
15 Q. Did anybody tell you what
16 criteria were used to select candidates for
17 the shadow slate?
18 A. Yes.
19 Q. What criteria was that?
20 A. They were looking for men of, men
21 or women, of great stature, business
22 experience, of experience in the tobacco
23 business, experience in the world of finance,
24 corporate finance. They wanted people of real
25 substance to be on this board. They wanted --
CLASSIC REPORTING, INC. (212) 268-2590
92
1 Burns
2 that was it. They were looking for real
3 people.
4 Q. Do you know whether or not an
5 individual's willingness to support a spin-off
6 of Nabisco was a requirement for inclusion on
7 the slate for the shadow board?
8 A. I do know whether or not it was a
9 requirement of my being on.
10 Q. Was it?
11 A. Absolutely not.
12 Q. Do you know whether or not it was
13 a requirement for anyone else being on the
14 board?
15 A. I have never heard directly,
16 indirectly by conversation, by writing or by
17 osmosis that it was.
18 Q. What was the next conversation
19 you had with anybody regarding RJR?
20 A. Well, I was having some
21 conversations with my colleague in the firm
22 about how to work out the indemnification, and
23 thereafter I really can't remember any
24 significant conversations until a meeting was
25 convened of all of the persons then committed
CLASSIC REPORTING, INC. (212) 268-2590
93
1 Burns
2 to join the slate or the shadow slate that you
3 and I have, we have coined the phrase here.
4 Q. Did there come a time when you
5 told either Mr. LeBow or Mr. Lorber that you
6 would indeed agree to serve?
7 A. Yes.
8 Q. As a candidate on the slate?
9 A. Thank you, that refreshes me. I
10 called him, I think it was Howard, I think it
11 was Howard, and said "Hey, you know, I have
12 talked to" --
13 Q. "Howard" meaning?
14 A. Lorber. I talked about it and I,
15 you know, "I would like to do this, I would
16 like to join with you in this effort, but I
17 have got to be indemnified." And then that
18 went into the works.
19 Q. Did you discuss anything else
20 with Mr. Lorber during this conversation?
21 A. I don't think so. Very brief
22 conversation.
23 Q. Is it correct that the next
24 event, then, is this meeting that was
25 convened?
CLASSIC REPORTING, INC. (212) 268-2590
94
1 Burns
2 A. I think so. It could have been
3 some piddling intervening event, but I don't
4 remember any.
5 Q. Do you recall when this meeting
6 took place?
7 A. No -- I think I can remember. I
8 think I can remember. I think I can remember.
9 Q. Okay.
10 A. If you were to tell me, refresh
11 my recollection as to the date on which this
12 shadow slate had to be made public or filed
13 with RJR, I think it must have been the day
14 before or the day after. It's right in there.
15 MR. MASHBERG: She can tell you
16 the exact date that the meeting took
17 place. She knows it. We all know it.
18 We have been through this 20 times
19 already. Tell him when the meeting
20 took place. Doesn't matter whether he
21 can remember when the meeting took
22 place. Let's cut through this.
23 MS. SILVERBERG: Could you please
24 mark a document BGL 8381 as Burns
25 Exhibit 3.
CLASSIC REPORTING, INC. (212) 268-2590
95
1 Burns
2 (Memorandum dated November 13,
3 1995, bearing production Nos. BGL
4 8381, marked Burns Exhibit 3 for
5 identification, as of this date.)
6 Q. I have placed before you Burns
7 Exhibit 3. Does that refresh your
8 recollection as to when the meeting was?
9 A. It certainly does. It really
10 doesn't, but I assume that it's correct. Does
11 not refresh my recollection. Let me just look
12 at it.
13 Q. I think -- off the record.
14 (Discussion off the record.)
15 Q. Do you recall that this meeting
16 took place sometime in mid-November 1995?
17 A. Oh, absolutely, surely.
18 Q. Does the timing of this meeting
19 now refresh your recollection somewhat as to
20 when your initial meeting with Mr. LeBow took
21 place?
22 A. No. It's still very consistent
23 with what I testified to. It was early
24 November or late October, yes.
25 Q. It's your recollection that these
CLASSIC REPORTING, INC. (212) 268-2590
96
1 Burns
2 series of telephone conversations and meetings
3 occurred over the span of four to six weeks?
4 A. Something like that. Again, I
5 don't remember.
6 Q. Did the New Valley board meet to
7 discuss -- withdraw that.
8 Were there any discussions at the
9 New Valley board of directors meetings
10 regarding RJR before this meeting you had with
11 other directors?
12 MR. MASHBERG: You mean at Sard?
13 Q. At Sard?
14 A. I don't remember.
15 Q. Who attended this meeting?
16 A. At Sard?
17 Q. At Sard, yes.
18 A. I should tell you that I came
19 early and left early. I was not there at the
20 whole meeting. The reason for that was I had
21 very short notice.
22 MR. MASHBERG: You don't have to
23 give a reason. Just answer her
24 question.
25 A. Okay. Present were Rouben
CLASSIC REPORTING, INC. (212) 268-2590
97
1 Burns
2 Chakalian, Bennett LeBow, Howard Lorber,
3 someone from the Sard Verbinnen firm. I don't
4 remember his name, Peter Strauss, the lawyer,
5 I have forgotten his name.
6 Q. Frome, F-R-O-M-E?
7 A. Mr. Frome. I believe, I can't
8 swear, I think Fred Zuckerman was there, I
9 think. I'm not 100 percent sure. And I don't
10 remember who else was there. It may have been
11 a couple others, and as I say, I had to leave
12 early.
13 Q. What was discussed at that
14 meeting?
15 A. Very little. It was really a
16 get-to-know-you-kind-of-a-meeting, for us to
17 shake hands. It was a very cordial, pleasant,
18 I think we went around the table and each of
19 us introduced ourselves to the others at the
20 table and spent a minute or two talking about
21 our backgrounds and what we did and so forth,
22 and with some I would say as I recall, think
23 back on it with some humor, touches of humor
24 here and there. It was a nice meeting.
25 Q. Did you discuss RJR at all during
CLASSIC REPORTING, INC. (212) 268-2590
98
1 Burns
2 this meeting?
3 A. Well, of course, because that's
4 what we were there for.
5 Q. What was discussed with respect
6 to RJR?
7 A. I have no recollection of that.
8 I really don't remember what was discussed at
9 that time, and as I say, I left early. I was
10 not there for a long time and somewhere along
11 the line, I think Michael Hirschfeld joined
12 us. He came late. I left early. How much of
13 an overlap, in fact, I have no recollection of
14 his uttering a word.
15 Q. Putting aside this meeting, at
16 any time other than at a New Valley board
17 meeting, did you ever have a discussion with
18 Mr. LeBow about possible obstacles to
19 Nabisco's spin-off?
20 A. As I say, it may have been
21 discussed at our first meeting when we sat at
22 the Rihga Hotel. Other than that, no. Other
23 than that and other than board meetings, no.
24 Q. Were any materials given out to
25 the directors at this November meeting, the
CLASSIC REPORTING, INC. (212) 268-2590
99
1 Burns
2 slate of directors?
3 A. I don't know. The reason I don't
4 know is that I was not there for the whole
5 time. I don't have a recollection of bringing
6 anything out of the meeting with me.
7 I should tell you in answer to an
8 earlier question, one or two questions ago, I
9 think you asked me if I have ever discussed
10 this with anyone other than at a board meeting
11 and I said no, I don't think so, but there was
12 another discussion of this at a second meeting
13 of the members of the shadow slate, so there
14 was such a meeting.
15 MR. MASHBERG: She will get to
16 that. Trust me, she will get to that.
17 THE WITNESS: I wanted her to be
18 aware of that.
19 Q. Did Mr. Icahn attend this meeting
20 in mid-November?
21 A. The meeting at Sard?
22 Q. The Sard meeting.
23 A. You know the answer to that. No,
24 he wasn't there when I was there.
25 Q. Did you ever have a meeting at
CLASSIC REPORTING, INC. (212) 268-2590
100
1 Burns
2 which Mr. Icahn attended with respect to RJR?
3 A. No.
4 Q. Have you ever had a telephone
5 conversation with Mr. Icahn at which RJR was
6 discussed?
7 A. No.
8 Q. Following what has been termed
9 the Sard meeting, what was the next
10 conversation or meeting you had with respect
11 to RJR or at which RJR was discussed?
12 A. I really don't remember, but as I
13 said to you, there was another meeting. It
14 was held at the Friars Club. It was a
15 luncheon meeting.
16 Q. Did that meeting occur in
17 mid-December?
18 A. I don't know. I don't remember.
19 Q. Who attended that meeting?
20 A. I'm looking in my mind's eye, I'm
21 trying to visualize it. Rouben Chakalian was
22 there. Peter Strauss was there. Fred
23 Zuckerman was there. I was there. Ben LeBow
24 was there. Howard Lorber was there. Mr.
25 Frome was there. I think he was. He was also
CLASSIC REPORTING, INC. (212) 268-2590
101
1 Burns
2 there. I'm not 100 percent sure. I don't see
3 him there, but I think he was. And any other
4 sundry members of the shadow slate. I just
5 don't remember who.
6 Q. Was there anyone there other than
7 members of the shadow slate, to use your term,
8 and Bennett LeBow and Mr. Lorber?
9 A. Oh, Dick Lampen was there and I
10 think Dick Lampen was also present at the Sard
11 meeting, I think. I'm pretty sure he was.
12 What's your pending question?
13 MS. SILVERBERG: You want to read
14 back the question?
15 (Record read.)
16 A. I can't think of anyone.
17 Q. Between the Sard meeting and the
18 Friars Club meeting, did you have any
19 telephone conversations regarding RJR with Mr.
20 LeBow or Mr. Lorber?
21 A. I may have, but I have no
22 recollection of any such conversation, as we
23 sit here now.
24 Q. Did you have any conversation
25 between those two meetings with any of the
CLASSIC REPORTING, INC. (212) 268-2590
102
1 Burns
2 other candidates for the shadow slate?
3 A. Between the two -- the Sard
4 meeting and the Friars Club meeting?
5 Q. That's correct.
6 A. No, I don't think so.
7 Q. What was discussed at the Friars
8 Club meeting?
9 A. It was just an update on, an
10 update on what was going on and again the
11 position that the RJR directors were taking
12 and an iteration of our approach to this.
13 Q. What was that approach?
14 A. That approach was to go to
15 shareholders on a referendum and to give the
16 shareholders an opportunity to exercise what
17 we call corporate democracy and opine on the
18 issue of whether or not there should be a
19 separation of the food and the tobacco
20 business. And, you know, that was a nice
21 discussion, very pleasant, cordial kind of a
22 luncheon meeting.
23 I was the first to leave, but I
24 think the meeting broke shortly after I left.
25 Q. Do you understand that the issue
CLASSIC REPORTING, INC. (212) 268-2590
103
1 Burns
2 before the shareholders is whether or not
3 there should be a separation of the food and
4 tobacco business or whether there should be an
5 immediate separation of the food and tobacco
6 business or do you have some other
7 understanding?
8 MR. MASHBERG: Objection to form.
9 MR. LOGAN: Objection.
10 MR. MASHBERG: Are you
11 characterizing the consent solicitation
12 that's out there and you are asking for
13 his understanding of the consent
14 solicitation, what it says?
15 MS. SILVERBERG: Well, I asked
16 him what was discussed about their
17 approach to the consent solicitation
18 and he said that in his response was
19 that there's a referendum before the
20 shareholders on whether or not there
21 should be a spin-off or a separation of
22 the tobacco and food business. And I
23 was asking whether or not he understood
24 that the issue was one of whether there
25 should be a separation or whether or
CLASSIC REPORTING, INC. (212) 268-2590
104
1 Burns
2 not the issue was one of the timing of
3 the separation.
4 MR. MASHBERG: I think you are
5 asking him to characterize, I think you
6 are right the way you recounted the
7 testimony as to what the consent
8 solicitation, the referendum
9 quote/unquote said, so with that
10 clarification, go ahead and answer the
11 question. Certainly the document does
12 speak for itself, but she is asking for
13 your understanding of it.
14 A. It's a very, very difficult
15 question for me to answer, because it goes
16 into the years of experience, surmise.
17 MR. MASHBERG: She is asking for
18 your understanding of the document.
19 A. I'm going to give it to her. No
20 no, of the document?
21 MR. MASHBERG: Of the consent
22 solicitation.
23 A. Our consent solicitation is
24 designed to inquire of shareholders as to
25 whether they want, I'm going to use my own
CLASSIC REPORTING, INC. (212) 268-2590
105
1 Burns
2 words, a spin-off, to use the Supreme Court's
3 terminology, with all due deliberate speed,
4 and the reason why I said it's a difficult
5 question to answer is in my own heart and
6 mind, I wonder about the bona fides of the
7 current directors of RJR and whether or not
8 they ever intend to have a spin-off ever, but
9 I don't know.
10 Q. Have I exhausted your
11 recollection of what was discussed at the
12 Friars Club meeting?
13 A. You have not only exhausted my
14 recollection, you have exhausted me.
15 Q. Have you had any other
16 discussions with anyone after the Friars Club
17 meeting regarding RJR?
18 A. That was in December, it's now
19 January.
20 Q. January.
21 A. So that would have been -- I have
22 no recollection of any discussions on these
23 subjects.
24 Q. Having gone through this series
25 of meetings, I'm going to try once again, does
CLASSIC REPORTING, INC. (212) 268-2590
106
1 Burns
2 this refresh your recollection at all as to
3 when the New Valley board of directors
4 discussed RJR?
5 A. No, it doesn't but the minutes
6 and records will speak for themselves.
7 Q. Have you had any conversations
8 with RJR shareholders regarding the consent
9 solicitation?
10 A. No.
11 Q. Have you had any conversations
12 with RJR shareholders regarding a spin-off?
13 A. No.
14 Q. Have you had any conversations
15 with RJR shareholders regarding your candidacy
16 on this, your potential candidacy on this
17 shadow slate?
18 MR. MASHBERG: Other than Mr.
19 LeBow or --
20 Q. Other than Mr. LeBow and
21 officers, employees of Brooke Group and New
22 Valley?
23 A. No, I have not.
24 Q. Do you know a Mr. Lucio Tan?
25 A. Spell the last name.
CLASSIC REPORTING, INC. (212) 268-2590
107
1 Burns
2 Q. T-A-N.
3 A. T-A-N.
4 MS. SILVERBERG: Off the record.
5 (Discussion off the record.)
6 A. What is the name.
7 Q. Lucio, L-U-C-I-O, Tan, T-A-N?
8 A. No, I have never heard of that
9 person.
10 Q. Have you heard of Gary Black?
11 A. No, I have not.
12 Q. Paul Taberer?
13 A. No, I have not.
14 Q. Are you familiar with a company
15 called Intabex?
16 A. No, I'm not.
17 Q. Are you familiar with a company
18 called Tabaca Lera?
19 A. No, no I am not.
20 Q. Tabaca Lera?
21 A. Either way, I don't know.
22 Q. Are you familiar with a company
23 called Reemtsma?
24 A. No.
25 MS. SILVERBERG: Off the record.
CLASSIC REPORTING, INC. (212) 268-2590
108
1 Burns
2 (Discussion off the record.)
3 (Recess taken.)
4 Q. I just want to make sure that the
5 record is clear on a few points and if I am
6 repeating a question, I apologize.
7 A. You go right ahead, Lieutenant
8 Columbo, ask me the last question.
9 Q. Have you ever had any discussion
10 with anybody about a possible merger of
11 Liggett with RJR or any of its subsidiaries?
12 A. No, I was never -- never -- no.
13 Q. Did you ever learn, other than by
14 reading the consent solicitation materials,
15 that LeBow had meetings with people at RJR?
16 A. My answer is no. I may have
17 missed something along the way.
18 Q. Were you ever told by anybody
19 that LeBow or anyone else at New Valley were
20 seeking investors in RJR?
21 MR. MASHBERG: People to buy
22 stock?
23 MR. LOGAN: Objection to form.
24 Q. Were you ever told that LeBow or
25 Icahn or Mr. Lorber were soliciting people or
CLASSIC REPORTING, INC. (212) 268-2590
109
1 Burns
2 requesting that people invest in RJR stock?
3 A. No.
4 Q. Were you ever asked to purchase
5 shares of RJR stock?
6 A. No.
7 Q. Are you aware of anyone who was
8 asked by either Mr. Lorber, LeBow or Icahn or
9 anyone at New Valley to invest in RJR stock?
10 A. I know of no such person.
11 Q. I would like to show you a
12 document that bears production Nos. PS, which
13 is from Peter Strauss's production, 223 to 359
14 and actually I will first ask the court
15 reporter to mark it as, I believe, Burns 4.
16 (Group of documents, title page
17 headed "RJR Nabisco Selected
18 Documents," bearing production
19 Nos. PS 223 through 359 marked
20 Burns Exhibit 4 for
21 identification, as of this date.)
22 Q. Have you seen a copy of that
23 document before?
24 A. I think I have, but -- I think I
25 have. There are certain things.
CLASSIC REPORTING, INC. (212) 268-2590
110
1 Burns
2 Q. I will represent to you that your
3 counsel made a document production from your
4 files this morning.
5 A. I know.
6 Q. And I notice that that document
7 was in your production as well.
8 A. It was?
9 Q. It was.
10 A. I really have no recollection of
11 having -- I never read this document, but the
12 reason why I said well, yes, is that there are
13 certain pages here that kind of look familiar
14 to me. I never read this document.
15 Q. When did you receive the
16 document?
17 A. I don't know.
18 Q. Did you receive it at a meeting?
19 A. I have no idea. I have no
20 recollection of ever receiving this document.
21 MS. SILVERBERG: I ask the
22 reporter to mark as Burns Exhibit 5 and
23 6, two copies of a consent of nominee.
24 (Copy of consent of nominee
25 marked Burns Exhibit 5 for
CLASSIC REPORTING, INC. (212) 268-2590
111
1 Burns
2 identification, as of this date.)
3
4 (Copy of consent of nominee
5 marked Burns Exhibit 6 for
6 identification, as of this date.)
7 MS. SILVERBERG: With a copy of
8 your signature.
9 Q. Is that your signature on each of
10 the two exhibits?
11 A. Yes, it is. It's a xerox copy of
12 what appears to be my signature.
13 Q. Is that the form that you signed
14 to consent to putting your name on the slate
15 for the shadow board?
16 MR. MASHBERG: Shadow slate.
17 A. Yes, yes.
18 Q. Can you explain why there are two
19 signed consents?
20 A. No.
21 Q. Do they, do you know whether or
22 not you signed two different consents?
23 A. No. No, I don't know. If I did.
24 I don't know that I did. I just don't
25 remember.
CLASSIC REPORTING, INC. (212) 268-2590
112
1 Burns
2 Q. Do the signatures and the
3 handwritten date appear to be slightly
4 different on the two versions?
5 A. Well, these are xerox copies, so
6 you never know what breaks in the xerox
7 machine. I just don't know.
8 MS. SILVERBERG: I would like to
9 ask the court reporter to mark as Burns
10 Exhibit 7, a document bearing
11 production Nos. AB 557 to 579.
12 (Fax transmittal sheet and
13 questionnaire, bearing production
14 Nos. AB 557 through 579, marked
15 Burns Exhibit 7 for
16 identification, as of this date.)
17 Q. Did that document come from your
18 files?
19 MR. MASHBERG: I will represent
20 that it did.
21 Q. Does that, is that document a
22 questionnaire that you filled out in
23 connection with your agreeing to serve on the
24 shadow slate?
25 A. It is.
CLASSIC REPORTING, INC. (212) 268-2590
113
1 Burns
2 Q. Did you in fact fill out that
3 questionnaire?
4 A. I did.
5 Q. Are the handwritten notations on
6 that document your handwritten notations?
7 A. Yes, they are.
8 MS. SILVERBERG: I would like to
9 mark as Burns 8, a document bearing
10 production Nos. AB 429 through 432 and
11 as Exhibit 9, document bearing
12 production Nos. AB 537 through 543.
13 (Indemnification Agreement,
14 bearing production Nos. AB 429
15 through 432, marked Burns Exhibit
16 8 for identification, as of this
17 date.)
18
19 (Fax transmittal sheet and
20 Indemnification Agreement,
21 bearing production Nos. AB 537
22 through 543, marked Burns Exhibit
23 9 for identification, as of this
24 date.)
25 Q. Do these exhibits, 8 and 9, come
CLASSIC REPORTING, INC. (212) 268-2590
114
1 Burns
2 from your files?
3 MR. MASHBERG: I will represent
4 that they do.
5 Q. I believe you testified earlier
6 about an indemnification agreement that you
7 discussed with Mr. LeBow or Mr. Lorber?
8 A. Yes.
9 Q. Are these documents drafts of
10 that indemnification agreement?
11 A. Well, the question is misleading.
12 I think you misapprehended or misstated what I
13 said.
14 Q. Wasn't intended to be.
15 A. I know that. You asked me if I
16 had testified that I had discussed an
17 indemnification agreement. I never have. Our
18 discussion merely was limited to two guys
19 saying: Hey, in order for me to do this, I
20 have to be indemnified. At that point, others
21 took over.
22 Q. Does this indemnification
23 agreement, though, reflect the type of
24 indemnification that you were seeking in
25 connection with your agreement to serve on the
CLASSIC REPORTING, INC. (212) 268-2590
115
1 Burns
2 shadow slate?
3 A. I would say I think so.
4 Q. Do you know whether or not you
5 have actually signed an indemnification
6 agreement?
7 A. No, I do not know that.
8 Q. You have not done so or you do
9 not --
10 A. I do not know whether I did. I
11 have no distinct recollection of having signed
12 one. I wonder why I would have to sign one.
13 MS. SILVERBERG: I would like to
14 mark as Burns Exhibit 10, a document
15 bearing production Nos. AB 527 through
16 531.
17 (Multipage document, fax
18 transmittal sheet and resume of
19 E. Thomas Williams, Jr., bearing
20 production Nos. AB 527 through
21 531, marked Burns Exhibit 10 for
22 identification, as of this date.)
23 Q. Did that document come from your
24 files?
25 MR. MASHBERG: I represent that
CLASSIC REPORTING, INC. (212) 268-2590
116
1 Burns
2 it did.
3 Q. Could you identify that document
4 for me?
5 A. Okay, I have looked at it.
6 Q. What is this document?
7 A. I have no idea. It appears to be
8 a resume of one Mr. Williams who is seeking a
9 position on the shadow slate.
10 Q. Do you know Mr. Williams?
11 A. No.
12 Q. Have you ever spoken to Mr.
13 Williams?
14 A. No.
15 Q. Did you send that letter to Mr.
16 LeBow or anybody else at Brooke Group?
17 A. I don't know. It appears from
18 the papers that I did. Why I ever got that,
19 if I did, I'm sure I did, I have no idea.
20 Q. Do you have any knowledge or
21 information regarding that document that you
22 have not already testified to?
23 A. No. I never heard of the guy.
24 MS. SILVERBERG: I would like to
25 mark as Burns Exhibit 11, a document
CLASSIC REPORTING, INC. (212) 268-2590
117
1 Burns
2 bearing production Nos. AB 90 through
3 AB 101.
4 (Memorandum dated January 2, 1996
5 with attached executed agreement,
6 bearing production Nos. AB 90
7 through AB 101, marked Burns
8 Exhibit 11 for identification, as
9 of this date.)
10 Q. Putting before you Burns Exhibit
11 11, can you identify that document for me,
12 please?
13 A. Yes.
14 Q. What is the document?
15 A. This is an agreement executed and
16 delivered, I believe, by and between New
17 Valley Corporation and the Brooke Group Ltd.
18 together with a fairness opinion to which I
19 think I had heretofore adverted from
20 Oppenheimer & Co., Inc., the fairness of the
21 terms of this agreement.
22 Q. What is the purpose of this
23 agreement?
24 A. The agreement, without going into
25 great detail, I haven't read it in a long
CLASSIC REPORTING, INC. (212) 268-2590
118
1 Burns
2 time, if I ever read it, it's a sharing of
3 costs and expenses and so forth in connection
4 with the RJR program.
5 Q. I would like to call your
6 attention to Page AB 96, paragraph 6?
7 A. You can just hand it to me.
8 Q. Which refers to Liggett?
9 A. Right.
10 Q. Have you had an opportunity to
11 read that paragraph?
12 A. I have had an opportunity to look
13 at it and glance at it, not read every word
14 but I see what it is.
15 Q. Does that paragraph refresh your
16 recollection at all as to whether or not you
17 had any discussions with anyone about the
18 possibility of merging Liggett with another
19 entity?
20 A. No, it does not.
21 MS. SILVERBERG: Finally, I would
22 like to mark as Burns Exhibit 12, a
23 stack of documents that were produced
24 to us this morning beginning with the
25 prefix AB and containing Bates Nos.
CLASSIC REPORTING, INC. (212) 268-2590
119
1 Burns
2 0001 through 0593, with the caveat that
3 certain of the documents with the AB
4 prefix have already been removed so
5 they could be marked as exhibits
6 previously in the deposition.
7 (Group of documents, bearing
8 production Nos. AB 0001 through
9 AB 0593, marked Burns Exhibit 12
10 for identification, as of this
11 date.)
12 Q. Are these documents from your
13 files?
14 MR. MASHBERG: I will endeavor to
15 answer that question. These all appear
16 to be copies of documents that I caused
17 to be pulled from Mr. Burns's files in
18 response to the subpoena duces tecum
19 for this deposition. I have not gone
20 through this page by page, but it
21 certainly appears to be the documents
22 that were in Mr. Burns's file which
23 were produced this morning.
24 Q. These documents came from the
25 file that you described this morning which
CLASSIC REPORTING, INC. (212) 268-2590
120
1 Burns
2 contained your New Valley materials; isn't
3 that correct?
4 A. Yes, ma'am.
5 MS. SILVERBERG: I have no
6 further questions for the witness at
7 this time.
8 MR. MASHBERG: Nothing here.
9 (Time noted: 1:30 p.m.)
10
11 Arnold I. Burns
12 Subscribed and sworn to
13 before me this______day
14 of_________________1996.
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
121
1
2
C E R T I F I C A T E
3
STATE OF NEW YORK )
4 ) ss.:
COUNTY OF NEW YORK )
5
I, DONNA BRUNCK, a Certified
6
Shorthand Reporter and Notary Public within
7
and for the State of New York, do hereby
8
certify:
9
That I reported the proceedings in
10
the within-entitled matter, and that the
11
within transcript is a true record of
12
such proceedings.
13
I further certify that I am not
14
related, by blood or marriage, to any of
15
the parties in this matter and that I am
16
in no way interested in the outcome of
17
this matter.
18
IN WITNESS WHEREOF, I have hereunto
19
set my hand this__23rd__day of_January,
20
1996.
21
__________________________
22 DONNA BRUNCK, CSR
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
122
1
2 January 23, 1996
3 I N D E X
WITNESS PAGE
_______ ____
4 ARNOLD I. BURNS
Examination by Ms. Silverberg 4
5
E X H I B I T S
6 BURNS
_____
FOR IDENTIFICATION PAGE
__________________ ____
7 1 Subpoena 7
8 2 Letter dated November 14, 1995
to Mr. White from Mr. Lampen,
9 with attachment, bearing
production Nos. BGL 8660 to 8662 43
10
3 Memorandum dated November 13,
11 1995, bearing production Nos.
BGL 8381 95
12
4 Group of documents, title page
13 headed "RJR Nabisco Selected
Documents," bearing production
14 Nos. PS 223 through 359 109
15 5 Copy of consent of nominee 110
16 6 Copy of consent of nominee 111
17 7 Fax transmittal sheet and
questionnaire, bearing production
18 Nos. AB 557 through 579 112
19 8 Indemnification Agreement,
bearing production Nos. AB 429
20 through 432 113
21 9 Fax transmittal sheet and
Indemnification Agreement,
22 bearing production Nos. AB 537
through 543 113
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
123
1
2 January 23, 1996
3 E X H I B I T S
(Continued)
4
BURNS
_____
5 FOR_IDENTIFICATION PAGE
___ ______________ ____
10 Multipage document, fax
6 transmittal sheet and resume
of E. Thomas Williams, Jr.,
7 bearing production Nos. AB 527
through 531 115
8
111 Memorandum dated January 2,
9 1996 with attached executed
agreement, bearing production
10 Nos. AB 90 through AB 101 117
11 112 Group of documents, bearing
production Nos. AB 0001 through
12 AB 0593 119
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
1
==============================================================================
In The Matter Of:
RJR NABISCO HOLDINGS CORP. v.
BENNETT S. LEBOW et al.
----------------
CARL C. ICAHN
Vol. 1, January 25, 1996
----------------
CLASSIC REPORTING, INC.
13 WEST 36th STREET
NEW YORK, NY 10018
(212) 268-2590
Orginal File ci012596.asc, 170 Pages
Min-U-Script[Registered] File ID: 3360773241
Word Index included with this Min-U-Script[Registered]
==============================================================================
==============================================================================
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
-------------------------------------x
:
RJR NABISCO HOLDINGS CORP., :
:
Plaintiff, :
:
-against- : 6:95CV00812
:
BENNETT S. LEBOW, BROOKE GROUP LTD., :
And CARL C. ICAHN, :
:
Defendants. :
:
-------------------------------------x
January 25, 1996
2:10 P.M.
Deposition of Defendant, CARL C.
ICAHN, taken by plaintiff pursuant to
subpoena, at the law offices of Wachtell
Lipton Rosen & Katz, 51 West 52nd Street, New
York, New York 10019, before Donna Brunck, a
Certified Shorthand Reporter and Notary Public
within and for the State of New York.
CLASSIC REPORTING, INC. (212) 268-2590
2
1
2 A P P E A R A N C E S:
3 WACHTELL LIPTON ROSEN & KATZ
Attorneys for Plaintiff
4 51 West 52nd Street
New York, New York 10019
5
BY: WARREN L. STERN, ESQ.
6 RACHELLE SILVERBERG, ESQ.
-and-
7 WOMBLE CARLYLE SANDRIDGE & RICE
3300 One First Union Center
8 301 South College Street
Charlotte, North Carolina 28202-6025
9
BY: WILLIAM C. RAPER, ESQ.
10
11 MILBANK, TWEED, HADLEY & McCLOY
Attorneys for Defendants
12 and the Witness
1 Chase Manhattan Plaza
13 New York, New York 10005-1413
14 BY: DAVID J. WOLFSON, ESQ.
HARLAN PROTASS, ESQ.
15
16 GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN,
17 Attorneys for Defendant
Carl C. Icahn
18 114 West 47th Street
New York New York 10036
19
BY: THEODORE ALTMAN, ESQ.
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
3
1
2 IT IS HEREBY STIPULATED AND AGREED by
3 and among the attorneys for the respective parties
4 herein that the sealing, filing and certification
5 of the within deposition be waived; that such
6 deposition may be signed and sworn to before any
7 officer authorized to administer an oath, with the
8 same force and effect as if signed and sworn to
9 before a judge of this court.
10 IT IS FURTHER STIPULATED AND AGREED
11 that all objections, except as to the form, are
12 reserved to the time of the trial.
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
4
1 Icahn
2 C A R L C. I C A H N,
3 having been first duly sworn by the
4 Notary Public (Donna Brunck), was
5 examined and testified as follows:
6 EXAMINATION BY MR. STERN:
7 Q. Mr. Icahn, have you been deposed
8 before?
9 A. Yes.
10 Q. About how many times?
11 A. I don't know, 70, 80 times.
12 Q. Seventy or 80 times. I take it,
13 then, you have no questions about how a
14 deposition proceeds; is that correct?
15 A. No, no.
16 Q. Have you had any discussions
17 regarding the deposition that you are giving
18 now?
19 A. Except for my attorney, I have
20 not.
21 Q. And I take it your discussions
22 with your attorney have been for purposes of
23 obtaining legal counsel; is that correct?
24 A. Of what?
25 Q. Of obtaining legal counsel; is
CLASSIC REPORTING, INC. (212) 268-2590
5
1 Icahn
2 that correct?
3 A. Of obtaining legal counsel?
4 Q. Yes, your discussions with your
5 attorney?
6 A. Have been pertaining to this
7 deposition?
8 Q. Yes.
9 A. I don't understand the question.
10 Q. You were discussing this
11 deposition with your attorney for the purpose
12 of obtaining legal counsel; is that correct?
13 A. I see what you mean, yes.
14 Q. Have you had any discussions with
15 anyone associated with Brooke Group concerning
16 this deposition?
17 A. No.
18 Q. Have you reviewed any transcript
19 of the deposition of any other person taken in
20 this case?
21 A. Aside from with my attorney?
22 Q. Did you review a transcript with
23 your attorney?
24 A. My attorney read some things from
25 a transcript of a deposition with Bennett
CLASSIC REPORTING, INC. (212) 268-2590
6
1 Icahn
2 LeBow.
3 Q. What things did he read?
4 A. I really can't recall, just some
5 of the questions Bennett answered pertaining
6 to some discussions with me.
7 Q. Was that testimony accurate so
8 far as you know?
9 A. Yes.
10 Q. Did you look at any documents in
11 preparation for this deposition?
12 A. No.
13 Q. Did your attorney read any other
14 documents to you?
15 A. Not that I recall.
16 Q. Mr. Icahn, what's the name of
17 your firm?
18 A. I have a lot of firms but
19 basically Icahn & Company.
20 Q. Is Icahn & Company the firm that
21 handled -- that's handling the RJR matter?
22 I will put a different question.
23 Who of your colleagues has worked
24 on the RJR matter with you?
25 A. Basically only me. I have an
CLASSIC REPORTING, INC. (212) 268-2590
7
1 Icahn
2 assistant that, you know, one of my assistants
3 did some review of the basic numbers of RJR,
4 you know, the public documents and earnings
5 and what have you.
6 Q. What's the name of that
7 assistant?
8 A. Richard Rubin.
9 Q. Which of your companies does Mr.
10 Rubin work for?
11 A. Just basically Icahn.
12 Q. What's his position?
13 A. I don't know if he has a specific
14 title. He is a research analyst. I guess
15 that would define his role.
16 Q. Mr. LeBow mentioned a Mr.
17 Rachefsky, is that a name familiar to you?
18 A. Yes.
19 Q. Who is Mr. Rachefsky?
20 A. He is also a research analyst. I
21 would say he is above Rubin in position there
22 at Icahn. He has worked a lot on Brooke, but
23 not so much on Reynolds.
24 Q. What is the distinction between
25 the work on Brooke and the work on Reynolds?
CLASSIC REPORTING, INC. (212) 268-2590
8
1 Icahn
2 A. They are two different companies.
3 Q. What kind of work has your firm
4 been performing with respect to Brooke -- I
5 will put another question. Does this pertain
6 to your holdings in Brooke Group, that is, the
7 work that Mr. Rachefsky performed?
8 A. Yes.
9 Q. Have you engaged any outside
10 consultants in connection with the RJR matter?
11 A. No.
12 Q. Now, in connection with this
13 deposition, did you -- let me put a different
14 question. Did you maintain a file with
15 respect to RJR?
16 A. I don't know if Rubin does.
17 Q. I'm asking now you personally?
18 A. I don't know if you call it a
19 file. I might have some reports and what have
20 you on it. I can't really recall.
21 Q. Did anyone at any of your
22 companies maintain any file concerning RJR, to
23 your knowledge?
24 A. My secretary might have some
25 research reports that I have looked at, but I
CLASSIC REPORTING, INC. (212) 268-2590
9
1 Icahn
2 don't really recall.
3 Q. What about Mr. Rubin, do you know
4 if he had a file?
5 A. You would have to ask him, I
6 don't know.
7 Q. Same question for Mr. Rachefsky?
8 A. I doubt he has anything, because
9 he hasn't really worked on it, but Rubin
10 might.
11 Q. Do you maintain a diary or
12 personal appointment book of some kind?
13 A. Yes.
14 Q. Have you looked at that book to
15 see if there are any entries concerning RJR?
16 A. No.
17 Q. Do you know whether there are
18 any?
19 A. I don't know. I think we sent
20 all the pertinent material to you in
21 discovery, though.
22 Q. I was going to ask you whether or
23 not to your knowledge any files of your firm
24 have been reviewed for purposes of discovery
25 in this case?
CLASSIC REPORTING, INC. (212) 268-2590
10
1 Icahn
2 A. I think my attorneys looked at
3 them.
4 Q. Why do you think that?
5 A. Well, I was told that.
6 Q. Who told you that?
7 A. Is that attorney-client privilege
8 or is that all right?
9 MR. ALTMAN: You can answer that.
10 A. My attorney told me.
11 Q. Did he tell you what files were
12 reviewed?
13 A. No. He just said he had looked
14 at some stuff for discovery.
15 Q. Did he say whether or not he had
16 looked at any of your personal appointment
17 books?
18 A. I don't recall if he did.
19 Q. And you don't know one way or
20 another whether he did or not; is that
21 correct?
22 A. I think he did.
23 Q. Did he tell you he did?
24 A. He went over with me the dates,
25 some of the dates about, you know, the filing
CLASSIC REPORTING, INC. (212) 268-2590
11
1 Icahn
2 of the Hart-Scott, that type of thing, because
3 I was trying to remember when we had filed and
4 when we had bought stock and what have you.
5 Q. Do you believe he looked at your
6 personal diary in connection with that review?
7 A. Yes.
8 Q. Do you know of any documents in
9 your possession concerning your investment in
10 RJR that were not produced in connection with
11 this matter?
12 A. I really don't know what was
13 produced so I can't answer that.
14 Q. You don't know?
15 A. No.
16 Q. Have you destroyed any documents
17 relating to the RJR investment?
18 A. No.
19 Q. Do you know whether you have
20 discarded any?
21 A. I don't really know that I even
22 have any. The only thing I can say to you is
23 that I might have some in a file concerning
24 some of the press releases and some of the --
25 I'm just guessing now, some research reports.
CLASSIC REPORTING, INC. (212) 268-2590
12
1 Icahn
2 I don't think there's anything very important
3 there, you know.
4 Q. My question related to whether or
5 not you recall discarding any documents
6 relating to RJR?
7 A. I don't recall.
8 Q. Did you ever hear of a Phil
9 Berkowitz?
10 A. I can't recall if I did.
11 Q. Did you ever hear of a Roland,
12 and I'm going to mispronounce H-L-A-W-A-T-Y
13 HLawaty, have you ever heard of a Roland
14 HLawaty?
15 A. I would remember that. No, I do
16 not.
17 Q. Do you regard the Milbank Tweed
18 firm as your counsel?
19 A. I never thought about it.
20 Q. Are you aware that your attorneys
21 are claiming attorney-client privilege with
22 respect to communications with lawyers from
23 Milbank Tweed?
24 A. My attorneys are claiming that?
25 MR. ALTMAN: Objection to the
CLASSIC REPORTING, INC. (212) 268-2590
13
1 Icahn
2 form.
3 Q. Yes.
4 MR. ALTMAN: I object to the
5 form.
6 You can answer.
7 A. I am not aware of that.
8 Q. Mr. Icahn, what business are you
9 in?
10 A. Investments, I would say. We
11 have a rail car business. I have a travel
12 business.
13 Q. What is the name of the travel
14 business?
15 A. Global Travel.
16 Q. And the name of the rail
17 business?
18 A. American Car & Foundry.
19 Q. And the name of the investment
20 business?
21 A. Well, Icahn & Company. We also
22 control American Realty Partners Real Estate.
23 Q. Focusing on your investment
24 activities, how long have you been in that
25 business?
CLASSIC REPORTING, INC. (212) 268-2590
14
1 Icahn
2 A. Since around -- well, just since
3 I got down to Wall Street?
4 Q. Yes?
5 A. What is the question, when did I
6 start Icahn or when did I go to Wall Street?
7 Q. When did you start Icahn?
8 A. 1968.
9 Q. When did you go to Wall Street?
10 A. About 1960. Might have been '61,
11 I'm not sure.
12 Q. Now, have you ever been a
13 defendant in any litigation?
14 A. Well, I mean, you know we have
15 done different takeovers, is that what you
16 mean?
17 Q. For the purpose of this question,
18 litigation in any connection?
19 A. Well, I would say in the
20 takeovers, yes.
21 Q. Have you been a defendant in more
22 than one litigation concerning, arising from
23 takeover activities?
24 A. Yes.
25 Q. Are takeover activities something
CLASSIC REPORTING, INC. (212) 268-2590
15
1 Icahn
2 that Icahn & Company engages in from time to
3 time?
4 A. Yes.
5 Q. Have there ever been any
6 judgments entered against you in respect of
7 those litigations?
8 A. I don't recall.
9 Q. Can you recall the matters in
10 which those litigations arose?
11 A. Well, you would buy stock in
12 companies and obviously the incumbent
13 management would hire firms like yourself and
14 then they would sue us. I don't think there
15 are any meaningful judgments ever filed. Just
16 most of the suits were basically nuisance
17 suits, paid a lot of legal fees but did not
18 amount to very much in helping the companies.
19 Q. The question really related to
20 the names of the suits, the names of the
21 companies?
22 A. Why don't you just check them.
23 There's a number of them. I'm sure you know
24 them better than I do.
25 Q. You would have no objection if I
CLASSIC REPORTING, INC. (212) 268-2590
16
1 Icahn
2 asked your counsel to provide that
3 information?
4 A. I would leave that up to my
5 counsel to decide if he should.
6 Q. Have you ever come under
7 investigation for any violation of the
8 securities laws?
9 MR. ALTMAN: This is expedited
10 discovery. We haven't talked about RJR
11 yet. This is what this case is about.
12 Q. We are getting there.
13 A. I would suggest if you want to
14 know that, you should talk to my attorneys.
15 You don't need me to answer that for you and
16 because I don't know the specific answers and
17 we are happy to have my attorneys provide
18 whatever you want in that regard, but I
19 thought we are here to talk about Reynolds and
20 move along.
21 Q. Are you declining to answer that
22 question?
23 A. I'm not doing anything. I am
24 saying to you that it's a question that I
25 don't quite understand the meaning of.
CLASSIC REPORTING, INC. (212) 268-2590
17
1 Icahn
2 Q. To your knowledge, have you ever
3 been investigated for any violation of the
4 securities laws?
5 MR. ALTMAN: I object to the
6 form.
7 A. I don't understand what it means.
8 I mean, you know, as I say to you, you would
9 have to describe exactly what you meant by
10 that.
11 Q. Well, have you ever been charged
12 with any criminal offense?
13 A. No. Not to my knowledge. I have
14 never been charged with a criminal offense.
15 Q. Have you ever been told by anyone
16 that you were under investigation by the
17 S.E.C. for violation of the securities laws?
18 A. I don't really believe I have
19 been, but, you know, I would have to have my
20 attorneys look into that. But I have never
21 been charged with a criminal offense.
22 Q. Have you ever been an officer or
23 director of any company that's filed for
24 bankruptcy protection?
25 A. TWA.
CLASSIC REPORTING, INC. (212) 268-2590
18
1 Icahn
2 Q. When was that, sir?
3 A. I can't remember the exact year.
4 I think about '90. What year do you think
5 that was? I don't remember the exact year.
6 Q. Sir, did there come a time when
7 you became interested in purchasing stock of
8 RJR?
9 A. Yes.
10 Q. When was that?
11 A. I believe it was -- I can't
12 remember the exact time, but I think it was
13 sometime in July.
14 Q. Is that July 1995?
15 A. Yes.
16 Q. Why did your attention turn to
17 RJR?
18 A. I can't remember exactly why.
19 Q. Do you have any general
20 recollection -- any recollection?
21 A. I think it had to do with Bennett
22 LeBow, but I tried to recall and I can't
23 recall the instance, but I think it was
24 because of Bennett LeBow mentioned it to me.
25 Q. Do you remember what Mr. LeBow
CLASSIC REPORTING, INC. (212) 268-2590
19
1 Icahn
2 said?
3 A. I really can't recall the
4 conversations. You mean at that time? When I
5 first purchased.
6 Q. Yes.
7 A. I can't remember the conversation
8 or even the instance.
9 MR. STERN: I'm going to ask the
10 reporter to mark as the first exhibit,
11 a document produced to us by Mr.
12 Icahn's attorneys, I 342 to 345.
13 (Copy of ledger sheets, bearing
14 production Nos. I 342 through I
15 345 marked Icahn Exhibit 1 for
16 identification, as of this date.)
17 Q. Mr. Icahn, the exhibit that's
18 been placed before you, have you ever seen
19 that document before?
20 A. No.
21 Q. The first page refers to
22 something called Barberry Corp.?
23 A. Yes.
24 Q. Do you see that?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
20
1 Icahn
2 Q. What is Barberry Corp.?
3 A. A company that I own.
4 Q. Has Barberry Corp. ever purchased
5 any RJR Nabisco common stock?
6 A. I can't remember which companies
7 we purchased it in, but this says they did,
8 but I have never looked, I never saw this.
9 Q. Well, you see that the date on
10 that document, the date next to -- the date on
11 the left-hand column of this document appears
12 to be July 21, '95, do you see that?
13 A. Yes.
14 Q. If you would please turn over to
15 the next page, there you see a document which
16 has the name High River Limited Partnership on
17 it, do you see that?
18 A. Yes.
19 Q. Could you identify High River
20 Limited Partnership, please?
21 A. Company that I control or own.
22 It's a partnership obviously that I control.
23 Q. Who are the other partners in
24 High River?
25 A. I think -- I shouldn't guess. I
CLASSIC REPORTING, INC. (212) 268-2590
21
1 Icahn
2 will find out for you.
3 Q. You don't know?
4 A. I can't remember -- well, I think
5 it might be -- why don't I find out exactly?
6 Q. Okay. Do you see the date there,
7 appears to be July 24, '95, do you see that?
8 A. Yes.
9 Q. By the way, do you recognize the
10 handwriting on this document?
11 A. No.
12 Q. Are these, are documents like
13 this, that is ledgers of what appears to be
14 stock purchase activity, kept by any of your
15 colleagues at Icahn & Company?
16 A. Well, we keep a very good records
17 so obviously we keep all the purchases.
18 Q. Does this look like the kind of
19 records your company keeps with respect to
20 purchases?
21 A. Yes.
22 Q. Who at the company?
23 A. We have a lot of people that
24 might keep this. Might be Eddie Mann or might
25 be Richard Buonato, I don't know exactly where
CLASSIC REPORTING, INC. (212) 268-2590
22
1 Icahn
2 you got this.
3 Q. I got this from your attorneys.
4 A. I don't know who supplied it.
5 Q. Now do you see that the date, I
6 was asking you to look at the date on the
7 second page, July 24, '95, the first date in
8 the left-hand column?
9 A. Yes.
10 Q. Does that refresh your
11 recollection as to precisely when you began to
12 purchase, or companies under your control
13 began to purchase RJR Nabisco common stock?
14 A. No, I just don't -- I remember we
15 bought it sometime in July, but this doesn't
16 refresh it.
17 Q. Did you give any instructions to
18 any of your colleagues or members of your
19 staff with respect to the purchase of RJR
20 Nabisco common stock?
21 A. Yes. They wouldn't purchase it
22 without my instructions.
23 Q. Who did you instruct to purchase
24 RJR Nabisco common stock?
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
23
1 Icahn
2 Q. Among your staff, who would it
3 have been at the time? Which people at the
4 time might have?
5 A. It was probably Eddie Matner.
6 Q. What's his position?
7 A. Basically order clerk and he also
8 keeps a lot of these records. It would have
9 been Eddie Matner or Richard Rubin that I
10 instructed to buy it.
11 Q. See in the right hand of the, of
12 each page there's a word, but as I look at it,
13 I don't think that's going to help us.
14 A. Yes.
15 Q. You see in the upper right hand
16 it says "Approved by," but that looks like it
17 says Page 1; is that correct?
18 A. I don't see what you are
19 referring to.
20 Q. Just in the box that says
21 "Approved by"?
22 A. Yes, that's what it looks like to
23 me.
24 Q. The third page of this document
25 has the name of an entity, Riverdale
CLASSIC REPORTING, INC. (212) 268-2590
24
1 Icahn
2 Investment Company; do you see that.
3 MR. ALTMAN: I think you are
4 referring to the fourth page.
5 MR. STERN: Yes, thank you.
6 Q. Do you see the name Riverdale
7 Investment Corp.?
8 A. Yes.
9 Q. What is that?
10 A. Another company that I own.
11 Q. Mr. Icahn, can you tell me with
12 whom you have discussed your interest in RJR
13 at any time?
14 MR. WOLFSON: Objection to form.
15 A. I told you that I talked to
16 Richard Rubin about it and of course LeBow,
17 Howard Lorber. I can't even recall
18 conversations with Lorber. I know with
19 Bennett and with Rubin and I remember being on
20 the phone also with some investment banker,
21 one investment banker I forgot -- I'm not sure
22 which firm, I can't recall who, we talked
23 about the values of Nabisco. I remember that
24 conversation. Aside from that, I can't really
25 recall. I might have told certain friends or
CLASSIC REPORTING, INC. (212) 268-2590
25
1 Icahn
2 accounts of mine that -- well, I don't really
3 have accounts anymore. I might have told a
4 few friends that I liked it in passing, but...
5 Q. Do you recall doing that, sir, or
6 are you speculating that you did that? When
7 you say may have told, it raises a question as
8 to whether you remember this or you are
9 suggesting this as a possibility?
10 A. I think -- I can't recall exactly
11 who, but I did mention it to a few people, but
12 I don't think they bought anything substantial
13 or anything like that. They wouldn't have the
14 kind of money to buy anything substantial, and
15 that's basically it.
16 Q. Do you remember who you mentioned
17 it to, the names of these people?
18 A. Well, just recently I spoke to my
19 roommate at college actually who bought some
20 stock, and I even forgot I talked to him about
21 it, but he told me he bought it and he was
22 pleased with the way it was performing.
23 Q. Who was that?
24 A. My roommate at college?
25 Q. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
26
1 Icahn
2 A. A doctor named Peter Liebert.
3 Q. Anyone else besides Mr. Liebert
4 or Dr. Liebert?
5 A. Not that I can recall talking to.
6 Q. I take it that you also discussed
7 it with your counsel; is that correct?
8 A. Oh, yes.
9 Q. Now I'm not interested in your,
10 in whether or not -- any legal advice your
11 counsel may have given you, but did your
12 counsel give you any non -- did you have any
13 discussions with your counsel about nonlegal
14 aspects of this matter, of your RJR purchases?
15 A. What do you mean by nonlegal?
16 Q. Did you discuss business --
17 A. No.
18 Q. -- matters with your counsel?
19 A. No, I did not.
20 Q. To your knowledge, sir, I would
21 like you to look once again at Exhibit 1. Are
22 there any purchases made by yourself or any
23 entity under your control or person under your
24 control that would not be reflected on Exhibit
25 1 at least as of the dates reflected on that
CLASSIC REPORTING, INC. (212) 268-2590
27
1 Icahn
2 exhibit?
3 A. I don't think there would be. We
4 keep records, as they say, and I think you
5 certainly know how much stock we have.
6 Q. The third page of the exhibit
7 reflects a date of 12/21/95 or December 21,
8 1995, and as you can see, there's a fax line
9 on the document, December 21, '95. To your
10 knowledge, have you or any of your entities or
11 persons under your control purchased any
12 shares of RJR Nabisco after December 21, 1995?
13 A. After when?
14 Q. December 21, 1995?
15 A. I don't know.
16 Q. Why did you start purchasing RJR
17 Nabisco?
18 A. I can't recall the exact
19 instance, I told you.
20 Q. I'm asking you your reasons?
21 A. You mean from a business point of
22 view?
23 Q. Yes.
24 A. I think it's extremely
25 undervalued. I think it's -- that's our
CLASSIC REPORTING, INC. (212) 268-2590
28
1 Icahn
2 business philosophy. I like to buy things
3 that are very cheap and when we looked at
4 this, I thought it was extremely undervalued.
5 Q. How did you come to that
6 conclusion?
7 A. Well, I looked at the values of
8 Nabisco and it's obvious to me that if it were
9 spun off, the stock would be worth another 15,
10 20 points which is almost 40, 50 percent
11 higher than it is today, so, you know, that's
12 enough incentive to buy, plus the fact I don't
13 see very much downside. The earnings of the
14 tobacco business is so great and the food
15 business so if you just broke it up, it's
16 worth, it's almost self-evident, which a lot
17 of good investments are, they are self-evident
18 but a lot of people don't see them sometimes.
19 Q. When you looked at the values of
20 Nabisco, were there any documents that you
21 were looking at?
22 A. I can't recall the exact
23 documents of what I looked at. We looked at
24 just earnings and just -- you don't have to do
25 a lot of research on this stuff. You just
CLASSIC REPORTING, INC. (212) 268-2590
29
1 Icahn
2 look at the earnings and look at the values
3 and as a food company alone, Nabisco would be
4 worth an unbelievable amount of money I think
5 to a foreign acquirer if they wanted to get on
6 the shelves in America, that type of thing. I
7 just think it's extremely undervalued.
8 Q. In reaching that conclusion, did
9 you have any information that was nonpublic,
10 to your knowledge?
11 A. No.
12 Q. When you came to that conclusion,
13 were you aware that Mr. LeBow had approached
14 RJR about the possibility of a transaction
15 involving Liggett?
16 A. Yes, it's not clear to me when I
17 knew he spoke to them about Liggett. I'm not
18 clear about that or when he had told me or if
19 he told me or how I knew that. I might have
20 read that in the newspapers or he might have
21 mentioned it, but I'm not sure.
22 Q. Did you personally read analyst
23 reports concerning RJR as opposed to having
24 one of your colleagues do that?
25 A. I don't believe I read any
CLASSIC REPORTING, INC. (212) 268-2590
30
1 Icahn
2 analyst reports.
3 Q. Did you ever hear of Gary Black?
4 A. Yes.
5 Q. Mr. Black is a tobacco analyst;
6 is that correct?
7 A. Yes.
8 Q. Did you ever have any discussions
9 with Mr. Black concerning RJR?
10 A. I never spoke to Mr. Black.
11 Q. Did you ever see any of his
12 reports?
13 A. I might have seen his reports. I
14 never spoke to him. I might have read them,
15 but I just don't recall. I think Rubin read
16 of few of them and I think Rubin spoke to
17 Black, but I never did.
18 Q. What makes you think that Mr.
19 Rubin read a few?
20 A. I remember Rubin mentioned to me
21 that Gary Black had told him something, but
22 that's as far as I can remember.
23 Q. Do you remember what Mr. Rubin
24 said Mr. Black had mentioned?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
31
1 Icahn
2 Q. Do you remember when Mr. Rubin
3 told you this?
4 A. No.
5 Q. Do you remember -- withdraw that.
6 MR. STERN: Off the record.
7 (Discussion off the record.)
8 MR. STERN: Would you mark
9 these -- I'm going to ask the reporter
10 to mark as Exhibit 2, a collection of
11 documents which were produced to us by
12 Mr. Icahn. They represent my cull of
13 that document production for analyst
14 reports and they have assorted Bates
15 numbers. I will represent that they
16 were not produced to us in the order in
17 which they are being marked for
18 purposes of this deposition.
19 (Group of documents marked Icahn
20 Exhibit 2 for identification, as
21 of this date.)
22 Q. Mr. Icahn, I've placed Exhibit 2
23 before you. On page I 1206 of Exhibit 2,
24 there is a reference to a Laurie, apparently a
25 Laurie Feldman. Is that a name you recognize?
CLASSIC REPORTING, INC. (212) 268-2590
32
1 Icahn
2 A. No.
3 Q. This report concerns --
4 A. I think she is an analyst, now
5 that you mention it. I'm not going to guess.
6 I know I heard the name.
7 Q. Have you ever talked to anyone
8 about Laurie Feldman or talked with Laurie
9 Feldman?
10 A. I think I did. I think I spoke
11 to her but I'm not sure it was her. I
12 remember talking, as I said to you, about one
13 investment banker about the values of Nabisco.
14 It might have been her, but I'm not sure.
15 Q. Now, this document, I 1206,
16 relates to, recites that it relates to Pet,
17 Inc. and takeover valuation by Grand
18 Metropolitan. Do you see the reference to
19 Grand Metropolitan and Pet, Inc. on this page?
20 A. Yes.
21 Q. Do those matters have any
22 relationship to RJR?
23 A. I don't know. I'm not sure what
24 this is.
25 Q. Did you perform any review of
CLASSIC REPORTING, INC. (212) 268-2590
33
1 Icahn
2 Grand Met or Pet, Inc. in connection with your
3 decision to invest in RJR?
4 A. Absolutely not.
5 Q. Have you ever heard --
6 MR. ALTMAN: Before you go on,
7 for clarity, the document referred to
8 was Bates stamp 001206.
9 MR. STERN: Yes, I think I said
10 that.
11 MR. ALTMAN: I might have missed
12 it.
13 Q. I would like you to turn, if you
14 will, to I 469, which is a Salomon Brothers
15 report which appears -- your counsel has found
16 it. That report appears to be by a Les
17 P-U-G-H. Did you discuss RJR with Mr. Pugh?
18 A. No.
19 Q. Anyone from Salomon Brothers?
20 A. No.
21 Q. If you turn to the next report,
22 that appears to be a report by Rodman &
23 Renshaw by Mr. Ronald Morrow, M-O-R-R-O-W.
24 Is that a familiar name to you?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
34
1 Icahn
2 MR. WOLFSON: What number is
3 that?
4 MR. STERN: Thank you, I 1201.
5 Q. Did you have any discussions with
6 Rodman & Renshaw?
7 A. No.
8 Q. The next document, I 686, is a
9 report from Merrill Lynch. Do you see that?
10 A. Yes.
11 Q. Did you have any discussions with
12 anyone from Merrill Lynch?
13 A. No.
14 Q. Did you ever hear of a Leonard
15 Teitelbaum?
16 A. No.
17 Q. There is, there follows at I 688,
18 a report from Goldman, Sachs, a Mr. or Ms.
19 Cohen, C-O-H-E-N. Any discussions with a
20 person named Cohen or with Goldman, Sachs
21 concerning RJR?
22 A. I don't recall any discussions
23 with any of these people.
24 Q. How about a Mr. Kirkland?
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
35
1 Icahn
2 Q. Do you know a Mr. Bryant
3 Kirkland? Is that a familiar name to you?
4 A. No.
5 Q. Did Mr. LeBow ever mention Bryant
6 Kirkland to you?
7 A. Not that I recall.
8 Q. I would like you to look, if you
9 would, at I 694, which is part of this
10 exhibit, and I see now that this is not an
11 analyst's report, does not appear to be an
12 analyst's report, so I will correct the record
13 in that respect. Have you ever seen this page
14 before?
15 A. No.
16 Q. Looking at this page, does this
17 refresh your recollection as to any
18 discussions you might have had about Mr.
19 Kirkland?
20 A. No.
21 Q. Did you ever discuss with anyone,
22 with Mr. Rubin, any analysis of price/earning
23 multiples of selected premium brand producers
24 in connection with the RJR matter?
25 A. I think we went over with some
CLASSIC REPORTING, INC. (212) 268-2590
36
1 Icahn
2 detail with Rubin about what the values of
3 Nabisco are relative to other food companies,
4 that type of thing.
5 Q. When did you do that, sir?
6 A. Well, during the period I bought
7 the stock.
8 Q. When did you first do that?
9 A. I don't recall when it was,
10 during the period I bought the stock.
11 Q. Just so that something is clear
12 on the record, is it your recollection that
13 you began buying the stock after Mr. LeBow
14 mentioned RJR to you?
15 A. I said I believe that's what
16 triggered it.
17 Q. The next document, I 956 has a
18 fax line, B.S. Research, do you see that? Do
19 you know what B.S. Research is?
20 A. No.
21 Q. And the last page, the document
22 has handwriting on it on the last several
23 pages, I 959 through 961. Do you recognize
24 that handwriting?
25 MR. ALTMAN: What pages?
CLASSIC REPORTING, INC. (212) 268-2590
37
1 Icahn
2 MR. STERN: 959 through 961.
3 A. No.
4 Q. The next document, sir, is I 378,
5 and that document says in the upper right-hand
6 corner "To Carl Icahn or Rick Rubin from Gary
7 Black." Do you see that?
8 A. Yes.
9 Q. Have you ever seen this document
10 before?
11 A. Well, I saw some of these
12 documents. I said I might have read a couple
13 of them, but I don't believe I ever did.
14 Q. Does this refresh your
15 recollection in any respect as to whether you
16 ever had a discussion with Gary Black?
17 A. I never spoke to Gary Black.
18 Q. Does this refresh your
19 recollection in any respect as to when Mr.
20 Rubin may have spoken to Mr. Black?
21 A. I told you that I know Rubin
22 spoke to him. I don't know exactly when.
23 Q. Do you believe it was after
24 receiving this -- is it your recollection that
25 that discussion took place after this report
CLASSIC REPORTING, INC. (212) 268-2590
38
1 Icahn
2 was issued?
3 A. I have no idea. When was the
4 report issued?
5 Q. The date on the document is
6 September 18th?
7 A. I'm sure he spoke to him before
8 that. I know he talked to him while we were
9 buying the stock. I know Rubin had definitely
10 spoken to Black.
11 Q. Prior to September 18th?
12 A. Yes.
13 Q. Having looked at this document,
14 is your recollection refreshed as to what Mr.
15 Rubin told you that he and Black said to one
16 another?
17 A. Yes, I know Rubin told me Black
18 likes the stock. I might have read one of
19 these reports one evening or something. You
20 know, like this Bernstein report I think I
21 might have read quickly and he just told me
22 that he liked the stock, that Black liked the
23 stock and that -- I think at one point he said
24 Black wanted to have lunch with me and meet me
25 and he said yes, what's the point of that?
CLASSIC REPORTING, INC. (212) 268-2590
39
1 Icahn
2 That was the whole thing about Black, and I
3 never really spoke to him, I just read the
4 report, I think. As I say, most of these
5 reports I never read, but this seems to ring a
6 bell, and basically that was it. I just went
7 over the numbers with Rubin. I said: You get
8 all the material and just go over the numbers
9 with me. You know if I like it, I do it by
10 instinct. I don't spend a lot of time with
11 reading analysts, listening to them and all
12 that.
13 Q. Did Mr. Rubin say why Mr. Black
14 wanted to have lunch with you?
15 A. Well, he knew I was involved, I
16 think, in the stock, you know, because Rubin
17 had spoken to him. And I think he said
18 something about that, but then I just said
19 well, you know, what the heck. I got the
20 numbers, what's the point. And I'm not even
21 sure Rubin said that, but I seem to recall
22 that.
23 Q. Just to complete the record on
24 this line of inquiry, if you turn to I 843,
25 you will see in documents following --
CLASSIC REPORTING, INC. (212) 268-2590
40
1 Icahn
2 MR. ALTMAN: Where is that?
3 MR. STERN: It's about half an
4 inch down from that September 18th
5 report.
6 Q. Bear Stearns, you see there are
7 three documents which appear to come from
8 respectively Bear Stearns, Paine Webber and
9 Schroder Wertheim. Did you see any documents
10 generated --
11 A. I don't recall any of these. As
12 I said, I did speak to an analyst about
13 Nabisco. I think it was this Laurie Feldman,
14 but I'm not sure.
15 Q. Does the name E. Goldman ring any
16 bells?
17 A. No.
18 Q. That's on 1189?
19 A. No, no, doesn't.
20 Q. Now Page 1188, that appears to be
21 a copy of a fax and on the upper right
22 corner --
23 MR. ALTMAN: 1188.
24 MR. STERN: I 1188.
25 MR. ALTMAN: That's still further
CLASSIC REPORTING, INC. (212) 268-2590
41
1 Icahn
2 down in this pile?
3 MR. STERN: Yes, right in front
4 of the Smith Barney report.
5 Q. You will see if you turn the
6 page, you will see in the upper left there's a
7 date November 3, 1995 and then the name Laurie
8 Feldman appears and then there's a table that
9 purports to be takeover valuations, do you see
10 that?
11 A. Yes.
12 Q. Do you remember ever seeing this
13 table before?
14 A. No. I don't remember seeing it.
15 But I did tell you that I went over the value
16 of Nabisco fairly thoroughly and what I
17 thought it was worth, and it's one of the
18 reasons I'm very bullish on Reynolds, and so I
19 went over that with Rubin and I believe it
20 might have been this Laurie Feldman, but I
21 know it was with one analyst and we went over
22 for about a half-hour on the telephone the
23 values of Nabisco as a takeover candidate, as,
24 you know, as a valuable asset, you know,
25 stand-alone asset.
CLASSIC REPORTING, INC. (212) 268-2590
42
1 Icahn
2 Q. Does this Page 1188 refresh your
3 recollection as to when that conversation with
4 Laurie Feldman took place?
5 A. As I have told you, it must have
6 been in the period I was buying the stock.
7 You know, it had to be sometime in, I think in
8 August.
9 Q. Is it possible that it was as
10 late as November?
11 A. I believe it was before I stopped
12 buying the stock.
13 Q. When was that, sir?
14 A. I don't remember, exactly. You
15 have the dates there on that sheet. I think I
16 bought more stock after talking to her.
17 That's what I seem to recall, so it would have
18 to be before that, so I don't think it would
19 be November. Maybe it would have been,
20 because I stopped buying it in December, so
21 it's possible, yes. It's possible it was
22 November.
23 Q. What did you and Laurie Feldman
24 say to one another?
25 A. Well, we just went over, you
CLASSIC REPORTING, INC. (212) 268-2590
43
1 Icahn
2 know, the valuation of Nabisco, the values of
3 Nabisco. It might not have been her, but I
4 think it seems to be that I was seeing all
5 these reports.
6 Q. In this conversation with
7 whomever it might have been, did you express
8 any opinions as to the value of Nabisco?
9 A. I was more interested in their
10 opinion. Why should I give my opinion?
11 Q. What opinion did the person on
12 the other end of the conversation express?
13 A. Well, I seem to remember just
14 going over numbers. I was more interested in
15 the numbers, what the valuations would be in
16 the marketplace if it stood alone as related
17 to other food companies, as a multiple, you
18 know. I was interested in that.
19 Q. What conclusion did you reach, if
20 any?
21 A. That it's very valuable.
22 Q. Did you come to a conclusion that
23 it was worth a particular number of dollars?
24 A. I told you before in the
25 testimony. I think it's worth a lot of money.
CLASSIC REPORTING, INC. (212) 268-2590
44
1 Icahn
2 You know, numbers.
3 Q. Do you have a range?
4 A. I'm trying to recall. I seem to
5 think it would be worth -- I can't recall the
6 exact numbers, but it made me feel that
7 Reynolds with Nabisco, you know if Nabisco was
8 spun off, the value would be, you know, I
9 believe over 50 with all the values, the value
10 together. That to me is the general memory of
11 it.
12 Q. Now the final document in that
13 pile is from Smith Barney. Did you have any
14 discussions with anyone from Smith Barney
15 concerning RJR?
16 A. As I said, I think -- as far as I
17 remember, I only had that one discussion with
18 that one analyst about Nabisco that I can
19 recall.
20 Q. In that discussion with the one
21 analyst, did the name Bennett LeBow come up?
22 A. I don't remember that but it
23 might have.
24 MR. STERN: I would like to mark
25 as the next exhibit, pages of
CLASSIC REPORTING, INC. (212) 268-2590
45
1 Icahn
2 handwritten notes produced to us by or
3 on behalf of Mr. Icahn, I 851 through
4 856. I 1205 and I 1080, 81.
5 (Pages of handwritten notes,
6 bearing production Nos. I 851
7 through I 856, I 1205 and I 1080
8 and I 1081, marked Icahn Exhibit
9 3 for identification, as of this
10 date.)
11 Q. Sir, I have placed Exhibit 3 in
12 front of you. Let's turn to the Pages 851 to
13 856. Do you see that? It's the first part of
14 this exhibit.
15 A. Yes.
16 Q. Do you recognize that
17 handwriting?
18 A. No.
19 Q. What about the page I 1205, do
20 you see that, it's the next part of that
21 exhibit?
22 A. Yes.
23 Q. Do you recognize that
24 handwriting?
25 A. I'm no good at recognizing
CLASSIC REPORTING, INC. (212) 268-2590
46
1 Icahn
2 handwriting, but I would venture a guess but
3 not from the handwriting. I know Richard
4 Rubin's been working on this pretty
5 assiduously, it's probably his. I wouldn't
6 know from the handwriting.
7 Q. You don't recognize the
8 handwriting, but you infer from circumstances
9 that it's Mr. Rubin's; is that correct?
10 A. That's my guess.
11 Q. Is the same true for 1080 to
12 1081?
13 A. Well, I'm just saying I see if
14 this came from my office and it was a lot to
15 do with all these companies.
16 MR. ALTMAN: This is 1080?
17 A. Yes, I mean that's my --
18 MR. ALTMAN: If you don't know --
19 A. I don't know the handwriting.
20 Q. Did you ever hear of an entity
21 called McKenzie Partners?
22 A. No.
23 Q. Prior to the RJR matter, have you
24 had any dealings with Mr. LeBow?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
47
1 Icahn
2 Q. When was the first time?
3 A. I don't remember the exact dates.
4 Q. When did you meet Mr. LeBow
5 first?
6 A. I can't recall the exact date.
7 About five years ago, six years ago.
8 Q. In what connection was that?
9 A. I was invited to go on his boat
10 in the Mediterranean, so maybe I don't know
11 the exact date, around 1990s, beginning of
12 1990 maybe.
13 Q. I take it he invited you to go on
14 his boat; is that correct?
15 A. I went with Leon Black.
16 Q. For the record, can you identify
17 Mr. Black?
18 A. Well, he is a friend of mine. He
19 used to -- he runs Apollo Fund.
20 Q. Was this a business occasion?
21 A. No.
22 Q. I take it Mr. LeBow was on the
23 boat as well?
24 A. Yes.
25 Q. Am I correct in understanding
CLASSIC REPORTING, INC. (212) 268-2590
48
1 Icahn
2 this was a social occasion among you, Mr.
3 LeBow and Mr. Black?
4 A. Yes, he had a few other people
5 and we went for a couple days.
6 Q. Were your families along?
7 A. My wife.
8 Q. Did any business venture result
9 from this sojourn?
10 A. No.
11 Q. When was the next time you came
12 into contact with Mr. LeBow?
13 A. Well, I can't remember the exact
14 time. You know, I had bought a lot of Western
15 Union bonds and we talked about them, he and
16 I. I didn't buy them as a result of being on
17 the boat, and -- but I just can't recall the
18 discussions with him per se.
19 Q. I'm not looking to get into
20 discussions about Western Union, but just so
21 that we can sort of sketch in the background
22 here, when did you buy the Western Union
23 bonds?
24 A. See, I don't remember the exact
25 dates. It was sometime after that, but I
CLASSIC REPORTING, INC. (212) 268-2590
49
1 Icahn
2 bought a lot of junk bonds. It wasn't just
3 Western Union. Icahn & Company decided to
4 make an investment in a lot of these junk
5 bonds in the '90s, early '90s, and Western
6 Union was one of them, Brooke was another. We
7 bought a great deal of different bonds. That
8 wasn't the only bonds we bought.
9 Q. Did you purchase the Western
10 Union bonds before the name of the company was
11 New Valley?
12 A. I don't recall. It was back in
13 the early -- when they were quite cheap, you
14 know, and everything was in trouble. We
15 bought a lot of different junk bonds but had
16 nothing to do with being on that boat.
17 Q. I understand. Was the company in
18 a bankruptcy proceeding at the time you bought
19 the bonds?
20 A. I can't recall.
21 Q. When was your -- I think you
22 said -- do you own any other securities issued
23 by any entities controlled by Mr. LeBow?
24 A. I believe right now it's just the
25 New Valley preferred and the Brooke.
CLASSIC REPORTING, INC. (212) 268-2590
50
1 Icahn
2 Q. What do you own in Brooke?
3 A. The Brooke bonds, it was just an
4 exchange offer. We own both juniors and
5 seniors and now there's one bond or we
6 exchanged for one bond.
7 Q. How big is your investment in
8 Brooke?
9 A. Face amount of bonds? About,
10 might be off here, but about 80 million.
11 Q. What about the New Valley
12 preferred?
13 A. I can't recall that.
14 Q. Other than the Brooke bonds and
15 the New Valley preferred and the Western Union
16 bonds that you mentioned, have you made any
17 other investments in LeBow entities?
18 A. Not that I recall.
19 Q. When was your next meeting with
20 Mr. LeBow after, your next encounter with Mr.
21 LeBow after the boat trip?
22 A. I don't recall specific
23 encounters. We have had a number of, you
24 know, a fair amount of encounters over that
25 period of time, mostly business. Actually,
CLASSIC REPORTING, INC. (212) 268-2590
51
1 Icahn
2 strike that. We had some encounters. He was
3 rather angry with some of the things that I
4 demanded when I owned the bonds, because
5 Brooke and Western Union, we were on other
6 sides of the table, put it that way. We were
7 on opposite sides of the table and a lot of
8 our negotiations concerned the bonds, as I was
9 a creditor and he was the
10 debtor-in-possession, so to speak.
11 Q. Talking now about New Valley?
12 A. Western Union, Brooke, what have
13 you. I guess at one point we weren't too
14 friendly.
15 Q. You were business adversaries, I
16 take it?
17 A. In a sense we were business
18 adversaries.
19 Q. At a point in time. Is it
20 accurate to say that at a certain point in
21 time you resolved your business differences;
22 is that correct?
23 A. I don't know that you can say
24 "resolved." I mean, we never had a point
25 where we weren't talking to each other, and on
CLASSIC REPORTING, INC. (212) 268-2590
52
1 Icahn
2 the other side of the coin, now we are
3 obviously a lot friendlier because all these
4 situations worked out.
5 Q. Was there a particular point in
6 time when the situations worked out so that
7 the adversity came to an end and you became
8 friendlier?
9 MR. ALTMAN: I object to form.
10 MR. WOLFSON: Objection to form.
11 A. Well, I say we became a lot
12 friendlier when, you know, the Western Union
13 worked out and the New Valley came out of
14 bankruptcy. I did not object to his
15 continuing to control it, you know. I was
16 happy with the outcome and so I would say we
17 became a lot friendlier at that point. It
18 didn't hurt our relationship that I did very
19 well on the Western Union, New Valley, and I
20 respected the way he got the company sold and
21 did well for the creditors, and so I think we
22 became friendlier.
23 Q. Do you have any board
24 representation at New Valley?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
53
1 Icahn
2 Q. Does Mr. LeBow talk to you from
3 time to time about New Valley matters, New
4 Valley business?
5 A. Well, we have a drink once in a
6 while he might mention it. I can't recall
7 specifics.
8 Q. Now, I believe -- just to bring
9 us back to the chronology -- I believe you
10 said that Mr. LeBow mentioned RJR to you
11 sometime this past summer; is that correct?
12 A. I think that's correct.
13 Q. Do you remember, was that in a
14 face-to-face meeting as opposed to a telephone
15 call?
16 A. I can't recall the first time he
17 mentioned it.
18 Q. Do you remember whether he did so
19 in the context of a business meeting or --
20 A. I just don't recall the
21 situation. I just will tell you that it's my
22 belief I bought it at the beginning or he made
23 me aware of the situation, but I can't recall
24 the first time he actually said it.
25 Q. Do you have any -- what is the
CLASSIC REPORTING, INC. (212) 268-2590
54
1 Icahn
2 first discussion about RJR with Mr. LeBow that
3 you can recall?
4 A. I could just recall generally
5 that he just told me I should look at the
6 values, how good they were, and I did.
7 Q. Do you know a Mr. Resseler?
8 A. Richard Resseler?
9 Q. Yes.
10 A. Yes.
11 Q. Have you ever discussed RJR with
12 him?
13 A. Not that I recall. He might have
14 been on the phone once when we were having our
15 contract negotiations, what have you, but
16 that's all I can remember.
17 Q. You are referring to the
18 negotiations that resulted with the agreement
19 you had with Brooke Group?
20 A. He may have been involved with
21 that.
22 MR. ALTMAN: I object to the form
23 of that question, but --
24 A. I remember him on the
25 speakerphone. That's about all I can tell you
CLASSIC REPORTING, INC. (212) 268-2590
55
1 Icahn
2 about --
3 Q. Do you have any financial --
4 A. -- the relation with RJR and him.
5 Q. Sorry, I interrupted you.
6 Do you have any financial
7 interest in Liggett?
8 A. Aside from owning Brooke bonds,
9 no.
10 Q. Have you told me about your
11 financial interests with any entity associated
12 with Mr. LeBow?
13 A. As far as I can recall.
14 Q. Did there come a time when you
15 had lunch with Mr. LeBow to discuss RJR?
16 A. Yes.
17 Q. When was that?
18 A. Well, it wasn't to discuss RJR,
19 but we had a lunch I believe toward the end of
20 August.
21 Q. Did you invite Mr. LeBow to lunch
22 or did he invite you?
23 A. I don't remember.
24 Q. Do you remember where the lunch
25 was held?
CLASSIC REPORTING, INC. (212) 268-2590
56
1 Icahn
2 A. I remember we had lunch at a
3 Chinese restaurant.
4 Q. Was that in New York?
5 A. Yes.
6 Q. Who raised the subject of -- did
7 the subject of RJR come up at that lunch?
8 A. Yes.
9 Q. Who raised it?
10 A. I remember talking about it
11 generally. I don't know who raised it.
12 Q. Was there anyone at this lunch
13 besides you about Mr. LeBow?
14 A. No.
15 Q. How long did the lunch last?
16 A. Hour and-a-half.
17 Q. Was RJR the primary topic of the
18 conversation?
19 A. I would say so.
20 Q. What did you say to him and he to
21 you on the subject of RJR?
22 A. I don't recall exactly. We just
23 talked about the values again.
24 Q. Sir, did there come a time when
25 you filed what's called a Hart-Scott-Rodino
CLASSIC REPORTING, INC. (212) 268-2590
57
1 Icahn
2 form with respect to RJR?
3 A. Yes.
4 Q. When was that?
5 A. I don't remember, somewhere in
6 August, sometime around there.
7 Q. Was that before or after the
8 lunch in the Chinese restaurant with Mr.
9 LeBow?
10 A. I'm not sure. I think it was
11 around that time.
12 Q. Is there any connection between
13 the two events?
14 A. I was trying to recollect that,
15 but I can't be sure.
16 MR. STERN: I'm going to mark as
17 the next exhibit, documents from --
18 produced to us on behalf of Mr. Icahn,
19 I 355 to 356, 349 to 350, 351 to 52,
20 353 to 354, 346 to 348 and 339.
21 (Group of documents, bearing
22 production Nos. I 355 to 356, 349
23 to 350, 351 to 52, 353 to 354,
24 346 to 348 and 339 marked Icahn
25 Exhibit 4 for identification, as
CLASSIC REPORTING, INC. (212) 268-2590
58
1 Icahn
2 of this date.)
3 Q. Mr. Icahn, I'm going to ask that
4 this exhibit be placed before you. Take a
5 moment to flip through the exhibit and tell me
6 if you have ever seen any of the documents
7 within it.
8 Let me ask a question about it.
9 I have a question on the record. Do you
10 recognize any of these documents, sir?
11 A. I recognize names on them, but I
12 never really looked at these documents, no.
13 Q. You have never seen these
14 letters?
15 A. Was I -- I mean if you are asking
16 was I involved in the business decision on the
17 documents, I guess I was, but I don't remember
18 seeing the documents themselves.
19 Q. All I'm asking you is if you have
20 ever seen these letters before?
21 A. I can't recall that I ever saw
22 them.
23 Q. Now, the first -- I take it
24 Gordon Altman is your law firm; is that
25 correct, sir?
CLASSIC REPORTING, INC. (212) 268-2590
59
1 Icahn
2 A. Yes.
3 Q. The first letter refers to a
4 company called Cadus.
5 MR. ALTMAN: Before you go on
6 with this, could we go off the record?
7 MR. STERN: Sure.
8 (Discussion off the record.)
9 MR. STERN: In an off-the-record
10 discussion, I have been advised by
11 counsel for Mr. Icahn that the letter
12 marked I 355 to 56 has nothing to do
13 with this matter and may have been
14 produced inadvertently. Subject to
15 confirmation of that point, we will ask
16 no questions about it and we will move
17 on.
18 Q. Mr. Icahn, the second document, I
19 349 does refer to RJR, do you see that?
20 A. Yes.
21 Q. This is a letter dated August 30,
22 1995 and it purports to enclose copies of an
23 Antitrust Improvement Acts notification and
24 report dated August 28, 1995 on your behalf.
25 Does this refresh your recollection as to the
CLASSIC REPORTING, INC. (212) 268-2590
60
1 Icahn
2 date of your lunch with Mr. LeBow?
3 A. No, this doesn't refresh. As I
4 said to you, the lunch --
5 MR. ALTMAN: The answer is no.
6 A. Okay.
7 MR. STERN: I appreciate
8 counsel's assistance here, but I think
9 it would be better if the witness were
10 permitted to answer the questions
11 completely before counsel comments.
12 MR. ALTMAN: The question was
13 does this refresh your recollection and
14 he indicated no.
15 MR. RAPER: Well, at least the
16 way it's done in North Carolina where
17 this case is pending, counsel does not
18 interrupt the witness when the witness
19 is continuing to answer a question just
20 because counsel wants to cut him off.
21 Q. Now, sir, the next letter which
22 is dated September 11th -- let me ask you if
23 you would to look at I 350, the second page?
24 A. I 351.
25 Q. I 350, second page of the letter
CLASSIC REPORTING, INC. (212) 268-2590
61
1 Icahn
2 dated August 30th that says, "As stated in the
3 report, Mr. Icahn is requesting early
4 termination of the waiting period."
5 Do you see that?
6 A. Yes.
7 Q. Why were you requesting early
8 termination of the waiting period?
9 A. I don't recall.
10 Q. The next document, I 351, which
11 is a letter dated September 11th says
12 "Contrary to what is stated in the report, Mr.
13 Icahn would like to withdraw his request for
14 early termination of the waiting period."
15 Do you see that?
16 A. Yes.
17 Q. Why at that point -- had you
18 determined at that point to withdraw your
19 request for early termination?
20 A. I just don't recall the whole
21 thing.
22 Q. Then, just so that the record is
23 complete and there's no confusion on it, on
24 Page I 347 which appears behind a fax dated
25 September 20, 1995 from Kim B. Fields to Betty
CLASSIC REPORTING, INC. (212) 268-2590
62
1 Icahn
2 Joubert, J-O-U-B-E-R-T, it says, "Please be
3 advised that contrary to what is stated in a
4 letter to the Department of Justice dated
5 September 11, 1995, Mr. Icahn hereby requests
6 early termination of the waiting period."
7 Do you see that? Did you discuss
8 with anyone, other than with counsel for
9 purposes of legal advice, whether to request
10 early termination of the waiting period?
11 A. No.
12 Q. Whether to withdraw a request for
13 early termination?
14 A. Other than legal, no, other than
15 my own counsel, no.
16 Q. What was the reason why you
17 advised -- strike that.
18 Did there come a time when you
19 determined to withdraw a request for early
20 termination of the waiting period?
21 A. Yes.
22 Q. Why was that?
23 A. I don't recall.
24 Q. Did there come a time when you
25 decided to request again early termination of
CLASSIC REPORTING, INC. (212) 268-2590
63
1 Icahn
2 the waiting period?
3 A. Yes.
4 Q. Why was that?
5 A. I don't recall.
6 Q. Then, sir, you see on I 339,
7 there is a letter on the letterhead of the
8 Federal Trade Commission to Kim Fields:
9 "Confirming our telephone conversation of
10 9/20/95 with Kim Fields of your office, a
11 request for early termination of the waiting
12 period," and it goes on and concludes "has
13 been granted."
14 I haven't read the whole letter,
15 but I just wanted to call your attention to
16 that fact. Do you recall discussing with
17 anyone other than counsel for purposes of
18 legal advice early termination, the fact that
19 early termination of the waiting period had
20 been granted?
21 A. No.
22 Q. Did you discuss that with Mr.
23 LeBow?
24 Let me put a slightly different
25 question. Did you discuss your
CLASSIC REPORTING, INC. (212) 268-2590
64
1 Icahn
2 Hart-Scott-Rodino filing in any respect with
3 Mr. LeBow?
4 A. I don't recall.
5 Q. With Mr. Rubin?
6 A. I don't recall.
7 Q. Mr. Rachefsky?
8 A. I just don't recall.
9 Q. Why did you determine to file a
10 Hart-Scott-Rodino filing in August?
11 A. Well, at that time, I thought
12 that it may be something more of an
13 investment. I discussed it with counsel and
14 they advised me that we should file the
15 Hart-Scott.
16 MR. STERN: Could I hear that
17 last answer read again, please?
18 (Record read.)
19 Q. Just so that I'm clear, what do
20 you mean by something more of an investment?
21 A. I said, I thought I said more
22 than just an investment.
23 Q. What do you mean by that?
24 A. I might become active in it.
25 Q. What do you mean by becoming
CLASSIC REPORTING, INC. (212) 268-2590
65
1 Icahn
2 active in it?
3 A. Well, I might become active in
4 asking the company or going to some
5 shareholders about spinning off Nabisco.
6 Q. Had you reached that decision
7 before you had lunch with Mr. LeBow?
8 MR. WOLFSON: Objection to form.
9 A. I don't know -- I have to tell
10 you that I don't know if the lunch was the
11 reason I reached the decision. I just don't
12 recall, but I reached a decision that I might
13 want to do more than just be a passive
14 investor. At that time, I decided after
15 speaking to counsel that it would be prudent
16 to file the Hart-Scott.
17 Q. Did there come a time when you
18 learned that New Valley had filed a
19 Hart-Scott-Rodino application with respect to
20 RJR?
21 A. Yes.
22 Q. When was that?
23 A. I believe it was about the middle
24 of August.
25 Q. Was that before you came to the
CLASSIC REPORTING, INC. (212) 268-2590
66
1 Icahn
2 conclusion that you might become something
3 more than just an investor in RJR?
4 A. Yes.
5 Q. Was there any -- in your mind,
6 was there any connection between the two
7 events?
8 A. No. I don't believe there was a
9 connection.
10 MR. STERN: Let's go off the
11 record.
12 (Discussion off the record.)
13 Q. Did anyone tell you that New
14 Valley was going to -- let me withdraw that
15 question.
16 How did you learn that New Valley
17 filed a Hart-Scott-Rodino application?
18 A. I don't recall.
19 Q. Was it from the newspaper?
20 A. Well, I mean someone told me
21 obviously. I don't recall if I read it in the
22 paper or Richard Rubin told me. It was
23 public, it was issued in the press somewhere.
24 Q. Did you learn about it before it
25 appeared in the press, to your recollection?
CLASSIC REPORTING, INC. (212) 268-2590
67
1 Icahn
2 A. To my recollection, no.
3 Q. Did you discuss that event with
4 Mr. LeBow?
5 A. I don't recall specific
6 discussions.
7 Q. Did the knowledge that New Valley
8 had filed a Hart-Scott-Rodino application with
9 respect to RJR affect your thinking with
10 respect to RJR in any way?
11 MR. ALTMAN: Could you repeat
12 that question, please?
13 MR. STERN: Let's have it read
14 again.
15 (Record read.)
16 MR. STERN: Let me put a
17 different question. I think I can save
18 time.
19 Q. Were your activities with respect
20 to RJR influenced in any way by the knowledge
21 that New Valley had filed a Hart-Scott-Rodino
22 application?
23 A. I don't recall.
24 Q. Did you purchase more shares
25 because of that fact?
CLASSIC REPORTING, INC. (212) 268-2590
68
1 Icahn
2 A. I just don't recall the whole
3 period.
4 Q. Did you and Mr. LeBow reach any
5 understandings at the lunch in the Chinese
6 restaurant that you have described?
7 A. No.
8 Q. At that lunch, did Mr. LeBow
9 mention that he had had conversations -- I
10 will strike that. Did Mr. LeBow mention that
11 he had had or his representatives had had
12 discussions with RJR concerning a transaction
13 involving Mr. LeBow?
14 A. I don't recall.
15 Q. Did there come a time when you
16 learned that Mr. LeBow had had such contacts
17 with RJR?
18 A. Yes.
19 Q. When was that?
20 A. I don't recall.
21 Q. Was it after filing the
22 Hart-Scott -- was it after you filed the
23 Hart-Scott-Rodino application?
24 A. I just don't recall when.
25 Q. Did you ever discuss with anyone
CLASSIC REPORTING, INC. (212) 268-2590
69
1 Icahn
2 why New Valley filed the Hart-Scott-Rodino
3 application as opposed to some other entity
4 owned by Mr. LeBow?
5 A. I don't recall such discussions.
6 Q. Do you have any understanding as
7 to that fact?
8 A. No.
9 Q. When you say understanding just
10 as a businessman, I think that you have to --
11 A. The entity that buys it has to
12 file, I believe.
13 Q. Right?
14 A. New Valley bought the stock.
15 Q. Do you know why New Valley bought
16 the stock as opposed to Brooke Group or some
17 other entity?
18 A. Aside from the fact that New
19 Valley has the money?
20 Q. Other than the fact that New
21 Valley has the money, you know of no other
22 reason; is that correct?
23 A. I mean, not to joust with you,
24 but I don't even understand the question. Why
25 doesn't the taxi driver file a Hart-Scott? A
CLASSIC REPORTING, INC. (212) 268-2590
70
1 Icahn
2 guy who has the money, you are filing if you
3 want to buy over $15 million, so...
4 Q. Did you ever talk to anyone
5 about --
6 A. At least that's my understanding
7 of it. Perhaps I'm wrong.
8 Q. Yes. Did anyone associated with
9 New Valley talk to you about New Valley's
10 reasons for filing the Hart-Scott-Rodino
11 application?
12 A. I really don't recall.
13 Q. Do you recall anything else about
14 this lunch with Mr. LeBow pertaining to RJR?
15 A. Generally, we went over the
16 values, you know, how good a value it was.
17 Q. What view did Mr. LeBow express
18 on that subject?
19 A. He thinks it's a great value.
20 Nabisco is worth a great deal and I remember I
21 think I said that this is almost as good as
22 Texaco was, that type of thing. We just
23 thought it was very, very cheap and that it
24 was almost unbelievable that management just
25 doesn't go and spin it off when you look at
CLASSIC REPORTING, INC. (212) 268-2590
71
1 Icahn
2 the values.
3 Q. Did Mr. LeBow express an opinion
4 about what the value was?
5 A. I mean I don't recall the exact
6 thing. I will just tell you the general tenor
7 of the lunch where we discussed the values of
8 RJR.
9 Q. Do you remember anything else
10 about the lunch?
11 A. Not particularly.
12 Q. Did the subject of fraudulent
13 conveyance claims come up in the lunch?
14 A. I don't recall.
15 Q. Had that -- do you know what I
16 mean by fraudulent conveyance claims in this
17 context?
18 A. Yes.
19 Q. By that I mean claims by
20 creditors or tobacco litigants against the
21 spin-off?
22 A. We talked generally. I don't
23 remember specifics. I think we discussed the
24 fact that that was a reason that they were
25 saying that they weren't going to spin it off
CLASSIC REPORTING, INC. (212) 268-2590
72
1 Icahn
2 now that you mention it, and I think, you
3 know, we felt that was, it was a ridiculous
4 reason, because they shouldn't really -- there
5 was no real claims, something to that effect.
6 That's all I can tell you.
7 Q. Had that subject come up in any
8 prior discussion you had with Mr. LeBow on the
9 subject of RJR?
10 A. I just don't recall.
11 Q. Did it come up in any of your
12 discussions with anyone concerning RJR prior
13 to this lunch?
14 A. Prior to the lunch? I don't
15 believe so.
16 Q. Now, did Mr. LeBow say why he
17 felt that this, the expressed concern about
18 fraudulent conveyance claims, was ridiculous?
19 MR. WOLFSON: Objection to form.
20 A. Maybe the word ridiculous wasn't
21 the right word to use. Just that, you know, I
22 think the general feeling in the lunch was
23 that there was really no reason for management
24 not to spin off Nabisco, no real reason except
25 for the fraudulent conveyance issue that you
CLASSIC REPORTING, INC. (212) 268-2590
73
1 Icahn
2 mentioned, and I think we felt that that
3 wasn't a real major issue, but I can't recall
4 now.
5 Q. Did either you or Mr. LeBow
6 express any reasons why you felt that it was
7 not a major issue?
8 A. I can't recall.
9 Q. Do you remember why you felt it
10 wasn't a major issue?
11 A. Well, you see, I don't remember
12 if really this was really discussed at great
13 length at the lunch. If you are asking me
14 afterwards in thinking about it, if you want
15 my views on it, I will give you my views on
16 it, but I don't think it was -- at the lunch
17 that was really a major issue. So I can't
18 recall exactly what was said at the lunch
19 about it.
20 Q. Well, up until that point in
21 time, had you performed any analysis of the
22 fraudulent conveyance issues?
23 A. I don't recall.
24 Q. Asked anyone or your counsel to
25 do so?
CLASSIC REPORTING, INC. (212) 268-2590
74
1 Icahn
2 A. I might have, but I don't recall.
3 I know I did that, but not prior to that time,
4 you know. I can't recall if I did that then.
5 Q. What happened next with respect
6 to your interest in RJR?
7 A. Well, I don't know what "next"
8 means, next to what?
9 Q. Following this lunch?
10 A. As I said, I think we filed a
11 Hart-Scott after the lunch, but I'm not sure
12 if it was right before or after, and obviously
13 I didn't buy it during the period of the
14 Hart-Scott and -- well, I mean, what do you
15 want the whole thing for the whole six months
16 or --
17 Q. Let's take it, I would like to
18 exhaust your recollection as to this matter
19 since the matter began, and I think right now
20 we are up to sometime in the end of August.
21 What I'm asking you is --
22 A. I can't remember chronologically.
23 I can tell you that obviously you know that we
24 have a -- LeBow and I agreed to an
25 arrangement, but is that what you want to know
CLASSIC REPORTING, INC. (212) 268-2590
75
1 Icahn
2 about?
3 Q. There came a time when you
4 reached an agreement with Mr. LeBow as
5 respects RJR; is that correct?
6 A. There came a time, yes.
7 Q. Do you remember when that was?
8 A. Sometime late September and
9 October, I believe.
10 MR. STERN: I'm going to mark as
11 the next exhibit, a document produced
12 to us on behalf of Mr. Icahn, No. I 695
13 through I 779.
14 (Document, bearing production
15 Nos. I 695 through I 779, marked
16 Icahn Exhibit 5 for
17 identification, as of this date.)
18 (Recess taken.)
19 Q. Mr. Icahn, I've placed this
20 exhibit before you. Can you identify that
21 exhibit?
22 A. Yes. You want me to read it?
23 Q. What is it?
24 A. An agreement between myself and
25 Bennett LeBow regarding RJR Holdings.
CLASSIC REPORTING, INC. (212) 268-2590
76
1 Icahn
2 Q. In fact, what this is is a set of
3 agreements between either yourself or entities
4 under your control and Mr. LeBow or entities
5 under his control; is that correct?
6 A. Yes, that's correct.
7 Q. You can take as long as you want
8 to study the document before answering this
9 question, but is it correct that these are the
10 only agreements that you have with Mr. LeBow
11 or entities controlled by him as respects RJR?
12 A. I believe that's correct. You
13 would have to really check with counsel,
14 because they gave you the documents, but I
15 believe that's correct.
16 Q. Now did there come a time when
17 you and Mr. LeBow reached the general
18 understanding that culminated in these signed
19 agreements?
20 A. Yes.
21 Q. When was that?
22 A. You know before the date on the
23 agreement.
24 Q. The date on the cover of this
25 document is October 17, 1995?
CLASSIC REPORTING, INC. (212) 268-2590
77
1 Icahn
2 A. We reached an understanding close
3 to that date.
4 Q. Matter of days before or week
5 before?
6 A. I would say days. Not even days,
7 I think we wrote it up right after we made the
8 agreement.
9 Q. How long did the negotiations
10 take with respect to this, to the preparation
11 of the written agreements?
12 A. On and off maybe a week, two
13 weeks.
14 Q. Did you and Mr. LeBow reach your
15 understanding at a meeting or by telephone or
16 some other way?
17 A. I just don't recall when we did
18 it.
19 Q. Well, after the Chinese
20 restaurant lunch, did you have a negotiating
21 session with Mr. LeBow?
22 A. I don't recall specifically. I
23 mean obviously we met and discussed it, but I
24 don't remember specific conversations.
25 Q. In the discussions with Mr. LeBow
CLASSIC REPORTING, INC. (212) 268-2590
78
1 Icahn
2 leading up to these agreements, was any other
3 person present?
4 A. I just don't recall specific
5 discussions.
6 Q. I'm asking you whether you have
7 any general -- any recollection as to whether
8 anyone was present at these discussions?
9 A. I just don't.
10 Q. Without asking you the specifics?
11 A. I don't remember specifics so I
12 can't remember the various discussions.
13 Q. Well, at any of the discussions
14 that you had with Mr. LeBow, whether or not
15 you remember the detail of the discussions, do
16 you remember any person being present other
17 than yourself, sir?
18 A. I just don't recall.
19 Q. Did Mr. Lorber participate in
20 these negotiate -- in these discussions?
21 Let me put a different question.
22 Did Mr. Lorber participate in the
23 discussions leading up to the agreements we
24 have marked as exhibits in this deposition?
25 A. I have to tell you I don't recall
CLASSIC REPORTING, INC. (212) 268-2590
79
1 Icahn
2 the meetings. I just don't recall them.
3 Q. Do you remember having more than
4 one lunch in New York with Mr. LeBow at which
5 you discussed RJR?
6 A. I didn't have more than one.
7 Q. You did?
8 A. No, I did not. That was the only
9 lunch I had with him.
10 Q. At the lunch with Mr. LeBow, did
11 you tell him that it would be a good idea, in
12 words or substance, that it would be a good
13 idea for the two of you to team up with
14 respect to RJR?
15 A. I don't recall saying that.
16 Q. Do you remember Mr. LeBow saying
17 with respect to RJR "Come on in, fine Carl,
18 love to have you"?
19 A. Find Carl, find?
20 Q. Fine, F-I-N-E, Carl, love to have
21 you. Did he say those words?
22 A. Something like that. He wanted
23 me to come in. I don't think it was at lunch.
24 He would like me on the team. He would like
25 me to be involved. They want me in, that type
CLASSIC REPORTING, INC. (212) 268-2590
80
1 Icahn
2 of thing.
3 Q. What did he mean by "want you
4 in"?
5 A. To do this agreement, the essence
6 of the agreement is what he wanted.
7 Q. And you don't remember whether he
8 said that at this Chinese lunch?
9 A. I don't think he said it then. I
10 just don't think it was at that time, but he
11 did say words to that effect that you just
12 read, though.
13 Q. At this lunch in the Chinese
14 restaurant, did you discuss with him some sort
15 of formal agreement that you would join to
16 support Mr. LeBow's efforts with respect to
17 RJR?
18 A. I don't recall if it was brought
19 up at that lunch, but obviously we had these
20 discussions to get to this agreement, but I
21 don't really remember no matter how many times
22 you ask me if we brought it up at that lunch.
23 Q. Was the formal agreement proposed
24 by you or by Mr. LeBow?
25 A. I think it was proposed by
CLASSIC REPORTING, INC. (212) 268-2590
81
1 Icahn
2 Bennett.
3 Q. When he proposed it, what did you
4 say about it?
5 A. See, I can't recall specifics. I
6 have to tell you it's sort of a blur as far as
7 all the other meetings. It's just in my mind.
8 I just can tell you the general essence of it.
9 Q. At this lunch, did he tell you
10 some of the elements of a transaction that he
11 had proposed to Mr. Harper and Mr. Goldstone
12 of RJR?
13 A. I told you I can't recall. I
14 don't believe he did, but I can't recall
15 Q. In your discussions with Mr.
16 LeBow leading up to these formal agreements,
17 were there any issues in particular that you
18 and he discussed?
19 A. Well, the issue that was
20 foremost, put it this way, the issue that was
21 the foremost concern of mine was that I didn't
22 want it to be in any way construed that we
23 were in this for greenmail or we were in this
24 to get something other than the other
25 shareholders would also receive, so I made
CLASSIC REPORTING, INC. (212) 268-2590
82
1 Icahn
2 that very plain to Bennett.
3 Q. What do you mean by greenmail?
4 A. Well, that, you know, that we
5 were going to do this, we were going to go out
6 or Bennett was going to go out and do what he
7 is doing now, go for a precatory and we would
8 be accused of wanting to sell our stock back
9 to the company or that Bennett would be
10 accused of wanting to merge the company with
11 Liggett or sell Liggett. In other words, get
12 anything to the other -- that the other
13 shareholders wouldn't receive. I told him if
14 that was going to be alleged and there was
15 going to be any merit to it, that we would
16 just lose.
17 Q. Lose what, sir?
18 A. Well, you know, the institutions
19 wouldn't support Bennett in his precatory, and
20 eventually if he puts up a slate or goes for
21 the proxy fight, that he would lose it.
22 Q. In your prior investment
23 activities, had you ever taken greenmail in
24 the way that you just described it?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
83
1 Icahn
2 Q. What situations were those, do
3 you remember?
4 A. Well, in the early '80s when
5 there were times when I wanted to take over
6 the companies, in most cases we wanted to buy
7 the company and they offered us, they offered
8 to buy us out.
9 Q. Was it a concern of yours that
10 Mr. LeBow had as an objective possibly selling
11 Liggett to RJR?
12 MR. ALTMAN: Objection to form.
13 A. Bennett told me that all
14 discussions about, with Harper about selling
15 Liggett were over, that that was over.
16 Q. When did he tell you that?
17 A. Well, you see as I told you, I
18 think it was after that lunch, but I'm pretty
19 sure it was after that lunch.
20 Q. Why do you -- why are you pretty
21 sure?
22 A. I just don't think it came up at
23 the lunch. As I told you, I can't remember.
24 No matter how many questions you ask, I can't
25 remember exactly when it came up.
CLASSIC REPORTING, INC. (212) 268-2590
84
1 Icahn
2 Q. What did he tell you about his
3 discussions with Harper?
4 A. No, no, he told me that,
5 basically that those discussions with Harper
6 to sell Liggett were just dead, and that was a
7 nonevent.
8 Q. Well --
9 A. Or nonconcern, that it wasn't
10 going to happen that he was going to sell
11 Liggett to.
12 Q. Am I correct in inferring from
13 your answer that he told you that he had
14 discussions with Harper?
15 A. Yes, I don't remember when. He
16 told me that but I don't know if it was at the
17 lunch or later date. It might have been that
18 I read that in the newspaper or it came up in
19 the press, but, see, I can't remember the
20 exact timing.
21 Q. I'm not asking you to repeat
22 yourself about your lack of recollection of
23 the date. I'm asking you to expand on what he
24 said about the subject of discussions with
25 Harper. Regardless on when he said it, what
CLASSIC REPORTING, INC. (212) 268-2590
85
1 Icahn
2 did he say on that subject?
3 A. I told you, that with Harper, you
4 know, the discussions with Harper to sell
5 Liggett were over.
6 Q. Did he tell you that he had
7 proposed to Mr. Harper that RJR buy Liggett?
8 A. I don't recall that he told me
9 that, no. He said -- I just don't recall. It
10 was my concern. I said that I don't want it
11 in any way to be alleged that you are doing
12 this to sell Liggett to RJR, because if that
13 comes up, you are going to lose and what's the
14 point of my getting involved with you. And he
15 told me that that wasn't going to happen.
16 Q. Did you have a reason for
17 thinking that Mr. LeBow had as an objective
18 selling Liggett to RJR?
19 A. I knew that at the time we did
20 this agreement, I obviously knew and I don't
21 know when I knew it, that they had had
22 discussions concerning a deal to sell Liggett.
23 I think it was in the newspapers, but maybe
24 I'm wrong. In any event, I knew about that,
25 that there were discussions about that. That
CLASSIC REPORTING, INC. (212) 268-2590
86
1 Icahn
2 had come up and Bennett had told me that those
3 discussions were over.
4 Q. Did Mr. LeBow tell you how the
5 discussions concluded?
6 A. I don't think we got into it in
7 detail. He just told me -- no, we didn't get
8 into any details on that. I just said I just
9 don't want this to be alleged and I want to be
10 sure of that, and he said that's not going to
11 happen.
12 Q. Did he ever mention to you that
13 he had spent some time seeking to organize a
14 joint venture with respect to some of RJR's
15 tobacco operations?
16 A. No.
17 Q. Did he ever mention -- did you
18 ever hear of a tobacco company named Reemstma
19 R-E-E-M-S-T-M-A?
20 A. No.
21 Q. Did he ever tell you that he had
22 reached an understanding of any kind with a
23 foreign tobacco company with respect to a
24 potential joint venture for RJR's
25 international tobacco assets?
CLASSIC REPORTING, INC. (212) 268-2590
87
1 Icahn
2 A. At one time he mentioned to me
3 that he was talking to an international
4 tobacco company. That's all I can remember
5 about it.
6 Q. That he was talking to
7 international --
8 A. I don't remember who.
9 Q. Did he say what he was talking to
10 an international tobacco company about?
11 A. I just don't recall. I remember
12 he was talking to an international tobacco
13 company. And I'm not sure, about joining up
14 with us, something to that effect, but it
15 never came to fruition.
16 Q. When did he have that discussion
17 with you?
18 A. I don't remember.
19 Q. Was it after your --
20 A. Obviously, yes.
21 Q. -- Chinese lunch?
22 A. It was obviously in the period we
23 were discussing this or maybe it was even
24 after we did this agreement, I can't remember.
25 I remember this came up. You jogged my
CLASSIC REPORTING, INC. (212) 268-2590
88
1 Icahn
2 memory, but I can't remember more than that.
3 Q. After the agreement that we
4 marked as Exhibit 5?
5 A. I just don't remember if it was
6 before or after.
7 Q. Did you ever hear of a company
8 named Tabaca Lera?
9 A. No.
10 Q. Intabex?
11 A. No.
12 Q. A fellow named Tony Taberer?
13 A. No.
14 Q. You probably heard of a company
15 called Rothmans; is that correct?
16 A. Yes.
17 Q. Did you ever hear anything about
18 Rothmans in connection with RJR?
19 A. All I can remember is he was
20 talking to one of those, you know,
21 international companies, and I think it might
22 have been Rothman, but I'm not sure.
23 Q. Did you ever hear of an entity
24 called Steele Partners?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
89
1 Icahn
2 Q. An individual named -- whose
3 first name begins with W and whose last name
4 is Lichtenstein?
5 A. No. I heard of a country.
6 Q. Did you ever hear of someone
7 named Gary Klesch?
8 A. Yes.
9 Q. Who is Mr. Klesch?
10 A. I met him, if it's the fellow I'm
11 thinking of in England.
12 Q. Yes.
13 A. Yes. He has a small investment
14 company in England.
15 Q. When did you meet him?
16 A. When I was in London maybe a year
17 ago, year and-a-half ago.
18 Q. Did your meeting concern RJR in
19 any way?
20 A. No.
21 Q. Did you ever discuss Mr. Klesch
22 with Mr. LeBow?
23 A. Yes, I think we discussed him a
24 couple of times. In fact, Bennett introduced
25 me or told me to look him up in England.
CLASSIC REPORTING, INC. (212) 268-2590
90
1 Icahn
2 Q. Did Mr. LeBow describe his
3 relationship with Mr. Klesch?
4 A. Said he uses him sometimes as an
5 investment banker. He does distressed bonds
6 and I should meet him.
7 Q. Did it ever come to your
8 attention that Mr. Klesch was performing
9 any -- was engaging in any activities at Mr.
10 LeBow's request concerning RJR?
11 A. I think once Bennett mentioned to
12 me that he might be raising some capital for
13 him or something like that, but I don't
14 remember specifics.
15 Q. When did Mr. LeBow say that?
16 A. I just don't recall when.
17 Q. Would it have been after this
18 lunch that you described?
19 A. Probably.
20 Q. Did you ever hear of an
21 individual named Lucio Tan?
22 A. What's that name.
23 Q. L-U-C-I-O, T-A-N?
24 A. No.
25 Q. Fortune Tobacco Company?
CLASSIC REPORTING, INC. (212) 268-2590
91
1 Icahn
2 A. No.
3 Q. Did it ever come to your
4 attention in any way that Mr. LeBow was
5 seeking to interest an individual in the
6 Philippines in acquiring RJR stock?
7 A. Yes, I believe he told me that he
8 was doing that, but I don't remember if it was
9 the Philippines. One time he told me he was
10 going around talking to some people, and he
11 mentioned he was going to go to Manila. He
12 told me on one of his trips and that he might
13 be, you know, talking to someone about again,
14 you know, joining us, acquiring some stock,
15 that type of thing.
16 Q. Do you remember when you had that
17 conversation with him?
18 A. No.
19 Q. Was it in October?
20 A. I just don't recall.
21 Q. Did he mention anyone in
22 particular that he was going to call upon?
23 A. No.
24 Q. Did he tell you what he was going
25 to tell them?
CLASSIC REPORTING, INC. (212) 268-2590
92
1 Icahn
2 A. No. Basically, you know, the
3 value of the company, how cheap it is and why
4 they should join us, that type of thing.
5 Q. What do you mean by the phrase
6 "join us"?
7 A. You know, buy stock. I was
8 buying in agreement, as you know, I'm going to
9 buy 5 million shares, I bought 8 million, but
10 I was supposed to buy at least five and he
11 said he was going to possibly bring other
12 people into it, into buying stock with us.
13 Q. Did you discuss with him forming
14 a group with other people?
15 A. Well, we talked about that as
16 part of, you know, what we were doing here.
17 Q. Did you discuss with Mr. LeBow
18 filing a 13-D at any point?
19 A. Well, we never got into
20 specifics, no.
21 Q. How did you -- you mentioned
22 before that you had bought 8 million shares.
23 How did you decide how much RJR stock to buy?
24 A. I just don't recall.
25 Q. In determining how many shares to
CLASSIC REPORTING, INC. (212) 268-2590
93
1 Icahn
2 buy, did you take into account anything having
3 to do with the necessity of filing a Section
4 13-D at a certain point in time?
5 MR. WOLFSON: Objection to form.
6 MR. STERN: I will put the
7 question a different way.
8 Q. In determining how many RJR
9 shares to purchase, did the requirements of
10 Section 13-D play a role in your thinking?
11 A. I just don't recall.
12 Q. Did Mr. LeBow ever report to you
13 or anyone else, did Mr. LeBow or any of his
14 associates ever tell you what happened with
15 respect to his efforts to interest others in
16 joining you?
17 A. No.
18 Q. To your knowledge, has Mr. LeBow
19 discontinued those efforts?
20 A. I believe he has.
21 Q. Why do you believe that?
22 A. He never talks about it, so I
23 would think he did.
24 Q. But he never told you that he
25 discontinued those efforts?
CLASSIC REPORTING, INC. (212) 268-2590
94
1 Icahn
2 A. He never specifically told me,
3 no.
4 Q. Did you ever hear of a Gerald
5 Levin?
6 A. No.
7 Q. Did you ever hear of Michael
8 Price?
9 A. Yes.
10 Q. Let's identify Mr. Price for the
11 record, please, so we know we are talking --
12 A. He is a big institutional holder
13 of RJR.
14 Q. Did you ever discuss RJR with Mr.
15 Price?
16 A. No.
17 Q. Did you ever discuss Mr. Price
18 with Mr. LeBow or any of his associates?
19 A. Yes.
20 Q. When did you have that
21 discussion?
22 A. I just don't recall but during
23 this period.
24 Q. "This period" meaning?
25 A. In the fall, I guess.
CLASSIC REPORTING, INC. (212) 268-2590
95
1 Icahn
2 Q. Did you discuss it with Mr.
3 LeBow, did you discuss Mr. Price with Mr.
4 LeBow?
5 A. Yes.
6 Q. What was said on -- who said what
7 to whom?
8 A. I remember Bennett told me that
9 Michael Price he believed owned a fair amount
10 of stock.
11 Q. Did he say he had been in contact
12 with Mr. Price?
13 A. I don't recall.
14 Q. Did he say he believed that Mr.
15 Price would support the effort that you and
16 Mr. LeBow had undertaken?
17 A. I don't recall the specific
18 conversation except that he told me that Price
19 owned a lot of stock. That's what he had
20 heard, he said.
21 Q. I'm sure you have heard of the
22 firm Wassherstein Parella; is that correct?
23 A. Yes.
24 Q. They are a New York based
25 investment banking firm; is that correct?
CLASSIC REPORTING, INC. (212) 268-2590
96
1 Icahn
2 A. I know them.
3 Q. Did you ever discuss RJR with
4 anyone from Wassherstein Parella?
5 A. Other than seeing Bruce
6 Wassherstein at a party, I didn't discuss it.
7 Q. When did you see Mr. Wassherstein
8 at a party?
9 A. In the summer.
10 Q. What month in the summer?
11 A. It was in the Hamptons. I think
12 it was around Labor Day.
13 Q. Did you talk to Mr. Wassherstein
14 about RJR at that encounter?
15 A. Yes.
16 Q. What did you say to him and he to
17 you?
18 A. I just -- we were talking very
19 briefly. It was a big party in the Hamptons
20 and I asked -- I don't know how it came up,
21 but I told him that, you know, I was thinking
22 of, you know, getting involved with Bennett,
23 you know, about RJR and he, the way I recall
24 it, he didn't think very much of the idea. He
25 was sort of negative on the whole thing.
CLASSIC REPORTING, INC. (212) 268-2590
97
1 Icahn
2 Q. What whole thing, what idea?
3 A. Well, you know, joining Bennett
4 on this whole enterprise.
5 Q. The enterprise?
6 A. Of this contract that we are
7 talking about, that type of thing, you know,
8 getting together with him.
9 Q. Did he say why he was negative on
10 the idea?
11 A. Yes, he felt, I think he felt
12 that -- I really can't recall, that it just
13 wouldn't be successful, but I can't recall
14 more than that.
15 Q. Did you know that Wassherstein
16 Parella had been working with Mr. LeBow?
17 A. Yes, I thought it was sort of
18 strange that he would say that, because
19 Bennett had told me that they were sort of
20 working with him, so I didn't mention it to,
21 you know, I didn't really get into it with
22 Bruce at the time. A lot of people around,
23 but I sort of thought it was strange, but I
24 never even, I don't think I mentioned it to
25 Bennett. I didn't think it was --
CLASSIC REPORTING, INC. (212) 268-2590
98
1 Icahn
2 Q. When did Mr. LeBow tell you?
3 A. Maybe I did mention to Bennett.
4 Q. That Wassherstein Parella had
5 been working with --
6 A. I remember him saying something
7 that he had been working with Wassherstein and
8 that they were, gee, I just don't recall.
9 They were talking to Wassherstein about the
10 whole thing, but --
11 Q. Did he tell you that he had
12 engaged Wassherstein Parella at some point
13 concerning RJR?
14 A. All I can remember is he said
15 that he was working with Wassherstein Parella
16 on this whole thing. That's all I can recall.
17 And then when I saw Bruce, Bruce said he
18 didn't think, I thought that was a little
19 strange. That's what I remember.
20 Q. Did you ever discuss with anyone
21 whether Mr. LeBow's filing of a
22 Hart-Scott-Rodino filing was perceived by,
23 would be perceived as a hostile gesture?
24 A. I don't recall that.
25 Q. Have you ever heard of someone
CLASSIC REPORTING, INC. (212) 268-2590
99
1 Icahn
2 named Mario Baeza?
3 A. No.
4 Q. Did Mr. Wassherstein tell you
5 that Wassherstein Parella had discontinued its
6 work for Mr. LeBow?
7 A. No.
8 Q. In connection with RJR?
9 A. No.
10 Q. Mr. Icahn, did you personally
11 review the agreements that you or your
12 affiliated entities reached with Mr. LeBow
13 regarding RJR Nabisco Holdings Corp.?
14 A. No.
15 Q. You left that to others; is that
16 correct?
17 A. Yes.
18 Q. Do you have an understanding as
19 to -- what is your understanding as to the
20 constraints that those agreements impose upon
21 either you or Mr. LeBow with respect to a
22 greenmail transaction of the type you
23 described?
24 A. If either of us do greenmail,
25 there is a penalty, there is a huge penalty,
CLASSIC REPORTING, INC. (212) 268-2590
100
1 Icahn
2 $50 million.
3 Q. Who proposed $50 million?
4 A. I did.
5 Q. Why did you choose that number?
6 A. I thought it was a big enough
7 number that you wouldn't do it.
8 Q. What did Mr. LeBow say when you
9 proposed 50 million?
10 A. He said fine.
11 Q. Did you ever see any analysis of
12 the amount of money that Mr. LeBow or Brooke
13 Group stood to make in the event that the kind
14 of transaction that he was discussing with Mr.
15 Harper were to be consummated?
16 A. No.
17 MR. WOLFSON: Objection to form.
18 Q. Did Mr. LeBow ever discuss that
19 subject with you?
20 A. Well, all I can remember is that,
21 as I said, that I know that they were having
22 these discussions with Harper. I just don't
23 know when I knew it, and I might have known it
24 before the lunch, during the lunch, after the
25 lunch, but I did know they were having
CLASSIC REPORTING, INC. (212) 268-2590
101
1 Icahn
2 discussions, but I was told by Bennett that
3 those discussions were completely, totally
4 over, that it was a nonevent, that it was over
5 and I didn't pay, you know, too much more
6 attention to it after that. And I think the
7 way I said it was well, was Bennett told me a
8 number of times we are not going to do
9 Liggett. We are not going to merge it, it's
10 over. If that's true, then you don't mind
11 giving me $50 million if it ever -- he said
12 yes, that's okay, because I said I'm not going
13 into this if that's going to be alleged and we
14 are going to get, you are not going to win it
15 then.
16 Q. Did anyone ever tell you that the
17 proposal that Mr. LeBow or his colleagues were
18 discussing with Mr. Harper and his colleagues
19 could increase his, the value of his holdings
20 in Brooke Group and Liggett by as much as 750
21 million to a billion dollars?
22 A. Absolutely not. Nobody ever
23 mentioned those kind of numbers to me.
24 Q. Have you testified to all that
25 you can recall about your discussions with Mr.
CLASSIC REPORTING, INC. (212) 268-2590
102
1 Icahn
2 LeBow concerning the possibility of a sale or
3 merger of Liggett to or with RJR?
4 A. I told you basically that my
5 interest in it, as I told him, was that we
6 get, that Nabisco gets spun off and I think
7 it's relatively simple. I told him, I said if
8 they don't perceive you and I are getting
9 something else out of this, we are going to
10 win, because it's going to be spun off because
11 there's too much value there. But if you are
12 going to bring up anything else, it's not
13 going to, I don't think people are going to
14 give you that value, and he told me what's
15 interesting to him is win this precatory and
16 the precatory was a simple question, spin it
17 off or not spin it off, and it's my feeling
18 that if we win big in the precatory, I believe
19 the company will do it. That's my feeling,
20 but in any event, that's why I'm really in it,
21 and I feel that with a $50 million penalty,
22 it's just not going to be alleged or not going
23 to be believed, why would anybody do something
24 if they are going to have to pay $50 million
25 and if you plan to do the $50 million, if he
CLASSIC REPORTING, INC. (212) 268-2590
103
1 Icahn
2 really planned to do the merger or if he
3 planned to really push that or do it, well,
4 then, what does he need me for? Why not go do
5 it? I'm not that important to the whole damn
6 game.
7 Q. Did Mr. LeBow say why he was
8 interested in your participation in the
9 transaction?
10 A. Yes, I mean, I think he wants, in
11 quotes, "somebody who is known to be an astute
12 investor on his side," but I don't think he
13 certainly needs my vote. I mean, I think the
14 institutions are going to go with him, and if
15 they go with him, he is going to win. If they
16 are not going to go with him, my 8 million is
17 not going to matter. He doesn't need my
18 participation. To get 50 million, he
19 certainly doesn't.
20 Q. You are receiving certain
21 benefits as a result of your agreements with
22 Mr. LeBow; is that correct?
23 A. Yes, yes.
24 Q. What is your understanding of
25 what you or your affiliated companies are --
CLASSIC REPORTING, INC. (212) 268-2590
104
1 Icahn
2 A. After the costs, after all the
3 costs, the proxy fight and everything, the
4 legal fees, I get 20 percent of New Valley's
5 profits, but, you know, I think I can
6 understand paying that. I personally, if I
7 were LeBow, I certainly wouldn't pay a $50
8 million penalty if I really believed I was
9 going to be doing something. If I believed I
10 was going to take greenmail, if I were LeBow
11 doing a merger with Liggett or any kind of
12 affiliated transaction like that, I sure
13 wouldn't be willing to pay 50 million for
14 bringing Carl Icahn into it because I don't
15 think I'm that valuable. I think the 20
16 percent is fair, but I don't think the 50
17 million would be. I think you would be crazy
18 to do that.
19 Now, you know, he talks one way,
20 he talks another, but he told me several times
21 in no uncertain terms that he is into this as
22 I am to see the thing spun off and make money
23 on it, and at the end, if there's a proxy
24 fight and we get control of RJR, I think
25 that's going to be something he is going to
CLASSIC REPORTING, INC. (212) 268-2590
105
1 Icahn
2 like to have perhaps, but that's if they don't
3 do it, and I happen to believe and I think he
4 really does too, that they are going to do it
5 if the precatory comes in big.
6 Q. In your last answer when you said
7 if he gets, if he wins the proxy fight and
8 gets control of RJR, that's something he would
9 like to have, what were you referring to?
10 A. Like to have, I don't mean it in
11 those terms. I'm saying I don't think anybody
12 is going to mind and I don't think it's -- if
13 they don't do the spin-off and he puts up a
14 slate, he has a slate and he has control of
15 it, that's one thing. I want to strike that.
16 I don't think people are going to mind that,
17 as long as he is not going to merge it with
18 Liggett or get something personal for himself
19 out of it. I think that's okay, but I don't
20 think it's okay if he is going to merge it
21 with Liggett or get anything extra for
22 himself. I don't think he will win.
23 Q. That's okay?
24 A. When I say okay, I think it's
25 perceived as all right.
CLASSIC REPORTING, INC. (212) 268-2590
106
1 Icahn
2 Q. I'm asking you what the "that"
3 refers to in that answer. I want to be clear
4 on that. What is okay?
5 A. The fact that after the Nabisco
6 spin-off, if his slate controls RJR, I don't
7 think that's perceived as very bad. I think
8 he'll win if that's all that's going to
9 happen, because he is doing a great favor to
10 all the shareholders in spinning it off, but I
11 don't think he has any chance of winning, he
12 will not win, if it's perceived that he is
13 going to merge it with Liggett.
14 Q. Did he ever tell you one way or
15 another whether he had ever raised with any of
16 the slate members the possibility that in the
17 event his slate were to be elected, he would
18 propose a merger between Liggett and RJR?
19 A. He didn't tell me. He told me
20 again that he is not doing this -- he is doing
21 this to get the Nabisco spin-off accomplished,
22 and that's what he has told me and he has told
23 me that in no uncertain terms, and I happen to
24 believe it because I really don't think he
25 would pay me 50 million if he intended to
CLASSIC REPORTING, INC. (212) 268-2590
107
1 Icahn
2 merge it with Liggett.
3 Q. Would your view on that change
4 depending on how much he stood to gain by
5 accomplishing such a merger?
6 A. How will he accomplish a merger
7 if he makes all this money and get a
8 shareholder vote for a merger where he is
9 really going to be getting all this. How does
10 he do it and get a shareholder vote?
11 Shareholders still have to vote for merger.
12 My view doesn't change. How is he going to do
13 it anyway?
14 Q. Did he ever discuss with you
15 whether there was a threshold percentage of
16 RJR shares that he or people associated with
17 him would need to control or would need to own
18 in order to have working control of the
19 company?
20 A. To have?
21 Q. Working control?
22 A. What does that mean, to win?
23 Q. To have effective control of the
24 company in order to, for the purpose of
25 effectuating a combination of some kind?
CLASSIC REPORTING, INC. (212) 268-2590
108
1 Icahn
2 MR. ALTMAN: Start again with
3 that question.
4 MR. STERN: That's a fair
5 objection.
6 Q. Did he ever discuss with you the
7 threshold percentage or the minimum percentage
8 of shares that he and persons acting with him
9 would need to control or own in order to be
10 able to put through a merger between Liggett
11 and RJR?
12 A. No.
13 Q. Did he ever discuss with you
14 whether a group owning 20 percent of RJR or
15 slightly more than 20 percent would be able to
16 exercise effective or de facto control of the
17 company?
18 MR. ALTMAN: Objection to form.
19 A. Never discussed it with me.
20 Q. Did he indicate to you that he
21 was discussing that subject with Mr. Tan?
22 A. Never told me that.
23 Q. Mr. Icahn, have you ever seen the
24 Brooke Group solicitation material?
25 A. What?
CLASSIC REPORTING, INC. (212) 268-2590
109
1 Icahn
2 Q. The consent solicitation
3 materials?
4 I will ask a prior question. Did
5 there come a time when you and Mr. LeBow
6 discussed a solicitation of consents from the
7 shareholders of RJR with respect to a spin-off
8 and perhaps other matters?
9 A. I just don't recall those
10 discussions. I know we are doing the
11 precatory, is that what you are referring to?
12 The thing that's out now, the precatory?
13 Q. Yes, sir. By precatory, are you
14 referring to the consent solicitation?
15 A. Yes, okay.
16 Q. When did that come up with Mr.
17 LeBow?
18 A. I just don't recall, but we
19 discussed that when we discussed the
20 agreement. You know, the strategy of going
21 for the consents, we discussed that. I just
22 don't remember specific conversations again.
23 I just remember that all of this was
24 discussed.
25 Q. Who raised that?
CLASSIC REPORTING, INC. (212) 268-2590
110
1 Icahn
2 A. Oh, I just don't recall.
3 Q. Did you ever see any, you are
4 aware, aren't you, that there are written --
5 that Brooke Group has prepared written
6 solicitation materials with respect to that
7 consent effort, that consent solicitation?
8 A. Oh, yes.
9 Q. Have you ever reviewed those
10 materials or read them?
11 A. Some of them. I just don't
12 recall.
13 MR. STERN: I would like to mark
14 as the next exhibit, a document which I
15 understand to be a copy of the consent
16 solicitation statement disseminated by
17 Brooke Group Ltd.
18 (Copy of consent solicitation
19 statement disseminated by Brooke
20 Group Ltd. marked Icahn Exhibit 6
21 for identification, as of this
22 date.)
23 Q. Mr. Icahn, I would like you to
24 direct your attention, if you would -- let me
25 ask you a prior question, sir. Can you
CLASSIC REPORTING, INC. (212) 268-2590
111
1 Icahn
2 identify this exhibit? Have you ever seen it
3 before?
4 A. I don't recall seeing this whole
5 document.
6 Q. Well, have you seen any part of
7 the document?
8 A. Yes.
9 Q. Which part have you seen?
10 A. Well, I saw different parts of
11 it, I believe, but I never saw the whole thing
12 wrapped together and stapled together and
13 whatnot.
14 Q. Who showed you parts of the
15 document?
16 A. I don't recall.
17 Q. Sir, if you look at the page that
18 is numbered iii in the form of three little
19 iii's, sort of the introductory pages, do you
20 see that?
21 A. Yes.
22 Q. Do you see it says, "High River
23 has agreed in a High River agreement that it
24 will not accept any form of greenmail from RJR
25 Nabisco during the solicitation." Do you see
CLASSIC REPORTING, INC. (212) 268-2590
112
1 Icahn
2 that sentence, sir?
3 A. Yes.
4 Q. And just so that we are clear on
5 the record, the High River agreement that's
6 referred to there, is it correct that that is
7 among the agreements that we marked earlier in
8 this deposition?
9 A. Yes.
10 Q. Have you discussed that sentence
11 with anyone?
12 A. I just don't recall.
13 Q. Is it an accurate, as far as you
14 know, is that an accurate statement of the
15 understanding or the agreement that High River
16 has reached in the High River agreement?
17 A. Yes.
18 Q. Did you ever discuss with anyone
19 whether High River or any other entity
20 associated with yourself or with Mr. LeBow
21 would accept a form of greenmail from RJR
22 Nabisco after this solicitation?
23 A. Yes, in the agreement. After the
24 solicitation, we still can't accept anything.
25 Bennett can't do it for a number of years.
CLASSIC REPORTING, INC. (212) 268-2590
113
1 Icahn
2 Q. Except upon payment of --
3 A. $50 million.
4 Q. Sir, did you ever discuss with
5 Mr. LeBow circumstances under which you or he
6 or both of you might waive the provisions in
7 these agreements with respect to the payment
8 of a $50 million in the event of a greenmail
9 type transaction?
10 A. No.
11 MR. WOLFSON: Objection to form.
12 Q. Did you ever discuss that subject
13 with anyone?
14 A. No.
15 Q. Sir, did it ever come up, did you
16 ever discuss with Mr. LeBow or with anyone
17 else your joining the slate of directors that
18 Brooke Group has proposed for RJR?
19 A. Did it ever come up that I --
20 Q. Yes?
21 A. No.
22 Q. Did you ever ask to be on the
23 slate?
24 A. No.
25 Q. Did Mr. LeBow ever ask you to
CLASSIC REPORTING, INC. (212) 268-2590
114
1 Icahn
2 join the slate?
3 A. I don't recall him ever asking
4 me. I never asked to be on it. I just don't
5 want to be an a board that I don't control the
6 company of.
7 Q. Are you familiar with the people,
8 with the names of the people who are on the
9 slate?
10 A. I know some of the names.
11 Q. Do you know any of the
12 individuals to your knowledge?
13 A. I think I might know one or two
14 of them.
15 Q. Who are they?
16 A. Frome, I know Frome.
17 Q. In what connection, sir?
18 A. Well, he was a lawyer, his firm
19 once represented me many years ago back in the
20 '60s maybe.
21 Q. Did you ever discuss RJR with Mr.
22 Frome?
23 A. No.
24 Q. Did you ever discuss RJR with any
25 members of the slate to your knowledge?
CLASSIC REPORTING, INC. (212) 268-2590
115
1 Icahn
2 A. Not that I recall.
3 Q. Do you know a Mr. Ridings?
4 A. Yes, I do know Ridings.
5 Q. In what connection do you know
6 him?
7 A. I forget. He was involved, I
8 think in a company once, Simplicity Pattern, I
9 believe he was -- represented the investment
10 banker for some group or another and that's
11 Simplicity Pattern.
12 Q. Was he involved in the TWA
13 bankruptcy?
14 A. I think he was. He was in that,
15 too.
16 Q. Was he providing professional --
17 A. I think he came in at the end.
18 Q. Was he providing professional
19 services to some constituent group?
20 A. I don't recall who he was
21 providing them to. I think he came at the
22 end.
23 Q. Did you ever discuss RJR with Mr.
24 Ridings?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
116
1 Icahn
2 Q. Do you have any business or
3 personal relationship with him?
4 A. I haven't seen him for a long
5 time.
6 Q. Did you ever discuss with anyone
7 how RJR would be managed in the event that the
8 slate of directors at Brooke Group -- that
9 Brooke Group has proposed were to be elected?
10 A. I think I talked to Bennett about
11 it, that what I want him to do is if -- well,
12 I just wanted to be clear, I think in talking
13 to Bennett it's my feeling that -- and I think
14 his -- that it's not going to come to that
15 where he is going to go the whole way, but I
16 think what he has to say and what he will say,
17 I shouldn't say what he will do. I think in
18 the discussions with him I think Nabisco
19 during the period before the spin-off, if he
20 ever does win, will have to be managed on a
21 day-to-day basis outside of his or the board's
22 purview. What I'm trying to say is that no
23 extraordinary transactions will be done with
24 Nabisco during the period before the spin-off,
25 that type of thing. I think we talked about
CLASSIC REPORTING, INC. (212) 268-2590
117
1 Icahn
2 that a little bit.
3 Q. You talked with Mr. LeBow about
4 that?
5 A. I think I did.
6 Q. Is this, are you now talking
7 about something other than the kinds of
8 transactions that we were discussing earlier,
9 namely, those that might result in a payment
10 of some kind to your entities?
11 MR. ALTMAN: Objection to form.
12 A. Would you repeat the question?
13 MR. STERN: I will ask a
14 different question because it may be
15 confusing.
16 A. Yes.
17 Q. When did you have the discussion
18 with Mr. LeBow that you described?
19 A. I just don't recall.
20 MR. ALTMAN: Could we identify
21 the subject again?
22 MR. STERN: I'm trying to follow
23 up on Mr. Icahn's answer.
24 Q. We are talking now about the
25 management of RJR after and in the event that
CLASSIC REPORTING, INC. (212) 268-2590
118
1 Icahn
2 Mr. LeBow's or Brooke Group's proposed slate
3 is elected, and I'm asking you whether you had
4 any discussions with anyone on that subject?
5 A. Yes.
6 Q. With whom?
7 A. With Bennett.
8 Q. And what did he say?
9 A. Well, I mean, he listened. It's
10 not a part of our agreement but he certainly
11 listens to me, and I said that what I would
12 like to see happen, in the event they don't do
13 it, and I think they will personally, in the
14 event you are going to have to run the slate,
15 in the event that you are not going to, that
16 they don't do the spin-off and you win a big
17 precatory, that you make it clear that your
18 board, the board is not going to be able to do
19 any kind of transactions with Nabisco that,
20 you know, would be untoward, that you are just
21 going to spin it off because that's what I
22 want as a large shareholder, and he said yes,
23 of course, and I want him -- and I told him I
24 want him to get a top-notch operating man for
25 RJR who is going to help to build the earnings
CLASSIC REPORTING, INC. (212) 268-2590
119
1 Icahn
2 of RJR. That's what I would like, but, of
3 course, he hasn't, you know, done that at this
4 point, but I think that he should do that.
5 Q. Now, in an earlier answer, I
6 think you used the phrase "go the whole way."
7 Do you remember that, using that phrase?
8 A. I don't know. You mean referring
9 to if you have to put up the slate?
10 Q. I'm asking you what you were
11 referring to?
12 A. I guess I meant -- I don't want
13 to have to read all this stuff back to find
14 it.
15 Q. No.
16 A. I guess what I would mean by that
17 would be if you have to put the slate up and
18 go for the proxy fight, is that --
19 Q. Yes?
20 A. -- the question?
21 Q. I wanted to know what you meant
22 by it. Is that what you meant by it?
23 A. I guess so.
24 Q. Have you ever discussed with Mr.
25 LeBow circumstances under which he would not
CLASSIC REPORTING, INC. (212) 268-2590
120
1 Icahn
2 put up his slate?
3 A. Well, he has told me without
4 question that if they spin it off, he is not
5 going to put up the slate, but other than
6 that, he is going to put up the slate.
7 There's no question in my mind he will put up
8 the slate, if they don't do the precatory, I
9 mean.
10 Q. Assuming --
11 A. A few things are 100 percent, but
12 I would bet on that one.
13 Q. Assuming the precatory is
14 adopted; is that correct? When you say if
15 they don't do the precatory?
16 A. I'm sorry. If they don't do the
17 spin-off, if after the precatory they don't do
18 the spin-off, he will definitely put up a
19 slate, in my opinion.
20 Q. If the precatory does not
21 obtain -- if the consent solicitation --
22 A. I don't know what would happen
23 then. I shouldn't guess. Speak to him. I
24 don't know.
25 Q. Have you ever discussed that
CLASSIC REPORTING, INC. (212) 268-2590
121
1 Icahn
2 subject with him?
3 A. In passing, but I think that we
4 all believe that the precatory is going to
5 have strong results in our favor.
6 Q. In the passing discussion that
7 you referred to, what did you and he say to
8 one another?
9 A. I don't recall. I don't recall
10 even bringing it up.
11 MR. ALTMAN: Could we go off the
12 record for a moment?
13 MR. STERN: Of course.
14 (Discussion off the record.)
15 Q. Mr. Icahn, did you ever see --
16 are you aware that Mr. LeBow or Brooke Group
17 provided his members of the proposed slate
18 with various materials concerning RJR?
19 A. Various?
20 Q. Materials concerning RJR?
21 A. I'm not aware of that. I don't
22 know what he did.
23 Q. So you have never seen any
24 documents that Mr. LeBow --
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
122
1 Icahn
2 Q. Provided to the members of the
3 proposed slate?
4 A. No.
5 MR. STERN: I would like to mark
6 as the next exhibit, a document
7 produced to us on behalf of Mr. Icahn.
8 Actually it's an exhibit of loose
9 pieces of paper. The numbers
10 sequentially are 787 to 806 and I 1111.
11 (Group of loose papers, bearing
12 production Nos. I 787 to 806 and
13 I 1111, marked Icahn Exhibit 7
14 for identification, as of this
15 date.)
16 Q. Mr. Icahn, did you receive or to
17 your knowledge people in your organization
18 receive any pro formas or projections
19 concerning RJR from anyone at Brooke Group?
20 A. All I know is Bennett showed me,
21 back in the summer, he showed me what he
22 believed earnings would be, but I think they
23 all came from public documents. It had to
24 come from public documents.
25 Q. Why do you say it had to come
CLASSIC REPORTING, INC. (212) 268-2590
123
1 Icahn
2 from public documents?
3 A. I wonder where else would he get
4 it?
5 Q. Did he show you a document or did
6 he --
7 A. No. To my recall, we sat down
8 one time in the summer. I believe it was at
9 my house, and he just -- I don't know if he
10 even gave me any papers, if I recall. He told
11 me what earnings, he believed just basically,
12 you know, the tobacco company had after the
13 spin-off. If you spun off Nabisco, the
14 tobacco company was still a great stand-alone
15 company with a lot of value, and he mentioned
16 some earnings to me, and then I asked Rubin to
17 check out the earnings because I didn't
18 remember what he told me as I recall. So I
19 asked Rubin to start really looking into it.
20 That's where it got started.
21 Q. Was that --
22 A. I think.
23 Q. Did that conversation take place
24 before you instructed your people to begin to
25 purchase RJR's shares?
CLASSIC REPORTING, INC. (212) 268-2590
124
1 Icahn
2 A. I think so. I'm trying to
3 remember, but I believe that's right.
4 Q. Do you recall whether that
5 conversation, that was -- I'm sorry, I think
6 you said that that conversation was at your
7 house; is that correct?
8 A. I believe it was.
9 Q. Was that a social visit?
10 A. Yes.
11 Q. Who brought up the subject of
12 RJR?
13 A. Bennett, I believe, but, you
14 know, we talked about it. I can't recall
15 exactly.
16 MR. ALTMAN: Could you try to
17 place this conversation in time?
18 MR. STERN: You are welcome to.
19 Sure.
20 A. I think it was in the summer. I
21 know it was in the summer but I don't remember
22 if it was -- I'm trying to remember a time.
23 It was in the summer, and I do believe I
24 didn't buy the stock before we talked, but
25 it's possible I had some stock already. I
CLASSIC REPORTING, INC. (212) 268-2590
125
1 Icahn
2 just can't recall.
3 And at that time, we discussed
4 earnings, but it was, I don't think he gave me
5 any papers. He just discussed it with me, and
6 then I asked Rubin to look into it, I think,
7 because the numbers sounded pretty good, but I
8 just don't remember what numbers he told me.
9 He just discussed with me earnings.
10 Q. Did he tell you whether he had or
11 any of his companies had purchased RJR's stock
12 at that point?
13 A. I don't recall.
14 Q. Did he tell you that he was in
15 discussions with RJR about a possible deal?
16 A. No, I don't think he told me
17 that. I think what he showed me was an annual
18 report of RJR and he started looking at the
19 annual report. We looked at some numbers or
20 maybe it was a 10-K or 10-Q and we looked at
21 some numbers and I asked Rubin to start
22 looking into them.
23 Q. Did this discussion take place
24 before the time that Mr. LeBow's company, New
25 Valley, filed the Hart-Scott-Rodino
CLASSIC REPORTING, INC. (212) 268-2590
126
1 Icahn
2 application?
3 A. I don't recall.
4 Q. Do you remember anything else of
5 this conversation?
6 A. We just talked about the great
7 value of RJR.
8 Q. Did he talk about, did he say
9 anything having to do with the possible
10 combination of Liggett and RJR?
11 A. I just don't recall.
12 Q. A joint venture involving some
13 other tobacco company and RJR?
14 A. I told you what I can recall,
15 that I think he showed me an annual report or
16 10-K and he said you should really look at
17 this, it's your kind of thing, that type of
18 thing. The values are really great. That's
19 all I can recall.
20 Q. You said that you asked Mr. Rubin
21 to take a look at RJR after that conversation?
22 A. I think I did.
23 Q. What did Mr. Rubin do, if you
24 know?
25 A. I don't know.
CLASSIC REPORTING, INC. (212) 268-2590
127
1 Icahn
2 Q. Did he ever come back to you?
3 A. You have gotten all those
4 research reports and what have you.
5 Q. Referring to the analysts'
6 reports that we discussed earlier?
7 A. Yes.
8 Q. Did Mr. Rubin ever come back to
9 you and report to you in response to your
10 request?
11 A. Yes.
12 Q. What did he tell you?
13 A. He went over numbers with me,
14 just we went over some numbers in depth.
15 Spent some time going over earnings and
16 Nabisco's value.
17 Q. How long after you asked him to
18 do this work did Mr. Rubin come back to you?
19 A. I just don't recall.
20 Q. Was it a matter of days, weeks,
21 months?
22 A. Maybe a week.
23 Q. Did it ever come to your
24 attention that after that Mr. Rubin obtained
25 projections for RJR-Liggett?
CLASSIC REPORTING, INC. (212) 268-2590
128
1 Icahn
2 A. I don't think he obtained
3 projections. I think he, well, he got
4 research reports. The thing that appealed to
5 me was Nabisco, the value if Nabisco spun off.
6 Q. I'm going to mark as exhibit -- I
7 have marked as Exhibit 7, I'm now going to
8 show Mr. Icahn, a document that I described
9 earlier. Mr. Icahn, I appreciate it if you
10 would examine this exhibit and you can, of
11 course, spend as much time as you would like
12 with it. I'm going to focus your attention on
13 the first page and on Page 806. Have you ever
14 seen this document or any of the pages before?
15 MR. ALTMAN: I'm just referring
16 to Page 806.
17 MR. STERN: Take your time.
18 A. I never saw these.
19 Q. Did you ever discuss with anyone
20 at your company, pro formas or projections
21 concerning RJR-Liggett?
22 A. I never did.
23 Q. Were you aware at any time that
24 anyone at Brooke Group was preparing
25 projections that appeared to reflect
CLASSIC REPORTING, INC. (212) 268-2590
129
1 Icahn
2 RJR-Liggett on a combined basis?
3 A. I was never shown this. I never
4 saw this. I see it is -- I never saw it.
5 MR. STERN: I'm going to mark as
6 the next exhibit, a document produced
7 to us on behalf of Mr. Icahn numbered I
8 1110. It's a single page. It's
9 obviously a page from a longer
10 document, but I'm marking it in the
11 form in which we received it.
12 (Single-page document, bearing
13 production Nos. I 1110, marked
14 Icahn Exhibit 8 for
15 identification, as of this date.)
16 Q. Mr. Icahn, the exhibit that's
17 been placed before you, have you ever seen
18 that page before?
19 A. I never saw this. I don't even
20 know what it is.
21 Q. Do you recognize the handwriting?
22 A. No.
23 Q. Do you recognize the name Robert
24 Goldberg?
25 A. No. No.
CLASSIC REPORTING, INC. (212) 268-2590
130
1 Icahn
2 Q. Do you recognize or have you ever
3 heard of a name Yasemin, Y-A-S-E-M-I-N,
4 Kantar, K-A-N-T-A-R?
5 A. No. I don't know what this is.
6 Q. Mr. Icahn, I take it you are
7 aware that Brooke Group has prepared various
8 consent solicitation materials and submitted
9 those materials to the S.E.C.; is that
10 correct?
11 A. Yes.
12 Q. Do you know whether they -- let
13 me put a different question. And that that
14 was a process that played out over a period of
15 weeks; is that correct?
16 A. Yes.
17 Q. Did they, did Brooke Group
18 provide you or your firm with copies of the
19 documents that they were submitting to the
20 S.E.C. as part of that process?
21 A. I think, I'm not sure, but I
22 think so.
23 Q. Who at your firm received -- did
24 you see those documents?
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
131
1 Icahn
2 Q. Who at your firm did, if you
3 know?
4 A. I think we had them sent to the
5 lawyers. I don't think we really looked at
6 them.
7 Q. Your counsel; is that correct?
8 A. Yes.
9 Q. What was the purpose of having
10 them sent to your counsel?
11 A. I don't know. I mean, I just
12 think we wanted to see it. I believe we got
13 them. I'm not sure.
14 Q. Did you ever have any discussions
15 with a Mr. Lederman concerning the RJR,
16 concerning Brooke Group's consent solicitation
17 materials?
18 A. Yes.
19 Q. When did you have such a
20 discussion?
21 A. On a couple of occasions I would
22 see the letter that was going out. I would
23 make some comments concerning the letter.
24 Q. Letter to whom?
25 A. To the shareholders.
CLASSIC REPORTING, INC. (212) 268-2590
132
1 Icahn
2 Q. And you made those comments to
3 Mr. Lederman; is that correct?
4 A. Yes.
5 Q. Mr. Lederman you know to be a
6 lawyer at Milbank Tweed; is that correct?
7 A. Yes.
8 Q. And you made those comments
9 before the letters went out to the
10 shareholders?
11 A. On occasion. I don't get too
12 involved in it, but they send me the letters
13 and I look at them and tell them what I think
14 sometimes.
15 Q. Do you remember what you said to
16 Mr. Lederman?
17 A. I don't recall specifics.
18 Q. In general, were there any points
19 that you --
20 A. There were points, but I don't
21 remember the points at this time.
22 Q. Did you make any comments, did
23 you give comments on preliminary or did you
24 give comments on consent solicitation
25 materials to anyone other than Mr. Lederman?
CLASSIC REPORTING, INC. (212) 268-2590
133
1 Icahn
2 A. Well, to Ben. I talk to Ben
3 occasionally about it. I am not that
4 involved, but I talk to him occasionally about
5 what they are doing.
6 Q. Were these phone conversations?
7 A. Sometimes -- yes, on the phone a
8 few times, meet him for a drink once in a
9 while.
10 Q. How frequently have you spoken
11 with Mr. LeBow since, let's say, early October
12 concerning RJR?
13 A. Roughly, I don't know, perhaps
14 once a week, maybe once every two weeks.
15 Q. Now, in your comments, the
16 comments on the consent solicitation materials
17 to Mr. LeBow, do you remember anything that
18 you told him or he told you?
19 A. Well, I just make it plain again
20 that, you know, that it's got to proceed that
21 we are doing this, we get the same as every
22 other shareholder. That's my major theme with
23 him, and the other thing, I just try to
24 remember like on some of the points in the
25 letter, I forgot what I told Lederman, I don't
CLASSIC REPORTING, INC. (212) 268-2590
134
1 Icahn
2 know.
3 MR. STERN: I'm going to mark,
4 unless there is objection, in the
5 interest of moving along as a single
6 exhibit, documents that have been
7 produced to us by counsel for Mr.
8 Icahn. For the record, the documents
9 in the exhibit are I 294 to 338, I 200
10 to 293. I 185 to 190. I 191 to 99. I
11 66 to 176 and I 1 through 60.
12 (Multipage document, bearing
13 production Nos. I 294 to 338, I
14 200 to 293, I 185 to 190, I 191
15 to 99, I 66 to 176 and I 1
16 through 60, marked Icahn Exhibit
17 9 for identification, as of this
18 date.)
19 Q. Mr. Icahn, we have placed that
20 exhibit before you and I wonder if you could
21 review that exhibit and tell me whether those
22 are copies of preliminary consent solicitation
23 materials drafted by the Brooke Group and
24 provided to you and provided to your firm?
25 A. Well, as I say, whatever they
CLASSIC REPORTING, INC. (212) 268-2590
135
1 Icahn
2 provide, I'm not sure what they are providing.
3 I can look at all this, but I don't read --
4 they send things over, I don't read them. So
5 it doesn't -- I mean, I could look at them,
6 but I'm telling you I don't read it.
7 Q. Did Mr. Rubin read any of those
8 materials, to your knowledge?
9 A. You would have to ask him. I
10 don't know.
11 Q. Do you remember receiving any of
12 those materials?
13 A. I just don't know.
14 Q. If you had received those
15 materials in the ordinary course of your
16 practice --
17 A. We receive certain materials from
18 him. I'm not sure what it is, and we sent you
19 what we did receive, I guess. I read the
20 letters, the different letters that were going
21 out. That's what I was interested in, so I
22 just got the letters that were going out to
23 the shareholders.
24 Q. There also came -- there were
25 also points in time when you were interviewed
CLASSIC REPORTING, INC. (212) 268-2590
136
1 Icahn
2 by members of the media with respect to this
3 matter; is that correct?
4 A. Yes. A couple of interviews, one
5 or two, that was it.
6 Q. Did you discuss with Mr. LeBow in
7 advance of those interviews what you would
8 say?
9 A. I just don't recall.
10 Q. Do you remember any particular
11 interviews?
12 A. I remember that we talked to The_
13 Times and The Wall Street Journal when we
14 first came out with this.
15 Q. What was your purpose in giving
16 those interviews?
17 A. Well, the purpose was to tell the
18 press what we were doing. As you know, LeBow
19 has a PR agent. He is running the whole thing
20 and he has got this George Sard, so they
21 wanted me to come and meet him and that was
22 about it. I haven't talk to the press really
23 since then.
24 Q. Mr. Sard arranged your
25 interviews?
CLASSIC REPORTING, INC. (212) 268-2590
137
1 Icahn
2 A. Maybe I talked to the press once,
3 you know, some magazine or whatever, but just
4 recently. Sard was one lunch we had, you
5 know, the luncheon that he had a few of the
6 newspapers come up, back a few months ago when
7 we had our agreement we announced it.
8 Q. At the time --
9 A. Since then, I don't think I
10 talked too much. Maybe recently I talked to
11 one magazine or something.
12 Q. At the time that you announced
13 your agreement; is that correct?
14 A. I believe that's right. Around
15 then, in October, you know better than I,
16 after we did our agreement, we made an
17 announcement concerning it.
18 Q. Whenever that date happened?
19 A. Yes, whenever it was.
20 Q. And you met with, there was a
21 lunch with Mr. Sard and with Mr. LeBow to
22 discuss publicizing your agreement; is that
23 correct?
24 A. I wouldn't call it a lunch to
25 publicize it. I think George Sard had a
CLASSIC REPORTING, INC. (212) 268-2590
138
1 Icahn
2 couple of people from the press come in for
3 interviews and so we had a quick sandwich, not
4 with them maybe, but maybe -- I don't recall.
5 I remember having lunch up there. You know,
6 sandwich at the desk.
7 Q. "Up there" being?
8 A. George Sard.
9 Q. Did you have any, before meeting
10 with members of the press, did you and Mr.
11 Sard and Mr. LeBow discuss anything about the
12 public relations strategy in this matter?
13 A. Yes.
14 Q. Who said what to whom on that?
15 A. I just don't recall. I really
16 don't recall the whole thing except vaguely
17 that we met with the press.
18 Q. Do you recall expressing any
19 views on the public relations strategy in this
20 matter?
21 A. I don't think I expressed much.
22 Q. Do you remember anything that Mr.
23 LeBow said?
24 A. With the press? It was in the
25 newspapers.
CLASSIC REPORTING, INC. (212) 268-2590
139
1 Icahn
2 Q. Prior to -- discussions
3 concerning the strategy for publicizing this
4 matter?
5 MR. ALTMAN: Objection to form.
6 A. I just don't recall.
7 Q. Have you ever seen any reports in
8 the press reporting disagreements between you
9 and Mr. LeBow concerning RJR?
10 A. There was one. I remember seeing
11 that because I have them send me the press
12 clippings.
13 Q. What publication was that, sir?
14 A. I don't recall.
15 Q. Who sends you the press
16 clippings?
17 A. Well, we get them from a service,
18 you know, we get them on different companies
19 we are interested in, so we get them all on
20 RJR.
21 Q. Is the name of that service
22 Burrelle's?
23 A. Yes, yes.
24 MR. STERN: I'm going to mark as
25 the next exhibit, a document that was
CLASSIC REPORTING, INC. (212) 268-2590
140
1 Icahn
2 obtained by our firm from sources other
3 than parties in this matter.
4 (News article marked Icahn
5 Exhibit 10 for identification, as
6 of this date.)
7 Q. Mr. Icahn, is this the news
8 article that you referred to several moments
9 ago?
10 A. Yes, yes.
11 Q. Have you ever heard of the
12 Delaney Report?
13 A. I have heard of it.
14 Q. Have you ever spoken to any
15 reporter associated with it?
16 A. No.
17 Q. What is the Delaney Report?
18 A. I don't know. I have heard of
19 it. That's all I can tell you.
20 Q. Now the report quotes, if you go,
21 I will direct your attention to the second
22 paragraph which states, "Icahn, however, is
23 beginning to bristle over LeBow's approach to
24 the RJR-NHC spin-off. Carl is not happy about
25 how LeBow has been behaving. He feels LeBow
CLASSIC REPORTING, INC. (212) 268-2590
141
1 Icahn
2 is simply looking out for LeBow first, last,
3 and always. That [LeBow] 'is more interested
4 in feathering his own nest rather than having
5 shareholders in mind,' said one source close
6 to Icahn."
7 Is that a true statement?
8 A. No.
9 Q. Do you have any knowledge or
10 information concerning any contacts between
11 any of your associates and the Delaney Report?
12 A. No.
13 Q. Do you have any idea where the
14 Delaney Report obtained the information
15 reported in this article?
16 A. I have no idea.
17 Q. The article goes on to say,
18 "'Carl will try to do things in a gentlemanly
19 fashion, but he doesn't want to be pushed
20 around by LeBow. If push comes to shove, Carl
21 will do things his own way,' said the source."
22 Is that an accurate statement?
23 A. Well, you know, it's a
24 generically accurate statement. I do things
25 my own way, but I have had no conflicts with
CLASSIC REPORTING, INC. (212) 268-2590
142
1 Icahn
2 Ben.
3 Q. Do you have any idea how the
4 Delaney Report got that quote?
5 A. I have no idea.
6 Q. Did you discuss this report with
7 anyone after you saw it?
8 A. In fact, the report, the way I
9 got this thing now that I remember, it came on
10 my desk with a note, it came from Bennett and
11 there was a note on it, "I thought we loved
12 each other," or something like that. It was
13 like a thing on it from Bennett. That's how I
14 got it, but I never even talked to Bennett
15 about it. He has been on a road show about
16 this stuff, and he called me a few days later
17 and I forgot about it. I just don't know how
18 they got it or where it came from.
19 Q. It's not true, so far as you are
20 concerned?
21 A. Not true. You know, I have no
22 conflicts with Ben. You know, just to
23 reiterate it, sum it up, we can keep going
24 over and over all afternoon or all evening,
25 but all different iterations of this relating
CLASSIC REPORTING, INC. (212) 268-2590
143
1 Icahn
2 to the spin-off and relating to Liggett, I
3 mean, jogs my memory slightly. You know, the
4 numbers you just showed me, Rubin had those
5 numbers with RJR-Liggett together or
6 something, and each time I remember if he did
7 show that to me, I remember several times
8 talking to Bennett and saying, "Ben, you are
9 not going to win this thing if you are going
10 to do Liggett, if you are going to try to do
11 it. You are not going to win it." I keep
12 saying it to him and as you know from his own
13 depositions, it was read to me, he is telling
14 me and he says at his deposition that he told
15 me that's it. I'm just, I want to see the
16 spin-off happen. You know, that's what he
17 wants to do and you know he says I want to win
18 this precatory, I want to see the spin-off.
19 We are not having any -- we are really not
20 having any conflicts about it.
21 Q. Did there come a time when you
22 discussed with Mr. LeBow or any of his
23 colleagues any option transaction involving
24 RJR, that is?
25 A. Excuse me?
CLASSIC REPORTING, INC. (212) 268-2590
144
1 Icahn
2 Q. Any transaction involving RJR
3 options or an option on RJR stock?
4 A. An option for who?
5 Q. Just in general, did you ever
6 discuss with Mr. LeBow a transaction?
7 A. Not that I recall.
8 Q. A transaction involving an RJR
9 stock option?
10 A. Oh, you know, something with
11 the -- at one point, they were talking about
12 buying, they were going to get bigger in this
13 in buying some options, and they mentioned
14 that to me, you know, that I might buy some
15 stock and give them some options or having, we
16 talked about that a little. There's not
17 enough return for me. I like to get bigger
18 returns so we dropped it.
19 Q. You use the --
20 A. I remember discussing that with
21 him.
22 Q. Who is the "they"?
23 A. Lorber, usually Howard Lorber is
24 with LeBow and me when we are together. He
25 mentioned that, that they might want to do
CLASSIC REPORTING, INC. (212) 268-2590
145
1 Icahn
2 options to get a bigger position, and I think
3 they may be doing that, I don't know, but it
4 wasn't enough return, so I wouldn't do it.
5 Q. Did he say -- when did you have
6 that discussion?
7 A. Maybe a week ago or something,
8 two weeks ago.
9 Q. Did he say why they would try to
10 increase their position by means of an option
11 as opposed to simply buying more stock?
12 A. What I remember is that they just
13 said that they may be buying an option and I
14 discussed it with Howard, but he is getting it
15 at a good price it seems like, if he is
16 getting it, and he said to me that. I said
17 well, you know, we have a lot of cash around,
18 so I said well, maybe I would buy some. I
19 think there's very little downside on the
20 stock, but, and do it, but then the returns
21 weren't big enough, so I said you are getting
22 a good price if you can do it the way you are
23 doing it.
24 Q. Did he say what the price would
25 be?
CLASSIC REPORTING, INC. (212) 268-2590
146
1 Icahn
2 A. I don't recall, but it wasn't
3 enough return. That's all I remember.
4 Q. Did he say how big an option he
5 was looking for?
6 A. No.
7 Q. Did he say with whom he was
8 discussing putting together the option
9 transaction?
10 A. What?
11 Q. Did he say with whom he was
12 discussing?
13 A. If he did, I don't recall.
14 Q. I just want the record to be
15 clear, I think you indicated -- let me
16 withdraw that and put it a different way.
17 With respect to the exhibit that
18 we marked earlier which appeared to be a
19 projection of some kind involving RJR and
20 Liggett, did Mr. LeBow ever show you that
21 document?
22 A. No.
23 Q. Have you --
24 A. I never saw that document. If
25 Rubin did mention it to me, it's possible he
CLASSIC REPORTING, INC. (212) 268-2590
147
1 Icahn
2 did, and I seem to remember talking to Bennett
3 and again Bennett would always say: Hey, I
4 just want to see the spin-off done. And
5 that's how we would end the discussion.
6 Q. Did Mr. LeBow ever discuss with
7 you his, any strategic considerations or plans
8 with respect to Liggett at all?
9 A. Not really, no.
10 Q. Did you ever discuss with him
11 Liggett's business performance?
12 A. No.
13 Q. Did you have any discussions with
14 Mr. LeBow concerning the subject of a possible
15 Liggett-RJR combination that you have not
16 testified about that you can recall?
17 A. I basically, to tell you -- we
18 have had different discussions but I tell you
19 the general theme is that I have told him time
20 and again that if he is going to win this, he
21 will win it in my opinion as long as he is not
22 getting anything personally out of it. That's
23 the basic thing of it.
24 Q. Has he ever disagreed with that?
25 A. No. I think that he is, I really
CLASSIC REPORTING, INC. (212) 268-2590
148
1 Icahn
2 believe that he believes that. I think he
3 does. I could be wrong, but I think he does.
4 Q. He never said anything to the
5 contrary to you; is that correct? I know what
6 your belief is, sir. I'm trying to establish
7 whether he ever disagreed with the point of
8 view that you have expressed?
9 A. What stands out in my mind is
10 basically his agreement, his telling me that's
11 what he is going to do. That stands out.
12 Could be conversations other than that, but
13 basically that's what stands out.
14 Q. Did Mr. LeBow or any of his
15 associates ever discuss the international
16 tobacco market with you?
17 A. Not that I recall.
18 Q. Did he ever discuss with you, did
19 he or any of his associates ever discuss with
20 you a third wave of litigation in the context
21 of discussing the spin-off?
22 A. Not that I recall.
23 Q. Did Mr. Rubin or any of your
24 associates ever discuss that with you?
25 A. Not that I recall.
CLASSIC REPORTING, INC. (212) 268-2590
149
1 Icahn
2 Q. Did anyone, either internal,
3 either in your firm or outside the firm, ever
4 ask you whether you would be willing to do a
5 billion dollar deal with respect to RJR?
6 A. Well, one time I talked about
7 putting up a billion dollars, going bigger
8 into it. I do remember that saying we might
9 get bigger.
10 Q. With whom did you discuss that?
11 A. I don't remember. I'm trying to
12 remember, but I can't.
13 Q. Did you ever discuss with anyone
14 having companies on an A list?
15 A. Companies on -- no, I don't
16 recall.
17 Q. Did you ever discuss with anyone
18 concerning RJR a 20 percent hurdle rate for an
19 acquisition?
20 A. I just don't recall.
21 Q. I'm going to show you again Icahn
22 Exhibit 3. I believe you have told me these
23 are not your notes and you don't recognize the
24 handwriting; is that correct?
25 A. That's correct.
CLASSIC REPORTING, INC. (212) 268-2590
150
1 Icahn
2 Q. Let me ask you, if you would, to
3 look at page I 853 and ask you if you would to
4 focus on the first three lines of that page
5 and ask you if that refreshes your
6 recollection in any respect as to any
7 discussion you might have had concerning RJR
8 and the international tobacco market?
9 A. Does not.
10 Q. I'm going to ask you if you would
11 to look at I 856 and look at that page as a
12 whole, if you would, and ask you if it
13 refreshes your recollection of discussing a
14 third wave of litigation with anyone in the
15 context of RJR?
16 A. Does not.
17 Q. Discussing Reemstma?
18 A. I don't know what that is.
19 Q. Well, there's testimony -- there
20 has been testimony on the record in this case
21 that there's a company called Reemstma which I
22 believe is a German tobacco company that
23 sometime had discussed RJR with Mr. LeBow.
24 Does that refresh your recollection as to
25 Reemstma?
CLASSIC REPORTING, INC. (212) 268-2590
151
1 Icahn
2 A. No.
3 MR. ALTMAN: Is it Reemstma or --
4 MR. STERN: The spelling here I
5 think is --
6 A. Were these papers discovered from
7 us?
8 Q. Yes.
9 A. I don't recall. It wasn't
10 brought up to me, I don't recall in any event.
11 Q. The statement appears here, would
12 you do a billion dollar deal. Does that
13 refresh your recollection in any way as to
14 discussions --
15 A. No, it wasn't in that context
16 that I remembered it.
17 Q. What context did you remember it
18 in?
19 A. I remembered once discussing with
20 LeBow about my putting in a billion.
21 Q. Did he ask you to put in a
22 billion?
23 A. I just remember the number came
24 up at one point, but, you know, that I might
25 go bigger and that was one of the iterations
CLASSIC REPORTING, INC. (212) 268-2590
152
1 Icahn
2 of our discussion in that agreement.
3 Q. Do you remember when that was?
4 A. Sometime before we did the
5 agreement.
6 Q. Let me ask you this. Were there
7 drafts of the agreement, of your agreements
8 with Mr. LeBow?
9 A. I just had no part of that. I
10 didn't even read the thing.
11 Q. You don't know if there were
12 drafts?
13 A. It might have been drafts, but I
14 don't know.
15 Q. I'm not asking you --
16 A. I have to tell you, I don't
17 recall. I didn't even read the agreement.
18 All I know is I negotiated it.
19 Q. That's fair enough. Then there's
20 the last two lines including the statement "20
21 percent hurdle rate for acquisition"?
22 A. I just don't know what any of
23 this means.
24 MR. STERN: Why don't we go off
25 the record for a moment. I will review
CLASSIC REPORTING, INC. (212) 268-2590
153
1 Icahn
2 my notes and I think we can wrap it up
3 fairly quickly.
4 (Recess taken.)
5 Q. If it were the fact that Mr.
6 LeBow were, contrary to what he told you,
7 still actively pursuing -- strike "still."
8 Let me put a different question.
9 If it were the fact that Mr.
10 LeBow, contrary to what he told you, were
11 pursuing an effort to combine Liggett with
12 RJR, would you still support him in the
13 consent solicitation?
14 MR. ALTMAN: I object to the form
15 of the question.
16 A. In this, in the precatory?
17 Q. Yes.
18 A. In this precatory?
19 Q. Yes.
20 A. I am contractually obligated to
21 support him in the precatory, I believe.
22 Q. And what about if the case were
23 as I described, beyond the precatory, would
24 you still support him?
25 MR. ALTMAN: Objection to form.
CLASSIC REPORTING, INC. (212) 268-2590
154
1 Icahn
2 A. I believe I am contractually
3 obligated, but I will tell you that, explain
4 what you mean when you say if he was pursuing;
5 you are saying if he was pursuing a merger?
6 Q. If that were still an objective
7 of Mr. LeBow's?
8 A. I would say in my opinion he
9 would need a vote of the shareholders for any
10 meaningful merger, and therefore how would he
11 accomplish that vote? That's the thing that
12 enters my mind. Unless it was a purchase of
13 some type, but I think he would -- I mean, my
14 reasoning in the whole thing and with him too,
15 is that I believe that the company, and I told
16 him this, will do the spin-off, because if I
17 were to advise the company, if I were the
18 company, they, you know, with all the pressure
19 on them at this point and every institution
20 really wants a spin-off, and I mean you have
21 to want it. You are in a business to make
22 money, and the spin-off makes unbelievable
23 sense, sort of like Texaco settling the
24 bankruptcy, same thing, you have to do that.
25 I told that to Bennett, you know,
CLASSIC REPORTING, INC. (212) 268-2590
155
1 Icahn
2 if you go into this and you blow it, if you
3 are thinking of doing something for yourself,
4 you might lose it, but I really believe that
5 the company is going to realize that even if,
6 they are not going to want to go through the
7 fight, if they go through the fight, even if
8 they win it somehow, next year they are going
9 to definitely face it again and lose it. Next
10 year somebody is going to come in for sure and
11 do it. So I think that, and I think Ben
12 believes that, that there's going to be a
13 point where they are going to do it.
14 Q. Do you have any understanding as
15 to the company's -- do you know what the
16 company's public position is as respects a
17 spin-off transaction?
18 A. They said they are not going to
19 do it. That doesn't mean that the public
20 position doesn't change.
21 Q. Did they say they weren't going
22 to do it immediately or did they say that they
23 would do it, that they intended to do it, at
24 some point in the future but not now?
25 A. Yes, but I don't believe what
CLASSIC REPORTING, INC. (212) 268-2590
156
1 Icahn
2 they are saying. I don't think they intend to
3 ever do it unless they are forced to do it.
4 In other words, I think if you get a big
5 precatory and the institution is going to push
6 them out or lose their position, they are only
7 going to do it if they realize they are going
8 to lose the company if they don't do it, and
9 the point I see if they don't do it now they
10 are going to lose it next year anyway. Why go
11 through a whole big proxy fight and possibly
12 lose? That's how I look at it as an
13 investment. I think it's going to be done. I
14 think the company doesn't want to do it,
15 because why is it going to change next year?
16 Why is it going to be better next year than
17 this year? Why is the litigation horizon
18 going to change?
19 Q. Have you ever discussed with
20 anyone whether or not the litigation that
21 could arise from a spin-off transaction could
22 injure the company?
23 A. Well, I discussed that, yes, I
24 told you I discussed that.
25 Q. With Mr. LeBow; is that right?
CLASSIC REPORTING, INC. (212) 268-2590
157
1 Icahn
2 A. Well, I did discuss it with some
3 of the lawyers at Milbank Tweed.
4 Q. With which lawyers?
5 A. As I recall, with Hirschfeld,
6 Mike Hirschfeld.
7 Q. When did you discuss that with
8 him?
9 A. I don't remember when, but we
10 discussed the concept of hurting. It's
11 nonsense, how is it going to hurt the company.
12 I'm not arguing.
13 Q. Did you discuss that with Mr.
14 Hirschfeld before you reached your agreement
15 with Mr. LeBow?
16 A. I think I did, but I don't
17 recall.
18 Q. What did Mr. Hirschfeld say on
19 the subject?
20 A. He believes it wouldn't. He just
21 believes there is absolutely no, not going to
22 be any injunctions and that there's absolutely
23 not a problem.
24 Q. Did he tell you why he believed
25 that?
CLASSIC REPORTING, INC. (212) 268-2590
158
1 Icahn
2 A. Did he tell me why?
3 Q. Yes,
4 A. Because the tobacco litigants
5 never won a case against, they never won a
6 case against RJR.
7 Q. Did he say anything more than
8 that?
9 A. I can't recall exactly. We went
10 through it. They never won a case.
11 Q. Did you ever discuss that subject
12 with anyone else?
13 A. My own attorneys, with Gordon
14 Altman.
15 Q. I take it you had that, those
16 discussions for purposes of obtaining legal
17 advice from Gordon Altman; is that correct?
18 A. Excuse me?
19 Q. You had that discussion for
20 purposes of obtaining legal advice from Gordon
21 Altman?
22 A. Yes.
23 MR. STERN: Am I correct that if
24 I were to ask about the content of that
25 discussion, I'm asking this to your
CLASSIC REPORTING, INC. (212) 268-2590
159
1 Icahn
2 counsel, that you would direct the
3 witness not to answer on grounds of
4 privilege?
5 MR. ALTMAN: Yes.
6 Q. Mr. Icahn, you indicated earlier
7 that your arrangements with LeBow included a
8 20 percent participation in New Valley's
9 profits; is that correct?
10 A. That's right.
11 Q. What are you bringing to the
12 matter that in your mind makes that an
13 appropriate level of compensation?
14 A. Why don't you ask the person
15 paying me?
16 Q. Did you ask for more?
17 A. I don't recall.
18 Q. Did he offer more?
19 A. I really don't recall.
20 Q. What was said on the subject of
21 why 20 percent as opposed to 25 percent?
22 A. He really wanted me in. He
23 wanted to have, in quotes, "an astute
24 investor," that owned a lot of stock in it.
25 He wanted me in. But your question is
CLASSIC REPORTING, INC. (212) 268-2590
160
1 Icahn
2 interesting, because why would he give me 50
3 million if he really planned to merge it with
4 Liggett? That I can sort of agree with you.
5 I think it's worth 20 percent of the profits
6 having me in. I don't think it's worth 50
7 million if he intends to do the other deal.
8 Q. If I pursued that, your counsel
9 would object correctly, asked and answered,
10 but what --
11 MR. ALTMAN: Well, at least asked
12 and answered.
13 A. If you pursue it, it's all right
14 with me.
15 Q. Did you have any other discussion
16 as to the value of your agreement to Mr. LeBow
17 other than what you've testified to?
18 A. I think there is a value that I'm
19 involved. I think he is right. It's good
20 that we have, going to everyone we have a huge
21 position, not just there with a small
22 position, that it's a meaningful position if
23 we win, and I think that does help him and I
24 think it's worth something and you have to
25 remember that I'm not going to get much on the
CLASSIC REPORTING, INC. (212) 268-2590
161
1 Icahn
2 20 percent. All the expenses are going to go
3 off of it. When you are through with the
4 expenses and everything, it's going to be far
5 less than a very meaningful -- well,
6 meaningful is relative -- but it's not going
7 to be a very big number I don't think because
8 of all the expenses.
9 Q. Have you any estimate of what the
10 20 percent stands to give you?
11 A. I never really went into an
12 estimate of it.
13 Q. Do you have a --
14 A. I really don't, but I don't think
15 it's going to be tremendous because of the
16 expenses.
17 Q. Have you yourself contacted any
18 RJR shareholders concerning the consent
19 solicitation?
20 A. No.
21 Q. Any of your people?
22 A. No.
23 Q. Has Mr. LeBow discussed with you
24 any shareholders he has contacted?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
162
1 Icahn
2 Q. Who?
3 A. He tells me he is doing very well
4 with it. He calls me from time to time and
5 tells me everybody is going with him.
6 Q. Has he mentioned any names?
7 A. The only name mentioned was
8 Michael Price because we read it in Barron's.
9 He was quoted obviously you know, so that came
10 up, but no one else that I can recall.
11 Q. And you have told me about your
12 conversation about Mr. Price already; is that
13 correct?
14 A. I told you about Price. I never
15 talked to him. I don't know him, but I just
16 told you that he mentioned him.
17 Q. Did you ever have any discussions
18 with Mr. Lorber about a possible transaction
19 involving RJR and Liggett?
20 A. I don't recall, except he is 98
21 percent there when I am with LeBow, so
22 obviously you have to take that when I am
23 talking to Bennett, he is there talking with
24 us, okay.
25 Q. I understood that Mr. Lorber has
CLASSIC REPORTING, INC. (212) 268-2590
163
1 Icahn
2 been present at a number of your conversations
3 with Mr. LeBow?
4 A. Maybe 80 percent, not 98, but he
5 is there most of the time.
6 Q. Have you had any discussions with
7 anyone about whether or not New Valley is
8 required to register under the Investment
9 Company Act of 1940?
10 A. Yes, we have talked about that.
11 Q. Who did you talk to?
12 A. You know, again, I can't remember
13 specific conversations but with Bennett and
14 Lorber, we talked about that.
15 Q. When was the last time you had
16 such a discussion?
17 A. Three weeks ago, a month ago,
18 something like that.
19 Q. What did they say to you?
20 A. They said it's just going to be
21 okay, there is not going to be a problem.
22 Q. Did they tell you why it wouldn't
23 be a problem?
24 A. They went into certain things,
25 I'm not a specialist in that area and I can't
CLASSIC REPORTING, INC. (212) 268-2590
164
1 Icahn
2 remember specific conversations. I think that
3 they are involved in real estate and enough
4 that it's not a problem.
5 Q. Did they tell you what things
6 they were going to do to prevent -- to avert
7 any problem?
8 A. I didn't get into, they have told
9 me, but I can't remember specifically. We
10 have had conversations about it and I can't
11 remember exactly. It's sort of complex stuff.
12 Q. Did they raise the subject with
13 you or did you raise it with them in any of
14 these conversations?
15 A. I raised it with them at one or
16 two times because, you know, when we are doing
17 this agreement, I wondered about that and I
18 asked them about that, because obviously, you
19 know, it's in the, you know, they have a thing
20 they had a year to cure and they said they
21 were going to cure it, and they explained it
22 to me, but it's, you know, complicated and I
23 just said okay.
24 Q. So to your knowledge, did they
25 cure the problem?
CLASSIC REPORTING, INC. (212) 268-2590
165
1 Icahn
2 A. They told me they did.
3 Q. Did you, did they discuss with
4 you whether or not New Valley's purchases of
5 RJR were related in any way to their
6 Investment Company Act problem?
7 MR. WOLFSON: Object to form.
8 MR. STERN: I will put a
9 different question.
10 Q. Did they discuss with you whether
11 there was any connection between New Valley's
12 purchases of RJR and the Investment Company
13 Act situation?
14 A. Well, I think there was a
15 relationship. I think that if you have too
16 much stock obviously as a percentage it's an
17 investment company issue, but they said they
18 cured the problem.
19 Q. Do you know what percentage of
20 New Valley's assets are comprised of stock?
21 A. I don't recall.
22 Q. Did you discuss with Mr. LeBow
23 the setting of February 15th as a deadline by
24 which to submit consents?
25 A. No, they told me they were going
CLASSIC REPORTING, INC. (212) 268-2590
166
1 Icahn
2 to put that date. I didn't get into the
3 reasoning. They just said they were going to
4 do it. They said you know we are doing real
5 well and why not.
6 Q. Who told you that?
7 A. I don't remember which one.
8 Q. Is it Mr. LeBow or Mr. Lorber?
9 A. I think it was LeBow, but I don't
10 remember.
11 Q. When did he tell you that?
12 A. Whenever they decided to do that,
13 I think they told me. Maybe not when they
14 did, but they told me they were doing it.
15 Q. Was that before it was publicly
16 announced?
17 A. I don't recall.
18 Q. Again, other than what you told
19 me, do you remember them giving you any
20 reasons why they were doing that?
21 A. Not other than what I told you.
22 MR. STERN: At this time we have
23 no further questions of Mr. Icahn. We
24 reserve our rights to recall him for
25 further deposition should developments
CLASSIC REPORTING, INC. (212) 268-2590
167
1 Icahn
2 in this matter warrant.
3 (Time noted: 5:40 P.M.)
4 __________________________
5 Carl I. Icahn
6 Subscribed and sworn to
7 before me this______day
8 of_________________1996.
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
168
1
2
C E R T I F I C A T E
_ _ _ _ _ _ _ _ _ _ _
3
STATE OF NEW YORK )
4 ) ss.:
COUNTY OF NEW YORK )
5
I, DONNA BRUNCK, a Certified
6
Shorthand Reporter and Notary Public within
7
and for the State of New York, do hereby
8
certify:
9
That I reported the proceedings in
10
the within-entitled matter, and that the
11
within transcript is a true record of
12
such proceedings.
13
I further certify that I am not
14
related, by blood or marriage, to any of
15
the parties in this matter and that I am
16
in no way interested in the outcome of
17
this matter.
18
IN WITNESS WHEREOF, I have hereunto
19
set my hand this__26th__day of_January,
20
1996.
21
__________________________
22 DONNA BRUNCK, CSR
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
169
1
2 January 25, 1996
I N D E X
_ _ _ _ _
3 WITNESS PAGE
_______ ____
CARL C. ICAHN
4 Examination by Mr. Stern 4
E X H I B I T S
_ _ _ _ _ _ _ _
5 ICAHN
-----
FOR_IDENTIFICATION PAGE
___ ______________ ____
6 1 Copy of ledger sheets, bearing
production Nos. I 342 through
7 I 345 19
8 2 Group of documents 31
9 3 Pages of handwritten notes,
bearing production Nos. I 851
10 through I 856, I 1205 and
I 1080 and I 1081 45
11
4 Group of documents, bearing
12 production Nos. I 355 to 356,
349 to 350, 351 to 52, 353 to
13 354, 346 to 348 and 339 57
14 5 Document, bearing production
Nos. I 695 through I 779 75
15
6 Copy of consent solicitation
16 statement disseminated by
Brooke Group Ltd. 110
17
7 Group of loose papers, bearing
18 production Nos. I 787 to 806
and I 1111 122
19
8 Single-page document, bearing
20 production Nos. I 1110 129
21 9 Multipage document, bearing
production Nos. I 294 to 338,
22 I 200 to 293, I 185 to 190, I 191
to 99, I 66 to 176 and I 1 through
23 60 134
24 10 News article 140
25
CLASSIC REPORTING, INC. (212) 268-2590
170
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
1
==============================================================================
In The Matter Of:
RJR NABISCO HOLDINGS CORP. v.
BENNETT S. LEBOW et al.
----------------
ROUBEN V. CHAKALIAN
Vol. 1, January 24, 1996
----------------
CLASSIC REPORTING, INC.
13 WEST 36th STREET
NEW YORK, NY 10018
(212) 268-2590
Original File rc012496.asc, 216 Pages
Min-U-Script[Registered] File ID: 0032776428
Word Index included with this Min-U-Script[Registered]
==============================================================================
==============================================================================
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
-------------------------------------x
:
RJR NABISCO HOLDINGS CORP., :
:
Plaintiff, :
:
-against- : 6:95CV00812
:
BENNETT S. LEBOW, BROOKE GROUP LTD., :
And CARL C. ICAHN, :
:
Defendants. :
:
-------------------------------------x
January 24, 1996
9:40 A.M.
Deposition of ROUBEN V. CHAKALIAN
taken by plaintiff pursuant to subpoena, at
the law offices of Wachtell Lipton Rosen &
Katz, 51 West 52nd Street, New York, New York
10019, before Donna Brunck, a Certified
Shorthand Reporter and Notary Public within
and for the State of New York.
CLASSIC REPORTING, INC. (212) 268-2590
2
1
2 A P P E A R A N C E S:
3 WACHTELL LIPTON ROSEN & KATZ
Attorneys for Plaintiff
4 51 West 52nd Street
New York, New York 10019
5
BY: WARREN L. STERN, ESQ.
6 -and-
WOMBLE CARLYLE SANDRIDGE & RICE
7 3300 One First Union Center
301 South College Street
8 Charlotte, North Carolina 28202-6025
9 BY: WILLIAM C. RAPER, ESQ.
10
MILBANK, TWEED, HADLEY & McCLOY
11 Attorneys for Defendants
and the Witness
12 1 Chase Manhattan Plaza
New York, New York 10005-1413
13
BY: TONI C. LICHSTEIN, ESQ.
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
3
1
2 IT IS HEREBY STIPULATED AND AGREED by
3 and among the attorneys for the respective parties
4 herein that the sealing, filing and certification
5 of the within deposition be waived; that such
6 deposition may be signed and sworn to before any
7 officer authorized to administer an oath, with the
8 same force and effect as if signed and sworn to
9 before a judge of this court.
10 IT IS FURTHER STIPULATED AND AGREED
11 that all objections, except as to the form, are
12 reserved to the time of the trial.
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
4
1 Chakalian
2 R O U B E N V. C H A K A L I A N,
3 having been first duly sworn by the
4 Notary Public (Donna Brunck), was
5 examined and testified as follows:
6 EXAMINATION BY MR. STERN:
7 Q. Mr. Chakalian, have you had your
8 deposition taken before?
9 A. Yes.
10 Q. How many times?
11 A. In this country? Twice.
12 Q. And abroad?
13 A. Four, five, six times, I don't
14 remember.
15 Q. Focusing on the depositions in
16 this country, were those taken in cases in
17 which you were a party personally?
18 A. No.
19 Q. When were they taken?
20 MS. LICHSTEIN: I'm going to
21 object on the grounds of relevance. I
22 don't see why the names of cases in
23 which Mr. Chakalian gave deposition
24 testimony has any conceivable relevance
25 or can lead to the discovery of
CLASSIC REPORTING, INC. (212) 268-2590
5
1 Chakalian
2 admissible evidence. I think you are
3 engaging in a fishing expedition, and I
4 would caution you that it would be I
5 believe appropriate for you to stay
6 within the parameters of Wachtel's
7 application for expedited discovery in
8 the courts.
9 MR. STERN: I'm going to stand on
10 my question.
11 Q. When were the depositions taken?
12 A. The last one about eight to 12
13 months ago.
14 Q. And when was the first one?
15 A. Probably three, four years ago.
16 Q. Were these depositions taken in
17 connection with Liggett?
18 A. One with Liggett.
19 Q. In a general way, what did the
20 litigation involving Liggett concern?
21 MS. LICHSTEIN: I object to the
22 form on the grounds that I have
23 previously expressed.
24 You may answer, if you can.
25 A. It was company-related. It was a
CLASSIC REPORTING, INC. (212) 268-2590
6
1 Chakalian
2 breach of contract. Both were basically
3 breach of contract situations with
4 distributors.
5 Q. Which company was concerned in
6 the deposition that was taken three or four
7 years ago?
8 A. Three, four years ago.
9 Q. How did your deposition come to
10 be taken?
11 MS. LICHSTEIN: Objection to
12 form. I assume it was noticed or
13 subpoenaed. Move on.
14 Q. Could you answer the question,
15 please?
16 A. One was at Liggett. One was at
17 Heublein.
18 MR. RAPER: For the record, would
19 you note whenever counsel confers with
20 the witness, please.
21 Q. You said there were several
22 depositions taken abroad. Was that one
23 country or more than one country?
24 A. Three countries.
25 Q. Which countries?
CLASSIC REPORTING, INC. (212) 268-2590
7
1 Chakalian
2 A. One was an arbitration -- one was
3 in Paris, France. One was in Switzerland and
4 one was in Beirut.
5 Q. And when were those depositions
6 taken?
7 A. I don't remember the dates.
8 Q. Did they concern Liggett?
9 A. No, RJ Reynolds.
10 Q. Have you ever been a defendant
11 personally in any case?
12 A. Personally? No.
13 Q. Would you state the date and
14 place of your birth, please?
15 A. December 23, 1935, Shanghai,
16 China.
17 MS. LICHSTEIN: Mr. Stern, come,
18 come. I do not know why the place of
19 Mr. Chakalian's birth has any
20 conceivable relevance other than an
21 absurd fishing expedition that you seem
22 determined to be engaged in.
23 MR. STERN: Ms. Lichstein, you
24 are attempting to turn this deposition
25 into a farce.
CLASSIC REPORTING, INC. (212) 268-2590
8
1 Chakalian
2 MS. LICHSTEIN: No, no, you are.
3 MR. STERN: Stop this talking.
4 MS. LICHSTEIN: You are by your
5 questioning, sir.
6 MR. STERN: Excuse me one second.
7 (Discussion held off the record)
8 Q. Mr. --
9 MS. LICHSTEIN: Could you please
10 wait for the witness to sit down.
11 MR. STERN: I will be happy to.
12 The witness nodded at me so I thought
13 he was ready.
14 THE WITNESS: I did.
15 Q. Mr. Chakalian, were you raised in
16 Shanghai?
17 MS. LICHSTEIN: Same objection.
18 A. Until the age of 10, yes.
19 Q. Then where did you go?
20 MS. LICHSTEIN: Same objection.
21 A. San Francisco.
22 Q. Did you live in San Francisco
23 until college?
24 MS. LICHSTEIN: Same objection.
25 A. Through, yes, through college.
CLASSIC REPORTING, INC. (212) 268-2590
9
1 Chakalian
2 Q. Where did you go to college?
3 A. University of San Francisco.
4 Q. Did you receive a degree?
5 A. Yes, sir.
6 Q. What degree was that?
7 A. B.S., B.S. in foreign trade
8 business.
9 Q. What year was that?
10 A. International, '56.
11 Q. Did you receive any further
12 education?
13 A. My MBA.
14 Q. Where did you get that?
15 A. Golden Gate University, San
16 Francisco, I think it was '61, '62. I don't
17 remember.
18 Q. Any other formal education?
19 A. Formal, no, that's it.
20 Q. What was your first full-time
21 employment?
22 A. The United States Army.
23 Q. What years were you in the army?
24 A. When I graduated, '56, '57, '58.
25 Q. Were you discharged from the army
CLASSIC REPORTING, INC. (212) 268-2590
10
1 Chakalian
2 in '58?
3 A. Yes, July '58.
4 Q. I assume that was an honorable
5 discharge?
6 A. Yes, I was an officer.
7 Q. What rank did you hold?
8 A. I left as a first lieutenant and
9 the reserves as a captain.
10 Q. What was your first full-time
11 employment after the army?
12 A. After the army, you are making me
13 dig here. I had several small jobs in the San
14 Francisco Bay area. My first real job was
15 with Leslie Salt Company.
16 Q. Leslie?
17 A. Leslie Salt.
18 Q. Company?
19 A. Slash Spice Islands.
20 Q. What years were you there?
21 A. When was the Nixon-Kennedy
22 debate? '59?
23 Q. So you were there for one year?
24 A. No, no, I was there for nine
25 years. I thought you asked me when I started.
CLASSIC REPORTING, INC. (212) 268-2590
11
1 Chakalian
2 Q. What was your term of employment
3 at Leslie Salt?
4 A. What do you mean by term of
5 employment?
6 Q. The years you were employed.
7 A. I was employed there until I,
8 until 1968, I believe. '69, '68.
9 Q. What were your responsibilities
10 there?
11 A. I was, I started as a street
12 salesman and then I left as director of
13 international sales, international -- director
14 of international.
15 Q. What was the business of this
16 company?
17 A. Production of salt and gourmet
18 spices.
19 Q. What was your next job?
20 A. Philip Morris.
21 Q. That started in 1968?
22 A. '68 or '69, somewhere in there.
23 Q. How long were you employed at
24 Philip Morris?
25 A. Couple of years. In Lucerne,
CLASSIC REPORTING, INC. (212) 268-2590
12
1 Chakalian
2 Switzerland.
3 Q. What were your duties there?
4 A. I opened Eastern Europe for them.
5 I was the first -- I ran Eastern Europe.
6 Q. Was that in the tobacco business?
7 A. Yes, sir.
8 Q. When did you leave Philip Morris?
9 A. 1971, I guess.
10 I should have brought my resume.
11 Q. Where did you go next?
12 A. I went for a year to Liggett
13 Myers in Brussels.
14 Q. What did you do there?
15 A. Director of what the -- I was
16 director of marketing.
17 Q. How long were you there?
18 A. A year.
19 Q. What happened next?
20 A. RJ Reynolds, Geneva.
21 Q. How long were you at RJ Reynolds?
22 A. From '72 through '80, in the
23 tobacco through '86. Then I went to Heublein.
24 Q. What were your responsibilities
25 between '72 and 1980 in a general way?
CLASSIC REPORTING, INC. (212) 268-2590
13
1 Chakalian
2 MS. LICHSTEIN: And 1980, excuse
3 me.
4 Q. Between 1972 and 1980, you --
5 A. '72 and '80?
6 Q. Maybe I misunderstood a prior,
7 your answer. Why don't you tell me what your
8 responsibilities were while you were at RJR.
9 A. Starting with?
10 Q. New question.
11 A. I was there from '72 to end of
12 '86.
13 Q. Right.
14 A. Okay, I was brought in as trade
15 development manager. Then I got, I don't
16 remember all the titles, trade development
17 manager. Then I got Eastern Europe. Then I
18 got U.S. military. I was director then. Then
19 I got Scandinavia. In '76, I was made vice
20 president. At that time, I had area one, what
21 did I have? '76 I became vice president for a
22 portion of Europe. You want --
23 Q. I'm not asking you to recall each
24 and every title. I'm asking you for a general
25 description of your responsibilities during
CLASSIC REPORTING, INC. (212) 268-2590
14
1 Chakalian
2 the period while you were at RJR?
3 A. Okay, I ran markets. I was
4 responsible for sales and profitability of
5 various markets and during the course between
6 '72 and '86, there were a sundry of markets,
7 many different markets added, deleted, areas,
8 hemispheres.
9 Q. This business concerned tobacco;
10 is that right?
11 A. No. No. In 1981 through '83,
12 October '81 to December '83, I was named
13 president of Delmonte. It was an RJR company,
14 president of Delmonte in London.
15 Q. Other than the time that you were
16 working with Delmonte, am I correct in
17 understanding that the products which you were
18 responsible, that is, the marketing
19 responsibilities were tobacco products; is
20 that right?
21 A. That's right.
22 Q. Then at some point as you
23 testified, you assumed responsibilities
24 relating to Delmonte?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
15
1 Chakalian
2 Q. For the record, what are
3 Delmonte's products?
4 MS. LICHSTEIN: I object to the
5 form. Are you asking as of today or in
6 1981 to 1983?
7 Q. At the time that you were
8 associated with Delmonte?
9 A. Canned goods, juices, vegetables,
10 fruits and juices.
11 Q. What year did you move from
12 Delmonte?
13 A. I left in December of 1983.
14 Q. But you were still within the RJR
15 organization at that time?
16 A. Yes, yes.
17 Q. What did you do after December of
18 1983?
19 A. I moved to Winston-Salem, North
20 Carolina.
21 Q. What did you do there?
22 A. I became executive vice president
23 of the international company.
24 Q. The international. Did that
25 include Delmonte?
CLASSIC REPORTING, INC. (212) 268-2590
16
1 Chakalian
2 A. No, sir.
3 Q. What was the business of the
4 international company?
5 A. Tobacco only.
6 Q. How long did you hold that
7 position?
8 A. Three years.
9 Q. Then what happened?
10 A. And then I was transferred to
11 Heublein by RJR.
12 Q. Was Heublein affiliated with RJR?
13 A. By RJR, yes.
14 Q. Was it owned by RJR at the time?
15 A. Yes.
16 Q. What was the business of
17 Heublein?
18 A. Spirits and wines.
19 Q. How long were you there?
20 A. RJR sold the company about six,
21 seven months into it, I believe. I forget the
22 exact timing.
23 Q. What was your position at
24 Heublein?
25 A. Senior vice president fine wines.
CLASSIC REPORTING, INC. (212) 268-2590
17
1 Chakalian
2 Best job in the world.
3 Q. Did you stay with the company
4 after its sale?
5 A. Yes, I stayed with Grand Met for
6 a couple years.
7 Q. I take it RJR sold Heublein to
8 Grand Met; is that accurate?
9 A. Yes.
10 Q. How long were you at Grand Met?
11 A. Couple of years.
12 Q. What was your position there?
13 A. Senior vice president of fine
14 wines.
15 Q. Did there come a time when you
16 left Grand Met?
17 A. Pardon me?
18 Q. Did there come a time when you
19 left Grand Met and took another job?
20 A. Yes.
21 Q. When was that?
22 A. Somewhere in '89, I believe.
23 '89, '90.
24 Q. What did you do?
25 A. I was the associate dean at the
CLASSIC REPORTING, INC. (212) 268-2590
18
1 Chakalian
2 business school at San Francisco State
3 University.
4 Q. Do you still hold that position
5 today?
6 A. No.
7 Q. Was that a full-time occupation?
8 A. Yes.
9 Q. How long did you have that job?
10 A. About two years.
11 Q. And then what did you do?
12 A. Then I went to work as a
13 consultant to Liggett.
14 Q. Did you have an academic
15 specialty while you were associate dean at the
16 business school?
17 MS. LICHSTEIN: I object to the
18 form.
19 Q. Did you teach?
20 A. I taught three classes.
21 Q. What did you teach, what
22 subjects?
23 A. International trade, how to do
24 business in Europe, Asia and one overall
25 international trade, those are the three
CLASSIC REPORTING, INC. (212) 268-2590
19
1 Chakalian
2 classes I taught.
3 Q. How did you become -- who engaged
4 you to become a consultant to Liggett?
5 A. Ben LeBow.
6 Q. When did you meet Mr. LeBow for
7 the first time?
8 MS. LICHSTEIN: Again, I object
9 to the form on the grounds of
10 relevance. We don't even have a year,
11 but assuming we are back in 1991, I
12 don't understand how there is any
13 conceivable relevance as to how this
14 witness met Mr. LeBow whenever he
15 indeed did meet him.
16 Q. When did you meet Mr. LeBow?
17 A. I think it was the fall of 1990
18 for the first time.
19 Q. How did you come to meet him?
20 MS. LICHSTEIN: Same objection.
21 A. I was called by a New York
22 headhunter and asked if I would be interested
23 in a position to run an international
24 department i.e., Russia.
25 Q. Was this an international
CLASSIC REPORTING, INC. (212) 268-2590
20
1 Chakalian
2 department for Liggett?
3 MS. LICHSTEIN: I object to the
4 form.
5 A. I don't recall at this time.
6 Q. Do you remember who the
7 headhunter was?
8 MS. LICHSTEIN: I object to the
9 form. No relevance. The question is
10 does he remember who the headhunter was
11 in 1991 who told him that there was a
12 potential job acting as a consultant to
13 an international department.
14 A. Handy Associates, I believe.
15 Q. Sorry?
16 A. Handy Associates.
17 Q. Did this contact from the
18 headhunter lead up to your first meeting with
19 Mr. LeBow?
20 A. Yes.
21 Q. What did you and Mr. LeBow
22 discuss at this initial meeting?
23 MS. LICHSTEIN: Same objection.
24 A. Basically the concepts of doing
25 business in Russia. That was his main thrust.
CLASSIC REPORTING, INC. (212) 268-2590
21
1 Chakalian
2 That was the main thrust.
3 Q. Was this meeting in 1990?
4 MS. LICHSTEIN: I object to the
5 form.
6 A. Yes, as I said, fall of 1990.
7 Q. Did Mr. LeBow offer you any
8 employment at or as a result of this meeting?
9 MS. LICHSTEIN: I object to the
10 form. Are you deeming consultancy to
11 be employment?
12 MR. STERN: Yes.
13 A. Eventually, yes.
14 Q. When did that happen?
15 A. Early in '91.
16 Q. And what arrangement did Mr.
17 LeBow offer to you?
18 A. Consultancy job.
19 Q. Did you eventually enter into a
20 consulting agreement with Mr. LeBow?
21 A. Yes, I did.
22 MS. LICHSTEIN: Excuse me, is the
23 question with Mr. LeBow or with
24 Liggett?
25 MR. STERN: That's a fair
CLASSIC REPORTING, INC. (212) 268-2590
22
1 Chakalian
2 objection.
3 Q. Was the consulting agreement with
4 Mr. LeBow or Liggett?
5 A. I don't recall right now.
6 Q. Was it a written agreement?
7 A. Pardon me?
8 Q. Was it a written agreement or --
9 A. Yes, it was.
10 Q. -- oral understanding?
11 Did it have a term of years?
12 A. Two years.
13 Q. What was the scope of the
14 engagement?
15 A. You want to ask that another way?
16 Q. What were your responsibilities
17 under the consulting agreement?
18 A. My responsibilities were to
19 travel to Russia once a month for 10 days and
20 to run the Russian factory. We had a Russian,
21 he had bought -- they had owned a Russian
22 factory -- actually, to run the Russian
23 factory, to do the joint venture agreement,
24 to, you know.
25 Q. A joint venture agreement
CLASSIC REPORTING, INC. (212) 268-2590
23
1 Chakalian
2 relating to the Russian operation?
3 A. Yes, the Russian operation.
4 Q. This is a Russian operation which
5 was owned by Liggett; is that right?
6 A. Yes, by Liggett.
7 Q. And you --
8 A. By Brooke Group actually.
9 Q. By Brooke Group?
10 A. Yes, sir.
11 Q. What was the relationship at the
12 time between Brooke Group and Mr. LeBow?
13 MS. LICHSTEIN: I object to the
14 form?
15 A. I don't know.
16 Q. Was Mr. LeBow the chairman or
17 chief executive officer of Brooke Group, to
18 your understanding?
19 MS. LICHSTEIN: I object to the
20 form.
21 A. Yes.
22 Q. How long did this arrangement
23 that you have described last?
24 MS. LICHSTEIN: By arrangement,
25 do you mean consultancy?
CLASSIC REPORTING, INC. (212) 268-2590
24
1 Chakalian
2 MR. STERN: Yes, the consulting
3 agreement involving the travel to
4 Russia and the involvement?
5 A. As I told you earlier, two years.
6 Q. During that time, were you
7 employed elsewhere?
8 A. No.
9 Q. Did you have any other employment
10 during the two years in which you were
11 performing your consulting agreement with
12 Brooke Group or Mr. LeBow?
13 A. What do you mean by employment?
14 Q. Did you have any other jobs?
15 A. What do you mean by other jobs?
16 Q. Were you receiving compensation
17 from other sources?
18 A. Yes.
19 Q. From whom?
20 A. From a couple of start-up
21 companies in the San Francisco Bay area.
22 Q. Were you consultants to those
23 companies as well?
24 A. Yes.
25 Q. Were you a consultant to those
CLASSIC REPORTING, INC. (212) 268-2590
25
1 Chakalian
2 companies?
3 A. Yes.
4 Q. What were the names of those
5 companies?
6 A. God, they were --
7 MS. LICHSTEIN: Whoa, wait. Just
8 one second. To the extent Mr. Stern is
9 asking you to disclose information
10 which may be proprietary confidential
11 information belonging to the companies
12 from which you rendered those
13 consulting services, I would admonish
14 you that I don't think that Mr. Stern
15 would expect you to violate the terms
16 of any confidentiality agreements, if
17 any exist, I don't know.
18 Q. Let me ask you if you are
19 precluded by any confidentiality agreement
20 from disclosing the names of those companies?
21 A. No.
22 Q. What are the names of the
23 companies?
24 A. I don't remember. Couple of my
25 students' start-up companies. Chang & Chin
CLASSIC REPORTING, INC. (212) 268-2590
26
1 Chakalian
2 was one of them. I'm honest. Chang & Chin
3 and the other one was the Vietnamese Boy,
4 Midang. My compensation was $1. They paid
5 for my bridge toll.
6 Q. I hope they did well.
7 A. One of them did.
8 Q. Going back to your engagement by
9 Brooke Group or by Mr. LeBow, what happened
10 after the two years that that consulting
11 arrangement lasted?
12 A. I left.
13 Q. What year would that have been?
14 A. '91, '92, '93, January of '93, I
15 believe.
16 Q. What did you do then?
17 A. Played with my grandkids.
18 Q. How long did that -- should I
19 take that to mean that you were, in effect,
20 retired during that period?
21 A. Yes.
22 Q. How long did that period of
23 retirement last?
24 A. Three months, four months.
25 Q. And then what did you do?
CLASSIC REPORTING, INC. (212) 268-2590
27
1 Chakalian
2 A. Then I was asked to come back by
3 Mr. LeBow to be co-CEO of Liggett.
4 Q. Who was the other co-CEO?
5 A. Mr. Richard Resseler and Mr.
6 LeBow.
7 Q. I assume you accepted Mr. LeBow's
8 invitation; is that correct?
9 A. Yes, I did.
10 Q. That was in 1993?
11 A. Yes, spring of '93.
12 Q. What did Mr. LeBow tell you that
13 he wanted you to do as co-CEO of Liggett?
14 A. Basically run the company and
15 find a new CEO.
16 Q. So it was understood that this
17 was an interim arrangement; is that correct?
18 A. I was on a consulting
19 arrangement.
20 Q. How long did this arrangement
21 last?
22 MS. LICHSTEIN: I object to the
23 form.
24 A. Three or four months.
25 Q. Then what happened?
CLASSIC REPORTING, INC. (212) 268-2590
28
1 Chakalian
2 A. Then the new CEO was hired.
3 Q. Who was that?
4 A. Ed Horrigan, Mr. Ed Horrigan.
5 Q. I didn't hear the last part, Ed
6 Horrigan?
7 A. Ed Horrigan. Edward A. Horrigan.
8 Q. What did you do once Mr. Horrigan
9 was hired?
10 A. I became a consultant again, to
11 him.
12 Q. To Mr. Horrigan?
13 A. To Liggett.
14 Q. On what matters -- how long did
15 this consulting, did this phase of the
16 consulting relationship last?
17 A. Until I became the CEO.
18 Q. When was that?
19 A. '94, June, I believe.
20 Q. Did you replace Mr. Horrigan?
21 A. Yes, I did.
22 Q. During this phase of the
23 consulting period, that is while Mr. Horrigan
24 was CEO, about what matters did you consult?
25 A. Variety.
CLASSIC REPORTING, INC. (212) 268-2590
29
1 Chakalian
2 Q. Did you consult on any proposals
3 for the sale of Liggett?
4 MS. LICHSTEIN: Object to the
5 form. I don't know, Mr. Stern, how
6 this has any conceivable relevance to
7 the issues encompassed by Wachtel's
8 application to the court for expedited
9 discovery and the order of the court.
10 As you well recall, the witness is here
11 today as a potential director nominee
12 to testify about what, if anything, Mr.
13 LeBow told him about future plans
14 regarding Reynolds. I have heard not
15 one word that has absolutely anything
16 to do with that.
17 MR. STERN: I will stand on my
18 question.
19 A. Repeat it.
20 Q. Did the variety of matters on
21 which you consulted during the period when Mr.
22 Horrigan was CEO include any matters relating
23 to the possible sale of Liggett?
24 MS. LICHSTEIN: Same objection.
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
30
1 Chakalian
2 Q. I believe you told me that you
3 became CEO in June 1994; is that correct?
4 A. I believe so, yes.
5 Q. Have you held that position
6 continuously since then?
7 A. Since.
8 Q. What are your duties as chief
9 executive officer?
10 A. Get yourself a business book and
11 look up what the CEO does.
12 Q. Well, do you have any particular
13 duties as chief executive officer?
14 A. I run the company.
15 Q. To whom do you report?
16 A. I believe to Mr. LeBow.
17 Q. Does Liggett have a board of
18 directors?
19 A. Yes, it does.
20 Q. Do you report to the board?
21 A. I am the chairman of the board.
22 Q. When did you become chairman?
23 A. I guess a few months after CEO.
24 Q. Does the board meet regularly?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
31
1 Chakalian
2 MS. LICHSTEIN: I object to the
3 form.
4 MR. RAPER: I apologize, what was
5 the answer to that question?
6 A. No.
7 Q. When it does meet, are minutes
8 maintained at its meetings?
9 A. I don't know.
10 Q. Has there ever been any
11 discussion of RJR at any meeting of the board
12 of directors of Liggett Corporation?
13 A. No.
14 MS. LICHSTEIN: I assume you mean
15 during that period of time that he has
16 been on the board.
17 MR. STERN: Yes.
18 Q. How long have you been on the
19 board?
20 A. Since '93 -- '94, I believe.
21 Q. Can you tell me when in 1994 you
22 went on the board?
23 A. During Ed Horrigan's tenure, I
24 was put on the board.
25 Q. So that was before June 1994?
CLASSIC REPORTING, INC. (212) 268-2590
32
1 Chakalian
2 A. Yes.
3 Q. And I take it your answer with
4 that time frame --
5 MS. LICHSTEIN: Sorry, my
6 objection was I don't know how the
7 witness could testify as to a time
8 period when he was neither employed by
9 Liggett nor on the board.
10 MR. STERN: That's a fair
11 objection. I'm not quibbling with the
12 objection. I've taken the objection
13 and an attempting to make sure the
14 record is clear to respond to your
15 objection.
16 Q. During the time you were on the
17 board, you cannot remember a meeting in which
18 RJR was discussed, correct?
19 A. Correct.
20 Q. When was the last time the
21 Liggett board of directors met?
22 A. I don't recall.
23 MS. LICHSTEIN: Surely I don't
24 want to interrupt you, I'm going to
25 have to make a call to the
CLASSIC REPORTING, INC. (212) 268-2590
33
1 Chakalian
2 pediatrician.
3 MR. STERN: Let's go off the
4 record.
5 (Discussion off the record.)
6 MR. STERN: This is actually a
7 natural point to break.
8 (Recess taken.)
9 Q. Mr. Chakalian, did you receive a
10 subpoena in connection with this deposition?
11 A. Yes, I did.
12 Q. Did you note that there was a
13 document request attached to that subpoena?
14 A. Did I what?
15 Q. Did you see that there was a
16 document request attached to the subpoena?
17 A. I didn't read it.
18 Q. You didn't read the document
19 request?
20 A. I didn't read the subpoena.
21 Q. What did you do with the subpoena
22 when you received it?
23 A. I gave it to my legal counsel.
24 Q. Who was that?
25 A. Josiah Murray.
CLASSIC REPORTING, INC. (212) 268-2590
34
1 Chakalian
2 Q. Is he your personal counsel?
3 A. No, he is company counsel.
4 Q. What company is that?
5 A. Liggett.
6 Q. Do you know what Mr. Murray did
7 with the subpoena?
8 A. What he actually did with it?
9 Q. Yes.
10 A. I don't know.
11 Q. Do you know if anyone caused any
12 search of your files to be made for documents
13 that were called for by the subpoena?
14 A. My secretary mentioned to me
15 that, yes.
16 Q. What did your secretary tell you?
17 A. She told me that a search was
18 made of our files.
19 Q. Did she tell you who made the
20 search?
21 A. Yes.
22 Q. Who was that?
23 A. Dobbins, James Dobbins.
24 Q. Who is Mr. Dobbins?
25 A. He is the associate of Mr.
CLASSIC REPORTING, INC. (212) 268-2590
35
1 Chakalian
2 Murray's.
3 Q. Did she tell you what Mr. Dobbins
4 looked for?
5 A. No.
6 Q. Do you know what Mr. Dobbins
7 looked for?
8 A. No.
9 Q. Did you ever discuss the file
10 search --
11 A. No.
12 Q. I need to finish the question.
13 -- with Mr. Dobbins?
14 A. No.
15 Q. Do you know which files Mr.
16 Dobbins searched?
17 A. No.
18 Q. Did Mr. Dobbins ask you whether
19 you had any -- I will put a different
20 question.
21 Do you maintain a personal
22 calendar or appointment book?
23 A. Yes.
24 Q. Do you know whether there are any
25 entries in your calendar or appointment book
CLASSIC REPORTING, INC. (212) 268-2590
36
1 Chakalian
2 relating to RJR?
3 A. Come again?
4 Q. Do you know whether there are any
5 entries in your calendar or appointment book
6 relating to RJR?
7 A. I don't recall of any.
8 MS. LICHSTEIN: Just to cut
9 through this, Mr. Stern, Milbank Tweed
10 yesterday asked Mr. Chakalian when he
11 returns to his office to review, or to
12 have reviewed, his calendar to see if
13 there are any entries with respect to
14 RJR and if there are any, we shall
15 provide them to you.
16 MR. STERN: Fine.
17 Q. Mr. Dobbins didn't ask to see
18 your calendar or personal appointment book; is
19 that correct?
20 A. I haven't talked to him.
21 Q. Do you know if the files that
22 were searched were files that were maintained
23 at Liggett as opposed to files that were
24 maintained elsewhere?
25 A. My office at Liggett.
CLASSIC REPORTING, INC. (212) 268-2590
37
1 Chakalian
2 Q. With whom have you discussed the
3 deposition that you are giving today?
4 MS. LICHSTEIN: Counsel.
5 A. With counsel, yes.
6 Q. Counsel being someone from
7 Milbank Tweed; is that correct?
8 A. Milbank Tweed and my general
9 counsel.
10 Q. Mr. Murray?
11 A. Mr. Murray.
12 Q. Have you discussed it with anyone
13 other than counsel?
14 A. No.
15 Q. Were those discussions with
16 counsel for purposes of receiving legal
17 advice?
18 A. Yes.
19 Q. Did there come a time when you
20 became aware that Mr. LeBow was considering
21 the possibility of a transaction with RJR, a
22 transaction of any kind?
23 MS. LICHSTEIN: I object to the
24 form.
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
38
1 Chakalian
2 Q. Did there come a time that you
3 became aware that Mr. LeBow was speaking
4 with -- I will put a different question. Do
5 you recognize the name Wassherstein Parella?
6 A. Yes, WP.
7 Q. For the record, you know them as
8 an investment banking firm; is that correct?
9 A. Yes.
10 Q. Have you ever heard the name
11 Mario Baeza?
12 A. Yes.
13 Q. Who is Mr. Baeza?
14 A. He is the guy from WP. He is the
15 kid from Cuba, works there.
16 Q. One who works with Wassherstein
17 Parella; is that correct?
18 A. Yes.
19 Q. Did there come a time when you
20 learned that Mr. LeBow was having
21 conversations with Wassherstein Parella
22 concerning RJR?
23 A. Yes.
24 Q. When was that?
25 A. Summer of -- last summer
CLASSIC REPORTING, INC. (212) 268-2590
39
1 Chakalian
2 sometime, I don't know, spring -- summer, I
3 believe.
4 Q. From whom did you learn that?
5 A. From Mr. LeBow.
6 Q. What did Mr. LeBow tell you?
7 A. He asked me to go to a meeting
8 with WP and Reemstma.
9 Q. Just so the spelling is clear,
10 Reemstma is R-E-E-M --
11 A. You people misspelled it.
12 R-E-E-M-S-T-M-A.
13 Q. Why don't you identify Reemstma;
14 what is Reemstma?
15 A. A German tobacco company.
16 Q. Did Mr. LeBow tell you what the
17 meeting would concern?
18 A. I was -- yes, I was giving them
19 an overview of the world cigarette market,
20 that was discussed.
21 Q. I'm sorry, in the conversation
22 with Mr. LeBow where Mr. LeBow asked you if
23 you would meet with Wassherstein in Reemstma,
24 did he tell you what that meeting would be
25 about?
CLASSIC REPORTING, INC. (212) 268-2590
40
1 Chakalian
2 A. Yes.
3 Q. What did he tell you?
4 A. We were going to have an overview
5 of the world tobacco markets.
6 Q. Did Mr. LeBow mention RJR in that
7 conversation?
8 A. There were mentions of it, yes,
9 possible mentions of it, yes.
10 Q. What did he say about RJR?
11 A. That there could be -- we are
12 discussing the possibility with WP of seeing
13 what can be done, you know, with RJR.
14 Q. Did he say -- what did you
15 understand him to mean by what could be done?
16 MS. LICHSTEIN: I object to the
17 form.
18 A. To me, it meant in my mind it
19 meant either a purchase, joint venture with
20 Reemstma to purchase.
21 Q. Purchase of RJR?
22 A. Of the tobacco business.
23 Q. Was this the first time that Mr.
24 LeBow had -- let me put a different question.
25 Prior to this conversation, were
CLASSIC REPORTING, INC. (212) 268-2590
41
1 Chakalian
2 you aware that Mr. LeBow or Brooke Group was
3 considering the possibility of doing something
4 with RJR?
5 A. No.
6 MS. LICHSTEIN: I object to the
7 form.
8 Q. This was when you first learned
9 of it; is that correct?
10 A. Right.
11 Q. And did you understand that the
12 possibilities that Mr. LeBow was considering
13 included a merger of Liggett with RJR?
14 MS. LICHSTEIN: I object to the
15 form.
16 A. No.
17 Q. A spinoff of RJR's food
18 businesses?
19 MS. LICHSTEIN: I object to the
20 form.
21 A. No.
22 Q. This conversation with Mr. LeBow,
23 was it a telephone conversation?
24 A. Telephone conversation.
25 Q. Did he call you?
CLASSIC REPORTING, INC. (212) 268-2590
42
1 Chakalian
2 A. I don't recall.
3 Q. Did he say anything else in the
4 conversation relative to RJR?
5 A. No.
6 Q. Did he say anything else about
7 Wassherstein Parella or, for example, what
8 Wassherstein Parella had been asked to do by
9 Mr. LeBow?
10 A. No.
11 Q. Did he say why Reemstma would be
12 there, would be at the meeting?
13 A. No.
14 Q. What did you tell Mr. LeBow?
15 A. I will go to the meeting.
16 Q. Did the meeting take place?
17 A. Yes.
18 Q. Where did the meeting take place?
19 A. In Manhattan, their offices.
20 Q. Whose offices?
21 A. WP.
22 Q. When did the meeting take place?
23 A. I don't recall the exact date.
24 Q. Who attended the meeting?
25 A. There were three or four
CLASSIC REPORTING, INC. (212) 268-2590
43
1 Chakalian
2 representatives from Reemstma and three or
3 four from WP and my CFO, David Sheets, and
4 myself.
5 Q. David Sheets is the CFO of
6 Liggett?
7 A. Yes, sir.
8 Q. Do you remember the names of any
9 of the representatives of Reemstma?
10 A. Yes. Mr. Boyson, Hans-Peter
11 Haubold. There was another guy, I don't
12 recall his name. And Marion, what's her last
13 name? She is the attorney, Marion something.
14 Q. What positions with the company
15 did these individuals hold, if you know?
16 A. Yes, Boyson was the CFO.
17 Hans-Peter was like a financial analyst, the
18 guy I don't recall was also a numbers guy and
19 Marion was the -- been their attorney for
20 years.
21 Q. Who was there from Wassherstein
22 Parella?
23 A. This fellow Rosen. I think I
24 remember Rosen, something, I don't know his
25 name. Mario was in and out, I believe, and a
CLASSIC REPORTING, INC. (212) 268-2590
44
1 Chakalian
2 couple of junior people. I don't know their,
3 don't recall their names.
4 Q. How long did the meeting last?
5 MS. LICHSTEIN: I'm going to just
6 ask the witness something for a minute.
7 MR. STERN: You wish to confer
8 with the witness?
9 MS. LICHSTEIN: Yes, I wish to
10 ask the witness and I will tell you
11 whether he recalls whether anyone else
12 was present at the meeting or you can
13 ask him that other than the people
14 listed. Why don't you ask him that?
15 Q. Was anyone else present at the
16 meeting other than the people listed?
17 A. No.
18 MS. LICHSTEIN: I wasn't sure
19 that you had asked and I just wanted it
20 to be clear.
21 MR. STERN: Fair enough. If you
22 wish to clarify the record, that's
23 fine.
24 MS. LICHSTEIN: Thank you.
25 Q. How long did the meeting last?
CLASSIC REPORTING, INC. (212) 268-2590
45
1 Chakalian
2 A. Couple, three hours.
3 Q. Were any documents presented at
4 the meeting or discussed at the meeting?
5 A. No.
6 Q. Was there any written agenda?
7 A. No.
8 Q. Did you take any notes?
9 A. No.
10 Q. Did you see anyone taking any
11 notes?
12 A. Some of the Wassherstein guys
13 were in the corner writing something.
14 Q. Did you ever see any memorandum
15 summarizing what or reporting what had
16 transpired at the meeting?
17 A. No.
18 Q. Now when this meeting took place,
19 was Wassherstein, if you know, formally
20 engaged by either Brooke Group or Liggett?
21 MS. LICHSTEIN: I think it would
22 be useful if you broke up the question
23 and ask him whether he knows or not.
24 MR. STERN: Okay.
25 Q. Do you know whether or not as of
CLASSIC REPORTING, INC. (212) 268-2590
46
1 Chakalian
2 the time of this meeting, Wassherstein had
3 been retained by Brooke Group?
4 A. No.
5 Q. How about by Liggett?
6 A. I don't recall.
7 MR. STERN: I'm going to mark as
8 Exhibit 1 --
9 MS. LICHSTEIN: Chakalian 1.
10 MR. STERN: Chakalian 1, a
11 document that is numbered RC 379
12 through 387.
13 MS. LICHSTEIN: Do you have
14 copies?
15 MR. STERN: No. These are all
16 your -- I found these on my desk this
17 morning.
18 MS. LICHSTEIN: They were
19 supposed to have been delivered to your
20 home. I apologize.
21 MR. STERN: 379 to 387.
22 MS. LICHSTEIN: I have a copy of
23 them.
24 (Multipage document, top fax from
25 Mr. LeBow to Mr. Chakalian, and
CLASSIC REPORTING, INC. (212) 268-2590
47
1 Chakalian
2 attached engagement letter,
3 bearing production Nos. 379
4 through 387, marked Chakalian
5 Exhibit 1 for identification, as
6 of this date.)
7 Q. Mr. Chakalian, a copy of Exhibit
8 1 has been placed before you and I ask you if
9 you can identify that document?
10 A. Yes, I see what it is.
11 MS. LICHSTEIN: I think that's
12 not the question.
13 A. What is the question?
14 Q. Let me put it to you this way.
15 The first page of this document is a fax to
16 your attention; is that correct?
17 A. To -- yes.
18 MS. LICHSTEIN: Just answer the
19 question, Mr. Chakalian.
20 A. Well, come again. Yes, it's a
21 fax to my office.
22 Q. It's a fax to your office?
23 A. Right.
24 Q. It's from BSL; is that correct?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
48
1 Chakalian
2 Q. And BSL, can you identify that?
3 A. That's LeBow, Bennett S. LeBow.
4 Q. Now attached to this fax is a
5 document in the form of a letter. Do you see
6 that?
7 A. Yes.
8 Q. Do you recall ever seeing this
9 document before?
10 A. I really don't.
11 Q. Now would you agree with me that
12 the document that's attached to the fax page
13 is in the form of an engagement letter?
14 A. Yes, it is.
15 MS. LICHSTEIN: Wait.
16 Q. Between --
17 MR. STERN: Let me state my
18 question. You can state your objection
19 and then you can say whatever you say.
20 Q. -- is in the form of an
21 engagement letter between a division of
22 Wassherstein Parella and Liggett Group and
23 Reemstma.
24 MS. LICHSTEIN: I object to the
25 form. The witness has said that he has
CLASSIC REPORTING, INC. (212) 268-2590
49
1 Chakalian
2 never, to his recollection, seen the
3 document before and what the document
4 is speaks for itself. If you want to
5 spend your time characterizing what you
6 think it is, fine. But I don't think
7 that's really the witness's obligation.
8 MR. STERN: I am asking if the
9 witness understands -- my co-counsel
10 would like --
11 MS. LICHSTEIN: I would
12 appreciate if the plaintiffs in this
13 lawsuit spoke only through one lawyer
14 at one deposition.
15 MR. RAPER: There's no question.
16 The plaintiffs in this lawsuit, in this
17 deposition and other depositions, will
18 speak and ask questions only through
19 one lawyer.
20 Ms. Lichstein, what I want to put
21 on the record is not a question to the
22 witness but it is the following: I am
23 North Carolina counsel and you are not
24 accompanied by North Carolina counsel
25 on your side. I just want to let you
CLASSIC REPORTING, INC. (212) 268-2590
50
1 Chakalian
2 know that in North Carolina, what is
3 allowed in depositions is an objection
4 without a speaking objection and
5 without anything that could in any way
6 be considered instructions to the
7 witness or your comments on the
8 question or anything else.
9 You are allowed to make a single
10 non-obtrusive objection. Anything else
11 is subject to sanction. I assumed you
12 did not know that rule in North
13 Carolina. This case is pending in the
14 Middle District of North Carolina and
15 that is a local rule. All counsel in
16 this case have to follow that rule, and
17 I just wanted to alert you to that
18 because I assume you did not know.
19 MS. LICHSTEIN: I thank you for
20 your comments, and I would ask New York
21 counsel to please keep his questions
22 within the parameters of permissible
23 questions under the Federal rules.
24 Q. Now I'm going to put the question
25 again; in order to save time, I'm not going to
CLASSIC REPORTING, INC. (212) 268-2590
51
1 Chakalian
2 ask the reporter to try to find the prior
3 question. What I'm asking you is if you would
4 agree with me that the document that's
5 attached to this facsimile which is addressed
6 to you is a form of engagement letter with
7 Wassherstein and Parella or one of its
8 affiliates and Liggett and Reemstma?
9 MS. LICHSTEIN: I object to the
10 form.
11 A. Yes.
12 Q. I would ask you to look at RC 385
13 and you will see that that page has a
14 signature line for Liggett?
15 A. Yes.
16 Q. I will state for the record so
17 that it's absolutely clear that this document
18 is not signed by anyone. Did Liggett Group
19 ever, to your knowledge, ever sign an
20 engagement letter with Wassherstein Parella?
21 A. No.
22 Q. Now did anyone ever propose to
23 Liggett Group that it sign such an engagement
24 letter?
25 MS. LICHSTEIN: I object to the
CLASSIC REPORTING, INC. (212) 268-2590
52
1 Chakalian
2 form.
3 A. I don't recall.
4 Q. The subject never came up?
5 A. No.
6 Q. I would like to call your
7 attention to the date on the first page of the
8 document, which is May 16th?
9 A. Yes.
10 Q. I am here trying to decipher
11 handwriting, 1995, but I think that's the most
12 logical interpretation?
13 A. Right, that's correct.
14 Q. Looking at that date and as well
15 the date on the second page of the exhibit,
16 which is April 20, 1995, does that, do those
17 dates refresh your recollection as to when
18 this meeting at Wassherstein Parella took
19 place, the meeting that you have described in
20 your previous testimony?
21 A. As I said earlier, it was late
22 spring or summer, so that's about in the
23 ballpark. May would be in the ballpark.
24 Q. To your knowledge, had
25 Wassherstein -- prior to the meeting, had
CLASSIC REPORTING, INC. (212) 268-2590
53
1 Chakalian
2 Wassherstein ever proposed to Mr. LeBow an
3 engagement letter in respect of this matter?
4 A. I don't know.
5 Q. Do you know if Mr. LeBow had any
6 understanding with Wassherstein Parella,
7 whether or not reduced to writing, as to the
8 terms of an engagement for investment banking
9 services in connection with RJR?
10 MS. LICHSTEIN: I object to the
11 form.
12 A. I don't know.
13 Q. Did you ever discuss that subject
14 with him?
15 A. No.
16 MR. STERN: I'm going to mark as
17 the next exhibit, a document which was
18 provided to us by counsel for the
19 witness and the LeBow parties today.
20 (Schedule marked Chakalian
21 Exhibit 2 for identification, as
22 of this date.)
23 Q. Mr. Chakalian, a copy of Exhibit
24 2 has been placed before you.
25 A. What is this?
CLASSIC REPORTING, INC. (212) 268-2590
54
1 Chakalian
2 Q. Can you identify this document?
3 MS. LICHSTEIN: Can we go off the
4 record?
5 MR. STERN: Sure.
6 (Discussion off the record.)
7 Q. Have you ever seen this schedule
8 before?
9 A. No.
10 Q. The schedule refers to a letter
11 dated March 16, 1995 from a B. Scheler to B.
12 LeBow and H. Lorber. Can you identify B.
13 Scheler, please?
14 A. Never heard of him.
15 Q. Have you ever seen a letter of
16 the description in this document?
17 A. Nope.
18 Q. Is it your practice to read
19 documents that come to you before they are
20 placed in your files?
21 A. Depends.
22 Q. What does it depend on?
23 A. Depends if it concerns the
24 business, yes. Anything that has to do with
25 legal or deep finances, I first get
CLASSIC REPORTING, INC. (212) 268-2590
55
1 Chakalian
2 interpretations or give it to my people and if
3 they deem it necessary to report to me on
4 same, they do.
5 Q. We should not infer from the fact
6 that if a document is found in your file that
7 you read the document?
8 A. No, don't, no. Please don't.
9 Q. I'm going to ask you one final
10 question about this document. Did you review,
11 in connection with preparing for this
12 deposition, any documents?
13 A. Nope.
14 MS. LICHSTEIN: Whoa, whoa, wait.
15 May I respond? In preparation --
16 A. Oh, yes.
17 MS. LICHSTEIN: In preparation
18 for the deposition, counsel did show
19 Mr. Chakalian various documents from
20 his files which had been produced to
21 you today.
22 Q. All documents shown to the
23 witness have been produced to us today; is
24 that correct?
25 A. I personally did not oversee the
CLASSIC REPORTING, INC. (212) 268-2590
56
1 Chakalian
2 document production last night. Sitting here
3 today, I am unaware of any documents that were
4 responsive to the subpoena that were not
5 produced. If there's a clarification, I
6 apologize, but I did not go back to the office
7 and do this last night.
8 MR. STERN: I take your
9 representation on that. I just want to
10 confirm.
11 MS. LICHSTEIN: There may have
12 been, I have told you my best
13 knowledge.
14 MR. STERN: I just want to
15 confirm that insofar as the witness
16 recalls, the letter dated March 16th
17 referred to in this Exhibit 2 was not
18 shown to him for purposes of this
19 deposition.
20 MS. LICHSTEIN: I represent that
21 it was not shown to him.
22 Q. The meeting at Wassherstein that
23 you have been talking about, what was said and
24 by whom at this meeting, to your best
25 recollection?
CLASSIC REPORTING, INC. (212) 268-2590
57
1 Chakalian
2 A. We were discussing, I will repeat
3 again, we were discussing the world tobacco
4 markets, what's going on, country by country.
5 Q. Did RJR come up in that
6 discussion?
7 A. Certainly did.
8 Q. What was said about RJR?
9 A. We were talking about their
10 businesses around the world.
11 Q. For what purpose?
12 A. For the purpose of review.
13 Q. Was this a regular review of the
14 world tobacco market that you were conducting?
15 A. This was a meeting at WP, what
16 regular?
17 Q. It was not a regular -- you did
18 not have meetings like this in the ordinary
19 course of your business; is that correct?
20 MS. LICHSTEIN: I object to the
21 form.
22 Off the record.
23 (Discussion off the record.)
24 MR. STERN: I will put a
25 different question. I will withdraw
CLASSIC REPORTING, INC. (212) 268-2590
58
1 Chakalian
2 the question.
3 MS. LICHSTEIN: Local counsel has
4 put constraints to me to force me to go
5 off the record.
6 MR. RAPER: Local counsel didn't
7 put constraints. The Federal Court put
8 restraints on you in the Middle
9 District of North Carolina.
10 MS. LICHSTEIN: I think we all
11 agree we are going to attempt to get a
12 clear record here, and I will do my
13 best to assist in getting one.
14 MR. RAPER: That would be a nice
15 change for you.
16 Q. Why were you meeting at this time
17 with Wassherstein Parella and with Reemstma to
18 review the world tobacco markets and to talk
19 about RJR's businesses? Why were you having
20 this meeting?
21 A. I was asked to come to this
22 meeting to review the possibility of doing
23 something with Reemstma and we were reviewing
24 not just RJR but all the tobacco companies.
25 Q. Was one of the possibilities a
CLASSIC REPORTING, INC. (212) 268-2590
59
1 Chakalian
2 joint venture between, a joint venture to
3 acquire RJR's tobacco businesses?
4 A. Possibility, yes.
5 Q. What did you say on that subject?
6 A. I really had no comment one way
7 or the other. I was just the expert guy on
8 the world markets.
9 Q. What did Wassherstein Parella say
10 on the subject or their representatives?
11 A. I don't recall.
12 Q. What about the people from
13 Reemstma?
14 A. They didn't say much.
15 Q. Do you know if at the time --
16 withdraw that.
17 What did Mr. Sheets say?
18 A. Mr. Sheets and I were talking
19 about exactly the same thing, the various
20 markets.
21 Q. Do you know whether at that time,
22 the time of the meeting Reemstma and Brooke
23 Group or Mr. LeBow had reached any
24 understanding with one another concerning an
25 approach to RJR about a transaction?
CLASSIC REPORTING, INC. (212) 268-2590
60
1 Chakalian
2 A. I don't know anything about that.
3 Q. Do you know how Brooke Group or
4 Liggett came to be talking to Reemstma about
5 the subject of this meeting as opposed to any
6 other company in the world?
7 A. No.
8 Q. Did Mr. LeBow ever discuss with
9 you a discussion that he had with Henry Kravis
10 concerning a possible transaction between
11 Liggett and RJR?
12 A. He very briefly mentioned to me
13 that he spoke with Mr. Kravis, so --
14 Q. About that subject?
15 A. I don't know about what venue,
16 but he said he talked to Henry.
17 Q. About a transaction between
18 Liggett and RJR?
19 A. He talked to Henry.
20 Q. When did Mr. LeBow tell you that?
21 A. I don't recall.
22 Q. Did he tell you what Mr. Kravis
23 said to him?
24 A. Nope.
25 Q. Did Mr., did it ever come to your
CLASSIC REPORTING, INC. (212) 268-2590
61
1 Chakalian
2 attention that Mr. LeBow had had discussions
3 with representatives of Tabaca Lera concerning
4 a transaction involving RJR?
5 A. I knew he went to Spain.
6 Q. How did you know that?
7 A. He told me.
8 Q. When did he tell you that?
9 A. On the phone.
10 Q. When was that phone conversation?
11 A. I don't know.
12 Q. Was that before or after this
13 meeting with --
14 A. I don't recall.
15 Q. -- Wassherstein?
16 Now, when you say he went to
17 Spain, did he say that he met with people in
18 Tabaca Lera?
19 A. Yes.
20 Q. Did you understand what the
21 purpose of that meeting was?
22 A. Not really, no.
23 Q. Did you know that it concerned
24 RJR?
25 A. No not at that time.
CLASSIC REPORTING, INC. (212) 268-2590
62
1 Chakalian
2 Q. Well, when did you come to learn
3 that?
4 A. I think he mentioned something to
5 me because, you know, I've known Tabaca Lera
6 for a hundred years. I know them all.
7 Q. But at some time you came to
8 understand that Mr. LeBow's meeting with
9 Tabaca Lera concerned RJR?
10 A. Yes, right, right.
11 MS. LICHSTEIN: Mr. Chakalian,
12 you should wait for the question to be
13 finished before you answer it.
14 Q. But you don't remember when that
15 was?
16 A. No.
17 Q. Did you ever come to be aware
18 that Mr. LeBow had discussions with a company
19 called Intabex concerning a possible
20 transaction with RJR?
21 A. Come again?
22 Q. Maybe I'm misstating the name of
23 the company.
24 A. Intabex.
25 Q. There's a company --
CLASSIC REPORTING, INC. (212) 268-2590
63
1 Chakalian
2 A. Yes, there is.
3 Q. What I'm asking you is whether it
4 ever came to your attention that Mr. LeBow had
5 had discussions with people from Intabex
6 concerning RJR?
7 A. No.
8 Q. Do you know a Mr. Taberer?
9 A. Yes.
10 Q. Who is Mr. Taberer?
11 MS. LICHSTEIN: Do you have a
12 first name for him?
13 Q. I think it's Tony?
14 A. Tony. He is the president of
15 Intabex.
16 Q. Have you ever discussed with
17 anyone communications between Mr. LeBow and
18 Mr. Taberer concerning RJR?
19 A. No.
20 Q. Have you ever met with -- I take
21 it Mr. Taberer is someone you dealt with in
22 the ordinary course of your business; is that
23 correct?
24 A. Yes.
25 Q. Have you ever discussed RJR with
CLASSIC REPORTING, INC. (212) 268-2590
64
1 Chakalian
2 him?
3 MS. LICHSTEIN: Object to the
4 form.
5 May we go off the record?
6 (Discussion held off the record)
7 Q. Did you ever discuss RJR with Mr.
8 Taberer?
9 A. Yes.
10 Q. When?
11 A. I discuss all companies with him.
12 Q. Did you ever discuss with Mr.
13 Taberer a transaction between Liggett and RJR?
14 A. No.
15 Q. Did you ever discuss with Mr.
16 Taberer a transaction between any, between Mr.
17 LeBow and any of his affiliates in RJR?
18 A. Mr. LeBow and -- come again?
19 Q. And any of his affiliated
20 companies, Brooke Group, for example, with
21 RJR?
22 A. No.
23 Q. Did Mr. LeBow ever tell you that
24 he had talked to Mr. Taberer about developing
25 a transaction concerning RJR?
CLASSIC REPORTING, INC. (212) 268-2590
65
1 Chakalian
2 A. I don't recall.
3 Q. Did it ever come to your
4 attention that there were discussions between
5 Mr. LeBow and representatives of Rothmans
6 concerning RJR?
7 A. Yes, after the fact, after this
8 trip to South Africa, yes.
9 Q. Who told you that?
10 A. Mr. LeBow did.
11 Q. When did you tell you this?
12 A. When he came back from South
13 Africa.
14 Q. Soon after he came back?
15 A. I don't recall.
16 Q. Sometime in 1995; is that
17 correct?
18 A. I guess, yes.
19 Q. Can you place it in time --
20 A. No.
21 Q. -- any more precisely than that?
22 A. No.
23 Q. What did he tell you about his
24 communication with Rothmans?
25 A. First he brought me greetings
CLASSIC REPORTING, INC. (212) 268-2590
66
1 Chakalian
2 from a couple of the people from down there
3 that I have known for years and that's, and he
4 says he just talked to them.
5 Q. Did he tell you what he was
6 talking to them about?
7 MS. LICHSTEIN: Excuse me, can
8 you have that reread? I think you may
9 have misspoken in your question.
10 (Record read.)
11 MS. LICHSTEIN: Thank you.
12 Q. Did Mr. LeBow tell you why he had
13 gone to meet with people from Rothmans?
14 A. He mentioned that they discussed
15 several possibilities, one of which could be
16 Reynolds, yes.
17 Q. What kind of possibilities?
18 A. Business possibilities.
19 Q. And when you say business
20 possibilities, can you be more specific than
21 that?
22 A. Business possibilities.
23 Q. Well, mergers, acquisitions,
24 those kinds of business possibilities?
25 A. All of the above. Tobacco,
CLASSIC REPORTING, INC. (212) 268-2590
67
1 Chakalian
2 paper, this is business, my friend.
3 Q. What did he say to you that he
4 had discussed with respect to Reynolds?
5 A. That he discussed Reynolds.
6 Q. Did he tell you that he had
7 discussed some sort of joint venture involving
8 Reynolds?
9 A. Possibilities, yes. No specific.
10 Q. Did he tell you he discussed a
11 possibility of a merger of Liggett and RJR?
12 A. No.
13 Q. Did he tell you that he discussed
14 the possibility of a spin-off of Nabisco?
15 A. No.
16 Q. Did you ever hear of Gary Klesch?
17 A. Klutch?
18 Q. K-L-E-S-C-H?
19 A. Oh, Klesch, I heard of him, yes.
20 Q. Who is the Mr. Klesch that you
21 heard of, what does he do?
22 A. He is in London somewhere.
23 Q. Do you understand him to be an
24 investment banker in London?
25 A. I guess. I never met him.
CLASSIC REPORTING, INC. (212) 268-2590
68
1 Chakalian
2 MR. RAPER: Sorry?
3 A. I never met him. I don't know
4 the man.
5 Q. How did you come to hear of him?
6 A. First of all, I used to live in
7 London.
8 Q. Do you think you heard of him
9 from living in London?
10 A. Sure I did, yes.
11 Q. Did Mr. LeBow ever mention Mr.
12 Klesch to you?
13 A. Yes.
14 Q. When was that?
15 A. During that same period, sometime
16 in '95.
17 Q. What did he say about Mr. Klesch?
18 A. That he was a banker in the city,
19 in the City of London.
20 Q. Did he tell you anything? Did he
21 tell you that he had asked Mr. Klesch to
22 assist him in developing a transaction
23 concerning RJR?
24 A. No.
25 Q. Did he indicate that there was
CLASSIC REPORTING, INC. (212) 268-2590
69
1 Chakalian
2 any connection between Mr. Klesch and Mr.
3 LeBow's consideration of possibilities
4 involving RJR?
5 A. No.
6 MS. LICHSTEIN: I object to the
7 form.
8 MR. STERN: Off the record.
9 (Discussion off the record.)
10 Q. After this meeting at the offices
11 of Wassherstein Parella, what happened next --
12 what was your next communication concerning
13 the possibility of a transaction involving Mr.
14 LeBow and RJR?
15 A. After?
16 Q. After Wassherstein Parella?
17 A. Oh, that's when I heard about the
18 what's it called, Scott-Rodino, whatever it's
19 called. Scott-Rodino whatever application.
20 Q. Are you referring to an
21 application under the Hart-Scott-Rodino Act?
22 A. That's it.
23 Q. This is an application that was
24 filed by entities associated by -- an entity
25 or entities associated with Mr. LeBow; is that
CLASSIC REPORTING, INC. (212) 268-2590
70
1 Chakalian
2 correct?
3 A. Correct.
4 Q. Concerning RJR; is that correct?
5 A. Correct.
6 Q. How did you hear about that?
7 A. I read it in the paper.
8 Q. So you recall just so --
9 A. Excuse me, let me change that. I
10 heard it a few days before through somebody at
11 Brooke Group and then I read it in the paper
12 two days later, three days later.
13 Q. So you heard about it a few days
14 before you read of it in the newspaper; is
15 that correct?
16 A. Yes.
17 Q. Who at Brooke Group told you
18 about it?
19 A. LeBow mentioned it to me and
20 Brian Kirkland.
21 Q. Was this at a meeting or phone
22 conversation?
23 A. Telephone.
24 Q. Did they call you or did you call
25 them?
CLASSIC REPORTING, INC. (212) 268-2590
71
1 Chakalian
2 A. I don't recall.
3 Q. I take it Mr. LeBow and Mr.
4 Kirkland, were they on the call together?
5 A. Separate calls.
6 Q. Was there anyone -- did you take
7 the call alone or was there someone on the
8 speaker or extension?
9 A. I was alone.
10 MS. LICHSTEIN: I object to the
11 form. I think we are talking about two
12 different calls.
13 Q. Either of the calls. Let me put
14 the question correctly. Were you alone on
15 both of the calls?
16 A. Yes.
17 Q. Were you in your office at the
18 time?
19 A. Don't recall.
20 Q. What did Mr. LeBow tell you?
21 A. That they filed, that they are
22 going to file.
23 Q. There are going to file a
24 Hart-Scott-Rodino respecting RJR; is that
25 correct?
CLASSIC REPORTING, INC. (212) 268-2590
72
1 Chakalian
2 A. Right.
3 Q. What else did he say to you?
4 A. That's basically it.
5 Q. Do you know the name of the
6 entity that filed the Hart-Scott?
7 A. I don't. I don't recall. I
8 guess I read it, but I don't remember.
9 Q. Have you ever had any business
10 connection with New Valley?
11 MS. LICHSTEIN: I object to the
12 form.
13 A. It's one of the companies Brooke
14 Group owns.
15 Q. But you are not an officer or
16 director of New Valley; is that correct?
17 A. No, sir.
18 Q. Are you a shareholder of New
19 Valley?
20 A. No, sir.
21 Q. Now did Mr. LeBow discuss other
22 things with you in this phone call --
23 A. Yes.
24 Q. -- in which he mentioned
25 Hart-Scott?
CLASSIC REPORTING, INC. (212) 268-2590
73
1 Chakalian
2 MS. LICHSTEIN: Mr. Chakalian, if
3 you can wait for Mr. Stern to finish
4 the question.
5 A. Yes, we talked general course of
6 the business.
7 Q. These other subjects did not
8 concern RJR; is that correct?
9 A. No, sir.
10 MS. LICHSTEIN: We have a
11 misunderstanding in the record. You
12 said they did not concern RJR; is that
13 right? And he said no, I think, so you
14 have --
15 A. No, they did not concern RJR.
16 Q. Fine, thank you.
17 MR. STERN: Off the record for a
18 second.
19 (Discussion off the record.)
20 Q. How did the subject come up? Do
21 you remember, the subject of the
22 Hart-Scott-Rodino filing, how did that come
23 up?
24 A. It was in the middle of a
25 conversation I had with LeBow.
CLASSIC REPORTING, INC. (212) 268-2590
74
1 Chakalian
2 Q. Between the meeting at
3 Wassherstein Parella and this conversation
4 with Mr. LeBow, had you had any discussions
5 with anyone concerning a possible LeBow
6 transaction with RJR?
7 A. No.
8 Q. Did Mr. LeBow ask you to do
9 anything with respect to RJR in this phone
10 conversation in which he mentioned
11 Hart-Scott-Rodino?
12 A. No.
13 Q. Did you then later have a
14 conversation with Mr. Kirkland in which
15 Hart-Scott-Rodino was mentioned?
16 A. Yes.
17 Q. What did Mr. Kirkland say on that
18 subject?
19 A. That it was going to be filed.
20 Q. Why was Mr. Kirkland calling you?
21 MS. LICHSTEIN: I object to the
22 form.
23 Q. Do you know why Mr. Kirkland was
24 calling you?
25 A. He was calling me on another
CLASSIC REPORTING, INC. (212) 268-2590
75
1 Chakalian
2 matter and this was part of the conversation.
3 Q. Did he raise the
4 Hart-Scott-Rodino filing or did you raise it?
5 A. I don't recall.
6 Q. Now, then, a few days later you
7 read about it in the newspaper; is that
8 correct?
9 A. Correct.
10 Q. Between the time of your
11 conversations with Mr. LeBow and Mr. Kirkland
12 and reading it in the newspaper, you had no
13 further discussions with them concerning RJR;
14 is that correct?
15 A. No, sir.
16 MS. LICHSTEIN: Again, I think we
17 have the same problem, I think.
18 Q. Did you have any further
19 discussions with anyone concerning RJR between
20 the time that you read of the Hart-Scott in
21 the newspaper and the time that you discussed
22 the subject with Mr. LeBow and Mr. Kirkland?
23 A. No capito.
24 Q. Does that mean you don't
25 understand?
CLASSIC REPORTING, INC. (212) 268-2590
76
1 Chakalian
2 A. I don't understand.
3 Q. Between the time that you spoke
4 with Mr. LeBow and Mr. Kirkland about
5 Hart-Scott-Rodino and the time that you read
6 about the filing in the newspaper, did you
7 have any discussions with anyone concerning
8 RJR?
9 A. No.
10 Q. Have you ever heard of a Gary
11 Black?
12 A. Yes, unfortunately I heard of
13 him.
14 Q. Mr. Black is an analyst of
15 tobacco stocks; is that correct?
16 A. Right.
17 Q. Why do you say it's unfortunate
18 that you have heard of him?
19 A. Because I always talk like that
20 about investment bankers. That was a kidding.
21 I don't know him.
22 Q. It was a comment made in jest; is
23 that correct?
24 A. Comment made in jest.
25 Q. Have you ever discussed with Mr.
CLASSIC REPORTING, INC. (212) 268-2590
77
1 Chakalian
2 Black, RJR?
3 A. I don't even know Mr. Black.
4 Q. You have never had any
5 communications with Mr. Black; is that
6 correct?
7 A. No.
8 MS. LICHSTEIN: Again, same
9 problem.
10 Q. Have you ever had any
11 communications with Mr. Black?
12 A. No.
13 Q. Have you ever discussed Mr. Black
14 with Mr. LeBow?
15 A. No.
16 Q. With Mr. Kirkland?
17 A. Yes.
18 Q. When did you discuss Mr. Black
19 with Mr. Kirkland?
20 A. When receiving the publications
21 from whatever company he works for, Bernstein
22 something.
23 Q. Mr. Kirkland sent you, am I
24 correct, sent you publications by Gary Black;
25 is that correct?
CLASSIC REPORTING, INC. (212) 268-2590
78
1 Chakalian
2 A. Yes.
3 Q. And at that time you discussed
4 Mr. Black with Mr. Kirkland?
5 A. I guess. I don't know what you
6 mean, I discussed Mr. Black.
7 Q. Did you talk to Mr. Kirkland
8 about Mr. Black?
9 A. I talked about his reports.
10 Q. What did you say about them?
11 A. I can't read half of them.
12 Q. Why couldn't you read half of
13 them?
14 A. Either I don't understand them or
15 the print was too small and I had Bryant
16 interpret some of the stuff for me.
17 Q. Was this --
18 A. You want the truth.
19 Q. Did you discuss with Mr. Kirkland
20 or anyone else whether or not you agreed with
21 Mr. Black's conclusions?
22 MS. LICHSTEIN: I object to the
23 form.
24 A. I don't recall.
25 MR. STERN: I'm going to mark as
CLASSIC REPORTING, INC. (212) 268-2590
79
1 Chakalian
2 the next exhibit a document produced to
3 us on behalf of Mr. Chakalian. I think
4 it's Exhibit 3.
5 (Report dated July 1995 from
6 Bernstein by Gary Black, bearing
7 production Nos. RC 300 through RC
8 351, marked Chakalian Exhibit 3
9 for identification, as of this
10 date.)
11 MR. STERN: It's RC 300 to RC
12 351.
13 Q. Mr. Chakalian, a copy of Exhibit
14 3 has been placed before you?
15 A. Right.
16 Q. Can you identify this document?
17 A. Yes.
18 Q. What is it?
19 A. A report from Bernstein by Gary
20 Black.
21 Q. Do you recall, the report is
22 dated July 1995; do you see that?
23 A. Right.
24 Q. I'm going to call your attention
25 to a facsimile line on the first page of the
CLASSIC REPORTING, INC. (212) 268-2590
80
1 Chakalian
2 document which is dated July 18, 1995; do you
3 see that?
4 A. Right.
5 Q. It also says Wassherstein
6 Parella.
7 MS. LICHSTEIN: Let the record
8 reflect that I am pointing to the upper
9 right-hand corner.
10 A. Right.
11 Q. Did you receive this report in
12 July 1995?
13 A. I guess so. Doesn't have my fax
14 on it, does it?
15 Q. I'm not asking, just so that we
16 are all clear, I'm not asking you to speculate
17 on whether or not you received it. I'm
18 showing you the document and I'm asking you
19 whether you recall receiving it?
20 A. Yes.
21 Q. Did you receive it from
22 Wassherstein Parella?
23 A. It says that here, but I don't
24 recall whether they sent it to me. Or
25 Kirkland sent it to me, I don't know.
CLASSIC REPORTING, INC. (212) 268-2590
81
1 Chakalian
2 Q. Did you discuss this document
3 with anyone? And take as much -- I'm not
4 going to ask you about detail in the document,
5 but take as much time as you feel you need to
6 refresh your recollection.
7 A. Yes, I did.
8 Q. Who did you discuss it with?
9 A. With my CFO.
10 Q. That was Mr. --
11 A. Sheets.
12 Q. First, do you have any
13 understanding as to why you were sent this
14 document?
15 MS. LICHSTEIN: I object to the
16 form.
17 A. This document comes to every
18 tobacco company in the Western World, and this
19 document is usually received, is usually sent
20 directly to the tobacco companies by these
21 characters, Black or Salomon or all these
22 investment bankers in New York. It comes
23 through every finance department of every
24 company in Europe, United States, Asia, you
25 name it.
CLASSIC REPORTING, INC. (212) 268-2590
82
1 Chakalian
2 Q. What did you say to your CFO
3 about this document or he to you?
4 A. Just a general business
5 discussion as to some of the numbers in it
6 regarding the tobacco business.
7 Q. Was this a document that was
8 referred to in the meeting with Wassherstein
9 Parella that you described?
10 A. I don't recall seeing it at that
11 meeting.
12 Q. Did you discuss with anyone --
13 let me put a different question. Did you
14 receive this document -- let me put a
15 different question.
16 To your knowledge, were you sent
17 this document because of -- put a different
18 question.
19 Did it ever come to your
20 attention that Mr. LeBow had had a meeting
21 with Mr. Harper of RJR in or about May 1995?
22 A. Yes, he told me that he met with
23 Harper.
24 Q. When did Mr. LeBow tell you that?
25 A. I don't recall the exact date.
CLASSIC REPORTING, INC. (212) 268-2590
83
1 Chakalian
2 Q. Did he tell you what they
3 discussed?
4 A. No specifics.
5 Q. Did he tell you that he discussed
6 a transaction between Liggett and RJR?
7 A. No specifics, never got into
8 specifics.
9 Q. Well, putting aside specifics,
10 did he tell you in general what they had
11 discussed?
12 A. All he mentioned to me was he met
13 with Harper.
14 Q. I take it did he tell you before
15 the meeting that he was planning on meeting
16 with Harper?
17 A. No.
18 Q. Did he say anything else about
19 this meeting with Harper other than that they
20 met?
21 A. No.
22 Q. Did he tell you this in the same
23 conversation that he had with you about the
24 Hart-Scott-Rodino filing?
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
84
1 Chakalian
2 Q. Did it ever come to your
3 attention that following that meeting,
4 representatives of Brooke Group or Mr. LeBow
5 met with representatives of RJR to discuss a
6 possible transaction involving Liggett and
7 RJR?
8 MS. LICHSTEIN: I object to the
9 form.
10 Can we have the question reread?
11 (Record read.)
12 A. Never came to my attention.
13 Q. Now going back to Exhibit 3, just
14 to clean up on this document?
15 A. Right.
16 Q. You had mentioned that there was
17 a discussion between you and Mr. Sheets and
18 then we digressed, I think. Have you told me
19 everything about that discussion?
20 A. Yes. Let me tell you what this
21 document is.
22 Q. That's fine.
23 A. All right.
24 Q. Sure.
25 A. This is a document that's put out
CLASSIC REPORTING, INC. (212) 268-2590
85
1 Chakalian
2 by every investment banker. They put out
3 these things, and we pursue it or scrutinize
4 it, the marketing department, the finance
5 department, whether it's RJR, Philip Morris,
6 Lorillard, Reemstma, and we look through it.
7 They give some numbers like price gaps. This
8 is one of the documents that is used in
9 planning.
10 Q. Yes. Did you ever receive any
11 tobacco industry report by Mr. Black from
12 Wassherstein Parella prior to July 1995?
13 A. No.
14 Q. So this is the first report on
15 the tobacco industry by Mr. Black that you
16 received from Wassherstein Parella; is that
17 correct?
18 MS. LICHSTEIN: I object to the
19 form.
20 MR. STERN: I will withdraw that
21 question.
22 Q. So your discussion with your CFO,
23 Mr. Sheets, about this document did not
24 concern RJR; is that correct?
25 A. Yes, it did.
CLASSIC REPORTING, INC. (212) 268-2590
86
1 Chakalian
2 Q. It concerned RJR?
3 A. Sure.
4 Q. What was said about RJR?
5 A. We were talking about pricing,
6 pricing in the domestic market. RJR is in
7 here. Philip Morris is in here.
8 Q. Did the conversation concern a
9 possible business combination transaction
10 between Liggett and RJR?
11 A. No, no.
12 May I say to you, let me add
13 this, I probably have three of these documents
14 and you have one with Wassherstein and
15 Parella, is that the way you say it? That
16 maybe even came from Bryant Kirkland, but my
17 finance department gets a copy of this. My
18 person who handles market share data gets a
19 copy of this.
20 Q. Your counsel made I think an
21 appropriate objection. The record is clear
22 that you do not recall receiving this document
23 from Wassherstein Parella. The record is
24 clear on that, sir.
25 A. Okay.
CLASSIC REPORTING, INC. (212) 268-2590
87
1 Chakalian
2 MR. STERN: I'm going to mark as
3 the next exhibit, a document from
4 Mr. -- produced on behalf of Mr.
5 Chakalian, RC 363 through 378.
6 (Document dated August 14, 1995,
7 bearing production Nos. RC 363
8 through 378, marked Chakalian
9 Exhibit 4 for identification, as
10 of this date.)
11 Q. Mr. Chakalian, we have placed a
12 copy of Exhibit 4 before you. Sir, can you
13 identify this document, please?
14 A. Yes. I remember seeing it. This
15 was prepared -- yes, I remember seeing it. It
16 was prepared by Kirkland.
17 Q. When did you see it?
18 A. I don't recall.
19 MS. LICHSTEIN: Could you hear
20 his answer?
21 A. I don't recall.
22 Q. Who showed it to you?
23 A. It was sent to me, I think.
24 Q. Who sent it to you?
25 A. Bryant Kirkland, I believe.
CLASSIC REPORTING, INC. (212) 268-2590
88
1 Chakalian
2 Looks like his work.
3 Q. I'm going to ask you, if you
4 would, to look at page RC 368.
5 MS. LICHSTEIN: One second.
6 Q. It's also numbered Page 2 on it.
7 MS. LICHSTEIN: We are now on
8 that page.
9 A. Yes.
10 Q. You see it says 8/14/95 in the
11 corner?
12 A. Yes.
13 Q. Does that refresh your
14 recollection as to when you saw this document?
15 A. Sometime after that date.
16 Q. So you believe you saw it
17 sometime after August 14, 1995; is that
18 correct?
19 A. A logical conclusion, yes.
20 Q. Did you discuss the document with
21 anyone?
22 A. No.
23 Q. Do you know why Mr. Kirkland sent
24 you the document?
25 MS. LICHSTEIN: I object to the
CLASSIC REPORTING, INC. (212) 268-2590
89
1 Chakalian
2 form.
3 A. I don't recall.
4 Q. I would ask you to look at RC
5 367.
6 MS. LICHSTEIN: Preceding page?
7 MR. STERN: Yes.
8 Q. You see that there is, that page
9 purports to be a summary of a transaction; do
10 you see that?
11 A. Right.
12 Q. That's a transaction that
13 involves Liggett Group; do you see that?
14 MS. LICHSTEIN: I object to the
15 form. Are you asking him whether he
16 reads that?
17 MR. STERN: I am calling his
18 attention to particular --
19 A. Yes.
20 MS. LICHSTEIN: Sorry.
21 Q. Did you ever discuss with anyone
22 a transaction, the transaction that is
23 outlined or summarized on that page?
24 A. I don't even understand it.
25 Q. I take it the answer is no; is
CLASSIC REPORTING, INC. (212) 268-2590
90
1 Chakalian
2 that correct?
3 A. No.
4 Q. I'm going to ask you to go back
5 to the following page, Page 2, RC 368 and also
6 look at 369 and 370, if you would. You see
7 that it says that it's an RJR-Liggett
8 operating statement, domestic and
9 international operations?
10 A. Right.
11 Q. Do you remember ever seeing a pro
12 forma or an operating statement for
13 RJR-Liggett domestic and international
14 operations before?
15 MS. LICHSTEIN: I object to the
16 form.
17 Q. Let me put a different question.
18 Have you ever seen an operating statement for
19 RJR-Liggett domestic and international
20 operations before? Have you ever seen a
21 document of that description?
22 MS. LICHSTEIN: Object to the
23 form.
24 A. I saw this document.
25 Q. Did you look at that page when
CLASSIC REPORTING, INC. (212) 268-2590
91
1 Chakalian
2 you saw this document?
3 A. Yes.
4 Q. Is that page a pro forma
5 operating statement for RJR and Liggett
6 domestic and international operations?
7 MS. LICHSTEIN: Object to the
8 form.
9 A. It is. Says so.
10 Q. Were you -- did you ever provide
11 to -- I'll strike that.
12 Did you ever become aware that
13 pro forma financial statements of RJR-Liggett
14 were being prepared?
15 A. Could you repeat that?
16 Q. Did you ever become aware that
17 someone was preparing pro forma financial
18 statements for RJR and Liggett on a combined
19 basis?
20 A. Yes.
21 Q. When did you become aware of
22 that?
23 A. When I saw this document.
24 Q. When you saw this document is the
25 first time that you became aware --
CLASSIC REPORTING, INC. (212) 268-2590
92
1 Chakalian
2 A. Yes.
3 Q. -- of that?
4 A. Yes.
5 MS. LICHSTEIN: Mr. Chakalian,
6 you have to wait for Mr. Stern to
7 finish the question.
8 THE WITNESS: Sorry.
9 Q. Did you discuss with anyone the
10 fact that someone was preparing pro formas of
11 that description?
12 A. No.
13 Q. Were you surprised to become
14 aware of that fact?
15 MS. LICHSTEIN: I object to the
16 form.
17 A. Well, this is after the WP
18 meetings, so you do prepare forms.
19 Q. This was after the WP meetings?
20 A. The meeting that I attended.
21 Q. Meeting of which there was a
22 discussion of worldwide tobacco?
23 A. Yes, right.
24 Q. Was a combination of RJR and
25 Liggett discussed at that meeting?
CLASSIC REPORTING, INC. (212) 268-2590
93
1 Chakalian
2 MS. LICHSTEIN: Objection, asked
3 and answered.
4 A. World markets were discussed.
5 Q. Would it follow from a discussion
6 of world markets that someone would be
7 preparing pro formas of the kind set forth at
8 RC 368?
9 A. I didn't know at the time.
10 Q. You didn't know at what time?
11 A. At the meeting I attended.
12 Q. You didn't know that pro formas
13 would be prepared, were going to be prepared
14 for RJR-Liggett; is that correct?
15 A. Correct.
16 Q. Was that subject discussed at the
17 meeting?
18 A. No.
19 Q. After you learned --
20 MS. LICHSTEIN: May he walk
21 again?
22 MR. STERN: You can walk.
23 Q. After you became aware of the
24 Hart-Scott-Rodino filing, what was your next
25 communication with anyone on the subject of a
CLASSIC REPORTING, INC. (212) 268-2590
94
1 Chakalian
2 possible transaction involving Liggett and
3 RJR?
4 MS. LICHSTEIN: Object to the
5 form.
6 MR. STERN: I will put a
7 different question.
8 Q. After you became aware of the
9 Hart-Scott-Rodino filing, when was your next
10 communication with anyone on the subject of
11 Mr. LeBow's interest in a transaction with
12 RJR?
13 A. No discussions. I don't recall
14 any discussions on that matter, except what I
15 read in the papers.
16 Q. Well, did there come a time when
17 you were asked to be a member of a slate of
18 nominees?
19 A. Yes.
20 Q. When was that?
21 A. Last quarter of '95. I don't
22 know exactly.
23 Q. Who raised that subject with you?
24 A. Mr. LeBow.
25 Q. Did he call you?
CLASSIC REPORTING, INC. (212) 268-2590
95
1 Chakalian
2 A. Yes.
3 Q. What did he say to you?
4 A. What?
5 Q. What did he say to you?
6 A. He says he has, he is going to
7 prepare a slate of, you know, he is going to
8 have a board of directors.
9 Q. For RJR?
10 A. Potentially, yes.
11 Q. What else did he say?
12 A. I don't recall.
13 Q. Did he ask you to do anything?
14 A. He asked me to consider it.
15 Q. Asked you to consider being a
16 member of the slate?
17 A. Yes.
18 Q. Did he say why he was approaching
19 you on this subject?
20 A. Yes, because he felt I know
21 something about the tobacco business.
22 Q. What did you tell Mr. LeBow?
23 A. I'll think about it.
24 Q. Did you think about it?
25 A. I did.
CLASSIC REPORTING, INC. (212) 268-2590
96
1 Chakalian
2 Q. Over how long a period of time?
3 A. Probably a week.
4 Q. Did you eventually get back to
5 Mr. LeBow?
6 A. Yes, I did.
7 Q. Did you call him?
8 A. I don't recall.
9 THE WITNESS: Can I say something
10 off the record?
11 MR. STERN: Off the record.
12 (Discussion off the record.)
13 Q. In any event, you remember that
14 there came a time when you spoke again with
15 Mr. LeBow and you indicated that you were
16 willing to join the slate; is that correct?
17 A. Yes.
18 Q. Now, between the time that you
19 learned of the Hart-Scott-Rodino filing and
20 the time that Mr. LeBow called you to discuss
21 a possible slate of directors, did you have
22 any communication with anyone on the subject
23 of a possible -- on the subject of Mr. LeBow's
24 interest in RJR?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
97
1 Chakalian
2 Q. Now, between the time that Mr.
3 LeBow called you to invite you to join the
4 slate and the time that you spoke with him and
5 indicated that you would be willing to do so,
6 did you have any communications with anyone on
7 the subject of Mr. LeBow's interest in RJR?
8 A. No.
9 Q. Did you consult with anyone about
10 the advisability of accepting Mr. LeBow's
11 proposal?
12 A. Yes.
13 Q. With whom?
14 A. With my general counsel at work,
15 Mr. Murray, and my personal counsel.
16 Q. For the record, would you
17 identify your personal counsel?
18 A. Bill Dullea, my son-in-law.
19 Q. Other than with these two
20 lawyers, did you discuss Mr. LeBow's
21 invitation with anyone?
22 A. No.
23 Q. Were you seeking legal advice
24 from Mr. Murray and Mr. Dullea?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
98
1 Chakalian
2 Q. Is Mr. Murray your personal
3 counsel?
4 A. No.
5 Q. He is counsel to Liggett; is that
6 correct?
7 A. Correct.
8 Q. What did you say to Mr. Murray
9 and Mr. Murray say to you?
10 MS. LICHSTEIN: I object and
11 instruct the witness not to answer on
12 the grounds of the attorney-client
13 privilege. I think it's clear that
14 such a privilege exists.
15 Q. In this discussion that you had
16 with Mr. LeBow in which you indicated that you
17 would be willing to join the slate, did you
18 tell him why you would be willing to join the
19 slate?
20 A. No.
21 Q. Why were you willing to join the
22 slate?
23 A. No specific reason. Because I
24 wanted to.
25 Q. Why did you want to?
CLASSIC REPORTING, INC. (212) 268-2590
99
1 Chakalian
2 A. Because I know the tobacco
3 business.
4 Q. Anything having to do with the
5 spin-off of Nabisco?
6 A. Really not.
7 Q. Did Liggett have an investment in
8 RJR at that time?
9 A. We owned some shares, yes.
10 Q. Do you know how many shares?
11 A. Total shares 200, I believe.
12 Q. Do you know when Liggett acquired
13 those shares?
14 A. Sometime in early '95.
15 Q. Who authorized Liggett to acquire
16 those shares?
17 A. I don't know.
18 Q. Did you know at the time that
19 Liggett was acquiring shares of RJR?
20 MS. LICHSTEIN: Object to the
21 form.
22 Off the record.
23 MR. STERN: It's a fair enough
24 objection.
25 Q. When did you learn that Liggett
CLASSIC REPORTING, INC. (212) 268-2590
100
1 Chakalian
2 had acquired shares of RJR?
3 A. When I was told they acquired
4 them.
5 Q. When was that?
6 A. Sometime in '95.
7 Q. Who told you that?
8 A. My treasurer.
9 Q. Is that a man or woman?
10 A. Pardon me?
11 Q. Is it a he or she?
12 A. A he.
13 Q. What is his name?
14 A. Sammy Veazy.
15 Q. What did he tell you?
16 A. He says we acquired some shares
17 of RJR.
18 Q. Did he tell you for what purpose?
19 A. No.
20 Q. Did he tell you who directed him
21 to do so?
22 MS. LICHSTEIN: Object to the
23 form.
24 Q. Did he say whether anyone had
25 directed him to do that?
CLASSIC REPORTING, INC. (212) 268-2590
101
1 Chakalian
2 A. I believe he told me someone at
3 Brooke.
4 Q. Did he say who that person was?
5 A. I don't recall.
6 Q. Did he mention Mr. LeBow in the
7 conversation?
8 A. No.
9 Q. Did he mention Mr. Kirkland?
10 A. No.
11 Q. Did you understand that the
12 acquisition of 200 shares was connected in any
13 way to Mr. LeBow's request that you attend a
14 meeting with Wassherstein Parella?
15 A. No.
16 MS. LICHSTEIN: Object to the
17 form.
18 Q. Does Liggett own shares of other
19 public companies?
20 A. I don't know.
21 Q. Did you discuss with anyone the
22 information that you had received from the
23 treasurer to the effect that Liggett had
24 acquired shares of RJR?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
102
1 Chakalian
2 Q. After you spoke with Mr. LeBow
3 and agreed or accepted his invitation to join
4 the slate, what happened next in connection
5 with Mr. LeBow's interest in RJR?
6 MS. LICHSTEIN: Object to the
7 form.
8 Q. I will put a different question.
9 What if anything did you do next
10 in connection with the subject that you had
11 discussed with Mr. LeBow?
12 A. Nothing.
13 Q. Did you discuss with Mr. LeBow
14 receiving any compensation for agreeing to
15 serve on his slate?
16 A. No.
17 Q. I say his slate, in anticipation
18 of an objection, I will clarify to mean the
19 slate that's proposed by Brooke Group?
20 A. No.
21 Q. Did there come a time when you
22 learned that you would be compensated?
23 A. No.
24 Q. Are you being compensated?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
103
1 Chakalian
2 Q. Did you discuss with Mr. LeBow
3 the possibility of indemnification?
4 A. Yes.
5 Q. When did you discuss that with
6 him?
7 A. I mentioned it to him.
8 Q. When?
9 A. Around the time -- actually, when
10 he offered me the thing, that's the first
11 thing that came to my mind.
12 Q. And you raised that with Mr.
13 LeBow at that time; is that correct?
14 A. Right.
15 Q. What did you say to him?
16 A. "What about indemnification?"
17 Q. Why was that something that
18 was -- was indemnification something important
19 to you?
20 MS. LICHSTEIN: Object to the
21 form.
22 A. I'm told that when you are on a
23 board, that's important.
24 Q. What did Mr. LeBow say to you
25 when you raised the subject of
CLASSIC REPORTING, INC. (212) 268-2590
104
1 Chakalian
2 indemnification?
3 A. I don't recall what he said.
4 Q. When did you next discuss with
5 anyone the subject of indemnification?
6 A. With my attorneys.
7 Q. Is that Mr. Murray and Mr.
8 Dullea?
9 A. Right.
10 Q. Did there come a time when you
11 signed an indemnification agreement?
12 A. Pardon me?
13 Q. Did there come a time when you
14 signed an agreement for indemnification with
15 respect to RJR?
16 MS. LICHSTEIN: Object to the
17 form.
18 A. I signed something.
19 MR. STERN: Off the record.
20 (Recess taken.)
21 MR. STERN: Mark this as the next
22 exhibit.
23 (Indemnification Agreement,
24 bearing production Nos. RC 3
25 through RC 17 marked Chakalian
CLASSIC REPORTING, INC. (212) 268-2590
105
1 Chakalian
2 Exhibit 5 for identification, as
3 of this date.)
4 MR. STERN: Mark this also.
5 (Document, bearing production
6 Nos. RC 352 through RC 356 marked
7 Chakalian Exhibit 6 for
8 identification, as of this date.)
9 Q. Mr. Chakalian, we are back on the
10 record. I'm going to place before you a
11 document that I have marked as Exhibit 5.
12 It's numbered RC 3 to RC 17. I'm going to ask
13 you if you can identify that document. Sir,
14 did this document come from your file?
15 A. Yes.
16 Q. What is this document?
17 A. Indemnification agreement.
18 Q. Is this an indemnification
19 agreement between you and Brooke Group?
20 A. Yes.
21 Q. Let me note for the record that,
22 let's go through this a little bit more
23 slowly. RC 4, is that your signature on RC 4?
24 A. Yes, it is.
25 Q. RC 4 is a signature page standing
CLASSIC REPORTING, INC. (212) 268-2590
106
1 Chakalian
2 on its own. Do you have in your possession a
3 fully signed copy of an indemnification
4 agreement?
5 A. I guess in my files, yes.
6 Q. Well, I don't want you to
7 speculate. Have you?
8 A. Yes.
9 Q. Do you recall having in your
10 files a fully executed copy of an
11 indemnification agreement?
12 A. Yes.
13 Q. Where is that file?
14 A. You got this from my files.
15 Q. Sir, let me ask you to look at RC
16 17. Sir, is that your signature on RC 17?
17 A. Yes, it is.
18 Q. A mark has been made over your
19 signature. Did you make that mark?
20 A. Yes, that's my mark.
21 Q. What does that mark signify?
22 A. That mark signifies file or I
23 have seen it.
24 MS. LICHSTEIN: Just so the
25 record is clear, do you mean the --
CLASSIC REPORTING, INC. (212) 268-2590
107
1 Chakalian
2 THE WITNESS: The little bird.
3 Q. You weren't crossing out your
4 signature, in other words?
5 A. No.
6 Q. Let's make sure we don't have a
7 double negative.
8 Were you placing that mark on
9 that page to cross out your signature?
10 A. No.
11 Q. Now, there's no signature in the
12 blank for Brooke Group; is that correct?
13 MS. LICHSTEIN: On Page RC 0017.
14 A. No.
15 MS. LICHSTEIN: We've got the
16 same problem. Mr. Stern, when you ask
17 questions ending in "Is that correct,"
18 I think we have a problem.
19 MR. STERN: Yes, we do have a
20 problem.
21 Q. Did Brooke Group sign RC 17?
22 A. No.
23 Q. Going back to RC 4, did Brooke
24 Group sign RC 4?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
108
1 Chakalian
2 Q. Is there any copy of an
3 indemnification agreement in your possession
4 signed by Brooke Group?
5 A. I don't know.
6 Q. Other than with counsel or as you
7 may have already testified with Mr. LeBow, did
8 you testify -- did you discuss this
9 indemnification agreement with anyone?
10 A. No.
11 Q. Other than the indemnification
12 agreement, do you have any agreements or
13 understandings with Brooke Group concerning
14 RJR?
15 A. No.
16 Q. Same question but with Mr. LeBow?
17 A. No.
18 Q. Have you committed to Brooke
19 Group or to Mr. LeBow that in the event you
20 were to become elected a director of RJR that
21 you would vote to support a spin-off of RJR
22 Nabisco?
23 A. You want to repeat that, have I
24 committed?
25 Q. Yes. Why don't we reread the
CLASSIC REPORTING, INC. (212) 268-2590
109
1 Chakalian
2 question?
3 (Record read.)
4 A. Yes, I would.
5 Q. Have you made that commitment to
6 Mr. LeBow?
7 MS. LICHSTEIN: I object to the
8 form.
9 A. I have stated it to him.
10 Q. When did you tell him that?
11 A. After I accepted to be on the
12 "slate."
13 Q. Did you tell him this orally or
14 in writing?
15 A. Orally.
16 Q. Was it a phone call or meeting?
17 A. Phone call.
18 Q. Can you remember who placed this
19 phone call?
20 A. Don't recall.
21 Q. What was said? What did Mr.
22 LeBow say to you and you to he on this phone
23 call?
24 A. Regarding what?
25 Q. Regarding RJR?
CLASSIC REPORTING, INC. (212) 268-2590
110
1 Chakalian
2 A. I said that I would support
3 spinning off Nabisco.
4 Q. Did he ask you, did he ask you
5 whether you would support that?
6 MS. LICHSTEIN: Object to the
7 form.
8 A. I don't recall.
9 Q. Did he bring up the subject or
10 did you?
11 A. I don't recall.
12 Q. Did you tell him why you would
13 support spinning off Nabisco?
14 A. No.
15 Q. What are the reasons, what are
16 your reasons for supporting a spin-off of
17 Nabisco?
18 A. I believe the shareholder value
19 will go up.
20 Q. On what do you base that belief?
21 A. On what I read.
22 Q. What have you read?
23 A. The newspapers.
24 Q. Just your belief is based on what
25 you've read in the newspapers; is that
CLASSIC REPORTING, INC. (212) 268-2590
111
1 Chakalian
2 correct?
3 A. Yes.
4 Q. Other than newspapers, have you
5 read anything concerning the advantages or
6 disadvantages of a spin-off of Nabisco?
7 MS. LICHSTEIN: I object to the
8 form.
9 A. Yes, I have.
10 Q. What is that?
11 A. I saw a document just a couple of
12 weeks ago on that matter.
13 Q. What document was that?
14 A. Prepared by Kirkland giving
15 advantages and disadvantages.
16 Q. Did you retain a copy of that
17 document in your file?
18 A. I don't believe so.
19 Q. Did you express your opinion to
20 Mr. LeBow prior to seeing that document?
21 A. Yes.
22 Q. Did you base your opinion about a
23 spin-off on that document?
24 A. No.
25 MS. LICHSTEIN: Object to the
CLASSIC REPORTING, INC. (212) 268-2590
112
1 Chakalian
2 form.
3 Q. Did we get the answer?
4 A. No.
5 Q. I have marked as Chakalian
6 Exhibit 6, a document numbered RC 352.
7 MS. LICHSTEIN: One second.
8 MR. STERN: Through 356.
9 MS. LICHSTEIN: This one?
10 MR. STERN: Yes.
11 Q. Mr. Chakalian, do you recognize
12 that document?
13 MS. LICHSTEIN: Wait a second, he
14 hasn't had a chance to look at it.
15 Q. Look at it, I'm sorry.
16 A. Yes.
17 Q. Is this document from your file?
18 A. I believe so.
19 Q. What is this document?
20 A. Bryant sent me a copy. This is
21 Gary Black or -- no, John Rooney -- says Gary
22 Black's outfit. This is the usual, you know,
23 bimonthly or whatever that's put out by
24 investment bankers, Gary Black, Rooney.
25 Q. The first page refers to a John
CLASSIC REPORTING, INC. (212) 268-2590
113
1 Chakalian
2 Rooney; do you see that?
3 MS. LICHSTEIN: 0352.
4 MR. STERN: Yes.
5 Q. Do you know Mr. Rooney?
6 A. Never heard of him. Never met
7 him.
8 Q. Did you discuss Exhibit 6 with
9 anyone?
10 A. No.
11 Q. Does your handwriting appear
12 anywhere on Exhibit 6?
13 MS. LICHSTEIN: Let him go
14 through each page.
15 MR. STERN: Let me ask a
16 different question.
17 Q. Do you recognize the handwriting
18 on Exhibit 6?
19 MS. LICHSTEIN: Could we do it
20 page by page?
21 MR. STERN: Sure.
22 A. On the first page where it says
23 Rouben and Dave, that's my secretary.
24 Conditional, I think it says, yes? I can't
25 read the word, but I assume that's what it is.
CLASSIC REPORTING, INC. (212) 268-2590
114
1 Chakalian
2 That's it.
3 Q. Do you know who sent you Exhibit
4 6?
5 A. I don't know.
6 MS. LICHSTEIN: If you can't
7 answer the question, tell the
8 questioner you can't answer it.
9 A. No.
10 Q. I just didn't hear the answer.
11 A. No.
12 Q. You don't know?
13 Just so the record is clear, is
14 your recollection that Mr. Kirkland sent you
15 this document?
16 MS. LICHSTEIN: Objection.
17 Q. I think there's a little bit of
18 confusion on the record on this. I just want
19 to make sure we are not at odds with one
20 another on a small point.
21 Did Mr. Kirkland send you this
22 document?
23 MS. LICHSTEIN: Off the record.
24 (Discussion off the record.)
25 Q. Do you know whether Mr. Kirkland
CLASSIC REPORTING, INC. (212) 268-2590
115
1 Chakalian
2 sent this to your office?
3 A. No.
4 Q. Now this document is dated
5 9/27/95 or September 27, 1995?
6 A. Yes.
7 Q. Does that refresh your
8 recollection as to when you had your
9 conversation with Mr. LeBow in which Mr. LeBow
10 raised the possibility of your joining the
11 slate?
12 A. Not at all.
13 Q. Did there come a time when you
14 filled out a questionnaire concerning the
15 slate of nominees that we have been talking
16 about?
17 A. Yes.
18 Q. When was that?
19 A. I don't recall.
20 Q. Do you know the purpose of the
21 questionnaire?
22 A. Biographical one, if you --
23 required by some government body.
24 Q. Who asked you to do it?
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
116
1 Chakalian
2 Q. Did you discuss the questionnaire
3 with anyone?
4 A. No.
5 MR. STERN: I'm going to mark as
6 the next exhibit, a document that was
7 made available to us on behalf of Mr.
8 Chakalian, number is RC 199 through RC
9 221.
10 (Questionnaire, bearing
11 production Nos. RC 199 through RC
12 221, marked Chakalian Exhibit 7
13 for identification, as of this
14 date.)
15 Q. Did this document come from your
16 files, sir?
17 A. Yes.
18 Q. Are the pages 200, RC 200 through
19 221, the questionnaire that you referred to in
20 your previous answer?
21 A. Yes.
22 Q. Now there appears to be a message
23 slip of some kind on the first page of this
24 exhibit; is that correct?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
117
1 Chakalian
2 Q. Do you recognize that
3 handwriting?
4 A. Yes.
5 Q. Is that your secretary's
6 handwriting?
7 A. Yes.
8 Q. And the note refers to a Mr.
9 Berkowitz; do you see that?
10 A. Right.
11 Q. Have you ever had any discussions
12 with Mr. Berkowitz concerning RJR? You can
13 answer that question yes or no for the moment.
14 A. Yes.
15 Q. Did you discuss the questionnaire
16 with Mr. Berkowitz?
17 A. Yes.
18 Q. Was Mr. Berkowitz or his firm
19 acting as your counsel at the time of that
20 discussion?
21 A. As my counsel, I don't
22 understand.
23 Q. Yes, was he acting as Mr.
24 Chakalian's counsel?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
118
1 Chakalian
2 Q. What did you say to Mr. Berkowitz
3 and he to you about the questionnaire?
4 A. "I will get it back to you soon."
5 Q. Anything, any other discussion
6 with Mr. Berkowitz?
7 A. No.
8 Q. Having looked at the
9 questionnaire, does this refresh your
10 recollection in any way as to any discussions
11 you may have had with anyone concerning the
12 questionnaire other than the discussion
13 obviously with Mr. Berkowitz?
14 A. No.
15 Q. Now you will see that the note on
16 the memorandum on the first page of the
17 exhibit is dated 11/15.
18 MS. LICHSTEIN: Wait a second.
19 The telephone slip, first page?
20 MR. STERN: Yes.
21 Q. Does that refresh your
22 recollection as to the date of your first
23 conversation with Mr. LeBow concerning his
24 suggestion or his invitation to join the
25 slate?
CLASSIC REPORTING, INC. (212) 268-2590
119
1 Chakalian
2 A. No.
3 Q. Did there come a time when you
4 met with other members of the slate?
5 A. Twice, yes.
6 Q. When was the first such occasion?
7 A. I don't recall the date, but it
8 was in New York.
9 MR. STERN: I'm going to mark as
10 Exhibit 8, a document from Mr.
11 Chakalian, produced on behalf of Mr.
12 Chakalian, RC 264.
13 (Memorandum from Mr. LeBow to Mr.
14 Chakalian, bearing production No.
15 RC 264, marked Chakalian Exhibit
16 8 for identification, as of this
17 date.)
18 Q. Mr. Chakalian, this exhibit has
19 been placed before you. Do you recognize this
20 document, sir?
21 A. Yes.
22 Q. Would you tell me what this
23 document is?
24 A. Invitation to come to New York to
25 Sard on Third Avenue.
CLASSIC REPORTING, INC. (212) 268-2590
120
1 Chakalian
2 Q. Is it correct that this is a
3 memorandum to you from Mr. LeBow?
4 MS. LICHSTEIN: Object to the
5 form.
6 A. Yes.
7 Q. Is this the meeting in New York
8 that you -- the first meeting that you recall
9 attending --
10 A. Yes.
11 Q. -- with other members of the
12 slate?
13 MS. LICHSTEIN: Let him finish.
14 A. Yes.
15 Q. And you see that it refers to a
16 meeting to be scheduled on November 15th, do
17 you see that?
18 A. Right.
19 Q. Does that refresh your
20 recollection as to the date on which the
21 meeting that you attended was held?
22 A. Yes.
23 Q. Now did you have any discussions,
24 prior to attending that meeting, did you have
25 any discussions concerning the RJR matter that
CLASSIC REPORTING, INC. (212) 268-2590
121
1 Chakalian
2 you can recall and that you have not already
3 testified about?
4 A. No.
5 Q. Did you discuss this meeting in
6 advance with anyone? In other words, did you
7 discuss the meeting with anyone in
8 anticipation of a meeting?
9 MS. LICHSTEIN: Object to the
10 form.
11 A. I don't recall.
12 Q. Who attended the meeting?
13 A. Members of the proposed slate,
14 but not all of them.
15 Q. Do you remember who was not
16 there?
17 A. I don't recall.
18 Q. Anyone else present at the
19 meeting?
20 A. I don't understand "anyone else."
21 Q. Other than members of the slate
22 or some of the members of the slate, was
23 anyone else at the meeting?
24 A. Yes.
25 Q. Who?
CLASSIC REPORTING, INC. (212) 268-2590
122
1 Chakalian
2 A. Members from Sard.
3 Q. People, representatives of Sard?
4 A. Yes.
5 Q. Anyone else?
6 A. Howard Lorber.
7 Q. Mr. LeBow?
8 A. Yes.
9 Q. Mr. Resseler?
10 A. No.
11 Q. Anyone else this you can recall?
12 A. Other than the slate?
13 Q. Other than the slate, Mr. Lorber
14 and Mr. LeBow and members from Sard?
15 A. That's it.
16 Q. Were there any documents
17 exchanged at the meeting?
18 A. I don't understand by the word
19 "exchanged."
20 Q. Were there any documents
21 distributed for the meeting?
22 MS. LICHSTEIN: Can we go off the
23 record?
24 (Discussion off the record.)
25 Q. Were you given any documents in
CLASSIC REPORTING, INC. (212) 268-2590
123
1 Chakalian
2 advance of the meeting to be discussed at the
3 meeting?
4 A. No.
5 Q. Were there any documents
6 distributed at the meeting?
7 A. Yes.
8 Q. What was distributed at the
9 meeting?
10 A. A draft of the announcement.
11 Q. Announcement concerning?
12 A. Concerning the slate.
13 Q. Was anything else distributed at
14 the meeting?
15 A. No.
16 Q. What was said and by whom at the
17 meeting?
18 A. My recollection is nothing much
19 was said except the discussion of the draft.
20 Q. How long did the meeting last?
21 A. Less than an hour and-a-half.
22 Q. Was the discussion at the meeting
23 entirely devoted to the subject of RJR?
24 A. The draft, yes, the draft.
25 MR. STERN: I'm going to mark as
CLASSIC REPORTING, INC. (212) 268-2590
124
1 Chakalian
2 the next exhibit a document produced to
3 us on behalf of Mr. Chakalian RC 258 to
4 260.
5 (Questionnaire, bearing
6 production Nos. RC 258 through RC
7 260, marked Chakalian Exhibit 9
8 for identification, as of this
9 date.)
10 Q. Mr. Chakalian, I'm going to place
11 Exhibit 9 before you. That's the document
12 that starts RC 258, and ask you whether or not
13 this document came from your file?
14 A. Yes.
15 Q. From whom did you receive this
16 document?
17 A. This came with the draft at the
18 Sard meeting.
19 Q. So your recollection is that you
20 were given this document at the Sard meeting?
21 A. Yes.
22 Q. Were the others present, the
23 other people present at the meeting all given
24 a document to your best -- the same document,
25 to your best recollection?
CLASSIC REPORTING, INC. (212) 268-2590
125
1 Chakalian
2 A. I believe everybody that was at
3 the meeting.
4 Q. Now, the second page of the
5 document has some handwriting. Is that your
6 handwriting?
7 A. That's my handwriting.
8 MR. STERN: I'm going to mark as
9 Exhibit 10, RC 254 through 257.
10 (Draft of press release, bearing
11 production Nos. RC 254 through
12 257, marked Chakalian Exhibit 10
13 for identification, as of this
14 date.)
15 Q. Mr. Chakalian, Exhibit 10 came
16 from your files; is that correct?
17 A. Yes.
18 Q. Is Exhibit 10 the draft of the
19 press release that was discussed at the
20 November 15th meeting?
21 A. Correct.
22 Q. Is that your handwriting on the
23 document?
24 A. Yes, it is.
25 Q. Looking at these two documents
CLASSIC REPORTING, INC. (212) 268-2590
126
1 Chakalian
2 together and your handwritten notes --
3 MS. LICHSTEIN: I don't think the
4 witness has looked through all of RC 10
5 yet.
6 Q. Take as much time as you need and
7 I'm going to ask you whether that refreshes
8 your recollection as to anything further that
9 was said at the meeting, that is, anything
10 other than what you've already testified
11 about?
12 A. No.
13 Q. On the second page of Chakalian
14 9, RC 259, you have identified that
15 handwriting --
16 A. Yes.
17 Q. -- as your own?
18 A. Yes.
19 Q. What does that say?
20 A. "30 K through April '96."
21 Q. What is that a reference to, if
22 you remember?
23 A. If -- I recall that was the
24 compensation for some of the board nominees.
25 Q. Was your notation reflecting
CLASSIC REPORTING, INC. (212) 268-2590
127
1 Chakalian
2 something that was being said at the meeting?
3 A. Yes.
4 Q. Who was speaking?
5 A. I don't recall.
6 Q. Did anyone at the meeting go
7 through Exhibit 9 paragraph by paragraph?
8 A. My recollection is they did not.
9 Q. Did anyone say what the purpose
10 of distributing Exhibit 9 at the meeting was?
11 I will put a different question. What is the
12 purpose of Exhibit 9?
13 MS. LICHSTEIN: I object to the
14 form.
15 A. It's a preparation of a Q and A
16 for the PR firm to respond to the press.
17 Q. What's your basis for that
18 understanding? Did anyone tell you that at
19 the meeting?
20 A. Forty years of experience.
21 Q. I would like to call your
22 attention to paragraph 10, paragraph numbered
23 10.
24 MS. LICHSTEIN: RC 9, paragraph
25 10.
CLASSIC REPORTING, INC. (212) 268-2590
128
1 Chakalian
2 Q. Which is on RC 259. It says,
3 it's the paragraph that starts with "This
4 proposed board merge RJR with Liggett if
5 elected"; do you see that?
6 A. Yes.
7 Q. Was there any discussion of that
8 subject at this meeting?
9 A. I don't recall.
10 Q. Going to the preceding paragraph,
11 paragraph 9, who on the board will be managing
12 the company if you win? Was there any
13 discussion of that subject at the meeting?
14 A. No.
15 Q. Have you ever had any discussion
16 with anyone about the management of RJR in the
17 event that the proposed slate were to be
18 elected?
19 A. Yes.
20 Q. With whom?
21 A. With LeBow.
22 Q. When was that?
23 A. I don't recall.
24 Q. Was it subsequent to the meeting
25 on November 15th?
CLASSIC REPORTING, INC. (212) 268-2590
129
1 Chakalian
2 A. Oh, yes.
3 Q. Was that one discussion or more
4 than one discussion?
5 A. A couple.
6 Q. Were these face to face or by
7 telephone?
8 A. All telephone.
9 Q. What did you say to him and he to
10 you in these discussions?
11 A. The basic gist was should and if
12 this happens, who could manage RJR Tobacco or
13 who could run, whatever word you want to use.
14 Q. When you say "this," what were
15 you referring to? Should "this" happen, what
16 did you mean?
17 A. If the consent decree goes
18 through and Nabisco is spun off.
19 Q. What do you mean by consent
20 decree?
21 A. This vote that's going on.
22 Q. The consent solicitation?
23 A. Consent solicitation, thank you.
24 Q. Who raised the subject? Who
25 raised that issue as between you and Mr.
CLASSIC REPORTING, INC. (212) 268-2590
130
1 Chakalian
2 LeBow?
3 MS. LICHSTEIN: The issue of who
4 would run Reynolds?
5 MR. STERN: Yes.
6 A. I don't recall. One of us did,
7 because we talk to each other, so I don't
8 remember who raised it.
9 Q. What else was said on that
10 subject?
11 A. That's it.
12 Q. Were any names suggested?
13 A. We were to consider.
14 Q. What names were you discussing?
15 A. No names were discussed.
16 Q. Was it discussed whether or not
17 you would have a management role under those
18 circumstances?
19 A. I preempted that question by
20 saying that I would not.
21 Q. Why did you say that?
22 A. Because I don't care to.
23 Q. Had Mr. LeBow asked you whether
24 you would be interested in performing such a
25 role?
CLASSIC REPORTING, INC. (212) 268-2590
131
1 Chakalian
2 A. Indirectly, yes.
3 Q. What did he say?
4 A. Should this happen, you may want
5 to get an apartment in Winston-Salem.
6 Q. Your reply to that?
7 A. "Been there, done that."
8 Q. Indicating you no longer -- you
9 had no interest in that subject?
10 A. No.
11 Q. Did he indicate whether he was
12 going to approach anyone else on that point?
13 A. Eventually. He said eventually
14 he would.
15 Q. Did he mention Mr. Zuckerman in
16 that connection?
17 A. No.
18 Q. Did he mention a Mr. Steffen in
19 that connection?
20 MS. LICHSTEIN: Do you have a
21 first name for a Mr. Steffen?
22 MR. STERN: I think the first
23 name is Chris.
24 MS. LICHSTEIN: Chris.
25 MR. STERN: Steffen, yes.
CLASSIC REPORTING, INC. (212) 268-2590
132
1 Chakalian
2 A. Never heard of him.
3 Q. Now, the subject of whether the
4 proposed board would merge RJR with Liggett if
5 elected which is numbered item 10 on Exhibit
6 9, did you ever discuss that subject with
7 anyone?
8 A. I told LeBow when I accepted the
9 position that if this ever came up and I was
10 on the board, I would vote for it.
11 Q. Who raised that subject at that
12 time?
13 MS. LICHSTEIN: Could we be
14 precise about what subject we are
15 talking about?
16 MR. STERN: Fine. That's fair
17 enough.
18 Q. I think you indicated that you
19 had expressed to Mr. LeBow when you accepted
20 this invitation to join the slate that if the
21 subject of a Liggett merger came up, you would
22 vote for it; is that correct?
23 A. Right.
24 Q. Who raised that subject?
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
133
1 Chakalian
2 Q. What else was said on that
3 subject?
4 A. Basically that was it.
5 Q. Why would you vote for it?
6 A. I have already told you in prior
7 testimony. I told you that. I think the
8 stock -- from what I read, the stock is
9 undervalued and I believe that if a spin-off
10 occurred, that both companies could benefit
11 from it.
12 Q. Mr. Chakalian, here we are
13 talking about, we are not talking about a
14 spin-off as such. We are talking about a
15 possibility of a merger of RJR with Liggett if
16 the proposed board were to be elected?
17 A. Oh, I'm sorry.
18 Q. Did you ever discuss the subject
19 of whether or not the proposed board would
20 merge RJR with Liggett --
21 A. No.
22 Q. -- if it were elected, with
23 anyone?
24 A. No.
25 Q. So a possible merger of RJR and
CLASSIC REPORTING, INC. (212) 268-2590
134
1 Chakalian
2 Liggett in the event this slate were to be
3 elected never came up in your discussions with
4 anyone?
5 A. No, sir.
6 MS. LICHSTEIN: We've got this
7 negative again.
8 MR. STERN: Let me do it again.
9 Q. Did the subject of a merger of
10 RJR with Liggett in the event the slate were
11 to be elected come up in any communication
12 that you had with anyone on the subject of
13 RJR?
14 A. Same question.
15 MS. LICHSTEIN: Just answer the
16 question.
17 A. No.
18 MS. LICHSTEIN: Off the record.
19 (Discussion off the record.)
20 Q. Let's go back to Exhibit 10.
21 This is the draft of the release that was
22 discussed at the November 15th meeting,
23 correct?
24 A. Right.
25 Q. Do you see that there's some
CLASSIC REPORTING, INC. (212) 268-2590
135
1 Chakalian
2 handwriting on this document, on the first
3 page of the document?
4 A. Right.
5 Q. Is that your handwriting?
6 A. Yes, it is.
7 Q. What's indicated by the
8 handwriting in the upper right-hand corner?
9 MS. LICHSTEIN: If you can read
10 it.
11 A. That is not my handwriting.
12 Q. Whose handwriting is that?
13 A. I can't tell.
14 Q. On the bottom of the page, is
15 that your handwriting?
16 A. Yes.
17 Q. What's indicated by that?
18 A. "Arnie Burns and Zuckerman were
19 not at the meeting."
20 Q. Did you have any, at the meeting,
21 did you have any comments to make about either
22 Exhibits 9 or 10?
23 A. None, no comments.
24 Q. Did you say anything at the
25 meeting?
CLASSIC REPORTING, INC. (212) 268-2590
136
1 Chakalian
2 A. No.
3 MR. STERN: I'm going to mark as
4 the next exhibit, a document from Mr.
5 Chakalian's file, R 21 through 25, RC
6 21 through 25. To aid counsel in
7 finding it, it's a memorandum dated
8 November 21, 1995 from Mr. Chakalian.
9 (Memorandum dated November 21,
10 1995 from Mr. Chakalian, bearing
11 production Nos. RC 21 through RC
12 25, marked Chakalian Exhibit 11
13 for identification, as of this
14 date.)
15 Q. Mr. Chakalian, Exhibit 11 came
16 from your file; is that correct?
17 A. Yes, it did.
18 Q. This is a memo from you to
19 several people and it's dated November 21,
20 1995?
21 A. Correct.
22 Q. Did you write this memo on or
23 about November 21, 1995?
24 A. I did.
25 Q. For the record, would you
CLASSIC REPORTING, INC. (212) 268-2590
137
1 Chakalian
2 identify Stephen Horney?
3 A. Vice president human relations.
4 Q. At Liggett?
5 A. At Liggett.
6 Q. Steve Kirchhoff?
7 A. Kirchhoff, vice president sales.
8 He is no longer with us.
9 Q. Josiah Murray?
10 A. General counsel.
11 Q. I think you identified Mr.
12 Sheets?
13 A. Yes.
14 Q. Mr. Sulin?
15 A. Vice president of operations.
16 Q. Why did you write this
17 memorandum?
18 A. I wrote this memorandum on the
19 eve of the Brooke proposed slate press release
20 to inform my management that they would be
21 seeing this in publications the following day,
22 and one of the names in the slate was
23 Chakalian, and I just didn't want to have an
24 upheaval in my, amongst my personnel
25 second-guessing, so I thought I would preempt
CLASSIC REPORTING, INC. (212) 268-2590
138
1 Chakalian
2 that. In fact, I did preempt that by writing
3 the memo.
4 Q. Why did you fear there would be
5 an upheaval among your personnel?
6 A. Because my personnel in Durham,
7 North Carolina is very goosey.
8 Q. Goosey about what?
9 A. We have had two RIFs; you know
10 what a RIF is?
11 Q. Rift?
12 A. RIF, restructuring. Restructured
13 twice and they are constantly worried. We
14 have had several presidents and they would
15 feel that there goes Chakalian out again; who
16 is the next idiot who is going to be coming
17 in. I didn't want them to have all these -- I
18 didn't want them to assume that because I was
19 on this proposed slate that I was going to be
20 leaving Liggett the next day.
21 Q. The last line of your memorandum
22 states, "Urge them to stress to any employees
23 with concerns about what this may mean for
24 Liggett that speculation is a waste of effort
25 and that our primary concern is finishing the
CLASSIC REPORTING, INC. (212) 268-2590
139
1 Chakalian
2 year with a strong fourth quarter"?
3 A. Right.
4 Q. Had you discussed with anyone
5 what the Brooke announcement might mean for
6 Liggett?
7 A. No.
8 Q. Was it -- I will rephrase that.
9 When you wrote this memo, did you have in mind
10 that your employees might be concerned about
11 the possibility that Liggett would be acquired
12 by RJR?
13 A. A multitude of concerns.
14 Q. Was that one concern?
15 A. One of a thousand.
16 Q. Now did there come a time when
17 you learned that representatives of RJR were
18 meeting with representatives of -- strike
19 that -- with associates of Mr. LeBow to
20 discuss the possible sale of Liggett to RJR?
21 MS. LICHSTEIN: Object to the
22 form.
23 A. You want to repeat that?
24 Q. I will repeat it. Did it ever
25 come to your attention that representatives of
CLASSIC REPORTING, INC. (212) 268-2590
140
1 Chakalian
2 RJR met with representatives or associates of
3 Mr. LeBow to discuss a possible sale of
4 Liggett to RJR?
5 MS. LICHSTEIN: Object to the
6 form.
7 A. No.
8 Q. Did anyone ever, did it ever come
9 to your attention, in or about August -- let
10 me put a different question.
11 In or about August 1995, did
12 anyone ask you for Liggett's projections for
13 purposes of a discussion of a possible sale of
14 Liggett?
15 A. No.
16 Q. Did it ever come to your
17 attention that Mr. Resseler -- you know Mr.
18 Resseler; is that correct?
19 A. Yes, I do.
20 Q. And you know that Mr. Goldstone
21 is now the CEO of RJR; is that correct?
22 A. Correct.
23 Q. And you know that in August he
24 was an officer of RJR; is that correct?
25 A. Correct.
CLASSIC REPORTING, INC. (212) 268-2590
141
1 Chakalian
2 Q. Did it ever come to your
3 attention that Mr. Goldstone and Mr. Resseler
4 were meeting in August of 1995?
5 A. No.
6 Q. At any time in 1995, did Mr.
7 LeBow or any of his associates ask you your
8 opinion about the value of Liggett as a
9 company?
10 A. An ongoing process.
11 Q. What's an ongoing process?
12 A. To evaluate your company.
13 Q. The question I asked was: Did
14 you and Mr. LeBow -- or I will put a different
15 question.
16 Did Mr. LeBow or any of his
17 associates ask you your opinion about the
18 value of Liggett as a company in 1995?
19 A. In 1985?
20 MS. LICHSTEIN: I object to the
21 form.
22 A. Yes.
23 Q. Did they ask you that once or
24 more than once?
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
142
1 Chakalian
2 Q. When were you asked that
3 question?
4 A. In the first half of '95.
5 Q. Did they indicate to you -- who
6 asked you the question?
7 A. LeBow.
8 Q. Was this in a meeting or a phone
9 conversation?
10 A. Phone conversation.
11 Q. Who placed the call?
12 A. I don't recall.
13 Q. What did Mr. LeBow say?
14 A. Amongst other things: By the
15 way, what is the value of Liggett today? What
16 do you figure the value of Liggett is today?
17 Q. Is that what Mr. LeBow said to
18 you, in words or substance?
19 A. In words to that effect.
20 Q. Did he say why he was interested
21 in eliciting your opinion at that particular
22 point in time?
23 A. No, he didn't have to, no.
24 Q. What did you tell him?
25 A. I told him what I figured it was
CLASSIC REPORTING, INC. (212) 268-2590
143
1 Chakalian
2 worth.
3 Q. What was that?
4 A. I don't want to tell him. It's
5 my business. I do this every year.
6 MR. STERN: Off the record.
7 (Discussion off the record.)
8 MR. STERN: Do you have any
9 observation on that, Counsel?
10 MS. LICHSTEIN: Yes, I think I
11 do. I think the witness believes that
12 his opinion constitutes confidential
13 proprietary information, and there's
14 not an operative confidentiality order
15 in place in this case, to my knowledge.
16 So, therefore, since I think the
17 witness thinks it inappropriate to
18 answer the question and based on that,
19 I'm going to respect his wishes and
20 instruct him not to answer at this
21 stage.
22 MR. STERN: For present purposes,
23 we will go on.
24 MS. LICHSTEIN: Sorry, go ahead.
25 MR. STERN: Do you need to break?
CLASSIC REPORTING, INC. (212) 268-2590
144
1 Chakalian
2 MS. LICHSTEIN: Finish this.
3 MR. STERN: We will reserve our
4 rights with respect to this issue and
5 move on to the next question.
6 MR. RAPER: Was there an
7 instruction?
8 MS. LICHSTEIN: I did instruct
9 him not to answer. I would respect the
10 witness's wishes with respect to the
11 proprietary nature of the information
12 and perhaps it could be resolved at a
13 later date.
14 MR. STERN: Let's take a break.
15 (Recess taken.)
16 Q. Mr. Chakalian, what else was
17 said, if anything, in this conversation about
18 the value of Liggett respecting your --
19 reserving our rights, but understanding your
20 counsel's instruction?
21 MS. LICHSTEIN: Based upon the
22 lack of a confidentiality agreement.
23 Q. I'm not attempting to reopen what
24 the question of the number was. What else was
25 said other than the actual number?
CLASSIC REPORTING, INC. (212) 268-2590
145
1 Chakalian
2 A. I believe that was it.
3 Q. Did Mr. LeBow tell you why, I
4 think I asked that question. Did RJR come up
5 in that conversation?
6 A. No.
7 Q. Did he mention to you at that
8 time that he was, that he or people associated
9 with him were preparing any analyses
10 concerning RJR?
11 A. When I gave that number, no. It
12 was early in the year.
13 MR. STERN: I would like to mark
14 as the next exhibit, a document
15 produced to us on behalf of Mr.
16 Chakalian, RC 362. It's an August 15,
17 1995 letter.
18 (Letter dated August 15, 1995,
19 bearing production No. RC 362
20 marked Chakalian Exhibit 12 for
21 identification, as of this date.)
22 Q. Mr. Chakalian, the subject that
23 we discussed in our last several questions and
24 answers, namely discussions in which you were
25 involved concerning the value of Liggett, was
CLASSIC REPORTING, INC. (212) 268-2590
146
1 Chakalian
2 there any subsequent discussion on that
3 subject with Mr. LeBow or any of his
4 associates?
5 A. Wait a minute, let me read this
6 first.
7 Q. I'm not at this moment focusing
8 on this exhibit, but I'm asking a prior
9 question: Was there any subsequent discussion
10 with Mr. LeBow or any of his associates in
11 which you were involved concerning the value
12 of Liggett?
13 A. No.
14 Q. Why don't we place Exhibit 12
15 before Mr. Chakalian. Is Exhibit 12 a
16 document from your file?
17 A. I'm not sure.
18 Q. Have you ever seen Exhibit 12
19 before?
20 A. Vaguely I recall it.
21 Q. Did you receive this document?
22 The document is dated August 15, 1995. Do you
23 remember seeing it on or about that date?
24 A. Addressed to my CFO, yes.
25 Q. Who showed it to you?
CLASSIC REPORTING, INC. (212) 268-2590
147
1 Chakalian
2 A. My CFO must have either shown it
3 to me or given me a copy.
4 Q. Did you discuss the document with
5 him?
6 A. No.
7 Q. The document says "Pursuant
8 to" -- the letter says, "Pursuant to the
9 request of Bennett S. LeBow, I have enclosed
10 two revised copies of Liggett-RJR financials
11 with accompanying assumptions," the document
12 goes on but I don't think we need to read into
13 the record the rest of the letter.
14 A. Yes.
15 Q. Did you discuss with anyone a
16 request by Mr. LeBow for revised copies or pro
17 forma financials of Liggett-RJR?
18 A. No.
19 Q. When you saw this document, what
20 was your understanding as to, if you had any,
21 as to the purpose of Mr. LeBow's request?
22 MS. LICHSTEIN: Object to the
23 form.
24 A. This was all part of the WP
25 scenario, as far as I was concerned.
CLASSIC REPORTING, INC. (212) 268-2590
148
1 Chakalian
2 Wassherman and -- what are they called?
3 Q. Wassherstein Parella?
4 A. Yes.
5 Q. What did you mean by Wassherstein
6 Parella scenario?
7 A. In other words, I knew about what
8 was going on there, what the objective of
9 Wassherstein was or what the proposed
10 objective was, and I thought this was part of
11 the same routine.
12 Q. And the objective of Wassherstein
13 Parella being?
14 A. When I wet with Reemstma, we were
15 talking about a possible evaluation of RJR.
16 Q. Did you also discuss a possible
17 evaluation of Liggett at that meeting with
18 Reemstma?
19 A. No, sir.
20 Q. Did you have any -- did you ever
21 see the pro forma financials that are referred
22 to in this letter?
23 A. I don't know if they are -- I'm
24 not sure.
25 MR. STERN: I'm going to mark as
CLASSIC REPORTING, INC. (212) 268-2590
149
1 Chakalian
2 the next exhibit a document from Mr.
3 Chakalian's file. I'm going to mark as
4 the next exhibit, a document from Mr.
5 Chakalian's file numbered RC 360.
6 (Copy of article titled "RJR
7 Appears Ripe For Buyout Analysts
8 Say," bearing production No. RC
9 360, marked Chakalian Exhibit 13
10 for identification, as of this
11 date.)
12 Q. Mr. Chakalian, is this document
13 from your file?
14 A. Yes.
15 Q. Is that your handwriting in the
16 upper right-hand corner?
17 A. Right.
18 Q. Is that how you indicate that a
19 document is to be placed in your file?
20 A. Right.
21 Q. Do you remember reading this
22 article on or about August 8, 1995?
23 A. Yes.
24 Q. Do you see on the left-hand side
25 of the document there's a mark. What is that?
CLASSIC REPORTING, INC. (212) 268-2590
150
1 Chakalian
2 A. An arrow.
3 Q. Did you make that arrow? Is that
4 your writing?
5 A. Tell you in a minute.
6 Q. If you don't remember, that's
7 fine.
8 A. No, I never do this to a point.
9 No, it's not mine.
10 Q. Do you know who made the arrow?
11 A. Don't know.
12 Q. The paragraph next to the arrow
13 refers to Mr. LeBow; do you see that?
14 A. Yes.
15 Q. And the subject of the article is
16 an RJR buyout; do you see that?
17 A. Right.
18 Q. The title is "RJR Appears Ripe
19 For Buyout Analysts Say"?
20 A. Right.
21 Q. Does this document refresh your
22 recollection as to any discussions you might
23 have had with Mr. LeBow as to the possibility
24 of a, in August 1995, as to the possibility of
25 an RJR-Liggett transaction?
CLASSIC REPORTING, INC. (212) 268-2590
151
1 Chakalian
2 A. No.
3 Q. Did you ever discuss this article
4 with anyone?
5 A. With LeBow.
6 Q. When did you discuss it with Mr.
7 LeBow?
8 A. I called him right after the
9 article.
10 Q. What did you say to him and he to
11 you?
12 A. "You keep a nice company."
13 Q. What did he say?
14 A. Laugh.
15 Q. I take it your remark was made in
16 jest?
17 A. Yes.
18 Q. Other than the jest, was there
19 anything discussed in this conversation?
20 A. No, nothing of substance.
21 Q. Why did you clip the article?
22 A. Because I get all North
23 Carolina -- we have a clipping service. I
24 didn't clip it.
25 Q. Why did you retain the article?
CLASSIC REPORTING, INC. (212) 268-2590
152
1 Chakalian
2 A. Pardon me?
3 Q. Why did you retain the article in
4 your file?
5 A. I really don't know.
6 MR. STERN: Mr. Chakalian, I'm
7 going to mark as the next exhibit a
8 document that was produced to us on
9 your behalf, RC 284.
10 (Letter, bearing production No.
11 RC 284, marked Chakalian Exhibit
12 14 for identification, as of this
13 date.)
14 Q. Mr. Chakalian, have you ever seen
15 Exhibit 14?
16 A. Yes, I have. Let me finish
17 reading it.
18 Q. Sure, go ahead.
19 A. Okay.
20 Q. The letter is addressed to a Mr.
21 Keith; do you see that?
22 A. Right.
23 Q. Who is Mr. Keith?
24 A. I don't know the gentleman, but I
25 understand he is a southern banker.
CLASSIC REPORTING, INC. (212) 268-2590
153
1 Chakalian
2 Q. Do you know what bank he is
3 associated with?
4 A. I really don't.
5 Q. Did you have any discussions with
6 Mr. Keith concerning RJR?
7 A. I did not.
8 Q. Did you have any discussions with
9 anyone about Mr. Keith?
10 A. With Mr. Murray.
11 Q. What did you and Mr. Murray
12 discuss?
13 MS. LICHSTEIN: Just a general
14 admonition that if you were seeking
15 legal advice from Mr. Murray, I would
16 admonish you not to testify. If you
17 were discussing business matters, you
18 are free to testify.
19 THE WITNESS: You want to repeat
20 that?
21 MS. LICHSTEIN: If you sought
22 legal advice from Mr. Murray, I
23 instruct you not to testify as to the
24 information you gave him to obtain
25 legal advice. If you discussed
CLASSIC REPORTING, INC. (212) 268-2590
154
1 Chakalian
2 business matters with Mr. Murray, you
3 are obligated to answer the question.
4 A. Okay. This was a business
5 matter.
6 Q. What did you and Mr. Murray
7 discuss?
8 A. I asked Mr. Murray if he had
9 anyone with banking experience that could be a
10 potential or possible candidate for the slate,
11 and Mr. Murray mentioned this gentleman.
12 Q. Why did you ask Mr. Murray that
13 question?
14 A. Because I thought that the slate
15 should have some local flavor, meaning North
16 Carolina flavor, because, you know, we wanted
17 someone in the tobacco business. You like to
18 have some local flavor on your boards.
19 Q. Why someone in the banking
20 business?
21 A. Because every tobacco board has
22 somebody from the banking business. Yes,
23 every tobacco board.
24 Q. Did you discuss Mr. Keith with
25 Mr. LeBow?
CLASSIC REPORTING, INC. (212) 268-2590
155
1 Chakalian
2 A. I did not.
3 Q. Did Mr. Murray, to your
4 knowledge?
5 A. I believe all he got was that
6 memo.
7 Q. Was Mr. LeBow aware that you were
8 making suggestions to Mr. Murray concerning
9 members of a slate?
10 A. I mentioned to him that I would,
11 yes, to LeBow.
12 Q. When did you say this to Mr.
13 LeBow?
14 A. I don't recall the exact date.
15 Q. What did you say to Mr. LeBow?
16 A. I said if you are going to have a
17 slate and you are talking about a slate, we
18 should have a nice sprinkling of like all the
19 other tobacco companies like Reynolds now has,
20 like Philip Morris has, like Lorillard has.
21 Q. What did Mr. LeBow say?
22 A. "Go ahead."
23 Q. Did Mr. Keith, to your knowledge,
24 agree to join the slate?
25 A. I believe he did not.
CLASSIC REPORTING, INC. (212) 268-2590
156
1 Chakalian
2 Q. Did anyone report to you whether
3 or not he indicated a reason for declining?
4 A. No.
5 Q. So you don't know why he
6 declined?
7 A. No.
8 MR. STERN: I'm going to mark as
9 the next exhibit, a document from the
10 files of Mr. Chakalian, RC 261 to 263
11 and for ease of reference, it's a fax
12 from Peter Strauss to Chester Hopkins
13 dated November 13, 1995.
14 (Fax from Peter Strauss to
15 Chester Hopkins dated November
16 13, 1995, bearing production Nos.
17 RC 261 and RC 262, marked
18 Chakalian Exhibit 15 for
19 identification, as of this date.)
20 Q. Mr. Chakalian, I have placed
21 Exhibit 15 before you. Can you identify this
22 document, sir?
23 A. Yes.
24 Q. What is it?
25 A. A copy of a fax from Strauss to
CLASSIC REPORTING, INC. (212) 268-2590
157
1 Chakalian
2 Hopkins.
3 Q. How did this document come into
4 your possession?
5 A. Hopkins sent it to me.
6 Q. Who is Mr. Hopkins?
7 A. He is with -- he is a headhunter
8 here in New York.
9 Q. Did you discuss RJR with Mr.
10 Hopkins?
11 A. No.
12 Q. Do you know how it came about
13 that Mr. Hopkins sent you this fax?
14 A. It was my understanding that he
15 was also helping out regarding the candidates
16 for the slate.
17 Q. Where did you get that
18 understanding?
19 A. From Mr. Hopkins.
20 Q. When did Mr. Hopkins tell you
21 that?
22 A. I don't recall.
23 Q. Was this a telephone conversation
24 with Mr. Hopkins?
25 A. Yes, sir.
CLASSIC REPORTING, INC. (212) 268-2590
158
1 Chakalian
2 Q. Is Mr. Hopkins someone you
3 engaged?
4 A. No.
5 Q. Do you know who engaged him?
6 A. I believe Mr. LeBow did.
7 May I ask your definition of the
8 word "engaged"?
9 Q. That's fair enough. Asked Mr.
10 Hopkins to identify possible members of a
11 slate.
12 A. Yes.
13 Q. Is it your understanding that Mr.
14 LeBow asked him to do that?
15 A. Yes.
16 Q. Did Mr. LeBow tell you that?
17 A. Mr. Hopkins did, no. LeBow
18 didn't.
19 Q. Did you have any discussions with
20 Mr. Hopkins concerning any possible members of
21 the slate?
22 A. Yes.
23 Q. Who did you discuss?
24 A. Members that are on a slate or
25 potential members.
CLASSIC REPORTING, INC. (212) 268-2590
159
1 Chakalian
2 Q. Anyone, potential members?
3 A. We discussed Strauss, discussed
4 this guy Bob Sidenstecker and discussed Don
5 Johnson.
6 Q. Who is Mr. Sidenstecker
7 A. Bob Sidenstecker was my very
8 first boss. Bob Sidenstecker is a retired
9 chap from, been in the tobacco industry 40
10 years. His last job was with Redman Chewing
11 Tobacco.
12 Q. To your knowledge, did anyone
13 approach Mr. Sidenstecker about joining the
14 slate?
15 A. No.
16 Q. You referred to a Mr. Johnson, I
17 believe?
18 A. Yes.
19 Q. Who is Mr. Johnson?
20 A. Mr. Don Johnson is retired
21 chairman of American Tobacco Company.
22 Q. To your knowledge, did anyone
23 approach Mr. Johnson about joining the slate?
24 A. Yes.
25 Q. Who was that?
CLASSIC REPORTING, INC. (212) 268-2590
160
1 Chakalian
2 A. Yours truly.
3 Q. What did he tell you?
4 A. He respectfully declined.
5 Q. What did you say to Mr. Johnson
6 and what did Mr. Johnson say to you?
7 A. I called Mr. Johnson and said
8 "You have been reading the papers as I have.
9 You have heard about the possible proposed
10 slate and I was wondering if you would be
11 interested in joining it."
12 Q. And he said no; is that right?
13 A. He said: Unfortunately -- I
14 thank you for your call, but unfortunately I
15 am helping my son out in his business in South
16 Carolina and I am up to my neck in alligators.
17 Q. Was that the entirety of your
18 discussion with Mr. Johnson?
19 A. Outside of personal things like
20 family and such, yes.
21 Q. Did you discuss Mr. Strauss with
22 Mr. Hopkins?
23 A. Yes.
24 Q. What did you and he say to one
25 another on that subject?
CLASSIC REPORTING, INC. (212) 268-2590
161
1 Chakalian
2 A. I did not know Peter Strauss. I
3 heard of him, but I did not know him, and I
4 basically said "The resume looks good. He is
5 a tobacco guy. Got some tobacco experience."
6 Q. Did you have any discussion about
7 Rothman's apparent connection with Mr.
8 Strauss?
9 A. No.
10 Q. Did you approach anyone else to
11 join the slate other than Mr. Johnson?
12 A. Yes, I did.
13 Q. Who?
14 A. Dale Sisel.
15 Q. Who is that?
16 A. Retired president of RJR
17 International.
18 Q. What did you -- when did you
19 approach him?
20 A. Sometime at the end of '95.
21 Q. What did you say to him and he to
22 you?
23 A. Same thing I told to Johnson:
24 You have been reading about all of this. And
25 Dale, who is a very dear friend of mine,
CLASSIC REPORTING, INC. (212) 268-2590
162
1 Chakalian
2 refused.
3 Q. Did he say why?
4 A. He did mention to me that he is
5 still under a contract with RJR, so...
6 Q. Was there anyone else that you
7 approached as a possible member of the slate?
8 A. Let me think. No.
9 Q. Did you discuss Mr. Sidenstecker
10 with Mr. LeBow?
11 A. No.
12 Q. Did you discuss Mr. Sidenstecker
13 with anyone?
14 A. Hopkins.
15 Q. What did you say about him?
16 A. First of all, you will see it
17 says here a page about Bob Sidenstecker which
18 I never got.
19 Q. Yes.
20 A. And I said I don't think you
21 should contact him. I told Chet not to
22 contact Bob regarding the possibility of
23 joining the slate.
24 Q. What was your reason for doing
25 that?
CLASSIC REPORTING, INC. (212) 268-2590
163
1 Chakalian
2 A. I don't think -- I think Mr.
3 Sidenstecker -- I have personal reasons for
4 that.
5 Q. Who is Mr. Sidenstecker?
6 A. He is a retired tobacco guy. He
7 used to be with Philip Morris. He used to be
8 with Liggett. He used to be with Rothmans.
9 He used to be with U.S.T.
10 Q. Did your reasons for thinking
11 that Mr. Sidenstecker not be approached have
12 anything to do with the merits of the consent
13 solicitation?
14 A. None at all.
15 Q. Did you discuss the merits of the
16 consent solicitation with either Mr. Johnson
17 or -- with Mr. Johnson?
18 A. Not at all.
19 Q. And with the other individual who
20 you approached?
21 A. Dale Sisel, not at all.
22 MR. STERN: I'm going to mark as
23 the next three exhibits, documents
24 numbered RC 292 to 293, RC 294 to 297,
25 and RC 276 to 280.
CLASSIC REPORTING, INC. (212) 268-2590
164
1 Chakalian
2 (Letter to Bear Stearns, bearing
3 production Nos. RC 292 to RC 293,
4 marked Chakalian Exhibit 16 for
5 identification, as of this date.)
6
7 (Opinion powers of attorney,
8 bearing production Nos. RC 294 to
9 RC 297 marked Chakalian Exhibit
10 17 for identification, as of this
11 date.)
12
13 (Document, bearing production
14 Nos. RC 276 to RC 280, marked
15 Chakalian Exhibit 18 for
16 identification, as of this date.)
17 Q. Let's start with Exhibit 16 and
18 this is a two-page document. Is this document
19 from your file?
20 A. Yes.
21 Q. Is that your signature on 293?
22 A. Yes.
23 MS. LICHSTEIN: The bottom right.
24 Q. Sir, can you identify this
25 document?
CLASSIC REPORTING, INC. (212) 268-2590
165
1 Chakalian
2 A. A letter to Bear Stearns.
3 Q. Did you discuss this document
4 with anyone before sending it?
5 A. No.
6 Q. Did anyone ask you to send this
7 document?
8 A. It was prepared for me.
9 Q. By whom?
10 A. I don't know.
11 Q. Is it correct that it was sent to
12 you by Mr. Berkowitz?
13 A. Yes.
14 Q. Other than with Mr. Berkowitz who
15 as I understand it is acting as counsel --
16 MS. LICHSTEIN: Acting as counsel
17 for Liggett in connection with this,
18 yes.
19 Q. -- did you ever discuss this
20 letter with anyone?
21 A. With my general counsel.
22 Q. Mr. Murray?
23 A. Right.
24 Q. Again for purposes of seeking
25 legal advice?
CLASSIC REPORTING, INC. (212) 268-2590
166
1 Chakalian
2 A. Right.
3 Q. Can you identify Exhibit 17?
4 MS. LICHSTEIN: Take a minute and
5 let the witness look at it.
6 MR. STERN: Yes.
7 Q. What is Exhibit 17?
8 A. In my opinion powers of attorney.
9 Q. Is that your signature on 296?
10 A. Yes.
11 Q. And 297?
12 A. Yes.
13 Q. Did you discuss these documents
14 with anyone before signing them?
15 A. No.
16 Q. I take it that's also your
17 signature on 295?
18 A. Yes.
19 Q. Did anyone ask you to sign the
20 documents that are collected in Exhibit 17?
21 A. My secretary faxed them to me.
22 Q. Yes. There's identified on the
23 first page of Exhibit 17 and the first page of
24 Exhibit 16 a fax line that says Roubetan?
25 A. Associates.
CLASSIC REPORTING, INC. (212) 268-2590
167
1 Chakalian
2 Q. What is Roubetan Associates?
3 A. That's my house. My wife's name
4 is Tanya and mine is Rouben so it's Roubetan.
5 Q. These were faxed to you at home,
6 correct?
7 A. Yes.
8 Q. Do you know who faxed Exhibit 17
9 to you?
10 A. My secretary.
11 Q. Did she obtain those documents
12 from anyone?
13 A. She must have.
14 Q. You had no discussion about those
15 documents?
16 A. No.
17 Q. Exhibit 18, can you identify that
18 document, sir?
19 A. Okay.
20 Q. Is that your signature on 277?
21 A. Yes, it is.
22 Q. Who is Keith Haines?
23 A. I think, he is with Georgeson &
24 Company.
25 Q. Did you discuss this document,
CLASSIC REPORTING, INC. (212) 268-2590
168
1 Chakalian
2 sir, that is, the document RC 277 with anyone?
3 A. No.
4 Q. I would ask you to look at RC
5 279. Is that a fax cover page to you from
6 Keith Haines?
7 A. Yes.
8 Q. And Mr. Haines, it appears from
9 that fax that Mr. Haines is requesting that
10 you sign something; is that correct?
11 A. Correct.
12 Q. Do you know -- I will withdraw
13 that. Did anyone at any time instruct you to
14 work with Mr. Haines in connection with the
15 RJR matter?
16 A. No one instructed me, no.
17 Q. How did it come about that you
18 were receiving faxes from Mr. Haines and
19 communicating -- I will withdraw that.
20 How did it come about that you
21 were receiving these documents from Mr.
22 Haines?
23 MS. LICHSTEIN: I object to the
24 form.
25 A. I don't know.
CLASSIC REPORTING, INC. (212) 268-2590
169
1 Chakalian
2 Q. Did you know who Mr. Haines was?
3 A. He was with Georgeson & Company.
4 Q. I take it you have complied with
5 Mr. Haines's request, with the request that
6 appears on Page 279 to sign the enclosed?
7 A. Correct.
8 Q. I assume that you --
9 MS. LICHSTEIN: Whoa, whoa, I
10 object to the form.
11 Q. When Mr. Haines asked you to sign
12 a document, did you sign it?
13 A. Yes.
14 Q. Why did you think it appropriate
15 to sign documents that were by request of Mr.
16 Haines?
17 A. Because my people checked them
18 over and said sign them.
19 Q. Who did you understand Mr. Haines
20 to be representing?
21 A. Security registration people, you
22 know, my laymen terms, Bear Stearns, you know.
23 Q. What was Bear Stearns?
24 A. To Bear Stearns.
25 MS. LICHSTEIN: Can we have the
CLASSIC REPORTING, INC. (212) 268-2590
170
1 Chakalian
2 question back?
3 Q. This isn't a great mystery. I am
4 simply asking you -- let me just see if I can
5 reconstruct, if we can go back over something.
6 Mr. Haines sent you a document?
7 A. Right.
8 Q. And it appears Mr. Haines may
9 have sent you more than one document; is that
10 correct?
11 A. Who knows.
12 Q. These documents, the document you
13 received from Mr. Haines, related to Liggett's
14 ownership of shares of RJR, correct?
15 A. Correct.
16 Q. Mr. Haines requested that you
17 take certain action with respect to those
18 documents?
19 A. Right.
20 Q. Is that correct?
21 A. Yes.
22 Q. And you took that action; is that
23 correct?
24 A. Correct.
25 Q. Why did you think that Mr. Haines
CLASSIC REPORTING, INC. (212) 268-2590
171
1 Chakalian
2 was -- it was appropriate to take action in
3 respect of a request by Mr. Haines?
4 A. Because I checked with my people
5 and they told me sign it.
6 Q. Which people did you check with?
7 A. I told you, my general counsel.
8 MS. LICHSTEIN: Again, you should
9 not testify as to the substance of any
10 attorney-client communication. You can
11 testify to any other communication.
12 A. And my treasurer.
13 Q. So you relied on your general
14 counsel and your treasurer?
15 A. Yes, sir.
16 Q. Did you understand when you were
17 signing these documents that they related to
18 the Brooke Group consent solicitation?
19 A. Yes, the general gist.
20 Q. You mentioned Bear Stearns in an
21 earlier answer. What was Bear Stearns'
22 connection to the RJR matter?
23 A. I just read the name.
24 Q. Is Bear Stearns where Liggett had
25 its account in which it purchased the RJR
CLASSIC REPORTING, INC. (212) 268-2590
172
1 Chakalian
2 shares?
3 A. I guess. I don't know.
4 Q. I don't want you to speculate.
5 A. I don't know.
6 MR. STERN: I'm going to mark as
7 the next exhibit, a document numbered
8 RC 357 through 359. The first page
9 recites "RJR Nabisco Holdings Cash Flow
10 Statement 6/30/95."
11 (Document headed "RJR Nabisco
12 Holdings Cash Flow Statement
13 6/30/95," bearing production Nos.
14 RC 357 through RC 359 marked
15 Chakalian Exhibit 19 for
16 identification, as of this date.)
17 Q. Sir, have you ever seen a copy of
18 that document before?
19 A. Yes, I have.
20 Q. What is it?
21 A. A cash flow statement.
22 Q. Cash flow statement for RJR
23 Nabisco Holdings?
24 A. Yes.
25 Q. When did you see it?
CLASSIC REPORTING, INC. (212) 268-2590
173
1 Chakalian
2 A. I don't recall.
3 Q. If you look at the first page,
4 sir, you will see that there is a, what
5 appears to be a, what may be a fax line and
6 there is a date 8/18/95?
7 A. Right.
8 Q. Does that refresh your
9 recollection as to when you saw this document?
10 A. Had to be around that time.
11 Q. Sir, if you would turn to the
12 second page of the document, you see it
13 appears to be a memo addressed to a Joanie?
14 A. Not a memo.
15 Q. It says fax memo, but in any
16 event, the word "Joanie" appears. Do you know
17 who Joanie is?
18 A. My secretary.
19 Q. Then it goes on to say, "As
20 discussed, please distribute to Dave and
21 Rouben"?
22 A. Yes.
23 Q. BK. BK is Bryant Kirkland; is
24 that correct?
25 A. Right.
CLASSIC REPORTING, INC. (212) 268-2590
174
1 Chakalian
2 Q. Did you have any discussions
3 about this document with Mr. Kirkland?
4 A. No.
5 Q. What about Mr. Sheets?
6 A. Nope.
7 Q. Do you have any understanding as
8 to why Mr. Kirkland sent you this document?
9 A. I don't even understand the
10 document.
11 Q. But the question is, do you
12 understand why Mr. Kirkland sent you the
13 document?
14 MS. LICHSTEIN: Objection, asked
15 and answered.
16 MR. STERN: I'm sorry, I had a
17 pending question and I think you may
18 not have been aware of that.
19 MS. LICHSTEIN: He asked you the
20 same question again and I objected
21 because of a legal matter because you
22 are not supposed to ask the same
23 question twice.
24 Q. Do you understand why Mr.
25 Kirkland sent you this document?
CLASSIC REPORTING, INC. (212) 268-2590
175
1 Chakalian
2 A. As a matter of information.
3 Q. Did you regularly receive from
4 Mr. Kirkland information concerning RJR
5 Nabisco Holdings?
6 MS. LICHSTEIN: Object to the
7 form.
8 A. I received from Mr. Kirkland on
9 many companies, not just RJR, including RJR.
10 Q. Did you understand at or about
11 the time that you received this document that
12 Mr. Kirkland was working on a possible
13 transaction between RJR and Liggett
14 Corporation?
15 A. I don't believe he was.
16 Q. Well, I'm asking you whether that
17 was your understanding?
18 A. No.
19 Q. And you say you don't believe he
20 was; is that correct?
21 A. He is a financial analyst.
22 Q. Mr. Kirkland was analyzing a
23 possible combination between RJR and Liggett
24 at about the time that he sent you this
25 document?
CLASSIC REPORTING, INC. (212) 268-2590
176
1 Chakalian
2 MS. LICHSTEIN: I object to the
3 form. Can we have the whole question
4 reread?
5 MR. STERN: I will put a new
6 question.
7 Q. When you received this document,
8 were you aware that Mr. Kirkland was working,
9 was performing an analysis of possible
10 transactions between RJR and Liggett?
11 A. Specifically no.
12 Q. Did you have a general awareness
13 to that effect?
14 A. He has done RJR-Liggett. He has
15 run RJR with another company. He has done
16 Liggett with another company. He does all
17 sorts of what-if scenarios.
18 Q. Were you performing any analysis
19 of RJR in August 1995?
20 A. No.
21 Q. What use, if any, did you make of
22 this document?
23 A. None.
24 MR. STERN: Let's take a break.
25 (Recess taken.)
CLASSIC REPORTING, INC. (212) 268-2590
177
1 Chakalian
2 MR. STERN: Would you mark these?
3 (Group of documents marked
4 Chakalian Exhibits 20 through 33
5 for identification, as of this
6 date.)
7 Q. Mr. Chakalian, I'm going to place
8 before you the documents we have marked as 20
9 through 33.
10 A. All right.
11 Q. I'm going to ask you if you can
12 identify these documents as documents that
13 were maintained in your file and ask you if
14 those documents refresh your recollection as
15 to any discussions that you may have had with
16 anyone concerning Mr. LeBow and RJR up until
17 the time of the November 15th meeting of the
18 proposed slate of nominees?
19 MS. LICHSTEIN: We have two
20 questions; is that right?
21 MR. STERN: That's --
22 Q. First of all, can you identify
23 those as documents that were maintained in
24 your file?
25 MS. LICHSTEIN: One by one or as
CLASSIC REPORTING, INC. (212) 268-2590
178
1 Chakalian
2 a group?
3 MR. STERN: Unless your counsel
4 objects, we can take them as a group.
5 MS. LICHSTEIN: If he can.
6 MR. STERN: If you can't take it
7 as a group, please let me know. Go
8 through them one by one and tell me.
9 MS. LICHSTEIN: Start with the
10 first number.
11 Q. If you don't -- why don't you go
12 through the documents one by one and state
13 whether you recognize it and, if so, whether
14 it was maintained in the file?
15 A. This was in my file.
16 MS. LICHSTEIN: 20.
17 Q. Exhibit 20?
18 A. Exhibit 20.
19 Q. Who sent you that document?
20 A. That came out of a publication
21 called Tobacco_International.
22 Q. Is that a document you clipped
23 for yourself?
24 A. Yes.
25 Q. Next document?
CLASSIC REPORTING, INC. (212) 268-2590
179
1 Chakalian
2 A. And I clipped it for this
3 article.
4 MS. LICHSTEIN: He doesn't know
5 what "this" is.
6 Q. The document speaks for itself.
7 MS. LICHSTEIN: He was actually
8 pointing.
9 A. Uzbat joint venture.
10 Q. Let's clarify the record. Your
11 purpose in retaining that article was not
12 because it referred to RJR but because of
13 another matter?
14 A. Right.
15 Q. Okay.
16 MS. LICHSTEIN: Now we are on 21.
17 MR. STERN: Yes.
18 MS. LICHSTEIN: Again your
19 question is?
20 Q. Sir, can you identify that
21 document?
22 A. Yes.
23 Q. What is that document?
24 A. A document from RJR from Mike
25 Harper to the shareholders.
CLASSIC REPORTING, INC. (212) 268-2590
180
1 Chakalian
2 Q. And that document was sent to
3 Liggett by Bear Stearns; is that correct?
4 A. Right.
5 Q. That's a document you retained in
6 your file; is that correct?
7 A. Correct.
8 Q. Did you discuss that document
9 with anyone?
10 A. No.
11 Q. Next document, please.
12 MS. LICHSTEIN: 22.
13 Q. Sir, can you identify that
14 document?
15 A. Yes.
16 Q. Did you receive that document
17 from anyone?
18 A. Yes.
19 Q. From whom did you receive it?
20 A. From Brooke Miami.
21 Q. Brooke Group?
22 A. Yes.
23 Q. Did you retain that document in
24 your file?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
181
1 Chakalian
2 Q. Did you discuss that document
3 with anyone?
4 A. No.
5 Q. Do you know who at Brooke sent it
6 to you?
7 A. I don't know.
8 Q. Do you know why the document was
9 sent to you?
10 A. I don't know.
11 Q. Can you go to the next document,
12 please?
13 MS. LICHSTEIN: 23.
14 Q. Sir, is Exhibit 23 a document
15 that was sent to you by New Valley
16 Corporation?
17 A. Yes.
18 Q. Was it retained in your file?
19 A. Yes.
20 Q. Do you know who at New Valley
21 sent it to you?
22 A. No.
23 Q. Have you discussed that document
24 with anyone?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
182
1 Chakalian
2 Q. Do you know why the document was
3 sent to you?
4 A. As standard, it's SOP, standard
5 operating procedure.
6 Q. To do what?
7 A. To send press releases and
8 everything out of Miami to me.
9 Q. Press releases concerning?
10 A. Concerning anything.
11 Q. Concerning any subject relating
12 to Brooke Group; is that correct?
13 A. Any subject relating to Brooke
14 Group and the cigarette business.
15 MS. LICHSTEIN: No. 24.
16 A. This is more of the same.
17 Q. Sir, can you identify 24 as a
18 document from your files?
19 A. Yes, it is.
20 Q. It was sent to you by Mr.
21 Berkowitz; is that correct?
22 A. This was sent by me.
23 Q. Sorry, is that a document you
24 sent to Mr. Berkowitz?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
183
1 Chakalian
2 Q. Did you discuss that document
3 with anyone?
4 A. No.
5 Q. Go to the next document, please.
6 MS. LICHSTEIN: No. 25.
7 Q. Sir, is that a document, is 25 a
8 document that was sent to you by Mr. Kirkland?
9 A. Yes.
10 Q. Did you discuss that document
11 with anyone?
12 A. No.
13 Q. Did you retain a copy of it in
14 your files?
15 A. Yes.
16 Q. Did you read the document when
17 you received it?
18 A. Parts of it.
19 Q. Do you have any understanding as
20 to why you were sent that document?
21 A. If you will see by the
22 addressees, it's just a bunch of, you know,
23 it's management from Brooke and some of the
24 slate is on here.
25 Q. It's an informational document?
CLASSIC REPORTING, INC. (212) 268-2590
184
1 Chakalian
2 A. Informational document, thank
3 you.
4 Q. Could you go to the next
5 document, please.
6 MS. LICHSTEIN: 26.
7 Q. Sir, is Exhibit 26 a news
8 clipping from The_New_York_Times?
___ ___ ____ _____
9 MS. LICHSTEIN: Among other
10 things.
11 Q. And other newspapers?
12 A. Yes.
13 Q. Are those clippings that you
14 made, sir?
15 A. No.
16 Q. Who provided you with those
17 clippings?
18 A. My public relations, from the
19 clipping service that we have. Some of it.
20 Q. So your recollection is that
21 those clippings were provided by a clipping
22 service; is that correct, sir?
23 A. Yes.
24 Q. Could you go to the next
25 document, please.
CLASSIC REPORTING, INC. (212) 268-2590
185
1 Chakalian
2 MS. LICHSTEIN: Which is No. 27.
3 Q. Sir, is Exhibit 27 a document
4 from your file?
5 A. Yes.
6 Q. Did you discuss Exhibit 27 with
7 anyone?
8 A. No.
9 Q. Next document, please.
10 MS. LICHSTEIN: 28.
11 Q. Sir, is Exhibit 28 a document
12 from your file?
13 A. Yes.
14 Q. Did you discuss that document
15 with anyone?
16 A. No, I did not.
17 Q. Next document, please.
18 MS. LICHSTEIN: 29.
19 Q. Is Exhibit 29 a document from
20 your file?
21 MS. LICHSTEIN: Let him look
22 through it.
23 MR. STERN: Fine.
24 A. Yes.
25 Q. Did you discuss that document
CLASSIC REPORTING, INC. (212) 268-2590
186
1 Chakalian
2 with anyone?
3 A. No.
4 Q. Sir, what are the numbers of the
5 exhibits that remain before you?
6 A. 30.
7 Q. 30 through 33; is that correct?
8 A. 30 through 33.
9 Q. Are Exhibits 30 through 33
10 documents that were maintained in your files?
11 A. Yes.
12 MS. LICHSTEIN: That's for 30.
13 A. Yes.
14 MS. LICHSTEIN: For 31.
15 A. Maintained in my files.
16 MS. LICHSTEIN: Onto 32?
17 A. Yes.
18 MS. LICHSTEIN: And now 33?
19 A. Yes.
20 Q. Sir, did you discuss -- exhibits
21 were maintained in your file; is that correct?
22 A. Right.
23 Q. Did you discuss any of those
24 exhibits with anyone?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
187
1 Chakalian
2 MS. LICHSTEIN: I object to the
3 form.
4 Q. Having been shown those exhibits,
5 have I refreshed your recollection as to any
6 communications you might have had with Mr.
7 LeBow or Brooke Group between the time he
8 asked you to -- he raised with you the
9 possibility of joining the RJR slate and this
10 meeting in November, November 15th that you
11 testified about?
12 A. Between what dates?
13 Q. Between the time that Mr. LeBow
14 approached you concerning an RJR slate and the
15 meeting in New York on November 15th?
16 A. That was the Sard meeting; right?
17 Q. Yes.
18 A. No.
19 Q. Does it refresh your recollection
20 as to any communications you had with Mr.
21 LeBow or anyone from Brooke Group concerning
22 RJR prior to the time that Mr. LeBow asked you
23 to consider joining the slate?
24 A. No.
25 Q. I take it you have heard of Carl
CLASSIC REPORTING, INC. (212) 268-2590
188
1 Chakalian
2 Icahn?
3 A. Yes.
4 Q. Have you ever met Mr. Icahn?
5 A. No, sir.
6 Q. Did you ever discuss Mr. Icahn
7 with Mr. LeBow?
8 A. No, sir.
9 Q. When did you become aware -- are
10 you aware that Mr. Icahn is a shareholder of
11 RJR?
12 A. I read the papers.
13 Q. You read that in the newspaper;
14 is that correct, sir?
15 A. Right.
16 Q. Do you have any information on
17 Mr. Icahn's interest in RJR from any source
18 other than the newspapers?
19 A. No, sir.
20 Q. After the meeting, what you
21 called the Sard meeting which took place on
22 November 15th, what did you do next in
23 connection with RJR?
24 A. In connection with RJR?
25 Q. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
189
1 Chakalian
2 A. What does that mean?
3 Q. The RJR-LeBow matter?
4 A. Nothing.
5 Q. Did there come a time when you
6 attended another meeting?
7 A. Until the next meeting, yes.
8 Q. So the record is clear, there
9 came a time when you attended a second meeting
10 of the proposed slate; is that correct?
11 A. Correct.
12 Q. Do you remember when that meeting
13 took place?
14 A. I believe it was in December.
15 MR. STERN: Let me mark as the
16 next Exhibit RC 275.
17 (Memo from Mr. LeBow to Mr.
18 Chakalian, bearing production No.
19 RC 275, marked Chakalian Exhibit
20 34 for identification, as of this
21 date.)
22 Q. Sir, a copy of Exhibit 34 is in
23 front of you. Is this a memo from Mr. LeBow
24 to you, sir?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
190
1 Chakalian
2 Q. And it refers to a meeting of
3 nominees for the board of directors of RJR for
4 December 14th; do you see that?
5 A. Correct.
6 Q. At the Friars Club; is that
7 right?
8 A. Correct.
9 Q. Did that meeting take place?
10 A. Yes, it did.
11 Q. Did it take place on December
12 14th?
13 A. Yes, it did.
14 Q. At the Friars Club?
15 A. Yes, it did.
16 Q. Is that the meeting that you
17 recall attending after the meeting on November
18 15th?
19 A. Yes.
20 Q. The second meeting. Did you have
21 any discussions with Mr. LeBow or anyone else
22 concerning RJR -- withdraw that.
23 Did you have any discussions
24 about what would be said at the meeting or
25 discussed at the meeting prior to the meeting
CLASSIC REPORTING, INC. (212) 268-2590
191
1 Chakalian
2 itself?
3 A. No.
4 Q. How long did the meeting last?
5 A. Lunchtime.
6 Q. Who was present?
7 A. I believe the whole slate.
8 Q. Anyone else?
9 A. Howard Lorber.
10 Q. Was there any discussion of RJR
11 at that meeting?
12 A. I don't -- I believe so.
13 Q. What was said on that subject and
14 by whom?
15 A. I don't remember by whom, but
16 there was a general discussion of what's
17 already been published. It was a rehash.
18 Q. How long did that discussion
19 take?
20 A. Lunchtime.
21 Q. Well, did it take the entire hour
22 and-a-half or were other matters discussed as
23 well?
24 A. No, I was there an hour, about an
25 hour and 10 minutes because I had a meeting at
CLASSIC REPORTING, INC. (212) 268-2590
192
1 Chakalian
2 quarter to 2:00, so I know I left.
3 Q. During the time that you were
4 there, was the only subject discussed the RJR
5 matter?
6 A. Well, yes.
7 Q. Did Mr. LeBow speak on the
8 subject?
9 A. I don't recall.
10 Q. Did Mr. Lorber?
11 A. I don't believe so.
12 Q. Do you recall what was said other
13 than just a rehash, as you I think indicated?
14 A. A rehash.
15 Q. Were any documents distributed at
16 the meeting or at the lunch?
17 A. I don't believe so.
18 Q. Was there a written agenda?
19 A. No.
20 Q. Was there any memorandum prepared
21 after the event describing what had transpired
22 at the event?
23 A. I have not seen it.
24 Q. Did you take any notes?
25 A. Did not.
CLASSIC REPORTING, INC. (212) 268-2590
193
1 Chakalian
2 Q. Was anyone taking any notes?
3 A. It was around the lunch table,
4 no.
5 Q. And did you say anything at this
6 lunch meeting?
7 A. To the group?
8 Q. Yes.
9 A. Not a word.
10 Q. I take it there was social
11 conversation at the meeting; is that correct?
12 A. Absolutely.
13 Q. You participated in that?
14 A. Absolutely.
15 Q. What did you do next in
16 connection with Mr. LeBow's interest in RJR?
17 A. That's it.
18 MR. STERN: I would like to mark
19 as Exhibit 35, a document produced on
20 behalf of Mr. Chakalian, RC 26 to 164.
21 (Document, bearing production
22 Nos. RC 26 through RC 164, marked
23 Chakalian Exhibit 35 for
24 identification, as of this date.)
25 Q. Mr. Chakalian, a copy of Exhibit
CLASSIC REPORTING, INC. (212) 268-2590
194
1 Chakalian
2 35 has been placed before you. Have you ever
3 seen that document?
4 A. Yes, I have.
5 Q. When did you see it?
6 A. I don't recall.
7 Q. Did you obtain it from someone?
8 A. Pardon me?
9 Q. Did you obtain this document from
10 someone?
11 A. I believe it was sent to me.
12 Q. Do you know who sent it to you?
13 A. I believe it was -- well, no.
14 Q. Did it come from Brooke Group?
15 A. Yes.
16 Q. Did you review this document when
17 you received it?
18 A. I didn't even look at it.
19 Q. Have you ever looked at this
20 document?
21 A. Like I'm looking at it now. I
22 flipped through it.
23 Q. But you did not study it?
24 A. No, sir.
25 Q. If I am repeating myself, I will
CLASSIC REPORTING, INC. (212) 268-2590
195
1 Chakalian
2 apologize. Did you ever discuss this document
3 with anyone?
4 A. No.
5 Q. Do you know why you were given
6 this document?
7 A. Because I'm on the -- probably
8 because I'm on the slate of directors.
9 Q. So your understanding is you
10 received it for informational purposes; is
11 that correct?
12 A. Right.
13 Q. Information in connection with
14 your --
15 A. Exactly.
16 Q. -- with your serving on the
17 proposed slate of directors; is that correct?
18 A. Correct.
19 Q. Sir, did you maintain any file at
20 home concerning RJR?
21 A. No, sir.
22 MR. STERN: Off the record.
23 (Discussion off the record.)
24 MR. STERN: I would like to mark
25 as the next exhibit, Exhibit 36, a
CLASSIC REPORTING, INC. (212) 268-2590
196
1 Chakalian
2 document from the files of Mr.
3 Chakalian RC 235 to 249.
4 (Fax and attachments from Mr.
5 Lampen to Mr. Chakalian, bearing
6 production Nos. RC 235 through RC
7 249 marked Chakalian Exhibit 36
8 for identification, as of this
9 date.)
10 Q. Sir, I'm placing Exhibit 36 in
11 front of you and ask you if you can identify
12 that document?
13 A. Who is this from? Okay.
14 Q. Can you identify that document,
15 sir?
16 A. Yes.
17 Q. What is it?
18 A. A fax and attachments from Dick
19 Lampen of New Valley to me at Liggett and I
20 wasn't home -- I wasn't there.
21 Q. You say you weren't there. Did
22 you eventually receive that document?
23 A. Yes. I instructed my secretary
24 to give that document to Josiah and then I
25 signed it and sent it back.
CLASSIC REPORTING, INC. (212) 268-2590
197
1 Chakalian
2 Q. This document, sir, appears to be
3 an agreement between a number of concerns
4 including Liggett and Jeffries?
5 A. Right.
6 Q. Did you discuss Jeffries? Do you
7 know what Jeffries is, sir?
8 A. Yes, I do.
9 Q. What is Jeffries?
10 A. Another one of these investment
11 financial, you know.
12 Q. Investment banking firm, would
13 that be an accurate description?
14 A. That's an accurate description.
15 Q. Is Jeffries performing any
16 services in connection with the consent
17 solicitation, to your knowledge?
18 A. No -- I don't know.
19 Q. Have you discussed the role of
20 Jeffries, if any, in this consent solicitation
21 with anyone?
22 A. Not at all.
23 Q. You have never discussed Jeffries
24 with Mr. LeBow; is that correct?
25 A. Not at all.
CLASSIC REPORTING, INC. (212) 268-2590
198
1 Chakalian
2 MS. LICHSTEIN: We have the same
3 problem.
4 MR. STERN: Yes.
5 Q. Did you ever discuss Jeffries
6 with Mr. LeBow?
7 A. No.
8 Q. Do you know why?
9 MS. LICHSTEIN: The "Am I
10 correct," at the end of his question.
11 That was the problem.
12 Q. Do you know why Liggett engaged
13 Jeffries?
14 A. No.
15 Q. Sir, I'm going to just show you
16 one exhibit that we previously marked,
17 Chakalian Exhibit 31, and ask you to look at
18 the second page?
19 A. Right.
20 Q. Which purports to be an analysis
21 of an effective debt exchange on common
22 shareholders RJR Nabisco; do you see that?
23 A. Yes, sir.
24 Q. Did you review that document?
25 A. I looked at it.
CLASSIC REPORTING, INC. (212) 268-2590
199
1 Chakalian
2 Q. Why was it sent to you, if you
3 know?
4 MS. LICHSTEIN: Object to the
5 form.
6 A. Part of the informational system,
7 Mr. Kirkland sends all, you know.
8 Q. Did you regard this information
9 as relevant?
10 MS. LICHSTEIN: Object to the
11 form.
12 A. I don't understand it.
13 Q. Did you ask Mr. Kirkland why he
14 sent it to you?
15 A. Yes.
16 Q. What did he say?
17 A. "You are automatic on my
18 computer. It all goes automatically."
19 Q. Sir, earlier in your deposition
20 you talked about a conversation with Mr. LeBow
21 in which you expressed your commitment to the
22 idea of a spin-off of Nabisco?
23 A. Right.
24 Q. Did you tell Mr. LeBow you were
25 committed to an immediate spin-off of Nabisco?
CLASSIC REPORTING, INC. (212) 268-2590
200
1 Chakalian
2 A. No time frame was given. I was
3 committed to a spin-off.
4 Q. But you did not discuss with him
5 whether it would be an immediate spin-off or a
6 spin-off at some later date?
7 A. Not specifically.
8 Q. Are you committed to an immediate
9 spin-off?
10 A. I am.
11 Q. Sir, did you retain all the
12 documents that you received in connection with
13 your service on the proposed RJR slate in the
14 file, in your files?
15 A. They are right here.
16 Q. Yes. So you did not discard or
17 destroy any documents?
18 A. No, sir.
19 Q. Did you ever hear of Lucio Tan?
20 A. Yes, I have.
21 MS. LICHSTEIN: Do you have a
22 guess, because I have to call my
23 office.
24 MR. STERN: Off the record.
25 (Discussion off the record.)
CLASSIC REPORTING, INC. (212) 268-2590
201
1 Chakalian
2 Q. I'm sorry, you said you have
3 heard of Mr. Tan; is that correct?
4 A. Yes, I certainly have.
5 Q. Who is Mr. Tan?
6 A. Mr. Tan is an entrepreneur in
7 Maqueda City in the Philippines. He is the
8 owner of Fortune Tobacco in the Philippines.
9 Q. Do you know Mr. Tan?
10 A. I've had -- yes, I have met him.
11 Q. Did you ever discuss RJR with Mr.
12 Tan?
13 A. Many times.
14 Q. When was the last such
15 discussion?
16 A. 1984.
17 Q. Did you ever discuss Mr. Tan with
18 Mr. LeBow?
19 A. Yes.
20 Q. When did you discuss Mr. Tan with
21 Mr. LeBow?
22 A. When Mr. LeBow told me he was
23 going to the Philippines to meet him.
24 Q. When did Mr. LeBow tell you that?
25 A. Sometime in the third quarter, I
CLASSIC REPORTING, INC. (212) 268-2590
202
1 Chakalian
2 believe it was.
3 Q. Third quarter of 1995?
4 A. '95.
5 Q. I take it you had not spoken
6 with -- when was the last time you had met Mr.
7 Tan?
8 A. 1984. '85.
9 Q. The discussion you had with Mr.
10 LeBow, that was a telephone conversation; is
11 that correct?
12 A. Correct.
13 Q. Did he call you or you call him?
14 A. I don't recall.
15 Q. What did Mr. LeBow say to you on
16 the subject of Mr. Tan?
17 A. That he was going to Asia and he
18 was going to be meeting with Mr. Tan.
19 Q. Did he tell you when he would be
20 meeting with Mr. Tan?
21 A. I don't recall.
22 Q. Did he tell you about what he
23 would be talking to Mr. Tan about?
24 A. He mentioned one of the subjects
25 would be about RJR.
CLASSIC REPORTING, INC. (212) 268-2590
203
1 Chakalian
2 Q. What did he say he would tell Mr.
3 Tan about RJR?
4 A. My recollection was that it was
5 going to be the same thing as we talked to
6 Reemstma about.
7 Q. What was that?
8 A. About a possible merger, joint
9 venture, all of the above.
10 Q. What did you say to Mr. LeBow?
11 A. In what respect?
12 Q. About Mr. Tan?
13 A. I don't think I want to answer
14 that.
15 Q. Did you make remarks about Mr.
16 Tan of a personal nature?
17 A. Yes.
18 Q. Well, did any of these remarks
19 bear on Mr. Tan's qualifications to engage in
20 the kind of transaction that Mr. LeBow was
21 contemplating?
22 A. No.
23 Q. Did they have any relevance to
24 RJR?
25 A. No, not in this specific case.
CLASSIC REPORTING, INC. (212) 268-2590
204
1 Chakalian
2 Q. What is your reason for being
3 reluctant to put on the record what you said
4 about Mr. Tan?
5 A. Because I'm not protecting Mr.
6 LeBow, I'm protecting RJR in this case, okay,
7 because of my past association with RJR.
8 MR. STERN: I think in this
9 case, I think we will treat this as we
10 treated the last time, that the witness
11 expressed a reservation about
12 disclosing a matter. We are in the
13 process of negotiating a
14 confidentiality order. When that's in
15 place, we may come back.
16 MS. LICHSTEIN: Fine.
17 MR. STERN: To this subject.
18 MS. LICHSTEIN: That's an
19 appropriate way of handling it, okay.
20 Q. Did Mr. LeBow or you say anything
21 further about Mr. Tan in this conversation?
22 A. No, sir.
23 Q. When did you next discuss Mr.
24 Tan, if ever?
25 A. I did not.
CLASSIC REPORTING, INC. (212) 268-2590
205
1 Chakalian
2 Q. Did Mr. LeBow tell you what came
3 of his meeting -- did Mr. LeBow ever tell you
4 that he had met with Mr. Tan?
5 A. Yes.
6 Q. When was that?
7 A. I don't remember when it was.
8 Q. Again, was this a telephone call?
9 A. Yes.
10 Q. What did Mr. LeBow say about that
11 meeting?
12 A. That he didn't have much time
13 with him.
14 Q. Did Mr. LeBow did not have much
15 time with Mr. Tan?
16 A. Yes.
17 Q. Did he say anything else about
18 the meeting?
19 A. No.
20 Q. Did he say whether they had in
21 fact discussed RJR at the meeting?
22 A. No.
23 Q. Did he say who else was at the
24 meeting?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
206
1 Chakalian
2 Q. What did he say in that respect?
3 A. Harry was there, Mr. Tan's first
4 lieutenant.
5 Q. Harry, what is Harry's full name,
6 if you know?
7 A. Harry, Harry, what the hell is
8 his name? Is it Harry? Harry Tan, I believe.
9 It's his cousin.
10 Q. Did he indicate whether or not
11 Mr. Taberer was there?
12 A. No.
13 Q. Did he say anything else about
14 his meeting with Mr. Tan?
15 A. No.
16 Q. Did you ever hear again from Mr.
17 LeBow on Mr. Tan?
18 A. From Mr. LeBow?
19 Q. Yes.
20 A. No.
21 Q. Did you ever discuss Mr. Tan with
22 anyone other than Mr. LeBow in connection with
23 a possible transaction involving Mr. LeBow and
24 RJR?
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
207
1 Chakalian
2 MR. RAPER: Excuse me, would you
3 read that back to me or would you tell
4 me what the question was?
5 MR. STERN: Why don't we have the
6 question and answer reread so we are
7 clear that the record is accurate.
8 (Record read)
9 Q. Did you ever hear of Michael
10 Price?
11 A. Yes, he is another one of these
12 analysts or whatever down on Wall Street.
13 Q. Did you ever discuss Mr. Price
14 with Mr. LeBow?
15 A. No.
16 Q. Did you ever discuss Mr. Price
17 with anyone in connection with Mr. LeBow's
18 interest in RJR?
19 A. No, sir.
20 Q. Other than those about whom you
21 have testified, have you ever discussed with
22 Mr. LeBow any other parties or individuals
23 that he approached concerning RJR?
24 MS. LICHSTEIN: Object to the
25 form.
CLASSIC REPORTING, INC. (212) 268-2590
208
1 Chakalian
2 A. No.
3 Q. Are you aware whether or not Mr.
4 LeBow approached anyone else, anyone other
5 than Reemstma and Mr. Tan concerning RJR?
6 A. No.
7 Q. Have you ever had any
8 discussions -- I will withdraw that.
9 Have you ever discussed with
10 anyone as to whether or not New Valley is
11 required to register under the Investment
12 Company Act of 1940?
13 A. No.
14 Q. Have you ever discussed with
15 anyone any connection between the Investment
16 Company Act and New Valley's purchases of RJR?
17 A. No. I don't understand the
18 question, so no.
19 MR. STERN: Let me just have a
20 couple minutes.
21 MS. LICHSTEIN: Sure, go right
22 ahead.
23 (Recess taken.)
24 Q. Just a few follow-up questions.
25 Have you read the deposition of
CLASSIC REPORTING, INC. (212) 268-2590
209
1 Chakalian
2 any other witness in this case prior to --
3 A. No, I have not.
4 Q. Let me finish. -- prior to your
5 attendance at this deposition?
6 A. No, I have not.
7 Q. Who else is on the board of
8 directors of Liggett?
9 A. Mr. LeBow and Mr. Ronald
10 Bernstein.
11 Q. How long have they been on the
12 board?
13 A. LeBow I guess forever, I don't
14 know. Bernstein I put him on the board in
15 '94, where are we? Yes, '94.
16 Q. Is Mr. Bernstein employed by
17 Liggett?
18 A. Mr. Bernstein is running the
19 Russian operation in Moscow.
20 Q. Russian operation of Liggett?
21 A. Used to be my CFO.
22 Q. Will the consent solicitation --
23 let me put a different question. In your
24 opinion, will there be any benefit to Liggett
25 from your participation in the consent
CLASSIC REPORTING, INC. (212) 268-2590
210
1 Chakalian
2 solicitation?
3 MS. LICHSTEIN: I object to the
4 form.
5 A. I don't believe so.
6 Q. Have you discussed that with Mr.
7 LeBow?
8 A. Not at all.
9 Q. With anyone else?
10 A. Not at all.
11 Q. Has Mr. LeBow or any of his
12 colleagues discussed with you any
13 circumstances under which the proposed slate
14 would not in fact run for election?
15 A. Come again?
16 Q. I will put a different question.
17 Is it your understanding that
18 there are circumstances under which you will
19 not run for membership on the RJR board?
20 A. My understanding?
21 Q. Yes.
22 A. Yes, there is.
23 Q. What are those circumstances?
24 A. If Reynolds spins off Nabisco in
25 the next couple of months.
CLASSIC REPORTING, INC. (212) 268-2590
211
1 Chakalian
2 Q. Then you would not run for
3 election; is that correct?
4 A. That's my understanding.
5 Q. And have you ever discussed with
6 Mr. LeBow whether there would be circumstances
7 where you would not run for election even if
8 RJR were to decline to spin-off Nabisco in the
9 next several months?
10 MS. LICHSTEIN: Sorry, can I have
11 that back?
12 MR. STERN: If you could read the
13 question.
14 (Record read.)
15 A. No.
16 MS. LICHSTEIN: I take it the
17 "you" -- I should have said this
18 before, does the "you" mean the whole
19 slate or Mr. Chakalian personally?
20 Q. The whole slate?
21 A. Oh, I was thinking of this.
22 Q. Does your answer change if we
23 make clear that the "you" meant the whole
24 slate?
25 A. Six of one, half a dozen of the
CLASSIC REPORTING, INC. (212) 268-2590
212
1 Chakalian
2 other.
3 MR. STERN: Subject to
4 reservations of rights and the like
5 that we have made in the course of this
6 deposition, I have no further
7 questions.
8 MS. LICHSTEIN: Thank you very
9 much.
10 (Time noted: 2:10 P.M.)
11
12 Rouben V. Chakalian
13
14 Subscribed and sworn to
15 before me this______day
16 of_________________1996.
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
213
1
2
C E R T I F I C A T E
_ _ _ _ _ _ _ _ _ _ _
3
STATE OF NEW YORK )
4 ) ss.:
COUNTY OF NEW YORK )
5
I, DONNA BRUNCK, a Certified
6
Shorthand Reporter and Notary Public within
7
and for the State of New York, do hereby
8
certify:
9
That I reported the proceedings in
10
the within-entitled matter, and that the
11
within transcript is a true record of
12
such proceedings.
13
I further certify that I am not
14
related, by blood or marriage, to any of
15
the parties in this matter and that I am
16
in no way interested in the outcome of
17
this matter.
18
IN WITNESS WHEREOF, I have hereunto
19
set my hand this 24th day of January,
20
1996.
21
__________________________
22 DONNA BRUNCK, CSR
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
214
1
2 January 24, 1996
3 I N D E X
WITNESS PAGE
4 ROUBEN V. CHAKALIAN
Examination by Mr. Stern 4
5
E X H I B I T S
6 CHAKALIAN
FOR IDENTIFICATION PAGE
7 1 Multipage document, top fax from
Mr. LeBow to Mr. Chakalian,
8 and attached engagement letter,
bearing production Nos. 379
9 through 387 46
10 2 Schedule 53
11 3 Report dated July 1995 from
Bernstein by Gary Black,
12 bearing production Nos. RC 300
through RC 351 79
13
4 Document dated August 14, 1995,
14 bearing production Nos. RC 363
through 378 87
15
5 Indemnification Agreement,
16 bearing production Nos. RC 3
through RC 17 104
17
6 Document, bearing production
18 Nos. RC 352 through RC 356 105
19 7 Questionnaire, bearing production
Nos. RC 199 through RC 221 116
20
8 Memorandum from Mr. LeBow to
21 Mr. Chakalian, bearing production
No. RC 264 119
22
9 Questionnaire, bearing production
23 Nos. RC 258 through RC 260 124
24 10 Draft of press release, bearing
production Nos. RC 254 through 257 125
25
CLASSIC REPORTING, INC. (212) 268-2590
215
1
2 January 24, 1996
3 E X H I B I T S
(Continued)
4
CHAKALIAN
5 FOR IDENTIFICATION PAGE
11 Memorandum dated November 21,
6 1995 from Mr. Chakalian, bearing
production Nos. RC 21 through RC 25 136
7
12 Letter dated August 15, 1995,
8 bearing production No. RC 362 145
9 13 Copy of article titled
"RJR Appears Ripe For Buyout
10 Analysts Say," bearing production
No. RC 360 149
11
14 Letter, bearing production No.
12 RC 284 152
13 15 Fax from Peter Strauss to Chester
Hopkins dated November 13,
14 1995, bearing production Nos.
RC 261 and RC 262 156
15
16 Letter to Bear Stearns, bearing
16 production Nos. RC 292 to RC 293 164
17 17 Opinion powers of attorney,
bearing production Nos. RC 294
18 to RC 297 164
19 18 Document, bearing production
Nos. RC 276 to RC 280 164
20
19 Document headed "RJR Nabisco
21 Holdings Cash Flow Statement
6/30/95," bearing production Nos.
22 RC 357 through RC 359 172
23 20-33 Group of documents 177
24 34 Memo from Mr. LeBow to Mr.
Chakalian, bearing production
25 No. RC 275 189
CLASSIC REPORTING, INC. (212) 268-2590
216
1
2 January 24, 1996
3 E X H I B I T S
(Continued)
4
CHAKALIAN
5 FOR IDENTIFICATION PAGE
35 Document, bearing production
6 Nos. RC 26 through RC 164 193
7 36 Fax and attachments from Mr.
Lampen to Mr. Chakalian,
8 bearing production Nos. RC 235
through RC 249 196
9
DIRECTION NOT TO ANSWER
10 PAGE LINE
142 22
11 through
143 14
12
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
1
==============================================================================
In The Matter Of:
RJR NABISCO v.
BENNETT S. LEBOW et al.
----------------
ROBERT L. FROME
Vol. 1, January 30, 1996
----------------
CLASSIC REPORTING, INC.
13 WEST 36th STREET
NEW YORK, NY 10018
(212) 268-2590
Original File rf013096.asc, 128 Pages
Min-U-Script[Registered] File ID: 2216453498
Word Index included with this Min-U-Script[Registered]
==============================================================================
==============================================================================
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
-------------------------------------x
:
RJR NABISCO HOLDINGS CORP., :
:
Plaintiff, :
:
-against- :6:95CV00812
:
BENNETT S. LEBOW, BROOKE GROUP LTD., :
And CARL C. ICAHN, :
:
Defendants. :
:
-------------------------------------x
January 30, 1996
3:50 P.M.
Deposition of ROBERT L. FROME,
taken by plaintiff pursuant to subpoena, at
the law offices of Wachtell Lipton Rosen &
Katz, 51 West 52nd Street, New York, New York
10019, before Donna Brunck, a Certified
Shorthand Reporter and Notary Public within
and for the State of New York.
2
1
2 A P P E A R A N C E S:
3 WACHTELL LIPTON ROSEN & KATZ
Attorneys for Plaintiff
4 51 West 52nd Street
New York, New York 10019
5
BY: RACHELLE SILVERBERG, ESQ.
6
7 MILBANK, TWEED, HADLEY & McCLOY
Attorneys for Defendants
8 and the Witness
1 Chase Manhattan Plaza
9 New York, New York 10005-1413
10 BY: DUNCAN J. LOGAN, ESQ.
11
PROSKAUER ROSE GOETZ & MENDELSOHN, L.L.P.
12 Attorneys for the Witness
1585 Broadway
13 New York, New York 10036-8299
14 BY: GREGG M. MASHBERG, ESQ.
15
ALSO PRESENT:
16 Harlan Protass
Milbank, Tweed, Hadley & McCloy
17
18
19
20
21
22
23
24
25
3
1
2 IT IS HEREBY STIPULATED AND AGREED by
3 and among the attorneys for the respective parties
4 herein that the sealing, filing and certification
5 of the within deposition be waived; that such
6 deposition may be signed and sworn to before any
7 officer authorized to administer an oath, with the
8 same force and effect as if signed and sworn to
9 before a judge of this court.
10 IT IS FURTHER STIPULATED AND AGREED
11 that all objections, except as to the form, are
12 reserved to the time of the trial.
13
14
15
16
17
18
19
20
21
22
23
24
25
4
1 Frome
2 R O B E R T L. F R O M E,
3 having been first duly sworn by the
4 Notary Public (Donna Brunck), was
5 examined and testified as follows:
6 EXAMINATION BY MS. SILVERBERG:
7 Q. Please state your name and
8 address for the record.
9 A. Robert L. Frome, 505 Park Avenue,
10 New York, New York 10022.
11 Q. What is your business address?
12 A. Same.
13 Q. Are you an attorney?
14 A. Yes.
15 Q. Did you do anything to prepare
16 for this deposition?
17 A. Yes.
18 Q. What did you do?
19 A. I met with Mr. Mashberg and Mr.
20 Logan and Mr. Protass just before the
21 deposition, and about a week ago I met with
22 Mr. Mashberg and Mr. Logan.
23 Q. Did you look at any documents in
24 preparation for your deposition?
25 A. No.
5
1 Frome
2 Q. Did you review any deposition
3 transcripts in preparation for your
4 deposition?
5 A. No.
6 Q. Did you discuss your deposition
7 today with anyone else?
8 A. What do you mean?
9 Q. Did you?
10 A. Besides myself?
11 Q. Besides yourself, yes?
12 A. Yes.
13 MR. LOGAN: And the three he
14 previously testified to?
15 Q. Did you discuss your testimony
16 with anybody other than Mr. Mashberg, Mr.
17 Logan and Mr. Protass?
18 A. No. I mean, I told people I was
19 going to be deposed.
20 Q. Did you discuss your deposition
21 testimony with any other nominee to the RJR
22 board of directors?
23 A. No.
24 Q. Have you ever been deposed
25 before?
6
1 Frome
2 A. Yes.
3 Q. How many times?
4 A. A few.
5 Q. What is the best of your
6 recollection as to how many times you have
7 been deposed before?
8 A. I don't remember.
9 Q. Were you deposed more than once?
10 A. Yes, a few means more than once.
11 Q. Were you deposed more than five
12 times?
13 A. I don't believe so.
14 Q. Were you a defendant in any of
15 the matters in which your deposition was
16 taken?
17 A. Yes, in one, I believe.
18 Q. Where was that action pending?
19 A. Minnesota, I believe, or
20 Wisconsin, one of those places.
21 Q. What was the nature of that
22 litigation?
23 A. This had to do with a group of
24 individuals who invested in a tax shelter and
25 I was a director of a coal company that had a
7
1 Frome
2 contractual relationship with the partnership
3 that was the tax shelter, and these investors
4 were suing the tax shelter partnership and the
5 coal company.
6 Q. Did those claims involve
7 allegations of violations of the federal
8 securities laws?
9 A. Yes.
10 Q. When was that litigation?
11 A. I would say late 1970s.
12 Q. How was that matter resolved?
13 A. It was settled.
14 Q. When was the first time your
15 deposition was taken?
16 A. I don't know. More than 10 years
17 ago.
18 Q. When was the last time your
19 deposition was taken?
20 A. I don't remember.
21 Q. Has your deposition been taken
22 within the last five years?
23 A. I don't believe so.
24 Q. What were the nature of the other
25 matters in which your deposition was taken?
8
1 Frome
2 A. I had a matrimonial action one
3 time that I was a party to.
4 Q. Any other matters that you can
5 recall?
6 A. Where I was deposed?
7 Q. Yes.
8 A. I don't remember.
9 Q. Are you here today pursuant to a
10 subpoena?
11 A. I don't know. If I am, I was
12 told I am entitled to a witness fee which I
13 haven't received. Am I here with respect to a
14 subpoena?
15 Q. Yes, you are.
16 A. Where is my witness fee?
17 Q. That's inadvertent and I will see
18 that you get your witness fee.
19 A. I will rely on that.
20 Q. You mentioned earlier that you
21 prepared for your deposition with Mr.
22 Mashberg, Mr. Logan and Mr. Protass?
23 A. Yes, ma'am.
24 Q. Are each of these three
25 individuals your counsel?
9
1 Frome
2 A. Yes, ma'am.
3 Q. Are you paying the legal fees of
4 Milbank Tweed?
5 A. Definitely not.
6 Q. Are you paying the legal fees of
7 Proskauer Rose?
8 A. Definitely not.
9 Q. Do you know who is paying those
10 legal fees?
11 A. No.
12 MS. SILVERBERG: I would like to
13 mark as Frome Exhibit 1, a subpoena
14 issued to Robert L. Frome dated
15 December 19, 1995.
16 (Subpoena issued to Robert L.
17 Frome dated December 19, 1995,
18 marked Frome Exhibit 1 for
19 identification, as of this date.)
20 Q. The court reporter just placed in
21 front of you what's been marked as Frome
22 Exhibit 1. Have you ever seen that document
23 before?
24 A. No, ma'am.
25 Q. Is that a subpoena issued to you?
10
1 Frome
2 A. That's what it says.
3 MR. MASHBERG: He can read what
4 it is.
5 MR. LOGAN: Objection to form.
6 A. It says subpoena in a civil case
7 AO88 revised 1/94.
8 Q. If you turn the first page of the
9 document, do you see a document labeled
10 attachment A?
11 A. Yes, I do.
12 Q. Have you ever seen that document
13 before?
14 A. No, ma'am.
15 Q. Did anybody ever tell you that
16 you were requested to produce documents prior
17 to today's deposition?
18 A. Yes.
19 Q. Did anybody tell you the type of
20 documents that you were supposed to produce
21 prior to today's deposition?
22 A. What do you mean?
23 Q. Did you have an understanding
24 that you were to produce certain documents
25 prior to your deposition today?
11
1 Frome
2 A. Yes.
3 Q. What documents did you understand
4 were to be produced?
5 A. All documents relating to the RJR
6 situation.
7 Q. Did you search your files for
8 documents relating to the RJR situation?
9 A. Yes, ma'am.
10 Q. Which files did you search?
11 A. What do you mean?
12 Q. Do you maintain files?
13 A. Yes. Well, some, yes.
14 Q. What are the locations of those
15 files?
16 A. They are in my, they are all
17 around, in my office, in the file room, they
18 are in storage, in my house, in my mother's
19 house. I didn't look in my mother's house.
20 Q. How did you undertake to search
21 your files for documents relating to the RJR
22 situation?
23 A. I got off my chair, found a file
24 said RJR, there it was.
25 Q. Did you look for RJR files in
12
1 Frome
2 your home?
3 A. No.
4 Q. Do you maintain RJR files in your
5 home?
6 A. No.
7 Q. Do you have any documents
8 relating to RJR in your home?
9 A. No -- well, no.
10 Q. Did you search your office for
11 files relating to RJR?
12 A. I looked around. I have a pretty
13 spare office. I don't keep much there.
14 Q. Where do you -- let me rephrase
15 that. Over the past few months, have you
16 received documents relating to RJR?
17 A. Yes.
18 Q. What have you done with those
19 documents?
20 A. I threw them away.
21 Q. Did you throw all of them away?
22 A. No, but generally.
23 Q. Did you keep certain of the
24 documents?
25 A. Yes, ma'am.
13
1 Frome
2 Q. On what basis did you decide
3 whether to keep a document or throw it away?
4 A. Well, I get this blizzard of
5 faxes, I threw all those away except there
6 were one or two I hadn't yet thrown away when
7 my counsel visited me and they told me that,
8 they asked that I give them those and I keep
9 any future faxes. Of course at the first
10 chance I got, I called up people sending me
11 the faxes and told them to stop.
12 Q. Was it your practice, though, to
13 throw away faxes you received?
14 MR. MASHBERG: In this case?
15 A. Yes.
16 MR. MASHBERG: When I say cases,
17 in connection with RJR?
18 A. In this situation, yes.
19 Q. Let me rephrase the question.
20 Was it your practice to throw away faxes that
21 you received relating to RJR?
22 A. Yes, ma'am.
23 Q. At what point did you stop
24 throwing away faxes that you received?
25 A. About a week ago when a gentleman
14
1 Frome
2 came to visit me.
3 Q. Were there any other criteria you
4 used to determine whether or not to save a
5 document?
6 A. I don't know. There weren't many
7 other documents.
8 Q. Do you recall how many documents
9 other than faxes you threw away?
10 A. Not many.
11 Q. Can you recall any specific
12 documents that you received other than
13 newspaper articles that you threw away?
14 A. No, I don't remember.
15 Q. Do you recall receiving any
16 financial analyses of RJR?
17 A. On the fax?
18 Q. On the fax.
19 A. No.
20 Q. Do you remember receiving any
21 computer-generated financial runs relating to
22 RJR by fax?
23 A. No, ma'am.
24 Q. What did you do with the
25 documents that you did not throw out?
15
1 Frome
2 A. I saved them.
3 Q. Did you save them in one place?
4 A. Yes.
5 Q. You saved them in a file?
6 A. Sort of.
7 Q. How did you save them?
8 A. I had a place I knew where they
9 were when I put them there.
10 Q. Was that the place that you
11 searched in order to obtain documents
12 responsive --
13 A. I looked there and amazingly it
14 was still there and I gave it to Mr. Mashberg.
15 Q. Did you give Mr. Mashberg all the
16 documents you found relating to RJR?
17 A. Yes, I did.
18 Q. Can you think of any documents
19 relating to RJR that were not provided to Mr.
20 Mashberg?
21 A. Today I did see a copy like of an
22 indemnity agreement or something like that,
23 but I guess I saw it afterward, I guess you
24 had that already. I gave it to you, I'm not
25 sure.
16
1 Frome
2 Q. Did you bring that with you
3 today?
4 A. No, I didn't. I can furnish it
5 to you.
6 Q. Are there any other documents
7 that you have relating to RJR that were not
8 provided to counsel?
9 A. Yes, it was a one-page thing that
10 said I would agree to serve as a nominee.
11 Q. Are there any other documents?
12 A. No, not that I found.
13 Q. Did you fill out a questionnaire
14 relating to your nomination to the RJR board
15 of directors?
16 A. Yes, I did.
17 Q. Did you maintain that document?
18 A. I'm not sure.
19 Q. Are you aware of any documents
20 that you turned over to your counsel in
21 response to the request that were not produced
22 to RJR?
23 A. No, I'm not.
24 MR. MASHBERG: I will answer
25 that. Everything that the witness
17
1 Frome
2 provided to us has been produced. You
3 have it.
4 MS. SILVERBERG: Are any
5 documents being withheld on the grounds
6 of privilege?
7 MR. MASHBERG: No.
8 Q. Do you presently serve on the
9 board of directors of any company?
10 A. Yes, ma'am.
11 Q. Which companies?
12 A. You mean companies registered
13 under the Securities and Exchange Act of 1934?
14 Q. Yes.
15 A. Health Care Services Group.
16 Q. Are you presently on the board of
17 any other companies?
18 A. Something called Nuco 2, N-U-C-O,
19 with a small 2 down in the bottom there.
20 Q. Do you serve as a director of any
21 other company?
22 A. No, I don't.
23 Q. In the past, have you served as a
24 director to any other company?
25 A. Companies under the Securities
18
1 Frome
2 Act?
3 Q. Yes.
4 A. Yes.
5 Q. Which companies?
6 A. Lots.
7 Q. Can you list them?
8 A. A company of VTX Electronics.
9 There was a company -- I don't remember all of
10 them.
11 Q. I will take your best
12 recollection.
13 A. Okay. There's a company Valley
14 Industries, Strauss Stores Corp. Sidari,
15 S-I-D-A-R-I Corporation. Did I say VTX?
16 Q. Yes, you did.
17 A. I have to think about it. I
18 don't remember any others.
19 Q. Have you ever served as a
20 director of company?
21 A. Brown Rubber Company.
22 Q. Any others?
23 A. Yes, I think so, but --
24 Q. Any others that you can recall?
25 A. Not right now.
19
1 Frome
2 Q. Have you ever served as a
3 director of a company that later filed for
4 bankruptcy?
5 A. Yes.
6 Q. Which company?
7 A. They all did. No, I'm only
8 kidding. Valley Industries, who else do you
9 have there?
10 Q. VTX Electronics.
11 A. They are still going on. She's
12 cute, isn't she?
13 Q. Strauss Stores?
14 A. They were acquired, I think. I
15 don't remember what happened to them. I went
16 off the board, it was years later they went
17 out, something happened.
18 Q. Sidari?
19 A. They are still in business.
20 Q. Brown Rubber Company?
21 A. I don't know what happened to
22 them.
23 Q. Have you ever been sued in your
24 capacity as a director of a company?
25 A. What do you mean?
20
1 Frome
2 Q. Have shareholders of a company
3 ever brought litigation against you?
4 MR. MASHBERG: As a director?
5 MS. SILVERBERG: As a director.
6 A. Yes.
7 Q. In connection with which company?
8 A. A company called Coal Fuels.
9 Q. Spell that.
10 A. C-O-A-L F-U-E-L-S.
11 Q. Was that the litigation we
12 discussed earlier?
13 A. It was the same company that was
14 involved.
15 Q. What were the nature of those
16 claims?
17 A. That we sold stock without
18 divulging full information and so forth and
19 gave misleading information.
20 Q. How were those claims resolved?
21 A. It was settled.
22 Q. Where was that action litigated?
23 A. Kentucky.
24 Q. Were there any other companies
25 whose shareholders --
21
1 Frome
2 A. No.
3 Q. -- whose shareholders brought
4 litigation against you while you were serving
5 as a director?
6 A. No.
7 Q. Have you ever been a defendant in
8 a litigation other than the litigations we
9 have already discussed?
10 A. No.
11 Q. To your knowledge, have you ever
12 been investigated for violations of the
13 securities laws other than matters we have
14 already discussed?
15 MR. MASHBERG: You mean --
16 MR. LOGAN: Investigated by whom?
17 Q. By any law enforcement?
18 A. To my knowledge, I was never the
19 target of an investigation.
20 Q. Do you own shares of RJR stock?
21 A. No, ma'am.
22 Q. Have you ever owned shares of RJR
23 stock?
24 A. No.
25 Q. Do you own options to purchase
22
1 Frome
2 RJR stock?
3 A. No.
4 Q. Have you ever owned options to
5 purchase RJR stock?
6 A. No.
7 Q. Do you own shares of New Valley
8 stock?
9 A. No.
10 Q. Do you know Howard Lorber?
11 A. Yes.
12 Q. When did you first meet Mr.
13 Lorber?
14 A. I met him initially 15 or more
15 years ago.
16 Q. How did you meet him?
17 A. In a bar.
18 MS. SILVERBERG: Off the record.
19 (Discussion off the record.)
20 A. The name of the bar was the
21 Sherry Netherlands bar.
22 Q. How did you come to meet Mr.
23 Lorber?
24 A. People hang out in a bar, there
25 was a TV series about that. I knew him very
23
1 Frome
2 casually in those days.
3 Q. Was it a chance meeting that you
4 met him at this bar?
5 A. Yes, like it wasn't a date.
6 Q. Did you talk business at this
7 meeting?
8 A. In the bar?
9 Q. Yes.
10 A. You're kidding, of course not.
11 Q. Have you spoken to Mr. Lorber
12 during the course of the past 15 years?
13 A. Yes, of course.
14 Q. Have you had any business
15 dealings with Mr. Lorber?
16 A. Oh, about, I don't remember when,
17 maybe eight years ago, he came to my firm and
18 requested that we or I guess you say retained
19 us to represent him.
20 Q. Can you describe your educational
21 background?
22 A. I went to PS 197 and I graduated
23 Forest Hills High School. I went to New York
24 University. Then I went to law school and
25 then I got a master's of law degree, too.
24
1 Frome
2 Q. What year did you graduate law
3 school?
4 MR. LOGAN: Talking about his
5 J.D?
6 Q. Your J.D.?
7 A. I'm not sure, I believe 1963 or
8 something like that.
9 Q. When did you get your master's of
10 law? Immediately thereafter?
11 A. A year or two later.
12 Q. What did you do following law
13 school?
14 A. I went to work.
15 Q. Where did you go to work?
16 A. It was a firm called, it was
17 later called Trubin & Silcox, but Javis Moore
18 Trubin & Silcox became Trubin & Silcox.
19 Q. What year did you join that firm?
20 A. A few months after law school.
21 Q. How long did you stay at that
22 firm?
23 A. You know, two, three years,
24 something like that.
25 Q. What did you do when you left
25
1 Frome
2 that law firm?
3 A. I went to work for a, became
4 associated with a single practitioner, had my
5 own little practice and I worked for him.
6 Q. How many years did you do that?
7 A. I don't remember.
8 Q. Approximately?
9 A. Short, two, three, four.
10 Q. What did you do after you stopped
11 working with that single practitioner?
12 A. I formed a partnership with
13 somebody, called Cooper & Frome for a couple
14 years and then I combined with my present
15 firm, probably around maybe 1970, early 1970,
16 something like that.
17 Q. What is the name of that firm?
18 A. Now it's called Olshan, Grundman
19 Frome & Rosenzweig.
20 Q. And you are still with that firm?
21 A. Yes.
22 Q. When you testified earlier that
23 eight years ago Mr. Lorber came to your firm
24 and asked you to represent him, I take it that
25 is that Olshan Grundman firm?
26
1 Frome
2 A. Yes.
3 Q. What was that the first business
4 relationship that you had with Mr. Lorber?
5 A. Yes.
6 Q. What entity retained you in
7 connection with that discussion with Mr.
8 Lorber?
9 A. I don't remember exactly.
10 Q. Was it New Valley?
11 A. No.
12 Q. Was it an entity that is
13 currently affiliated with Mr. LeBow?
14 A. No.
15 Q. What is the next business dealing
16 that you had with Mr. Lorber?
17 A. When there was a company called
18 Pantesote.
19 Q. Spell that.
20 A. P-A-N-T-E-S-O-T-E.
21 Q. Was that a legal matter that your
22 firm was retained to handle for Mr. Lorber?
23 A. Yes.
24 Q. Has your firm handled legal
25 matters for Mr. Lorber on a regular basis over
27
1 Frome
2 the past eight years?
3 A. Regular, irregular basis. Might
4 be 10 years, it's approximate.
5 Q. Has any of that legal work
6 involved either New Valley or Brooke Group?
7 A. In only one instance that I could
8 remember.
9 Q. What instance is that?
10 A. There was a company called Sky
11 Box which was a subsidiary of either Brooke
12 Group or New Valley. I believe it was New
13 Valley, and -- maybe it was Brooke Group. I
14 don't remember, and we represented Sky Box.
15 Q. Was that action pending in
16 Delaware Chancery Court?
17 A. What action are we talking about?
18 Q. Did that retention involve
19 litigation?
20 A. No.
21 Q. When was that retention?
22 A. I would say approximately 1993 to
23 '95, '92 to '95, something like that.
24 Q. Have you done any legal work for
25 Liggett? "You" meaning your firm.
28
1 Frome
2 A. No.
3 Q. Have you had any other business
4 dealings with Mr. Lorber other than through
5 your law firm?
6 A. Yes -- well, yes.
7 Q. Can you describe those?
8 A. When some of these instances
9 where the firm was involved, I might be an
10 investor as well. In Pantesote, I was an
11 investor.
12 Q. In other words -- have you made
13 financial investments with Mr. Lorber?
14 A. Yes.
15 Q. On how many occasions?
16 A. I can think of two. There may be
17 others. I can't remember.
18 Q. Which companies were those?
19 A. Pantesote and there was a
20 company, VTX Company.
21 Q. Do you know Mr. Bennett LeBow?
22 A. Yes, I do.
23 Q. When did you first meet Mr.
24 LeBow?
25 A. I don't remember.
29
1 Frome
2 Q. Going back to Mr. Lorber, have
3 you had any other financial dealings with Mr.
4 Lorber?
5 A. I may have bought insurance from
6 him at one time.
7 Q. Anything else?
8 A. Not that I remember.
9 MS. SILVERBERG: Could you just
10 read back his answer to my question of
11 when he first met Mr. LeBow?
12 (Record read.)
13 Q. What is your first recollection
14 of meeting Mr. LeBow?
15 A. I would estimate, you know,
16 three, four, five years ago.
17 Q. Do you recall how you came to
18 meet Mr. LeBow?
19 A. You are going to laugh, I met him
20 in a bar, too.
21 Q. Was he with Mr. Lorber? At which
22 bar did you meet Mr. LeBow?
23 A. I would say it was either the St.
24 Regis or the Four Seasons, not the Four
25 Seasons Hotel, the Four Seasons Restaurant. I
30
1 Frome
2 wouldn't want you to be in the wrong place.
3 Q. Have you had any business
4 dealings with Mr. LeBow?
5 A. No, except for the Sky Box and
6 whatever his involvement was in Sky Box.
7 Q. Have you invested in any
8 companies along with Mr. LeBow?
9 A. No.
10 Q. Other than Sky Box, you have had
11 no business dealings with Mr. LeBow?
12 A. No.
13 Q. Have you met Mr. Icahn?
14 A. Yes.
15 Q. When was the first time you met
16 Mr. Icahn?
17 A. Years and years, 20 years ago, 15
18 years, probably 20 years ago.
19 Q. Have you had any business
20 dealings with Mr. Icahn?
21 A. My firm represented Icahn, too.
22 Q. In what matters did your firm
23 represent Mr. Icahn?
24 A. There was a thing called Baird &
25 Warner, became Barnett Real Estate Trust.
31
1 Frome
2 Something called Tappan Industries. Something
3 called -- I can't think of the name. Several.
4 This must have been in the early '80s I would
5 guess, late '70s.
6 Q. Have you had any business
7 dealings with Mr. Icahn other than through
8 representation through your law firm?
9 A. At one time I had invested with
10 Carl.
11 Q. Which company?
12 A. That was more than 10 years ago.
13 He had a partnership that he was just
14 investing the money.
15 Q. Did there come a time when you
16 were asked to join -- to put your name up for
17 nomination to the RJR board of directors?
18 A. Yes.
19 Q. When did that happen?
20 A. I would say in October or
21 November of 1995.
22 Q. How did that come to happen?
23 A. Howard Lorber said to me, you
24 know, that did I want to get involved, that
25 Ben LeBow had owned some RJR stock and was
32
1 Frome
2 thinking of putting together a slate.
3 Q. Was this conversation in person?
4 A. I believe it was on the phone. I
5 don't remember.
6 Q. Prior to this telephone call from
7 Mr. Lorber, had you had any conversations with
8 Mr. Lorber relating to RJR?
9 A. Not that I remember.
10 Q. Prior to this conversation with
11 Mr. Lorber, had you had any conversations with
12 Mr. LeBow relating to RJR?
13 A. No.
14 Q. When Mr. Lorber called you on
15 this occasion, did you know that Mr. LeBow was
16 purchasing shares of RJR stock?
17 MR. MASHBERG: Objection to form.
18 MR. LOGAN: Objection to form.
19 MR. MASHBERG: You can answer.
20 A. Did I know he was purchasing
21 shares? No, I didn't know.
22 Q. At the time Mr. Lorber made this
23 phone call, were you aware that -- let me
24 rephrase that. At the time Mr. Lorber made
25 this phone call, did you know that Mr. LeBow
33
1 Frome
2 was planning on doing a consent solicitation?
3 MR. LOGAN: Objection.
4 Q. With respect to RJR?
5 MR. LOGAN: Objection to form.
6 A. I didn't know whether or not he
7 was.
8 Q. What did Mr. Lorber -- rephrase
9 that.
10 Did Mr. Lorber describe to you
11 Brooke Group's activities with respect to RJR
12 during this phone conversation?
13 A. Not really. In a most general
14 way, they owned some stock and they --
15 Q. Did Mr. Lorber say who owned RJR
16 stock?
17 A. No, he was vague. They, I assume
18 he meant Brooke Group or New Valley.
19 Q. Did he say how much stock they
20 owned?
21 A. No.
22 Q. Did they say they were proposing
23 a spin-off of Nabisco?
24 MR. LOGAN: Objection to form.
25 Q. Let me rephrase it. Did Mr.
34
1 Frome
2 Lorber say that Brooke Group was advocating a
3 spin-off of Nabisco?
4 A. I don't remember.
5 Q. Did Mr. Lorber discuss a spin-off
6 of Nabisco at all during that conversation?
7 A. I don't remember.
8 Q. Did Mr. Lorber discuss the issues
9 that would be put before the shareholders in
10 the event there were a proxy fight?
11 A. I don't believe so. I don't
12 remember.
13 Q. Did Mr. Lorber say whether there
14 had been a decision made that Brooke Group
15 would in fact run a proxy contest?
16 A. I don't remember.
17 Q. Did Mr. Lorber ask you about your
18 views relating to a spin-off of Nabisco during
19 this conversation?
20 A. No.
21 Q. Did Mr. Lorber give you any
22 background information relating to RJR during
23 this conversation?
24 A. No.
25 Q. Did he give you any information
35
1 Frome
2 relating to RJR during this conversation?
3 A. Not that I remember.
4 Q. Did Mr. Lorber discuss the
5 consent solicitation during this conversation?
6 A. Not that I remember.
7 Q. Did Mr. Lorber ask your views on
8 a spin-off of Nabisco during this
9 conversation?
10 A. No.
11 Q. Did Mr. Lorber discuss what the
12 platform would be for Brooke Group's
13 candidates that were nominated to run as
14 directors for RJR?
15 MR. MASHBERG: Objection to form.
16 MR. LOGAN: Objection to form.
17 MS. SILVERBERG: Let me rephrase
18 that.
19 Q. Did Mr. Lorber mention whether or
20 not Brooke Group's nominees would run on a
21 particular slate?
22 MR. MASHBERG: Objection to form.
23 MR. LOGAN: Objection to form.
24 A. No.
25 Q. Did Mr. Lorber mention Liggett
36
1 Frome
2 during this conversation?
3 A. Not that I remember.
4 Q. Did Mr. Lorber ask you whether or
5 not you were willing to put your name up for
6 nomination?
7 A. No.
8 Q. Did Mr. Lorber say anything other
9 than -- I think you used the term they were
10 thinking of putting together a slate?
11 A. Yes -- no, he didn't. It was
12 very vague.
13 Q. Did you have an understanding as
14 to why Mr. Lorber called you to tell you that
15 they were thinking of putting together a
16 slate?
17 A. He asked me if I wanted to, I'm
18 not positive about the slate, but if I wanted
19 to be involved.
20 Q. Did he indicate how it would be
21 possible for you to be involved?
22 A. No.
23 Q. Did he indicate whether or not he
24 was contacting other people to see if anyone
25 else wanted to be involved?
37
1 Frome
2 A. No.
3 Q. Did you have any understanding
4 during that conversation what type of
5 activities he might want you, you might be
6 interested in getting involved in?
7 A. No.
8 Q. Did Mr. Lorber ask you whether
9 you were interested in purchasing RJR stock?
10 A. No.
11 Q. Did Mr. Lorber ask you whether
12 you were interested in purchasing options for
13 RJR stock?
14 A. No.
15 Q. Did Mr. Lorber mention to you why
16 he or Brooke Group were thinking of putting
17 together a slate?
18 A. No.
19 Q. Is there anything else that you
20 can recall about this conversation with Mr.
21 Lorber?
22 A. No, ma'am.
23 Q. What did you say to Mr. Lorber?
24 A. I asked him if he wanted me to be
25 involved and he said yes and I said okay.
38
1 Frome
2 Q. So you agreed to be involved?
3 A. Right.
4 Q. Did you indicate in what manner
5 you would like to be involved in?
6 A. No, when you make these
7 agreements, you could always change your mind.
8 Q. Did you take notes of this
9 conversation?
10 A. No, come on, what are you
11 kidding?
12 Q. Was anybody else, did anybody
13 else participate in the conversation?
14 A. Yes, I had the phone. I was on
15 the phone. Nobody else participated. No.
16 Q. During this conversation, was
17 there an understanding that you would call Mr.
18 Lorber or he would call you back with further
19 details?
20 A. Yes, we talk, we may speak to
21 each other from time to time. I assume he
22 would let me know if there was some way I
23 could make money.
24 Q. How long did this conversation
25 last?
39
1 Frome
2 A. Ten, 12 minutes. There may be
3 other subjects discussed, too.
4 Q. Did you understand this would be
5 a way for you to make money?
6 A. That's what I come to the office
7 for, honey.
8 Q. During this conversation, did you
9 have an understanding as to how you could make
10 money?
11 A. No.
12 Q. Do you recall when in the
13 October-November time frame you had this
14 conversation?
15 A. No.
16 Q. Following this conversation,
17 did -- let me rephrase that. Did you take any
18 action with respect to RJR after this
19 conversation?
20 A. No, ma'am.
21 Q. Did you read any articles
22 relating to RJR?
23 A. No.
24 Q. Did you look up any public
25 filings of RJR?
40
1 Frome
2 A. No.
3 Q. Did you talk to anybody about
4 this conversation?
5 A. I don't remember.
6 Q. What was the next conversation
7 you had with anybody relating to RJR?
8 A. I don't remember.
9 Q. Did there come a point when Mr.
10 Lorber called you following that initial phone
11 call?
12 A. Yes.
13 Q. When was that?
14 A. Subsequently, I don't remember.
15 Q. Was it a matter of days later or
16 weeks later?
17 A. A day, 10 days.
18 Q. During the second phone call with
19 Mr. Lorber, did you discuss RJR?
20 A. I really don't remember any of
21 the specifics.
22 Q. Putting aside whether you can
23 recall the specifics, do you recall whether or
24 not you discussed RJR during that
25 conversation?
41
1 Frome
2 A. You know, I know my lawyers will
3 be upset, but we had so many conversations I
4 don't remember what was said. It was
5 mentioned, you know, and sometimes RJR was
6 mentioned. We might have talked once a week,
7 RJR was mentioned. I don't recall at all what
8 was said. Ben -- he said you have to get
9 together with Ben LeBow if you want to discuss
10 this. I said okay, I will get together with
11 Ben LeBow.
12 Q. Between the first conversation
13 and the second conversation you had with Mr.
14 Lorber, did you have any conversations with
15 Mr. LeBow?
16 A. No, ma'am.
17 Q. Between those two conversations
18 with Mr. Lorber, did you have any
19 conversations with anyone else at New Valley
20 or Brooke Group?
21 A. No, ma'am.
22 Q. Between those two conversations,
23 did you have discussions with anybody relating
24 to RJR?
25 A. Not that I remember.
42
1 Frome
2 Q. Did there come a time when -- I
3 take it from your testimony that there came a
4 time when Mr. Lorber suggested that you speak
5 to Mr. LeBow?
6 A. Yes, ma'am.
7 Q. Would that be relating to RJR?
8 A. Yes.
9 Q. Do you recall anything of
10 substance relating to RJR that was said during
11 your conversations with Mr. Lorber until the
12 time he suggested you speak to Mr. LeBow?
13 A. No.
14 Q. During those conversations with
15 Mr. Lorber, did you ever discuss a possible
16 spin-off of RJR --
17 A. No.
18 Q. -- during those conversations
19 with Mr. Lorber?
20 A. Actually, I don't remember
21 really. I don't believe so.
22 Q. During those conversations with
23 Mr. Lorber, did you ever discuss Liggett?
24 A. No.
25 Q. During those conversations with
43
1 Frome
2 Mr. Lorber, did you ever discuss the
3 possibility of your acquiring RJR stock?
4 A. No.
5 Q. During those conversations with
6 Mr. Lorber, did you ever discuss the
7 possibility that you acquire options for RJR
8 stock?
9 A. No.
10 Q. During those conversations with
11 Mr. Lorber, did you ever discuss any
12 transaction that would result in a change of
13 control of RJR or any of its subsidiaries?
14 A. I don't remember.
15 Q. During those discussions with Mr.
16 Lorber, did you ever discuss a transaction
17 that would result in a merger of RJR or any of
18 its subsidiaries with any other entity?
19 A. No.
20 Q. Did there come a time when you
21 called Mr. LeBow relating to RJR?
22 A. No.
23 Q. Did Mr. LeBow call you relating
24 to RJR?
25 A. No.
44
1 Frome
2 Q. I believe you testified that Mr.
3 Lorber suggested that you call Mr. LeBow; is
4 that correct?
5 A. Well, he said I should talk to
6 him, I believe is what he said.
7 Q. Did there come a time that you
8 met with Mr. LeBow?
9 A. Yes.
10 Q. When was the first meeting that
11 you had with Mr. LeBow relating to RJR?
12 A. I think it's in my --
13 THE WITNESS: Duncan, you refresh
14 my recollection on the date. Somebody
15 can give me the diary and I will tell
16 you what it was.
17 MS. SILVERBERG: Why don't I mark
18 as Exhibit 2 a document bearing
19 production No. RF 001 which is a -- I
20 will let you identify it.
21 (Photostat of part of Mr. Frome's
22 1995 diary marked Frome Exhibit 2
23 for identification, as of this
24 date.)
25 A. Yes.
45
1 Frome
2 Q. Before you look at the exhibit,
3 let me ask you, during your conversations with
4 Mr. Lorber prior to the time you met with Mr.
5 LeBow, did Mr. Lorber ever invite you to join
6 a slate of candidates that would run for the
7 RJR board of directors?
8 A. No.
9 Q. I have put in front of you
10 Exhibit 2. Can you identify that document?
11 A. Yes, it's a photostat of a part
12 of my 1995 diary.
13 Q. And does the date reflected on
14 that document reflect your appointments for
15 November 15th?
16 A. I guess. It says Wednesday,
17 November 15th -- no, it says Wednesday the
18 15th. Doesn't say what month.
19 Q. Do you know what month?
20 A. No, I don't.
21 MR. MASHBERG: We can represent
22 that it was cut off the photocopy. It
23 was for November.
24 Q. Does that document refresh your
25 recollection as to when you met Mr. LeBow?
46
1 Frome
2 A. No.
3 MR. MASHBERG: She is asking you
4 if you --
5 A. No, it doesn't. I believe I did
6 not meet him on the 15th, so I'm confused
7 about that.
8 Q. Do you have any recollection as
9 to when you first met with Mr. LeBow with
10 respect to RJR?
11 A. I would say it was in latter half
12 of October, first half of November of 1995.
13 Q. Where did you meet Mr. LeBow?
14 A. In the restaurant at the Regency
15 Hotel.
16 Q. In New York?
17 A. Yes, ma'am.
18 Q. Did anyone else attend this
19 meeting?
20 A. Yes.
21 Q. Who attended?
22 A. Mr. Lorber was there and another
23 gentleman was there.
24 Q. Who was that other gentleman?
25 A. His name was Dick somebody. I
47
1 Frome
2 don't remember his name.
3 Q. Was this gentleman --
4 A. I think he worked for Brooke. I
5 think he is now, may be a nominee for the
6 slate. If I saw the list, I could tell you.
7 MR. MASHBERG: Don't speculate.
8 Q. Was it Richard Lampen?
9 A. I don't remember.
10 Q. What was discussed at this
11 meeting?
12 A. I guess LeBow indicated that I
13 don't know who, but that entities affiliated
14 with him had a substantial stock position in
15 RJR, that they believed it was in the best
16 interest of shareholders to distribute the
17 shares of stock of Nabisco that RJR owned,
18 that the distribution would result in a very
19 substantial increase in the combined price of
20 the Nabisco and RJR shares as compared to the
21 existing price of RJR, and I think he further
22 said that they planned to do a consent,
23 precatory consent solicitation which would --
24 which the shareholders would urge the board,
25 existing board of RJR, to distribute Nabisco
48
1 Frome
2 shares to RJR shareholders and that if the
3 board failed to respond, then they were
4 considering or perhaps decided, I don't
5 remember, to form a slate of directors and run
6 on the platform of distributing, essentially
7 distributing Nabisco to RJR shareholders.
8 Q. Did Mr. LeBow say anything else?
9 A. Well, a lot of other things. I
10 don't remember all of them.
11 Q. Did Mr. LeBow provide you with
12 any materials during that meeting?
13 A. No.
14 Q. Did you take notes at that
15 meeting?
16 A. No.
17 Q. Did Mr. LeBow discuss why he
18 thought that a spin-off of Nabisco was in the
19 shareholders' best interest?
20 MR. MASHBERG: He answered that
21 already.
22 A. I don't remember.
23 Q. Did Mr. LeBow discuss RJR's
24 position on a spin-off?
25 A. He said the existing directors
49
1 Frome
2 were refusing to distribute the shares of
3 Nabisco on the ground that there was some kind
4 of a nonlegal obligation to certain creditors
5 and certain lenders to RJR, and that there was
6 a chance that this might constitute a
7 fraudulent conveyance.
8 Q. Did Mr. LeBow discuss at all any
9 tax issues relating to a spin-off of Nabisco?
10 A. Yes, it was mentioned but I don't
11 know exactly what was said.
12 Q. Did Mr. LeBow say that he did not
13 agree with the RJR directors' position with
14 respect to a spin-off?
15 A. Yes, definitely.
16 Q. Did Mr. LeBow explain why he
17 disagreed with their views as to what you
18 termed the nonlegal obligations and the chance
19 of a fraudulent conveyance claim?
20 A. Well, with respect to nonlegal
21 obligations, I don't remember what he said.
22 It's not legal. It was overriding.
23 Q. Did you have any information
24 relating to a spin-off of Nabisco other than
25 what you were told by Mr. LeBow?
50
1 Frome
2 A. No.
3 Q. Did Mr. LeBow say whether or not
4 he was intending to run his -- to -- let me
5 rephrase that.
6 Did Mr. LeBow say whether or not
7 he had made a determination as to whether or
8 not a proposed slate of candidates would run
9 for election at the 1996 annual meeting?
10 MR. MASHBERG: Objection to form.
11 MR. LOGAN: Objection.
12 A. I remember -- I don't remember
13 the particulars, but I knew when I left the
14 meeting that he was planning to run a slate.
15 Q. Do you know whether or not a
16 decision had been made at that time as to
17 whether or not he would run the slate?
18 A. I'm sorry, I didn't hear.
19 MS. SILVERBERG: Could you please
20 repeat the question.
21 (Record read.)
22 A. Whether he would run the slate?
23 MR. LOGAN: Objection to form.
24 Q. Had there been, to your
25 knowledge, had there been a decision as to
51
1 Frome
2 whether or not the Brooke Group slate of
3 candidates would run for election at the 1996
4 annual meeting?
5 A. Yes, when I left the meeting, I
6 know that, I had the impression that Brooke
7 Group or whoever it was associated with LeBow
8 planned to run a slate if the existing
9 directors did not distribute Nabisco shares.
10 Q. During that meeting, did anybody
11 invite you -- let me rephrase that. During
12 that meeting, did anyone ask whether you were
13 willing to put your name up for nomination?
14 A. I don't remember the specifics,
15 but I was in effect invited to join the slate.
16 Q. Before you were -- during this
17 meeting but before you were invited to join
18 the slate, did anybody ask you your views as
19 to whether or not an immediate spin-off was
20 appropriate?
21 A. I don't remember.
22 Q. By the conclusion of that
23 meeting, had you formed a view as to whether
24 or not an immediate spin-off of Nabisco was
25 appropriate?
52
1 Frome
2 A. It sounded like it made sense and
3 would benefit the stockholders.
4 Q. During that meeting, did Mr.
5 LeBow ask you for your views as to the
6 propriety of an immediate spin-off?
7 MR. MASHBERG: Objection to form.
8 MR. LOGAN: Objection.
9 A. I don't remember.
10 Q. During that meeting, did you
11 express any views as to whether a spin-off was
12 a good idea?
13 A. I don't remember.
14 Q. Did you tell them during that
15 meeting that you would agree to put your name
16 up for nomination?
17 A. I don't believe I said in as many
18 words, but I think when I left the meeting, it
19 was kind of understood that I would.
20 THE WITNESS: Can we take a
21 recess?
22 (Recess taken.)
23 Q. Why did you decide to put your
24 name up for nomination?
25 MR. MASHBERG: Objection to form.
53
1 Frome
2 MR. LOGAN: Objection.
3 A. I thought it might be financially
4 beneficial to me.
5 Q. In what way?
6 A. The directors fees, legal fees,
7 stock options and stuff like that.
8 Q. Did you expect that it would be
9 financially beneficial to you in any other
10 way?
11 A. Not that I can think of, no.
12 Q. I believe you testified earlier
13 that you have not purchased RJR stock?
14 A. That's correct.
15 Q. Why have you not purchased RJR
16 stock?
17 A. I don't know. I never thought of
18 it. It's not in my investment universe.
19 Q. Were there any other reasons why
20 you decided to put your name up for
21 nomination?
22 A. Yes, Howard and Ben are fun. I
23 know Carl and I hang around bars and have fun
24 and stuff like that.
25 Q. Before this meeting you had in
54
1 Frome
2 New York with Mr. LeBow and Mr. Lorber, had
3 you had any discussions with Mr. Icahn
4 relating to RJR?
5 A. No, ma'am.
6 Q. Did you discuss this meeting with
7 anyone?
8 A. Yes. I don't remember. I know I
9 discussed it but I don't recall the
10 particulars. Might have been my partners.
11 Q. Did you discuss this meeting with
12 your partners?
13 A. Some of them.
14 Q. Did you discuss with them whether
15 or not you should put your name up for
16 nomination to the RJR board of directors?
17 A. I just sort of told them, you
18 know. Nobody said it was a bad idea.
19 Q. Did you discuss with any of your
20 partners the possibility of liability on your
21 partners flowing from your serving as a
22 director of RJR?
23 MR. LOGAN: Objection to form.
24 A. No, we are not that cowardly. We
25 have faith in the justice system. We don't do
55
1 Frome
2 anything wrong. We don't have any liability.
3 Q. Is the answer to my question no?
4 A. Of course not, yes, no.
5 Q. Did you request that Brooke Group
6 or New Valley indemnify you for any legal
7 costs or liabilities you might incur as a
8 result of being nominated to serve as an RJR
9 director?
10 A. They offered it.
11 Q. Did you request any
12 indemnification for your law firm for any
13 legal cost or liability resulting from your
14 being a nominee to the RJR board of directors?
15 A. Gee, you think I should request
16 it? No, I haven't. Maybe I should request
17 it. It's a good suggestion.
18 Q. Do you have an executed
19 indemnification agreement with Brooke Group or
20 New Valley?
21 MR. MASHBERG: Does he have it in
22 his possession or is there one?
23 Q. Is there one?
24 A. There definitely is one. I
25 looked for it. I couldn't find it, but maybe
56
1 Frome
2 if I look more, I could, if you really want me
3 to.
4 Q. I want to know whether or not it
5 exists?
6 A. Yes, that does exist.
7 Q. If you can find it and turn it
8 over, that would be nice.
9 Are you getting a fee for having
10 your name put up for nomination?
11 A. Yes.
12 Q. What is that fee?
13 A. Thirty thousand.
14 Q. Are you receiving any other
15 compensation for having your name put up for
16 nomination?
17 A. No, ma'am.
18 Q. Have you entered into any
19 agreement or understanding with Brooke Group
20 or New Valley other than your indemnification
21 agreement?
22 MR. MASHBERG: And the fee?
23 Q. And the fee.
24 A. I don't know exactly what you
25 mean. I don't believe there are any written
57
1 Frome
2 agreements or oral agreements. They agreed
3 they were going to pay me 30,000. I agreed to
4 serve as director.
5 Q. Are you aware Mr. Zuckerman has
6 entered into a consulting agreement with
7 Brooke Group?
8 A. I know who Zuckerman is now. I
9 guess I do. They asked me about him before.
10 I couldn't remember who he was.
11 Q. Is the answer to my question yes?
12 MR. MASHBERG: Do you remember
13 the question?
14 A. The question was whether
15 Zuckerman entered into a consulting agreement.
16 Q. Whether or not you know that Mr.
17 Zuckerman entered into a consulting agreement?
18 A. Yes, I had heard that he was
19 going to or they were talking about it.
20 Q. Do you have any consulting
21 agreement with Brooke Group or New Valley or
22 any entity affiliated with it?
23 A. No.
24 Q. Have you entered into any oral
25 agreement?
58
1 Frome
2 A. Sounds like a good idea.
3 MR. MASHBERG: It comes out on
4 the record, so that was obviously said
5 in jest.
6 A. You can put it on the record. It
7 is a good idea.
8 Q. Have you entered into any oral
9 agreement with either Mr. LeBow, Brooke Group
10 or New Valley?
11 A. No, ma'am.
12 Q. Have you discussed an RJR
13 spin-off with any financial advisers?
14 A. You mean of mine?
15 Q. Let me rephrase the question.
16 Have you ever received a report
17 from a financial adviser relating to a
18 spin-off of Nabisco?
19 A. Any financial adviser? I don't
20 recall having seen any.
21 Q. Have you received any oral report
22 from a financial adviser relating to a
23 spin-off of RJR?
24 A. No.
25 Q. A spin-off of Nabisco?
59
1 Frome
2 A. Right, no. Unless you call LeBow
3 a financial adviser.
4 Q. What was the next conversation
5 you recall relating to RJR?
6 A. I speak to Howard Lorber about
7 once every 10 days, so when we converse on a
8 variety of subjects, it would be mentioned,
9 program was proceeding. We have to have a
10 get-together for all the directors, I would be
11 invited and so forth.
12 Q. During your meeting with Mr.
13 LeBow and Mr. Lorber, did you discuss Liggett?
14 A. You know, I remember Liggett was
15 mentioned but I can't remember what was said,
16 mentioned in relation to RJR, but I don't
17 remember what was said.
18 Q. Do you have any recollection what
19 was mentioned with respect to Liggett?
20 A. No. I'm talking about possible
21 combination of Liggett and RJR, but I don't
22 recall anything beyond that.
23 Q. Did Mr. LeBow indicate that he
24 was contemplating a possible merger between
25 Liggett and RJR?
60
1 Frome
2 A. Something about a merger was
3 mentioned, but I can't recall anything about
4 that.
5 Q. Do you recall whether or not --
6 let me rephrase that. Did Mr. LeBow say that
7 he would like to merge Liggett with RJR at
8 sometime in the future.
9 MR. MASHBERG: Asked and
10 answered.
11 A. I don't remember exactly what was
12 said.
13 Q. Did there come a time that you
14 learned that Mr. LeBow had proposed a
15 transaction to RJR involving Liggett?
16 A. Yes.
17 Q. When did you learn that?
18 A. I don't remember.
19 Q. Did you learn it before this
20 meeting with Mr. LeBow?
21 A. No, I don't believe so.
22 Q. Did you learn it after this
23 meeting?
24 A. Yes, I believe so.
25 Q. The discussion relating to
61
1 Frome
2 Liggett during your meeting with Mr. LeBow and
3 Mr. Lorber, did you understand -- you
4 testified that he did mention something
5 relating to a merger between Liggett and RJR;
6 is that correct?
7 A. Yes.
8 Q. Did you understand that --
9 MR. LOGAN: I want to object to
10 the form of the prior question.
11 Q. -- that the merger you were
12 discussing related to a plan that Mr. LeBow
13 had abandoned?
14 A. No.
15 Q. Did you understand that Mr. LeBow
16 at that time was contemplating a merger
17 between Liggett and RJR?
18 MR. MASHBERG: I think you asked
19 that precise question.
20 MS. SILVERBERG: I want to make
21 sure the record is clear.
22 MR. MASHBERG: I think the record
23 is clear.
24 MR. LOGAN: I object to the form
25 of the question.
62
1 Frome
2 A. I think LeBow mentioned a
3 combination of Liggett and RJR prospectively,
4 but I don't remember what he said about it.
5 Q. Did Mr. LeBow say how he planned
6 to effectuate such a merger?
7 MR. MASHBERG: Objection to form.
8 MR. LOGAN: Objection to form.
9 A. I don't remember.
10 Q. Did Mr. LeBow say whether or not
11 he had any specific plans to effectuate that
12 merger?
13 A. I don't remember.
14 MR. MASHBERG: Objection to form.
15 MR. LOGAN: Objection to form.
16 A. I don't remember what he said.
17 Q. Did Mr. LeBow indicate whether or
18 not he was pursuing such a merger?
19 A. I don't recall. I don't think,
20 no, I don't remember.
21 Q. Did Mr. LeBow mention whether he
22 had had discussions with anybody relating to a
23 prospective merger of Liggett and RJR?
24 A. No. I don't remember what he
25 said.
63
1 Frome
2 Q. Did Mr. LeBow say whether he was
3 seeking investors to invest in RJR?
4 A. No.
5 Q. Did Mr. LeBow ask whether you
6 would be interested in investing in RJR?
7 A. No.
8 Q. Is there anything that would
9 refresh your recollection as to what was said
10 during that discussion?
11 A. Tape recording.
12 Q. Did you tape-record that
13 conversation?
14 A. No, ma'am.
15 Q. Do you know whether or not Mr.
16 LeBow tape-recorded the conversation?
17 A. I don't know.
18 Q. Did you take notes of that
19 conversation?
20 A. No.
21 Q. When did this conversation take
22 place?
23 MR. LOGAN: Asked and answered.
24 A. Isn't there another diary page?
25 Could I see the other diary page?
64
1 Frome
2 MR. LOGAN: Ms. Silverberg will
3 show you the other diary pages if she
4 chooses.
5 A. Is that December?
6 Q. Yes.
7 A. I don't know. I would assume
8 around the middle of, approximately middle of
9 November, maybe late October, early November.
10 Q. Did Mr. LeBow say what type of
11 transaction --
12 MR. MASHBERG: I think you have
13 exhausted this line, I really do.
14 Every conceivable permutation and
15 combination is what you are doing here.
16 Doing this every step of the way.
17 MS. SILVERBERG: It's just that
18 the witness doesn't seem to recall what
19 occurred at this conversation, so I am
20 trying to refresh his recollection.
21 MR. MASHBERG: I understand that
22 and I have let you do that, but there
23 comes a point where you have to stop,
24 because you can't just keep going at it
25 every conceivable possible way.
65
1 Frome
2 MS. SILVERBERG: I'm just trying
3 to refresh the witness's recollection.
4 MR. MASHBERG: You are allowed to
5 probe, only up to a certain point. Ask
6 this last question and let's move on.
7 Q. Was there a discussion of the
8 possible structure that a transaction between
9 Liggett and RJR might take?
10 A. Not that I remember.
11 Q. How long did this conversation
12 take place?
13 MR. MASHBERG: You mean the whole
14 meeting?
15 A. It was lunch, so --
16 Q. How long did the luncheon last?
17 A. Hour and-a-half, between hour
18 and-a-quarter, and hour and three-quarters.
19 Q. How long did the discussion of
20 Liggett last?
21 A. I don't remember. It wasn't a
22 big part of it.
23 Q. What was the context in which
24 Liggett first was mentioned?
25 A. I don't remember.
66
1 Frome
2 Q. Did LeBow mention whether or not
3 he had done any pro forma analyses of a merger
4 between Liggett and RJR?
5 A. I don't remember any.
6 Q. Did Mr. Lorber participate in the
7 discussion of Liggett?
8 A. I don't remember. I don't think
9 so. It was a very brief part of the
10 conversation.
11 Q. Was Mr. Resseler the other
12 participant at that meeting?
13 A. Definitely not.
14 Q. Was Robert Frome the other
15 participant at that meeting?
16 A. Yes, he was.
17 MR. LOGAN: He was one of them.
18 MR. MASHBERG: Off the record.
19 (Discussion off the record.)
20 Q. I did misspeak. Richard Lampen.
21 A. The guy worked for Brooke Group
22 or something, one of those companies. I don't
23 remember.
24 Q. Did you remember whether that
25 individual was an official at Brooke Group?
67
1 Frome
2 A. Yes, I think he was an officer or
3 some kind, maybe wasn't an officer, but I'm
4 sure he worked for Brooke Group. Kind of a
5 tall guy.
6 Q. Can you describe what this
7 individual looked like?
8 A. Yes, he was tall and nondescript.
9 Q. Approximately how old was he?
10 A. I would say late forties, early
11 fifties.
12 Q. Was he a lawyer?
13 A. I think so. Must have been
14 Lampen.
15 MR. MASHBERG: Don't guess.
16 A. I don't know.
17 Q. Did you understand that this
18 person lived in New York or --
19 A. I didn't know.
20 Q. Was there any discussion at your
21 meeting with Mr. LeBow and Lorber as to New
22 Valley's status under the 1940 act?
23 A. No, ma'am.
24 Q. What was the next discussion that
25 you had following this meeting relating to
68
1 Frome
2 RJR?
3 MR. MASHBERG: Other than what he
4 testified?
5 A. I testified before. You want me
6 to testify to the same thing again?
7 Q. If you could just repeat that,
8 yes.
9 MR. MASHBERG: He already
10 testified he had some phone calls with
11 Lorber. You want to go to the next
12 meeting?
13 Q. When was the next meeting you had
14 relating to RJR?
15 A. I don't remember the date, but I
16 would say it was sometime in December.
17 Q. Was that a meeting at which all
18 the nominees gathered?
19 A. One or two missing, but
20 essentially it was all of them.
21 Q. Before that meeting, I take it
22 you had conversation -- did you have
23 conversations with Mr. LeBow relating to RJR?
24 A. No, I had no conversations with
25 LeBow between the luncheon meeting and this
69
1 Frome
2 second meeting.
3 Q. Did you have discussions during
4 this time period between the two meetings?
5 Did you have discussions relating to RJR with
6 anyone other than Mr. Lorber?
7 A. Just casual conversations with
8 acquaintances, not pertaining to any of this.
9 Q. Did you have conversations
10 relating to RJR with anyone at New Valley or
11 Brooke Group other than Mr. LeBow and Mr.
12 Lorber?
13 A. No, maybe relating to faxes or
14 some stuff, but nothing of any substance.
15 Q. Following your meeting with Mr.
16 LeBow and Mr. Lorber, did you have any further
17 discussions with Mr. Lorber relating to
18 Liggett?
19 A. No.
20 MR. MASHBERG: Objection to the
21 form.
22 MR. LOGAN: Objection.
23 Q. At any time following your
24 meeting with Mr. LeBow and Mr. Lorber, did you
25 discuss with anybody a transaction involving a
70
1 Frome
2 merger between Liggett and RJR or any of its
3 subsidiaries?
4 A. Between then and the first
5 meeting -- and the second meeting?
6 Q. Yes.
7 A. No, I did not.
8 Q. During your conversations with
9 Mr. Lorber between the two meetings, what did
10 you discuss relating to RJR?
11 MR. MASHBERG: I think he
12 answered that, didn't he?
13 A. I don't remember the specifics,
14 just generally the program was going ahead.
15 Q. Did you discuss the merits of a
16 spin-off of Nabisco?
17 A. No.
18 Q. Did you discuss any transaction
19 that would involve the change of control of
20 RJR?
21 A. Just in a general way.
22 Q. What did you say about it?
23 A. I don't remember.
24 Q. Did you discuss at any point any
25 transactions that would involve a change of
71
1 Frome
2 control of RJR?
3 MR. MASHBERG: You just asked him
4 that.
5 A. Yes. I mean, talking about a
6 proxy contest, of course.
7 Q. Putting aside a proxy contest,
8 did you discuss any transactions that would
9 involve a change of control of RJR?
10 A. No.
11 Q. Did you discuss with anybody a
12 transaction that would involve a change of
13 control of RJR?
14 MR. MASHBERG: Objection.
15 MR. LOGAN: When?
16 A. Apart from a proxy contest?
17 Q. Apart from a proxy contest.
18 A. No, never, no.
19 Q. Between these two meetings, did
20 you discuss with anybody a transaction that
21 would involve a merger of Liggett with RJR or
22 any of its subsidiaries?
23 MR. MASHBERG: You asked him the
24 question already.
25 A. No.
72
1 Frome
2 Q. Between these two meetings, did
3 you discuss with anybody a transaction that
4 would involve a merger of RJR or its
5 subsidiaries with any entity?
6 A. Not that I recall.
7 Q. I believe you said between these
8 two meetings you may have discussed RJR with
9 casual acquaintances?
10 A. Yes.
11 Q. Who did you discuss RJR with?
12 A. I don't remember. Some of my
13 people in my firm, friends.
14 Q. Did you discuss a spin-off?
15 A. My girlfriend maybe.
16 Q. Did you discuss a spin-off of
17 Nabisco with any of these individuals?
18 A. With my girlfriend I always talk
19 about spin-offs. You want to get a woman,
20 tell her "spin-off." They go "ahh."
21 Q. I take it the answer to my
22 question is no?
23 A. You are right.
24 MR. MASHBERG: Off the record.
25 (Discussion off the record.)
73
1 Frome
2 Q. During this period between the
3 two meetings, did you discuss with anybody --
4 did you have any discussions with anybody
5 relating to Liggett?
6 A. No, ma'am.
7 Q. I believe you said that the
8 second meeting was sometime in December?
9 A. Yes.
10 Q. Let me just call your attention
11 back to what I believe is marked as Frome
12 Exhibit 2 which we identified as a page from
13 your diary for November 15th?
14 A. Yes.
15 Q. Did you attend a meeting in
16 November 15th with the nominees to the RJR
17 board of directors?
18 A. I'm confused. Oh, yes, could
19 have been. That would put the original
20 meeting with LeBow maybe in October then.
21 Q. How many?
22 A. I only had three meetings all
23 together. Luncheon meeting with LeBow. I had
24 a meeting around 40th Street and Third Avenue
25 at the public relations firm and then there
74
1 Frome
2 was another luncheon meeting where most of the
3 nominees attended.
4 Q. Would that last meeting have
5 taken place at the Friars Club?
6 A. That was the Friars Club.
7 Q. Did the second meeting take place
8 at a firm called Sard?
9 A. Yes, that's it.
10 MR. MASHBERG: We know when, too,
11 right?
12 A. Was it November 15th?
13 MR. MASHBERG: There's no fact in
14 this universe that's clearer than the
15 dates of these meetings.
16 Q. I believe you testified earlier
17 that there came a time that you learned that
18 Mr. LeBow had discussions with RJR?
19 A. Yes.
20 Q. When did you learn that?
21 A. I don't remember.
22 Q. From whom did you learn that?
23 A. I don't know.
24 Q. What did you learn about those
25 discussions?
75
1 Frome
2 A. I may have read it in the
3 material, you know, that there had been
4 discussions about a proposed combination
5 between RJR and Liggett, and I guess what I
6 read was that the RJR people did not want to
7 proceed with the combination. Maybe it was
8 one of those false allegations being made by
9 the RJR group.
10 Q. Did you have an understanding
11 that Mr. LeBow was interested in pursuing that
12 transaction notwithstanding the fact that RJR
13 had decided not to go ahead with it?
14 MR. MASHBERG: Wait, wait. At
15 what point are you asking him, as he
16 sits here today? Are you going back in
17 time? Are we going to start with
18 Liggett all over again?
19 Q. At any time, did you have an
20 understanding that Mr. LeBow intended to
21 pursue his merger plan between Liggett and RJR
22 after August of 1995?
23 MR. LOGAN: Objection to form.
24 A. I assume that he was considering
25 that.
76
1 Frome
2 Q. When did you have this
3 assumption?
4 A. Well, when we attended the Sard
5 meeting, they distributed a book and the book
6 contained information illustrating the
7 financial impact of a combination between RJR
8 and Liggett.
9 Q. Was the book discussed at the
10 Sard meeting?
11 A. I don't remember.
12 Q. Did you review the book?
13 A. I glanced through it, yes.
14 Q. Did you discuss the book with Mr.
15 LeBow?
16 A. No.
17 Q. Did you discuss the book with
18 anyone else?
19 A. Not that I remember.
20 Q. Was it your understanding after
21 reviewing the --
22 MS. SILVERBERG: Let me mark as
23 Frome Exhibit 3, a document bearing
24 production Nos. RF 117 through RF 253.
25 (Multipage document, bearing
77
1 Frome
2 production Nos. RF 117 through RF
3 253, marked Frome Exhibit 3 for
4 identification, as of this date.)
5 Q. Was that the material that was
6 distributed at the Sard meeting?
7 A. Yes, I believe some of it.
8 Q. Just so the record is clear, did
9 you review that material at the meeting?
10 A. No. I don't remember, I don't
11 think so. I looked at it afterward.
12 Q. After you reviewed the material,
13 did you have an understanding that Mr. LeBow
14 was still interested in a merger between
15 Liggett and RJR?
16 MR. MASHBERG: I think he
17 testified that he assumed that --
18 A. I don't think I spoke to anybody.
19 But he sets forth a lot of detail between
20 Liggett and RJR. I have to assume this is
21 part of the plan.
22 MR. MASHBERG: She doesn't want
23 to hear what your assumptions are. She
24 wants to hear what you know. She wants
25 to hear facts.
78
1 Frome
2 A. I don't know.
3 Q. At the Sard meeting, did Mr.
4 LeBow discuss his plans with respect to RJR?
5 MR. MASHBERG: Objection --
6 sorry. Withdrawn.
7 MR. LOGAN: I object to the form
8 of the question.
9 A. I don't know what you mean.
10 In general, yes, he said he
11 wanted to spin off the Nabisco shares. He
12 went through how beneficial it would be for
13 the shareholders, how the combined price of
14 Nabisco and RJR would be greater than RJR
15 alone.
16 Q. Did Mr. LeBow discuss Liggett at
17 the Sard meeting?
18 A. I don't remember. I don't
19 remember him discussing it.
20 Q. Do you not recall either way or
21 do you remember that he specifically --
22 A. I'm inclined to say no, he didn't
23 discuss it, but I'm not really sure about
24 that.
25 Q. Did anybody at the meeting
79
1 Frome
2 comment on the fact that the materials that
3 were distributed contained references to a
4 merger between Liggett and RJR?
5 A. Not that I remember.
6 Q. Did Mr. LeBow say anything as to
7 the proposals set forth in those materials?
8 A. No, I don't remember him saying
9 anything.
10 MR. MASHBERG: Objection to form.
11 MR. LOGAN: Objection.
12 A. I don't think it was really --
13 MR. MASHBERG: There is no
14 question.
15 THE WITNESS: I'm sorry.
16 Q. Would you like to expand on your
17 prior answer?
18 A. Sure. This was a big fat book
19 given out. I don't think anybody read the
20 book while we were sitting there, so the
21 questions weren't asked about oh, page, what's
22 this mean, what does that mean.
23 Q. Did you ever discuss that book
24 with Mr. LeBow at any time?
25 A. No, ma'am.
80
1 Frome
2 Q. Did you discuss that book with
3 Mr. Lorber at any point?
4 A. No.
5 Q. Did you discuss that book with
6 anybody?
7 A. Not that I remember.
8 Q. Did you form an opinion as to
9 whether or not Mr. LeBow should pursue the
10 proposals set forth in those materials?
11 MR. LOGAN: Objection. This is a
12 fact witness. You are not paying him
13 as an expert witness.
14 MS. SILVERBERG: He is currently
15 a candidate for the RJR board of
16 directors and if he has formed an
17 opinion as to the advisability of a
18 transaction, I don't see why the
19 witness should not be permitted to
20 testify as to that opinion.
21 MR. MASHBERG: I just note that
22 the document is quite lengthy and you
23 are asking a rather broad question
24 about a document which has a lot of
25 material in it.
81
1 Frome
2 MS. SILVERBERG: I will rephrase
3 the question.
4 Q. Have you formed an opinion as to
5 the advisability of a merger between Liggett
6 and RJR?
7 A. No, ma'am.
8 MR. LOGAN: Objection to form.
9 Q. Do you recall anything else that
10 was discussed at the Sard meeting?
11 A. Generally a discussion why the
12 prospect, we have a chance of winning,
13 everybody introduced ourselves, a little bit
14 about their backgrounds, stuff like that.
15 Q. Were there any financial advisers
16 present?
17 A. I don't believe so. Mr.
18 Hirschfeld from Greg's firm -- from, there was
19 a lawyer present.
20 MR. MASHBERG: She didn't ask you
21 that.
22 THE WITNESS: I'm sorry.
23 MR. MASHBERG: Now she will.
24 MR. LOGAN: He wasn't sure what
25 she meant by financial advisers. I'm
82
1 Frome
2 not sure either what she meant.
3 Q. At the Sard meeting, was there
4 any discussion as to what this slate of
5 candidates -- let me withdraw the question.
6 At any time did Mr. Hirschfeld
7 provide a legal opinion as to the legality of
8 an immediate spin-off off Nabisco?
9 MR. LOGAN: I object and I direct
10 the witness not to disclose the
11 substance of any confidential
12 attorney-client communications.
13 Q. Without disclosing the substance
14 of any attorney-client communications, have
15 you ever received a legal opinion on whether
16 or not an immediate spin-off of Nabisco is
17 legal?
18 MR. LOGAN: She is asking -- I
19 object to the form, first of all. She
20 is asking -- I believe she is asking if
21 you have ever received a legal opinion
22 from anyone who is not an attorney
23 representing you.
24 MS. SILVERBERG: No, that was not
25 my question.
83
1 Frome
2 MR. LOGAN: Because she is not
3 entitled to know the substance of your
4 communications that were in confidence
5 with your attorney.
6 Q. Have the nominees to the RJR
7 board ever received a legal opinion relating
8 to an immediate spin-off of Nabisco?
9 MR. MASHBERG: Do you mean a
10 written opinion?
11 Q. Well, we'll start with a written
12 opinion.
13 A. I myself never received a written
14 or oral opinion with respect to the legality
15 of the spin-off.
16 Q. Have you ever received either in
17 writing or orally any assurance that the
18 spin-off of Nabisco would not lead to
19 liability on the part of RJR?
20 MR. MASHBERG: What do you mean
21 assurance?
22 MR. LOGAN: I object to the form
23 of the question.
24 MR. MASHBERG: There is an
25 indemnity agreement here. Is that what
84
1 Frome
2 you are referring to?
3 MS. SILVERBERG: No, whether or
4 not it would result in liability to
5 RJR.
6 MR. MASHBERG: Assurance, I
7 object to the form of that.
8 Q. Have you ever received a legal
9 opinion, either orally or in writing, that a
10 spin-off of Nabisco would not result in
11 liability on the part of RJR?
12 A. No.
13 Q. Have you ever received a legal
14 opinion, either in writing or orally, that a
15 spin-off of Nabisco would not result in
16 liability to RJR's shareholders?
17 MR. MASHBERG: Objection to form.
18 MR. LOGAN: Objection.
19 A. No.
20 Q. I apologize if I am repeating a
21 question. I want to make sure the record is
22 clear.
23 Was there any discussion at the
24 Sard meeting relating to Liggett?
25 MR. MASHBERG: Asked and
85
1 Frome
2 answered.
3 A. I don't remember there being any
4 discussion.
5 Q. Do you recall anything else that
6 was discussed at the Sard meeting other than
7 what you've already testified about?
8 A. No, ma'am.
9 Q. Have you ever told Mr. LeBow that
10 you support an immediate spin-off of Nabisco?
11 A. Not in so many words, no.
12 Q. Have you told him that in sum or
13 substance?
14 A. I'm sure he assumes that I do.
15 MR. MASHBERG: Don't --
16 A. I'm sorry. I never told him.
17 MR. MASHBERG: That's a double
18 assumption.
19 A. I assume he assumes. I don't
20 know, no, I never told him that.
21 Q. Has Mr. LeBow ever asked your
22 view on the spin-off?
23 A. No.
24 Q. Do you have a view as to the
25 advisability of an immediate spin-off?
86
1 Frome
2 MR. MASHBERG: I think you asked
3 him that, too.
4 MR. LOGAN: I objected to it.
5 And I object to this one.
6 A. Sounds like a good idea.
7 MR. MASHBERG: Go ahead, answer
8 it again.
9 A. I did.
10 Q. On what is that opinion based?
11 A. I believe that the combined price
12 of Nabisco shares and RJR shares subsequent to
13 a spin-off would be very substantially higher
14 than the existing price of RJR shares alone.
15 So that the shareholders would be happy to
16 have the higher price stock than a lower price
17 stock.
18 Q. On what information are you
19 relying in coming to that conclusion?
20 MR. LOGAN: Objection to form.
21 A. The original discussions that I
22 had with Mr. LeBow and reading some of the
23 materials that have been distributed.
24 Q. Do you have any information on
25 the value of a spin-off other than what you
87
1 Frome
2 have learned from Mr. LeBow or have read
3 either in the newspaper or publicly filed
4 documents?
5 A. Some of these things, faxes,
6 newspaper articles, Sanford Bernstein's
7 article.
8 Q. Other than public reports and
9 public filings?
10 A. No.
11 Q. In your conversations with Mr.
12 LeBow, do you have any other basis for your
13 view?
14 MR. LOGAN: And all the other
15 materials he just pointed to.
16 A. And the stuff that I just gave
17 you.
18 Q. I believe that the other
19 materials you referred to were Sanford
20 Bernstein reports.
21 MR. MASHBERG: You said public
22 materials. I don't know that all those
23 things are public materials in the
24 sense of a news article or a press
25 release, so there is a whole packet of
88
1 Frome
2 materials that he has received and I
3 think that's what he was referring to.
4 Whatever it is that he received, that's
5 included in your question.
6 Q. Following the Sard meeting, what
7 is the next discussion you recall relating to
8 RJR?
9 A. Again, I continued to have these
10 conversations with Mr. Lorber, you know, which
11 were, I was advised of so-called progress of
12 what was happening and then there was a third
13 meeting at the Friars Club.
14 Q. What did you discuss in your
15 conversations with Mr. Lorber?
16 A. Essentially the focus was planned
17 to do consent solicitation and prospects and
18 so forth and maybe some nominees or people
19 might come on the board like this guy
20 Zuckerman and so forth, things of that nature.
21 Q. Did you discuss with Mr. Lorber
22 the criteria that was being used to select who
23 would be a nominee to the RJR board?
24 A. No.
25 Q. During this time period, did you
89
1 Frome
2 have any discussions with Mr. Lorber with
3 respect to Liggett?
4 A. No.
5 Q. Going back to what I marked as
6 Exhibit 3, I believe that exhibit contains
7 financial analyses -- financial pro formas
8 relating to RJR; is that correct?
9 A. If they are there, I guess it's
10 correct.
11 Q. Have you received --
12 MR. MASHBERG: Go ahead. Let her
13 ask her question.
14 Q. Have you received any other
15 financial information relating to RJR from Mr.
16 LeBow or Brooke Group?
17 A. Not -- only what's included here.
18 None that I recollect.
19 Q. If you had received such
20 information, would it have been included in
21 the materials that you have sent to me?
22 A. Not necessarily.
23 Q. Do you have a recollection of any
24 other financial materials that you received?
25 A. I don't remember any.
90
1 Frome
2 Q. What was discussed at the Friars
3 Club meeting?
4 A. Just the plans of how they are
5 going to go visit institutions and solicit
6 consents and so forth. That it was filled
7 with optimism.
8 Q. Were any financial advisers
9 present?
10 A. I don't think so.
11 MR. MASHBERG: Objection to form.
12 MR. LOGAN: Objection to form.
13 A. Not that I remember.
14 Q. Did the nominees receive a report
15 from a financial adviser relating to RJR?
16 A. No, not that I remember.
17 Q. I would like to show you a
18 document that was marked at Mr. Strauss's
19 deposition, it's Strauss Exhibit 2, and ask
20 you whether or not you have ever seen that
21 document before?
22 A. Yes, I believe I have.
23 Q. When did you see this document?
24 A. I don't remember.
25 Q. Was this document distributed at
91
1 Frome
2 either of the meetings that you attended with
3 the other nominees to the RJR board of
4 directors?
5 A. I think it may have been given at
6 the Sard meeting, but I really don't remember.
7 Q. Let me call your attention to the
8 top of the first page. There is a note that
9 says "Confidential draft 11/15/95 9:27 a.m."
10 Does that refresh your recollection that this
11 was distributed at the Sard meeting?
12 A. Presuming that was the date of
13 the meeting, yes. I don't really remember
14 this being distributed.
15 Q. Do you recall any discussion of
16 this document?
17 A. No, ma'am.
18 Q. I would like to call your
19 attention to Page 2, point 10.
20 A. Yes.
21 Q. And just there is in bold print a
22 question that says: "Would this proposed
23 board merge RJR with Liggett if elected?"
24 And then in brackets there is an
25 answer which says, "If our board is elected,
92
1 Frome
2 its primary objective would be to immediately
3 spin off the Nabisco food unit to RJR Nabisco
4 shareholders on a tax-free basis. If a merger
5 with Liggett would benefit all RJR
6 shareholders, we would consider it."
7 Do you see that?
8 A. Yes, ma'am.
9 MR. LOGAN: Objection to form.
10 Q. Did I read that correctly?
11 A. I don't know.
12 Q. Does this refresh your
13 recollection at all as to whether there was a
14 discussion of Liggett at the Sard meeting?
15 A. No, ma'am.
16 Q. Do you recall any discussion of
17 this question and answer?
18 A. No, ma'am.
19 MS. SILVERBERG: I would like to
20 mark as Frome Exhibit 4, a document
21 with production Nos. RF 21 through RF
22 23.
23 (Document, bearing production
24 Nos. RF 21 through RF 23, marked
25 Frome Exhibit 4 for
93
1 Frome
2 identification, as of this date.)
3 Q. I will represent to you that this
4 document was included in the documents that
5 were produced to us by your counsel from your
6 files. You will note that the document has
7 handwriting next to it, do you see that?
8 A. Yes.
9 Q. Is that your handwriting?
10 A. Yes.
11 Q. I would like to call your
12 attention to point 10 we were discussing just
13 before and could you just note for the
14 record --
15 A. There is an X and it's kind of
16 marked with a paren on the outside of the item
17 10 and there is an X next to it.
18 Q. Does this refresh your
19 recollection at all as to whether or not there
20 was a discussion of that point at the Sard
21 meeting?
22 A. No. I don't think there was a
23 discussion now that I look at this, but I'm
24 not sure.
25 Q. Do you recall whether or not you
94
1 Frome
2 had a discussion of that point at any time?
3 A. No.
4 Q. Do you know what that X refers
5 to?
6 A. I think it means I wanted to find
7 out more about that, but I don't remember.
8 Q. Did you find out more about that
9 point?
10 A. Not that I remember. I don't
11 think I did.
12 Q. Do you recall any discussion at
13 any time with respect to that point?
14 A. Subsequent to the Sard meeting?
15 No.
16 Q. Or during the Sard meeting?
17 A. No. Not that I recall.
18 Q. I'm sorry if I am repeating a
19 question, but just so the record is clear, did
20 you receive that at the meeting?
21 A. I believe so.
22 Q. That would have been the Sard
23 meeting on the 15th?
24 A. Yes, ma'am.
25 Q. Was there any discussion of the
95
1 Frome
2 other points in that document at the Sard
3 meeting?
4 A. No, not that I recall. Some of
5 the topics were covered, like --
6 MR. MASHBERG: She is asking if
7 these points in the memo --
8 THE WITNESS: I understand.
9 MR. LOGAN: In the context of
10 them being in this document.
11 MR. MASHBERG: We seem to be
12 going backwards.
13 A. I don't recall any of them being
14 discussed.
15 Q. Does this document refresh your
16 recollection as to any other matters that were
17 discussed?
18 A. No, ma'am.
19 Q. At the Sard meeting?
20 A. No.
21 Q. Going back to the meeting at the
22 Friars Club, was there any discussion at that
23 meeting regarding Liggett?
24 A. No, ma'am.
25 Q. Do you recall what was discussed
96
1 Frome
2 at the Friars Club other than that which
3 you've already testified about?
4 A. No, ma'am.
5 Q. How long did that meeting last?
6 A. I was only there I would guess an
7 hour, 45 minutes, hour and 15.
8 Q. Was there any discussion at that
9 meeting as to whether or not the nominees
10 would in fact run for election in the 1996
11 annual meeting?
12 A. Well, it was already assumed that
13 we were the nominees, of course we would run.
14 MR. MASHBERG: Don't assume.
15 Answer her question.
16 A. No, there was no discussion about
17 that.
18 Q. Have you ever had a discussion
19 with Mr. Icahn over the past year relating to
20 RJR?
21 A. Yes, there was one conversation
22 at a party, it was really all. Nothing of
23 substance was discussed.
24 Q. What was discussed?
25 A. There was just joking around.
97
1 Frome
2 Q. Did you mention Liggett during
3 that discussion?
4 A. No. Definitely not.
5 Q. Have you ever discussed the
6 question of greenmail with Mr. LeBow?
7 A. No, ma'am.
8 Q. Have you discussed greenmail with
9 Mr. Icahn?
10 A. No.
11 Q. Have you discussed greenmail with
12 anyone else employed by Brooke Group or New
13 Valley?
14 A. No, ma'am.
15 Q. Have you discussed the management
16 of RJR in the event that Brooke Group's
17 nominees are elected?
18 A. No, ma'am.
19 Q. Have you discussed any action
20 that the RJR board might take if the nominees
21 are elected?
22 A. Only the spin-off.
23 Q. Have you discussed whether or not
24 the nominees if elected would effectuate an
25 immediate spin-off of Nabisco?
98
1 Frome
2 MR. MASHBERG: Objection to form.
3 MR. LOGAN: Objection.
4 A. I don't remember it being
5 discussed. It's on a platform.
6 Q. Do you know whether Mr. LeBow is
7 soliciting investors -- is soliciting
8 individuals to invest in RJR?
9 A. Not that I know of.
10 Q. Do you know whether or not Mr.
11 LeBow or anyone employed by Brooke Group or
12 New Valley is soliciting individuals to
13 purchase options in RJR?
14 A. Not that I know of.
15 Q. Do you know whether anyone at
16 Brooke Group or New Valley is soliciting
17 individuals to invest in RJR?
18 A. Not that I know of.
19 Q. To your knowledge, does Mr. LeBow
20 hold options to purchase RJR stock?
21 A. I don't know.
22 Q. To your knowledge, does Mr. Icahn
23 hold options to purchase RJR stock?
24 A. I don't know.
25 Q. Do you know a Mr. Lucio Tan?
99
1 Frome
2 A. A man?
3 Q. Yes.
4 A. No.
5 Q. Do you know a Michael Price?
6 A. I know who he is. I don't know
7 him.
8 Q. Have you had any discussions with
9 him relating to RJR?
10 A. No.
11 Q. Do you know a Gary Black?
12 A. No.
13 Q. Do you know Gary Klesch?
14 A. No.
15 Q. Are you familiar with the firm of
16 Wassherstein Parella?
17 A. I know of Wassherstein Parella.
18 Q. Have you had any discussions with
19 anyone at Wassherstein Parella relating to RJR
20 within the past year?
21 A. No.
22 Q. Do you know a Mario Baeza?
23 A. No.
24 Q. Are you familiar with a company
25 called Tabaca Lera?
100
1 Frome
2 A. No.
3 Q. Are you familiar with a company
4 called Intabex?
5 A. No.
6 Q. Are you familiar with an
7 individual named Tony Taberer?
8 A. No.
9 Q. Are you familiar with a company
10 called Rothmans?
11 A. A cigarette.
12 Q. Yes.
13 A. I heard of Rothmans.
14 Q. Have you spoken to anyone at
15 Rothmans with respect to RJR?
16 A. No, ma'am.
17 Q. Are you aware of any proposed
18 transaction that would involve Rothmans and
19 RJR?
20 A. No.
21 Q. Have you had any discussions with
22 Mr. LeBow or anyone else at New Valley or
23 Brooke Group relating to the Investment
24 Company Act of 1940?
25 A. Yes.
101
1 Frome
2 Q. With whom did you have those
3 discussions?
4 A. Mr. Lorber.
5 Q. When did you have those
6 discussions?
7 A. In December.
8 Q. What did you discuss?
9 A. I knew that, I guess I was
10 informed that New Valley had an investment
11 that they were trying to liquidate because
12 they -- before the end of the year, because
13 they were concerned that the investment might
14 be considered a security for Investment
15 Company Act purposes.
16 Q. What was that security?
17 A. It was an investment in a
18 partnership.
19 Q. What was the partnership?
20 A. I think it was called WG Trading
21 or something like that.
22 Q. Has New Valley liquidated that
23 investment?
24 A. I believe it has liquidated
25 almost all of it. Or it has now liquidated
102
1 Frome
2 almost all of it.
3 Q. Did you discuss with Mr. Lorber
4 any other issues relating to the 1940 act?
5 A. No.
6 Q. Did Mr. Lorber discuss RJR as a
7 means through which New Valley could address
8 its status under the 1940 act?
9 MR. MASHBERG: Objection to form.
10 MR. LOGAN: Objection.
11 A. No. No.
12 Q. Did Mr. Lorber discuss any other
13 actions that New Valley was taking?
14 A. No.
15 Q. With respect to the 1940 act?
16 A. No.
17 MR. MASHBERG: Objection to form.
18 MR. LOGAN: Objection.
19 Q. Have you had any meetings with
20 anyone -- let me rephrase that.
21 Within the past year, have you
22 had any discussions relating to RJR with
23 people other than individuals employed by
24 Brooke Group or New Valley?
25 MR. LOGAN: Other than what he's
103
1 Frome
2 already testified to today?
3 MS. SILVERBERG: I said other
4 than individuals employed by Brooke
5 Group and New Valley.
6 A. Talking having social
7 conversations with my girlfriend, you have
8 that already.
9 Q. Other than your girlfriend.
10 MR. MASHBERG: People in his
11 firm?
12 A. I had casual conversations but
13 no, nothing.
14 MR. MASHBERG: Not a great
15 question.
16 Q. Other than your girlfriend and
17 your law partners, with whom have you had
18 those conversations?
19 A. Social acquaintance, a friend,
20 people in the securities industry, people I
21 know. People saw it in the paper, I was a
22 nominee, they called, what was going on, stuff
23 like that.
24 Q. Do you recall what was said
25 during those conversations?
104
1 Frome
2 A. Well, first of all, everybody was
3 incredulous that it said in the paper I was 53
4 years old. Everybody knows I'm not that old.
5 That was a shocking thing. That was the
6 principal thing people were interested in.
7 Q. Anything else that you can recall
8 being discussed?
9 A. How much money was I getting
10 paid, the important stuff.
11 Q. Anything else that you recall?
12 A. Not really.
13 Q. Just so that the record is clear,
14 other than that initial conversation you had
15 with Mr. LeBow and Mr. Lorber in New York,
16 have you had any conversations with Mr. LeBow
17 or Mr. Lorber or anyone else at Brooke Group
18 or New Valley relating to a possible
19 transaction between Liggett and RJR?
20 A. Just what I testified to already.
21 MR. MASHBERG: Off the record.
22 (Discussion off the record.)
23 MS. SILVERBERG: I would like to
24 mark as Frome Exhibit 5, a document
25 bearing production No. RF 031-A.
105
1 Frome
2 (Schematic, bearing production
3 No. RF 031-A marked Frome Exhibit
4 5 for identification, as of this
5 date.)
6 Q. Can you identify this document?
7 A. Yes.
8 Q. What is this document?
9 A. This is the Magna Carta.
10 This is a schematic that I
11 prepared during the Sard meeting that explains
12 the transaction which occurred a while ago,
13 maybe in '94 or something, I see it says 1994
14 here, in which RJR paid down certain
15 liabilities and distributed certain assets and
16 so forth.
17 Q. Do these notes reflect a
18 conversation that took place at the Sard
19 meeting?
20 A. Yes. Ben LeBow made a
21 presentation and I don't remember really what
22 happened. These were notes on it, in which
23 this paydown of debt occurred and in effect he
24 demonstrated the paydown was actually a
25 distribution of assets, and if the Nabisco
106
1 Frome
2 distribution were a fraudulent conveyance,
3 than this would also be a fraudulent
4 conveyance.
5 Q. Could you explain that reasoning?
6 A. Well, if you made a distribution
7 of assets in 1994 and in 1996, either would be
8 considered a fraudulent conveyance if the
9 company was insolvent, I guess, at the time of
10 distribution.
11 Q. Why did Mr. LeBow believe that
12 this transaction, that the -- let me rephrase
13 that.
14 Did Mr. LeBow state why he
15 believed that the transaction reflected in
16 these notes was a distribution of assets?
17 A. Well, I don't recall the
18 particulars, but he did explain it at that
19 time.
20 Q. Do you have any recollection as
21 to what he explained on that matter?
22 A. It was pretty complicated, as you
23 can see.
24 Q. Did you review this document in
25 preparation for your deposition?
107
1 Frome
2 A. This document?
3 Q. Yes.
4 A. When the gentlemen were at my
5 office last week I looked at it. Yes.
6 Q. As you sat here today for your
7 deposition, did you recall that this document
8 existed?
9 MR. MASHBERG: Before you showed
10 it to him?
11 MS. SILVERBERG: Yes.
12 A. I saw it. I didn't think about
13 it.
14 Q. When I asked you earlier whether
15 you recalled anything else that occurred at
16 the Sard meeting, were you aware that these
17 notes existed?
18 A. No, I didn't think about it.
19 Q. Having shown you these notes, do
20 you now have any further recollection as to
21 what was discussed at the Sard meeting?
22 A. No.
23 Q. I'm going to take you through the
24 document just so that we can get your
25 handwriting clear. Do you see at the top?
108
1 Frome
2 A. I guess that means tobacco
3 liability or something, right?
4 Q. Is that the text on the top line
5 of text all the way to the left in the circle?
6 A. Yes.
7 Q. Says "Tobacco liability"?
8 A. I think so.
9 Q. And then just to the right of
10 that there is a vertical line?
11 A. Yes.
12 Q. Just to the right of that there
13 are two letters, what do those letters say?
14 A. I would say "RN."
15 Q. Does that stand for RJR Nabisco?
16 A. RN? No.
17 Q. What would RN stand for?
18 A. I have no idea.
19 Q. Do you see text in the circle
20 following the reference?
21 A. 8-B.
22 Q. Under that?
23 A. Something D, PO, B-I-D
24 Q. P-O B-I-D. Do you know what that
25 refers to?
109
1 Frome
2 A. No.
3 Q. Could that be a reference to
4 public as in public debt?
5 A. Could be.
6 Q. In the circle immediately to the
7 right of that?
8 A. Says "2-B bank."
9 Q. Did the reference to 8-B refer to
10 8 billion?
11 A. Must be.
12 Q. Does that refresh your
13 recollection as to the letters underneath?
14 A. Could be public debt, it would
15 make sense if it did.
16 MR. MASHBERG: She is asking if
17 it refreshes your recollection at the
18 time.
19 A. I don't remember what I wrote.
20 Q. You see there is a line, a
21 vertical line going down joined by a
22 horizontal line going across?
23 A. Yes.
24 Q. Then there are two more vertical
25 lines, one on the right and one on the left,
110
1 Frome
2 do you see that?
3 A. Yes.
4 Q. Taking the circled line on the
5 left, it ends in a circle?
6 A. Says "Reynolds."
7 Q. Following the vertical line on
8 the right?
9 A. Says "Nabisco."
10 Q. Above the word Nabisco, there is
11 a number; does that say '94?
12 A. Yes.
13 Q. Would that indicate 1994?
14 A. Yes.
15 Q. To the right, a little bit above
16 '94, there is a word. What is that word?
17 A. "Add" you mean?
18 MR. MASHBERG: She means here.
19 A. Above that?
20 Q. Yes.
21 A. Intercompany.
22 Q. How would you read the text under
23 "Interco"?
24 A. It says "4 billion intercompany
25 debt."
111
1 Frome
2 Q. What's the word immediately to
3 the left of the 4 billion?
4 A. Add.
5 Q. Underneath the 4 billion in debt
6 there is some text in the circle?
7 A. "2 billion public, 2 billion
8 bank."
9 Q. To the left of the circle, there
10 is a short either a short word or some
11 letters?
12 A. "Got"; I guess it says "Got."
13 Q. Just below the circle, what does
14 the text say?
15 A. "Borrow 2 billion, pay off 2
16 billion at RN level." Maybe it does say RJR.
17 Q. Could that be Reynolds Holdings
18 or RJR Holdings?
19 A. Maybe some other company in
20 there.
21 Q. To the left of that last box,
22 there is a narrow rectangle above a circle?
23 A. Says "Reduce value." "1. Reduce
24 value."
25 Q. And 2?
112
1 Frome
2 A. "2. Hurt higher multiple of
3 earnings."
4 Q. Hurt?
5 A. I think so, yes.
6 Q. Starting at the top, do you
7 recall what the 8 billion referred to?
8 A. No.
9 Q. Do you know what the 2 billion
10 referred to?
11 A. No.
12 Q. Do you know what the $4 billion
13 in intercompany debt referred to?
14 A. No.
15 Q. Do you have any recollection?
16 A. No.
17 Q. Do you know what the reference
18 below to 2 billion public and 2 billion bank
19 refers to?
20 A. I believe it's the combination of
21 the, that adds up to the 4 billion.
22 Q. Do you know what the reference --
23 A. Intercompany? I don't know what
24 it means really.
25 Q. Do you know what the reference
113
1 Frome
2 below it to "borrow 2 billion, pay off 2
3 billion at RN level" refers to?
4 A. Not really.
5 Q. Do you know what the note "Reduce
6 value" refers to?
7 A. No.
8 Q. Do you know what the reference to
9 "Hurt higher multiple of earnings" refers to?
10 A. No.
11 Q. Do you recall anything else from
12 Mr. LeBow's presentation on the subject?
13 A. No, ma'am.
14 Q. Was there any discussion of the
15 subject other than Mr. LeBow's presentation?
16 A. I don't remember.
17 Q. Did Mr. LeBow distribute any
18 materials?
19 A. No, just the fat book that you
20 have.
21 MS. SILVERBERG: I'm going to
22 mark as Frome Exhibit 6, a document
23 bearing production Nos. RF 33 through
24 RF 116.
25 (Multipage Document dated January
114
1 Frome
2 of 1996 at bottom, bearing
3 production Nos. RF 33 through RF
4 116, marked Frome Exhibit 6 for
5 identification, as of this date.)
6 MR. MASHBERG: You want to ask
7 him a question.
8 Q. Can you identify the document?
9 A. Yes. Frome Exhibit 6.
10 Q. Have you ever seen that document
11 before?
12 A. You know, I don't remember this
13 thing. I guess they must have maybe gave this
14 out at the --
15 MR. MASHBERG: Don't guess.
16 A. I don't know.
17 Q. Well, let me call your attention
18 to the bottom of the front page which I think
19 bears a date January of 1996?
20 A. Yes.
21 Q. Do you see that?
22 A. Yes.
23 Q. Does that refresh your
24 recollection as to when you might have
25 received this document?
115
1 Frome
2 A. No. I'm not sure how I got it.
3 Q. Have you had any discussions
4 relating to RJR after the Friars Club meeting?
5 A. Yes.
6 Q. Have you had any meetings with
7 Mr. Lorber or Mr. LeBow relating to RJR after
8 the Friars Club meeting?
9 A. No.
10 Q. Have you had any telephone
11 discussions with Mr. LeBow relating to RJR
12 following the Friars Club meeting?
13 A. No.
14 Q. Have you had any discussions with
15 Mr. Lorber relating to RJR following the
16 Friars Club meeting?
17 A. Yes.
18 Q. How many discussions?
19 A. Not many. Maybe two, three at
20 the most.
21 Q. When were these discussions?
22 A. These were conversations, you
23 know, Happy New Year and stuff and in the
24 midst how RJR, he told me last week he is
25 working like a dog visiting shareholders
116
1 Frome
2 around the country so forth and so on. Very
3 optimistic.
4 Q. Did he mention anything else
5 relating to RJR?
6 A. No, just how it's going, it was
7 like a political campaign approach.
8 Q. Have you spoken to any RJR
9 shareholders?
10 MR. LOGAN: When?
11 Q. At any point from October 1, 1995
12 through the present?
13 MR. MASHBERG: Other than Mr.
14 LeBow?
15 A. Yes, unrelated to LeBow, yes.
16 Q. Have you spoken to RJR
17 shareholders with respect to the consent
18 solicitation?
19 A. Not really.
20 Q. Have you discussed the consent
21 solicitation with any RJR shareholders?
22 A. No.
23 Q. Have you discussed a spin-off
24 with Nabisco with any RJR shareholders?
25 A. No, except to say that's the
117
1 Frome
2 platform of our group.
3 Q. Were these communications that
4 were initiated by you or the shareholder?
5 A. They were people I knew otherwise
6 and just happened to mention it.
7 Q. Were you calling them for the
8 purpose of discussing RJR?
9 A. No.
10 MR. LOGAN: Objection to form.
11 MR. MASHBERG: He never said he
12 called anybody.
13 Q. Did you initiate these
14 conversations for the purposes of discussing
15 RJR?
16 A. No.
17 MR. MASHBERG: Wait. That's
18 another bad question. Ask him if he
19 initiated the conversation.
20 Q. Did you initiate these
21 conversations with the shareholders?
22 A. No.
23 Q. Did they initiate them with you?
24 A. No. They were all conversations
25 that had nothing to do, conversations relating
118
1 Frome
2 to other subjects principally and RJR was just
3 mentioned. It was one person particularly who
4 would have been a stockholder.
5 Q. With whom did you have these
6 conversations?
7 A. A woman named Patty Shane.
8 Q. Who is Patty Shane?
9 A. She is a principal at a firm
10 called Wolff & Company.
11 Q. How do you spell that?
12 A. I don't know. W-O-L-F-F.
13 Q. What did you say to her about
14 RJR?
15 A. Nothing. She just said she has
16 been buying stock since it is going up. She
17 thinks it is a buy. She is like a regular
18 stockholder. If they do the spin-off, the
19 stock can go up even higher.
20 Q. Did you discuss Liggett with her?
21 A. No.
22 MS. SILVERBERG: I would like to
23 mark as Frome Exhibit 7, a document
24 bearing production Nos. RF 24 through
25 27.
119
1 Frome
2 I will mark three documents, one
3 bearing production Nos. 24 through 27,
4 second document bearing production Nos.
5 28 through 31. Just two documents.
6 MR. LOGAN: Exhibits 7 and 8.
7 MS. SILVERBERG: We can mark them
8 both as Exhibit 7 if you prefer.
9 MR. LOGAN: I don't care. I'm
10 asking.
11 MS. SILVERBERG: They can both be
12 marked as 7.
13 (Press release and accompanying
14 letter, bearing production Nos.
15 24 through 27 and Nos. 28 through
16 31, marked Frome Exhibit 7 for
17 identification, as of this date.)
18 Q. Mr. Frome, can you identify these
19 documents?
20 A. Yes, Exhibit 7 is a press release
21 and -- first part is press release and second
22 part is a letter.
23 Q. When did you receive these
24 documents?
25 A. I don't remember.
120
1 Frome
2 Q. From whom did you receive these
3 documents?
4 A. I don't know.
5 MS. SILVERBERG: I'm going to
6 mark as Exhibit 8, a document bearing
7 production No. RF 002.
8 (Page from Mr. Frome's diary,
9 December 14, 1995, bearing
10 production No. RF 002, marked
11 Frome Exhibit 8 for
12 identification, as of this date.)
13 Q. Can you identify that document?
14 A. Yes.
15 Q. What is it?
16 A. A page from my diary, December
17 14, 1995, a great day.
18 MS. SILVERBERG: Can the reporter
19 please repeat the answer?
20 A. You want me to repeat that?
21 Q. I did not hear.
22 A. A photostat of a page of my diary
23 December 14, 1995.
24 Q. Was that the day of the Friars
25 Club meeting?
121
1 Frome
2 A. Yes.
3 MS. SILVERBERG: I'm now going to
4 mark as Exhibit 9, a series of
5 documents that bear sequential Bates
6 Nos. from 3 to 20.
7 (Group of faxes, bearing
8 production Nos. 3 through 20,
9 marked Frome Exhibit 9 for
10 identification, as of this date.)
11 Q. Mr. Frome, could you identify
12 these documents?
13 A. Yes, ma'am.
14 Q. What are they?
15 A. They are a bunch of faxes I
16 received.
17 Q. These are faxes that you received
18 from individuals at Brooke Group?
19 A. Yes. Says from Bryant Kirkland.
20 MS. SILVERBERG: I would like to
21 mark as Exhibit 10, three documents
22 that were produced at the beginning of
23 this deposition and do not bear
24 production numbers. The first document
25 says "Fax" and is dated January 24,
122
1 Frome
2 1996. The second document, the cover
3 sheet says "Fax" and is dated January
4 22, 1996 and the third document is
5 again a fax dated January 24, 1996.
6 (Three documents, fax dated
7 January 24, 1996; fax dated
8 January 22, 1996 and fax dated
9 January 24, 1996, marked Frome
10 Exhibit 10 for identification, as
11 of this date.)
12 Q. Mr. Frome, can you identify these
13 documents?
14 A. Yes. They are some faxes I
15 received from Brooke Group in January, last
16 week or so.
17 Q. Have you had any conversations
18 with the other nominees to the RJR board other
19 than at the two meetings you have described?
20 A. Yes.
21 Q. With whom did you have
22 discussions?
23 A. Rouben Chakalian.
24 Q. When did you meet Mr. Chakalian?
25 A. Probably two or three days before
123
1 Frome
2 Christmas.
3 Q. Where did you meet him?
4 A. Madison Avenue out in the street.
5 We were not in a bar.
6 Q. Was this a scheduled meeting?
7 A. No, no, I was walking with my
8 daughter. We were doing some Christmas
9 shopping and he was walking: Hi. Hi. Merry
10 Christmas.
11 Q. Did you discuss RJR with him?
12 A. No, discussed the weather and
13 Christmas, Christmas holiday, and I was going
14 down to Anguilla.
15 Q. Did you have discussions with any
16 of the other nominees to the RJR board?
17 A. No, no. Is George Levin a
18 nominee?
19 Q. No, he is not.
20 Have you had discussions with
21 George Levin?
22 A. No, I don't know who the guy is.
23 I am just curious.
24 MR. MASHBERG: The witness is
25 looking at Exhibit 10 and you see, is
124
1 Frome
2 that where you are getting the name?
3 A. Yes. Never heard of the guy.
4 MS. SILVERBERG: Off the record.
5 Thank you Mr. Frome, I have no
6 further questions.
7 THE WITNESS: Thank you.
8 MR. LOGAN: I have no questions.
9 BY MS. SILVERBERG:
10 Q. I have a few more questions, Mr.
11 Frome. I would like to have the reporter mark
12 as Frome Exhibit 11, a document bearing
13 production No. RF 32.
14 (Letter from Bryant Kirkland to
15 Mr. Frome, bearing production No.
16 RF 32, marked Frome Exhibit 11
17 for identification, as of this
18 date.)
19 Q. Mr. Frome, can you identify this
20 document?
21 A. Yes, it's a letter from Bryant
22 Kirkland which evidently enclosed the exhibit
23 previously that was given to me.
24 Q. Does this refresh your
25 recollection as to how you got that consent?
125
1 Frome
2 A. It came by Federal Express.
3 MS. SILVERBERG: Thank you Mr.
4 Frome. I have no further questions.
5 (Time noted: 6:20 P.M.)
6 __________________________
7 Robert L. Frome
8
9
10 Subscribed and sworn to
11 before me this______day
12 of_________________1996.
13
14
15
16
17
18
19
20
21
22
23
24
25
126
1
2
C E R T I F I C A T E
_ _ _ _ _ _ _ _ _ _ _
3
STATE OF NEW YORK )
4 ) ss.:
COUNTY OF NEW YORK )
5
I, DONNA BRUNCK, a Certified
6
Shorthand Reporter and Notary Public within
7
and for the State of New York, do hereby
8
certify:
9
That I reported the proceedings in
10
the within-entitled matter, and that the
11
within transcript is a true record of
12
such proceedings.
13
I further certify that I am not
14
related, by blood or marriage, to any of
15
the parties in this matter and that I am
16
in no way interested in the outcome of
17
this matter.
18
IN WITNESS WHEREOF, I have hereunto
19
set my hand this________day of__________,
20
1996.
21
__________________________
22 DONNA BRUNCK, CSR
23
24
25
127
1
2 January 30, 1996
I N D E X
_ _ _ _ _
3 WITNESS PAGE
_______ ____
ROBERT L. FROME
4 Examination by Ms. Silverberg 4
E_X_H_I_B_I_T_S
_ _ _ _ _ _ _ _
5 FROME _____
FOR_IDENTIFICATION PAGE
___ ______________ ____
6 1 Subpoena issued to Robert L.
Frome dated December 19, 1995 9
7
2 Photostat of part of Mr.
8 Frome's 1995 diary 44
9 3 Multipage document, bearing
production Nos. RF 117
10 through RF 253
11 4 Document, bearing production
Nos. RF 21 through RF 23 92
12
5 Schematic, bearing production
13 No. RF 031-A 104
14 6 Multipage Document dated January
of 1996 at bottom, bearing
15 production Nos. RF 33 through
RF 116 113
16
7 Press release and accompanying
17 letter, bearing production Nos.
24 through 27 and Nos. 28
18 through 31 119
19 8 Page from Mr. Frome's diary,
December 14, 1995, bearing
20 production No. RF 002 120
21 9 Group of faxes, bearing production
Nos. 3 through 20 120
22
10 Three documents, fax dated January
23 24, 1996; fax dated January 22,
1996 and fax dated January 24, 1996 122
24
11 Letter from Bryant Kirkland to Mr.
25 Frome, bearing production No.RF 32 124
128
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
1
==============================================================================
In The Matter Of:
RJR NABISCO HOLDINGS CORP. v.
BENNETT S. LEBOW et al.
----------------
RICHARD J. LAMPEN
Vol. 1, January 29, 1996
----------------
CLASSIC REPORTING, INC.
13 WEST 36th STREET
NEW YORK, NY 10018
(212) 268-2590
Original File rl012996.asc, 195 Pages
Min-U-Script[Registered] File ID: 1214369441
Word Index included with this Min-U-Script[Registered]
==============================================================================
==============================================================================
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
-------------------------------------x
:
RJR NABISCO HOLDINGS CORP., :
:
Plaintiff, :
:
-against- : 6:95CV00812
:
BENNETT S. LEBOW, BROOKE GROUP LTD., :
And CARL C. ICAHN, :
:
Defendants. :
:
-------------------------------------x
January 29, 1996
10:05 A.M.
Deposition of RICHARD J. LAMPEN,
taken by Plaintiff pursuant to subpoena, at
the law offices of Wachtell Lipton Rosen &
Katz, 51 West 52nd Street, New York, New York
10019, before Donna Brunck, a Certified
Shorthand Reporter and Notary Public within
and for the State of New York.
CLASSIC REPORTING, INC. (212) 268-2590
2
1
2 A P P E A R A N C E S:
3 WACHTELL LIPTON ROSEN & KATZ
Attorneys for Plaintiff
4 51 West 52nd Street
New York, New York 10019
5
BY: RACHELLE SILVERBERG, ESQ.
6
7 MILBANK, TWEED, HADLEY & McCLOY
Attorneys for Defendants
8 and the Witness
1 Chase Manhattan Plaza
9 New York, New York 10005-1413
10 BY: MICHAEL L. HIRSCHFELD, ESQ.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
3
1
2 IT IS HEREBY STIPULATED AND AGREED by
3 and among the attorneys for the respective parties
4 herein that the sealing, filing and certification
5 of the within deposition be waived; that such
6 deposition may be signed and sworn to before any
7 officer authorized to administer an oath, with the
8 same force and effect as if signed and sworn to
9 before a judge of this court.
10 IT IS FURTHER STIPULATED AND AGREED
11 that all objections, except as to the form, are
12 reserved to the time of the trial.
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
4
1 Lampen
2 R I C H A R D J. L A M P E N,
3 having been first duly sworn by the
4 Notary Public (Donna Brunck), was
5 examined and testified as follows:
6 EXAMINATION BY MS. SILVERBERG:
7 Q. Could you please state your name
8 and address for the record?
9 A. My name is Richard J. Lampen, and
10 my address is 350 Costa Brava Court, Coral
11 Gables, Florida.
12 Q. What is your business address?
13 A. My business address is 100
14 Southeast Second Street, Miami, Florida.
15 Q. Have you ever been deposed
16 before?
17 A. I have.
18 Q. How many times?
19 A. I'm not certain. I would say
20 probably four or five times.
21 Q. When was the first time you were
22 deposed?
23 MR. HIRSCHFELD: You want just
24 the date?
25 MS. SILVERBERG: The date, yes.
CLASSIC REPORTING, INC. (212) 268-2590
5
1 Lampen
2 A. I would guess around 1990.
3 Q. Were you a party in that matter
4 or just a witness?
5 A. I was a witness.
6 Q. What was the matter?
7 MR. HIRSCHFELD: Could I ask what
8 the relevance of that question is?
9 MS. SILVERBERG: I'm just trying
10 to get some background information on
11 the witness.
12 MR. HIRSCHFELD: I don't think
13 it's relevant background information
14 given the scope of the examination that
15 has been directed by the court to find
16 out what matters this witness has given
17 deposition testimony in prior to today.
18 Q. Before what court was that
19 testimony given?
20 MR. HIRSCHFELD: Same objection.
21 You don't have to answer that question.
22 Q. When was the next time that your
23 deposition was taken?
24 A. 1993.
25 Q. Were you a party in that
CLASSIC REPORTING, INC. (212) 268-2590
6
1 Lampen
2 litigation?
3 A. I was not.
4 Q. Was that deposition taken action
5 pending in federal court?
6 MR. HIRSCHFELD: I'm going to
7 direct the witness not to answer. Same
8 objection.
9 Q. When was the next time your
10 deposition was taken?
11 A. 1994.
12 Q. Were you a party in that
13 litigation?
14 A. I was not.
15 Q. When was the next time your
16 deposition was taken?
17 A. Today.
18 Q. Are those all the times that you
19 can recall that your deposition has been
20 taken?
21 A. That's all that I recall.
22 Q. Are you here today pursuant to
23 subpoena?
24 A. I am.
25 Q. Have you seen the subpoena?
CLASSIC REPORTING, INC. (212) 268-2590
7
1 Lampen
2 A. Yes.
3 Q. Did you see a document --
4 withdraw that.
5 Was there a document request
6 attached to that subpoena?
7 A. I don't recall.
8 MS. SILVERBERG: Off the record.
9 (Discussion off the record.)
10 Q. Are you aware that RJR has served
11 upon defendants a first request for production
12 of documents?
13 A. I am aware that there has been a
14 document request made.
15 Q. Do you understand who that
16 document request was made to?
17 A. I don't have any recollection of
18 ever having seen the document.
19 MS. SILVERBERG: Let me mark as
20 Exhibit 1, RJR's application to
21 schedule expedited discovery.
22 (RJR's application to schedule
23 expedited discovery marked Lampen
24 Exhibit 1 for identification, as
25 of this date.)
CLASSIC REPORTING, INC. (212) 268-2590
8
1 Lampen
2 Q. I will place before you what's
3 been marked as Lampen Exhibit 1 and as you
4 will see, I have flagged a page in the middle
5 which contains plaintiff's first request for
6 the production of documents and ask you have
7 you ever seen that document before?
8 A. I may have, but I don't recall.
9 Q. Did you undertake any search of
10 files in response to that document request?
11 MR. HIRSCHFELD: Well, since the
12 witness doesn't recall whether or not
13 he has seen this document request, I
14 don't think it's fair to ask him
15 whether or not he undertook a search of
16 files in response to it. I have no
17 objection if you want to ask the
18 witness whether he was involved at all
19 in any search of files or preparation
20 of documents for production in this
21 case.
22 Q. Were you involved at all in a
23 search of files in the preparation of
24 documents for production in this case?
25 A. Only to the extent I was asked to
CLASSIC REPORTING, INC. (212) 268-2590
9
1 Lampen
2 provide our counsel with my files.
3 Q. Which files were those?
4 A. Files that I have relating to RJR
5 matters.
6 Q. Did you search your files that
7 related to RJR matters?
8 A. I don't know that I searched
9 them. I turned my files over to our counsel.
10 Q. Where were these files located?
11 A. In my file cabinet.
12 Q. Is this a file cabinet that you
13 keep at your home, at your office?
14 A. My office.
15 Q. This is your office at New
16 Valley?
17 A. Correct.
18 Q. The files that you ultimately
19 turned over to your counsel, how are those
20 files created and maintained?
21 A. They are maintained by myself and
22 by my secretary.
23 Q. What documents do you ordinarily
24 put in these files?
25 MR. HIRSCHFELD: Note an
CLASSIC REPORTING, INC. (212) 268-2590
10
1 Lampen
2 objection to form. The witness can
3 answer. I don't want to belabor this.
4 A. I mean generally any document
5 that I think relevant to save, I would put in
6 my files.
7 Q. Do you have a practice as to what
8 types of documents you save and what types of
9 documents you file?
10 A. Other than what I just said, no.
11 I mean, I save documents that I think are
12 relevant that I might have some future use
13 for.
14 Q. Would all documents that you have
15 relating to RJR that you have saved, would
16 they be found in the files that you turned
17 over to your counsel?
18 A. Yes, they should be.
19 Q. Did you search any files or --
20 let me withdraw that. Did you turn over to
21 counsel any files other than those relating to
22 RJR?
23 A. My recollection is that I may
24 have turned over some files I had that related
25 to the Investment Company Act of 1940. I
CLASSIC REPORTING, INC. (212) 268-2590
11
1 Lampen
2 turned over whatever I was asked. I don't
3 remember. I remember those two.
4 Q. When you say files relating to
5 RJR, what do you mean when you say relating to
6 RJR?
7 A. Materials that have some
8 connection to RJR. I don't know how else to
9 say it.
10 Q. Is it fair to say that any
11 documents that you have in your possession
12 relating to RJR would have been turned over to
13 your counsel?
14 A. As far as I know.
15 Q. Do you have any files that you
16 maintain at home?
17 A. I do not.
18 Q. Do you have any office other than
19 the office where these files are located?
20 A. I only have one office, that's at
21 New Valley.
22 Q. Did your review of New Valley
23 minutes -- let me withdraw that.
24 As part of the files that would
25 have been turned over to your counsel, would
CLASSIC REPORTING, INC. (212) 268-2590
12
1 Lampen
2 New Valley minutes have been contained in
3 those files?
4 MR. HIRSCHFELD: Objection to
5 form, you may answer.
6 A. I don't maintain the New Valley
7 minutes in my files.
8 Q. Who maintains the New Valley
9 minutes?
10 A. In the sense of filing the New
11 Valley minutes, we have a paralegal who makes
12 sure that the minutes are put into the minute
13 books for our various companies.
14 Q. Who takes the minutes for the New
15 Valley board?
16 A. Generally the corporate secretary
17 does.
18 Q. Who is that?
19 A. Mark Bell.
20 Q. Please describe your educational
21 background.
22 A. I attended college at Johns
23 Hopkins University and law school at Columbia
24 University Law School.
25 MS. SILVERBERG: I would like to
CLASSIC REPORTING, INC. (212) 268-2590
13
1 Lampen
2 go back and mark as Exhibit 2, a
3 subpoena addressed to Richard Lampen in
4 this matter.
5 (Subpoena addressed to Richard
6 Lampen marked Lampen Exhibit 2
7 for identification, as of this
8 date.)
9 Q. Mr. Lampen, I will ask you to
10 review that subpoena and ask you have you seen
11 this subpoena before?
12 MS. SILVERBERG: Let's go off
13 the record.
14 (Discussion off the record.)
15 Q. Going back to your education, you
16 said you went to Johns Hopkins and then
17 Columbia Law School?
18 A. Correct.
19 Q. Did you have any education after
20 Columbia Law School?
21 A. No.
22 Q. What did you do after you
23 graduated from Columbia Law School?
24 A. I joined the law firm of Steel
25 Hector & Davis in Miami.
CLASSIC REPORTING, INC. (212) 268-2590
14
1 Lampen
2 Q. What year was that?
3 A. 1978.
4 Q. How long did you stay at Steel
5 Hector?
6 A. Until May of 1986.
7 Q. What did you do after leaving
8 Steel Hector?
9 A. I joined Salomon Brothers.
10 Q. What was your title when you
11 joined Salomon Brothers?
12 A. Vice president.
13 Q. How long did you stay at Salomon
14 Brothers?
15 A. Until May of 1992.
16 Q. Did your title change at all from
17 1986 through 1992?
18 A. It did.
19 Q. What titles did you have during
20 the course of your stay at Salomon Brothers?
21 A. I believe it was at the beginning
22 of 1989 I was elected a director of Salomon
23 Brothers and effective the beginning of 1991,
24 I was elected a managing director.
25 Q. What did you do when you left
CLASSIC REPORTING, INC. (212) 268-2590
15
1 Lampen
2 Salomon Brothers in 1992?
3 A. I returned to Steel Hector &
4 Davis.
5 Q. When did you leave Steel Hector?
6 A. October 1st of 1995 I joined New
7 Valley.
8 Q. Are you currently on the New
9 Valley board?
10 A. I am not.
11 Q. Do you serve on the boards of any
12 companies?
13 A. Currently as of now, the only
14 board that I am serving on is a company by the
15 name of Roland International Corporation.
16 Q. What type of company is that?
17 A. A real estate company.
18 Q. How long have you been on the
19 board?
20 A. I have been on the board of
21 Roland since I believe September or October of
22 1993, I believe.
23 Q. Were there any boards that you
24 had sat on but no longer sit on?
25 A. Yes, a number.
CLASSIC REPORTING, INC. (212) 268-2590
16
1 Lampen
2 Q. Which companies are those?
3 A. I was on the board of the United
4 States Can Corporation. I was on the board of
5 Trump Plaza Funding. I was on the board of
6 All American Bottling Corporation. I was on
7 the board of the International Bank of Miami
8 N.A. And I was on the board of the holding
9 company for that bank, which I believe is
10 International Bank Corp. of Miami, Inc.,
11 something like that.
12 Q. When were you a director of
13 United States Can Corp.?
14 A. I believe I became, I was a
15 director from February 1990 until
16 approximately February of '91. Then I went
17 back on the board again in August, I don't
18 know, sometime in '91 and served as a director
19 until April of '95.
20 Q. Why did you leave and then come
21 back?
22 MR. HIRSCHFELD: I'm going to
23 object to that question. This has
24 absolutely nothing to do with this case
25 and you know it. Can we move on to
CLASSIC REPORTING, INC. (212) 268-2590
17
1 Lampen
2 something relevant?
3 Q. What years did you serve on the
4 board of Trump Plaza Funding?
5 MR. HIRSCHFELD: I'm going to
6 object to that question, too. I think
7 it's irrelevant.
8 MS. SILVERBERG: Are you going to
9 instruct the witness not to answer?
10 MR. HIRSCHFELD: Yes, I am.
11 Q. What years did you serve as a
12 director of All American Bottling Corp.?
13 MR. HIRSCHFELD: Same objection.
14 Q. What years did you serve on the
15 board of International Bank of Miami, N.A.?
16 MR. HIRSCHFELD: Same objection.
17 Q. What year did you serve on the
18 holding company, International Bank Corp. of
19 Miami, Inc.?
20 MR. HIRSCHFELD: Objection.
21 MS. SILVERBERG: Would I get the
22 same instruction if I asked the witness
23 what type of business each of these
24 companies were in?
25 MR. HIRSCHFELD: Absolutely.
CLASSIC REPORTING, INC. (212) 268-2590
18
1 Lampen
2 Q. Were you ever sued for services
3 that you did as a director of a company?
4 MR. HIRSCHFELD: Objection,
5 direction not to answer.
6 MS. SILVERBERG: On what grounds?
7 MR. HIRSCHFELD: It's not
8 relevant to the issues in this lawsuit.
9 The issues in this lawsuit have to do
10 with an alleged conspiracy on the part
11 of Mr. LeBow, Icahn and Brooke Group
12 Ltd. to acquire control of RJR Nabisco
13 Holdings and purportedly to effect a
14 merger between RJR Reynolds Tobacco
15 and/or RJR Nabisco on the one hand and
16 Liggett Group, Inc. on the other.
17 That's what you asked to take the
18 deposition about.
19 MS. SILVERBERG: That's correct.
20 MR. HIRSCHFELD: I'm certainly
21 going to allow you to take anything and
22 everything of this witness that is
23 conceivably relevant to that. Asking
24 him when he was on the boards of
25 unaffiliated, unrelated companies, why
CLASSIC REPORTING, INC. (212) 268-2590
19
1 Lampen
2 he went on and off those boards and
3 what the business of those
4 unaffiliated, unrelated companies is in
5 my view goes well beyond the scope of
6 what you asked to depose on.
7 Q. Have you ever been a defendant in
8 any litigation?
9 A. Yes.
10 Q. What litigation?
11 MR. HIRSCHFELD: Does the
12 litigation have anything to do with
13 Brooke Group or any affiliate of Brooke
14 Group?
15 THE WITNESS: Does not.
16 MR. HIRSCHFELD: I direct the
17 witness not to answer.
18 Q. Does the litigation have anything
19 to do with alleged violations of federal
20 securities laws?
21 MR. HIRSCHFELD: Direct the
22 witness not to answer.
23 Q. To your knowledge, have you ever
24 been the target of an S.E.C. investigation.
25 MR. HIRSCHFELD: Again, I'm going
CLASSIC REPORTING, INC. (212) 268-2590
20
1 Lampen
2 to direct the witness not to answer.
3 Q. To your knowledge, have you ever
4 been the target of any other federal law
5 enforcement investigation?
6 MR. HIRSCHFELD: Same direction.
7 Q. Have you ever been the target of
8 any law enforcement investigation?
9 MR. HIRSCHFELD: Same direction.
10 Q. While you were at Salomon
11 Brothers, did you ever do any work for Brooke
12 Group?
13 A. No.
14 Q. While you were at Salomon
15 Brothers, did you ever do any work for New
16 Valley?
17 A. No.
18 Q. While you were at Salomon
19 Brothers, did you ever do any work for Liggett
20 Group?
21 A. No.
22 Q. While you were at Salomon
23 Brothers, did you ever do any work for Bennett
24 LeBow?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
21
1 Lampen
2 Q. While you were at Salomon
3 Brothers, did you do any work for any company
4 affiliated with Bennett LeBow?
5 A. I did not.
6 Q. While you were at Steel Hector
7 either before or after you were at Salomon
8 Brothers, did you do any work for Brooke
9 Group?
10 A. I did not.
11 Q. While you were at Steel Hector,
12 did you -- withdraw that.
13 Generally when I refer to your
14 time at Steel Hector, I mean both the time
15 before you were at Salomon Brothers and the
16 time after you were at Salomon Brothers unless
17 I say otherwise.
18 While you were at Steel Hector,
19 did you do any work for New Valley?
20 A. I did not.
21 Q. While you were at Steel Hector,
22 did you do any work for Bennett LeBow?
23 A. I did not.
24 Q. While you were at Steel Hector
25 did you do any work for any company affiliated
CLASSIC REPORTING, INC. (212) 268-2590
22
1 Lampen
2 with Bennett LeBow?
3 A. I did not.
4 Q. Would your answer be the same if
5 I were to ask whether anybody at Steel Hector
6 did any work for any of those entities?
7 A. To the best of my knowledge, the
8 answer would be the same.
9 Q. When did you first meet Bennett
10 LeBow?
11 A. May of 1995.
12 Q. Where did that first meeting take
13 place?
14 A. At his office in Miami.
15 Q. Had you ever spoken to Mr. LeBow
16 prior to that meeting at his office in Miami?
17 A. He had called me on the phone to
18 set the meeting up the day before or some
19 period of time before the meeting.
20 Q. At the time you received that
21 telephone call, did you know anything about
22 Mr. LeBow -- let me withdraw that.
23 At the time you received that
24 telephone call, did you know who Mr. LeBow
25 was?
CLASSIC REPORTING, INC. (212) 268-2590
23
1 Lampen
2 A. Yes.
3 Q. What did you know of Mr. LeBow?
4 A. I knew Mr. LeBow had been a, had
5 been involved with Western Union and various
6 other companies since the late '80s. I knew
7 that he was headquartered in Miami, and I had
8 recently been called about the fact that he
9 was seeking an individual with a legal
10 background to join his organization.
11 Q. When you say you had recently
12 been called about the fact that he was seeking
13 an individual, from whom did you receive that
14 call?
15 A. I had received it from a couple
16 of different sources. One was from a lawyer
17 who had, I had known who knew Mr. LeBow. The
18 second was from a headhunter.
19 Q. At the time that you received
20 that call, I guess the calls from the lawyer
21 and the headhunter, did you know anybody who
22 work at New Valley?
23 A. I didn't.
24 Q. Did you know anybody who worked
25 at Brooke Group?
CLASSIC REPORTING, INC. (212) 268-2590
24
1 Lampen
2 A. I didn't.
3 Q. I take it you did not know Mr.
4 Lorber?
5 A. I did not.
6 Q. Did you know anyone at Liggett?
7 A. No, I did not.
8 Q. I take it you told the headhunter
9 that you were willing to speak with Mr. LeBow?
10 A. I did.
11 Q. Following that phone call but
12 before you spoke with Mr. LeBow, did you
13 undertake to learn anything about Mr. LeBow or
14 Brooke Group?
15 A. Ask me the timing again; what
16 period are you referring to?
17 Q. Between the time that you got
18 this call from the headhunter and the time
19 that you got the call from Mr. LeBow, did you
20 do any research or background work on either
21 Mr. LeBow or Brooke Group?
22 A. Not that I recall.
23 Q. Did you discuss the issue with
24 anybody?
25 A. Probably just with the lawyer who
CLASSIC REPORTING, INC. (212) 268-2590
25
1 Lampen
2 had called me when he had originally called me
3 when he told me Mr. LeBow was looking for
4 someone with a legal background.
5 Q. Did either this lawyer or the
6 headhunter say why Mr. LeBow was looking for
7 someone with a legal background?
8 A. No. I think just that he was
9 looking for someone to fill a general counsel
10 slot which had been vacant for a while at his
11 companies.
12 Q. Who was the lawyer who called?
13 A. Brad Scheler.
14 Q. What firm is he with?
15 A. Fried Frank.
16 Q. Is that with their New York
17 office?
18 A. Yes, it is.
19 Q. What did Mr. LeBow say to you
20 during that first telephone call?
21 A. My recollection is he had said
22 that Brad had said some very good things about
23 me and would I be interested in having lunch
24 with him.
25 Q. Did he say anything else?
CLASSIC REPORTING, INC. (212) 268-2590
26
1 Lampen
2 A. Not that I recall.
3 Q. I take it you agreed?
4 A. I agreed.
5 Q. When was this again? This was in
6 May 1995?
7 A. I believe this was in May.
8 Q. Do you keep an appointment
9 calendar?
10 A. Yes.
11 Q. Did you search that calendar for
12 references to RJR when you were responding to
13 the document request?
14 A. I did not.
15 Q. Is there any reason why you
16 didn't?
17 A. I wasn't asked to.
18 Q. How long did your first meeting
19 with Mr. LeBow take?
20 MR. HIRSCHFELD: I'm going to
21 impose an objection at this point. I
22 certainly would encourage you to
23 inquire of Mr. Lampen whether there was
24 any discussion at any of these meetings
25 with Mr. LeBow that bears upon RJR
CLASSIC REPORTING, INC. (212) 268-2590
27
1 Lampen
2 Nabisco, bears upon anything that is at
3 issue in this lawsuit, but I think we
4 are going very, very far afield if we
5 are going to trace through the entire
6 sequence of Mr. Lampen's discussions
7 with Mr. LeBow over the ensuing five
8 months prior to his coming on board at
9 New Valley. I think most of that, in
10 my view, is thoroughly extraneous to
11 this lawsuit. I don't think this is a
12 proper subject of inquiry but I think
13 you can move through the entire area
14 and get whatever may be relevant to
15 this lawsuit if you simply confine your
16 questions in a manner so that they are
17 calculated to elicit information, if
18 there is any, that bears upon RJR
19 Nabisco as opposed to the universe at
20 large. So I would encourage you to
21 restate your question in a manner that
22 is intended to elicit the relevant
23 information.
24 Q. Did anyone else attend this
25 meeting other than you and Mr. LeBow?
CLASSIC REPORTING, INC. (212) 268-2590
28
1 Lampen
2 A. No.
3 Q. Did Mr. LeBow say to you during
4 this meeting why he was looking for somebody
5 with a legal background?
6 MR. HIRSCHFELD: I will let the
7 witness answer this one question.
8 A. I don't have any recollection.
9 Q. Did Mr. LeBow say why he was
10 looking to hire somebody with a legal
11 background at this time?
12 MR. HIRSCHFELD: Objection,
13 direct the witness not to answer.
14 Q. How long did the meeting last?
15 A. It was a luncheon, I'm assuming
16 an hour, hour and-a-half.
17 Q. At the time of the meeting, did
18 Mr. LeBow say what position was going to be
19 open that he was trying to fill?
20 A. Yes, my recollection is that he
21 indicated that the slot to be filled was the
22 general counsel position.
23 Q. Did Mr. LeBow discuss at that
24 meeting various legal issues that were facing
25 New Valley at that time?
CLASSIC REPORTING, INC. (212) 268-2590
29
1 Lampen
2 A. I have no recollection of that.
3 Q. What did you understand the
4 purpose of the meeting to be?
5 MR. HIRSCHFELD: I'm going to
6 object to the form of the question. We
7 are wasting a lot of time here,
8 Rachelle. He already said the meeting
9 was set up as a result of the telephone
10 call he received from a headhunter and
11 from an attorney indicating that Mr.
12 LeBow was looking to hire somebody with
13 a legal background. Why belabor the
14 obvious here? Let's move on to
15 something that's relevant to the
16 litigation.
17 Q. During this meeting, did Mr.
18 LeBow discuss New Valley and its business?
19 A. My recollection is that he gave
20 me, you know, an overview of the history of
21 New Valley and gave me some understanding of
22 the corporate structure of New Valley and
23 Brooke Group.
24 Q. Did he discuss with you the
25 question as to New Valley's status under the
CLASSIC REPORTING, INC. (212) 268-2590
30
1 Lampen
2 Investment Company Act of 1940?
3 A. I have no recollection of that.
4 Q. I'm sorry, just so that the
5 record is clear, you don't recall either way
6 or you don't recall him saying that?
7 A. I don't recall him saying that.
8 Q. Did he discuss with you at all
9 any contacts he had had or was planning to
10 have with individuals at RJR regarding a
11 possible transaction between RJR and Liggett?
12 MR. HIRSCHFELD: Objection to
13 form.
14 You may answer.
15 A. We never discussed RJR.
16 Q. Did you discuss Liggett during
17 that meeting?
18 A. I believe we did.
19 Q. What did you discuss about
20 Liggett?
21 A. All I recall is us discussing how
22 Liggett fit in the corporate structure, that
23 Liggett was a subsidiary of Brooke and had its
24 own separate high-yield debt.
25 Q. Did you discuss anything else
CLASSIC REPORTING, INC. (212) 268-2590
31
1 Lampen
2 about Liggett?
3 A. We may have, but I don't
4 remember.
5 Q. Did Mr. LeBow mention at all the
6 possibility of merging Liggett with another
7 entity?
8 A. No.
9 Q. Did he say that he was looking
10 into the possibility of merging Liggett with
11 any other entity?
12 A. No.
13 Q. I'm sorry, did you say that Mr.
14 LeBow did not discuss RJR at all?
15 A. No.
16 Q. You did not say that or he did
17 not discuss -- let me withdraw that.
18 Did Mr. LeBow discuss RJR at all
19 during this meeting?
20 A. We never discussed RJR.
21 Q. During the discussion of Liggett,
22 did Mr. LeBow discuss the possibility of
23 creating an international joint venture with
24 Liggett?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
32
1 Lampen
2 Q. Did Mr. LeBow offer you a
3 position at the end of that meeting?
4 A. He did not.
5 Q. Did there come a time that Mr.
6 LeBow offered you a position with New Valley?
7 A. There did.
8 Q. When was that?
9 A. Maybe the second, third week in
10 September.
11 Q. How many times did you meet with
12 Mr. LeBow between that first meeting in May of
13 1995 and the time at which he offered you a
14 position at New Valley?
15 A. I would say -- I would be
16 guessing, but it could we'll have been four,
17 five, six times more in person. We spoke a
18 number of times also.
19 Q. Approximately how many times did
20 you say you spoke on the phone?
21 A. Probably an equal number of
22 times.
23 Q. Would these have been substantive
24 conversations as opposed to scheduling
25 conversations?
CLASSIC REPORTING, INC. (212) 268-2590
33
1 Lampen
2 MR. HIRSCHFELD: Objection to
3 form.
4 Q. How many substantive telephone
5 conversations did you have with Mr. LeBow from
6 your initial meeting in May of 1995?
7 MR. HIRSCHFELD: Objection to
8 form.
9 Q. Until the time he made an offer
10 to you in September of 1995.
11 MR. HIRSCHFELD: Objection to
12 form. Could you define what you mean
13 by "substantive"?
14 Q. Conversations at which you
15 discussed matters of substance as opposed to
16 scheduling an appointment and confirming an
17 appointment or conversations of the like.
18 A. I would guess around a dozen
19 times.
20 MS. SILVERBERG: Can you read
21 back around four questions. I asked
22 him a question.
23 MR. HIRSCHFELD: Let's go off the
24 record.
25 (Discussion off the record.)
CLASSIC REPORTING, INC. (212) 268-2590
34
1 Lampen
2 Q. Just to clarify, how many total
3 telephone conversations do you recall having
4 with Mr. LeBow from your initial meeting in
5 May of '95 through the time at which he
6 extended an offer to you?
7 MR. HIRSCHFELD: I would urge you
8 if you can't state with certainty, say
9 so.
10 A. I definitely can't state with
11 certainty.
12 Q. During any of your conversations
13 with Mr. LeBow either by phone or in person,
14 did you discuss the issue of New Valley's
15 status under the Investment Company Act of
16 1940?
17 MR. HIRSCHFELD: While the
18 witness is thinking, just so the record
19 is clear, when you said at any time
20 during your discussions, you are
21 talking now about the discussions
22 following the first meeting in May 1995
23 and up to and including the
24 conversation of which the offer of
25 employment was extended?
CLASSIC REPORTING, INC. (212) 268-2590
35
1 Lampen
2 MS. SILVERBERG: That's correct.
3 A. I have no recollection.
4 Q. You have no recollection of
5 discussing that matter?
6 A. I have no recollection of
7 discussing that matter with him.
8 Q. During this time frame that we
9 are focusing on between May and mid-September
10 of 1995, did you meet with other individuals
11 at New Valley other than Mr. LeBow?
12 A. I did.
13 Q. Who did you meet with?
14 A. I met with Howard Lorber. I met
15 with Jerry Sauter.
16 Q. How do you spell that?
17 A. S-A-U-T-E-R.
18 Up until the time that he made me
19 the offer and we made the decision to proceed,
20 those were the only two other people that I
21 spoke with.
22 Q. For the record, what is Mr.
23 Lorber's position?
24 A. He is the president and chief
25 operating officer of New Valley.
CLASSIC REPORTING, INC. (212) 268-2590
36
1 Lampen
2 Q. What is Mr. Sauter's position?
3 A. He is vice president and chief
4 financial officer.
5 Q. On how many occasions did you
6 speak either by phone or in person with Mr.
7 Lorber?
8 MR. HIRSCHFELD: During the same
9 period?
10 Q. During the same time period
11 between May and September 1995.
12 A. I would only be guessing, but --
13 MR. HIRSCHFELD: Let's not guess,
14 Mr. Lampen.
15 A. I don't know.
16 MR. HIRSCHFELD: Although I
17 appreciate your desire to be helpful to
18 Ms. Silverberg, it's ultimately not
19 going to help anybody if you speculate.
20 I know Ms. Silverberg does not want you
21 to speculate either.
22 Q. Did you meet in person with Mr.
23 Lorber?
24 A. I did.
25 Q. Did you meet in person with Mr.
CLASSIC REPORTING, INC. (212) 268-2590
37
1 Lampen
2 Lorber on more than one occasion?
3 A. Yes.
4 Q. Did you speak with Mr. Lorber on
5 the telephone?
6 A. I did.
7 Q. Did you do so on more than one
8 occasion?
9 A. I don't remember that.
10 Q. Do you recall whether or not you
11 met with Mr. Lorber on more than five
12 occasions?
13 A. In person?
14 Q. In person. Again between May and
15 September 1995?
16 A. I just don't remember the precise
17 number of times I met with him.
18 Q. Did you meet in person with Mr.
19 Sauter?
20 A. Yes.
21 Q. Did you meet in person with Mr.
22 Sauter on more than one occasion?
23 A. Only on one occasion.
24 Q. Did you speak with Mr. Sauter on
25 the telephone?
CLASSIC REPORTING, INC. (212) 268-2590
38
1 Lampen
2 A. Yes.
3 Q. Did you do so on more than one
4 occasion?
5 A. Yes, I did.
6 Q. Do you have any recollection as
7 to how many times you spoke with him by
8 telephone, again focusing on this May to
9 September time frame?
10 A. Probably two or three times.
11 Q. Prior to the time Mr. LeBow
12 extended you an offer to join New Valley, did
13 you discuss with Mr. Lorber New Valley's
14 status under the Investment Company Act of
15 1940?
16 A. Not that I recall.
17 Q. Prior to the time that Mr. LeBow
18 extended you an offer to join New Valley, did
19 you discuss with Mr. Sauter New Valley's
20 status under the Investment Company Act of
21 1940?
22 A. Not that I recall.
23 Q. Prior to the time that Mr. LeBow
24 offered you a position at New Valley, did you
25 discuss with anybody at New Valley, New
CLASSIC REPORTING, INC. (212) 268-2590
39
1 Lampen
2 Valley's status under the Investment Company
3 Act of 1940?
4 A. Not that I recall.
5 Q. Is New Valley registered as an
6 investment company under the 1940 act?
7 A. It is not.
8 Q. Is New Valley presently claiming
9 a one-year exemption from registration under
10 one of the provisions of the 1940 act?
11 A. It is not.
12 Q. At any point within the past few
13 months, was New Valley claiming a one-year
14 exemption from registration?
15 A. It was.
16 Q. Were you aware of that at the
17 time that Mr. LeBow made you an offer to join
18 New Valley?
19 A. I'm sure I had read it in the
20 10-K or some of their, whatever S.E.C. filing
21 it was disclosed in.
22 Q. Other than reading it in an
23 S.E.C. filing, did you have any other
24 knowledge as to New Valley's status under the
25 1940 act?
CLASSIC REPORTING, INC. (212) 268-2590
40
1 Lampen
2 A. I did not.
3 Q. Prior to the time Mr. LeBow
4 offered you a position at New Valley, did you
5 discuss with him RJR?
6 A. Yes.
7 Q. When is the first discussion with
8 Mr. LeBow that you can recall relating to RJR?
9 A. It would have been after the
10 public announcement by RJR, I believe, towards
11 the tail end of August of '95, that Mr. LeBow
12 had received Hart-Scott-Rodino clearance to
13 buy RJR shares.
14 Q. Did you first learn about Mr.
15 LeBow's Hart-Scott-Rodino filing from the
16 press or from Mr. LeBow?
17 A. From the press.
18 Q. Just so the record is clear,
19 prior to that time, you had no discussion with
20 Mr. LeBow relating to RJR?
21 A. That's correct.
22 Q. Approximately how many
23 discussions had you had with Mr. LeBow between
24 that first meeting in May and the time you
25 discussed it with him at the tail end of
CLASSIC REPORTING, INC. (212) 268-2590
41
1 Lampen
2 August?
3 A. I had a number of them, but I
4 don't know the precise number.
5 Q. During the discussions you had
6 with Mr. LeBow between that first meeting in
7 May and the tail end of August, did you
8 discuss Liggett with him at all?
9 A. Not that I recall.
10 Q. How soon after reading about Mr.
11 LeBow's Hart-Scott-Rodino clearance in the
12 newspaper did you speak to Mr. LeBow about
13 RJR?
14 A. I don't recall.
15 Q. Did you call Mr. LeBow to ask him
16 about RJR?
17 A. I did not.
18 Q. Did Mr. LeBow call you to discuss
19 RJR with you?
20 A. He did not.
21 Q. Did the conversation arise in a
22 conversation that you had with Mr. LeBow at
23 which other topics were discussed as well --
24 actually, let me withdraw that.
25 How did the topic of RJR first
CLASSIC REPORTING, INC. (212) 268-2590
42
1 Lampen
2 come up in a conversation between you and Mr.
3 LeBow?
4 A. My recollection is that it had
5 received publicity at some point between the
6 last time we had spoken and the next meeting
7 that they had received their Hart-Scott-Rodino
8 approval, and I don't recall anything being
9 discussed other than just that fact that they
10 now had this approval.
11 Q. Did you discuss why Mr. LeBow
12 sought Hart-Scott-Rodino clearance?
13 A. No.
14 Q. Did you have an understanding why
15 Mr. LeBow sought Hart-Scott-Rodino clearance?
16 MR. HIRSCHFELD: Other than the
17 obvious one?
18 Q. Other than the obv -- well.
19 MR. HIRSCHFELD: My understanding
20 is there is only one reason why you ask
21 for a Hart-Scott-Rodino clearance,
22 which is to enable you to buy
23 additional shares because you have
24 reached some sort of threshold beyond
25 which you can't go without approval.
CLASSIC REPORTING, INC. (212) 268-2590
43
1 Lampen
2 That much it seems to me is
3 self-explanatory from the fact.
4 Q. Let me rephrase the question.
5 Before you read in the newspaper
6 that Mr. LeBow had received Hart-Scott-Rodino
7 clearance, were you aware that Mr. LeBow was
8 purchasing RJR shares?
9 A. Not that I recall.
10 Q. Did Mr. LeBow personally file a
11 Hart-Scott-Rodino for Hart-Scott-Rodino
12 clearance or did he do it through one of his
13 entities?
14 A. I don't know.
15 Q. Did you ask Mr. LeBow why he was
16 purchasing RJR shares -- let me withdraw that.
17 In your first conversation with
18 Mr. LeBow at which RJR was discussed, did you
19 ask him why he was purchasing RJR's shares?
20 A. I don't recall. I mean, I have
21 no recollection of it. We generally didn't
22 discuss things that were, you know,
23 confidential inside information during the
24 courses of our conversations.
25 Q. So what did you discuss about RJR
CLASSIC REPORTING, INC. (212) 268-2590
44
1 Lampen
2 at this first conversation?
3 A. I just understood that he had
4 filed a Hart-Scott, he or New Valley had filed
5 a Hart-Scott filing as to RJR. I know some
6 point around there there was also a similar
7 filing being made by Carl Icahn.
8 Q. And you did not ask for further
9 information about this, about the
10 Hart-Scott-Rodino filing?
11 A. Generally during our
12 conversations we didn't discuss things that,
13 you know, were not on the public record. I
14 was not yet an employee of New Valley, and it
15 wouldn't have been appropriate.
16 Q. Once there was a
17 Hart-Scott-Rodino filing, it was on the public
18 record. And you still did not discuss it with
19 him?
20 MR. HIRSCHFELD: Objection to
21 form.
22 Q. When was the next conversation
23 you had with Mr. LeBow regarding RJR?
24 A. I don't recall.
25 Q. Prior to the time that Mr. LeBow
CLASSIC REPORTING, INC. (212) 268-2590
45
1 Lampen
2 extended an offer for you to join New Valley,
3 did you discuss RJR at all with Mr. Lorber?
4 A. I think my comments as to Mr.
5 LeBow would be the same as to Mr. Lorber. I
6 never met with Mr. Lorber, I don't believe, I
7 never met with Mr. Lorber when Mr. LeBow was
8 not also present, at least I don't recall
9 having met with him.
10 Q. Let me try again. Do you recall
11 any conversations attended by Mr. Lorber at
12 which RJR was discussed?
13 MR. HIRSCHFELD: At what point in
14 time?
15 Q. Prior to the time at which you
16 were extended an offer to join New Valley.
17 MR. HIRSCHFELD: I'm going to
18 object. It was asked and answered, but
19 he can answer it again.
20 MS. SILVERBERG: No, what I asked
21 him was whether or not he recalled the
22 next conversation he had with Mr. LeBow
23 and he did not. My question now is
24 whether or not he can recall any
25 conversation at which Mr. Lorber was
CLASSIC REPORTING, INC. (212) 268-2590
46
1 Lampen
2 present at which RJR was discussed. I
3 have now moved from the next
4 conversation to any conversation.
5 MR. HIRSCHFELD: But it's still
6 within the same time frame?
7 MS. SILVERBERG: Still within the
8 time frame.
9 MR. HIRSCHFELD: Following the
10 May meeting and prior to the offer
11 being extended to him to join?
12 MS. SILVERBERG: Yes.
13 A. Again, it was only, the only
14 thing I can recall is that at some point after
15 the Hart-Scott-Rodino filing was made, I met
16 again with Mr. LeBow and Mr. Lorber at which
17 in some fashion that fact was mentioned.
18 Q. What fact?
19 A. The fact that they had, you know,
20 that this press release had been issued by RJR
21 about I guess New Valley having gotten
22 Hart-Scott-Rodino approval as to RJR stock.
23 As I said before, I believe around this time
24 there was also an announcement, I can't
25 remember if it was before or after the
CLASSIC REPORTING, INC. (212) 268-2590
47
1 Lampen
2 meeting, where that was discussed about Mr.
3 Icahn also obtaining Hart-Scott-Rodino
4 clearance.
5 Q. Was Mr. Sauter in attendance at
6 this meeting?
7 A. He was not.
8 Q. Did you ever meet with Mr.
9 Sauter -- let me withdraw that.
10 Was Mr. LeBow present at all your
11 meetings with Mr. Sauter?
12 A. No, I met alone with Mr. Sauter.
13 Q. Did you discuss RJR with Mr.
14 Sauter?
15 A. I did not.
16 Q. Prior to the time Mr. LeBow
17 offered you a position with New Valley, did
18 you have any conversations with Mr. LeBow
19 about RJR other than this conversation at
20 which he mentioned the Hart-Scott filing?
21 MR. HIRSCHFELD: Objection to
22 form. The witness can answer.
23 A. That's the only conversation I
24 recall. I mean I may have, but that's the
25 only one that I recall.
CLASSIC REPORTING, INC. (212) 268-2590
48
1 Lampen
2 Q. You said Mr. LeBow offered you a
3 position with New Valley in the second or
4 third week of September; is that correct?
5 A. Yes. Probably the third week
6 sounds better, sounds more correct.
7 Q. Who was the general counsel
8 before -- let me withdraw that. Were you
9 replacing somebody who had recently left New
10 Valley?
11 A. Not recently. I'm not sure of
12 the history. I think several years before
13 there had been a general counsel there --
14 actually, there was, I mean, actually Western
15 Union itself had a general counsel who had
16 been there through the time of the sale of the
17 money transfer business of Western Union in
18 connection with the bankruptcy proceeding. I
19 don't know when, this all occurred prior to my
20 arrival, but I believe the man's name was John
21 Walters. He had been the general counsel of
22 the, of New Valley up -- when it was Western
23 Union up through the bankruptcy.
24 Q. To your knowledge, was there
25 general counsel of New Valley following the
CLASSIC REPORTING, INC. (212) 268-2590
49
1 Lampen
2 bankruptcy up until the time you were hired?
3 A. There was another lawyer at New
4 Valley named Mark Bell who may have used the
5 title, but his involvement, he also had the
6 title of general counsel of the Brooke Group.
7 He may have had the same title at New Valley,
8 I don't know that.
9 Q. Is Mark Bell currently employed
10 by New Valley?
11 A. Yes, he is.
12 Q. And is he still general counsel
13 of Brooke Group?
14 A. Yes, he is.
15 Q. What's his title at New Valley?
16 A. I believe he has a title of
17 secretary and associate general counsel. I
18 think that's the title he has used since I
19 arrived.
20 Q. Is he the only lawyer other than
21 you now at New Valley?
22 A. There is one other lawyer.
23 Q. Who is that?
24 A. Andrew Balog, B-A-L-O-G.
25 Q. Is Mr. Balog also an attorney at
CLASSIC REPORTING, INC. (212) 268-2590
50
1 Lampen
2 Brooke Group?
3 A. He has -- I think he is both an
4 associate general counsel of Brooke Group and
5 of New Valley.
6 Q. Do you have any title at Brooke
7 Group?
8 A. I have the title of special
9 counsel.
10 Q. What is a special counsel?
11 A. Counsel who's involved from time
12 to time on legal matters of the Brooke Group
13 and its affiliates.
14 Q. I apologize if I'm repeating
15 myself, but just to make sure the record is
16 clear, prior to the time you were extended an
17 offer to join New Valley did you meet with
18 anyone at New Valley, other than Mr. LeBow,
19 Mr. Lorber and Mr. Sauter?
20 A. Not that I recall.
21 Q. Did you accept the offer to join
22 New Valley?
23 A. Not immediately. There involved
24 several days of negotiations and discussions
25 back and forth and negotiation of an
CLASSIC REPORTING, INC. (212) 268-2590
51
1 Lampen
2 employment agreement, process which probably
3 spread over a week from the time that he first
4 made the offer to the time that my employment
5 agreement was signed and I was elected an
6 officer by the New Valley board.
7 Q. What is your title now?
8 A. Executive vice president.
9 Q. And general counsel?
10 A. And general counsel and assistant
11 secretary.
12 Q. During that week from the time
13 that Mr. LeBow extended an offer to you and
14 the time your employment agreement was signed,
15 did you speak with Mr. LeBow?
16 A. Yes.
17 Q. Did you discuss matters with him
18 other than simply the negotiation of your
19 employment contract?
20 A. I mean, my recollection is during
21 that period that's what we were primarily
22 focused on was trying to see if we could
23 finalize arrangements for me to join New
24 Valley.
25 Q. During that week before your
CLASSIC REPORTING, INC. (212) 268-2590
52
1 Lampen
2 employment contract was signed, did you
3 discuss RJR with anyone at New Valley or
4 Brooke Group?
5 A. I don't recall.
6 Q. During that week before your
7 employment contract was signed, did you
8 discuss the Investment Company Act of 1940
9 with anyone at Brooke Group or New Valley?
10 A. I don't recall doing that.
11 Q. During the week before your
12 employment contract was signed, did you
13 discuss Liggett with anyone at Brooke Group or
14 New Valley?
15 A. Same answer.
16 Q. Just for the record, do you want
17 to say?
18 A. I don't recall discussing that
19 with Mr. LeBow.
20 Q. Did any of the negotiations over
21 your employment contract in any way involve
22 responsibilities with respect to Liggett?
23 A. No.
24 Q. Did your negotiations with
25 respect to your employment agreement in any
CLASSIC REPORTING, INC. (212) 268-2590
53
1 Lampen
2 way involve discussions over responsibilities
3 relating to the 1940 act?
4 A. No.
5 Q. Did your negotiations over your
6 employment agreement in any way involve
7 discussions over responsibilities regarding
8 RJR?
9 A. No.
10 Q. To whom do you report at New
11 Valley?
12 A. To Mr. LeBow and --
13 Q. Do you report to anyone else?
14 A. And I guess to Mr. Lorber. We
15 don't have a formal structure. I would report
16 to the chief executive officer and the chief
17 operating officer.
18 Q. Who reports directly to you?
19 A. The two lawyers who I mentioned
20 before. That's it.
21 Q. Do you remember the date on which
22 your employment agreement was signed?
23 A. I don't.
24 Q. Would it be the end of September?
25 A. At some point, you know, in the
CLASSIC REPORTING, INC. (212) 268-2590
54
1 Lampen
2 latter part of September.
3 Q. And then you began at New Valley
4 starting October 1st; is that correct?
5 A. Yes.
6 Q. When you initially joined New
7 Valley, did anyone brief you or bring you
8 up-to-date on various matters that were, that
9 you should be advised on? Let me withdraw
10 that and start over.
11 Prior to --
12 THE WITNESS: Could we take a
13 five-minute break?
14 MS. SILVERBERG: Sure.
15 (Recess taken.)
16 Q. Once you joined New Valley, did
17 somebody update you on New Valley's status
18 under the 1940 act?
19 A. I remember after I joined, Mr.
20 LeBow asked me to work with Mr. Lorber on
21 various 1940 act issues.
22 Q. How soon after you began working
23 at New Valley did Mr. LeBow ask you to look
24 into 1940 act issues?
25 A. Sometime right near the beginning
CLASSIC REPORTING, INC. (212) 268-2590
55
1 Lampen
2 of the time I was there full time, Mr. LeBow
3 and I sat down and I remember he gave me a
4 number of projects that he wanted me to get
5 involved with, one of which was working with
6 Mr. Lorber, as I mentioned, on 1940 act
7 issues.
8 Q. Was anyone else present during
9 this discussion?
10 A. I think it was just Mr. LeBow and
11 myself.
12 Q. During this meeting, did Mr.
13 LeBow also talk to you about RJR?
14 A. He may have, but I don't recall.
15 Q. Did Mr. LeBow speak to you at
16 this meeting about Liggett?
17 A. Not that I recall.
18 Q. Did Mr. LeBow give you any
19 materials about the 1940 act?
20 A. No, he didn't.
21 Q. Did Mr. LeBow give you any
22 written materials at all at this meeting?
23 A. No, he didn't.
24 Q. Did you take notes at this
25 meeting?
CLASSIC REPORTING, INC. (212) 268-2590
56
1 Lampen
2 A. No.
3 Q. When you say he wanted you to
4 look at 1940 act issues, what issues were
5 those?
6 MR. HIRSCHFELD: I want to
7 interpose at this point an objection.
8 It's clear that Mr. Lampen was engaged
9 and we are now talking about a point in
10 time at which he is in fact working as
11 general counsel of New Valley
12 Corporation. I have allowed the
13 witness to answer generally with
14 respect to subject matters that he can
15 recall having been part of, this
16 initial discussion with Mr. LeBow who
17 was, of course, the chairman, chief
18 executive officer of New Valley, and I
19 am loath to allow the witness to go
20 into any further detail regarding those
21 discussions which I believe to be the
22 subject of attorney-client privilege.
23 Q. During this discussion with Mr.
24 LeBow, was this the first time that you
25 learned that there were some issues as to New
CLASSIC REPORTING, INC. (212) 268-2590
57
1 Lampen
2 Valley's status under the 1940 act?
3 MR. HIRSCHFELD: Objection as to
4 the form of the question. The witness
5 has already testified that he was aware
6 of the public filings of New Valley's
7 position with respect to the 1940 act.
8 Q. At the time of this discussion
9 with Mr. LeBow, did you have any information
10 other than that that you had read in public
11 filings relating to New Valley's status under
12 the 1940 act?
13 A. Not that I recall.
14 Q. At the time you had this
15 discussion with Mr. LeBow, was New Valley
16 registered under the 1940 act?
17 A. It was not.
18 Q. Was New Valley seeking an
19 exemption under, a one-year exemption from
20 filing -- let me withdraw that. Was New
21 Valley taking the position that it was
22 entitled to a one-year exemption from
23 registering under the 1940 act?
24 A. New Valley was operating under a
25 one-year exemption for the 1940 act.
CLASSIC REPORTING, INC. (212) 268-2590
58
1 Lampen
2 Q. What did that one-year exemption
3 provide?
4 A. An exemption through a date in
5 January of 1996 from registration as an
6 investment company under the 1940 act.
7 Q. Was that exemption pursuant to
8 Rule 3a-2?
9 MR. HIRSCHFELD: I'm going to
10 object to this. I don't believe that
11 the witness is in a position to comment
12 upon what exemption the company was
13 relying on up to the point in time in
14 which he became involved nor am I in a
15 position, absent consultation with the
16 witness, to indicate that the witness
17 can answer that question based on any
18 knowledge subsequently acquired other
19 than in the course of discharging his
20 role as counsel in which he was
21 assisted by other counsel.
22 Q. Has New Valley ever publicly
23 disclosed that it was relying on exemption
24 3a-2 to the 1940 act to give it a one-year
25 exemption from registering under the 1940 act?
CLASSIC REPORTING, INC. (212) 268-2590
59
1 Lampen
2 A. I don't recall off the top of my
3 head whether the S.E.C. disclosure of New
4 Valley specifically cites a rule under the
5 1940 act or not, but you can look in the 10-K
6 and find out the answer.
7 Q. What was the first -- withdraw
8 that. When was the first discussion you
9 recall with Mr. LeBow relating to RJR from
10 October 1st on?
11 A. I don't recall specifically what
12 my first conversation with him, when it was.
13 Q. Do you recall how the topic of
14 RJR first came up?
15 A. I don't.
16 Q. Did there come a time that you
17 learned that New Valley was purchasing RJR
18 stock?
19 A. Yes.
20 Q. When did you learn that?
21 A. Sometime, you know, around the
22 time that I was joining New Valley.
23 Q. Who told you?
24 A. I don't recall who would have
25 told me.
CLASSIC REPORTING, INC. (212) 268-2590
60
1 Lampen
2 Q. Do you recall learning how much
3 RJR stock New Valley had purchased?
4 A. Yes.
5 Q. When did you learn this?
6 A. I don't recall, but I used to on
7 a regular basis learn that information.
8 Q. Was there a regular report that
9 you received that indicated New Valley's
10 purchases of RJR stock?
11 A. There was.
12 Q. Did you save those reports?
13 A. I did not. I mean --
14 MR. HIRSCHFELD: The answer is
15 no. You have answered the question.
16 A. I don't recall saving it. If I
17 have any, they are in my files, but I didn't
18 regularly save every one of those that I got.
19 Q. Did you discuss these purchases
20 with anyone?
21 A. I'm sure I must have discussed
22 them with some of the other people at New
23 Valley.
24 Q. Who did you discuss them with?
25 MR. HIRSCHFELD: Only if you have
CLASSIC REPORTING, INC. (212) 268-2590
61
1 Lampen
2 a specific recollection, Mr. Lampen.
3 If you don't, then don't speculate as
4 to who you may have had discussions
5 with.
6 A. I certainly remember discussing
7 it with Jerry Sauter.
8 Q. What did you discuss with Mr.
9 Sauter?
10 A. I just remember from time to time
11 discussing the amount of stock that had been
12 purchased.
13 Q. Do you recall what you said to
14 him about that?
15 A. No.
16 Q. Do you recall what he said to
17 you?
18 A. I don't.
19 Q. Do you recall discussing it with
20 anyone else?
21 A. I don't recall, no.
22 Q. Did you discuss it with Mr.
23 LeBow?
24 A. I may have, but I don't recall
25 specifically.
CLASSIC REPORTING, INC. (212) 268-2590
62
1 Lampen
2 Q. Did you discuss it with Mr.
3 Lorber?
4 A. Again, would be the same answer.
5 Q. Were New Valley's stock purchases
6 of RJR -- withdraw that.
7 Did you attend New Valley's board
8 meetings?
9 A. I do.
10 Q. Were New Valley's purchases of
11 RJR stock discussed at any New Valley board
12 meeting?
13 A. I know there have been
14 discussions of RJR at New Valley's board
15 meetings. I mean, I don't remember off the
16 top of my head whether status reports were
17 given as to New Valley's purchases.
18 Q. Did the New Valley board
19 authorize the purchase by New Valley of RJR
20 stock?
21 A. I don't know.
22 Q. If the New Valley board had
23 authorized the stock purchases, would that
24 board actually be reflected in New Valley's
25 board minutes?
CLASSIC REPORTING, INC. (212) 268-2590
63
1 Lampen
2 MR. HIRSCHFELD: Objection to
3 form.
4 You may answer, if you can.
5 A. The records of New Valley, the
6 written records of New Valley's board action
7 would be in its minute books.
8 Q. Do you know how much RJR stock
9 New Valley has purchased?
10 A. Approximately, yes.
11 Q. What is that amount?
12 A. I think it's 4.8-some-odd-million
13 shares.
14 Q. Do you know what the dollar
15 amount of those purchases are?
16 A. On what basis?
17 Q. What is the total investment that
18 New Valley currently has in RJR stock?
19 MR. HIRSCHFELD: Objection to
20 form.
21 A. I don't understand the question.
22 Q. How much money has New Valley
23 spent in buying RJR stock?
24 A. What's New Valley's cost?
25 Q. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
64
1 Lampen
2 A. I don't know the answer, but it's
3 approximately $150 million.
4 Q. Is that New Valley's largest
5 investment since its bankruptcy?
6 A. Certainly the largest one since
7 I've joined New Valley.
8 Q. Who decided that New Valley
9 should invest $150 million in RJR stock?
10 A. I wasn't at New Valley at the
11 time that decision was made.
12 Q. Did you ever discuss with anyone
13 the advisability of investing 150 million in
14 RJR stock?
15 A. I did not.
16 Q. Does the New Valley board of
17 directors know that New Valley has invested
18 approximately $150 million in RJR stock?
19 MR. HIRSCHFELD: To your
20 knowledge.
21 Q. To your knowledge?
22 A. Yes.
23 Q. What is the basis of that
24 statement?
25 A. Because I believe from a number
CLASSIC REPORTING, INC. (212) 268-2590
65
1 Lampen
2 of conversations and discussions the board is
3 very familiar with the, with New Valley's
4 activities as to RJR.
5 Q. What conversations were those
6 that you just referred to -- let me restate
7 the question. With whom did you have the
8 conversations you just referred to?
9 A. I didn't say that I had the
10 conversation.
11 Q. Are these conversations that were
12 reported back to you?
13 A. And/or conversations that I was
14 present for.
15 Q. With whom were these
16 conversations that -- let me withdraw that.
17 Just so that the record is clear, are you
18 testifying that you had conversations with
19 directors of New Valley at which RJR was
20 discussed?
21 MR. HIRSCHFELD: Other than Mr.
22 LeBow and Mr. Lorber?
23 Q. Other than Mr. LeBow and Mr.
24 Lorber?
25 A. In some cases yes.
CLASSIC REPORTING, INC. (212) 268-2590
66
1 Lampen
2 Q. Did these discussions include a
3 discussion of the fact that New Valley has
4 invested $150 million in RJR stock?
5 A. I believe so.
6 Q. With whom did you have these
7 discussions?
8 A. I've either had discussions or
9 been at meetings where New Valley's ownership
10 of RJR was discussed I would assume with all
11 the directors.
12 Q. Without assuming, who did you
13 personally have this discussion with?
14 MR. HIRSCHFELD: Discussion of
15 what?
16 Q. Of the fact that New Valley spent
17 $150 million buying RJR stock?
18 MR. HIRSCHFELD: I'm going to
19 object to the form of the question. I
20 think what the witness has testified to
21 is that he can recall being present at
22 discussions regarding RJR at which it
23 was referred to or it was taken as a
24 given or something of that nature.
25 MS. SILVERBERG: I don't think
CLASSIC REPORTING, INC. (212) 268-2590
67
1 Lampen
2 that that's what the witness testified
3 to. I think you are putting words in
4 the witness's mouth.
5 MR. HIRSCHFELD: Let's stop the
6 game-playing. The think the record is
7 abundantly clear that the witness has
8 said, has tried to give you the answer
9 that he was present at discussions at
10 which the size of the investment in RJR
11 Nabisco stock was mentioned.
12 MS. SILVERBERG: I don't --
13 MR. HIRSCHFELD: He also
14 testified that he was not present at
15 the time the decision was made as to
16 the amount of the investment that would
17 be made, and that he did not have any
18 discussion regarding the advisability
19 of making such an investment in such an
20 amount. Now --
21 MS. SILVERBERG: That does not
22 reflect the witness's testimony.
23 MR. HIRSCHFELD: Well, then, you
24 are just not listening, Rachelle.
25 MS. SILVERBERG: He testified
CLASSIC REPORTING, INC. (212) 268-2590
68
1 Lampen
2 that he did not have a discussion with
3 Mr. LeBow about the advisability of the
4 investment. He did not testify -- I
5 did not ask him about discussions with
6 anyone else. As to my question with
7 respect to discussions with anyone
8 else, he said he either had discussions
9 or he assumes Ben had meetings and
10 that's a compound sentence -- instead
11 of guessing as to what the record says,
12 could you read back his last answer,
13 please.
14 (Record read)
15 Q. Let me just ask the witness
16 because I heard "or Ben had meetings," instead
17 of "been at meetings." I just want you to
18 clarify what did you say, that you had been at
19 meetings at which this was discussed or that
20 Ben had meetings at which this was discussed?
21 A. I said been, B-E-E-N at meetings.
22 Q. What was said at these meetings?
23 MR. HIRSCHFELD: I'm going to
24 admonish the witness that if the
25 meetings involved either this witness
CLASSIC REPORTING, INC. (212) 268-2590
69
1 Lampen
2 or another individual acting as counsel
3 for New Valley Corporation engaging in
4 a privileged communication with the
5 directors of New Valley, that the
6 witness so state and decline to answer
7 the question in order to preserve the
8 attorney-client privilege.
9 A. I recollect attending meetings
10 where the -- where discussions were held as to
11 various issues relating to the ownership
12 levels of New Valley of the stock and also
13 issues were discussed about the activities of
14 Brooke Group with respect to the pending
15 consent solicitation.
16 Q. Were these board meetings or were
17 they meetings -- or were they other types of
18 meetings -- let me rephrase that. Did these
19 discussions take place at board meetings?
20 A. Yes.
21 Q. Did you have similar discussions
22 other than at board meetings?
23 A. With certain of the directors,
24 yes.
25 Q. What was discussed at board
CLASSIC REPORTING, INC. (212) 268-2590
70
1 Lampen
2 meetings?
3 MR. HIRSCHFELD: Again I would
4 caution the witness to answer only with
5 respect to discussions which were not
6 for the purpose of obtaining any legal
7 advice and in which no attorney,
8 whether yourself or somebody else,
9 participated as a legal adviser to New
10 Valley or its directors.
11 A. Could you repeat the question,
12 please?
13 (Record read.)
14 A. My answer would be the same
15 answer I gave before.
16 Q. Well, could you be more specific
17 in your answer?
18 MR. HIRSCHFELD: If you can.
19 A. I mean, I don't recall any more
20 detail. I remember there were discussions on
21 those topics of the status reports of where
22 New Valley was in terms of ownership and
23 status reports on what the process was with
24 Brooke Group and the consent solicitation.
25 Q. Do you recall any conversation at
CLASSIC REPORTING, INC. (212) 268-2590
71
1 Lampen
2 a board meeting regarding the advisability of
3 the New Valley continued purchases of RJR
4 stock?
5 A. No.
6 Q. Do you recall any discussion at
7 the board level as to the advisability of any
8 particular amount of stock purchases of RJR
9 stock?
10 A. I remember discussions at the
11 board meeting about the provisions of New
12 Valley's plan of reorganization which imposed
13 limitations on New Valley's, on the aggregate
14 amount of payments that could be made by New
15 Valley for purchases of RJR stock unless
16 certain conditions were met.
17 Q. What conditions were those?
18 MR. HIRSCHFELD: Just so the
19 record is clear, let me ask the witness
20 to clarify whether the plan of
21 reorganization to which he referred
22 makes specific reference to RJR Nabisco
23 or whether there is a generic
24 limitation with respect to the
25 acquisition?
CLASSIC REPORTING, INC. (212) 268-2590
72
1 Lampen
2 THE WITNESS: It was a generic
3 limitation.
4 MR. HIRSCHFELD: Read the pending
5 question back.
6 (Record read.)
7 A. The condition, the primary
8 condition was obtaining a fairness opinion
9 from an identified list of investment banking
10 firms.
11 Q. Under what circumstances was New
12 Valley required to get a fairness opinion?
13 A. My recollection is that the plan
14 of reorganization provided that New Valley
15 could not make payments of more than $75
16 million for the purchase of shares or assets
17 of any one company without having obtained an
18 investment banker's opinion.
19 Q. What would the investment banker
20 be asked to opine upon?
21 MR. HIRSCHFELD: Objection as to
22 form.
23 Q. You just testified that under the
24 plan, New Valley could not make payments of
25 more than $75 million for shares or assets of
CLASSIC REPORTING, INC. (212) 268-2590
73
1 Lampen
2 any company without having obtained an
3 investment banker's opinion; is that correct?
4 A. Correct, with the addition that
5 the $75 million was determined exclusive of
6 purchase money nonrecourse financing.
7 Q. On what topic would the
8 investment banker be giving an opinion?
9 A. I believe the investment banker
10 would be opining that the acquisition in
11 excess of that amount would be fair to New
12 Valley.
13 Q. Is such an opinion necessary only
14 when the transaction may involve a related
15 party or is this for any time New Valley seeks
16 to purchase more than $75 million of shares or
17 assets of a company?
18 A. The provisions of the, that I
19 have just referred to about the $75 million
20 apply regardless of whether or not the entity
21 whose shares or assets are being purchased is
22 in any fashion an affiliate of New Valley.
23 Q. Does the plan require that the
24 investment banker rendering the opinion be an
25 independent financial advisor?
CLASSIC REPORTING, INC. (212) 268-2590
74
1 Lampen
2 A. I don't recall that it uses those
3 words. It does have a list of investment
4 banking firms that are the exclusive potential
5 providers of that opinion.
6 Q. Other than board discussion in
7 connection with this fairness opinion, do you
8 recall any other board discussion relating to
9 New Valley's purchase of RJR stock?
10 MR. HIRSCHFELD: Objection to
11 form.
12 MS. SILVERBERG: What's the
13 objection?
14 MR. HIRSCHFELD: Presumes a
15 limitation of the witness's prior
16 testimony. You can answer.
17 A. I recall board discussions about
18 an expense profit-sharing arrangement that was
19 entered into between New Valley and Brooke
20 Group that related to RJR and that also
21 required receipt of an investment banker's
22 fairness opinion under the terms of New
23 Valley's plan of reorganization.
24 Q. Is this a different investment
25 banker's opinion from the one referred to in
CLASSIC REPORTING, INC. (212) 268-2590
75
1 Lampen
2 your previous answer?
3 A. Well, it relates to a different
4 section of the plan of reorganization.
5 Q. Do you recall any other board
6 discussions relating to New Valley's purchases
7 of RJR stock?
8 A. Yes. I remember board
9 discussions relating to New Valley's
10 engagement of Jeffries & Company as New
11 Valley's financial advisor in connection with
12 its investment in the RJR Nabisco stock.
13 Q. Do you recall any other board
14 discussions of New Valley's purchases of RJR's
15 stock?
16 A. Yes, I recall discussions
17 relating to an agreement entered into between
18 New Valley and an entity affiliated with Carl
19 Icahn which related to New Valley's interest
20 in RJR.
21 Q. Do you recall any other board
22 discussion relating to New Valley's purchases
23 of RJR stock?
24 A. That's all I recall.
25 Q. How many New Valley board
CLASSIC REPORTING, INC. (212) 268-2590
76
1 Lampen
2 meetings have you attended?
3 A. I can recall at least four New
4 Valley board meetings I have attended by in
5 person or participated in if the meetings were
6 being held by telephone.
7 Q. Do you recall when those meetings
8 were?
9 A. There was one held some point in
10 the end of September. There was one held I
11 believe the first week in December.
12 The second one held --
13 Q. Do you mean third? I believe you
14 said one in September and one in December. Do
15 you now mean a third one?
16 A. There was one in September, one
17 in the first week in December, a second one in
18 December held perhaps the middle of the month.
19 There's also a New Valley board meeting held I
20 think around January 12th.
21 Q. Are those the only board meetings
22 that you can recall?
23 A. I believe so.
24 Q. Did you attend the meeting at the
25 end of September?
CLASSIC REPORTING, INC. (212) 268-2590
77
1 Lampen
2 A. I did.
3 Q. The board discussions that we
4 discussed at which the board discussed New
5 Valley's purchases of RJR stock, did they take
6 place at a single meeting or did they take
7 place at various meetings?
8 A. At various meetings.
9 Q. Which is the first board meeting
10 at which you can recall a discussion of New
11 Valley's purchase of RJR stock?
12 A. I believe the first discussion
13 would have been at the September meeting where
14 there would have been a status report as to
15 the amount of purchases at the time of that
16 meeting.
17 Q. Do you recall if anything else
18 relating to New Valley's purchases of RJR
19 stock was discussed at that first meeting at
20 the end of December?
21 A. I believe the, I believe there
22 was also a discussion of the agreements with
23 the affiliate of Carl Icahn.
24 Q. Was anything else discussed
25 during that September meeting relating to New
CLASSIC REPORTING, INC. (212) 268-2590
78
1 Lampen
2 Valley's purchases of RJR stock?
3 A. There may have been, but I don't
4 recall.
5 Q. Do you recall what was discussed
6 at that first December meeting relating to New
7 Valley's purchases of RJR stock?
8 A. Yes. I believe there was a
9 discussion at that December meeting about the
10 expense profit-sharing agreement between
11 Brooke and New Valley. I think there is also
12 a discussion of the $75 million provision from
13 the plan of reorganization. I believe there
14 was also a discussion of the Jeffries
15 potential engagement. And I believe there was
16 also a discussion of the Brooke consent
17 solicitation effort.
18 Q. These were all discussed at the
19 first December meeting?
20 A. Yes.
21 Q. Going back to the September
22 meeting, do you recall approximately how long
23 the board discussed New Valley's purchases of
24 RJR stock?
25 A. No, I don't.
CLASSIC REPORTING, INC. (212) 268-2590
79
1 Lampen
2 Q. What was discussed regarding the
3 affiliate of Carl Icahn?
4 A. What was discussed was the
5 agreement that I had earlier referred to that
6 New Valley subsequently entered into with Carl
7 Icahn relating to New Valley's investment in
8 RJR Nabisco stock.
9 Q. Did the board approve that
10 agreement?
11 A. I don't recall.
12 Q. What was discussed about the
13 agreement?
14 A. I don't recall specifically. My
15 recollection is that Mr. LeBow and Mr. Lorber
16 summarized the proposed terms of the
17 arrangement with Mr. Icahn.
18 Q. Do you recall anything else about
19 the board discussion of New Valley's purchases
20 of RJR stock?
21 A. No, I don't.
22 Q. Do you recall anything else about
23 the board discussion of the agreement with
24 Carl Icahn's affiliate?
25 A. No, I don't.
CLASSIC REPORTING, INC. (212) 268-2590
80
1 Lampen
2 Q. Going back to the first board
3 meeting in September, do you recall what was
4 discussed about the expense and profit-sharing
5 agreement with New Valley?
6 A. I'm not sure which board meeting
7 you are talking about.
8 Q. The first December board meeting?
9 A. You just said September.
10 Q. I'm sorry, December.
11 A. No, I recall that I summarized
12 for the board the details of that arrangement
13 between New Valley and Brooke.
14 Q. Did Carl Icahn attend any New
15 Valley board meeting, to your knowledge?
16 A. Not during the period that I was
17 there.
18 Q. Did you draft the New Valley
19 profit-sharing agreement with Brooke Group?
20 A. No, it was drafted by our
21 counsel.
22 Q. Who is that?
23 A. Milbank Tweed.
24 Q. Was anything else said about the
25 profit-sharing between New Valley and Brooke
CLASSIC REPORTING, INC. (212) 268-2590
81
1 Lampen
2 Group other than your summary to the board?
3 MR. HIRSCHFELD: Again, I'm going
4 to caution the witness in answering the
5 question not to disclose any
6 information that may be subject to the
7 attorney-client privilege.
8 A. We discussed the necessity under
9 the plan of reorganization of obtaining a
10 fairness opinion before entering into that
11 agreement, and the board approved the
12 engagement by the company of Oppenheimer &
13 Company to provide such opinion.
14 Q. Which opinion is this that they
15 were approving?
16 A. Relating to the profit-sharing
17 and expense arrangement.
18 Q. What was discussed at this first
19 December board meeting about -- let me
20 withdraw that.
21 I believe you testified that you
22 also discussed at this first December board
23 meeting the provision in the reorganization
24 plan which calls for a fairness opinion in the
25 event New Valley wants to purchase more than
CLASSIC REPORTING, INC. (212) 268-2590
82
1 Lampen
2 $75 million of stock or assets of a company?
3 A. That's correct.
4 Q. What was discussed about that?
5 A. What was discussed about that was
6 that the board also engaged at that same
7 meeting, Oppenheimer & Company to provide an
8 opinion to the board that acquisition of more
9 than $75 million would be fair.
10 Q. Was anything else discussed about
11 the retention of Oppenheimer?
12 A. I believe that I reviewed with
13 the board the terms of the engagement of
14 Oppenheimer.
15 Q. Did Oppenheimer & Company provide
16 a fairness opinion to New Valley on the
17 fairness of the $75 million investment?
18 A. They have not been asked to.
19 Q. Was Oppenheimer asked to provide
20 any opinion with respect to New Valley's
21 purchases of RJR stock?
22 A. They have not. They have been
23 engaged, but they have not been asked to
24 render an opinion.
25 Q. Did the board authorize the
CLASSIC REPORTING, INC. (212) 268-2590
83
1 Lampen
2 engagement of Oppenheimer in connection with
3 their investment in RJR stock?
4 A. Yes.
5 Q. What did the board authorize with
6 respect to that engagement?
7 A. They authorized to engage
8 Oppenheimer to render an opinion as to the two
9 matters.
10 Q. Did Oppenheimer render an opinion
11 with respect to the profit-sharing agreement
12 between New Valley and Brooke Group?
13 A. It has.
14 Q. But they have not rendered an
15 opinion as to New Valley's purchases of RJR
16 stock?
17 A. That's correct.
18 Q. Why has Oppenheimer -- let me
19 withdraw that. Why has New Valley not asked
20 Oppenheimer to render such an opinion?
21 MR. HIRSCHFELD: I will let the
22 witness answer if the witness is able
23 to do so without either compromising
24 the attorney-client privilege or
25 discussing matters relating to the
CLASSIC REPORTING, INC. (212) 268-2590
84
1 Lampen
2 ongoing strategy of New Valley
3 Corporation for maximizing the value of
4 its investment in RJR Nabisco. If the
5 witness can't answer in compliance with
6 those guidelines, he should so
7 indicate.
8 A. We haven't requested the opinion
9 because we, to request it would require us to
10 pay the second portion of the fee which we
11 have chosen not to do so far.
12 Q. Are there any other reasons why
13 you have not yet asked Oppenheimer to render
14 the second opinion?
15 A. No.
16 Q. Is the board of directors aware
17 that you have not yet asked Oppenheimer to
18 render the second opinion?
19 A. The answer is I don't know.
20 Q. How much would New Valley be
21 required to pay Oppenheimer in the event it
22 renders this second opinion?
23 MR. HIRSCHFELD: I'm going to
24 object and ask what the relevance of
25 that question is?
CLASSIC REPORTING, INC. (212) 268-2590
85
1 Lampen
2 MS. SILVERBERG: Well, they
3 haven't yet rendered an opinion. The
4 answer is because they would have to
5 pay Oppenheimer in the event
6 Oppenheimer renders a second opinion.
7 I would like to know what the magnitude
8 of that payment is.
9 MR. HIRSCHFELD: I understand
10 that, but I fail to understand what the
11 relevance of that inquiry has.
12 MS. SILVERBERG: Well, the
13 opinion to be rendered would go to New
14 Valley's investment in RJR stock.
15 MR. HIRSCHFELD: Yes. I still
16 fail to see any relevance of that
17 inquiry to the issues that have been
18 raised in this lawsuit.
19 MS. SILVERBERG: Are you
20 instructing the witness not to answer?
21 MR. HIRSCHFELD: Yes, I think at
22 this point I will.
23 MS. SILVERBERG: Are you aware
24 that the local rules for the Middle
25 District of North Carolina impose
CLASSIC REPORTING, INC. (212) 268-2590
86
1 Lampen
2 limits on the ability of attorneys to
3 instruct witnesses not to answer and
4 they are not to object to questions
5 other than on grounds of privilege?
6 MR. HIRSCHFELD: I am aware that
7 you are proceeding with this deposition
8 pursuant to an application that you
9 made to the court to inquire into
10 specific matters of this witness in his
11 capacity as a nominee BGL for election
12 to the board of directors of RJR
13 Nabisco.
14 I am further aware that I have
15 allowed you unbelievable latitude in
16 connection with this examination and
17 that you have similarly and persons
18 from your firm have similarly been
19 allowed unbelievable latitude in other
20 examinations of these director
21 nominees. We have permitted you to go
22 far, far beyond what you ever indicated
23 to the court you wished to inquire of
24 these witnesses.
25 I'm going to ask you again if you
CLASSIC REPORTING, INC. (212) 268-2590
87
1 Lampen
2 can suggest to me how it is that the
3 amount of money that needs to be paid
4 for a second fairness opinion from
5 Oppenheimer & Company bears upon the
6 issues in this lawsuit which I
7 understand to allege that there is an
8 undisclosed conspiracy involving Mr.
9 Icahn, Mr. LeBow and Brooke Group to
10 seize control of RJR Nabisco Holdings
11 and to force a merger between Liggett
12 and RJR Nabisco Holdings or RJR
13 Reynolds. If you can explain to me how
14 the amount of the fairness opinion
15 bears upon those issues, I will allow
16 the witness to answer. Thus far, you
17 have not. It has nothing to do with
18 the rules of the Middle District of
19 North Carolina. It has to do with the
20 court order regarding this discovery.
21 You have gone well beyond it.
22 MS. SILVERBERG: For the record,
23 we stated in our application for
24 expedited discovery that the
25 depositions of nominees were expected
CLASSIC REPORTING, INC. (212) 268-2590
88
1 Lampen
2 to last well under a day apiece and we
3 have proceeded with that schedule. We
4 have not been taking undue time with
5 these witnesses and we are proceeding
6 in accordance to the schedule that we
7 told the court we would proceed with.
8 You suggested in your objection
9 that the decision not to proceed for
10 the second opinion may go to the
11 business strategy and maximizing their
12 investment of New Valley and RJR stock.
13 This litigation goes to LeBow's and
14 Brooke Group's intent with respect to
15 RJR. And to the extent that this
16 question might lead to the discovery of
17 admissible evidence, I am going to push
18 ahead with my question.
19 MR. HIRSCHFELD: Okay. The
20 witness answered the question I
21 admonished him as to what issues he
22 ought to bear in mind before answering,
23 and I told him if any of those issues,
24 any of those areas of privilege would
25 be transgressed by an answer, that he
CLASSIC REPORTING, INC. (212) 268-2590
89
1 Lampen
2 ought not to answer. The fact is that
3 he answered the question, thereby
4 indicating that he does not relate to
5 the ongoing strategy of New Valley
6 Corporation and I'm going to persist in
7 my instruction. The amount that New
8 Valley has to pay for a fairness
9 opinion is totally irrelevant.
10 MS. SILVERBERG: It's not the
11 fact that they would have to pay an
12 amount. It's the fact that they did
13 not proceed with obtaining the fairness
14 opinion because they don't want to pay
15 the second amount of the fee, and that
16 is why I am asking what the amount of
17 the -- what portion of the fee would be
18 due. We have wasted more time in this
19 argument back and forth than we would
20 have spent if the witness had simply
21 answered the question and I would have
22 moved on.
23 MR. HIRSCHFELD: I appreciate
24 your position. I persist in my
25 direction to the witness.
CLASSIC REPORTING, INC. (212) 268-2590
90
1 Lampen
2 MS. SILVERBERG: Can you please
3 mark this point in the transcript.
4 MR. HIRSCHFELD: Let's take a
5 break now for a minute, okay?
6 MS. SILVERBERG: Yes.
7 (Recess taken.)
8 MR. HIRSCHFELD: What I would
9 like to do, I really stand by my
10 objection, but in the interest of just
11 moving this nonsense along, I will
12 allow the witness to answer the
13 question, although I have my objection
14 as to its relevance. I think the
15 witness can indicate the amount that
16 would be payable for the second
17 fairness opinion from Oppenheimer.
18 A. The amount is $87,500.
19 Q. What was the amount payable to
20 Oppenheimer for its first opinion?
21 A. I don't know what you mean by the
22 first opinion.
23 Q. Oppenheimer rendered an opinion
24 as to the fairness of the profit-sharing
25 arrangement between New Valley and Brooke
CLASSIC REPORTING, INC. (212) 268-2590
91
1 Lampen
2 Group; is that correct?
3 A. Yes.
4 Q. How much became due and payable
5 to Oppenheimer upon rendering that opinion?
6 A. Upon engagement, Oppenheimer was
7 owed one-half of the fee or $175,000. Upon, I
8 guess request and delivery of each of the two
9 opinions, it was owed an additional $87,500
10 with respect to each opinion.
11 Q. I believe you testified that at
12 this first December meeting you also discussed
13 the potential engagement of Jeffries &
14 Company?
15 A. Yes.
16 Q. What was discussed with respect
17 to Jeffries & Company?
18 A. All I recall is that the fact
19 that New Valley was planning on engaging
20 Jeffries was discussed.
21 Q. Why was Jeffries & Co. engaged?
22 A. They were engaged to be the
23 financial advisers to New Valley in connection
24 with New Valley's investment in the RJR
25 Nabisco stock.
CLASSIC REPORTING, INC. (212) 268-2590
92
1 Lampen
2 Q. When was Jeffries & Company
3 engaged?
4 A. They were initially engaged by
5 New Valley I think around the second week in
6 December.
7 Q. By that time, how much RJR stock
8 did New Valley own?
9 A. By that time, it had the current
10 position that it has today.
11 Q. Did New Valley have any financial
12 adviser acting on its behalf either before or
13 during the time that it was purchasing RJR
14 stock?
15 A. I know that from the time I
16 arrived at the beginning of October up through
17 the time that Jeffries was engaged, New Valley
18 did not otherwise have a financial adviser.
19 Q. Are you aware of any financial
20 adviser that was retained by New Valley prior
21 to October of '95?
22 A. Not that I'm aware of.
23 Q. I believe you said that there was
24 a second meeting in December or the end of
25 December a meeting of the New Valley board; is
CLASSIC REPORTING, INC. (212) 268-2590
93
1 Lampen
2 that correct?
3 A. I think it was around the third
4 week of December.
5 Q. Do you recall what was discussed
6 at that board meeting regarding New Valley's
7 purchases of RJR stock?
8 A. No, I don't.
9 Q. Do you recall whether or not New
10 Valley's purchases of RJR stock were discussed
11 during that board meeting?
12 A. I don't remember. Nothing had
13 changed since the prior meeting.
14 Q. Were there any discussions of New
15 Valley's purchases of RJR stock during the New
16 Valley board meeting of January 12, 1996?
17 A. This would be an area covered by
18 the attorney-client privilege.
19 MR. HIRSCHFELD: In that, case I
20 will admonish the witness not to
21 answer.
22 Q. I take it that there were
23 discussions but that those discussions took
24 place in the context of either of the
25 rendering of legal advice or someone seeking
CLASSIC REPORTING, INC. (212) 268-2590
94
1 Lampen
2 legal advice?
3 A. That is correct.
4 Q. Now I believe, going back you
5 testified that you discussed New Valley's
6 purchases of RJR stock both at board meetings
7 and that you also had discussions with
8 directors outside the context of board
9 meetings regarding New Valley's purchases of
10 RJR stock?
11 A. That's correct.
12 Q. Who did you speak to outside of
13 the board context regarding New Valley's
14 purchases of RJR stock?
15 MR. HIRSCHFELD: Is the question
16 which directors he spoke to outside the
17 context of the formal board of
18 directors meeting?
19 MS. SILVERBERG: Yes.
20 MR. HIRSCHFELD: Okay.
21 A. Well, certain members of the
22 board are officers of the company as Mr.
23 LeBow, Lorber and Sauter.
24 You know, I would presume I have
25 had discussions with them where the amount of
CLASSIC REPORTING, INC. (212) 268-2590
95
1 Lampen
2 the stock that New Valley owns was discussed.
3 In terms of other directors, I
4 have had meetings with or I have attended
5 meetings outside of a board context with Barry
6 Ridings, with Arnold Burns, and Richard
7 Resseler and probably Mr. Ron Kramer.
8 Q. Who is Ron Kramer?
9 A. He is a New Valley director.
10 Q. What did you discuss with Mr.
11 Ridings with respect to New Valley's purchases
12 of RJR stock?
13 MR. HIRSCHFELD: Again, I'm
14 cautioning the witness that if he can
15 answer without violating
16 attorney-client confidences or without
17 getting into areas of business
18 strategy, he may do so, but otherwise
19 he should stand upon the privileges I
20 have described.
21 A. I don't recall specifically. I
22 believe I attended a breakfast with Mr.
23 Ridings once where there was discussion about
24 the status of our purchases of RJR stock and
25 the status of the Brooke solicitation effort.
CLASSIC REPORTING, INC. (212) 268-2590
96
1 Lampen
2 Q. Do you recall when this meeting
3 took place?
4 A. Probably sometime in October,
5 October, November.
6 Q. Where did this meeting take
7 place?
8 A. In Manhattan. It was at the
9 Carlyle Hotel.
10 Q. Who else attended that meeting?
11 A. Mr. LeBow.
12 Q. What was said with respect to New
13 Valley's purchases of RJR stock?
14 A. I don't recall.
15 Q. Did you testify that you had
16 meetings with Arnold Burns with respect to --
17 at which New Valley's purchases of RJR stock
18 were discussed; is that correct?
19 MR. HIRSCHFELD: Objection to
20 form.
21 MS. SILVERBERG: I will rephrase
22 that.
23 Q. Did you have one or more meetings
24 with Arnold Burns of which the subject of New
25 Valley's purchases of RJR stock was discussed?
CLASSIC REPORTING, INC. (212) 268-2590
97
1 Lampen
2 A. I don't recall specifically, but
3 I remember meeting one or more times with Mr.
4 Burns at which we discussed the RJR situation
5 generally. I don't remember specifically what
6 was discussed.
7 Q. Did you discuss with Richard
8 Resseler, New Valley's purchases of RJR stock?
9 A. I don't recall specifically.
10 Q. Did you discuss with Ron Kramer
11 New Valley's purchases of RJR stock?
12 A. Yes.
13 Q. What did you discuss with respect
14 to those purchases?
15 A. I remember speaking with Ron
16 Kramer when I was going through the process
17 of -- when we were going through the process
18 of trying to determine which investment
19 banking firm to engage to render the fairness
20 opinion, the fairness opinions that I referred
21 to before.
22 Q. What did you say to him about New
23 Valley's purchases of RJR stock?
24 A. What I do recall is that we were
25 talking about the fact that if New Valley was
CLASSIC REPORTING, INC. (212) 268-2590
98
1 Lampen
2 to increase its position above the $150
3 million level, that it would require a
4 fairness opinion.
5 Q. I believe you testified earlier
6 that a fairness opinion might be triggered
7 after reaching a $75 million threshold; is
8 that correct?
9 A. I testified after New Valley had
10 paid more than $75 million exclusive of margin
11 financing.
12 Q. It would be required to get a
13 fairness opinion?
14 A. Correct.
15 Q. Has New Valley yet paid more than
16 $75 million exclusive of margin financing for
17 its investment in RJR stock?
18 A. It has not.
19 Q. Do you recall any conversations
20 you had with any individual regarding New
21 Valley's purchases of RJR stock that you have
22 not already testified to or that would not be
23 privileged under the attorney-client
24 privilege?
25 MR. HIRSCHFELD: Or under the
CLASSIC REPORTING, INC. (212) 268-2590
99
1 Lampen
2 business strategy privilege.
3 A. I have attended two meetings of
4 the nominees for the RJR board at which,
5 again, the RJR situation was discussed.
6 Q. Any other conversations?
7 A. I'm sure I have discussed the RJR
8 purchases with other employees of New Valley.
9 Q. Did anyone ever question whether
10 or not New Valley should be purchasing $150
11 million worth of RJR stock?
12 A. No.
13 Q. Going back to October of 1995
14 when you first joined New Valley, did you
15 become aware that Mr. LeBow had approached RJR
16 about a spin-off of Nabisco?
17 A. Yes.
18 Q. When did you become aware of
19 that?
20 A. Sometime after I joined them.
21 Q. How did you become aware?
22 A. I don't recall.
23 Q. Shortly after joining New Valley,
24 did there come a time when Mr. LeBow briefed
25 you on what you have been calling the RJR
CLASSIC REPORTING, INC. (212) 268-2590
100
1 Lampen
2 situation?
3 A. Not that I recall specifically.
4 There came a time after I joined when I
5 received several bunches of written materials
6 about RJR, its S.E.C. filings, et cetera,
7 that -- newspaper articles, et cetera, that
8 oriented me to the company and what had been
9 going on recently.
10 Q. Did this material that you
11 received include internal analyses of RJR?
12 A. I don't know if they were
13 internal analyses. At some point in time, I
14 saw some materials that included some computer
15 runs that related to RJR.
16 Q. Prior to your receipt of this
17 initial set of materials, had you spoken to
18 anyone at New Valley or Brooke Group regarding
19 RJR?
20 A. I'm sure I must have.
21 Q. What was the first discussion
22 that you recall about RJR?
23 A. I don't recall, I don't recall.
24 Q. Who was the person who -- do you
25 recall from whom you first learned about the
CLASSIC REPORTING, INC. (212) 268-2590
101
1 Lampen
2 RJR situation, as you call it?
3 A. I think it was from reading in
4 the newspaper about the Hart-Scott-Rodino
5 announcement that RJR had made sometime in
6 August.
7 Q. What was the next piece of
8 information you learned with respect to RJR?
9 A. I don't specifically recall.
10 Q. What is the first conversation
11 that you recall having with respect to RJR?
12 MR. HIRSCHFELD: After?
13 Q. After joining New Valley?
14 A. I don't recall.
15 Q. Do you recall any conversations
16 that you had relating to RJR once you joined
17 New Valley?
18 A. Sure.
19 Q. What is the first such
20 conversation that you can recall?
21 MR. HIRSCHFELD: If you are able
22 to place such a conversation as being
23 the first among those that you recall,
24 you may answer. If you can't --
25 A. I am unable to do that.
CLASSIC REPORTING, INC. (212) 268-2590
102
1 Lampen
2 Q. Did you review the materials that
3 were sent to you regarding RJR?
4 A. In a cursory fashion.
5 Q. Did you then speak to anybody
6 about those materials?
7 A. Yes.
8 Q. Who did you speak to?
9 A. Probably Bryant Kirkland.
10 Q. Did you call him or did he call
11 you?
12 A. He had provided me with the
13 copies of the S.E.C. filings and other
14 materials, other written materials that I had
15 received on RJR, background material.
16 Q. Did you save those materials?
17 A. I believe so.
18 Q. Were they in the files that you
19 provided the counsel?
20 A. I believe so.
21 Q. Did you call Bryant Kirkland or
22 did he call you after you received these
23 materials?
24 A. I don't recall.
25 Q. What do you recall was said
CLASSIC REPORTING, INC. (212) 268-2590
103
1 Lampen
2 during that conversation with Mr. Kirkland?
3 A. I don't recall specifically other
4 than I believe at some point in time after
5 looking through the materials having some
6 discussions with him where he, I think, had
7 described some of the corporate structure of
8 RJR for me.
9 Q. Did you have any questions to ask
10 him after reading the materials?
11 A. Not that I recall.
12 Q. How long did you spend reading
13 these materials?
14 A. I have read or referred back to
15 those materials from time to time on a number
16 of occasions, but I have no idea in the
17 aggregate how much time I spent.
18 Q. Did those materials include --
19 did the initial packet of materials include
20 anything other than S.E.C. filings and
21 newspaper clippings?
22 A. I don't recall whether or not the
23 computer run that I referenced before was in
24 that or some subsequent set of materials that
25 I received.
CLASSIC REPORTING, INC. (212) 268-2590
104
1 Lampen
2 Q. After you received this initial
3 set of materials, I take it then you received
4 subsequent materials relating to RJR?
5 A. Much -- the answer is yes. Much
6 of the materials were duplicative. I remember
7 when I attended the first session with the
8 other nominees that in conjunction with that
9 we received a pact of information which my
10 recollection is was very similar to various of
11 the other packets that I had received, the
12 information packets I had received from time
13 to time.
14 Q. Putting aside the information you
15 got that was at the meeting of the nominees,
16 approximately how many information packets did
17 you receive relating to RJR other than the
18 first set of materials you initially received?
19 A. I don't know, probably several.
20 Q. From whom did you receive them?
21 A. Generally from Bryant Kirkland.
22 Q. Did you receive information
23 material from anyone else?
24 A. Not that I recall.
25 Q. Did you generally discuss these
CLASSIC REPORTING, INC. (212) 268-2590
105
1 Lampen
2 materials with anyone after you received them?
3 A. Not that I recall.
4 Q. Did you review the materials as
5 you received them?
6 A. Perhaps to the extent there was
7 something new or different than what I had
8 seen in the prior packages, I might have
9 looked at them.
10 Q. Did the material, putting aside
11 S.E.C. filings and newspaper clippings, did
12 the materials that you received contain
13 information with respect to potential
14 transactions involving RJR?
15 A. No, other than, I mean, any
16 transactions contemplated by the computer runs
17 I would have seen.
18 Q. What type of transactions were
19 contemplated by the computer runs?
20 A. My understanding was that the
21 computer runs related to a transaction from
22 the spring in which, as I understand it, would
23 have involved a spin-off of RJR's Nabisco
24 business in conjunction with a transaction
25 involving Liggett and a company by the name of
CLASSIC REPORTING, INC. (212) 268-2590
106
1 Lampen
2 Reemstma, an international tobacco company.
3 Q. When did you receive these
4 materials?
5 A. Sometime after I joined New
6 Valley.
7 Q. At the time that you received
8 these materials, did you understand that New
9 Valley or Brooke Group were still
10 contemplating such a transaction?
11 A. No, my understanding was that was
12 something that had related to a period of time
13 prior to my arrival at New Valley.
14 Q. Do you know who sent you these
15 materials?
16 A. Bryant Kirkland.
17 Q. Do you know why he sent you
18 materials on a transaction that was no longer
19 being contemplated?
20 A. No.
21 Q. Did you ever ask him why he was
22 sending you those materials?
23 A. My recollection is having asked
24 him and that's where I learned about some of
25 the history that I just referred to in that
CLASSIC REPORTING, INC. (212) 268-2590
107
1 Lampen
2 the fact that the Reemstma transaction was no
3 longer something that was being pursued.
4 Q. Did you have any discussions with
5 anyone at New Valley or Brooke Group regarding
6 this transaction that contemplated a joint
7 venture with Reemstma?
8 A. I believe I just referred to I
9 did with Bryant Kirkland. Whether I discussed
10 it with anyone else, I don't recall.
11 Q. What did Mr. Kirkland tell you
12 about the transaction?
13 A. Just that the transaction was no
14 longer alive, that I guess RJR had not been
15 prepared to pursue it.
16 Q. Did he tell you that Mr. LeBow
17 had met with individuals at RJR with respect
18 to this transaction?
19 A. Not that I recall one way or the
20 other.
21 Q. Did you ever come to learn that
22 Mr. LeBow had met with individuals at RJR
23 regarding such a transaction?
24 A. Yes.
25 Q. How did you come to learn that?
CLASSIC REPORTING, INC. (212) 268-2590
108
1 Lampen
2 A. Certainly through reading the
3 drafts of the consent solicitation materials.
4 Q. Did you ever have a conversation
5 with Mr. LeBow in which he discussed with you
6 his meetings with RJR?
7 A. Not that I recall.
8 Q. Did you ever have a conversation
9 with Mr. LeBow in which he discussed with you
10 the nature of the transaction that he had
11 proposed to RJR?
12 A. Not that I specifically recall.
13 Q. When you received the materials
14 containing a transaction that would involve a
15 spin-off of Nabisco in conjunction with a
16 transaction with Reemstma, did you understand
17 at the time that you received that material
18 that such a transaction was no longer being
19 considered by Brooke Group?
20 A. That was my understanding.
21 Q. How did you come to have that
22 understanding?
23 A. I think I just testified from my
24 conversations with Bryant Kirkland.
25 Q. Were these conversations before
CLASSIC REPORTING, INC. (212) 268-2590
109
1 Lampen
2 or after he sent you the materials?
3 A. I don't recall.
4 Q. Did you ever discuss with Mr.
5 LeBow the possibility of merging Liggett with
6 RJR or any of its subsidiaries?
7 MR. HIRSCHFELD: Other than in a
8 privileged context?
9 A. Yes.
10 Q. When were those discussions?
11 A. Well, I mean the one discussion I
12 can recall specifically was some recent
13 discussions in the context of some meetings
14 with shareholders of RJR in which Mr. LeBow
15 made clear that our consent solicitation had
16 nothing to do with a merger between Liggett
17 and RJR.
18 Q. Other than that, have you ever
19 had a conversation with Mr. LeBow at which a
20 possible transaction between Liggett and RJR
21 or one of its subsidiaries was discussed?
22 A. Not that I specifically recall.
23 Q. Did you discuss with anyone the
24 possibility of merging -- let me rephrase
25 that.
CLASSIC REPORTING, INC. (212) 268-2590
110
1 Lampen
2 Did you discuss with anyone at
3 Brooke Group or New Valley the possibility of
4 merging Liggett with RJR or any of its
5 subsidiaries?
6 MR. HIRSCHFELD: Can I ask for a
7 clarification of the question? You
8 keep phrasing it that way and I'm not
9 certain that I know anymore what it is
10 that you are referring to. Are you
11 referring to the historical proposal
12 that he indicated he learned of or are
13 you referring to something else or are
14 you referring to a universe of
15 possibilities?
16 MS. SILVERBERG: I was looking to
17 see whether or not he has ever had a
18 discussion, and I will add other than
19 to which you have already testified, at
20 which there's discussion of the
21 possibility of merging Liggett with RJR
22 or any of its subsidiaries?
23 MR. HIRSCHFELD: Okay. I don't
24 understand the question. I'm going to
25 have to object to the form now. You
CLASSIC REPORTING, INC. (212) 268-2590
111
1 Lampen
2 are going to have to help me out a
3 little bit by clarifying whether you
4 are referring to the historical
5 proposal that was made or some other
6 proposal.
7 Q. Other than the conversations you
8 have testified to with Mr. Kirkland, did you
9 discuss with anyone Mr. LeBow's discussions
10 with RJR?
11 MS. SILVERBERG: I will rephrase
12 that.
13 Q. I believe you testified you are
14 now aware that Mr. LeBow had discussions with
15 RJR. In connection with -- let me withdraw
16 that.
17 Do you understand that during the
18 course of those discussions Mr. LeBow made a
19 proposal to RJR that involved Liggett?
20 MR. HIRSCHFELD: You mean the
21 proposal he previously testified to?
22 MS. SILVERBERG: Yes.
23 A. Yes.
24 Q. What did you understand that
25 proposal to be?
CLASSIC REPORTING, INC. (212) 268-2590
112
1 Lampen
2 MR. HIRSCHFELD: Objection, asked
3 and answered.
4 Q. Did that proposal involve a
5 spin-off of Nabisco from RJR followed by a
6 merger of RJR's tobacco company with Liggett
7 in connection with a joint venture with
8 Reemstma?
9 MR. HIRSCHFELD: If you can
10 answer that question.
11 A. All I can answer is that I know
12 that it involved RJR, Liggett and Reemstma.
13 Q. Did you have discussions with
14 respect to that proposal with anyone other
15 than Mr. Kirkland?
16 A. Not that I recall.
17 Q. Did you have conversations with
18 respect to that proposal with Mr. Kirkland
19 other than the conversations to which you have
20 already testified?
21 A. Not that I recall.
22 Q. Are you aware of any other
23 proposals contemplated by Brooke Group or New
24 Valley with respect to a combination of RJR
25 and Liggett other than the proposal that you
CLASSIC REPORTING, INC. (212) 268-2590
113
1 Lampen
2 have just testified about?
3 A. No.
4 Q. Are you aware of whether anyone
5 at New Valley or Brooke Group continued to
6 investigate the feasibility of a merger
7 between Liggett and RJR or any of its
8 subsidiaries after May of 1995?
9 A. I don't have the specifics in
10 front of me. I know from reading the proxy
11 statement the background that discussions
12 occurred subsequent to May, terminating prior
13 to my arrival at New Valley and those were
14 some discussions between RJR and
15 representatives of Mr. LeBow.
16 Q. Are you aware of any proposal to
17 merge Liggett with RJR or any subsidiary of
18 RJR other than those proposals that were
19 discussed with RJR?
20 MR. HIRSCHFELD: Objection, asked
21 and answered.
22 A. The answer is no.
23 Q. At any of the New Valley board
24 meetings that you attended, did the board
25 discuss the possibility of a merger between
CLASSIC REPORTING, INC. (212) 268-2590
114
1 Lampen
2 Liggett and RJR in any of its subsidiaries?
3 A. Not that I recall.
4 Q. To your knowledge, has anyone
5 ever discussed a merger of Liggett and RJR or
6 one of its subsidiaries as a way of resolving
7 New Valley's status under the 1940 act?
8 A. No.
9 MR. HIRSCHFELD: Objection to
10 form.
11 The witness may answer.
12 MS. SILVERBERG: Let's take a
13 break.
14 (Recess taken.)
15 Q. At the time you joined New Valley
16 in October of 1995, what did you understand to
17 be Brooke Group or New Valley's intentions
18 with respect to RJR?
19 A. My understanding was that the
20 intentions were to conduct a consent
21 solicitation relating to a precatory
22 nonbinding resolution as to the spin-off. I
23 believe by the time I arrived, we had learned
24 about the secret bylaw adoption that had
25 pushed us in the direction of it being a
CLASSIC REPORTING, INC. (212) 268-2590
115
1 Lampen
2 consent solicitation, so that was my
3 understanding was that Brooke was going to be
4 proceeding with a consent solicitation and I
5 was also aware that at some point after that
6 because of provisions in RJR's bylaws, that we
7 had to, that if we did not put names in for a
8 potential director nominees by November 20th,
9 that or at least that was the procedure that
10 the bylaws specified with respect to nominees.
11 Q. I'm sorry, they were intending to
12 nominate a slate of candidates for the 1996
13 annual meeting?
14 A. No, that's not what I said. My
15 understanding was that under the procedure
16 specified by RJR's bylaws that we needed to
17 put names up by November 20th or under the
18 procedures specified by the bylaws, they
19 wouldn't be eligible for being candidates at
20 the next annual meeting.
21 Q. How did you come to learn this
22 information?
23 A. I don't recall.
24 Q. Did there come a time when Mr.
25 LeBow sat down and updated you on New Valley's
CLASSIC REPORTING, INC. (212) 268-2590
116
1 Lampen
2 and Brooke Group's activities with respect to
3 RJR?
4 A. Not that I specifically recall.
5 Q. Did you have any discussions with
6 Mr. LeBow or Mr. Lorber during your first few
7 weeks at New Valley with respect to RJR?
8 A. I may have during my first few
9 weeks. Mr. LeBow was out of the country for a
10 good period of the time.
11 Q. Did you have any conversations
12 with Mr. Lorber with respect to RJR?
13 A. I may have, but I don't recall.
14 Q. Do you recall in your mind any
15 discussion that you had with either Mr. LeBow
16 or Mr. Lorber with respect to a possible
17 spin-off of Nabisco?
18 A. Well, I recall there came some
19 point in time after I had been there for a
20 while when having been primarily involved in
21 matters not involving RJR, there came a point
22 in time, I remember when Mr. LeBow or Mr.
23 Lorber mentioned to me the proposed schedule
24 for the filing of preliminary consent
25 solicitation materials with the S.E.C., and I
CLASSIC REPORTING, INC. (212) 268-2590
117
1 Lampen
2 recall in conjunction with other business that
3 I was in New York the later part of October,
4 first part of November, becoming involved in
5 reviewing drafts of those documents.
6 Q. At the time that you discussed
7 with Mr. LeBow the preliminary consent
8 materials, did you have an understanding of
9 the issues that were going to be involved in
10 the consent solicitation?
11 A. I don't recall precisely.
12 Q. Did you understand what Mr. LeBow
13 and Brooke Group's position was going to be in
14 the consent solicitation?
15 MR. HIRSCHFELD: With respect to
16 what?
17 MS. SILVERBERG: With respect to
18 the spin-off of Nabisco?
19 A. Well, I understood that the whole
20 purpose of the consent solicitation was to
21 have the shareholders send a message to the
22 RJR board for an immediate spin-off of
23 Nabisco.
24 MS. SILVERBERG: Let's take a
25 break.
CLASSIC REPORTING, INC. (212) 268-2590
118
1 Lampen
2 (Recess taken.)
3 MS. SILVERBERG: Could you read
4 back the last answer.
5 (Record read.)
6 Q. How did you come to have that
7 understanding?
8 A. From conversations with people at
9 New Valley, Brooke or conversations with our
10 professional advisers.
11 Q. With whom did you have those
12 conversations at New Valley and Brooke?
13 A. I don't recall specifically.
14 Q. Do you recall any of your
15 conversations?
16 A. No. As I said before, I recall
17 that there came a point in time in October
18 when Mr. LeBow asked me to get involved in RJR
19 which I really had not had much involvement
20 with up to that point in time.
21 Q. During that conversation in which
22 Mr. LeBow asked you to get involved in RJR,
23 did he give you any background information on
24 RJR?
25 A. No. I think I got the background
CLASSIC REPORTING, INC. (212) 268-2590
119
1 Lampen
2 information; whether it was before or after
3 that conversation, I don't know. The
4 materials I got were from Bryant Kirkland.
5 Q. Do you recall anything else from
6 your discussion with Mr. LeBow?
7 A. Somewhere around this time frame
8 in late October, I think, I don't recall, Mr.
9 Lorber or Mr. LeBow and I discussed the issue
10 of the necessity by November 20th of potential
11 nominees being identified, and I believe it
12 was Mr. Lorber who communicated or asked me
13 whether that was something that I would be
14 prepared to consider.
15 Q. Did you understand at the time
16 that the slate of candidates would in fact run
17 for the position of -- that these candidates
18 would indeed run for election at the 1996
19 annual meeting?
20 A. No, I mean quite to the contrary.
21 I understood that this was a mechanic that we,
22 in order to in effect hold our place, we
23 needed to put names in by November 20th, but a
24 decision as to whether a slate would actually
25 be run was not a decision that would be made
CLASSIC REPORTING, INC. (212) 268-2590
120
1 Lampen
2 until some future point in time.
3 Q. Has that decision been made yet?
4 A. No.
5 Q. Did you have a conversation with
6 anyone with respect to the merits of a
7 spin-off of Nabisco?
8 A. I mean at some point in this time
9 frame, you know, I learned more about the
10 spin-off. Who it was from, I don't recall.
11 Q. Who did you learn about the
12 spin-off?
13 A. I think I became more aware of
14 the, just of the economics of the situation
15 about what portion of the value of the RJR
16 stock was attributable to Nabisco. Some of
17 the positive benefits that a spin-off would
18 have in terms of the stand-alone business of
19 both Nabisco and RJR, some information about
20 the strong financial condition of both
21 entities on a stand-alone basis. I remember
22 at some point having some discussions about
23 the fact that all of this could be
24 accomplished on a tax-free basis and also that
25 all of this could be accomplished with really
CLASSIC REPORTING, INC. (212) 268-2590
121
1 Lampen
2 de minimis legal risk.
3 Q. Did you meet with any financial
4 advisers with respect to spinning off Nabisco?
5 A. No.
6 Q. From whom did you get the
7 information you just discussed?
8 MR. HIRSCHFELD: Can I ask what
9 the relevance of that inquiry is with
10 respect to the issues raised by RJR
11 Nabisco in the lawsuit?
12 MS. SILVERBERG: Yes, I want
13 information as to the conversations
14 that Mr. Lampen has had with other
15 individuals with respect to New
16 Valley's holdings of RJR stock. I also
17 want to get an understanding of what
18 knowledge he has with respect to a
19 spin-off, what information he has with
20 respect to a spin-off and what his
21 intentions may be in the event that he
22 is elected as a director of RJR.
23 Our Complaint alleges that the
24 consent solicitation is part of an
25 orchestrated plan by Mr. LeBow and
CLASSIC REPORTING, INC. (212) 268-2590
122
1 Lampen
2 Brooke Group and Mr. Icahn to obtain
3 control of RJR, and Mr. Lampen is a
4 nominee to the RJR board of directors,
5 and in terms of what his understanding
6 of the merits of a spin-off is and what
7 his benefits might be to RJR and
8 whether or not he considered that and
9 to the extent he considered it before
10 he agreed to be a nominee to the RJR
11 board is certainly relevant to the
12 matters at issue in the lawsuit.
13 MR. HIRSCHFELD: I couldn't
14 disagree with you more. I have no idea
15 how that relates to any secret plan
16 that's being alleged by Mr. LeBow and
17 Mr. Icahn. It's not my understanding
18 that you have free rein to inquire into
19 every aspect of the merits or lack of
20 merits of the spin-off of RJR Nabisco.
21 MS. SILVERBERG: My question did
22 not seek further information as to the
23 merits or lack of merits of a spin-off
24 of Nabisco. It was trying to elicit
25 information as to with whom he had
CLASSIC REPORTING, INC. (212) 268-2590
123
1 Lampen
2 these conversations so that I can find
3 out what information he had in reaching
4 the decision he came to as to whether
5 or not he supports a spin-off.
6 MR. HIRSCHFELD: Well, let's go
7 on, but I can see we are going to be
8 here for days at this rate.
9 Read back the question.
10 (Record read.)
11 A. I don't specifically recall all
12 the sources from whom I got the information.
13 A portion of it would have come from my
14 conversations with Bryant Kirkland. A portion
15 of it would have come from reviewing the
16 various drafts of the consent solicitation
17 materials. Also some of it would have come
18 from various conversations with our legal
19 advisers. Various would have come from, I'm
20 sure, articles and other things that I read.
21 Q. Do you now have an opinion as to
22 the advisability of an immediate spin-off of
23 Nabisco?
24 MR. HIRSCHFELD: Objection to
25 form.
CLASSIC REPORTING, INC. (212) 268-2590
124
1 Lampen
2 You may answer.
3 A. I mean, you know, I think I have
4 a sense from what I have heard that the
5 spin-off is something that seems to make a
6 great deal of sense. I mean that's a decision
7 ultimately that could only be taken after a
8 full, you know, review of all of the issues.
9 It's something that as a nominee I would have
10 to exercise my fiduciary duties and
11 understanding fully all of the issues relating
12 to a potential spin-off, a process that I have
13 not gone through.
14 Q. Have you given any thought to the
15 advisement -- withdraw that. Have you given
16 any thought to the proper timing of any
17 spin-off of Nabisco?
18 A. Yes, I have given some thought to
19 it.
20 Q. Have you reached a conclusion as
21 to the proper timing of the spin-off of
22 Nabisco?
23 A. My answer would be the same that
24 I gave before. My sense is that it's
25 something that would be in the best interest
CLASSIC REPORTING, INC. (212) 268-2590
125
1 Lampen
2 of the shareholders of RJR to be done as soon
3 as possible, i.e., immediately, but that's an
----
4 issue that ultimately as a member of the board
5 of directors were I ever to be of RJR, I would
6 have to go through my, satisfy my fiduciary
7 responsibilities to be fully informed and
8 educated on all aspects of that decision, a
9 process that I have not gone through.
10 Q. Have you ever attended a board
11 meeting of the New Valley board at which the
12 advisability of a spin-off of Nabisco was
13 discussed?
14 A. I don't recall attending any
15 meeting one way or the other where the merits
16 of a spin-off per se were discussed.
17 Q. Did you attend any meeting at
18 which the merits of particular timetable for
19 spin-off were discussed?
20 A. I don't recall.
21 Q. Now I believe you testified that
22 there came a time when Mr. Lorber asked you if
23 you were interested in being named as a
24 potential nominee to the RJR board of
25 directors?
CLASSIC REPORTING, INC. (212) 268-2590
126
1 Lampen
2 A. That's correct.
3 Q. When did that come about?
4 A. I think I said I believe it was
5 late October, early November. I don't recall.
6 Q. Did Mr. Lorber call you? Is that
7 how the discussion started?
8 A. I was at a meeting with Mr.
9 Lorber.
10 Q. Was anyone else at that meeting?
11 A. Yes, it was a large conference
12 that we were having, although he and I spoke
13 privately as to this matter.
14 Q. What did he say to you?
15 A. Just what I testified to before.
16 He explained to me that the procedures under
17 RJR's bylaw where in order for us to reserve
18 the right subsequently to have the ability to
19 put forward nominees, we needed to identify
20 those nominees to RJR by November 20th and
21 asked me whether I would be prepared to be one
22 of those nominees.
23 Q. Did you understand that he was
24 putting together a slate of several candidates
25 to run?
CLASSIC REPORTING, INC. (212) 268-2590
127
1 Lampen
2 A. Yes.
3 Q. If necessary at the 1996 annual
4 meeting?
5 A. I understood that he and Mr.
6 LeBow were doing that.
7 Q. Did you understand at that time
8 whether or not they had already selected
9 certain candidates?
10 A. I don't recall.
11 Q. Prior to this discussion with Mr.
12 Lorber, had you ever discussed with either him
13 or Mr. LeBow your views as to the merits of a
14 spin-off of Nabisco?
15 A. Not that I recall.
16 Q. During that discussion with Mr.
17 Lorber, did he discuss with you your view as
18 to the merits of a proposal to spin off
19 Nabisco?
20 A. No, not that I recall.
21 Q. Were you involved at all in the
22 selection of other candidates to be named to
23 the slate?
24 A. I was not.
25 Q. Did Mr. Lorber discuss with you
CLASSIC REPORTING, INC. (212) 268-2590
128
1 Lampen
2 what criteria were going to be used to
3 determine who they should select to be on
4 their slate of candidates?
5 A. No, he did not.
6 Q. Did you ever come to learn from
7 any source what criteria was used to determine
8 who would be on the slate of candidates?
9 A. No. I was not involved in that
10 process.
11 Q. What did you tell Mr. Lorber
12 during this conversation in response to his
13 request?
14 A. I told him that I would be
15 prepared to have my name put forth as a
16 nominee.
17 Q. Did he tell you what that might
18 entail?
19 A. I don't recall specifically.
20 Q. Do you recall anything from that
21 conversation with respect to your nom -- let
22 me withdraw that.
23 Was anything else said during
24 this conversation with respect to your name
25 being added to the list of candidates for the
CLASSIC REPORTING, INC. (212) 268-2590
129
1 Lampen
2 RJR board?
3 A. I just remember Mr. Lorber saying
4 that he felt with my investment banking and
5 legal background that I would be a good
6 director. The fact that I have, you know,
7 been a director of a number of companies
8 before. I don't recall anything else.
9 Q. Did you and Mr. Lorber discuss
10 any other issues relating to RJR during this
11 conversation?
12 A. Not that I recall.
13 Q. What was the next conversation
14 you can recall relating to your nomination as
15 a director to the RJR board?
16 A. The next conversation I can
17 recall is at some point the week before the
18 20th which I think may have been a Monday or
19 Tuesday, sometime in the middle of that prior
20 week, we had a meeting in New York which was
21 really a get-acquainted session for all the
22 nominees to have a chance -- a number of us
23 didn't know all the other members of the
24 slate. We had an opportunity to get together
25 and be introduced.
CLASSIC REPORTING, INC. (212) 268-2590
130
1 Lampen
2 MR. HIRSCHFELD: When you said
3 the 20th, Mr. Lampen, referring to the
4 20th of November, 1995?
5 A. I am. It was the week prior to
6 that, I believe.
7 Q. Are you aware of any individuals
8 who were asked to join Mr. LeBow's slate but
9 who declined to do so?
10 A. No.
11 Q. What was discussed at this
12 meeting in New York?
13 A. I really don't recall any of the
14 substance. The meeting was primarily an
15 opportunity for us to get to know each other.
16 I remember us all kind of going around the
17 table and introducing ourselves and telling
18 each other a little bit about ourselves, and I
19 think there was some discussion in terms of
20 schedule, the fact that I think there were
21 some biographical materials that were
22 necessary that had to be provided to RJR under
23 the terms of the bylaw provision, and my
24 recollection was that there was some material
25 being passed around for people to correct any
CLASSIC REPORTING, INC. (212) 268-2590
131
1 Lampen
2 information about themselves. I think that
3 happened there. And then I believe there was
4 some discussion about the timing of the
5 release of this information to, you know, when
6 the company would be putting out a press
7 release about this information.
8 Q. Did the New Valley board have any
9 discussions with respect to Brooke Group's
10 slate of candidates?
11 A. Not that I recall.
12 Q. Why did you agree to put your
13 name up for nomination?
14 MR. HIRSCHFELD: Objection. What
15 does that have to do with anything,
16 why, his personal reasons why?
17 Q. Did you have any reasons other
18 than personal reasons for agreeing to put your
19 name up for nomination?
20 MR. HIRSCHFELD: I'm going to
21 object to that. What is the relevance
22 of his personal decision why he agreed
23 to have --
24 MS. SILVERBERG: I asked whether
25 he had any motives other than personal,
CLASSIC REPORTING, INC. (212) 268-2590
132
1 Lampen
2 whether he has any other motives for
3 wanting to serve as a director of RJR.
4 MR. HIRSCHFELD: I don't
5 understand the question. Whatever
6 thought process he went through to
7 decide that he wished to allow for his
8 name to be put into nomination, that
9 broad category, I don't see what that
10 has anything to do with this
11 litigation.
12 MS. SILVERBERG: I asked apart
13 from any personal reasons that he might
14 have had, were there other reasons that
15 he had for agreeing to put his name up
16 for nomination?
17 MR. HIRSCHFELD: I don't
18 understand the question. Business
19 reasons that he had? I also don't
20 understand the relevance of it.
21 Q. Do you understand the question?
22 A. No.
23 Q. In deciding whether or not to
24 agree to put your name up for nomination, did
25 you take into account any factors other than
CLASSIC REPORTING, INC. (212) 268-2590
133
1 Lampen
2 personal factors?
3 MR. HIRSCHFELD: Objection to
4 form. Assumes facts not in evidence.
5 A. Not that I'm aware of.
6 Q. Did there come a time after you
7 joined the New Valley board -- after you
8 joined New Valley, that you purchased RJR
9 stock?
10 A. Yes.
11 Q. Do you remember approximately
12 when that was?
13 Would you like me to refresh your
14 recollection with a document?
15 A. Yes, it would be helpful.
16 MS. SILVERBERG: I will ask the
17 court reporter to mark as Exhibit 3 a
18 document bearing production No. BGL
19 8182.
20 (Memo, bearing production No. BGL
21 8182, marked Lampen Exhibit 3 for
22 identification, as of this date.)
23 A. On November 13, 1995, I purchased
24 2,000 shares of RJR stock.
25 Q. I take it that document refreshes
CLASSIC REPORTING, INC. (212) 268-2590
134
1 Lampen
2 your recollection?
3 A. It does.
4 Q. Why did you purchase RJR stock?
5 A. Because I think that there's a
6 good potential with a successful spin-off for
7 the stock to go from the approximately $30
8 level that I paid for it well up into the 40,
9 $50 range.
10 Q. Did Mr. LeBow or anyone else at
11 Brooke Group or New Valley suggest to you that
12 you purchase RJR stock?
13 A. No.
14 Q. Have you purchased any RJR stock
15 other than the 2,000 shares reflected in that
16 memo?
17 A. I have not.
18 Q. Are you aware of whether or not
19 Mr. LeBow has ever approached any individual
20 and requested that they purchase RJR stock?
21 A. I'm not aware of that.
22 Q. Do you know a Mr. Lucio Tan?
23 A. No.
24 Q. Are you aware of any discussions
25 that Mr. LeBow had with Mr. Tan?
CLASSIC REPORTING, INC. (212) 268-2590
135
1 Lampen
2 A. I am not.
3 Q. Do you know a Michael Price?
4 A. I know of Michael Price.
5 Q. Have you ever had any discussions
6 with Mr. Price?
7 A. I have not.
8 Q. Are you aware of any discussions
9 relating to RJR that Mr. LeBow or anyone else
10 at Brooke Group has had with Mr. Price?
11 A. No.
12 Q. Do you know a Gary Black?
13 A. I know who Gary Black is.
14 Q. Have you had any conversations
15 with Mr. Black relating to RJR?
16 A. I have not.
17 Q. Do you know a Gary Klesch?
18 A. Yes, I do.
19 Q. Have you had any discussions with
20 Mr. Klesch regarding RJR?
21 A. Yes, and those conversations are
22 privileged.
23 Q. Who is Mr. Klesch?
24 A. Mr. Klesch is the principal of
25 Klesch & Company.
CLASSIC REPORTING, INC. (212) 268-2590
136
1 Lampen
2 Q. Is that an investment advisory?
3 A. A brokerage firm, I believe,
4 based in London.
5 Q. When did you have these
6 conversations with Mr. Klesch?
7 A. I would say intermittently
8 through December and January.
9 Q. I take it they started in
10 December and they went through December and
11 January?
12 A. I don't recall specifically when
13 they started, but I think it would have been
14 that approximate time frame.
15 Q. At the time you had these
16 conversations with Mr. Klesch, was he retained
17 by either Brooke Group or New Valley?
18 A. No.
19 Q. Was he acting as an investment
20 adviser to either Brooke Group or New Valley?
21 A. I don't believe so.
22 Q. What is the basis for your
23 assertion of privilege as to those
24 conversations?
25 MR. HIRSCHFELD: Business
CLASSIC REPORTING, INC. (212) 268-2590
137
1 Lampen
2 strategy.
3 A. I misspoke, excuse me.
4 MR. HIRSCHFELD: It is a
5 privilege.
6 A. Okay.
7 Q. How many conversations did you
8 have with Mr. Klesch?
9 A. I don't recall.
10 Q. Was it more than one
11 conversation?
12 A. Yes.
13 Q. Was it more than five?
14 A. It may be.
15 Q. Was it more than 10?
16 A. I don't recall. It could be.
17 Q. Were these meetings in person or
18 by telephone?
19 A. By telephone.
20 Q. Did you have any meeting with Mr.
21 Klesch in person?
22 A. I have never met him in person.
23 Q. Did anyone else participate in
24 these telephone calls?
25 A. I don't recall having had a
CLASSIC REPORTING, INC. (212) 268-2590
138
1 Lampen
2 conversation with Mr. Klesch where it was not
3 just the two of us on the phone.
4 Q. During this time period, was Mr.
5 Klesch having conversations with Mr. LeBow as
6 well?
7 A. I don't know.
8 Q. Do you know whether or not Mr.
9 Klesch was having conversations with anybody
10 else at New Valley or Brooke Group during this
11 December-January time period?
12 A. Yes. I know Mr. Klesch speaks
13 regularly with people at Brooke, New Valley.
14 Q. Do you know whether or not these
15 conversations related to RJR?
16 A. No, I don't know that.
17 Q. These phone conversations with
18 Mr. Klesch, who initiated them?
19 A. Some were initiated by me. Some
20 were initiated by Mr. Klesch.
21 Q. Who initiated the first
22 conversation?
23 A. I don't recall.
24 Q. Did you have something that you
25 wanted to discuss with Mr. Klesch or did he
CLASSIC REPORTING, INC. (212) 268-2590
139
1 Lampen
2 have an idea that he wanted to discuss with
3 you?
4 MR. HIRSCHFELD: If it's either
5 of those two.
6 Q. If it's either of those two?
7 A. It was an idea that I wanted to
8 discuss with Mr. Klesch.
9 Q. Did that idea involve RJR?
10 A. It did.
11 Q. Did that idea involve Liggett?
12 A. No.
13 Q. Did that idea involve a merger of
14 RJR or any of its subsidiaries with any other
15 entity?
16 A. Did not.
17 Q. Did that idea involve the
18 acquisition of RJR or any of its subsidiaries
19 by Mr. LeBow or any entity affiliated with
20 him?
21 A. Did not.
22 Q. Did that idea involve any change
23 in control of RJR?
24 A. Did not.
25 Q. At any point during your
CLASSIC REPORTING, INC. (212) 268-2590
140
1 Lampen
2 discussions with Mr. Klesch, did you discuss a
3 possible change in control of RJR?
4 A. No.
5 Q. At any time during your
6 conversations with Mr. Klesch, did you discuss
7 Liggett?
8 A. No.
9 Q. At any time during your
10 conversations with Mr. Klesch, did you discuss
11 the possible merger of RJR or any of its
12 subsidiaries with any other entity?
13 A. I did not.
14 Q. Is there anything else you can
15 tell me about your discussions with Mr. Klesch
16 that would not fall under what your counsel is
17 invoking as the business strategy privilege?
18 A. With respect to RJR?
19 Q. With respect to RJR?
20 A. There is not.
21 Q. I believe you said you had more
22 than one, maybe more than five conversations
23 with Mr. Klesch during this December/January
24 time frame. Did all of those conversations
25 involve RJR?
CLASSIC REPORTING, INC. (212) 268-2590
141
1 Lampen
2 A. They did not.
3 Q. Approximately how many
4 conversations did you have with Mr. Klesch
5 that did involve RJR?
6 A. I think basically all the
7 conversations but perhaps one related to RJR.
8 Q. Did any of those conversations
9 with Mr. Klesch involve New Valley's status
10 under the 1940 act?
11 MR. HIRSCHFELD: Okay, you can
12 answer it.
13 A. The answer is yes.
14 Q. Did all of your conversations
15 with Mr. Klesch during that time period
16 involve the 1940 act?
17 MR. HIRSCHFELD: I'm going to
18 direct the witness not to answer.
19 Q. Were your conversations with Mr.
20 Klesch with respect to RJR and the 1940 act
21 related?
22 MR. HIRSCHFELD: Direct the
23 witness not to answer.
24 MS. SILVERBERG: On what grounds?
25 MR. HIRSCHFELD: Business
CLASSIC REPORTING, INC. (212) 268-2590
142
1 Lampen
2 strategy.
3 Q. Do you know an individual named
4 Mario Baeza?
5 A. I know who Mario Baeza is.
6 Q. Have you had any discussions with
7 him?
8 A. No, I have not.
9 Q. Are you familiar with a company
10 called Tabaca Lera?
11 A. No, I'm not.
12 Q. Are you familiar with a tobacco
13 company called Intabex?
14 A. I am not.
15 Q. Are you familiar with an
16 individual named Anthony Taberer?
17 A. No.
18 Q. Have you had any discussions with
19 anyone at Reemstma?
20 A. No.
21 Q. Have you had discussions with
22 anyone at Wassherstein Parella regarding RJR?
23 A. Only on non-RJR matters.
24 MS. SILVERBERG: Are you going to
25 let me inquire further into his
CLASSIC REPORTING, INC. (212) 268-2590
143
1 Lampen
2 conversations with Mr. Klesch with
3 respect to the 1940 act or RJR?
4 MR. HIRSCHFELD: No.
5 MS. SILVERBERG: I am going to
6 reserve my rights, then, for a ruling.
7 Q. I believe you said that New
8 Valley has currently purchased approximately
9 $150 million worth of RJR stock; is that
10 correct?
11 A. I think I said that its cost for
12 the RJR stock that it purchased nears $150
13 million is my recollection.
14 Q. How was it decided how much RJR
15 stock New Valley would purchase?
16 A. I don't know.
17 Q. Were you involved at all in the
18 decision?
19 A. I was not.
20 Q. Do you know whether or not that
21 decision was affected at all by the fact that
22 after New Valley spent $75 million on the
23 acquisition of stock, it would need to seek an
24 opinion from an outside financial adviser?
25 A. I know that the second half of
CLASSIC REPORTING, INC. (212) 268-2590
144
1 Lampen
2 the question that that is what the plan of
3 reorganization provides. How that, the nexus
4 between that and the decision about how much
5 RJR stock was not something I was party to.
6 Q. Do you know how much money New
7 Valley has spent in purchasing RJR stock?
8 A. I think I just answered, some
9 number less than $150 million, including
10 margin financing.
11 Q. Do you know how much New Valley
12 spent excluding margin financing?
13 A. Less than $75 million.
14 Q. Do you know what the number is?
15 A. I do not.
16 MS. SILVERBERG: I'm going to
17 mark as Exhibit 4, a document bearing
18 production No. BGL 8660.
19 (Letter and attachment, top
20 document bearing production No.
21 BGL 8660, marked Lampen Exhibit 4
22 for identification, as of this
23 date.)
24 Q. Have you seen this document
25 before?
CLASSIC REPORTING, INC. (212) 268-2590
145
1 Lampen
2 A. Yes, I have.
3 Q. Did you prepare this letter?
4 A. I did.
5 Q. Did you attach the attachment?
6 A. Yes.
7 Q. And does the attachment reflect
8 New Valley's purchases of RJR stock?
9 A. It does.
10 Q. Through November 9, 1995?
11 A. It does.
12 Q. If you look at the top of the
13 last page, the second entry is a sale to Icahn
14 on October 20, 1995?
15 A. Right.
16 Q. Did New Valley sell RJR's shares
17 to Mr. Icahn?
18 A. It did.
19 Q. Why did it do so?
20 A. That was in conjunction with the
21 agreement that New Valley entered into with
22 Mr. Icahn.
23 Q. Do you know why it was that Mr.
24 Icahn purchased his shares from New Valley as
25 opposed to in the market?
CLASSIC REPORTING, INC. (212) 268-2590
146
1 Lampen
2 MR. HIRSCHFELD: Other than
3 because that's what the agreement
4 provides?
5 Q. Do you know why the agreement was
6 drafted in such a way so that Mr. Icahn would
7 purchase the shares from New Valley as opposed
8 to the market?
9 A. I don't recall specifically. My
10 understanding was that it was an attempt to,
11 in effect, equalize in terms of number of
12 shares and cost the relative positions of Mr.
13 Icahn and New Valley on the date the agreement
14 was entered into with Mr. Icahn.
15 Q. Did you send this letter and the
16 attachments to Mr. White on or about November
17 14th?
18 A. I did.
19 Q. Why did you do so?
20 A. Because he had requested in
21 conjunction with the potential rendering by
22 Oppenheimer of the fairness opinions, he had
23 requested a schedule of all of -- of all of
24 the RJR purchases to date by New Valley.
25 Q. You will note that while the
CLASSIC REPORTING, INC. (212) 268-2590
147
1 Lampen
2 heading of the chart says "All transactions
3 through November 9, 1995," the chart itself
4 includes transactions through December --
5 October 26, 1995?
6 A. Right.
7 Q. Are those transactions accurate?
8 A. I believe what the date refers to
9 on the top was that was the date through which
10 the chart had been prepared. That was the
11 date of the preparation of the chart.
12 Q. Does this chart reflect all
13 purchases by New Valley of RJR stock to the
14 present?
15 A. I believe so.
16 Q. If you look at the second
17 sentence of your letter, it states that, "We
18 are preparing a summary of the activities
19 performed by Brooke Group with respect to the
20 RJR situation," do you see that?
21 A. Yes.
22 Q. What were you referring to when
23 you said the RJR situation?
24 A. This related to the
25 profit-sharing and expense agreement that was
CLASSIC REPORTING, INC. (212) 268-2590
148
1 Lampen
2 going to be entered into whereby New Valley
3 was going to agree to pay certain expenses of
4 Brooke in connection with Brooke's
5 solicitation of consents, and what Mr. White
6 was requesting was more detail as to what
7 activities Brooke Group was going to be
8 providing on behalf of New Valley.
9 Q. Did you prepare such a summary of
10 activities?
11 A. Not specifically in that form.
12 The listing of those activities appeared
13 directly in drafts of the agreements. There
14 was not an interim document between the drafts
15 of the agreements and this letter.
16 Q. Did that list of activities
17 ultimately appear in the final letter?
18 A. It did.
19 Q. In the final agreement?
20 A. It did.
21 MS. SILVERBERG: I'm going to
22 mark as Lampen Exhibit 5, a document
23 bearing production Nos. AB 90 through
24 AB 101.
25 (Copy of final agreement between
CLASSIC REPORTING, INC. (212) 268-2590
149
1 Lampen
2 New Valley and Brooke, cover
3 letter, related fairness opinion
4 from Oppenheimer to the members
5 of the board of New Valley,
6 bearing production Nos. AB 90
7 through AB 101, marked Lampen
8 Exhibit 5 for identification, as
9 of this date.)
10 Q. Can you identify this document?
11 A. Yes. This is a copy of the final
12 agreement between New Valley and Brooke as
13 well as a cover letter where I was
14 distributing copies of this document as well
15 as the related fairness opinion from
16 Oppenheimer to the members of the board of New
17 Valley.
18 Q. Is this the opinion letter that
19 we discussed earlier in connection with the
20 New Valley/Brooke Group profit-sharing
21 agreement?
22 A. Yes, it is.
23 Q. Is this document the New
24 Valley/Brooke Group profit-sharing agreement
25 that you discussed earlier?
CLASSIC REPORTING, INC. (212) 268-2590
150
1 Lampen
2 A. Yes, it is.
3 Q. Does this agreement contain the
4 list of activities performed by Brooke Group
5 with respect to RJR that would benefit New
6 Valley?
7 A. Yes, it does.
8 Q. Could you refer me to what
9 sections those are?
10 A. There may be other references. I
11 know in particular if you look at Section 2,
12 there's an itemization of items A through P of
13 certainly some of the activities that were
14 going to be performed by Brooke.
15 Q. Were you involved in the
16 negotiation of this agreement?
17 A. Yes, I was.
18 Q. Were you involved in the
19 preparation of the agreement?
20 A. I reviewed drafts.
21 Q. Who else at New Valley reviewed
22 drafts or Brooke Group?
23 A. I know copies of the drafts were
24 distributed to Mr. LeBow and to Mr. Sauter.
25 Q. I would like to call your
CLASSIC REPORTING, INC. (212) 268-2590
151
1 Lampen
2 attention to Page 6 to the agreement and in
3 particular paragraph 6. I would like to ask
4 you to take a moment to read that paragraph.
5 Have you had an opportunity to
6 review that paragraph?
7 A. I have.
8 Q. Do you know how it came about
9 that this paragraph is included in this
10 profit-sharing agreement?
11 A. Yes. My recollection is that
12 Oppenheimer & Co., who was reviewing the
13 transactions respective of the fairness of it
14 to New Valley's shareholders saw a comparable
15 provision to this in the Icahn agreements
16 between Brooke and New Valley and Icahn, and
17 wanted a provision in here for the protection
18 of the New Valley, of New Valley similar to
19 the provisions, you know, in effect, the
20 penalty that appeared in the Icahn agreement
21 if there was ever a merger of Liggett.
22 Q. So did you view this paragraph as
23 a penalty?
24 A. Here it was intended to protect
25 New Valley in the event that you could have a
CLASSIC REPORTING, INC. (212) 268-2590
152
1 Lampen
2 circumstance where Liggett was ever sold and
3 that sale resulted in New Valley having less
4 than a 20 percent return on its investment
5 after recouping all of its costs.
6 Q. So is it correct that this
7 paragraph was added at the suggestion of
8 Oppenheimer & Company?
9 A. That's correct.
10 Q. Did Oppenheimer & Company review
11 drafts of this agreement?
12 A. Yes, it did.
13 Q. Did this paragraph appear in the
14 initial draft of the agreement?
15 A. I don't recall.
16 Q. Has anybody asked you why this
17 agreement contains a paragraph discussing a
18 possible merger between Liggett and a
19 subsidiary of RJR until I just did?
20 A. I don't recall anyone having
21 asked me about it, no.
22 Q. Have you discussed this paragraph
23 with anybody?
24 A. Yes.
25 Q. Who did you discuss it with?
CLASSIC REPORTING, INC. (212) 268-2590
153
1 Lampen
2 A. As I think I had mentioned before
3 at the New Valley board meeting, the first
4 board meeting in December, I reviewed in
5 considerable detail with the board the
6 specifics of the proposed arrangements between
7 Brooke and New Valley.
8 Q. Did you discuss this paragraph?
9 A. I believe I did, yes.
10 Q. What did you say about this
11 paragraph?
12 A. That I believe what I would have
13 said would be along the lines of what I have
14 just said to you, that one of the comments
15 that Oppenheimer had given to us during the
16 course of some discussions with them about the
17 proposed transaction -- the proposed
18 arrangements between the two companies was
19 that Liggett should be, that New Valley should
20 be, "protected," that there wouldn't be a
21 circumstance where Liggett could be sold and
22 as I said, New Valley would at least recoup
23 all of its expenses and achieve an internal
24 rate of return of 20 percent.
25 Q. Was there any discussion at this
CLASSIC REPORTING, INC. (212) 268-2590
154
1 Lampen
2 meeting about the likelihood that such a
3 contingency would occur?
4 A. My recollection was there was a
5 conclusion -- there was a discussion that it
6 was not at all a likely scenario, but we had
7 put it in because Oppenheimer felt that that
8 was an important part of their analysis of the
9 transactions as a whole being fair to New
10 Valley.
11 Q. Did you discuss anything with
12 respect to Liggett at this meeting other than
13 the likelihood -- other than the opinion that
14 this was not a likely scenario?
15 A. Not that I recall.
16 Q. Did you discuss with Oppenheimer
17 the likelihood that the scenario could come to
18 pass?
19 A. I believe so.
20 Q. What did you discuss with
21 Oppenheimer?
22 A. Just what I said, that it was,
23 you know, not a likely scenario, but I think
24 they felt that since a similar type of
25 provision had been included in the Icahn
CLASSIC REPORTING, INC. (212) 268-2590
155
1 Lampen
2 agreements, that it made sense to have a
3 similar type of provision in this agreement.
4 Q. Did you give either the board or
5 Oppenheimer any facts or other information to
6 support your statement that it was not a
7 likely scenario?
8 A. I don't recall specifically what
9 was said to them.
10 Q. Do you have any recollection
11 other than that to which you have already
12 testified?
13 A. Not specifically, no.
14 Q. Do you have any general
15 recollection?
16 A. Only that a merger of Liggett was
17 never one of the issues that was on the table
18 since I have arrived at Brooke -- I mean at
19 New Valley in October. The focus has always
20 been as to RJR on first the transaction with
21 Carl Icahn and then the commencement of the
22 consent solicitation with the reservation of
23 rights basically as to the board through the
24 submission of names by November 20th.
25 Q. During your discussion with
CLASSIC REPORTING, INC. (212) 268-2590
156
1 Lampen
2 Oppenheimer over this paragraph, did you ever
3 attempt to find out why Mr. Icahn included a
4 provision with respect to a possible merger of
5 Liggett in his agreement with New Valley?
6 A. My understanding was always that
7 those provisions had been included because
8 people were trying to send a stronger message
9 to the world that that was not what was being
10 contemplated and then had attempted to put
11 teeth into it by in fact having a penalty if
12 either party was to violate that agreement.
13 MS. SILVERBERG: You want to
14 break for lunch?
15 MR. HIRSCHFELD: Sure.
16 (Luncheon recess 2:25 P.M.)
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
157
1 Lampen
2 A F T E R N O O N S E S S I O N
3 January 29, 1996
4 3:00 P.M.
5 R I C H A R D J. L A M P E N,
6 resumed and testified further as
7 follows:
8 EXAMINATION (Continued)
9 BY MS. SILVERBERG:
10 Q. Before the break, your counsel
11 had asserted a business strategy privilege
12 with respect to some questions I was asking.
13 I want to restate a question I had asked
14 earlier to make sure the record is clear. I
15 had asked you whether or not at any point you
16 had had discussions -- let me rephrase that.
17 I had asked you whether or not from the time
18 you joined New Valley and on you had
19 discussions with anyone about the possibility
20 of a merger between Liggett and RJR, and any
21 of its subsidiaries other than the proposal
22 that was presented to RJR and I believe your
23 answer was no; is that correct?
24 A. That's right.
25 Q. I want to be clear that in your
CLASSIC REPORTING, INC. (212) 268-2590
158
1 Lampen
2 answer, your answer is that no, you have never
3 had any such discussions and not that you have
4 never had any other discussions other than
5 those that might be privileged under either
6 attorney-client privilege or business strategy
7 privilege?
8 A. That's correct.
9 Q. Just so the record is clear, it's
10 correct that you have not had any discussions
11 and your answer encompasses any discussions
12 regardless of whether or not they would be
13 protected by any privilege?
14 A. That is correct.
15 Q. Also you testified earlier that
16 Oppenheimer & Company has not given an opinion
17 as to the fairness of New Valley's investment
18 thus far in RJR; is that correct?
19 A. Right. We have not asked them,
20 we have not asked them to deliver a written
21 opinion to us on that.
22 Q. Has Oppenheimer indicated whether
23 or not they would be able to give such an
24 opinion if asked?
25 A. I mean obviously Oppenheimer has
CLASSIC REPORTING, INC. (212) 268-2590
159
1 Lampen
2 their own process for issuing fairness
3 opinions. It is certainly my belief based on
4 my conversations with them that it is
5 basically tautological in nature buying
6 securities in a large cap entity, buying
7 marketable securities in a large cap entity at
8 market seems to be the essence of fairness, so
9 I don't have any reason to anticipate that
10 that is not an opinion -- that that is an
11 opinion that we could not receive promptly
12 upon request.
13 Q. Have you had any discussions with
14 anyone at Oppenheimer as to whether or not
15 they would be able to give an opinion on this
16 issue?
17 A. Yes, we have spoken to
18 Oppenheimer about it.
19 Q. Have they said anything that
20 would indicate that there is some question as
21 to whether or not there would be --
22 A. Not in the slightest.
23 Q. Are you aware of whether or not
24 Mr. LeBow or anyone else at Brooke Group is
25 seeking investors to invest in RJR stock at
CLASSIC REPORTING, INC. (212) 268-2590
160
1 Lampen
2 the present time?
3 A. I am not.
4 Q. Are you aware of whether or not
5 Mr. LeBow approached any individuals to ask
6 them to invest in RJR at any time from June of
7 1995 to the present?
8 A. I am not.
9 Q. Are you aware of whether or not
10 Mr. LeBow or anyone at Brooke Group has
11 attempted to obtain voting control over any
12 securities of RJR at any time from June 1995
13 to the present?
14 A. Other than as contemplated by the
15 Icahn agreement?
16 Q. Other than as contemplated by the
17 Icahn agreement.
18 A. Well, the answer is yes.
19 Obviously, we are out soliciting proxies or
20 soliciting consents for the spin-off proposal.
21 Q. Has Mr. LeBow or anyone else at
22 Brooke Group attempted to obtain voting
23 control over any RJR stock other than through
24 the solicitation of consents?
25 A. And other than Icahn?
CLASSIC REPORTING, INC. (212) 268-2590
161
1 Lampen
2 Q. And other than Icahn?
3 A. Not that I'm aware of.
4 Q. Has Mr. LeBow or Brooke Group
5 attempted to obtain options on the purchase of
6 RJR securities?
7 A. We have not attempted to obtain
8 options, no.
9 Q. Has either Mr. LeBow or anyone
10 else at Brooke Group or New Valley discussed
11 the possibility of obtaining options on RJR
12 stock?
13 MR. HIRSCHFELD: Objection,
14 direction not to answer. Business
15 strategy.
16 Q. Has anyone at Brooke Group or New
17 Valley discussed the possibility of obtaining
18 options on RJR stock as a means of being able
19 to vote those RJR securities?
20 MR. HIRSCHFELD: Objection. Same
21 direction.
22 MS. SILVERBERG: For the same
23 reason?
24 MR. HIRSCHFELD: Same reason,
25 yes.
CLASSIC REPORTING, INC. (212) 268-2590
162
1 Lampen
2 Q. Did you discuss with Mr. Klesch
3 at any time in December or January the
4 possibility of New Valley or Brooke Group
5 obtaining options on RJR stock?
6 MR. HIRSCHFELD: Same objection,
7 same direction.
8 Q. Have you discussed with anybody a
9 proposal whereby Mr. LeBow can obtain control
10 of RJR?
11 MR. HIRSCHFELD: Whereby Mr.
12 LeBow personally --
13 MS. SILVERBERG: Let me withdraw
14 that.
15 Q. Are you aware of any proposals
16 that contemplate Brooke Group or New Valley or
17 any entity affiliated with it obtaining
18 control of RJR or any of its subsidiaries?
19 A. I'm not aware of any such
20 proposal since my arrival at New Valley.
21 Q. Have you had any conversations in
22 which the possibility of Brooke Group or New
23 Valley or any entity affiliated with it could
24 obtain control of RJR or any of its
25 subsidiaries?
CLASSIC REPORTING, INC. (212) 268-2590
163
1 Lampen
2 A. No, other than to the, you know,
3 other than as potentially contemplated by the
4 fact that we have put forward names for a
5 slate of directors.
6 Q. Does Brooke Group presently have
7 any options to purchase RJR stock?
8 MR. HIRSCHFELD: Objection.
9 Direction not to answer.
10 Q. Does New Valley currently have
11 any options to purchase RJR stock?
12 MR. HIRSCHFELD: Same objection,
13 same direction.
14 MS. SILVERBERG: I would like to
15 mark as deposition Exhibit 6, a
16 document bearing production No. BGL
17 5261 through 5346.
18 (Multipage document prepared by
19 Bryant Kirkland, bearing
20 production Nos. BGL 5261 through
21 5346, marked Lampen Exhibit 6 for
22 identification, as of this date.)
23 Q. Have you seen this document
24 before?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
164
1 Lampen
2 Q. What is Project Alpha?
3 A. I believe that is a code name
4 used by Jeffries.
5 Q. A code name for what?
6 A. For their work with New Valley
7 Brooke on RJR.
8 Q. Was this document prepared by
9 Jeffries?
10 A. That's what I was told.
11 Q. Did you receive a copy?
12 A. I did not.
13 Q. When I asked you if you had seen
14 this document before, I believe you said yes?
15 A. I have seen it before.
16 Q. When was the first time you had
17 seen this document?
18 A. I saw it in Bryant Kirkland's
19 office.
20 Q. When did you see it in Mr.
21 Kirkland's office?
22 A. I don't remember, sometime
23 December 4th, I see the deadline, the date on
24 it. I don't remember, some point more than a
25 month ago I saw this in his office and was
CLASSIC REPORTING, INC. (212) 268-2590
165
1 Lampen
2 told by him that it had been prepared by
3 Jeffries.
4 Q. Was this among the materials sent
5 to you by Mr. Kirkland?
6 MR. HIRSCHFELD: I think the
7 witness testified that he hadn't seen
8 it other than in Kirkland's office. It
9 was -- he was not sent a copy of it.
10 A. I don't recall ever getting a
11 copy of it.
12 Q. Did you review it when you were
13 in Mr. Kirkland's office?
14 A. In the most cursory fashion.
15 Q. When you reviewed this document,
16 did it appear to be a complete document?
17 A. My review would have been
18 insufficient to know how complete or
19 incomplete it was.
20 Q. Do you recall anything that you
21 read in the document?
22 A. My recollection was that it was
23 basically -- my recollection was it was a lot
24 of materials that they had received for us
25 that it was, you know, of newspaper articles
CLASSIC REPORTING, INC. (212) 268-2590
166
1 Lampen
2 and copies of our preliminary consent
3 solicitation materials that for whatever
4 reason they had packaged in this form.
5 Q. Do you recall reading this packet
6 and the information about the consent
7 solicitation?
8 A. Not that I recall.
9 MS. SILVERBERG: I would like to
10 mark as Exhibit 7, a copy of the
11 privilege log submitted by LeBow and
12 Brooke Group in response to plaintiff's
13 first request for production of
14 documents.
15 (Privilege log submitted by LeBow
16 and Brooke Group in response to
17 Plaintiff's First Request for
18 Production of Documents, marked
19 Lampen Exhibit 7 for
20 identification, as of this date.)
21 Q. Were you involved at all in the
22 preparation of this privilege log?
23 A. I was not.
24 Q. Could you please turn to Page 2
25 of the privilege log. Around halfway down
CLASSIC REPORTING, INC. (212) 268-2590
167
1 Lampen
2 there is a document, BGL 4598 through 4601.
3 Do you see that entry?
4 A. Yes.
5 Q. Under the column for the
6 recipients, the last person on the list is an
7 A. Fleischer of Fried Frank?
8 A. Right.
9 Q. Who is Fried Frank representing?
10 A. Jeffries.
11 Q. If you would please turn to Page
12 3 of the document. The fourth entry has a
13 reference to a W. Lichtenstein from Steel
14 Partners. What is Steel Partners?
15 A. Steel Partners is a, I don't know
16 if it's a hedge fund, it's either a hedge fund
17 or a money manager at which New Valley had
18 some money invested or through which New
19 Valley had some money invested. I believe
20 it's an equity orientation.
21 Q. Who is W. Lichtenstein?
22 A. I have no idea.
23 Q. Looking to the second-to-last
24 entry on the privilege log, it refers --
25 A. Which page.
CLASSIC REPORTING, INC. (212) 268-2590
168
1 Lampen
2 Q. Still on Page 3. There's a
3 document from Bryant Kirkland to Bennett
4 LeBow, subject matter facsimile forwarding
5 dividend analysis and discussion of request
6 for legal advice. Do you know what that
7 dividend analysis is?
8 A. I have no idea.
9 Q. If you could please turn to Page
10 7 of the privilege log?
11 A. Yes.
12 Q. The fifth entry down has a
13 subject matter minutes of the board of
14 directors meeting containing advice of Bradley
15 Scheler of Fried Frank. Do you know who Fried
16 Frank was representing?
17 A. I believe in April of '95, Fried
18 Frank was doing legal work for New Valley.
19 Q. Did that legal work involve RJR?
20 A. I have no idea.
21 Q. Excuse me?
22 A. I have no idea.
23 Q. Looking at the second-to-last
24 entry on Page 7 of the privilege log, under
25 subject matter -- it identifies a document
CLASSIC REPORTING, INC. (212) 268-2590
169
1 Lampen
2 from R. Lampen to an individual at Sullivan &
3 Cromwell and copied to H. Lorber and the
4 subject matter is an analysis of proposed
5 structure of New Valley containing attorney
6 comments. Do you see that entry?
7 A. Yes, I do.
8 Q. Did that proposed structure of
9 New Valley in any way involve RJR?
10 MR. HIRSCHFELD: I'm going to
11 need a minute to consult with the
12 witness to see if he can answer the
13 question without violating the
14 privilege.
15 (Counsel conferred with the
16 witness.)
17 MR. HIRSCHFELD: With respect to
18 the pending question, I will allow the
19 witness to answer -- I will just allow
20 the witness to answer. Put the
21 question again and let's see if the
22 witness can answer.
23 MS. SILVERBERG: Please restate
24 the question.
25 (Record read.)
CLASSIC REPORTING, INC. (212) 268-2590
170
1 Lampen
2 MR. HIRSCHFELD: Just a yes or
3 no.
4 A. Yes.
5 Q. Did that proposed new structure
6 of New Valley contemplate a change of control
7 of RJR?
8 A. No.
9 Q. Did that proposed structure of
10 New Valley involve a merger of RJR or any of
11 its subsidiaries with any other entity?
12 A. No, it didn't.
13 Q. Did that proposed structure of
14 New Valley involve Liggett?
15 A. No, it did not.
16 Q. In what way did that proposed
17 structure of New Valley involve RJR?
18 A. Only to the extent that the
19 proposed structure of New Valley related
20 generally to investment securities held by New
21 Valley of which RJR securities would have been
22 a portion of that holding.
23 Q. So did the proposed structure of
24 New Valley relate in any way to the structure
25 of RJR?
CLASSIC REPORTING, INC. (212) 268-2590
171
1 Lampen
2 A. No.
3 Q. Did the proposed structure of New
4 Valley involve in any way options in RJR
5 securities?
6 MR. HIRSCHFELD: I'm going to
7 object and direct the witness not to
8 answer. Business strategy.
9 Q. Who is S. Fostelman at Sullivan &
10 Cromwell?
11 A. A typographical error. It's a
12 lawyer by the name of Jack Bostelman at
13 Sullivan & Cromwell.
14 Q. Does the proposed structure of
15 New Valley address New Valley's status under
16 the 1940 act?
17 MR. HIRSCHFELD: I object and
18 direct the witness not to answer.
19 Attorney-client privilege.
20 MS. SILVERBERG: Is it your
21 testimony that the proposed structure
22 itself is attorney-client privilege?
23 Is it your position that the proposed
24 structure itself is attorney-client
25 privilege?
CLASSIC REPORTING, INC. (212) 268-2590
172
1 Lampen
2 MR. HIRSCHFELD: I think your
3 question called for the witness to get
4 into areas that are covered by the
5 privilege. That's the reason why I
6 directed him not to answer.
7 Q. What was the proposed structure
8 of New Valley?
9 MR. HIRSCHFELD: Object. Direct
10 the witness not to answer.
11 MS. SILVERBERG: What is the
12 basis of the objection?
13 MR. HIRSCHFELD: Attorney-client
14 privilege.
15 MS. SILVERBERG: Is it your
16 position that the structure itself is
17 privileged?
18 MR. HIRSCHFELD: I have stated my
19 position. It's subject to the
20 attorney-client privilege and your
21 question would require the witness to
22 disclose information that's covered by
23 the attorney-client privilege.
24 Q. Have you discussed the proposed
25 structure of New Valley with anyone other than
CLASSIC REPORTING, INC. (212) 268-2590
173
1 Lampen
2 Mr. Bostelman?
3 A. I have either had conferences or
4 attended meetings with Mr. Bostelman, Sullivan
5 & Cromwell, of which other individuals from
6 New Valley were present.
7 Q. Have you discuss the proposed
8 structure of New Valley with Mr. Icahn?
9 MR. HIRSCHFELD: This proposed
10 structure of New Valley?
11 MS. SILVERBERG: Yes.
12 A. No.
13 Q. Have you discussed this proposed
14 new structure of New Valley with any financial
15 advisers?
16 A. No.
17 Q. I would like to call your
18 attention to Page 10 of the privilege log.
19 Four lines from the bottom, there is a
20 questionnaire of nominee Richard Lampen. Is
21 that the questionnaire that you filled out in
22 connection with having your name put on the
23 slate of candidates to be run for the RJR
24 board?
25 A. Yes, it was.
CLASSIC REPORTING, INC. (212) 268-2590
174
1 Lampen
2 Q. Was this the same questionnaire
3 that was sent to the other nominees to the RJR
4 board?
5 A. I have no idea.
6 Q. Did this questionnaire seek basic
7 background information?
8 A. Yes, it did.
9 MS. SILVERBERG: I was just going
10 to I guess ask Mr. Hirschfeld as far as
11 I know, all the nominees thus far have
12 produced the questionnaire that they
13 have, that they filled out as part of
14 the process of having their names put
15 on the slate to run for the RJR board
16 of directors, and I was wondering if
17 there was any reason why Mr. Lampen's
18 questionnaire was not produced.
19 MR. HIRSCHFELD: I'm not aware
20 Mr. Lampen's questionnaire was not
21 produced.
22 Q. Is the document identified on the
23 privilege log the questionnaire that you
24 filled out?
25 A. I have no idea.
CLASSIC REPORTING, INC. (212) 268-2590
175
1 Lampen
2 MS. SILVERBERG: Off the record.
3 (Discussion off the record.)
4 Q. Turning to Page 11, five lines
5 down there is a document from a potential
6 financial consultant to Richard Lampen which
7 is a letter agreement between New Valley and
8 potential financial consultant. Is that the
9 engagement of Oppenheimer that we have been
10 discussing or is that a different financial
11 consultant?
12 MR. HIRSCHFELD: I don't know
13 that the witness can answer that.
14 A. I don't know what it refers to.
15 Q. In December of 1995, did you have
16 any discussions with a potential financial
17 consultant to New Valley?
18 A. I don't know what a potential
19 financial consultant means.
20 Q. The entry under subject matter
21 for that entry refers to a letter agreement
22 between New Valley and a potential financial
23 consultant. Do you know whether or not New
24 Valley entered into a letter agreement in
25 December of 1995 with any financial advisers
CLASSIC REPORTING, INC. (212) 268-2590
176
1 Lampen
2 other than Jeffries & Company and Oppenheimer
3 & Company?
4 A. Not that I can think of.
5 MS. SILVERBERG: Michael, let me
6 ask you on the record, was there any
7 attempt in compiling this privilege log
8 to differentiate between drafts and
9 final documents?
10 MR. HIRSCHFELD: I believe so,
11 but I can't state with certainty if the
12 preparers were able to determine in
13 each instance if a document was a draft
14 or the final.
15 MS. SILVERBERG: The reason I ask
16 is because the entry we have been
17 looking at is a letter agreement
18 between New Valley and potential
19 financial consultant. The next entry
20 is a draft letter agreement between New
21 Valley and potential investment
22 consultant. I surmise from reviewing
23 this that you have taken a position
24 that draft documents and draft letter
25 agreements are protected by the
CLASSIC REPORTING, INC. (212) 268-2590
177
1 Lampen
2 attorney-client privilege, but I note
3 that the document identified as a
4 letter agreement between New Valley and
5 potential financial consultant has also
6 been identified as protected under the
7 attorney-client privilege.
8 MR. HIRSCHFELD: Right.
9 MS. SILVERBERG: Is there any way
10 we can find out at some point whether
11 or not that's a final letter agreement?
12 MR. HIRSCHFELD: You know, I can
13 make inquiry following the conclusion
14 of the deposition to see if there is
15 any way to determine whether the
16 document is a final or a draft and to
17 ascertain more particularly the basis
18 for the assertions of privilege.
19 Obviously, the privilege claim in both
20 instances is not simply attorney-client
21 but also business strategy.
22 MS. SILVERBERG: Were the
23 documents produced in the manner in
24 which they were maintained to the
25 extent possible in the files of Mr.
CLASSIC REPORTING, INC. (212) 268-2590
178
1 Lampen
2 Lampen?
3 MR. HIRSCHFELD: As far as I am
4 aware, they were produced in a manner
5 in which they were maintained, yes.
6 MS. SILVERBERG: It might assist
7 you to note that the documents on this
8 privilege log are, go sequentially from
9 8621 to 8659 at which point we pick up
10 the document that's been marked as
11 Lampen Exhibit 4, and then we pick up
12 again on 8663, so to the extent that
13 might help you in trying to determine
14 what that letter agreement is, I just
15 wanted to point that out.
16 Q. Mr. Lampen, I'm going to show you
17 a bunch of documents which if you prefer, I
18 could hand them to you as one stack and have
19 you go through it or you can do it one by one,
20 whichever is easier for you, and basically ask
21 you whether or not you have ever seen or
22 received at New Valley any of these documents?
23 MR. HIRSCHFELD: Let me make a
24 suggestion. Why don't you give him the
25 pile. Let the witness quickly flip
CLASSIC REPORTING, INC. (212) 268-2590
179
1 Lampen
2 through the pile and separate them into
3 seen them, have not seen them.
4 MS. SILVERBERG: Just for the
5 record, I will identify the documents
6 as I hand them to him. These are all
7 documents that were marked at the
8 deposition of Mr. LeBow. They are
9 Exhibit 4, 5, 6, 7, 10, 11, 12, 13, 14,
10 15, 16, 17, 18, 19, 20, 21, 23, 24, 25,
11 26, 30, 31, 32, 33, 34, 35, 36, 37, 38,
12 39, 40, 41, 42, 43, 44, 45, 46.
13 A. Okay.
14 MR. HIRSCHFELD: I would just
15 indicate for the record that Mr. Lampen
16 has indicated that he has seen copies
17 of Plaintiff's Exhibits 31 and 44
18 marked for identification at Mr.
19 LeBow's deposition and is uncertain, he
20 thinks he may have seen the document
21 marked as Plaintiff's Exhibit 30 of Mr.
22 LeBow's deposition, and has not seen
23 any of the other documents that you
24 showed him.
25 Q. Mr. Lampen, can you identify what
CLASSIC REPORTING, INC. (212) 268-2590
180
1 Lampen
2 was marked at Mr. LeBow's deposition as
3 Exhibit 31?
4 A. Yes. It's a series of five or
5 six bar charts showing various annual rates of
6 return for the RJR stock in comparison with
7 some of its peers in various industries.
8 Q. When did you first see that
9 document?
10 A. I don't recall.
11 Q. Is that one of the documents that
12 you received from Mr. Kirkland?
13 A. I know Mr. Kirkland -- I believe
14 Mr. Kirkland was the preparer of this
15 document. When I would have seen it, I don't
16 remember.
17 Q. Did you receive it at a board
18 meeting?
19 A. I have no idea.
20 Q. I will ask you to identify --
21 going back to Exhibit 31, did you discuss that
22 document with anyone?
23 A. I have no recollection of
24 discussing it with anyone.
25 Q. I will ask you to identify what
CLASSIC REPORTING, INC. (212) 268-2590
181
1 Lampen
2 was marked as LeBow Exhibit 44 and ask if you
3 can identify that document?
4 A. Well, I identify the first two
5 pages which is an affidavit of Mr. LeBow's
6 submitted in connection with the
7 Hart-Scott-Rodino filing made by New Valley
8 with respect to RJR. The other documents
9 behind it I have never seen before, but I have
10 seen the first two pages.
11 Q. Did you receive analyses from Mr.
12 Kirkland that were not contained in the pile
13 that I handed you earlier?
14 A. I don't know what pile you are
15 referring to what you handed me before.
16 MS. SILVERBERG: I will rephrase
17 the question.
18 Q. I just handed you before a series
19 of documents that were marked as exhibits
20 during Mr. LeBow's deposition?
21 A. Right.
22 Q. Other than the documents you
23 identified as the ones you have seen and the
24 document that you identified as a maybe, were
25 there documents other than S.E.C. filings and
CLASSIC REPORTING, INC. (212) 268-2590
182
1 Lampen
2 price clippings relating to RJR that you
3 received from Mr. Kirkland?
4 A. As I think I have previously
5 testified, I recall that in one or more of
6 these information packages that I received
7 about RJR, there was a computer run. Whether
8 there was other material of a nonfinancial
9 matter, I don't recall.
10 Q. Would the computer run have been
11 a pro forma for RJR?
12 A. I think, as I previously
13 testified, my understanding was it related to
14 the Reemstma/RJR/Liggett transaction from the
15 past summer which I understand had been the
16 versions I had reflected that workup dated for
17 the subsequent public filings by various, I
18 guess by Liggett and RJR, though I'm not sure.
19 I don't know exactly what had changed from any
20 prior iterations of those documents.
21 Q. Is it your understanding that
22 someone at Brooke Group or New Valley just
23 updated those financials to take into account
24 RJR latest filings?
25 A. And New Valley's or Liggett's
CLASSIC REPORTING, INC. (212) 268-2590
183
1 Lampen
2 rather.
3 Q. Do you know why people at New
4 Valley or Brooke Group are updating these
5 computer runs?
6 MR. HIRSCHFELD: Objection to
7 form.
8 Q. Did you ever instruct anybody to
9 update the computer runs?
10 A. No.
11 Q. Did you have an understanding as
12 to why they were updating the computer runs?
13 A. No.
14 Q. Did you ever ask somebody why
15 they were sending you updated computer runs on
16 a proposal that you understood to be dead?
17 A. I remember asking Bryant Kirkland
18 what these related to, and it was explained to
19 me that it related to a transaction that was
20 no longer current. That had died prior to my
21 ever getting involved or having learned of Mr.
22 LeBow and RJR's interest.
23 Q. Did you ever ask anybody why
24 employees of Brooke Group or New Valley were
25 spending time updating computer runs on a
CLASSIC REPORTING, INC. (212) 268-2590
184
1 Lampen
2 transaction that was dead?
3 A. No.
4 Q. Other than updates of computer
5 runs for the proposal that was presented to
6 RJR, did you receive any other computer runs
7 on RJR?
8 A. Not that I'm aware of.
9 Q. Who is Jerry Schrager?
10 A. Jerry Schrager is a lawyer with
11 the law firm of Dreyer & Traub in New York.
12 Q. Do they represent Brooke Group?
13 A. No.
14 Q. Do they represent New Valley?
15 A. Yes.
16 Q. Do they represent New Valley in
17 connection with RJR?
18 A. No.
19 Q. Do they represent New Valley in
20 connection with the 1940 act?
21 A. No.
22 Q. Could you please pass me the
23 maybe document. I note that you have
24 identified LeBow Exhibit 30 as a document that
25 you might have seen in the past. What is the
CLASSIC REPORTING, INC. (212) 268-2590
185
1 Lampen
2 basis for your belief that you might have seen
3 this document?
4 A. I don't remember, I don't recall
5 ever having seen it in this format, but I see
6 some information in here in particular what
7 I'm referring to -- I stand corrected. I
8 don't believe this is a document that I have
9 seen. I think I misread some of these numbers
10 before. Doesn't relate to what I thought it
11 related to so I would put this in the no pile.
12 Q. Are you aware of any resolution
13 of the New Valley board expressing its intent
14 to be engaged primarily as soon as reasonably
15 possible in a business other than that of
16 investing, reinvesting, owning, holding or
17 trading in securities?
18 MR. HIRSCHFELD: Can I ask what
19 the relevance of that question is?
20 MS. SILVERBERG: Yes, it goes to
21 New Valley's position regarding its
22 status under the 1940 act.
23 MR. HIRSCHFELD: Why is that an
24 issue in the lawsuit?
25 MS. SILVERBERG: Because RJR
CLASSIC REPORTING, INC. (212) 268-2590
186
1 Lampen
2 alleged in its Complaint that one of
3 the motivating factors for Brooke Group
4 and LeBow in trying to effectuate a
5 merger between Liggett and RJR and
6 subsidiaries is issues raised under the
7 1940 act.
8 MR. HIRSCHFELD: Right. I'm
9 still missing the connection.
10 MS. SILVERBERG: I would like to
11 explore what New Valley understands its
12 needs are with respect to the 1940 act,
13 what type of exemption it has and
14 whether or not it needs to find some
15 sort of business to be in other than
16 investing, reinvesting, owning or
17 holding or trading securities.
18 MR. HIRSCHFELD: I think that
19 goes well beyond the permitted scope of
20 the examination. Allegation is that
21 Brooke Group, Mr. LeBow in particular,
22 those two of the defendants sought to
23 acquire control and are seeking to
24 acquire control over RJR Nabisco
25 Holdings pursuant to an undisclosed
CLASSIC REPORTING, INC. (212) 268-2590
187
1 Lampen
2 plan and scheme and that the motivating
3 factor for that is the need to resolve
4 a purported Investment Company Act
5 issue at New Valley or possibly at
6 Brooke. You have asked the witness in
7 numerous ways on numerous occasions
8 whether there is any transaction
9 contemplated involving RJR Nabisco or
10 any subsidiary of RJR Nabisco.
11 MS. SILVERBERG: That he is aware
12 of.
13 MR. HIRSCHFELD: Or any
14 subsidiary of Brooke or affiliate of
15 Brooke that he is aware of that is
16 intended or relates in any way to the
17 Investment Company Act issue which you
18 have alleged, and the witness has said
19 no. Beyond that, you are not entitled
20 to inquire into matters that are
21 peculiar to New Valley and have no
22 bearing and no relation upon RJR
23 Nabisco.
24 MS. SILVERBERG: Are you
25 instructing the witness not to answer?
CLASSIC REPORTING, INC. (212) 268-2590
188
1 Lampen
2 MR. HIRSCHFELD: Yes, I think I
3 am.
4 Q. I believe you testified that at
5 the time you joined New Valley there was a
6 question as to New Valley's status under the
7 1940 act.
8 MR. HIRSCHFELD: Objection to
9 form.
10 MS. SILVERBERG: I will rephrase
11 it.
12 Q. Is it correct that at the time
13 you joined New Valley there was a question as
14 to New Valley's status under the 1940 act?
15 A. No, I don't believe there was any
16 question.
17 Q. Was New Valley operating under an
18 exemption to registration under the 1940 act?
19 A. Yes.
20 MR. HIRSCHFELD: Objection, asked
21 and answered.
22 Q. Is New Valley presently operating
23 under an exemption to the 1940 act?
24 A. As I have already answered, no.
25 Q. What caused that change in
CLASSIC REPORTING, INC. (212) 268-2590
189
1 Lampen
2 status?
3 MR. HIRSCHFELD: Objection. It's
4 not relevant to the lawsuit unless it
5 had anything to do with RJR. You may
6 inquire as to whether a change in
7 status had anything to do with RJR
8 Nabisco or any affiliate or subsidiary
9 of RJR Nabisco.
10 MS. SILVERBERG: Are you
11 directing the witness not to answer?
12 MR. HIRSCHFELD: The question as
13 you posed it, yes. The question that I
14 have suggested as should be amended I
15 will allow him to answer.
16 Q. Are you going to answer my
17 question?
18 MR. HIRSCHFELD: No, I am
19 directing him not to answer your
20 question.
21 Q. What business is New Valley
22 currently primarily engaged in?
23 A. New Valley is presently primarily
24 engaged in the investment banking and
25 brokerage business and the ownership and
CLASSIC REPORTING, INC. (212) 268-2590
190
1 Lampen
2 management of commercial real estate.
3 Q. At the time you joined New
4 Valley, what business was New Valley primarily
5 engaged in?
6 A. At the time that, of the two
7 businesses that I just mentioned, at the time
8 I joined New Valley, it was only at that time
9 engaged in the investment banking and
10 brokerage business.
11 Q. Since the time you joined New
12 Valley, how much time would you say you have
13 spent on what you call the RJR matter?
14 MR. HIRSCHFELD: Objection,
15 what's the relevance of that question?
16 MS. SILVERBERG: It's designed to
17 elicit information.
18 MR. HIRSCHFELD: Directing him
19 not to answer.
20 Q. From the time you joined New
21 Valley to the present, how much time has Mr.
22 LeBow spent on the New Valley matter?
23 MR. HIRSCHFELD: Direction not to
24 answer.
25 MS. SILVERBERG: Well, I'm going
CLASSIC REPORTING, INC. (212) 268-2590
191
1 Lampen
2 to reserve my rights for a ruling on
3 these objections, but other than that,
4 I have nothing further at this time.
5 (Time noted: 4:00 P.M.)
6 __________________________
7 Richard J. Lampen
8
9 Subscribed and sworn to
10 before me this______day
11 of_________________1996.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
192
1
2
C E R T I F I C A T E
_ _ _ _ _ _ _ _ _ _ _
3
STATE OF NEW YORK )
4 ) ss.:
COUNTY OF NEW YORK )
5
I, DONNA BRUNCK, a Certified
6
Shorthand Reporter and Notary Public within
7
and for the State of New York, do hereby
8
certify:
9
That I reported the proceedings in
10
the within-entitled matter, and that the
11
within transcript is a true record of
12
such proceedings.
13
I further certify that I am not
14
related, by blood or marriage, to any of
15
the parties in this matter and that I am
16
in no way interested in the outcome of
17
this matter.
18
IN WITNESS WHEREOF, I have hereunto
19
set my hand this 29th day of January,
20
1996.
21
__________________________
22 DONNA BRUNCK, CSR
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
193
1
2 January 29, 1996
I N D E X
3 WITNESS PAGE
RICHARD J. LAMPEN
4 Examination by Ms. Silverberg 4
5 E X H I B I T S
LAMPEN
6 FOR IDENTIFICATION PAGE
1 RJR's application to schedule
7 expedited discovery 7
8 2 Subpoena addressed to Richard
Lampen 13
9
3 Memo, bearing production No.
10 BGL 8182 133
11 4 Letter and attachment, top
document bearing production
12 No. BGL 8660 144
13 5 Copy of final agreement between
New Valley and Brooke, cover
14 letter, related fairness opinion
from Oppenheimer to the members
15 of the board of New Valley,
bearing production Nos. AB 90
16 through AB 101 149
17 6 Multipage document prepared by
Bryant Kirkland, bearing
18 production Nos. BGL 5261 through
5346 163
19
7 Privilege log submitted by
20 LeBow and Brooke Group in response
to Plaintiff's First Request
21 for Production of Documents 166
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
194
1
2 January 29, 1996
I N D E X (Continued)
3
MARKED FOR RULING
4 PAGE LINE
5 18
5 6 4
16 20
6 17 3
17 11
7 17 14
17 17
8 18 2
19 10
9 19 18
19 23
10 20 3
20 7
11 28 9
84 20
12 to
90 6
13 93 14
141 14
14 141 19
142 21
15 163 6
171 3
16 171 14
172 7
17 185 12
188 25
18 190 11
190 20
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
CLASSIC REPORTING, INC. (212) 268-2590
1
==============================================================================
In The Matter Of:
RJR NABISCO HOLDINGS CORP. v.
BENNETT S. LEBOW et al.
----------------
BARRY W. RIDINGS
Vol. 1, January 22, 1996
----------------
CLASSIC REPORTING, INC.
13 WEST 36th STREET
NEW YORK, NY 10018
(212) 268-2590
Original File br0l2296.asc, 188 Pages
Min-U-Script[Registered] File ID: 4257828937
Word Index included with this Min-U-Script[Registered]
==============================================================================
==============================================================================
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
-------------------------------------x
:
RJR NABISCO HOLDINGS CORP., :
:
Plaintiff, :
:
-against- : 6:95CV00812
:
BENNETT S. LEBOW, BROOKE GROUP LTD., :
And CARL C. ICAHN, :
:
Defendants. :
:
-------------------------------------x
January 22, 1996
10:05 A.M.
Deposition of non-party witness,
BARRY W. RIDINGS, taken by plaintiff pursuant
to subpoena, at the law offices of Wachtell
Lipton Rosen & Katz, 51 West 52nd Street, New
York, New York 10019, before Arta Pascullo, a
Registered Professional Reporter and Notary
Public within and for the State of New York.
CLASSIC REPORTING, INC. (212) 268-2590
2
1
2 A P P E A R A N C E S:
3 WACHTELL LIPTON ROSEN & KATZ
Attorneys for Plaintiff
4 51 West 52nd Street
New York, New York 10019
5
BY: WARREN L. STERN, ESQ.
6 RACHELLE SILVERBERG, ESQ.
7
MILBANK, TWEED, HADLEY & McCLOY
8 Attorneys for Defendants
and the Witness
9 1 Chase Manhattan Plaza
New York, New York 10005-1413
10
BY: DUNCAN J. LOGAN, ESQ.
11
12 PROSKAUER ROSE GOETZ & MENDELSOHN, L.L.P.
Attorneys for the Witness
13 1585 Broadway
New York, New York 10036-8299
14
BY: GREGG M. MASHBERG, ESQ.
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
3
1
2 IT IS HEREBY STIPULATED AND AGREED by
3 and among the attorneys for the respective parties
4 herein that the sealing, filing and certification
5 of the within deposition be waived; that such
6 deposition may be signed and sworn to before any
7 officer authorized to administer an oath, with the
8 same force and effect as if signed and sworn to
9 before a judge of this court.
10 IT IS FURTHER STIPULATED AND AGREED
11 that all objections, except as to the form, are
12 reserved to the time of the trial.
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
4
1 Ridings
2 B A R R Y W. R I D I N G S,
3 having been first duly sworn by the
4 Notary Public (Arta Pascullo), was
5 examined and testified as follows:
6 EXAMINATION BY MR. STERN:
7 Q. Will you state your name and
8 address for the record, please.
9 A. Barry W. Ridings, 16 Erwin Park,
10 Montclair, New Jersey 07042.
11 Q. Mr. Ridings, have you had your
12 deposition taken before?
13 A. Yes.
14 Q. Once or more than once?
15 A. More than once.
16 Q. How many times?
17 A. A lot.
18 Q. Can you give us a rough number?
19 A. Fifteen.
20 Q. With that experience, I'm
21 confident you understand that you are obliged
22 to answer our questions truthfully. Is that
23 so?
24 A. I think so.
25 Q. You understand that the
CLASSIC REPORTING, INC. (212) 268-2590
5
1 Ridings
2 deposition is being given subject to the
3 penalties of perjury, is that so?
4 A. Yes.
5 Q. Are you represented by counsel at
6 this deposition?
7 A. Yes.
8 Q. Would you identify your counsel?
9 A. Sitting both to my right.
10 MR. STERN: Would counsel
11 identify themselves for the record.
12 MR. MASHBERG: I'm sure we are
13 already on the record. Mr. Mashberg
14 and Mr. Logan.
15 Q. Who is paying the fees of Mr.
16 Mashberg and Mr. Logan?
17 A. I believe New Valley is.
18 MR. LOGAN: I caution the witness
19 to only testify as to facts that he has
20 knowledge of. If you don't know the
21 answer, say you don't know.
22 Q. You know that you are not paying
23 the fees?
24 A. That's correct.
25 Q. Now, are you here pursuant to a
CLASSIC REPORTING, INC. (212) 268-2590
6
1 Ridings
2 subpoena?
3 A. Yes.
4 Q. Have you seen that subpoena?
5 A. Yes.
6 MR. STERN: I would like to mark
7 as Ridings Exhibit 1, a copy of the
8 subpoena.
9 (Copy of subpoena marked Ridings
10 Exhibit 1 for identification, as
11 of this date.)
12 MR. STERN: Pursuant to which
13 this deposition is being taken.
14 Q. Mr. Ridings, I'm placing Exhibit
15 1 before you. Can you identify that as the
16 subpoena pursuant to which your deposition is
17 being taken?
18 A. This appears to be a copy of that
19 which was served on me.
20 Q. You have seen a copy of that
21 document before?
22 A. Yes, I have.
23 Q. And you notice that there is a
24 list of documents attached to that subpoena.
25 Do you see that?
CLASSIC REPORTING, INC. (212) 268-2590
7
1 Ridings
2 A. There is an attachment.
3 Q. Did you review that attachment
4 when you received it?
5 A. Yes, I read it.
6 Q. Did you perform any search for
7 the documents that are requested in that
8 attachment?
9 A. Yes.
10 Q. Did you perform the search
11 personally?
12 A. Yes.
13 Q. Did anyone assist you?
14 A. No.
15 Q. How did you go about performing
16 your search?
17 A. I went to my files and took
18 everything out of my files relating to either
19 RJR or New Valley.
20 Q. Are you confident that obtaining
21 the documents of that description, that is,
22 documents related to RJR and New Valley,
23 compiled whatever documents you had in your
24 possession that would be responsive to that
25 request?
CLASSIC REPORTING, INC. (212) 268-2590
8
1 Ridings
2 A. Yes.
3 Q. What did you do with the
4 documents that you took from your files?
5 A. I took the entire content of both
6 files and showed them to counsel.
7 Q. Which counsel?
8 A. Both counsel sitting here with me
9 today.
10 Q. What did they do with them?
11 MR. MASHBERG: Objection.
12 MR. LOGAN: Object to the form.
13 Q. Did they take them from you?
14 A. They reviewed the files. And
15 they took some of which they made copies and
16 forwarded them to you.
17 Q. But they didn't take everything
18 that you had shown them; is that correct?
19 A. That's correct.
20 Q. What didn't they take?
21 A. I don't know.
22 Q. Do you still have documents in
23 your possession that relate either to RJR or
24 to New Valley?
25 A. With respect to New Valley, I do.
CLASSIC REPORTING, INC. (212) 268-2590
9
1 Ridings
2 Q. Do you have any documents in your
3 possession that relate to RJR? That were
4 not -- I'm sorry. Let me put a different
5 question.
6 Are there documents in your files
7 that relate to RJR that were not taken by your
8 counsel?
9 A. I believe counsel took everything
10 in my RJR file with the exception of 10-Ks and
11 10-Qs.
12 Q. And with respect to the New
13 Valley documents, is it correct to say that
14 the New Valley documents that you retained
15 were documents that did not relate to RJR; is
16 that correct?
17 A. That's correct.
18 Q. Do you know if those documents
19 were otherwise called for by the subpoena?
20 A. I don't understand the question.
21 Q. The documents relating to New
22 Valley that you retained, that did not relate
23 to RJR, were they nevertheless called for by
24 the subpoena?
25 A. I don't believe so.
CLASSIC REPORTING, INC. (212) 268-2590
10
1 Ridings
2 Q. Did any of those documents relate
3 to the Investment Company Act of 1940?
4 MR. MASHBERG: Which documents?
5 Q. Any of the documents that were
6 retained -- that were taken from your file,
7 shown to counsel and then retained, did any of
8 those documents relate to the Investment
9 Company Act of 1940?
10 MR. LOGAN: Retained by Mr.
11 Ridings?
12 MR. STERN: Correct.
13 A. I believe counsel has kept copies
14 of certain documents that they deemed to be
15 privileged and not given to you although I
16 think they have given you a log of those
17 documents. Other than that, I believe there
18 is nothing in my file that pertains to the
19 questions.
20 Q. Have you seen any log that was
21 prepared by counsel with respect to privileged
22 documents?
23 A. I reviewed what you are looking
24 at now this morning.
25 MR. STERN: I would like to mark
CLASSIC REPORTING, INC. (212) 268-2590
11
1 Ridings
2 as Exhibit 2, a page that was just
3 handed to us by Mr. Ridings's counsel
4 (Privileged log marked Ridings
5 Exhibit 2 for identification, as
6 of this date.)
7 Q. Mr. Ridings, I'm going to place
8 Exhibit 2 before you and ask you if you can
9 identify that document.
10 A. This is a copy of the document
11 that counsel shared with me this morning.
12 Q. Is that a document reflecting a
13 description of documents as far as you know
14 your counsel claims to be privileged documents
15 that came from your file?
16 A. Yes.
17 Q. Other than the documents that are
18 reflected in that memorandum, are there any
19 documents that you took from your file when
20 you searched your files in response to the
21 subpoena -- that have not been produced to us
22 other than the 10-Ks and 10-Qs that you
23 described?
24 MR. MASHBERG: Object to the
25 form.
CLASSIC REPORTING, INC. (212) 268-2590
12
1 Ridings
2 MR. LOGAN: Object to the form.
3 Q. Do you understand the question?
4 A. I'm sorry. It was a run-on
5 sentence. Can we break it down in smaller
6 bites.
7 Q. I understand it's a fact that
8 when you received the subpoena you searched
9 your files; is that correct?
10 A. Yes.
11 Q. You removed from your files
12 documents relating to RJR and New Valley; is
13 that correct?
14 A. I took my entire RJR file and my
15 entire New Valley file and sat with counsel.
16 Q. And of that collection of
17 documents, some set was removed by counsel for
18 production to us today; is that correct?
19 A. Correct.
20 Q. And at least two documents were
21 identified as privileged documents and are
22 reflected in Exhibit 2; is that correct?
23 A. Correct.
24 Q. And you've also told me that you
25 left in your RJR file some 10-Ks or 10-Qs and
CLASSIC REPORTING, INC. (212) 268-2590
13
1 Ridings
2 some documents of that nature; is that
3 correct?
4 A. Correct.
5 Q. We have three sets of documents.
6 The documents that have been produced, two
7 sets of documents that are listed and the
8 public documents that were left in your file.
9 Are there any other documents that you took
10 out of your files when you reviewed them after
11 receiving the subpoena?
12 MR. MASHBERG: Object to the
13 form.
14 MR. LOGAN: Object to the form.
15 A. Took out --
16 Q. That you removed from your files
17 as you searched your files in response to the
18 subpoena?
19 A. The only other, to use your word,
20 "pile" of documents are New Valley documents
21 which are not responsive to the subpoena which
22 were not produced.
23 Q. I take it that you have
24 maintained a file with respect to the RJR
25 matter; is that correct?
CLASSIC REPORTING, INC. (212) 268-2590
14
1 Ridings
2 A. Yes.
3 MR. LOGAN: Object to the form.
4 MR. MASHBERG: RJR matter.
5 Define that for us.
6 Q. You are a nominee for the RJR
7 board of directors; is that correct?
8 A. Yes.
9 Q. And you were proposed as such a
10 nominee by Brooke Group; is that correct?
11 A. Yes.
12 Q. With respect to that matter, you
13 have maintained the file; is that correct?
14 A. Yes.
15 Q. How have you gone about
16 maintaining that file?
17 A. I don't understand the question.
18 Q. What have you placed in that
19 file, what kind of documents?
20 A. Any documents that pertain to RJR
21 that come into my possession.
22 Q. Have any documents pertaining to
23 RJR come into your possession that you've
24 discarded?
25 A. Not that I recall.
CLASSIC REPORTING, INC. (212) 268-2590
15
1 Ridings
2 Q. Destroyed.
3 A. No.
4 Q. Placed out of your possession in
5 any way?
6 A. Not that I recall.
7 Q. So every document that you can
8 recall that you have received or generated
9 pertaining to RJR has been placed in that
10 file; is that correct?
11 MR. MASHBERG: Object to the
12 form.
13 MR. LOGAN: Object to the form.
14 A. Other than public documents, I
15 can't think of anything that I have destroyed,
16 thrown away or given to someone else. As I
17 sit here today, I can't think of any.
18 Q. And do you maintain a diary or
19 calendar of personal appointments or similar
20 document?
21 A. I don't maintain a diary. I have
22 a calendar.
23 Q. An appointment calendar?
24 A. Yes.
25 Q. Would that appointment calendar
CLASSIC REPORTING, INC. (212) 268-2590
16
1 Ridings
2 reflect meetings or communications respecting
3 RJR?
4 MR. MASHBERG: Object to the
5 form.
6 A. Communications, no. Meetings,
7 usually. And I say that only because I'm not
8 perhaps as good as I should be in keeping an
9 accurate diary.
10 Q. Did you review that appointment
11 calendar to determine if there were any
12 entries in the calendar relating to RJR in the
13 course of your document collection in response
14 to the subpoena?
15 A. I looked at the calendar to see
16 what was the date of the board meeting of
17 Exhibit 2 and actually could not find it on my
18 calendar, meaning it was a phone call, not a
19 meeting.
20 Q. Did you examine your calendar
21 generally to see if there were any entries
22 relating to RJR?
23 A. Only with respect to that. And I
24 did not see any entries. But I was looking
25 for the date of that board meeting. And it
CLASSIC REPORTING, INC. (212) 268-2590
17
1 Ridings
2 was a New Valley board meeting.
3 Q. What date were you looking at?
4 A. A date in January where it had a
5 board meeting for New Valley.
6 Q. You have not looked in your
7 calendar for, say, October, November, December
8 of 1995 to see if there are any entries
9 relating to RJR; is that correct?
10 A. There are no entries for RJR. I
11 had no RJR activity.
12 Q. When did you become a nominee for
13 the RJR board of directors?
14 A. The exact date?
15 Q. Well, it was in November; isn't
16 that correct?
17 A. I actually don't recall the date.
18 Q. What is your best recollection as
19 to when you became a nominee?
20 A. I don't recall.
21 MR. STERN: I'm going to ask the
22 reporter to mark as Exhibit 3, a
23 document that was produced to us over
24 the weekend. It's numbered BR 1
25 through BR 93.
CLASSIC REPORTING, INC. (212) 268-2590
18
1 Ridings
2 (Letter from Brooke Group to RJR,
3 bearing production Nos. BR 1
4 through BR 93, marked Ridings
5 Exhibit 3 for identification, as
6 of this date.)
7 Q. Can you identify that document,
8 Mr. Ridings?
9 MR. MASHBERG: Before you answer
10 the question, just a minute.
11 Okay, please proceed.
12 A. It is a letter from Brooke Group
13 to RJR with respect to a stockholder notice to
14 submit business.
15 Q. Have you seen that document
16 before?
17 A. Yes. It was in my file.
18 Q. Having reviewed that document
19 this morning, does that refresh your
20 recollection that you were proposed for the
21 RJR board of directors in November of 1995?
22 A. It's dated November 20th and it
23 has my consent I think dated November 16th, I
24 think I saw it in here.
25 Q. In attempting to respond to the
CLASSIC REPORTING, INC. (212) 268-2590
19
1 Ridings
2 subpoena, did you review your appointment
3 calendar for November and December 1995?
4 A. Just briefly.
5 Q. Did you review it carefully
6 enough to determine whether or not there were
7 any entries relating to RJR?
8 A. I have answered that question
9 already. There is nothing in that calendar on
10 RJR.
11 Q. Fine. Thank you.
12 Now, after receiving the subpoena
13 in this matter -- I'll put a different
14 question.
15 When did you first learn that
16 your deposition was requested in this matter?
17 A. When I received the subpoena.
18 Q. And after receiving the subpoena,
19 what did you do with respect to the subpoena?
20 What did you first do with respect to the
21 subpoena?
22 A. I read it.
23 Q. And then what did you do?
24 A. It was served over a weekend so I
25 didn't do anything until the following Monday.
CLASSIC REPORTING, INC. (212) 268-2590
20
1 Ridings
2 Q. Then what happened?
3 A. My recollection is that I called
4 Ben LeBow, told him that I had gotten the
5 subpoena, and he suggested that I call Milbank
6 which I did.
7 Q. Why did you call Mr. LeBow?
8 A. Because he's the chairman of New
9 Valley.
10 Q. What did you say to Mr. LeBow and
11 what did he say to you?
12 A. I had indicated that I had gotten
13 the subpoena. His response was I should call
14 one of the partners down at Milbank Tweed.
15 Q. Is that the sum of the
16 conversation, as you recall it?
17 A. Yes.
18 Q. What did you next do?
19 A. My recollection is that I called
20 the person at Milbank Tweed.
21 Q. Did Mr. LeBow suggest someone?
22 A. Yes. I'm drawing a blank on his
23 name right now.
24 Q. Was it Mr. Hirschenfeld?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
21
1 Ridings
2 Q. What did you say to Mr.
3 Hirschenfeld and he to you?
4 MR. LOGAN: Objection. The
5 witness will not be permitted to
6 disclose the substance of privileged
7 attorney-client communication.
8 Q. Was Mr. Hirschenfeld acting as
9 your attorney at that time?
10 A. I believe he was.
11 Q. When did you engage Mr.
12 Hirschenfeld to act as your attorney?
13 A. I believe New Valley and Brooke
14 engaged Milbank on behalf of the nominees.
15 Q. So you understand that this was
16 an attorney-client conversation that you were
17 having with Mr. Hirschenfeld; is that correct?
18 A. I don't think I thought about it
19 at that moment.
20 Q. Did you view Mr. Hirschenfeld as
21 your attorney when you placed that call to
22 him?
23 MR. MASHBERG: In connection with
24 the subpoena?
25 MR. STERN: Yes.
CLASSIC REPORTING, INC. (212) 268-2590
22
1 Ridings
2 A. I viewed him as my attorney which
3 was why I was calling him, to know how to
4 respond to the subpoena.
5 Q. After speaking to Mr.
6 Hirschenfeld, what did you do with respect to
7 the subpoena?
8 A. Nothing.
9 Q. What happened next with respect
10 to the subpoena?
11 A. When?
12 Q. After the conversation with Mr.
13 Hirschenfeld?
14 A. Nothing happened.
15 Q. Did you search your files?
16 A. At that point, no.
17 Q. Well, had you searched -- at the
18 time you spoke to Mr. Hirschenfeld, you had
19 not yet searched your files?
20 A. No.
21 Q. You searched your files after
22 speaking to Mr. Hirschenfeld; is that correct?
23 A. Not until we had a date for this
24 deposition. I didn't bother searching it
25 beforehand.
CLASSIC REPORTING, INC. (212) 268-2590
23
1 Ridings
2 Q. After the conversation with Mr.
3 Hirschenfeld, when was your next communication
4 with anyone concerning this deposition?
5 A. I don't recall.
6 Q. Did there come a time when you
7 learned that there was a date set for the
8 deposition?
9 A. Yes.
10 Q. From whom did you learn that?
11 A. Counsel at Milbank.
12 Q. And then what did you do?
13 A. It was at that point that I
14 gathered my files.
15 Q. And we've discussed that already.
16 Other than gathering your files, have you done
17 anything to prepare for this deposition?
18 A. Other than meeting with counsel?
19 Q. Have you met with counsel?
20 A. Yes.
21 Q. How many times?
22 A. This morning. And on Friday.
23 Q. Now, other than counsel, and the
24 conversation with Mr. LeBow that you
25 described, have you discussed this deposition
CLASSIC REPORTING, INC. (212) 268-2590
24
1 Ridings
2 with anyone?
3 A. This deposition?
4 Q. Yes.
5 A. My wife.
6 Q. Other than your wife?
7 A. The fact that my deposition is
8 being taken?
9 Q. The deposition.
10 A. Well, yes.
11 Q. With whom?
12 A. My secretary.
13 Q. Anyone else?
14 A. Several of the people that work
15 for me. There are various transactions in
16 process.
17 Q. Anyone else?
18 A. I have indicated to Mr. LeBow at
19 the last New Valley board meeting that my
20 deposition was scheduled.
21 Q. Anyone else?
22 A. I don't recall right now.
23 Q. Now, how did the subject of your
24 deposition come up with Mr. LeBow at the last
25 New Valley board meeting?
CLASSIC REPORTING, INC. (212) 268-2590
25
1 Ridings
2 A. One of the questions of one of
3 the directors was please update the board on
4 New Valley -- excuse me -- on the RJR matter.
5 Mr. LeBow indicated that certain nominees had
6 their deposition scheduled, and I indicated
7 that mine was scheduled for today.
8 Q. When was that board meeting?
9 A. I think it was about two weeks
10 ago. I can't recall the exact date.
11 Q. Now, going back to a conversation
12 with anyone concerning this deposition, were
13 any of the conversations that you alluded to
14 with your secretary or colleagues or the like,
15 did any of them concern the substance of the
16 deposition as opposed to simply the fact that
17 the deposition was taking place?
18 A. Only the latter.
19 Q. Now, in between the time that you
20 spoke with Mr. Hirschenfeld, your initial
21 conversation with Mr. Hirschenfeld, and the
22 time that you were told by your attorneys that
23 the deposition had been scheduled for a
24 certain date, did you do anything or have any
25 communications concerning the deposition with
CLASSIC REPORTING, INC. (212) 268-2590
26
1 Ridings
2 anyone, other than what you've already
3 testified?
4 A. Yes.
5 Q. With whom?
6 A. I sent a letter to Milbank
7 indicating that they can act, I'm not sure of
8 the legal terms, but they can be my receiver
9 for information or legal matters on this.
10 Q. At whose request? Did anyone
11 request you to send that letter?
12 A. I can't recall who suggested it.
13 Either Milbank or perhaps counsel at New
14 Valley.
15 MR. STERN: I'm going to have
16 marked as Exhibit 4, a copy of a
17 document No. BR 5128.
18 (Letter from Mr. Ridings to Mr.
19 Bell, bearing production Nos. BR
20 5128, marked Ridings Exhibit 4
21 for identification, as of this
22 date.)
23 MR. STERN: Mark as the next
24 exhibit, a document numbered 519.
25 (Memorandum dated December 19
CLASSIC REPORTING, INC. (212) 268-2590
27
1 Ridings
2 from Mark Bell to Mr. Ridings, et
3 al., bearing production Nos. BR
4 519, marked Ridings Exhibit 5 for
5 identification, as of this date.)
6 MR. STERN: Place Exhibit 5
7 before the witness.
8 Q. Mr. Ridings, can you identify
9 Exhibit 5?
10 A. Yes. It's a letter from Mark
11 Bell to me, among others.
12 Q. Who is Mr. Bell.
13 A. Mr. Bell is general counsel for
14 Brooke Group according to the letterhead.
15 Q. May I have Exhibit 5 back,
16 please.
17 A. Uh-huh.
18 Q. Did you take any action after
19 receiving Exhibit 5?
20 A. Yes. I prepared a letter in
21 response.
22 Q. I'm going to show the witness
23 Exhibit 4. I ask you if that is the letter
24 that you prepared in response?
25 A. It is.
CLASSIC REPORTING, INC. (212) 268-2590
28
1 Ridings
2 Q. Mr. Ridings, do you have a copy
3 of Exhibit 5 before you? That is the December
4 19th memorandum from Mr. Bell?
5 A. Yes.
6 Q. You see that this letter is
7 addressed to yourself and a number of other
8 individuals. Do you see that?
9 A. Yes.
10 Q. Have you had discussions with any
11 of those individuals concerning this
12 deposition?
13 A. No.
14 Q. Having shown you Exhibits 4 and
15 Exhibit 5, have I refreshed your recollection
16 as to any conversations that you may have had
17 with anyone concerning this deposition other
18 than those conversation about which you've
19 told me?
20 MR. MASHBERG: Object to the
21 form.
22 MR. LOGAN: Objection.
23 A. I don't recall any other
24 conversations.
25 Q. Would you state the date and
CLASSIC REPORTING, INC. (212) 268-2590
29
1 Ridings
2 place of your birth, please?
3 A. Glen Ridge, New Jersey. March 4,
4 1952.
5 Q. Were you raised in New Jersey?
6 A. Yes. I live in my hometown,
7 believe it or not.
8 Q. Where did you receive your
9 post-secondary school education?
10 A. Colgate University.
11 Q. What degree did you receive?
12 A. I have a bachelor's degree with a
13 master's -- excuse me with a concentration in
14 religion.
15 Q. From Colgate?
16 A. Yes.
17 Q. What year did you receive that?
18 A. 1974.
19 Q. Do you have any other degrees?
20 A. I have an MBA from Cornell
21 University.
22 Q. When did you receive that?
23 A. 1976.
24 Q. I take it that you went straight
25 from Colgate to Cornell?
CLASSIC REPORTING, INC. (212) 268-2590
30
1 Ridings
2 A. Right.
3 Q. What was your first full-time
4 employment?
5 A. I worked at Chase Manhattan Bank.
6 Q. What years?
7 A. 1976 to 1979.
8 Q. What did you do there?
9 A. Various things. Do you want me
10 to go through it?
11 Q. Give me a general description?
12 A. Training program. Worked out
13 project finance.
14 Q. Were you based here in New York?
15 A. Yes.
16 Q. What did you do after leaving
17 Chase?
18 A. I was employed by Bear Sterns &
19 Company.
20 Q. Again in New York?
21 A. Yes.
22 Q. What years were you employed by
23 Bear Stearns?
24 A. '79 until '86.
25 Q. What position did you have?
CLASSIC REPORTING, INC. (212) 268-2590
31
1 Ridings
2 A. Ultimately I was a limited
3 partner in the investment banking group.
4 Q. Did you have any specialty there?
5 A. I ran the group that focused on
6 IPOs.
7 Q. Were these equity transactions or
8 debt transactions?
9 A. Sorry. Equity.
10 Q. What did you do in 1986?
11 A. I went to Drexel Burnham.
12 Q. What years were you at Drexel?
13 A. '86 until the end.
14 Q. The end being 1990?
15 A. That's right.
16 Q. What did you do at Drexel?
17 A. I was a managing director in the
18 investment banking group.
19 Q. Again I take it you were in New
20 York?
21 A. Yes.
22 Q. What field of finance were you
23 active in?
24 A. I was a generalist there. I
25 worked on equities deals, debt deals, M&A
CLASSIC REPORTING, INC. (212) 268-2590
32
1 Ridings
2 deals. Restructurings.
3 Q. What did you do in 1990?
4 A. Went to Alex. Brown & Sons.
5 Q. Is that where you are today?
6 A. Yes.
7 Q. You have been there continuously
8 since 1990; is that correct?
9 A. Yes.
10 Q. What was your first position at
11 Alex Brown?
12 A. Managing director.
13 Q. Do you still hold that title?
14 A. Yes.
15 Q. What responsibilities have you
16 had as managing director at Alex. Brown?
17 A. I run our restructuring practice.
18 I'm also active in our merger and acquisition
19 business. I sit on our commitment committee
20 for debt securities or opinion letter
21 committee.
22 Q. Have you been active in those
23 matters since joining the firm in 1990?
24 In other words, has your
25 involvement in the activities that you just
CLASSIC REPORTING, INC. (212) 268-2590
33
1 Ridings
2 described been continuous since 1990 or have
3 you changed roles over the five or six years
4 that we are talking about?
5 A. Yes. Actually my roles have
6 evolved through time.
7 Q. Without going into great detail,
8 can you give us a general description of how
9 your role has evolved over the five or six
10 years?
11 A. Without sounding funny, it's
12 gotten to be a lot more work and more
13 administration stuff.
14 Q. Let me focus on something. When
15 you came in in 1990, you were involved in the
16 restructuring practice; is that correct?
17 A. Right.
18 Q. And that involvement has
19 continued to this date?
20 A. Correct.
21 Q. In fact, I think you had -- you
22 ran their restructuring practice?
23 A. I still do, right.
24 Q. You ran it from the time you
25 joined the firm in 1990?
CLASSIC REPORTING, INC. (212) 268-2590
34
1 Ridings
2 A. Yes.
3 Q. What is the restructuring
4 practice of Alex. Brown.
5 A. It's representing debtors or
6 creditors in restructurings in either Chapter
7 11 or prepetition.
8 Q. Have you personally been named as
9 a defendant in any litigation?
10 A. In connection with the Drexel
11 bankruptcy, I, along with all the managing
12 directors of the firm, my recollection, were
13 named as defendants.
14 Q. What was the upshot of that
15 litigation?
16 A. There was a so-called global
17 settlement which may be familiar to you,
18 whereby all of the -- I think all of the
19 managing directors settled that matter.
20 Again, that is in connection with the Drexel
21 bankruptcy.
22 Q. You say your deposition has been
23 taken a number of times. Was your deposition
24 taken in that matter?
25 A. It was not.
CLASSIC REPORTING, INC. (212) 268-2590
35
1 Ridings
2 Q. Any other matter in which you
3 have personally been a defendant?
4 A. Not that I recall.
5 Q. Have you ever known yourself to
6 be under investigation for any violations of
7 the securities laws?
8 A. No.
9 Q. Have you ever been charged with
10 any criminal offense?
11 A. No.
12 Q. I take it you serve on at least
13 one board of directors. Is it accurate to
14 say -- is New Valley the only board on which
15 you serve?
16 A. No.
17 Q. Could you tell me the other --
18 are there any other public companies on whose
19 board of directors you serve?
20 A. Yes.
21 Q. Which ones? And if you can give
22 me the years of service roughly?
23 A. Telemundo.
24 Q. Telemundo?
25 A. Right. 1996 -- 1995-1996.
CLASSIC REPORTING, INC. (212) 268-2590
36
1 Ridings
2 Transcore Waste Service. 1993 or
3 '4 to the present.
4 Noodle Kidoodle, formerly called
5 Greenman Brothers. 1994 to present.
6 Norex-America 1993 to present.
7 I'm leaving out one or two.
8 Q. What is the business of
9 Telemundo?
10 A. It is a network of Spanish
11 television stations.
12 Q. Transcore, what is its business?
13 A. A waste management company in the
14 State of Florida.
15 Q. Noodle Kidoodle?
16 A. Noodle Kidoodle is actually a
17 pretty neat company. It's a specialty
18 children's store, chain of stores, that do not
19 sell action figures or violent toys. It's
20 educational in models and things like that.
21 Q. And Norex-America?
22 A. Norex-America is a company that
23 is involved in, broadly speaking, shipping
24 offshore oil and gas.
25 Q. And, of course, New Valley.
CLASSIC REPORTING, INC. (212) 268-2590
37
1 Ridings
2 A. New Valley.
3 Q. When did you become a director of
4 New Valley?
5 A. In connection with the emergence
6 from bankruptcy.
7 Q. When did New Valley go into
8 bankruptcy?
9 A. I don't recall when it went in.
10 Q. Let's note for the record that
11 Mr. Ridings is referring to a -- is it a copy
12 of Exhibit 3?
13 A. Yes.
14 Q. I take it you are referring to
15 that document to refresh your recollection as
16 to boards of directors. Is that accurate?
17 A. Yes. There are two more that I
18 did not mention, if you want me to go through
19 them.
20 Q. Which ones are they?
21 A. SubMicron Systems. It's a
22 manufacturer of semiconductor manufacturing
23 equipment.
24 And Trinity Americas.
25 Q. What is its business?
CLASSIC REPORTING, INC. (212) 268-2590
38
1 Ridings
2 A. It's in the business of acquiring
3 a company.
4 Q. What line of business is the
5 company that it is acquiring?
6 A. It's a restaurant chain in South
7 America.
8 Q. In what years did you serve or
9 have you served on the boards of these two
10 companies?
11 A. I would say both of them for the
12 last -- at least last two years. Then the
13 last one which is in this document Tiger
14 Direct. That company has recently been sold
15 to Global Direct. I'm no longer a member of
16 the board.
17 Q. What was the business of Tiger
18 Direct?
19 A. A computer software catalog
20 company.
21 Q. What years did you serve on its
22 board?
23 A. A long time. About 10 years.
24 Q. Were all of these companies,
25 companies with which either Drexel or Alex.
CLASSIC REPORTING, INC. (212) 268-2590
39
1 Ridings
2 Brown had a financing relationship with?
3 A. No.
4 Q. Which ones were not?
5 A. All of them.
6 Q. Let's go back to New Valley.
7 A. Okay. Let me add to that. With
8 respect to Drexel, Drexel may have done a
9 financing for some of these. I don't know.
10 But my involvement had no relation to Drexel.
11 Q. Let's go back to New Valley. New
12 Valley went into bankruptcy in what year?
13 A. I don't recall.
14 Q. Did you have any involvement at
15 all in the New Valley bankruptcy proceeding?
16 A. Yes.
17 Q. What was the nature of that
18 involvement?
19 A. I was the financial advisor to
20 the preferred stockholders.
21 Q. Was this a committee of public
22 shareholders?
23 A. Public, preferred. Yes.
24 Q. How long did you serve in that
25 capacity?
CLASSIC REPORTING, INC. (212) 268-2590
40
1 Ridings
2 A. I would say it was for about 90
3 or 120 days. The very end of the bankruptcy.
4 Q. I take it Alex. Brown was engaged
5 in that capacity; is that right?
6 A. Yes. Alex. Brown received a fee
7 in connection with that representation.
8 Q. You performed the services or you
9 supervised the performance of services; is
10 that correct?
11 A. I was the team leader of a group
12 of people who worked on that assignment.
13 Q. Who engaged Alex. Brown for that
14 assignment?
15 A. Counsel to the committee.
16 Q. Who was that?
17 A. Co-counsel. The lawyer from the
18 New Jersey firm was Gary Norgaard. I'm sorry.
19 I don't recall the name of his firm.
20 And New York counsel was Judge
21 Buschman. Former Judge Buschman. Again I
22 don't recall the name of his firm.
23 Q. Is it accurate to say that your
24 work as financial advisor to this committee
25 led to your taking a seat on the New Valley
CLASSIC REPORTING, INC. (212) 268-2590
41
1 Ridings
2 board? Is that accurate?
3 A. Yes.
4 Q. How did that come about?
5 A. In connection with the
6 bankruptcy, the preferred A holders had the
7 right to nominate two directors. And I was
8 one of the people that they put up for
9 election.
10 Q. Who was the other?
11 A. I don't recall. One of the
12 current directors of New Valley.
13 Q. Was your appointment to the board
14 subject to approval of the shareholder of New
15 Valley?
16 MR. MASHBERG: Object to the
17 form.
18 MR. LOGAN: Objection.
19 Q. I'll put a different question.
20 You said the preferred A holders. Was that
21 Your committee?
22 A. Yes.
23 Q. They had the right to nominate
24 two directors?
25 A. I think probably in bankruptcy
CLASSIC REPORTING, INC. (212) 268-2590
42
1 Ridings
2 the proper terminology would have been
3 "appoint" two directors coming out of the
4 bankruptcy.
5 Q. There would have been no other
6 creditor or shareholder constituency whose
7 consent would have been necessary for you to
8 take your position on the board; is that
9 accurate?
10 If that can't be answered yes or
11 no, explain what, if any, involvement other
12 creditor or shareholder bodies would have in
13 your appointment to the board?
14 MR. LOGAN: Object to the form.
15 MR. MASHBERG: Objection.
16 A. I actually just don't recall. It
17 was approved by the bankruptcy judge. Again,
18 I don't really recall the mechanics.
19 Q. Mr. LeBow or an entity controlled
20 by him had a significant stake in New Valley;
21 is that correct?
22 A. Yes.
23 Q. Was Mr. LeBow's approval required
24 for you to join the New Valley board?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
43
1 Ridings
2 Q. Did he oppose your joining the
3 board?
4 A. No.
5 Q. When did your service on the New
6 Valley board start?
7 A. I think about a year ago.
8 Q. So that would be early '95; is
9 that correct?
10 A. Give or take. I think January.
11 Got out of bankruptcy in December or January.
12 December '94 or January '95.
13 Q. How many board meetings have
14 there been since January of 1995?
15 A. I don't recall the exact number.
16 Q. How frequently does the board
17 meet?
18 A. At least quarterly. But I think
19 we may have had more -- just four meetings. I
20 just don't recall.
21 Q. Do you serve on any committees of
22 the board?
23 A. I don't think I serve on any of
24 the New Valley committees.
25 Q. Other than board meetings, have
CLASSIC REPORTING, INC. (212) 268-2590
44
1 Ridings
2 you attended any meetings concerning New
3 Valley since your appointment to the board?
4 A. I'm not sure what you mean by
5 meetings.
6 Q. Since joining the board, what
7 involvement in the activities of New Valley
8 have you had other than attendance at
9 directors meetings?
10 A. I have had conversations with New
11 Valley management.
12 Q. Who in New Valley management.
13 A. Ben LeBow. Howard Lorber. Dick
14 Lampen.
15 That is all I can recall right
16 now.
17 Q. And you had these conversation
18 frequently?
19 MR. MASHBERG: Object to the
20 form.
21 MR. LOGAN: Objection.
22 A. I think I probably talked to New
23 Valley people at least once a month. Perhaps
24 more frequently.
25 Q. What did these discussions
CLASSIC REPORTING, INC. (212) 268-2590
45
1 Ridings
2 concern?
3 A. New Valley.
4 Q. Any particular issues that you
5 can recall?
6 A. That is a pretty general
7 question. I'm not sure what you mean.
8 Q. Did there come a time that you
9 learned that Mr. LeBow had taken an interest
10 in some kind of transaction with RJR?
11 A. Yes.
12 Q. When was that?
13 A. The exact date?
14 Q. To your best recollection.
15 A. I don't recall.
16 Q. How did you learn of it?
17 A. It was brought up at a New Valley
18 board meeting.
19 Q. Can you remember the month in
20 which that meeting was held?
21 A. I just don't recall.
22 Q. Who brought it up?
23 A. Mr. LeBow informed the board that
24 New Valley had taken a position in RJR.
25 Q. Taking a position meaning
CLASSIC REPORTING, INC. (212) 268-2590
46
1 Ridings
2 purchasing stock; is that correct?
3 A. Yes.
4 Q. Did you say how much stock New
5 Valley had purchased?
6 A. I don't recall.
7 Q. Had the board of New Valley
8 approved the investment in RJR before it was
9 made?
10 A. Actually, I think when he first
11 raised the issue, it was before he purchased
12 and he was asking for our input on it. It was
13 not -- he was not informing us that he had
14 done it. He was bringing it to our attention
15 that he wanted to do it.
16 Q. Did he say how many shares he was
17 proposing to have New Valley acquire?
18 A. I don't recall.
19 Q. Did he say anything else on the
20 subject of RJR at this meeting?
21 A. Not that I recall.
22 Q. Did he say what the purpose of
23 the investment would be?
24 A. I don't remember.
25 Q. Did he say why he was suggesting
CLASSIC REPORTING, INC. (212) 268-2590
47
1 Ridings
2 purchases of RJR stock?
3 A. As opposed to what?
4 Q. As opposed to any of the thousand
5 other companies?
6 A. I don't recall.
7 Q. Did he mention the possibility of
8 a spin-off of the Nabisco Company in the
9 course of that meeting?
10 A. In the course of that first
11 meeting, I just don't remember.
12 Q. Are minutes maintained of New
13 Valley board meetings?
14 A. I believe so.
15 Q. Have you reviewed the minutes of
16 each meeting that you have attended?
17 A. Any minutes that have been sent
18 to me, I have reviewed.
19 Q. Do you remember seeing any
20 minutes in which RJR is discussed?
21 A. I don't remember.
22 Q. Have you told me everything that
23 you remember Mr. LeBow saying at this board
24 meeting when he first raised the possibilities
25 of an RJR investment?
CLASSIC REPORTING, INC. (212) 268-2590
48
1 Ridings
2 A. My only recollection is that his
3 bringing up the subject.
4 Q. Did anyone else say anything?
5 A. I don't remember.
6 MR. MASHBERG: On this subject?
7 MR. STERN: On this subject.
8 A. I don't really remember.
9 Q. Did the board take any action
10 with respect to the subject that Mr. LeBow had
11 raised?
12 A. Again, I'm sorry. I just don't
13 remember.
14 Q. When did you next hear of
15 anything about Mr. LeBow's interest in a
16 possible transaction involving RJR?
17 A. What do you mean by
18 "transaction"?
19 Q. I'm trying to be as general as I
20 can to describe anything that Mr. LeBow might
21 have in mind as respects RJR?
22 A. I don't recall a specific
23 meeting.
24 Q. When did you next hear, if you
25 can recall, I know you don't have perfect
CLASSIC REPORTING, INC. (212) 268-2590
49
1 Ridings
2 recollection, but taking your recollection as
3 you sit here, what do you recall happening
4 next with respect to Mr. LeBow or Brooke Group
5 or New Valley and RJR?
6 MR. LOGAN: Object to the form.
7 A. I don't really remember any other
8 events or conversations on it until the
9 conversation where LeBow indicated he was
10 putting together his list of nominees for
11 director.
12 Q. When was that?
13 A. I don't remember.
14 Q By the way, at this board meeting
15 where Mr. LeBow first raised RJR, did he say
16 anything about how much -- how big an
17 investment he was proposing to have New Valley
18 make in RJR?
19 MR. LOGAN: Object to the form.
20 A. I don't remember.
21 Q. Have there been any New Valley
22 board meetings that you've missed since going
23 on the board?
24 A. I'm not sure. None come to mind.
25 Q. I want to go back to a
CLASSIC REPORTING, INC. (212) 268-2590
50
1 Ridings
2 conversation in which it was indicated that
3 Mr. LeBow was putting together a list of
4 nominees. You said you don't recall when you
5 learned it. Do you recall from whom you
6 learned it?
7 A. That he was putting --
8 Q. That Mr. LeBow was putting
9 together a list of nominees?
10 A. From Mr. LeBow.
11 Q. Did he tell you this in a phone
12 call or in a meeting?
13 A. No. It was a phone conversation.
14 Q. Were you and he the only people
15 on the phone?
16 A. I don't recall.
17 Q. Did he call you?
18 A. I don't recall.
19 Q. At the time of the phone call,
20 had you heard anything about, let's say, a
21 Hart-Scott-Rodino filing by New Valley with
22 respect to RJR? Did you know that there had
23 been such a filing?
24 A. I don't know.
25 Q. Well, what did Mr. LeBow say to
CLASSIC REPORTING, INC. (212) 268-2590
51
1 Ridings
2 you and you to Mr. LeBow in this phone
3 conversation?
4 A. I don't recall the exact words.
5 But the gist of the conversation was he was
6 putting together some names for possible
7 directors. He wondered if I had any interest
8 and I indicated to him that I thought I might
9 have an interest.
10 Q. Did Mr. LeBow say why he had
11 called you?
12 A. I'm not sure if he did call me or
13 I called him.
14 Q. You are right. I'm sorry. That
15 was a bad question.
16 Did Mr. LeBow indicate to you why
17 he was soliciting your interest in joining a
18 slate?
19 A. I don't remember.
20 Q. Did he say why he thought you
21 should be on the slate?
22 A. I don't recall.
23 Q. Now, I think you told me that you
24 told Mr. LeBow that you might have an interest
25 in joining a slate. Why was that the case?
CLASSIC REPORTING, INC. (212) 268-2590
52
1 Ridings
2 A. That I wanted to think about it.
3 And I would have to get internal approval to
4 do it.
5 Q. Did you have any other discussion
6 in this conversation about RJR?
7 A. I don't recall.
8 Q. Did Mr. LeBow tell you why he was
9 proposing a slate?
10 A. I think I knew already that he
11 was proposing a slate with respect to a
12 shareholder meeting coming up in 1996.
13 Q. How did you know that?
14 A. I can't recall how I knew it.
15 But I think I knew about it.
16 Q. Did he discuss a Nabisco spin-off
17 with you in this conversation?
18 A. At that conversation, I don't
19 recall.
20 Q. I'm going to place before you but
21 first have marked as the next exhibit a
22 document which was produced to us by Mr. LeBow
23 and by Brooke Group a week or so ago.
24 (Multipage document, top letter
25 from Mr. Lampen to Mr. Richard
CLASSIC REPORTING, INC. (212) 268-2590
53
1 Ridings
2 White, bearing production Nos. BR
3 8660 through 8662, marked Ridings
4 Exhibit 6 for identification, as
5 of this date.)
6 MR. STERN: It is numbered BR
7 8660 through 8662.
8 Q. Mr. Ridings I'm going to place
9 that exhibit before you. First I'll ask if
10 you have ever seen that document or any copy
11 of it before?
12 A. I have not seen this.
13 Q. Would you turn to the first page,
14 please. Do you see that I believe the first
15 page is a cover letter from a Mr. Lampen; is
16 that correct?
17 A. Yes.
18 Q. Can you identify Mr. Lampen for
19 the record.
20 A. He's counsel at New Valley.
21 Q. And the letter is addressed to a
22 Mr. Richard White. Do you see that?
23 A. Right.
24 Q. Do you know who Mr. White is?
25 A. It indicates he's a managing
CLASSIC REPORTING, INC. (212) 268-2590
54
1 Ridings
2 director at Oppenheimer.
3 Q. Apart from what it indicates in
4 the letter, do you have any personal knowledge
5 of Mr. White?
6 A. I have spoken with him.
7 Q. About what?
8 A. I think it was -- Oppenheimer
9 delivered an opinion to New Valley.
10 Q. Concerning RJR?
11 A. Concerning New Valley's and
12 Brooke's intercompany dealings.
13 Q. And what did you talk to Mr.
14 White about?
15 A. Under the New Valley bankruptcy,
16 any intercompany dealings had to be approved
17 or a fairness opinion gotten by an investment
18 bank and again I'm not sure of the exact terms
19 or requirements, but I believe Oppenheimer was
20 retained to provide such an opinion. I had
21 called him just to see what the scope of his
22 investigation was, if he had any questions for
23 me or to get some flavor for when he was going
24 to be done with his work and what his
25 conclusions were.
CLASSIC REPORTING, INC. (212) 268-2590
55
1 Ridings
2 Q. Did anyone request you to make
3 that call?
4 A. No.
5 MR. STERN: Off the record.
6 (Discussion held off the record.)
7 Q. Mr. Ridings, looking at the
8 second and third page of the exhibit, do you
9 see what appears to be a listing of New Valley
10 RJR Nabisco stock purchases and holdings. Do
11 you see that?
12 A. Yes.
13 Q. And you see that, at least
14 according to this document, there were shares
15 purchased on a trade date of February 24,
16 1995, that is, preferred Series C and common
17 stock purchased on a trade date of March 6,
18 '95. Do you see that?
19 A. Uh-huh.
20 Q. Then you see there are purchases
21 at various dates thereafter going through
22 November 9th.
23 A. Yes.
24 Q. Looking at that exhibit, is your
25 recollection refreshed as to when Mr. LeBow
CLASSIC REPORTING, INC. (212) 268-2590
56
1 Ridings
2 raised with the RJR -- sorry -- raised with
3 the New Valley board of directors his interest
4 in having New Valley purchase shares of RJR?
5 A. Not really. Again, he brought it
6 to our attention at the board meeting. And
7 again, I can't remember what it is. When
8 he -- again in the bankruptcy there are
9 requirements for board approval as to what he
10 invests in when you hit certain thresholds
11 before that you are planning on hitting
12 certain thresholds. So I think the document
13 speaks for itself as to when he made
14 purchases.
15 Q. I was asking not when he made
16 purchases but I was asking you if the document
17 refreshed your recollection as to when he
18 first raised the subject with the New Valley
19 board?
20 A. I don't recall.
21 Q. Do you know how much money New
22 Valley has invested in RJR?
23 A. Today?
24 Q. Yes.
25 A. I don't know.
CLASSIC REPORTING, INC. (212) 268-2590
57
1 Ridings
2 Q. Look at that document, does that
3 refresh your recollection?
4 A. The document only speaks as of
5 November.
6 Q. As of November, how much did New
7 Valley have invested in RJR?
8 MR. MASHBERG: Based on what is
9 in the document.
10 Q. Based on your personal knowledge.
11 If the document refreshes your recollection in
12 that regard, that is fine.
13 MR. MASHBERG: There is a
14 difference between refreshing your
15 recollection and what you see in the
16 document.
17 A. I don't know. I can read the
18 document.
19 Q. What does the document say.
20 A. It appears to say that the total
21 investment balance is at cost 149 million and
22 at market 145 million.
23 Q. Were you aware in November that
24 New Valley had invested $149 million in RJR?
25 A. I believe we had had board
CLASSIC REPORTING, INC. (212) 268-2590
58
1 Ridings
2 meetings where we approved these investments.
3 Q. Why did you believe these
4 investments were in New Valley's interest?
5 I'll ask a prior question. I'll withdraw that
6 question.
7 Did you approve these
8 investments?
9 MR. MASHBERG: Object to the
10 form.
11 Q. Did you vote to approve these
12 investments?
13 A. Yes.
14 Q. Why did you do so?
15 A. I thought it was a good
16 investment.
17 Q. Why?
18 A. I don't know how to answer that.
19 Q. On what did you base your
20 assessment that it was a good investment?
21 A. Our conversations at the board
22 level.
23 Q. Who was having these
24 conversations?
25 A. The board.
CLASSIC REPORTING, INC. (212) 268-2590
59
1 Ridings
2 Q. Were there people in management
3 of New Valley who made presentations to the
4 board with respect to this investment?
5 A. What do you mean by presentation?
6 Q. What information was brought to
7 the board by anyone with respect to the
8 board's deliberation on this investment?
9 A. Again, my recollection is at
10 various board meetings we talked about RJR and
11 conversations were had by many of the people
12 on the floor.
13 Q. Can you remember anything being
14 said in any of these conversations as to just
15 this was a good investment for New Valley?
16 A. I think the general consensus was
17 that it was a good investment and we'd make
18 money on it.
19 Q. Were there any documents shown to
20 the board of directors by anyone with respect
21 to this investment?
22 A. Everything I have in my file you
23 have. You mean other than what you have?
24 Q. Let's start there.
25 A. There is nothing else other than
CLASSIC REPORTING, INC. (212) 268-2590
60
1 Ridings
2 what you have.
3 Q. Did you receive any of the
4 documents from your file at a board of
5 directors meeting or in preparation for a
6 board of directors meeting?
7 A. I don't recall.
8 Q. Did Mr. LeBow attend these board
9 of directors meetings?
10 A. Yes.
11 Q. He's a director of New Valley; is
12 that correct?
13 A. Yes.
14 Q. Did he talk about the investment
15 rationale for this investment?
16 A. I don't remember. I don't recall
17 specifically that he talked about it. He may
18 have.
19 Q. How much time would you say
20 cumulatively did the board of directors of New
21 Valley spend discussing this as an investment?
22 MR. MASHBERG: Cumulatively
23 adding up each board meeting.
24 MR. STERN: Yes. How much time
25 was spent?
CLASSIC REPORTING, INC. (212) 268-2590
61
1 Ridings
2 MR. MASHBERG: Object to the
3 form.
4 MR. LOGAN: Objection.
5 A. I have no idea.
6 Q. Is this the largest investment
7 New Valley has made?
8 A. I'd have to go back and refresh
9 my recollection on our other investments. I
10 don't recall.
11 Q. Sitting here now, can you think
12 of any that is larger?
13 A. At various times we had more
14 money than this in government securities.
15 Q. Other than government securities?
16 A. Again, I have to refresh my
17 memory about the documents.
18 Q. Did you view yourself as having
19 fiduciary duties with anyone with respect to
20 these investments? Your approval of these
21 investments?
22 MR. LOGAN: Objection.
23 A. I'm not sure I understand the
24 question.
25 Q. Do you understand the concept of
CLASSIC REPORTING, INC. (212) 268-2590
62
1 Ridings
2 fiduciary duty?
3 A. I think so.
4 Q. Did you understand yourself to
5 have any fiduciary duties with respect to your
6 approval of these investments?
7 MR. LOGAN: Objection.
8 MR. MASHBERG: Object to the
9 form.
10 A. As a director of New Valley, I
11 believe I have fiduciary obligations to the
12 shareholders of New Valley.
13 Q. With respect to these
14 investments, how did you go about fulfilling
15 those fiduciary obligations?
16 MR. LOGAN: Objection. Object to
17 the form.
18 A. I believe based on the various
19 presentations, the various things that I have
20 reviewed which you have copies of and my
21 thought process that I fulfill those
22 obligations.
23 Q. Who made these various
24 presentations?
25 A. As I indicated, there were
CLASSIC REPORTING, INC. (212) 268-2590
63
1 Ridings
2 various discussions at the board's level and
3 again you have copies of all the documents
4 that I reviewed. Again what you don't have
5 are the public documents which we didn't give
6 back to you.
7 Q. When did you first get public
8 documents concerning RJR?
9 A. I don't recall.
10 Q. Was it after, let's say, October?
11 A. I don't recall.
12 Q. Was it before October?
13 A. I don't recall.
14 Q. Do you know if your file contains
15 a single document that is dated earlier than
16 November 1995?
17 MR. MASHBERG: Object to the
18 form.
19 MR. LOGAN: Objection.
20 A. I don't know. You are looking at
21 the dates right now. We can look at them
22 together. I'm just not sure.
23 Q. So your testimony is, so we are
24 clear, that any documents you received as a
25 New Valley director with respect to New
CLASSIC REPORTING, INC. (212) 268-2590
64
1 Ridings
2 Valley's investment in RJR would have been in
3 the file and would have been produced to us?
4 MR. LOGAN: Object to the form.
5 A. As I indicated very much earlier,
6 I have two files, RJR file and a New Valley
7 file. Any material I get from New Valley or
8 on New Valley, I put in that file. Counsel
9 and I went through it. And we attempted to
10 comply with the subpoena that you sent me.
11 Q. You went through both files, New
12 Valley file and RJR file; is that correct?
13 A. That's right.
14 Q. So if you had a document in the
15 New Valley file that related to RJR, it would
16 have been produced to us or withheld on the
17 grounds of privilege; is that correct?
18 MR. LOGAN: Object to the form.
19 A. That is correct.
20 Q. So, if there is no document in
21 the production that is earlier than November
22 1995, we can assume that you did not receive
23 it in your capacity as a director of New
24 Valley no document relating to RJR earlier
25 than November 1995?
CLASSIC REPORTING, INC. (212) 268-2590
65
1 Ridings
2 MR. MASHBERG: That is a bad
3 question. Ask him another question.
4 MR. STERN: It is a question.
5 MR. LOGAN: Object to the form.
6 MR. MASHBERG: Ask him a
7 question. It's not a question.
8 A. Can you rephrase the question?
9 Q. If is there no document that you
10 have produced to us dated earlier than
11 November '95, is it then accurate to conclude
12 that you received no document concerning RJR
13 prior to that date?
14 MR. LOGAN: Object to the form.
15 A. I don't recall when I got the
16 public documents on RJR. That may have been
17 before that. I don't recall.
18 Q. Do you remember what these public
19 documents were?
20 A. 10-K, 10-Q annual.
21 Q. Which 10-K and which 10-Q?
22 A. I don't recall.
23 Q. Going back to your discussion
24 with Mr. LeBow in which he raised the
25 possibility of your joining the slate, I think
CLASSIC REPORTING, INC. (212) 268-2590
66
1 Ridings
2 you told me that you told him that you would
3 think about it; is that right?
4 A. Right.
5 Q. What did you do after that
6 conversation with respect to what Mr. LeBow
7 had suggested?
8 A. I don't recall specifically what
9 I did.
10 Q. Do you have any recollection of
11 what you did, whether specific or not?
12 A. Well, when I determined that I
13 would like to do it, I had to get approval
14 from Alex. Brown.
15 Q. Did you determine that you would
16 like to do it?
17 A. Yes.
18 Q. When did you reach that
19 determination?
20 A. The exact date?
21 Q. If you remember.
22 A. I'm sorry. I don't. I don't
23 remember.
24 Q. How long after the call from Mr.
25 LeBow did you reach that determination?
CLASSIC REPORTING, INC. (212) 268-2590
67
1 Ridings
2 A. Probably within a week or two.
3 Q. Why did you decide you would like
4 to do it?
5 A. As you can see from my resume,
6 I'm on a number of boards, I actually enjoy
7 being on board of directors. I think it's
8 interesting, challenging. I enjoy the types
9 of things that directors do.
10 Q. Did you give any consideration to
11 the desirability of a spin-off of Nabisco in
12 the course of determining whether or not you
13 wanted to accept Mr. LeBow's invitation?
14 A. I don't recall.
15 Q. Did you give any consideration
16 whether or not there might be potential
17 business activities for Alex. Brown as a
18 result of your participation in Mr. LeBow's
19 efforts?
20 A. I don't think I was thinking
21 about Alex. Brown in that regard.
22 Q. Did Mr. LeBow in his initial
23 conversation mention to you whether you would
24 be compensated for your effort?
25 A. With respect to what?
CLASSIC REPORTING, INC. (212) 268-2590
68
1 Ridings
2 Q. If you were to accept his
3 invitation to join the slate?
4 A. I don't think he told me in that
5 conversation about any compensation. I think
6 I learned about it later.
7 Q. In this period in which you were
8 deliberating over what to do, did you consult
9 with anyone?
10 A. My wife.
11 Q. Other than your wife?
12 A. Not that I recall.
13 Q. Then there came a point in time
14 when you decided that you were interested in
15 pursuing this; is that correct?
16 A. Yes.
17 Q. And then after that, what did do
18 you?
19 A. I had to get internal approval
20 which I mentioned which entailed speaking to
21 the person to whom I report to make sure that
22 it was not a problem.
23 Q. Who is that?
24 A. I report to the head of
25 investment bank, his name is Gar Richlan.
CLASSIC REPORTING, INC. (212) 268-2590
69
1 Ridings
2 Q. What did you say to Mr. Richlan?
3 A. I don't recall the exact words,
4 but I indicated to him that I had been asked
5 to become a nominee for the board of RJR. He
6 wanted to know if I thought this would be a
7 significant involvement in terms of my time.
8 That is about all I can recall discussing.
9 Q. What did you tell him in response
10 to his question.
11 A. I think at times it could be
12 significant.
13 Q. Why did you think that?
14 A. I take being a director seriously
15 and at times the time commitment can be large.
16 Q. Did you tell Mr. Richlan that you
17 thought it could involve a time of significant
18 commitment?
19 A. I indicated to him that at times
20 it could take some time.
21 Q. What did he say?
22 A. I don't recall his specific
23 words.
24 Q. Did you discuss the possibility
25 of Nabisco spin-off with Mr. Richlan?
CLASSIC REPORTING, INC. (212) 268-2590
70
1 Ridings
2 A. No.
3 Q. Do you remember anything else
4 about that conversation?
5 A. Other than his indicating that he
6 didn't have a problem with my going on the
7 board, I don't.
8 Q. What happened next with respect
9 to the RJR matter?
10 A. I think I called Mr. LeBow
11 probably that same day and indicated that I
12 had gotten internal approval and that I could
13 in fact become a nominee.
14 Q. What did Mr. LeBow say?
15 A. I don't recall.
16 Q. Up to that point, had you
17 discussed compensation with Mr. LeBow?
18 A. No.
19 Q. Had you discussed
20 indemnification?
21 A. I don't remember.
22 Q. What happened next?
23 A. I think he told me that someone
24 would send a questionnaire for me to fill out
25 and send back.
CLASSIC REPORTING, INC. (212) 268-2590
71
1 Ridings
2 MR. STERN: I would like to mark
3 as the next exhibit -- three
4 exhibits -- documents from the file of
5 Mr. Ridings. The first exhibit is No.
6 BR 0147 to 0168.
7 Next is BR 0125 to 0145.
8 The third exhibit is BR 0146.
9 (Copy of directors and officers
10 questionnaire, bearing production
11 Nos. BR 0147 through 0168, marked
12 Ridings Exhibit 7 for
13 identification, as of this date.)
14
15 (Document headed "Questionnaire
16 for Nominees," bearing production
17 Nos. BR 0125 through 0145, marked
18 Ridings Exhibit 8 for
19 identification, as of this date.)
20
21 (One-page document, bearing
22 production Nos. BR 0146, marked
23 Ridings Exhibit 9 for
24 identification, as of this date.)
25 Q. Mr. Ridings, I'm going to place
CLASSIC REPORTING, INC. (212) 268-2590
72
1 Ridings
2 Exhibit 7 before you. I ask you if you can
3 identify that document.
4 A. This is a copy of the directors
5 and officers questionnaire that I filled out
6 in by hand.
7 Q. Is this the form of questionnaire
8 that was sent to you by someone associated
9 with Mr. LeBow?
10 A. I think it was sent by Milbank.
11 Q. Are they counsel for Mr. LeBow?
12 A. I think they are my counsel.
13 Q. Were they counsel for Mr. LeBow
14 at the time?
15 A. I believe they are counsel to New
16 Valley. I don't know if they are counsel to
17 Mr. LeBow.
18 Q. Well, I think you said in a
19 previous answer that Mr. LeBow said that
20 someone would send you a questionnaire. Is
21 that the questionnaire that you were referring
22 to?
23 A. I think so.
24 Q. Mr. Ridings, do you see that the
25 cover page of this document is a fax from --
CLASSIC REPORTING, INC. (212) 268-2590
73
1 Ridings
2 appears to be from your office to Gayle Sered
3 at Milbank; do you see that?
4 A. Yes.
5 Q. By the way, is this your
6 handwriting on the document?
7 A. No.
8 Q. Do you recognize the handwriting?
9 A. On this cover page?
10 Q. On the cover page, yes.
11 A. I think it's the handwriting of
12 my assistant.
13 Q. And then on the second page, BR
14 148, there is additional handwriting. Is that
15 your handwriting?
16 A. Yes.
17 Q. And then the questionnaire is
18 filled in by hand as you indicated. Is that
19 your handwriting on the questionnaire? We
20 might note that there appears to be two
21 different handwritings on BR 151.
22 A. Yes. I see that. That is what I
23 was looking at. The three faded entries are
24 Andrea's.
25 MR. MASHBERG: Referring to BR
CLASSIC REPORTING, INC. (212) 268-2590
74
1 Ridings
2 151.
3 A. Referring to question H on BR
4 151.
5 Q. And the other handwriting on the
6 pages, BR 148, 168, that is yours?
7 A. It appears so.
8 Q. Is Gayle Sered an attorney at
9 Milbank?
10 A. I don't know.
11 Q. Now, this cover page, this fax
12 cover page is dated November 13th. Do you see
13 that?
14 A. Yes.
15 Q. Does this refresh your
16 recollection as to when you received your
17 first contact from Mr. LeBow, that is, the
18 contact in which he asked whether you would be
19 interested in joining a slate?
20 A. No.
21 Q. It was sometime before November
22 13th; is that correct?
23 A. Yes.
24 Q. Does it refresh your recollection
25 as to the date on which you had your next
CLASSIC REPORTING, INC. (212) 268-2590
75
1 Ridings
2 conversation with Mr. LeBow, that is, the
3 conversation in which you indicated that you
4 would be interested in joining his slate?
5 A. I don't recall.
6 Q. It is accurate, however, that
7 this fax was sent by your office on November
8 13th; is that correct?
9 MR. MASHBERG: Are you asking him
10 to --
11 MR. STERN: I'm asking if there
12 is any reason to question that this fax
13 was sent on November 13th.
14 MR. LOGAN: Object to the form.
15 A. I have no reason to believe it
16 wasn't sent on that date. I just don't know.
17 Q. If you turn to the second page.
18 A. Yes.
19 Q. Do you see that the text of that
20 page is a fax cover sheet dated November 9,
21 1995 from Ms. Sered to you. And you can see
22 that there is a fax line on it that indicates
23 November 9, 1995. Do you see that?
24 A. Yes.
25 Q. Does this refresh your
CLASSIC REPORTING, INC. (212) 268-2590
76
1 Ridings
2 recollection as to when you had your first
3 conversation with Mr. LeBow?
4 A. No.
5 Q. Concerning RJR?
6 A. No.
7 Q. The date of the second
8 conversation?
9 A. No.
10 Q. Did you ever talk to Gayle Sered
11 concerning RJR?
12 A. No.
13 Q. I'm going to show Mr. Ridings
14 Exhibit 8. Mr. Ridings, can you identify that
15 document.
16 A. This appears to be the typed
17 version of the director and officers
18 questionnaire.
19 Q. Did you sign Exhibit 8?
20 A. It's signed and dated November
21 14th.
22 Q. Signed by you?
23 A. Yes.
24 Q. So is it correct that Exhibit 7
25 reflects your handwritten answers to the
CLASSIC REPORTING, INC. (212) 268-2590
77
1 Ridings
2 questions and Exhibit 8 reflects a typed
3 version of those answers; is that correct?
4 A. Yes. We were looking at question
5 H. You should look at that. There is some
6 differences there.
7 Q. But if there are differences,
8 exhibit 8 is the correct version; is that
9 accurate?
10 A. Yes. And I will just also point
11 out just for the record that on my
12 directorships, again Exhibit 8, one of those
13 company's name has changed and one of those
14 companies has been acquired since the date of
15 this. To make sure that we are clear.
16 Q. So the record is clear, why don't
17 you indicate which one changed and which one
18 was acquired?
19 A. Greenman Brothers has changed its
20 name to Noodle Kidoodle and Tiger Direct has
21 been acquired by Global Direct.
22 Q. I'm going to place Exhibit 9
23 before you. I ask if you can identify that
24 document.
25 A. This is a list of the boards on
CLASSIC REPORTING, INC. (212) 268-2590
78
1 Ridings
2 which I served. And there are some other
3 handwritten language which I can't really make
4 out.
5 Q. Do you recognize the handwriting?
6 A. I'm not sure.
7 Q. Do you know whether Exhibit 8
8 was -- I'm sorry. Is that Exhibit 9?
9 A. 9.
10 Q. Whether Exhibit 9 was prepared in
11 connection with your completion of the
12 questionnaire?
13 A. Yes. The list of directorships
14 was a typed version of what I had written on a
15 piece of paper. And --
16 Q. Did Andrea prepare Exhibit 9?
17 A. I believe so.
18 Q. For the record, what is Andrea's
19 full name?
20 A. Andrea Ormand. This is signed
21 "Lynn."
22 Q. Who is Lynn?
23 A. Lynn Rule is the administrative
24 assistant for the investment bank group in New
25 York.
CLASSIC REPORTING, INC. (212) 268-2590
79
1 Ridings
2 Q. She works for Alex Brown?
3 A. She works for me and Alex Brown.
4 Q. In between your discussion with
5 Mr. LeBow in which you indicated an interest
6 in joining the slate and receiving and
7 completing this questionnaire, do you recall
8 doing anything in connection with RJR?
9 A. I'm not sure what you mean by
10 anything.
11 Q. Did you have any communications
12 with anyone concerning RJR?
13 A. In the time frame from the 9th to
14 the 14th?
15 Q. In the time frame from whenever
16 it was that you had your conversation with Mr.
17 LeBow in which you said that you were
18 interested in joining the slate, and
19 completing this questionnaire. Do you recall
20 anything else in connection with RJR?
21 A. I don't recall.
22 Q. Did you do any studies or perform
23 any analysis of RJR in that time period?
24 A. I don't recall.
25 Q. I asked the reporter to mark the
CLASSIC REPORTING, INC. (212) 268-2590
80
1 Ridings
2 next three exhibits, 10, 11 and 12.
3 (Fax from J. Bryant Kirkland III
4 and newspaper article from The_
5 Wall_Street_Journal dated Friday,
6 November 10, 1995, bearing
7 production Nos. BR 0095 and 0096,
8 marked Ridings Exhibit 10 for
9 identification, as of this date.)
10
11 (Fax from J. Bryant Kirkland III
12 and article from Miami_Daily_
_____ _____
13 Business_Review, bearing
________ ______
14 production Nos. BR 0097 and 0098
15 marked Ridings Exhibit 11 for
16 identification, as of this date.)
17
18 (Fax from J. Bryant Kirkland III,
19 and copy of research report,
20 bearing production Nos. BR 0099
21 through 0103, marked Ridings
22 Exhibit 12 for identification, as
23 of this date.)
24 Q. Mr. Ridings, I'm going to place
25 these exhibits before you and I ask you if you
CLASSIC REPORTING, INC. (212) 268-2590
81
1 Ridings
2 can identify those exhibits.
3 A. These are copies of two newspaper
4 articles and a research report that was faxed
5 to me.
6 Q. The articles and research report
7 concern RJR; is that correct?
8 A. Yes. They all concern RJR.
9 Q. And these documents were in your
10 file in your RJR file; is that correct?
11 A. Yes.
12 Q. Who were the documents faxed to
13 you by?
14 A. Bryant Kirkland
15 Q. Do you know Mr. Kirkland?
16 A. I don't.
17 Q. Do you see that the documents are
18 addressed to other people including yourself,
19 do you see that?
20 A. Yes.
21 Q. Do you know the other people to
22 whom the document is addressed?
23 A. Not all of them.
24 Q. Who don't you know?
25 A. I don't know Larry Lederman. I'm
CLASSIC REPORTING, INC. (212) 268-2590
82
1 Ridings
2 not sure about Phil Berkowitz. I know George
3 Sard by name only. Chakalain I know only by
4 name.
5 Q. Do you see the document is copied
6 to a Mr. Sauter and Mr. Lampen?
7 A. Yes. Right.
8 Q. Do you know them?
9 A. Dick Lampen I know. Jerry Sauter
10 I only know by name.
11 Q. Mr. Lampen I think you've
12 identified is general counsel at New Valley;
13 is that correct?
14 A. I think that is right.
15 Q. Do you know Mr. Sauter's
16 position?
17 A. I'm not sure.
18 Q. Is he associated with New Valley?
19 A. I think so. I think so.
20 Q. Do you know why Mr. Kirkland sent
21 you these documents?
22 A. He, I think, sends me
23 documents -- clippings, if you will, on RJR.
24 Q. Now you see that the cover page
25 is dated November 10th. Do you see that?
CLASSIC REPORTING, INC. (212) 268-2590
83
1 Ridings
2 A. They all are.
3 Q. And had you agreed with Mr. LeBow
4 that you would join his slate by November
5 10th?
6 A. I don't recall that.
7 Q. Do you know if you received any
8 documents concerning RJR prior to November
9 10th?
10 A. Again, you have everything. So
11 we can look at the dates.
12 Q. You certainly don't recall
13 receiving anything prior to November 10th; is
14 that correct?
15 A. I don't recall that I did or did
16 not actually.
17 Q. One way or the other?
18 A. Right.
19 Q. Have you ever spoken with Mr.
20 Kirkland?
21 A. I don't think so.
22 MR. STERN: I'm going to have
23 marked as the next exhibit a document
24 produced by Mr. Ridings. BR 104 to
25 109.
CLASSIC REPORTING, INC. (212) 268-2590
84
1 Ridings
2 (Fax cover sheet dated 11/13/95
3 and accompanying articles,
4 bearing production Nos. BR 0104
5 through BR 0109, marked Ridings
6 Exhibit 13 for identification, as
7 of this date.)
8 Q. Can you identify that document?
9 A. Another fax of a newspaper
10 article on LeBow and RJR.
11 Q. Who sent it to you?
12 A. Kirkland.
13 Q. Is it correct that he sent it to
14 you on November 13, 1995?
15 MR. MASHBERG: Are you asking for
16 the date?
17 Q. What is the date of the fax?
18 A. It's dated the 13th.
19 Q. Why did Mr. Kirkland send this
20 document to you?
21 MR. MASHBERG: Object to the
22 form.
23 MR. LOGAN: Objection.
24 Q. Do you have an understanding as
25 to why Mr. Kirkland sent this document to you?
CLASSIC REPORTING, INC. (212) 268-2590
85
1 Ridings
2 A. Again, I have never spoken with
3 him. I think he acts like a clipping service.
4 I get copies of lots of articles in
5 newspapers.
6 Q. Do you receive copies of articles
7 related to other companies from Mr. Kirkland?
8 A. No.
9 Q. Just RJR?
10 A. Actually, I don't know if he
11 sends anything on New Valley. I don't recall.
12 Q. If you want to look at any of
13 these exhibits at any time, let me know.
14 MR. STERN: I'm going to mark as
15 the next exhibit a document which is
16 really a collection of loose pages in
17 Mr. Ridings's document production. For
18 convenience, I'll clip them together
19 for identification.
20 (Copies of articles from The_Wall
___ ____
21 Street_Journal and The_New_York_
______ _______ ___ ___ ____
22 Times, bearing production Nos. BR
_____
23 0110 through BR 0121, marked
24 Ridings Exhibit 14 for
25 identification, as of this date.)
CLASSIC REPORTING, INC. (212) 268-2590
86
1 Ridings
2 Q. I'm placing Exhibit 14 before
3 you. I ask you just to review that document
4 briefly. Take as much time as you need. I
5 won't be asking you detailed questions about
6 it.
7 A. Okay.
8 Q. Can you identify that document?
9 MR. MASHBERG: I don't think that
10 is a document.
11 MR. STERN: That is a fair
12 objection.
13 Q. Describe that exhibit.
14 A. There are more copies of various
15 articles from The Journal and The_Times.
___ _____
16 Q. Concerning RJR; is that correct?
17 A. Yes.
18 Q. Did you clip those articles?
19 A. I don't recall.
20 Q. From where did you obtain these
21 articles?
22 A. I don't recall. I may have
23 clipped them. I don't know.
24 Q. For what purpose were you
25 retaining those documents?
CLASSIC REPORTING, INC. (212) 268-2590
87
1 Ridings
2 A. Again as I indicated earlier, I
3 see things on RJR, I tend to put them in the
4 file.
5 Q. Did you start that after you had
6 agreed with Mr. LeBow that you would join his
7 slate?
8 A. I don't recall.
9 MR. STERN: I'm going to mark as
10 the next two exhibits, documents from
11 Mr. Ridings's file, BR 179 to 80. BR
12 173 to 176.
13 (Letter dated November 7, 1995 to
14 Shareholders from RJR Nabisco,
15 bearing production Nos. BR 0179
16 and 0180 marked Ridings Exhibit
17 15 for identification, as of this
18 date.)
19
20 (Letter dated November 14, 1995
21 from Brooke Group Ltd. to
22 Shareholders RJR Nabisco, bearing
23 production Nos. BR 0173 through
24 BR 0176, marked Ridings Exhibit
25 16 for identification, as of this
CLASSIC REPORTING, INC. (212) 268-2590
88
1 Ridings
2 date.)
3 Q. I'm placing Exhibits 15 and 16
4 before you. Can you identify those documents,
5 please?
6 A. There are two documents. One
7 dated the 7th from RJR to RJR shareholders.
8 One dated the 14th from Brooke Group to RJR
9 Shareholders.
10 Q. How did Exhibit 15 come into your
11 possession?
12 A. I don't recall.
13 Q. How did Exhibit 16 come into your
14 possession?
15 A. I don't specifically recall.
16 Q. Do you recall when you received
17 either document?
18 A. Not specifically. No.
19 Q. Did you read the documents?
20 A. It's my custom to read everything
21 that people send to me on things that are
22 important to me.
23 Q. Did you discuss those documents
24 with anyone?
25 A. Not that I recall.
CLASSIC REPORTING, INC. (212) 268-2590
89
1 Ridings
2 MR. STERN: I'm going to mark as
3 the next exhibit a document from Mr.
4 Ridings's file BR 123 to 124.
5 (Consent of Nominee, bearing
6 production Nos. BR 0123 and BR
7 0124, marked Ridings Exhibit 17
8 for identification, as of this
9 date.)
10 Q. Can you identify that document?
11 A. It's a consent of nominee dated
12 the 16th and signed by me. There are two of
13 them.
14 Q. Copies; is that correct?
15 A. I think it's copies of two
16 originals.
17 Q. Did you sign that document on
18 November 16th?
19 A. I guess so. It indicates so.
20 Q. Who asked you to sign this
21 document?
22 A. I think it was in connection with
23 the officer and director questionnaire that we
24 looked at earlier. I don't recall. It might
25 have been a cover letter.
CLASSIC REPORTING, INC. (212) 268-2590
90
1 Ridings
2 Q. Do you recall who sent you this
3 document?
4 A. I think Milbank did.
5 Q. Did you discuss it with anyone
6 before you signed it?
7 A. I read it.
8 Q. But did you discuss it with
9 anyone?
10 A. Did I discuss exactly what with
11 anyone?
12 Q. The document, consent of nominee,
13 Exhibit 17.
14 A. Other than everything we have
15 been talking about and getting internal
16 approvals and all that kind of stuff? Other
17 than the things we've discussed?
18 Q. Yes.
19 A. I don't recall talking to anyone
20 else.
21 Q. After your conversation with Mr.
22 LeBow in which you indicated an interest in
23 signing on or in joining his slate, when did
24 you next speak with Mr. LeBow?
25 A. I don't specifically recall.
CLASSIC REPORTING, INC. (212) 268-2590
91
1 Ridings
2 Q. Did there come a time when you
3 attended a meeting of people who were proposed
4 to be on Mr. LeBow's slate?
5 A. No.
6 Q. Did you ever attend any meeting
7 concerning RJR at the Carlyle Hotel here in
8 New York?
9 A. I think I had breakfast with Ben
10 LeBow and Dick Lampen there once.
11 Q. When was that?
12 A. I don't recall specifically.
13 Q. Was it within the last six
14 months?
15 A. Yes.
16 Q. Did you discuss anything having
17 to do with RJR at the breakfast?
18 A. I don't recall. I think we
19 discussed New Valley issues. And -- not I
20 think. We discussed New Valley matters. And
21 I don't specifically recall RJR, but it would
22 have been customary that we touch on that. It
23 was a New Valley matter.
24 Q. You don't recall one way or the
25 other whether you did so?
CLASSIC REPORTING, INC. (212) 268-2590
92
1 Ridings
2 A. I don't specifically recall.
3 MR. STERN: I'm going to mark as
4 the next exhibit, a document from the
5 files of Mr. Ridings, No. BR 169 to 72.
6 (Document headed "Questions &
7 Answers," bearing production Nos.
8 BR 0169 through 0172, marked
9 Ridings Exhibit 18 for
10 identification, as of this date.)
11 Q. Mr. Ridings, Exhibit 18 has been
12 placed before you. Can you identify that
13 document?
14 A. It's a document entitled
15 "Questions & Answers."
16 Q. Have you ever seen it before?
17 A. It was in my file. I have seen
18 it.
19 Q. Did you read it?
20 A. Yes.
21 Q. When did you get it?
22 A. I don't recall.
23 Q. From whom did you get it?
24 A. I don't recall who sent it to me.
25 Q. Where were you when you received
CLASSIC REPORTING, INC. (212) 268-2590
93
1 Ridings
2 it?
3 A. I don't remember.
4 Q. Did you ever discuss that
5 document with anyone?
6 A. Not that I recall.
7 Q. Do you understand that the
8 document came from someone associated with Mr.
9 LeBow?
10 MR. MASHBERG: Are you telling
11 him that?
12 MR. STERN: I'm asking --
13 MR. MASHBERG: Object to the
14 form.
15 Q. Is it your understanding that
16 that document was sent to you by someone
17 connected with Mr. LeBow?
18 A. I think so. It might have been
19 with other documents. I don't know if there
20 was a cover letter or what.
21 Q. Do you know who authored the
22 document?
23 A. No.
24 Q. Have you ever been contacted by
25 any member of the press with respect to RJR?
CLASSIC REPORTING, INC. (212) 268-2590
94
1 Ridings
2 A. No.
3 Q. Have you ever received any
4 instructions from anyone associated with Mr.
5 LeBow about how to handle any possible
6 contacts from the press in that regard?
7 A. Yes.
8 Q. From whom did you receive those
9 instructions?
10 MR. MASHBERG: Object to the
11 form.
12 You can answer.
13 MR. LOGAN: Objection.
14 A. The people at Sard, and I'm going
15 to pronounce the other word wrong, so I won't
16 even attempt it.
17 Q. Sard is the public relations firm
18 engaged by Mr. LeBow; is that correct, or by
19 the Brooke Group?
20 A. Yes.
21 Q. With whom did you have
22 discussions on that subject at Sard?
23 A. I had a meeting at Sard with Mr.
24 LeBow, Mr. Lorber and a woman from Sard whose
25 name I don't recall. And a gentleman whose
CLASSIC REPORTING, INC. (212) 268-2590
95
1 Ridings
2 name I don't recall.
3 Q. Do you remember when that meeting
4 was?
5 A. The date? I don't.
6 Q. What was the purpose of that
7 meeting?
8 A. To review with them my resume and
9 directorships so they would know my
10 background.
11 Q. Who set the meeting up?
12 A. It was not me. I don't recall.
13 Q. Did the meeting take place before
14 or after you submitted the questionnaire?
15 A. I don't recall.
16 Q. Were you given any documents at
17 the meeting?
18 A. I don't remember.
19 Q. Can you recall whether you were
20 given Exhibit 18 at the meeting?
21 A. I might have been. I just don't
22 remember.
23 Q. How long did the meeting last?
24 A. I don't recall.
25 Q. Did anyone take any notes of the
CLASSIC REPORTING, INC. (212) 268-2590
96
1 Ridings
2 meeting?
3 A. I did not take any notes. And I
4 don't recall if anyone else did.
5 Q. What was said and by whom at the
6 meeting, to your best recollection?
7 A. The Sard people wanted to know a
8 little bit about my background.
9 In answer to your earlier
10 question, the Sard people indicated that if I
11 were to be called by the press, I should refer
12 all phone calls to them. I don't really
13 recall anything specific.
14 Q. Was anything else discussed at
15 the meeting that you can recall?
16 A. I just don't remember.
17 Q. Were you aware of any meetings of
18 members of the proposed slate that you did not
19 attend.
20 A. Yes.
21 Q. Were you aware of one such
22 meeting or more than one such meeting?
23 MR. MASHBERG: That is a little
24 confusing. Was he aware now or --
25 Q. How many such meetings were there
CLASSIC REPORTING, INC. (212) 268-2590
97
1 Ridings
2 that you did not attend, to your knowledge?
3 A. I think there were two.
4 Q. When was the first?
5 A. Specifically? I don't recall.
6 Q. Was it in November?
7 A. I don't know.
8 Q. Do you know where it was held?
9 A. It was held at Sard.
10 Q. At Sard?
11 A. Yes.
12 Q. And --
13 A. I'm not sure if that was the
14 first one. One of them was held in Sard.
15 Q. Where was the other one held?
16 A. At a restaurant.
17 Q. Do you know the name of the
18 restaurant?
19 A. Friars Club?
20 Q. Friars Club?
21 A. Yes.
22 Q. Do you know when that meeting was
23 held?
24 A. No.
25 Q. Was it in December?
CLASSIC REPORTING, INC. (212) 268-2590
98
1 Ridings
2 A. I don't recall.
3 Q. Were you invited to attend these
4 meetings?
5 A. Both.
6 Q. Was there a reason why you did
7 not?
8 A. My schedule did not permit
9 either.
10 Q. Did you receive any reports from
11 anyone concerning what had transpired at these
12 meetings?
13 A. My meeting at Sard was in the
14 afternoon of the day that they had had their
15 meeting.
16 Q. Which meeting?
17 A. I'm sorry. One of the meetings
18 where the nominees for RJR had met was at
19 Sard. I could not attend that meeting. I was
20 able to go in the afternoon to meet the Sard
21 people. No report was given to me other than
22 that they had met earlier that day.
23 Q. And what about the second
24 meeting, did you receive a report about that
25 meeting?
CLASSIC REPORTING, INC. (212) 268-2590
99
1 Ridings
2 A. Not that I recall.
3 Q. Did there come a time that you
4 agreed with Mr. LeBow on the fee that you
5 would receive in connection with your agreeing
6 to be a nominee for election to the board of
7 directors of RJR?
8 A. There came a time when I was
9 informed of it.
10 Q. When was that?
11 A. Specifically? I don't recall the
12 date.
13 Q. Who informed you?
14 A. I think it was Mr. LeBow.
15 Q. Did he do this in person or by
16 telephone?
17 A. I don't recall.
18 Q. What did he say to you and you to
19 him?
20 A. My recollection is that he
21 informed me that in addition to the
22 indemnification, the nominees would be paid a
23 fee of $30,000 for their commitment of time.
24 Q. Had you had a discussion with a
25 fee with him prior to this occasion?
CLASSIC REPORTING, INC. (212) 268-2590
100
1 Ridings
2 A. No.
3 Q. With any representative of LeBow
4 or Brooke Group?
5 A. No.
6 Q. How did the number $30,000 come
7 to be chosen?
8 A. I don't know.
9 Q. What did you say?
10 A. I don't recall.
11 Q. Now, you referred in your earlier
12 answer to indemnification. When did the
13 subject of indemnification first come up?
14 A. I don't recall.
15 Q. But you recall that it came up?
16 A. I think there was a document we
17 sent by Milbank.
18 Q. Prior to receiving that document,
19 had you discussed indemnification with anyone?
20 A. I don't recall.
21 Q. Was it a concern of yours?
22 MR. MASHBERG: Object to the
23 form.
24 A. Can you be more specific?
25 Q. Was it something that you were
CLASSIC REPORTING, INC. (212) 268-2590
101
1 Ridings
2 considering as you were pursuing your various
3 activities with respect to RJR?
4 MR. MASHBERG: Object to the
5 form.
6 MR. LOGAN: Object to the form.
7 A. All the boards I'm on we have
8 indemnification. I guess I assumed it was a
9 matter of course that we would get it.
10 MR. STERN: I'm going to mark as
11 the next exhibit a document from Mr.
12 Ridings's file BR 94.
13 (Letter dated November 26, 1995
14 to Mr. Ridings from Brooke Group
15 Ltd., bearing production Nos. BR
16 94 marked Ridings Exhibit 19 for
17 identification, as of this date.)
18 Q. Mr. Ridings can you identify that
19 document?
20 A. It's a letter sent to me by
21 Brooke Group, and I can't read the signature.
22 Q. Is your signature on that
23 document?
24 A. Yes.
25 Q. Is that document an agreement
CLASSIC REPORTING, INC. (212) 268-2590
102
1 Ridings
2 with respect to your compensation for acting
3 as or serving on the slate?
4 MR. MASHBERG: Object to the
5 form.
6 MR. LOGAN: Object to the form.
7 MR. MASHBERG: The document
8 speaks for itself.
9 A. It just indicates that I would be
10 paid $30,000.
11 Q. That is an agreement with respect
12 to your compensation, is it not?
13 MR. MASHBERG: Objection to the
14 extent it's calling for a legal
15 conclusion.
16 MR. LOGAN: Object to the form.
17 Objection.
18 A. It's a very short paragraph that
19 I can read.
20 Q. All I'm asking you is what you
21 understand that letter to be. Is that a
22 letter confirming an understanding with Brooke
23 Group as with respect to your compensation for
24 agreeing to serve on the slate of nominees?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
103
1 Ridings
2 MR. LOGAN: Object to the form.
3 Q. Thank you.
4 Did there come a time when you
5 signed another agreement with Brooke Group?
6 A. Regarding --
7 Q. Regarding RJR?
8 A. I'm not sure.
9 MR. STERN: Let's mark as the
10 next exhibit, a document from Mr.
11 Ridings's file, BR 43 to 47.
12 (Unsigned, undated
13 indemnification agreement,
14 bearing production Nos. BR 0043
15 to 0047 marked Ridings Exhibit 20
16 for identification, as of this
17 date.)
18 Q. Did there come a time when you
19 were sent a draft of an indemnification
20 agreement?
21 A. I don't recall.
22 Q. I'm going to place Ridings
23 Exhibit 20 before you. Can you identify that
24 document?
25 A. It looks like it's an unsigned,
CLASSIC REPORTING, INC. (212) 268-2590
104
1 Ridings
2 undated indemnification agreement.
3 Q. Mr. Ridings, would you turn to
4 the cover page, please?
5 A. All right.
6 Q. Is that a cover page that was
7 faxed dated November 19, 1995 from Gayle Sered
8 to yourself?
9 A. Yes.
10 Q. Do you remember receiving that
11 fax and attachment?
12 A. Do I specifically remember
13 receiving it? No.
14 Q. Did you receive it?
15 A. I believe I did.
16 Q. What did you do with it?
17 A. I don't recall.
18 Q. Did you read it?
19 A. I think so.
20 Q. Did you show to it counsel?
21 A. It came from counsel.
22 Q. Did you show it to any other
23 counsel?
24 A. No.
25 Q. Did you show it to anyone at
CLASSIC REPORTING, INC. (212) 268-2590
105
1 Ridings
2 Alex. Brown?
3 A. No.
4 Q. Did you comment on it?
5 MR. MASHBERG: Object to the
6 form.
7 A. Not that I recall.
8 Q. I'm going to mark as the next
9 exhibit, a document from Mr. Ridings's file,
10 BR 438 to 444.
11 (Unmarked, undated
12 indemnification agreement with
13 changes, bearing production Nos.
14 BR 0437 to 0444 marked Ridings
15 Exhibit 21 for identification, as
16 of this date.)
17 Q. The exhibit that has been placed
18 before you, can you identify it?
19 A. It appears to be another
20 unmarked, undated indemnification agreement
21 with changes.
22 Q. Did you receive that document or
23 about November 21, 1995?
24 A. It appears so.
25 MR. MASHBERG: He's asking you
CLASSIC REPORTING, INC. (212) 268-2590
106
1 Ridings
2 not if you know what the document says
3 but whether you recall receiving it.
4 A. I don't specifically recall
5 receiving it.
6 Q. But you have no reason to think
7 that you did not?
8 A. No. I think I did.
9 Q. The cover letter refers to -- the
10 cover letter suggests that the recipient might
11 call with comments. Did you call anyone with
12 comments on that document?
13 A. No.
14 Q. Did there come a time when you
15 signed an indemnification agreement?
16 A. I think so.
17 Q. Do you remember the date?
18 A. I don't.
19 Q. Did you keep a copy of that
20 agreement in your file?
21 A. I don't know.
22 Q. Have you seen or do you remember
23 seeing a signed indemnification agreement in
24 the course of collecting documents in response
25 to the subpoena?
CLASSIC REPORTING, INC. (212) 268-2590
107
1 Ridings
2 A. I don't remember.
3 Q. Do you remember to whom you sent
4 a copy of the signed indemnification
5 agreement?
6 A. I don't recall.
7 Q. If you wanted to obtain one, who
8 would you ask to obtain it for you?
9 A. I would call Dick Lampen.
10 Q. Were you ever asked to comment on
11 any press release that Brooke Group was making
12 with respect to the RJR matter?
13 A. Yes.
14 Q. When was that?
15 A. I think -- I'm not sure when.
16 Q. Did you provide any comments?
17 A. They only sought my comments as
18 to a couple of sentences they talked about me.
19 Q. Who asked you for comments?
20 A. I think the people at Sard.
21 MR. STERN: I'm going to mark as
22 the next exhibit, a document from Mr.
23 Ridings's file, BR 187 to 192.
24 (Draft press release, bearing
25 production Nos. BR 0187 through
CLASSIC REPORTING, INC. (212) 268-2590
108
1 Ridings
2 BR 0192, marked Ridings Exhibit
3 22 for identification, as of this
4 date.)
5 Q. Can you identify that document,
6 Mr. Ridings?
7 A. It appears to be a draft press
8 release.
9 Q. Who drafted it?
10 A. I don't know.
11 Q. Who sent it to you? I'll put a
12 prior question. Did you receive a copy of
13 that document?
14 A. I believe so.
15 Q. Do you remember when?
16 A. Specifically, no.
17 Q. Would you tell me the date that
18 appears on the cover sheet.
19 A. 11/20.
20 Q. November 20, 1995. Does that
21 refresh your recollection as to when you
22 received that document?
23 A. I specifically don't recall.
24 Q. That document on its face asks
25 you for comments on a drafted press release;
CLASSIC REPORTING, INC. (212) 268-2590
109
1 Ridings
2 is that correct?
3 MR. MASHBERG: You mean the cover
4 fax sheet?
5 MR. STERN: Correct.
6 A. It does.
7 Q. Is that the request for comment
8 that you were testifying about?
9 A. No. Actually, I did not mean
10 this. There was another prior draft that had
11 a paragraph on me that I commented on. This
12 looks like there were revisions to that.
13 Q. I take it these comments just
14 related to the accuracy of the description of
15 your background; is that correct?
16 MR. MASHBERG: Object to the
17 form.
18 MR. LOGAN: Object to the form.
19 Q. What did the comments concern?
20 MR. MASHBERG: What did his
21 comments on the previous draft concern?
22 MR. STERN: Yes.
23 A. My comments focused on the
24 description of myself.
25 MR. STERN: I'm going to mark as
CLASSIC REPORTING, INC. (212) 268-2590
110
1 Ridings
2 the next exhibit, a document from Mr.
3 Ridings's file, BR 409 to 413.
4 (Memorandum dated November 20,
5 1995, and attachments, bearing
6 production Nos. BR 0409 through
7 0413, marked Ridings Exhibit 23
8 for identification, as of this
9 date.)
10 Q. The exhibit that has been placed
11 before you, can you identify that exhibit?
12 A. It appears to be a memorandum
13 from Milbank.
14 Q. Did you receive that document?
15 A. I think it was sent to me. Yes.
16 Q. Now, that document enclosed
17 another document; is that correct, or so it
18 says on the cover?
19 A. Yes.
20 Q. What document did it enclose
21 according to the cover page?
22 A. Stockholder notice.
23 Q. Have we previously marked that as
24 Exhibit 3?
25 A. Exhibit 3 is a stockholder
CLASSIC REPORTING, INC. (212) 268-2590
111
1 Ridings
2 notice.
3 Q. Was that or a draft of that
4 document the enclosure to the memorandum?
5 A. I would think so. I don't know
6 for sure.
7 Q. Now, did you read the stockholder
8 notice when you received it?
9 A. Yes. I read this.
10 Q. Now, pardon me for leaning over,
11 but I only have one copy. Exhibit 23 states,
12 "If you have any questions, please contact me
13 at," and a phone number. It's signed Phil
14 Berkowitz. Did you contact Mr. Berkowitz
15 concerning the document?
16 A. No.
17 Q. Did you contact anyone concerning
18 the document?
19 A. No. Not that I recall.
20 MR. MASHBERG: Which document?
21 Q. Concerning the enclosure to
22 Exhibit 17.
23 MR. LOGAN: Exhibit 23.
24 Q. Sorry misspoke. Exhibit 23?
25 A. Not that I recall.
CLASSIC REPORTING, INC. (212) 268-2590
112
1 Ridings
2 MR. STERN: I would like to mark
3 as the next exhibit, a document from
4 Mr. Ridings's file, BR 466 and 468.
5 (Cover fax sheet dated 11/27 and
6 attachments, bearing production
7 Nos. BR 0466 through 0468, marked
8 Ridings Exhibit 24 for
9 identification, as of this date.)
10 Q. Exhibit 24 has been placed before
11 you. Can you identify that document?
12 A. It's a fax from my office back to
13 Milbank with a signature page.
14 Q. Do you remember signing that
15 document?
16 A. Not specifically.
17 Q. Is that the signature page to the
18 indemnification agreement that we were
19 discussing earlier?
20 A. It sounds like it is.
21 Q. Whose handwriting is on the cover
22 sheet?
23 A. I'm not sure. I can't tell if
24 that is Andrea's or not.
25 MR. STERN: I'm going to mark as
CLASSIC REPORTING, INC. (212) 268-2590
113
1 Ridings
2 the next exhibit a document from Mr.
3 Ridings's file BR 420 to 432. I should
4 note for the record that the form in
5 which I have it is a loose collection
6 of pages clipped together. I do not
7 know whether they were produced clipped
8 together in this fashion or maintained
9 in Mr. Ridings's file in this fashion.
10 (Fax and attached newspaper
11 articles, bearing production Nos.
12 BR 0420 through BR 0432, marked
13 Ridings Exhibit 25 for
14 identification, as of this date.)
15 Q. Exhibit 25 has been placed before
16 you. Can you identify that document?
17 A. The first page is a fax sheet
18 from Ben LeBow.
19 Q. Do you remember receiving that
20 document?
21 A. Yes.
22 Q. Does that document refer to a
23 meeting of the proposed slate of RJR
24 directors?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
114
1 Ridings
2 Q. Is that one of the meetings that
3 you were unable to attend?
4 A. Yes.
5 Q. Did you discuss -- after you
6 received that fax, did you discuss or did you
7 speak with Mr. LeBow concerning RJR?
8 A. With respect to the meeting?
9 Q. Yes.
10 A. No. I had Andrea call him and
11 tell him that I was out of town.
12 Q. Now, the exhibit has clipped to
13 it several newspapers -- one or more newspaper
14 articles. Do you see that?
15 A. Yes.
16 Q. So the record is clear, do you
17 remember whether that document, that exhibit
18 was maintained in your file clipped together
19 in the way that I gave it to you?
20 MR. MASHBERG: With part of the
21 cover sheet.
22 A. I don't think it was. It may
23 have just been the way you got it.
24 Q. What are the pages attached to
25 that fax cover sheet.
CLASSIC REPORTING, INC. (212) 268-2590
115
1 Ridings
2 A. An article from The New York
3 Times from December 26th.
4 Q. How did that article come into
5 your possession?
6 A. I think I just kept it in my
7 briefcase and had it filed in my RJR file.
8 Q. Is it your recollection that you
9 clipped that article or was it sent to you?
10 A. From its appearance, I would say
11 it's the whole page because we have pictures
12 of things that are unrelated to RJR in it. So
13 I think it's something that I just pulled out
14 of The_New_York_Times. And it's from a couple
15 of different dates.
16 Q. So there are several different
17 clippings in there; is that correct?
18 A. It appears so. Yes.
19 Q. Do you sometimes read the
20 newspapers from time to time and note articles
21 of interest to you and then ask your office to
22 copy them and place them in the file?
23 A. I actually think the original is
24 in the file folded over and whoever made the
25 copies, copied everything, front and back.
CLASSIC REPORTING, INC. (212) 268-2590
116
1 Ridings
2 MR. STERN: With the agreement of
3 all present, I'll take the newspaper
4 article and mark that as Ridings
5 Exhibit 26 so is there is no confusion
6 (Fax cover sheet dated November
7 30, 1995, bearing production No.
8 BR 0420, re-marked Ridings
9 Exhibit 25 for identification, as
10 of this date.)
11
12 (Newspaper clipping from The New
13 York Times, bearing production
14 Nos. BR 0421 through 0432, marked
15 Ridings Exhibit 26 for
16 identification, as of this date.)
17 Q. Mr. Ridings, is Exhibit 26 the
18 newspaper pages that we discussed earlier in
19 connection with Exhibit 25?
20 A. Yes.
21 MR. STERN: I would like to have
22 marked as a single exhibit, if there is
23 no objection, a number of documents
24 which were produced by Mr. Ridings.
25 They all appear to be copies of news
CLASSIC REPORTING, INC. (212) 268-2590
117
1 Ridings
2 articles or press releases or the like
3 attached to fax cover pages that
4 purport to be from Mr. Kirkland to a
5 number of people, including Mr.
6 Ridings. So that the record is clear,
7 I also see Bernstein Report included in
8 these exhibits.
9 (Fax dated 11/17/95, and
10 attachments, bearing production
11 Nos. BR 181 to 184; BR 193 to
12 197; BR 201 to 209; BR 349 to
13 350; BR 353 to 360; BR 414
14 through 419; BR 445 to 455; BR
15 470 to BR 489; BR 502 to 503; BR
16 497 to BR 501; BR 504 to BR 515;
17 BR 520 to 525 and BR 527 to BR
18 538 marked Ridings Exhibit 27 for
19 identification, as of this date.)
20 Q. I'm going to place Exhibit 27
21 before the witness but before that I'm going
22 to show it to Mr. Logan.
23 (Group of articles, top article
24 bearing production Nos. BR 0177,
25 marked Ridings Exhibit 28 for
CLASSIC REPORTING, INC. (212) 268-2590
118
1 Ridings
2 identification, as of this date.)
3 MR. STERN: In the interest of
4 protecting the record, I've been
5 requested and agreed to read the Bates
6 numbers into the record of Exhibit 27.
7 BR -- these are the numbers of the
8 separate documents that are compiled in
9 Exhibit 27: BR 181 to 184. BR 193 to
10 197. BR 201 to 209. BR 349 to 350.
11 BR 353 to 360. BR 414 through 419. BR
12 445 to 455. BR 470 to BR 489. BR 502
13 to 503. BR 497 to BR 501. BR 504 to
14 BR 515. BR 520 to 525. BR 527 to BR
15 538.
16 Q. Mr. Ridings, I place Exhibit 27
17 back before you. Can you identify that
18 document.
19 A. These are copies of various press
20 releases, Bloomberg_News articles and other
21 similar things, that were sent to me from the
22 Brooke Group. There is at least one research
23 report in here as well.
24 Q. Is that a report by Mr. Black of
25 Bernstein Research?
CLASSIC REPORTING, INC. (212) 268-2590
119
1 Ridings
2 A. Yes.
3 Q. Now, what is your understanding
4 of those documents being sent to you by Brooke
5 Group?
6 MR. MASHBERG: Object to the
7 form.
8 MR. LOGAN: Object to the form.
9 A. I'm not sure what you mean.
10 Q. Why were you getting those
11 documents?
12 MR. MASHBERG: Object to the
13 form.
14 MR. LOGAN: Object to the form.
15 A. I think I answered that earlier.
16 I thought Bryant Kirkland was acting kind of
17 like a clipping service and not just sending
18 me but sending everybody copies of press
19 releases and other items.
20 Q. But the purpose was in order to
21 permit you to -- in order to keep you informed
22 about matters pertaining to the RJR consent
23 solicitation; is that accurate?
24 MR. LOGAN: Object to the form.
25 MR. MASHBERG: Object to the
CLASSIC REPORTING, INC. (212) 268-2590
120
1 Ridings
2 form.
3 A. I have never spoken with Bryant
4 so I don't know what his purpose was. Again I
5 viewed it like a clipping service.
6 Q. What did you use it for?
7 MR. MASHBERG: Object to the
8 form.
9 Q. Did you make any use of those
10 documents?
11 A. I read them.
12 Q. For what purpose?
13 A. So I can see what was in them.
14 Q. Why were you interested in seeing
15 what was in the documents?
16 A. I don't understand your question.
17 Q. Were you attempting to keep
18 yourself abreast of developments in Mr.
19 LeBow's relationship with RJR?
20 MR. MASHBERG: Object to the
21 form.
22 MR. LOGAN: Object to the form.
23 A. At least.
24 Q. Anything else?
25 A. I read them. They came to me
CLASSIC REPORTING, INC. (212) 268-2590
121
1 Ridings
2 from Brooke in connection with this matter, so
3 I read them.
4 Q. Take a look at Exhibit 28,
5 please. Can you identify that document?
6 A. These are more clippings from
7 various papers.
8 Q. From where did you obtain those
9 clippings?
10 A. I think those are ones that I
11 pulled out of the newspaper.
12 Q. Again, why did you pull them out
13 of the newspaper?
14 A. They had to do with RJR.
15 Q. Now, have you ever heard of a Mr.
16 Gary Klesch?
17 A. No.
18 Q. You've heard of Gary Black?
19 A. Say the name again.
20 Q. Gary Black?
21 A. I think he's the analyst from
22 Bernstein.
23 Q. You read at least one of his
24 reports concerning RJR; is that correct?
25 A. Right.
CLASSIC REPORTING, INC. (212) 268-2590
122
1 Ridings
2 Q. Did you ever have any discussion
3 with Mr. Black concerning RJR?
4 A. No.
5 Q. Did you ever have any discussions
6 with anyone concerning RJR and Mr. Black?
7 A. Conversation with anyone about
8 Mr. Black?
9 Q. Yes.
10 A. Not that I recall.
11 MR. STERN: I would like to mark
12 as the next document, a document from
13 Mr. Ridings's file, BR 457 to 464.
14 (Bloomberg article on RJR,
15 bearing production Nos. BR 0457
16 through 0464, marked Ridings
17 Exhibit 29 for identification, as
18 of this date.)
19 Q. Mr. Ridings, can you identify
20 that exhibit, please?
21 A. Yes.
22 Q. What is it?
23 A. It's a Bloomberg article on RJR
24 that was prepared for me or run for me by one
25 of the analysts who works for me.
CLASSIC REPORTING, INC. (212) 268-2590
123
1 Ridings
2 Q. The name of that analyst?
3 A. Edings Thibault.
4 Q. Is the first page of the document
5 of the exhibit a memo from Mr. Thibault to
6 you?
7 A. Yes.
8 Q. Does it say, "Here are some
9 stories from the KKR Borden deal"?
10 A. Yes.
11 Q. Did you ask Mr. Thibault to
12 collect stories on the KKR Borden deal?
13 A. Yes.
14 Q. When did you ask him to do that?
15 A. It's dated November 1st.
16 Q. You are referring to the date on
17 Mr. Thibault's memo to you; is that correct?
18 A. Right.
19 Q. When did you make the request of
20 him that resulted in that memo?
21 A. I don't recall.
22 Q. But it was sometime prior to
23 November 1st, is that correct, or on November
24 1st?
25 A. Yes. Could have been on the same
CLASSIC REPORTING, INC. (212) 268-2590
124
1 Ridings
2 day.
3 Q. Now, why did you ask him to
4 obtain documents -- to obtain information on
5 the KKR Borden deal?
6 A. I was trying to refresh my memory
7 on the KKR Borden, RJR deal.
8 Q. Why were you trying to do that?
9 A. So I can understand what
10 happened.
11 Q. Why were you interested on or
12 about November 1, 1995 in understanding what
13 happened in the Borden KKR deal?
14 A. I'm not sure I understand.
15 Q. What prompted your requesting Mr.
16 Thibault --
17 A. Edings. It's easier to say his
18 first name.
19 I don't know.
20 Q. Had you spoken with Mr. LeBow by
21 this time about your joining the slate?
22 A. I don't recall.
23 Q. Is there anything that you
24 learned about the Borden KKR deal that you
25 regarded as important in reaching a decision
CLASSIC REPORTING, INC. (212) 268-2590
125
1 Ridings
2 to accept Mr. LeBow's invitation to join the
3 slate?
4 A. I don't know that they were
5 connected.
6 Q. In which file was this document
7 maintained?
8 A. RJR.
9 Q. In your RJR file?
10 A. That is what it indicates.
11 Q. That file contained documents
12 relating to your membership on Mr. LeBow's
13 slate, or Brooke Group slate; is that correct.
14 MR. LOGAN: Object to the form.
15 A. No.
16 Q. Did you obtain that document --
17 I'll withdraw that and put another question.
18 Did you make your request of your
19 associate to obtain that information because
20 of anything having to do with New Valley's
21 interest in RJR?
22 A. I don't specifically recall.
23 Q. You don't remember one way or the
24 other whether your request for that
25 information had anything to do with New
CLASSIC REPORTING, INC. (212) 268-2590
126
1 Ridings
2 Valley?
3 A. Well, it obviously had to do with
4 New Valley.
5 Q. Why is that obvious?
6 A. Because it deals with RJR. I
7 don't have an interest in RJR other than my
8 position as a nominee.
9 Q. You are not a shareholder of RJR;
10 is that correct?
11 A. No.
12 Q. Did the information that Mr.
13 Thibault obtained for you have any bearing of
14 a decision that you made as a director of New
15 Valley?
16 A. I don't recall.
17 Q. Have you ever heard of George
18 Levin?
19 A. It doesn't ring a bell.
20 Q. How about Ronald Bernstein?
21 A. That sounds familiar. Refresh my
22 memory.
23 Q. I'm going to place back before
24 you, Ridings Exhibit 27, and I'll point to the
25 first page where there is a list of names that
CLASSIC REPORTING, INC. (212) 268-2590
127
1 Ridings
2 include Warren Lichtenstein. Do you see that?
3 A. Yes.
4 Q. Does that refresh your
5 recollection?
6 A. I don't know who he is.
7 Q. What about George Levin, do you
8 see his name on the list? Does that refresh
9 your recollection as to Mr. Levin?
10 A. No.
11 Q. What about Gary Klesch?
12 A. No.
13 Q. Who is Karen Eisenbud?
14 A. I don't know.
15 MR. STERN: I would like to mark
16 as the next exhibit, a page from Mr.
17 Ridings's file. BR 469.
18 (Fax dated November 13, 1995 to
19 Mr. Ridings from Mr. LeBow,
20 bearing production Nos. BR 0469,
21 marked Ridings Exhibit 30 for
22 identification, as of this date.)
23 Q. Mr. Ridings, can you identify
24 that document?
25 A. It's a fax from Ben LeBow to me.
CLASSIC REPORTING, INC. (212) 268-2590
128
1 Ridings
2 Q. Do you remember receiving that
3 document on or about the date indicated on it?
4 A. Yes.
5 Q. Whose handwriting is in the
6 document?
7 A. There are two people's
8 handwriting on the document. The word which
9 is not legible, it says "File," that is mine.
10 The other I'm not familiar.
11 Q. The date on this document is
12 November 13, 1995. Do you see that?
13 A. Yes.
14 Q. And it appears to be an
15 invitation to a meeting at the Sard firm; is
16 that correct?
17 A. Yes.
18 Q. Is that the meeting that you
19 testified to earlier that you were unable to
20 attend?
21 A. Yes.
22 Q. And you attended a subsequent
23 session at Sard later that day, is that
24 accurate?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
129
1 Ridings
2 Q. Now, does this document refresh
3 your recollection as to when you were first
4 approached by Mr. LeBow about joining the
5 slate?
6 A. No.
7 Q. About the date on which you got
8 back to Mr. LeBow and told him that you would
9 be interested in doing so?
10 A. No.
11 Q. There is a phone number on that
12 document, do you see that?
13 A. Yes.
14 Q. Do you recognize that telephone
15 number?
16 MR. LOGAN: There are five or six
17 phone numbers.
18 Q. There is a handwritten telephone
19 number on that document. Do you see that
20 212-751-7272. Do you recognize that?
21 A. No.
22 Q. Then there is a reference to a
23 Mr. Lorber. Do you see that?
24 A. Yes.
25 Q. What does that refer to, do you
CLASSIC REPORTING, INC. (212) 268-2590
130
1 Ridings
2 know?
3 A. I can read what it says.
4 Q. Apart from what it says, do you
5 know what it refers to?
6 A. I don't.
7 MR. STERN: I'm going to mark as
8 the next exhibit, a document from Mr.
9 Ridings's file, BR 198 to 200.
10 (Fax dated 12/28/95, and
11 attachment, bearing production
12 Nos. BR 0198 through 200, marked
13 Ridings Exhibit 31 for
14 identification, as of this date.)
15 Q. I'm placing Exhibit 31 before you
16 and I ask you if you can identify that
17 document.
18 A. It is a copy of another news
19 article.
20 Q. Is it a document that you
21 retained in your file?
22 A. Yes.
23 Q. From whom did you receive it?
24 A. Brooke Group.
25 Q. Did you receive that document on
CLASSIC REPORTING, INC. (212) 268-2590
131
1 Ridings
2 or about December 28, 1995?
3 A. I think so.
4 Q. Do you see that there are a list
5 of names in the fax distribution?
6 A. Yes.
7 Q. Do you recognize or do you know
8 who Stephanie Don is?
9 A. I don't see that.
10 Q. The last one?
11 A. I have no idea.
12 Q. Martin LeBow?
13 A. I don't know.
14 Q. Who is Mikhail, the name Mikhail
15 Iosilevich. Do you recognize that name?
16 A. No.
17 MR. STERN: I'm going to mark as
18 the next exhibit, a document from Mr.
19 Ridings's file. BR 490 to 496.
20 (Fax dated November 16, 1995 and
21 attachment, bearing production
22 Nos. BR 0490 through 0496, marked
23 Ridings Exhibit 32 for
24 identification, as of this date.)
25 Q. Can you identify that document?
CLASSIC REPORTING, INC. (212) 268-2590
132
1 Ridings
2 A. It's a fax from Milbank.
3 Q. Is that a fax that was sent to
4 you?
5 A. It's addressed to me.
6 Q. Did you receive that document on
7 or about the date indicated on the cover which
8 is November 16, 1995?
9 A. I think so.
10 Q. Did you read it?
11 A. I think so.
12 Q. What is the attachment?
13 A. It appears to be a couple. One
14 is Annex F which is a summary of my resume.
15 And there is a letter to Cede & Company dated
16 November 20. Excuse me. To RJR on letterhead
17 of Cede & Company.
18 Q. Did you have discussions about
19 those documents with anyone?
20 A. Not that I recall.
21 Q. Just to bring us back to a frame
22 of reference in terms of time, in terms of
23 chronology, I believe -- there was a
24 conversation with Mr. LeBow in which you
25 expressed interest in joining his slate. Then
CLASSIC REPORTING, INC. (212) 268-2590
133
1 Ridings
2 there was a meeting at some point in the Sard
3 offices in which you met with him and others
4 to discuss the RJR matter; is that correct?
5 Again, I'm just trying to set a time here, a
6 frame of reference.
7 A. Yes. I think we talked about
8 both of those in detail.
9 Q. In between those events, I don't
10 know how much detail we discussed but we did
11 discuss them, in the time frame between those
12 two events, did you have any discussion with
13 anyone concerning RJR other than as to which
14 you already testified?
15 A. Not that I can recall.
16 Q. Now, following the meeting in the
17 Sard offices, what is the next conversation
18 with Mr. LeBow or any representative of the
19 Brooke Group that you remember concerning RJR?
20 A. It would have been at the next
21 New Valley board meeting.
22 Q. Do you remember when that meeting
23 was?
24 A. I don't.
25 Q. Was it in 1996 or in 1995.
CLASSIC REPORTING, INC. (212) 268-2590
134
1 Ridings
2 A. It was in 1995.
3 Q. Would it have been sometime in
4 December of 1995?
5 A. I believe so.
6 Q. Who attended that meeting?
7 A. It was a phone meeting.
8 Q. When was the meeting called?
9 A. I don't recall.
10 Q. Was it a regular meeting?
11 A. Was it regular as opposed to
12 special?
13 Q. Yes.
14 A. I don't recall.
15 Q. Who participated in the call?
16 A. Do I remember who the people on
17 the phone were?
18 Q. Yes.
19 A. Mr. LeBow, Mr. Lorber, myself,
20 Mr. Burns, Mr. Resseler, Mr. Kramer. We may
21 have had inside and outside counsel.
22 That is all I can think of off
23 the top of my head.
24 Q. Were there other directors from
25 New Valley on the phone?
CLASSIC REPORTING, INC. (212) 268-2590
135
1 Ridings
2 A. There probably was. I just don't
3 recall.
4 Q. Is Mr. Resseler affiliated with
5 New Valley?
6 A. He's a director.
7 Q. Mr. Kramer?
8 A. Also a director.
9 Q. Mr. Burns is also a director?
10 A. Yes.
11 Q. Mr. Lorber, is he affiliated with
12 New Valley?
13 A. Yes. He's an officer. I think
14 he's a director.
15 Q. How long did this phone meeting
16 last?
17 A. I don't recall.
18 Q. Was it more than an hour?
19 A. I don't recall.
20 Q. Did you take any notes during the
21 meeting?
22 A. I did not.
23 Q. Where were you physically?
24 A. On a train.
25 Q. What time of day was the meeting?
CLASSIC REPORTING, INC. (212) 268-2590
136
1 Ridings
2 A. It was in the afternoon.
3 Q. You had this cell phone, I
4 assume, and you took the call from a train; is
5 that correct?
6 A. Right. I usually use the phone
7 on the train.
8 Q. Was this part of your regular
9 commute?
10 A. No.
11 Q. Were there any documents
12 circulated to the board in connection with
13 this meeting?
14 A. I don't remember.
15 Q. What was said at this meeting, to
16 your best recollection?
17 MR. MASHBERG: Regarding?
18 Q. Regarding RJR.
19 A. I don't recall.
20 Q. Regarding New Valley's investment
21 in RJR?
22 A. I don't recall anything specific
23 about RJR.
24 Q. Do you recall anything -- I'm
25 entitled to your recollection, no matter how
CLASSIC REPORTING, INC. (212) 268-2590
137
1 Ridings
2 general.
3 A. I understand.
4 Q. Do you recall anything even in a
5 general way about RJR?
6 A. It wasn't about RJR, the meeting.
7 Someone always asks for an update and my
8 recollection is just that things are moving
9 forward.
10 Q. After this phone meeting, when
11 was your next communication with anyone
12 concerning RJR?
13 A. Specifically about RJR as opposed
14 to New Valley?
15 Q. Well, anything having to do with
16 Brooke Group, LeBow or New Valley's interest
17 in RJR?
18 MR. LOGAN: Object to the form.
19 Q. Do you understand that question
20 or am I missing something?
21 A. Again my confusion is we had New
22 Valley meetings fairly regularly. And at
23 those meetings, occasionally RJR would come
24 up.
25 Q. When was the next meeting about
CLASSIC REPORTING, INC. (212) 268-2590
138
1 Ridings
2 New Valley?
3 A. I think we had one in January.
4 Q. Was this a board meeting?
5 A. Another board meeting.
6 Q. Was this a phone meeting or a
7 meeting at which you were all present?
8 A. Another phone meeting.
9 Q. Did RJR come up at that meeting?
10 A. Again, LeBow or Lorber or someone
11 would always give an update on everything and
12 RJR is reviewed at every meeting whether it's
13 a sentence or two or whatever.
14 Q. Do you remember what Mr. LeBow
15 and Mr. Lorber said at the January meeting?
16 A. No.
17 Q. What was the next communication
18 you had with anyone concerning RJR?
19 A. I don't recall any specifically.
20 We're almost at the current time.
21 Q. After this New Valley meeting in
22 January that you just told me about, was there
23 any other meeting, a subsequent meeting,
24 relating to New Valley?
25 A. I don't think we had any other
CLASSIC REPORTING, INC. (212) 268-2590
139
1 Ridings
2 New Valley meetings since the last board
3 meeting.
4 Q. Has the board of directors of New
5 Valley ever taken any formal action with
6 respect to RJR?
7 MR. MASHBERG: Object to the
8 form.
9 MR. LOGAN: Object to the form.
10 A. I don't know what you mean.
11 Q. Has the board of directors ever
12 taken a vote or passed any resolutions with
13 respect to RJR?
14 A. With respect to New Valley's
15 actions? With respect to RJR and Brooke?
16 Q. Yes.
17 A. I think we have.
18 Q. When was that?
19 A. I don't know.
20 Q. Was this one occasion or more
21 than one occasion?
22 A. I don't recall.
23 Q. What occasion do you recall?
24 What do you recall doing?
25 A. In order -- again under the
CLASSIC REPORTING, INC. (212) 268-2590
140
1 Ridings
2 bankruptcy agreement, when New Valley went
3 over a certain threshold with respect to
4 investments or did anything with Brooke, we
5 had to get opinions from outside investment
6 bankers. So that happened with Oppenheimer.
7 Now I don't recall if we have to take a formal
8 vote or I'm not quite sure how the mechanics
9 work. You really would have to talk to
10 counsel for New Valley to see how the
11 mechanics work.
12 Q. How many different occasions did
13 New Valley obtain opinions from Oppenheimer or
14 another outside investment banker?
15 A. I don't recall.
16 MR. LOGAN: With respect to RJR?
17 MR. STERN: Yes.
18 A. With respect to RJR, I don't
19 recall.
20 Q. You recall at least one?
21 A. At least one.
22 MR. STERN: I'm going to mark as
23 the next exhibit, a document -- three
24 documents from Mr. Ridings's files, BR
25 539 through 548.
CLASSIC REPORTING, INC. (212) 268-2590
141
1 Ridings
2 (Memorandum dated January 2, 1996
3 with attached agreement, bearing
4 production Nos. BR 0539 through
5 0550, marked Ridings Exhibit 33
6 for identification, as of this
7 date.)
8 (Recess taken)
9 Q. I would like to correct the
10 record in one respect. Exhibit 33 is BR 539
11 through 550.
12 Mr. Ridings, I'm placing Exhibit
13 33 before you. Can you identify that
14 document?
15 A. It's a cover memo from Dick
16 Lampen, and it included the agreement between
17 New Valley and Brooke and the Oppenheimer
18 opinion letter.
19 Q. Is that the opinion letter that
20 you referred to in your earlier testimony?
21 A. Yes.
22 Q. Did you review those documents
23 when you received them?
24 A. Yes.
25 Q. Did Mr. Lampen send you those
CLASSIC REPORTING, INC. (212) 268-2590
142
1 Ridings
2 documents on or about January 2, 1996?
3 A. I believe so.
4 Q. What was the purpose, if you
5 know, for his sending those documents to you?
6 A. I'm a director of New Valley.
7 Q. Did you discuss those documents
8 with anyone?
9 A. I don't recall.
10 Q. So the record is clear, BR 540 is
11 an agreement between New Valley Corporation
12 and Brooke Group; is that correct?
13 A. Yes.
14 Q. And that document is approved by
15 the New Valley board of directors?
16 A. I don't recall.
17 Q. Was that agreement discussed at
18 any meeting of the New Valley's board of
19 directors?
20 A. Yes.
21 Q. Do you remember any of the
22 discussion?
23 A. My recollection is that we went
24 through it. I think Mr. Lampen walked us
25 through.
CLASSIC REPORTING, INC. (212) 268-2590
143
1 Ridings
2 Q. Was this at the January meeting
3 of the New Valley board?
4 A. No. I think it would have been
5 the December meeting.
6 Q. I'm sorry. You are correct. Is
7 that the meeting in which you participated by
8 phone from a train?
9 A. No.
10 Q. An earlier meeting?
11 A. No. I think the phone meeting --
12 it must have been an earlier meeting. I'm not
13 quite sure. The train phone call had to do
14 with some other New Valley matters. I don't
15 recall talking about this document at that
16 meeting.
17 Q. But you do recall that there was
18 a New Valley board meeting in December in
19 which this document was discussed; is that
20 correct?
21 A. I'm not sure if it was December
22 or when. But I do recall us talking about
23 that document.
24 Q. And do you recall that Mr. Lampen
25 walked you through the document; is that
CLASSIC REPORTING, INC. (212) 268-2590
144
1 Ridings
2 correct?
3 A. I think it was Dick. I'm not
4 positive.
5 Q. I'm going to show you Section 1,
6 Proposals. And I'm going to ask you if Mr.
7 Lampen said anything about Section 1,
8 Proposals?
9 MR. LOGAN: Objection. The
10 witness is cautioned not to disclose
11 the substance of any confidential
12 attorney-client communications at the
13 meeting.
14 Q. Did anyone other than Mr. Lampen
15 discuss this document?
16 A. Again, I'm not even positive it
17 was Dick. I just don't recall.
18 Q. Someone discussed it. You don't
19 know whether it was Mr. Lampen or not?
20 A. I think it was Dick but I'm not
21 positive.
22 Q. If it wasn't Mr. Lampen, would it
23 have been a lawyer for the company?
24 A. I don't remember.
25 Q. Did anyone who was not a counsel
CLASSIC REPORTING, INC. (212) 268-2590
145
1 Ridings
2 for the company make any comment whatsoever on
3 that document that you can remember?
4 A. I don't remember.
5 Q. Do you know whether the company,
6 New Valley, provided information to
7 Oppenheimer & Company so that it could develop
8 its opinion dated December 27, 1995?
9 A. Do I know that they gave
10 Oppenheimer?
11 Q. Yes.
12 A. I don't know.
13 Q. I think you indicated earlier
14 that you had at least one discussion with
15 someone from Oppenheimr, Mr. White, about a
16 fairness opinion?
17 A. I think it was Mr. White.
18 Q. And the discussion concerned the
19 fairness opinion that is part of Exhibit 33?
20 A. I believe so.
21 Q. Have you seen Exhibit 33, does it
22 refresh your recollection in any way as to
23 what you might have said to Mr. White and he
24 to you?
25 A. Other than what we talked about?
CLASSIC REPORTING, INC. (212) 268-2590
146
1 Ridings
2 Earlier? Nothing else comes to mind.
3 Q. Other than what you've testified
4 about, do you recall any discussion with
5 anyone concerning this agreement with New
6 Valley Corporation that is part of Exhibit 33?
7 A. I don't recall any.
8 Q. Other than the agreement that is
9 part of Exhibit 33, are there any other
10 agreements between New Valley Corporation and
11 Brooke Group as respects RJR?
12 A. Other than that agreement?
13 A. I don't know.
14 Q. But you don't know of any?
15 A. No. But I don't think --
16 Q. We are in a double negative.
17 A. I'm sorry.
18 Q. I think the record is clear. You
19 don't know whether or not there are other
20 agreements between New Valley and Brooke Group
21 concerning RJR?
22 A. I don't know.
23 Q. What is the purpose of the
24 Oppenheimer & Co. fairness opinion?
25 MR. MASHBERG: Objection. Object
CLASSIC REPORTING, INC. (212) 268-2590
147
1 Ridings
2 to the form.
3 MR. LOGAN: Objection.
4 A. We talked about that earlier.
5 The bankruptcy settlement required fairness
6 opinions when there were any New Valley/Brooke
7 interactions.
8 Q. For the benefit of who?
9 A. For the benefit of New Valley.
10 The shareholders.
11 Q. The public shareholders of New
12 Valley; isn't that correct?
13 A. Right.
14 Q. Why did the bankruptcy documents
15 require that fairness opinion and procedure?
16 MR. LOGAN: Object to the form.
17 A. I don't know that I can answer
18 that question.
19 Q. Was this something that you
20 negotiated in the course of your duties as
21 advisor to a preferred shareholder committee
22 in the New Valley bankruptcy?
23 A. It's not something that I
24 negotiated. So you know there were preferred
25 A, B and common. We were not just my
CLASSIC REPORTING, INC. (212) 268-2590
148
1 Ridings
2 committee.
3 Q. Were you involved in negotiation
4 of that provision?
5 A. I don't recall.
6 Q. Did there come a time when New
7 Valley engaged in a firm called Jeffries in
8 connection with RJR?
9 A. Yes.
10 Q. Did you have any discussions
11 about that?
12 A. No.
13 Q. Do you know when that was?
14 A. Not off the top of my head.
15 Q. How did you come to know it?
16 A. I can't recall.
17 MR. STERN: I'm going to mark as
18 the next exhibit -- the next two
19 exhibits -- a document from Mr.
20 Ridings's files. BR 551 through 564.
21 BR 565 through 648.
22 (Memorandum dated January 8, 1996
23 with copy of Jeffries Engagement
24 Letter, bearing production Nos.
25 BR 0551 through BR 0564, marked
CLASSIC REPORTING, INC. (212) 268-2590
149
1 Ridings
2 Ridings Exhibit 34 for
3 identification, as of this date.)
4
5 (Document headed "Brooke Group
6 Ltd. Consent Solicitation of RJR
7 Shareholders," bearing production
8 Nos. BR 0565 through 0648, marked
9 Ridings Exhibit 35 for
10 identification, as of this date.)
11 Q. I'm going to place Exhibit 34
12 before you. I ask you if you can identify
13 that document.
14 A. Yes.
15 Q. What is it?
16 A. It's a memo from Dick Lampen to
17 the board with a copy of the Jeffries
18 engagement letter.
19 Q. Is that to the New Valley board?
20 A. Yes.
21 Q. Were those documents discussed at
22 any meeting of the board of New Valley?
23 A. I don't recall.
24 Q. Did New Valley board of directors
25 authorize the retention of Jeffries?
CLASSIC REPORTING, INC. (212) 268-2590
150
1 Ridings
2 A. I can't specifically recall.
3 Q. Do you know how New Valley came
4 to choose Jeffries?
5 A. I don't know.
6 Q. Do you know the purpose for the
7 retention of Jeffries?
8 A. It's stated in the engagement.
9 Q. Other than as may be stated in
10 the engagement?
11 MR. MASHBERG: Object to the
12 form.
13 MR. LOGAN: Objection.
14 MR. STERN: I'll withdraw that
15 question.
16 Q. Did you have any discussion with
17 anyone concerning the purpose of the
18 engagement of Jeffries?
19 A. I can't recall any.
20 Q. I have marked as the next
21 exhibit, Exhibit 35. I'm going to place that
22 before you Mr. Ridings.
23 Can you identify that document?
24 It's a document entitled "Consent Solicitation
25 of RJR Shareholders."
CLASSIC REPORTING, INC. (212) 268-2590
151
1 Ridings
2 From whom did you obtain this?
3 First let me ask you a preliminary question.
4 Exhibit 35 consists of a number of loose pages
5 which is the form in which we received it.
6 Can you tell me if that was one document as
7 maintained in your file or more than one
8 document?
9 A. I believe it was one document.
10 Q. And from whom did you receive it?
11 A. Someone at Brooke or New Valley.
12 Q. Do you remember who?
13 A. I don't.
14 Q. Do you remember when?
15 A. It indicates in January.
16 Q. Do you know why you received it?
17 MR. MASHBERG: Object to the
18 form.
19 MR. LOGAN: Objection.
20 Q. What was your understanding of
21 the reason for your being given this document?
22
23 MR. LOGAN: Object to the form.
24 A. It was sent to me. I didn't ask
25 for it.
CLASSIC REPORTING, INC. (212) 268-2590
152
1 Ridings
2 Q. Did you have any discussions with
3 anyone concerning that document?
4 A. Not that I recall.
5 Q. Did you read it?
6 A. I did.
7 MR. STERN: I would like to mark
8 as the next exhibit, a document from
9 Mr. Ridings's file, BR 210 through 348.
10 (Group of documents headed "RJR
11 Nabisco Selected Documents,"
12 bearing production Nos. BR 0210
13 through 0348, marked Ridings
14 Exhibit 36 for identification, as
15 of this date.)
16 Q. Exhibit 36 is before you. Can
17 you identify that?
18 A. It's a copy of some documents
19 concerning Brooke Group and RJR and research
20 reports.
21 Q. Is that a collection of documents
22 that you received from Brooke Group?
23 A. Either Brooke or New Valley.
24 Q. Did you receive all those
25 documents at the same time or did you receive
CLASSIC REPORTING, INC. (212) 268-2590
153
1 Ridings
2 those documents at different times?
3 MR. MASHBERG: Referring to
4 Exhibit 36?
5 MR. STERN: Yes.
6 A. It came -- I think it's all part
7 of one bound package.
8 Q. Do you remember from whom it came
9 first individually?
10 A. No.
11 Q. Was it Mr. Kirkland?
12 A. I don't know.
13 Q. Do you remember when it came?
14 A. No.
15 Q. What is your understanding as to
16 why you received it?
17 MR. MASHBERG: Object to the
18 form.
19 MR. LOGAN: Objection.
20 Q. Did you have any discussions with
21 anyone as to why you were given that document?
22 A. I didn't ask that it be sent.
23 Q. Did you read it?
24 A. I did.
25 Q. Did you note when you read it --
CLASSIC REPORTING, INC. (212) 268-2590
154
1 Ridings
2 excuse me. Did you note when you received it
3 that there is a summary of a transaction
4 reflected on the page marked 213?
5 A. Right.
6 Q. Did you read that page?
7 A. Yes.
8 Q. Did you discuss the transaction
9 that is summarized on that page with anyone?
10 A. No.
11 Q. Had anyone ever discussed,
12 discussed with you, at any time the
13 possibility of a transaction between Liggett
14 and RJR??
15 A. I don't recall any.
16 Q. When you read that page, did
17 you --
18 MR. STERN: I'll withdraw that
19 question.
20 I'm going to mark as the next
21 exhibit a document from Mr. Ridings's
22 file, BR 361 through BR 404.
23 (Fax dated 1/2/96, with
24 attachments, bearing production
25 Nos. BR 361 through BR 404,
CLASSIC REPORTING, INC. (212) 268-2590
155
1 Ridings
2 marked Ridings Exhibit 37 for
3 identification, as of this date.)
4 Q. Mr. Ridings can you identify that
5 document?
6 A. It appears to be a copy of the
7 solicitation of written consents with a cover
8 sheet.
9 Q. This solicitation issued by
10 Brooke Group; is that correct?
11 A. That is what it says.
12 Q. Do you remember receiving that
13 document?
14 A. Not specifically.
15 Q. Did you read that document or any
16 copy of it?
17 A. I have read the solicitation.
18 Yes.
19 Q. Did you discuss the solicitation
20 with anyone?
21 A. Not specifically that I recall.
22 No.
23 Q. Now, sir, other than -- we've
24 marked a number of exhibits today. I'll ask
25 you if you can recall receiving any documents
CLASSIC REPORTING, INC. (212) 268-2590
156
1 Ridings
2 concerning New Valley's interest in RJR other
3 than the documents that we have marked as
4 exhibits?
5 MR. MASHBERG: Objection.
6 MR. LOGAN: Object to the form.
7 Q. Any other documents?
8 A. Other documents that I have
9 received on RJR. Is that the question?
10 Q. Yes.
11 A. Other than everything we talked
12 about so far?
13 Q. Yes.
14 A. No.
15 Q. You can remember no documents?
16 A. I can remember no documents.
17 Q. Have you ever discussed with
18 anyone the possible -- I'll withdraw that
19 question.
20 Do you recognize the name
21 Liggett?
22 A. Yes.
23 Q. What is Liggett?
24 A. It's a tobacco company.
25 Q. Is it a tobacco company that is
CLASSIC REPORTING, INC. (212) 268-2590
157
1 Ridings
2 owned or controlled by Mr. LeBow and the
3 Brooke Group?
4 A. I think it's owned by Brooke
5 Group.
6 Q. Have you ever had any business
7 relationships with Liggett?
8 A. No.
9 Q. Have you ever discussed with
10 anyone the possibility of a sale of Liggett?
11 A. No.
12 Q. Merger or other businesses
13 combination of Liggett?
14 A. No.
15 Q. Are you aware that Mr. LeBow had
16 discussion in 1995 with representatives of RJR
17 concerning a possible merger of Liggett and
18 RJR?
19 MR. LOGAN: Object to the form.
20 A. In the consent solicitation, I
21 think there is a paragraph on that. That is
22 all I know of that matter.
23 Q. You never discussed that with
24 anyone?
25 A. I have never discussed it. No.
CLASSIC REPORTING, INC. (212) 268-2590
158
1 Ridings
2 Q. Have you ever discussed with
3 anyone how RJR was to be managed in the event
4 that Brooke Group -- in the event that the
5 slate of nominees of which you are a member is
6 elected as the board of directors of RJR?
7 A. I'm sorry. Run-on sentence.
8 Q. You are on a slate of directors
9 of candidates for the board of directors for
10 RJR; is that correct?
11 A. Yes.
12 Q. In the event that slate is
13 elected --- I'll withdraw that.
14 Have you ever discussed with
15 anyone how RJR would be managed in the event
16 that slate were to be elected?
17 MR. MASHBERG: Object to the
18 form.
19 A. No, I have not.
20 Q. Have you ever discussed with
21 anyone any approach by anyone associated with
22 Brooke Group to any third-party investor
23 concerning RJR?
24 MR. LOGAN: Object to the form.
25 A. I didn't understand what you mean
CLASSIC REPORTING, INC. (212) 268-2590
159
1 Ridings
2 by "approach."
3 Q. Any -- I'll rephrase the
4 question. Have you ever discussed with anyone
5 associated with Brooke Group, whether anyone
6 from Brooke Group had contacted any other
7 person concerning an investment in RJR?
8 MR. LOGAN: Object to the form.
9 A. I don't recall.
10 Q. Have you ever heard of Lucia Tan.
11 A. I don't know that name.
12 Q. Prior to joining the board of New
13 Valley, had you any dealings with Mr. LeBow?
14 A. I met him previously.
15 Q. When?
16 A. The date?
17 Q. To your best recollection?
18 A. Prior to 1990.
19 Q. In what connection?
20 A. While I was at Drexel, I
21 represented a company that we were selling and
22 one of the companies we were soliciting to see
23 if they had interest in Western Union. And
24 then in connection with that, I had met Mr.
25 LeBow.
CLASSIC REPORTING, INC. (212) 268-2590
160
1 Ridings
2 Q. Was that your only interaction
3 with Mr. LeBow prior to the New Valley
4 bankruptcy proceeding?
5 A. Yes.
6 Q. Prior to the New Valley
7 bankruptcy, did you have any dealings with
8 Brooke Corporation?
9 A. No.
10 Q. With Mr. Resseler?
11 A. I knew who he was. He was
12 employed by Drexel. We may have had a
13 conversation now and then.
14 Q. You didn't work with him at
15 Drexel, did you?
16 A. I did not.
17 Q. What about Fred Zuckerman?
18 A. No.
19 Q. Did you ever discuss with Mr.
20 Zuckerman a change -- I'll put a question
21 rather than just a name.
22 Did you ever hear of Mr.
23 Zuckerman prior to your involvement in the
24 Brooke Group slate?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
161
1 Ridings
2 Q. So you had not had any
3 conversations with him?
4 A. No.
5 Q. Do you know Chris Andersen?
6 A. Yes.
7 Q. Have you ever discussed RJR with
8 Chris Andersen?
9 A. No.
10 Q. Did you ever hear of Michael
11 Price?
12 A. Yes.
13 Q. For the record, who is Mr. Price?
14 A. He is a fund manager of mutual
15 shares.
16 Q. Have you ever discussed RJR with
17 Mr. Price?
18 A. No.
19 Q. Have you ever discussed Mr. Price
20 with Mr. LeBow or anyone associated with Mr.
21 LeBow?
22 A. No.
23 Q. I'm sure you heard of the firm
24 Wassherstein Parella?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
162
1 Ridings
2 Q. Do you know a Mr. Biaz who worked
3 with Wassherstein Parella. Mario Biaza. Do
4 you know him?
5 A. I don't think so.
6 Q. Had you ever had any dealings
7 with Wassherstein Parella concerning RJR?
8 A. No.
9 Q. Have you heard of a company
10 called Starbuch?
11 A. No.
12 Q. Intabex?
13 A. No.
14 Q. Do you know or have you heard of
15 a Mr. Tony Taberer?
16 A. No. Doesn't ring a bell.
17 Q. Now, have you heard of anything
18 called the Steele Partners?
19 A. No.
20 Q. Now, you told me that you have
21 two agreements with Brooke Group. You have an
22 indemnification agreement and a compensation
23 agreement; is that correct, with respect to
24 the slate?
25 MR. MASHBERG: Object to the form
CLASSIC REPORTING, INC. (212) 268-2590
163
1 Ridings
2 of the question.
3 MR. LOGAN: Objection.
4 A. I'm not sure if those are
5 agreements with Brooke or New Valley or both.
6 Q. We've marked as exhibits a form
7 of indemnification agreement and a letter
8 reflecting or referring to a $30,000 payment?
9 A. Right.
10 Q. Do you have any other
11 understandings with Mr. LeBow or Brooke Group
12 as with respect to RJR?
13 A. No.
14 Q. The $30,000 compensation for
15 being a member of the slate, is that being
16 paid to you personally or will it be paid to
17 Alex. Brown?
18 A. Personally to me.
19 Q. Have you ever performed any
20 financial analysis of Liggett Corporation?
21 A. Independent financial analysis?
22 Q. Yes.
23 A. No.
24 Q. Why did you qualify the answer by
25 reference to an independent financial
CLASSIC REPORTING, INC. (212) 268-2590
164
1 Ridings
2 analysis?
3 A. I didn't understand your
4 question.
5 Q. Did you ever perform financial
6 analysis of any kind of Liggett?
7 A. No.
8 Q. Now, have you ever performed any
9 analysis of the spin-off -- of the financial
10 consequences of a spin-off of Nabisco?
11 A. I haven't performed any analysis.
12 No.
13 Q. Are you committed to supporting
14 the spin-off in the event that you are elected
15 to be a member of the board of directors of
16 RJR?
17 MR. MASHBERG: Object to the
18 form.
19 MR. LOGAN: Object to the form.
20 MR. MASHBERG: Are you talking in
21 his own mind or communication?
22 Q. Have you committed to anyone that
23 you would vote for a spin-off in the event
24 that you are elected to the RJR board?
25 A. I have not guaranteed how I would
CLASSIC REPORTING, INC. (212) 268-2590
165
1 Ridings
2 vote on any matter -- any matter. I don't
3 have any information yet that would -- enough
4 information that would fulfill the sort of
5 obligations I have as a director to make that
6 sort of a decision.
7 Q. In the event that you are asked
8 to make a decision, the decision you make will
9 depend on the information that you are given
10 at the time and your evaluation of it; is that
11 correct?
12 MR. MASHBERG: Object to the
13 form.
14 MR. LOGAN: Objection.
15 A. I expect, if elected, that the
16 board would review this matter fairly promptly
17 and make a decision.
18 Q. You don't know what decision you
19 will make in that event?
20 A. I don't think I have all the
21 important relevant complete information yet to
22 make a final decision.
23 Q. Is there any information that you
24 believe you need that will assist you in
25 making such a decision?
CLASSIC REPORTING, INC. (212) 268-2590
166
1 Ridings
2 A. All I have seen is the public
3 documents. I haven't seen anything other than
4 that.
5 Q. Those are the documents that are
6 among the exhibits that we've marked today as
7 well as documents that you've retained in your
8 file?
9 A. The 10-K and 10-Q that I didn't
10 bring. Right.
11 MR. STERN: By the way, I'm
12 going to request, for the record, an
13 identification, either copies of or
14 identification by title and date of the
15 public documents that have been
16 retained.
17 Now, I'm going to mark what I
18 think will be the final exhibit, a
19 document that appears to be a 10-K for
20 New Valley Corporation.
21 (10-K for New Valley Corporation
22 marked Ridings Exhibit 38 for
23 identification, as of this date.)
24 Q. Mr. Ridings, can you identify
25 that document as a Form 10-K for New Valley
CLASSIC REPORTING, INC. (212) 268-2590
167
1 Ridings
2 Corporation for the year ended December 31,
3 1994?
4 A. Right. That is what it says.
5 Q. Did you review the New Valley
6 10-K for that year?
7 MR. MASHBERG: Before or after it
8 was prepared?
9 MR. STERN: Before it was
10 prepared.
11 A. I don't recall.
12 Q. Sir, did you sign a copy of that
13 document?
14 A. I don't recall. It doesn't
15 indicate that I did. But I don't know.
16 Q. You were on the board of
17 directors of New Valley during -- when that
18 document was filed with the S.E.C.; is that
19 correct? I think there is a stamp on the
20 front of the document.
21 A. I would have been on the board in
22 March.
23 Q. March 1995?
24 A. Correct.
25 Q. In the course of any of your
CLASSIC REPORTING, INC. (212) 268-2590
168
1 Ridings
2 discussions concerning New Valley, has the
3 subject of New Valley's status under the
4 Investment Company Act of 1940 come up?
5 A. Yes.
6 Q. When was the first time that came
7 up?
8 A. Very first board meeting I
9 attended.
10 Q. Has there ever been a discussion
11 and has it come up subsequently at board
12 meetings?
13 A. Has what?
14 Q. The subject of New Valley's
15 status under the Investment Company Statute
16 Act of 1940. Has that subject come up from
17 time to time throughout 1995?
18 A. Yes.
19 Q. When was the last time it was
20 discussed?
21 A. In January.
22 Q. This past January? January 1996?
23 A. Right. This month.
24 Q. Most recent board meeting?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
169
1 Ridings
2 Q. What was said on the subject?
3 MR. LOGAN: I would like to
4 caution the witness not to -- he can
5 answer the question -- not to disclose
6 any attorney-client communication.
7 Q. Who spoke on the subject?
8 A. Outside counsel and inside
9 counsel.
10 Q. Anyone else?
11 A. Management.
12 Q. What did management say? Who
13 from management, let me ask that question
14 first?
15 A. Mr. Lorber, Mr. LeBow.
16 Q. What did they say on this
17 subject?
18 MR. MASHBERG: Answer the
19 question but what you do is don't
20 disclose attorney-client communication
21 if Mr. Lorber or Mr. LeBow included
22 those in those comments to the board.
23 A. Can you repeat your question?
24 Q. What did Mr. Lorber or LeBow say
25 on the subject of New Valley's status under
CLASSIC REPORTING, INC. (212) 268-2590
170
1 Ridings
2 the Investment Company Act of 1940.
3 A. It was a discussion of what the
4 status was under the Investment Company Act.
5 Q. What did they say on that
6 subject?
7 A. Specifically?
8 Q. Yes.
9 A. I can't remember the specifics.
10 Q. Can you remember anything about
11 what they said?
12 A. About what they said?
13 Q. Yes.
14 A. We were reviewing various numbers
15 and schedules.
16 Q. I take it you were reviewing
17 documents; is that correct?
18 A. Yes.
19 Q. Did any of those documents or
20 schedules refer in any way to RJR?
21 A. Well, RJR is in our accounts and
22 records. So any balance sheet has RJR shown
23 as an asset. Not on the balance sheet per se,
24 but it's there.
25 Q. What percentage of the assets are
CLASSIC REPORTING, INC. (212) 268-2590
171
1 Ridings
2 represented by the RJR investment?
3 A. I don't recall.
4 Q. Do you remember approximately?
5 A. No.
6 Q. Do you know whether or not New
7 Valley has sought any relief from the
8 Securities and Exchange Commission with
9 respect to registration of New Valley under
10 the Investment Company Act?
11 MR. MASHBERG: Object to the
12 form.
13 MR. LOGAN: Objection.
14 A. I think it was the --
15 MR. MASHBERG: Just answer his
16 question.
17 A. No.
18 Q. They have not sought such relief?
19 A. No.
20 Q. To your knowledge, is New Valley
21 presently in compliance with the Investment
22 Company Act?
23 MR. LOGAN: Object to the form.
24 MR. STERN: I'll withdraw that.
25 Q. I'll show the witness the
CLASSIC REPORTING, INC. (212) 268-2590
172
1 Ridings
2 discussion of the Investment Company Act that
3 appears on Pages 4 and 5 of Exhibit 38.
4 A. Okay.
5 Q. Now, do you see that this
6 discussion refers to a Rule 3a-2 and a
7 one-year period under that rule. Do you see
8 that?
9 A. Right.
10 Q. Do you see further that the
11 discussion says that if a company has not
12 become engaged in a businesses or businesses
13 other than that of investing, reinvesting
14 owning, holding or trading in securities,
15 prior to the end of the one-year period
16 referred to in that discussion the company
17 will seek to obtain an extension of the date
18 or an exception from the S.E.C. or a no-action
19 position from the staff with respect to
20 registration?
21 MR. LOGAN: Object to the form.
22 Q. Do you see that discussion in
23 that paragraph.
24 A. Yes.
25 Q. Has the company become engaged in
CLASSIC REPORTING, INC. (212) 268-2590
173
1 Ridings
2 businesses other than primarily in business
3 other than that of investing, reinvesting,
4 holding or trading securities?
5 MR. LOGAN: Object to the form.
6 A. Can you clarify your question?
7 Q. Does the company continue to rely
8 on an exception from registration under the
9 Investment Company Act?
10 MR. MASHBERG: Object to the
11 form.
12 MR. LOGAN: Object to the form.
13 A. I'm not sure what the question
14 means. It's a legal question.
15 Q. Do you understand -- I'll
16 withdraw that.
17 You see that this discussion
18 indicates that the company is relying as of
19 the date of this document on an exception from
20 registration provided under the Investment
21 Company Act?
22 A. This is March of '95.
23 Q. Yep. You see further that the
24 discussion indicates that that exception has a
25 one-year time period.
CLASSIC REPORTING, INC. (212) 268-2590
174
1 Ridings
2 A. Right.
3 Q. What I'm asking you is: Is the
4 company continuing to rely on that exception?
5 MR. MASHBERG: Object to the
6 form. You are asking for a legal
7 conclusion, Counsel.
8 MR. STERN: I'm asking whether he
9 knows, based on discussion he's heard
10 in his capacity as a New Valley
11 director, of whether or not the company
12 is continuing to rely on that.
13 A. Again, I'm not sure I know how to
14 answer that question. I'm not a lawyer.
15 Q. I'm not asking for your opinion
16 as to whether they need to or not. I'm simply
17 asking you if anyone told you whether the
18 company was or not?
19 A. Was or not?
20 Q. Relying on that exception?
21 A. I don't recall anyone telling me
22 specifically whether we are or are not relying
23 on that.
24 Q. Has anyone told you whether the
25 company is relying on any exception of any
CLASSIC REPORTING, INC. (212) 268-2590
175
1 Ridings
2 kind from the Investment Company Act?
3 MR. MASHBERG: Objection, form.
4 MR. LOGAN: Objection.
5 MR. MASHBERG: These are legal
6 questions.
7 MR. STERN: No. I'm simply
8 asking what he heard.
9 A. Again, I'm unclear in your
10 question.
11 Q. As we sit here today, what is
12 your understanding of the status of New Valley
13 under the Investment Company Act of 1940?
14 MR. MASHBERG: Objection, form.
15 MR. LOGAN: Objection.
16 A. My understanding is that we are
17 not an investment company.
18 Q. You are not an investment
19 company?
20 A. No.
21 Q. What is the basis of that
22 understanding?
23 A. Based on the board meetings and
24 conversations we've had.
25 Q. Is your understanding that you
CLASSIC REPORTING, INC. (212) 268-2590
176
1 Ridings
2 are not an investment company and, therefore,
3 need not register or that you would be -- you
4 would be an investment company and require to
5 register but for reliance on an exception?
6 MR. MASHBERG: Objection. Form.
7 This is like the bar examination here.
8 MR. LOGAN: Objection.
9 MR. STERN: I'll stand on that
10 question.
11 A. I don't know how to answer it.
12 It's a compound question.
13 Q. Is it your understanding that New
14 Valley would be required to register under the
15 Investment Company Act absent an exception?
16 MR. LOGAN: Object to the form.
17 MR. MASHBERG: Object to the
18 form.
19 A. I'm struggling with the question.
20 Required? I guess -- that is what the law
21 says? If that is what the law says, that is
22 what we have to do.
23 Q. Do you know the 10-K refers to a
24 one-year period under Rule 3a-2. Did you see
25 that as you read it?
CLASSIC REPORTING, INC. (212) 268-2590
177
1 Ridings
2 A. Right.
3 Q. Am I correct that that period
4 expired on or about January 18th?
5 A. I don't know.
6 Q. Did you ever discuss with anyone
7 the expiration of that one-year period?
8 A. Yes. It's been discussed.
9 Q. Where?
10 A. Where?
11 Q. Yes. Where did you discuss it?
12 A. At board meetings.
13 Q. Starting when?
14 A. As I indicated, the very first
15 board meeting I attended we talked about it.
16 Q. What was said on that subject?
17 MR. MASHBERG: I caution you not
18 to disclose communications between
19 attorney and client on that subject.
20 A. I don't know how to answer that
21 question. We talked about it a lot.
22 Q. What conclusion have those
23 discussions come to?
24 A. I think I answered that question
25 before.
CLASSIC REPORTING, INC. (212) 268-2590
178
1 Ridings
2 Q. Which is?
3 A. It's my understanding that New
4 Valley is not an investment company.
5 Q. New Valley acquire any operating
6 businesses within the last year that is
7 publicly disclosed?
8 A. During the last year, New Valley
9 made a number of acquisitions of businesses
10 and assets and divested some business. And
11 again, I think all significant ones have been
12 publicly announced or will be if they haven't
13 been.
14 Q. Do operating companies comprise
15 more than half of New Valley's assets?
16 MR. MASHBERG: Object to the
17 form.
18 MR. LOGAN: Object to the form.
19 A. I don't know the answer to that
20 off the top of my head.
21 Q. Who at New Valley is responsible
22 for handling Investment Company Act issues?
23 MR. MASHBERG: Object to the
24 form.
25 A. Ultimately?
CLASSIC REPORTING, INC. (212) 268-2590
179
1 Ridings
2 Q. Yes.
3 A. I would think the chairman of the
4 board. He's ultimately responsible.
5 Q. Do you know who has been given
6 day-to-day responsibility for handling the
7 matter?
8 MR. MASHBERG: Object to the
9 form.
10 MR. LOGAN: Object to the form.
11 A. I don't know that anyone
12 specifically has been given day-to-day
13 responsibility
14 Q. If you had a question about the
15 Investment Company Act as respects New Valley,
16 who would you call?
17 MR. LOGAN: Object to the form.
18 A. I would call Dick Lampen.
19 Q. Did you ever hear any discussion
20 of the Investment Company Act -- I'll withdraw
21 that question.
22 Did the subject of the Investment
23 Company Act ever come up in the context of any
24 discussion that you had at New Valley
25 concerning RJR?
CLASSIC REPORTING, INC. (212) 268-2590
180
1 Ridings
2 MR. MASHBERG: Remember any
3 attorney-client communications.
4 A. I don't recall.
5 Q. Other than you've testified, can
6 you recall any discussion or any discussion
7 with Mr. LeBow concerning his interest in RJR?
8 MR. MASHBERG: Object to the
9 form.
10 MR. LOGAN: Objection.
11 A. I think we pretty much covered
12 each of the meetings and conversations that
13 I've had. I cannot recall anything
14 specifically that we haven't talked about.
15 Q. What about any other person
16 associated with Brooke Group; can you recall
17 any communications you had with any such
18 person concerning RJR other than as you have
19 testified this morning?
20 MR. MASHBERG: Objection. Form.
21 MR. LOGAN: Objection.
22 A. That is really a broad question.
23 There may have been a conversation where
24 someone called and said: Hey, did you get
25 whatever it is we sent you.
CLASSIC REPORTING, INC. (212) 268-2590
181
1 Ridings
2 Q. Other than conversations
3 concerning the delivery of documents or
4 scheduling and the like, can you recall any
5 conversation except as you've testified?
6 MR. MASHBERG: Objection. Form.
7 MR. LOGAN: Objection.
8 A. None immediately come to mind.
9 Q. Has Mr. LeBow or any of his
10 colleagues said anything to you about the
11 possibility that it may not be necessary to
12 have the slate actually proceed with the
13 nomination and election process?
14 MR. MASHBERG: Objection. Form.
15 MR. LOGAN: Objection.
16 A. Can you rephrase that question?
17 Q. Sure. Has Mr. LeBow ever said
18 anything to to you suggest that circumstance
19 might prove it unnecessary for the slate to
20 actually be proposed?
21 A. I think the consent solicitation
22 indicates that if RJR determines to spin off
23 the food group now, that there would not be a
24 need for the nominees to go forward.
25 Q. Other than what you've read in
CLASSIC REPORTING, INC. (212) 268-2590
182
1 Ridings
2 the consent solicitation, have you discussed
3 that with anyone?
4 A. Not that I recall.
5 MR. STERN: No further questions.
6 MR. LOGAN: I have nothing.
7 (Time noted: 2:30 p.m.)
8
9 Barry W. Ridings
10
11 Subscribed and sworn to
12 before me this______day
13 of_________________1996.
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
183
1
2
C E R T I F I C A T E
_ _ _ _ _ _ _ _ _ _ _
3
STATE OF NEW YORK )
4 ) ss.:
COUNTY OF NEW YORK )
5
I, ARTA PASCULLO, a Registered
6
Professional Reporter and Notary Public
7
within and for the State of New York, do
8
hereby certify:
9
That I reported the proceedings in
10
the within-entitled matter, and that the
11
within transcript is a true record of
12
such proceedings.
13
I further certify that I am not
14
related, by blood or marriage, to any of
15
the parties in this matter and that I am
16
in no way interested in the outcome of
17
this matter.
18
IN WITNESS WHEREOF, I have hereunto
19
set my hand this________day of__________,
20
1996.
21
22 ARTA PASCULLO, RPR
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
184
1
2 January 22, 1996
3 I N D E X
4 WITNESS PAGE
BARRY W. RIDINGS
5 Examination byl Mr. Stern 4
6 E X H I B I T S
7 RIDINGS
FOR IDENTIFICATION PAGE
8 1 Copy of subpoena 6
9 2 Privileged log 11
10 3 Letter from Brooke Group to
RJR, bearing production Nos.
11 BR 1 through BR 93 18
12 4 Letter from Mr. Ridings to
Mr. Bell, bearing production
13 Nos. BR 5128 26
14 5 Memorandum dated December 19
from Mark Bell to Mr. Ridings,
15 et_al., bearing production
Nos. BR 519 26
16
6 Multipage document, top letter
17 from Mr. Lampen to Mr. Richard
White, bearing production Nos.
18 BR 8660 through 8662 52
19 7 Copy of directors and officers
questionnaire, bearing production
20 Nos. BR 0147 through 0168 71
21 8 Document headed "Questionnaire
for Nominees," bearing production
22 Nos. BR 0125 through 0145 71
23 9 One-page document, bearing
production Nos. BR 0146 71
24
25
CLASSIC REPORTING, INC. (212) 268-2590
185
1
2 January 22, 1996
E X H I B I T S
3 (Continued)
RIDINGS
4 FOR_IDENTIFICATION PAGE
10 Fax from J. Bryant Kirkland III
5 and newspaper article from
The_Wall_Street_Journal dated
6 Friday, November 10, 1995,
bearing production Nos. BR
7 0095 and 0096 80
8 11 Fax from J. Bryant Kirkland III
and article from Miami_Daily_
9 Business_Review, bearing production
Nos. BR 0097 and 0098 80
10
12 Fax from J. Bryant Kirkland III,
11 and copy of research report,
bearing production Nos. BR 0099
12 through 0103 80
13 13 Fax cover sheet dated 11/13/95 and
accompanying articles, bearing
14 production Nos. BR 0104
through BR 0109 84
15
14 Copies of articles from The_
___
16 Wall_Street_Journal and The_
New_York_Times, bearing production
17 Nos. BR 0110 through BR 0121 85
18 15 Letter dated November 7, 1995
to Shareholders from RJR Nabisco,
19 bearing production Nos. BR 0179
and 0180 87
20
16 Letter dated November 14, 1995
21 from Brooke Group Ltd. to
Shareholders RJR Nabisco, bearing
22 production Nos. BR 0173 through
BR 0176 87
23
17 Consent of Nominee, bearing
24 production Nos. BR 0123 and
BR 0124 89
25
CLASSIC REPORTING, INC. (212) 268-2590
186
1
2 January 22, 1996
E X H I B I T S
3 (Continued)
RIDINGS
4 FOR_IDENTIFICATION PAGE
18 Document headed "Questions &
5 Answers," bearing production
Nos. BR 0169 through 0172 92
6
19 Letter dated November 26, 1995
7 to Mr. Ridings from Brooke Group
Ltd., bearing production Nos.
8 BR 94 101
9 20 Unsigned, undated indemnification
agreement, bearing production
10 Nos. BR 0043 to 0047 103
11 21 Unmarked, undated indemnification
agreement with changes, bearing
12 production Nos. BR 0437 to 0444 105
13 22 Draft press release, bearing
production Nos. BR 0187 through
14 BR 0192 107
15 23 Memorandum dated November 20,
1995, and attachments, bearing
16 production Nos. BR 0409 through
0413 110
17
24 Cover fax sheet dated 11/27 and
18 attachments, bearing production
Nos. BR 0466 through 0468 112
19
25 Fax dated November 30, 1995,
20 bearing production Nos.
BR 0420 re-marked 116
21
26 Newspaper clipping from The New
22 York Times, bearing production
Nos. BR 0421 through 0432 116
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
187
1
2 January 22, 1996
E X H I B I T S
3 (Continued)
RIDINGS
4 FOR_IDENTIFICATION PAGE
27 Fax dated 11/17/95, and
5 attachments, bearing production
Nos. BR 181 to 184; BR 193 to
6 197; BR 201 to 209; BR 349 to 350;
BR 353 to 360; BR 414 through
7 419; BR 445 to 455; BR 470 to
BR 489; BR 502 to 503; BR 497
8 to BR 501; BR 504 to BR 515;
BR 520 to 525 and BR 527 to
9 BR 538 117
10 28 Group of articles, top article
bearing production Nos. BR 0177 117
11
29 Bloomberg article on RJR,
12 bearing production Nos. BR 0457
through 0464 122
13
30 Fax dated November 13, 1995 to
14 Mr. Ridings from Mr. LeBow,
bearing production Nos. BR 0469 127
15
31 Fax dated 12/28/95, and
16 attachment, bearing production
Nos. BR 0198 through 200 130
17
32 Fax dated November 16, 1995
18 and attachment, bearing production
Nos. BR 0490 through 0496 131
19
33 Memorandum dated January 2, 1996
20 with attached agreement, bearing
production Nos. BR 0539 through
21 0550 141
22 34 Memorandum dated January 8, 1996
with copy of Jeffries Engagement
23 Letter, bearing production Nos.
BR 0551 through BR 0564 148
24
25
CLASSIC REPORTING, INC. (212) 268-2590
188
1
2 January 22, 1996
E X H I B I T S
3 (Continued)
RIDINGS
4 FOR_IDENTIFICATION PAGE
35 Document headed "Brooke Group Ltd.
5 Consent Solicitation of RJR
Shareholders," bearing production
6 Nos. BR 0565 through 0648 149
7 36 Group of documents headed
"RJR Nabisco Selected Documents,"
8 bearing production Nos. BR 0210
through 0348 152
9
37 Fax dated 1/2/96, with attachments,
10 bearing production Nos. BR 361
through BR 404 154
11
38 10-K for New Valley Corporation 166
12
DOCUMENT_REQUEST
13 PAGE LINE
166 11
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
1
==============================================================================
In The Matter Of:
RJR NABISCO v.
BENNETT S. LEBOW et al.
----------------
FREDERICK W. ZUCKERMAN
Vol. 0, January 19, 1996
----------------
CLASSIC REPORTING, INC.
13 WEST 36th STREET
NEW YORK, NY 10018
(212) 268-2590
Original File ap1885.asc, 86 Pages
Min-U-Script[Registered] File ID: 3230665381
Word Index included with this Min-U-Script[Registered]
==============================================================================
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
-------------------------------------x
RJR NABISCO HOLDINGS CORP., :
:
Plaintiff, :
:
-against- : 6:95CV00812
:
BENNETT S. LEBOW, BROOKE GROUP LTD., :
And CARL C. ICAHN, :
:
Defendants. :
-------------------------------------x
January 19, 1996
10:30 A.M.
Deposition of non-party witness,
FREDERICK W. ZUCKERMAN, taken by plaintiff
pursuant to subpoena, at the law offices of
Wachtell Lipton Rosen & Katz, 51 West 52nd
Street, New York, New York 10019, before Arta
Pascullo, a Registered Professional Reporter
and Notary Public within and for the State of
New York.
CLASSIC REPORTING INC. (212) 268-2590
2
1
2 A P P E A R A N C E S:
3 WACHTELL LIPTON ROSEN & KATZ
Attorneys for Plaintiff
4 51 West 52nd Street
New York, New York 10019
5
BY: WARREN L. STERN, ESQ.
6
7 MILBANK, TWEED, HADLEY & McCLOY
Attorneys for Defendants
8 and the Witness
1 Chase Manhattan Plaza
9 New York, New York 10005-1413
10 BY: DUNCAN J. LOGAN, ESQ.
11
PROSKAUER ROSE GOETZ & MENDELSOHN, L.L.P.
12 Attorneys for the Witness
1585 Broadway
13 New York, New York 10036-8299
14 BY: GREGG M. MASHBERG, ESQ.
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING INC. (212) 268-2590
3
1
2 IT IS HEREBY STIPULATED AND AGREED by
3 and among the attorneys for the respective parties
4 herein that the sealing, filing and certification
5 of the within deposition be waived; that such
6 deposition may be signed and sworn to before any
7 officer authorized to administer an oath, with the
8 same force and effect as if signed and sworn to
9 before a judge of this court.
10 IT IS FURTHER STIPULATED AND AGREED
11 that all objections, except as to the form, are
12 reserved to the time of the trial.
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING INC. (212) 268-2590
4
1 Zuckerman
2 F R E D E R I C K W. Z U C K E R M A N,
3 having been first duly sworn by the
4 Notary Public (Arta Pascullo), was
5 examined and testified as follows:
6 EXAMINATION BY MR. STERN:
7 Q. Will you state your name and
8 address for the record, please.
9 A. Frederick W. Zuckerman, 605 Park
10 Avenue, Apartment 20-A, New York, New York
11 10021.
12 Q. Mr. Zuckerman, do you know
13 Bennett LeBow?
14 A. Yes.
15 Q. Have you ever discussed Liggett
16 with him?
17 A. No.
18 Q. Have you ever discussed Liggett
19 with anyone?
20 MR. MASHBERG: Ever in history?
21 MR. STERN: Yes.
22 A. Yes.
23 Q. Have you ever discussed Liggett
24 with anyone involved in the RJR consent
25 solicitation?
CLASSIC REPORTING INC. (212) 268-2590
5
1 Zuckerman
2 A. No.
3 Q. When was the last time you
4 discussed Liggett?
5 MR. MASHBERG: Let me interrupt.
6 I assume you are excluding
7 conversations with counsel in
8 preparation for this deposition?
9 MR. STERN: He can answer that
10 question without revealing the
11 substance of any communication with
12 counsel. Then we will explore further
13 if it's a communication with counsel.
14 Under these circumstances when it's
15 privileged, I won't inquire into it.
16 Can I have the question read
17 back?
18 (Record read.)
19 A. Yesterday with counsel.
20 Q. In the course of preparation for
21 this deposition?
22 A. Yes.
23 Q. Which counsel was that?
24 A. These two gentlemen.
25 Q. Would you give their names for
CLASSIC REPORTING INC. (212) 268-2590
6
1 Zuckerman
2 the record?
3 MR. MASHBERG: Mr. Mashberg and
4 Mr. Logan.
5 Q. Are they your counsel?
6 A. Yes.
7 Q. Are they representing you here in
8 this deposition?
9 A. Yes.
10 Q. Who is paying their fees?
11 A. I believe New Valley is paying
12 the fees.
13 MR. LOGAN: Can I state -- advise
14 the witness, if you don't know a fact,
15 please don't speculate.
16 A. I don't really know.
17 Q. Sir, I share the admonition not
18 to speculate. If you have a belief based on
19 facts you do know, then I'm entitled to hear
20 your belief.
21 A. I do not know but I know they are
22 not here for free.
23 Q. You are not paying?
24 A. I'm not paying.
25 Q. Sir, have you ever been deposed
CLASSIC REPORTING INC. (212) 268-2590
7
1 Zuckerman
2 before?
3 A. Yes.
4 Q. How many times?
5 A. Three or four.
6 Q. When was the first such instance?
7 A. What?
8 Q. When was the first such instance?
9 A. In the early '80s.
10 Q. What did that litigation concern?
11 A. Litigation between Chrysler
12 Corporation and one of its dealers or
13 suppliers. I don't remember.
14 Q. Were you a party in that
15 litigation?
16 A. No.
17 Q. When was the next time you were
18 deposed?
19 A. In the early '80s.
20 Q. What did that concern?
21 A. Three of the four are the same.
22 The same kind of case.
23 Q. Cases involving Chrysler and one
24 of its dealers?
25 A. Or suppliers.
CLASSIC REPORTING INC. (212) 268-2590
8
1 Zuckerman
2 Q. You were not named as a party in
3 any of those cases?
4 A. No, sir.
5 MR. MASHBERG: Let him finish the
6 question.
7 Q. Subsequent to those depositions
8 in the early '80s that you described, have you
9 ever been deposed or examined under oath in
10 any context?
11 A. Yes.
12 Q. When was that?
13 A. In 1988 or '89.
14 Q. What did that concern?
15 A. The case was John Kluge versus
16 Bill Fugazy.
17 Q. Were you a party in that case?
18 A. No.
19 Q. In general, what did the case
20 concern?
21 MR. LOGAN: If you know.
22 A. I'm not sure how to answer that
23 question. I don't know with absolute
24 certainty.
25 Q. What is your understanding?
CLASSIC REPORTING INC. (212) 268-2590
9
1 Zuckerman
2 MR. LOGAN: If you know, tell
3 him. If you don't know, you don't
4 know.
5 A. My understanding is that John
6 Kluge was suing Bill Fugazy for $60 million
7 for not representing correctly his liabilities
8 when Metromedia took over the firm called
9 Fugazy Express.
10 Q. How were you connected to this?
11 A. I was the vice president and
12 treasurer of Chrysler Corporation and Chrysler
13 Corporation was involved in the transaction.
14 Q. When was the next time you were
15 examined under oath?
16 A. Never.
17 Q. Sir, were you served with a
18 subpoena in connection with this deposition?
19 A. No, sir.
20 MR. MASHBERG: For clarification
21 when you use the word "served," I don't
22 know if counsel accepted service on the
23 witness's behalf.
24 Q. How did you come to learn that
25 this deposition was being requested?
CLASSIC REPORTING INC. (212) 268-2590
10
1 Zuckerman
2 A. I think Duncan Logan told me on
3 the telephone.
4 Q. Mr. Logan called you?
5 A. Yes.
6 Q. Is that correct?
7 A. Yes.
8 Q. He told you that RJR was
9 requesting your deposition in connection with
10 some litigation with LeBow. Did he tell you
11 that in substance?
12 A. Yes. In substance.
13 Q. Was he your counsel at that time?
14 A. I don't know how to answer that
15 question.
16 Q. You don't know whether he was
17 your lawyer?
18 A. That's right.
19 Q. Had you consulted Mr. Logan or
20 his firm for legal advice prior to that
21 conversation?
22 A. No.
23 Q. What else was said in that
24 conversation?
25 MR. LOGAN: Let me interrupt for
CLASSIC REPORTING INC. (212) 268-2590
11
1 Zuckerman
2 a second. Maybe we can go off the
3 record for a second.
4 MR. STERN: For purposes of
5 determining whether the privilege
6 applies to this conversation?
7 MR. LOGAN: Yes.
8 MR. STERN: And only for that
9 purpose?
10 MR. LOGAN: Yes.
11 MR. STERN: Yes.
12 (Discussion held off the record)
13 BY MR. STERN:
14 Q. Sir, when did you engage Milbank
15 to become your counsel?
16 A. I did not. Never.
17 Q. You never engaged Milbank to
18 become your counsel?
19 MR. MASHBERG: Objection to the
20 form of the question. What do you mean
21 by "engage"? That is a confusing
22 question. It's a term of art that you
23 are using.
24 MR. LOGAN: I join in the
25 objection.
CLASSIC REPORTING INC. (212) 268-2590
12
1 Zuckerman
2 MR. MASHBERG: Ask him if he's
3 being represented by Milbank.
4 Q. Did there come a time when you
5 consented to have Milbank act as your counsel?
6 A. Yes.
7 Q. When was that?
8 A. I don't know exactly.
9 Q. Was this before or after this
10 phone call with Mr. Logan?
11 A. It was before.
12 Q. To whom did you manifest that
13 consent?
14 A. To no one. In my own name.
15 Q. When did the subject of Milbank
16 acting as your counsel come up?
17 A. I really don't know how to answer
18 that question. I'm sorry. Except I know that
19 they are my counsel.
20 Q. Did you also know that they were
21 your counsel when you got this call from Mr.
22 Logan?
23 A. Yes.
24 Q. What did you and Mr. Logan say to
25 one another in this call?
CLASSIC REPORTING INC. (212) 268-2590
13
1 Zuckerman
2 MR. LOGAN: I advise the witness
3 not to disclose the substance of any
4 attorney-client confidential
5 communication.
6 Q. When did the Proskauer firm
7 become your counsel?
8 A. I first met the gentleman on my
9 right yesterday.
10 Q. Did anyone ever show you a
11 request for documents that had been issued in
12 connection with this deposition?
13 A. No.
14 Q. Did anyone ever show you a formal
15 subpoena that had been issued in connection
16 with this deposition?
17 A. No.
18 Q. Did you understand that RJR had
19 issued a subpoena calling for your appearance
20 and for the production of documents in your
21 possession, custody or control?
22 A. Yes.
23 Q. How did you come to understand
24 that?
25 A. In my conversation with Mr.
CLASSIC REPORTING INC. (212) 268-2590
14
1 Zuckerman
2 Logan.
3 Q. And were you asked to review your
4 files or otherwise obtain documents for
5 purposes of this deposition?
6 A. Yes.
7 Q. Who asked you that?
8 A. Mr. Logan.
9 Q. What documents did he ask you to
10 collect?
11 A. Any documents relative to this
12 situation.
13 Q. Which situation is that?
14 A. The RJR --
15 MR. LOGAN: I advise the witness
16 not to disclose the substance of any
17 confidential communications between
18 attorney and client.
19 Q. What search of your documents did
20 you make?
21 A. I looked in my file.
22 Q. What were you looking for?
23 A. Documents relative to my
24 connection with Mr. LeBow.
25 Q. What time period?
CLASSIC REPORTING INC. (212) 268-2590
15
1 Zuckerman
2 A. September of 1995 to date.
3 Q. Why did you start then?
4 A. I had no contact with Mr. LeBow
5 before September 1995.
6 Q. Did you find any documents in
7 your file relating to your connection with Mr.
8 LeBow?
9 A. Yes.
10 Q. And what did you do with those
11 documents?
12 A. I brought them with me yesterday
13 to the preparation for the deposition.
14 Q. And did you provide them to your
15 counsel in that connection?
16 A. I did.
17 Q. Did you provide your counsel all
18 documents that you found in your file?
19 A. Yes.
20 Q. Did you discard or otherwise
21 destroy any documents that you found in --
22 A. No.
23 Q. I have to finish the question.
24 -- that you found in your file?
25 A. No.
CLASSIC REPORTING INC. (212) 268-2590
16
1 Zuckerman
2 Q. To your knowledge, did counsel
3 produce all the documents that you gave him to
4 me today?
5 MR. MASHBERG: I will answer that
6 question. All the documents that the
7 witness provided to me I produced to
8 you this morning. In addition to a few
9 more documents that Mr. Logan provided
10 you constituting excerpts from the
11 witness's appointment book.
12 MR. STERN: Have any documents
13 been withheld on grounds of privilege
14 or for any other reason?
15 MR. MASHBERG: No.
16 Q. You checked your file and checked
17 your appointment book; is that correct?
18 A. Yes.
19 Q. And you gave the documents
20 relating to Mr. LeBow to your counsel; is that
21 correct?
22 A. Yes.
23 Q. Do you have in your possession or
24 control any other documents relating to RJR?
25 A. No.
CLASSIC REPORTING INC. (212) 268-2590
17
1 Zuckerman
2 Q. At any time, did any documents
3 relating to Mr. LeBow or RJR come into your
4 possession that you discarded without putting
5 in your file?
6 A. Yes.
7 Q. What kind of documents were
8 those?
9 A. Faxes.
10 Q. From whom?
11 A. I believe they were faxes from
12 New Valley.
13 Q. From a Mr. Kirkland?
14 A. I don't know.
15 Q. What documents, do you remember
16 what these faxes were?
17 A. Public - Wall Street Journal
18 articles and the like.
19 Q. When did you receive them?
20 A. I don't know.
21 Q. Did you receive any financial
22 analyses from anyone concerning the LeBow
23 connection?
24 A. No.
25 Q. Now, I think you said that the
CLASSIC REPORTING INC. (212) 268-2590
18
1 Zuckerman
2 relationship with Mr. LeBow began in
3 September; is that correct?
4 A. Yes.
5 Q. Did you know Mr. LeBow prior to
6 September?
7 A. No.
8 Q. How did you come into contact
9 with him?
10 A. I called him.
11 Q. You called him?
12 A. Yes.
13 Q. Why did you call him?
14 A. I read in the public press what
15 he was doing relative to RJR.
16 Q. Can you put a date on this?
17 A. Probably August of '95.
18 Q. And what had you read in the
19 press that caused you to wish to speak to Mr.
20 LeBow?
21 A. That he was investing in RJR
22 Nabisco common stock with Carl Icahn with the
23 ultimate purpose of forcing a spin-off of the
24 Nabisco goods group.
25 Q. Did you know Mr. Icahn?
CLASSIC REPORTING INC. (212) 268-2590
19
1 Zuckerman
2 A. I have met him.
3 Q. When did you meet Mr. Icahn?
4 A. In the '80s.
5 Q. Did you meet him after, at any
6 point after the 1980s?
7 A. No.
8 Q. Did you meet him in the course of
9 business?
10 A. Yes. And socially.
11 Q. In the '80s?
12 A. Yes.
13 Q. What was it about what you had
14 read concerning Mr. LeBow, Mr. Icahn and RJR
15 that caused you to want to speak to Mr. LeBow?
16 A. I believe that it is directly in
17 the interest of shareholders to spin off the
18 Nabisco.
19 Q. Whose shareholders?
20 A. RJR Nabisco shareholders.
21 Q. When did you form that belief?
22 A. Probably as early as 1991.
23 Q. Why did you come to that belief?
24 A. In 1991, I was involved in the
25 process of selling RJR Nabisco common stock.
CLASSIC REPORTING INC. (212) 268-2590
20
1 Zuckerman
2 And in that process as always is the case you
3 have many meetings with institutional
4 shareholders. Institutional shareholders --
5 many institutional shareholders felt that
6 having the two companies together was negative
7 for shareholder value.
8 Q. For the record, what was your
9 position in 1991?
10 A. I was senior vice president and
11 treasurer of RJR Nabisco.
12 Q. So I'm correct, then, the belief
13 that you came to in 1991 was based on your
14 communications with institutional investors;
15 is that correct?
16 MR. LOGAN: Objection.
17 MR. MASHBERG: Read that back,
18 please.
19 (Record read.)
20 Q. That you just described.
21 MR. MASHBERG: I ask that you not
22 summarize the witness's testimony. He
23 answered the question clearly. Rely on
24 his answer rather than your summary.
25 MR. STERN: You can take that
CLASSIC REPORTING INC. (212) 268-2590
21
1 Zuckerman
2 position. This witness has aligned his
3 interest in an adverse party. I'm
4 entitled to cross-examine him.
5 MR. MASHBERG: I'm going to
6 object to your summarizing testimony
7 which may or may not have the effect of
8 putting words in the witness's mouth.
9 He can refer back to his previous
10 testimony in answer to the question
11 rather than you summarizing.
12 MR. STERN: Put an objection to
13 the form of the question. I would
14 appreciate if you didn't make speeches
15 on the record.
16 MR. MASHBERG: Why don't you
17 proceed.
18 MR. LOGAN: Please note my
19 objection to the form of the question.
20 (Record read.)
21 A. Please refer to my prior answer.
22 Q. Are you declining to answer that
23 question?
24 MR. MASHBERG: He's answered the
25 question.
CLASSIC REPORTING INC. (212) 268-2590
22
1 Zuckerman
2 A. I answered the question already.
3 Q. Between 1991 and this
4 conversation that you had in your contact with
5 Mr. LeBow in August of '95, did you have any
6 further discussions with anyone concerning the
7 subject of spinning off Nabisco?
8 MR. LOGAN: Object to the form.
9 A. No.
10 MR. MASHBERG: Objection.
11 He answered the question.
12 MR. STERN: I didn't hear the
13 answer.
14 (Record read.)
15 Q. Now, in this initial discussion
16 you had with Mr. LeBow, I'm referring to the
17 one in August of 1995, what did you say to him
18 and what did he say to you?
19 MR. LOGAN: Object to the form.
20 For clarification, I'm pretty sure he
21 did not testify that that conversation
22 was in August.
23 Q. When did you first contact Mr.
24 LeBow?
25 MR. LOGAN: I could be wrong.
CLASSIC REPORTING INC. (212) 268-2590
23
1 Zuckerman
2 A. I did say August of 1995.
3 Q. Thank you for confirming that.
4 What did you say to him and he to
5 you in that initial conversation?
6 A. I told him who I was. I told him
7 that I thought it might be interesting for us
8 to get together because we shared a common
9 interest as it related to the spinning off of
10 Nabisco.
11 Q. How did you describe yourself to
12 Mr. LeBow?
13 A. I told him my name and I told him
14 the positions I had had in the past.
15 Q. Was he aware of you?
16 A. Absolutely, yes.
17 Q. What did you mean when you said
18 that you had a common interest in spinning off
19 Nabisco?
20 A. I now am a partner in an
21 investment banking firm. I hoped to get him
22 to hire me to work on the project that he was
23 clearly embarked upon.
24 Q. What is the name of the firm?
25 A. Zuckerman & Firstenberg.
CLASSIC REPORTING INC. (212) 268-2590
24
1 Zuckerman
2 Q. Were you an RJR shareholder in
3 August 1995?
4 A. No.
5 Q. What did Mr. LeBow say to you?
6 A. He said he would think about it.
7 Q. Was that the entirety of the
8 conversation, at least as you can recall
9 today?
10 A. Yes.
11 Q. Did you take any notes during the
12 conversation?
13 A. No.
14 Q. Did you tell anyone about that
15 conversation?
16 A. My partner. Yes. I told my
17 partner.
18 MR. STERN: Let's go off the
19 record.
20 Q. I didn't hear the answer to the
21 last question. Did you tell anyone about your
22 conversation?
23 A. Yes. I told my partner.
24 Q. Which partner?
25 A. Paul Firstenberg. I only have
CLASSIC REPORTING INC. (212) 268-2590
25
1 Zuckerman
2 one.
3 Q. What did you tell him?
4 A. That I had a conversation with --
5 a business development conversation with Ben
6 LeBow. I was trying to get us hired to work
7 for him but that nothing had really happened.
8 Q. Had you heard of Mr. LeBow before
9 this conversation?
10 A. Of course.
11 Q. What did you know of Mr. LeBow
12 before the conversation?
13 A. Matters that are in the public
14 press.
15 Q. Were you aware of any particular
16 reputation Mr. LeBow had in the business
17 community?
18 A. I'm not going to share my
19 judgments like that with you.
20 Q. Are you refusing to answer that
21 question?
22 MR. MASHBERG: The question is
23 ambiguous.
24 MR. LOGAN: I would like to
25 object to the form.
CLASSIC REPORTING INC. (212) 268-2590
26
1 Zuckerman
2 MR. MASHBERG: Rephrase the
3 question.
4 MR. STERN: Can I hear the
5 question back?
6 (Record read.)
7 Q. Yes or no: Were you aware that
8 Mr. LeBow had a reputation in the business
9 community?
10 MR. LOGAN: Object to the form.
11 MR. MASHBERG: Object to the
12 form.
13 You can answer.
14 A. Yes.
15 Q. What was that reputation?
16 MR. LOGAN: Object to the form.
17 A. He was hostile to management.
18 Q. Did you know anything else about
19 Mr. LeBow's reputation?
20 MR. LOGAN: Object to the form.
21 MR. MASHBERG: I object. This is
22 a waste of time. You can read the
23 press yourself and determine for
24 yourself what the press would indicate
25 as the reputation of Mr. LeBow. Why
CLASSIC REPORTING INC. (212) 268-2590
27
1 Zuckerman
2 are we going through this process?
3 MR. STERN: The only thing that
4 is wasting time are these kinds of
5 objections.
6 Can I have an answer?
7 A. Repeat the question.
8 (Record read.)
9 A. No.
10 Q. Going back to your conversation
11 with your partner after your conversation with
12 Mr. LeBow, what did your partner say to you?
13 A. I don't recall.
14 Q. Do you remember anything else
15 about that conversation?
16 A. No.
17 Q. What happened next with respect
18 to your contacts with Mr. LeBow?
19 A. Mr. LeBow invited me to lunch.
20 Q. When did he do that, that is,
21 extend the invitation?
22 A. I don't know. I don't remember
23 exactly.
24 Q. Was it shortly after your initial
25 phone call?
CLASSIC REPORTING INC. (212) 268-2590
28
1 Zuckerman
2 A. Probably within a week or so.
3 Q. When you called Mr. LeBow, what
4 kind of engagement did you have in mind?
5 A. A general advisory engagement.
6 Q. With respect to any particular
7 kind of transaction?
8 A. With respect to the effort to get
9 RJR to spin off Nabisco.
10 Q. Did you and Mr. LeBow speak
11 thereafter to arrange a meeting?
12 A. Yes. A lunch. Yes.
13 Q. I think you said he called you;
14 is that correct?
15 A. Yes.
16 Q. What did you say to him in that
17 conversation?
18 A. I said I would like to have
19 lunch. He said fine.
20 Q. Is there anything else said?
21 A. We talked about the location for
22 the lunch.
23 Q. I take it you agreed to have
24 lunch with him?
25 A. That is correct.
CLASSIC REPORTING INC. (212) 268-2590
29
1 Zuckerman
2 Q. Between that conversation and
3 that lunch, did you speak about the LeBow
4 matter with anyone?
5 MR. LOGAN: Object to the form.
6 Q. Did you speak about your contact
7 with Mr. LeBow with anyone?
8 A. Yes. To my partner.
9 Q. And what did you say to him?
10 A. "LeBow has invited us to lunch."
11 Q. Did he invite your partner to
12 lunch as well?
13 A. Yes. I asked him would it be
14 okay if I brought my partner along. He said
15 sure.
16 Q. Did you and your partner have any
17 further conversation about this prior to the
18 lunch?
19 A. I don't recall.
20 Q. Where was the lunch?
21 A. At Ben Bensons which is a
22 steakhouse at 1301 Avenue of the Americas.
23 Q. When did the lunch take place?
24 A. You have it there. I don't
25 remember. Early September.
CLASSIC REPORTING INC. (212) 268-2590
30
1 Zuckerman
2 MR. STERN: I'm going to place
3 before the witness a document that was
4 produced to me this morning No. FZ 11.
5 I ask if that refreshes his
6 recollection as to when his lunch with
7 Mr. LeBow took place?
8 A. Yes. On Thursday, September 7th.
9 Q. That took place at Ben Bensons in
10 New York; is that correct?
11 A. Yes.
12 Q. Who was at the lunch?
13 A. Ben LeBow, Paul Firstenberg, Fred
14 Zuckerman and an associate of Ben LeBow whose
15 name I do not remember.
16 Q. Was it Mr. Ressler?
17 A. I don't know.
18 Q. I'm trying to refresh your
19 recollection.
20 A. I don't know.
21 Q. How long did the lunch last?
22 A. An hour and-a-half maybe.
23 Q. And did you discuss RJR during
24 that lunch?
25 A. Yes.
CLASSIC REPORTING INC. (212) 268-2590
31
1 Zuckerman
2 Q. What was said and by whom?
3 A. I don't remember.
4 Q. Did you discuss the spin-off of
5 Nabisco?
6 A. In a general way.
7 Q. Do you remember anything that was
8 said on that subject?
9 A. No.
10 Q. Did you discuss Liggett Tobacco?
11 A. No.
12 Q. Did you discuss Mr. Icahn?
13 A. I don't remember.
14 Q. Did you discuss the possibility
15 of a consent solicitation?
16 A. Yes.
17 Q. What was said on that subject?
18 A. I don't remember.
19 Q. Who brought it up?
20 A. I don't remember.
21 Q. Did you discuss the possibility
22 of forming a shareholder group?
23 MR. LOGAN: Object to the form.
24 MR. MASHBERG: Object to the
25 form.
CLASSIC REPORTING INC. (212) 268-2590
32
1 Zuckerman
2 A. I don't understand the question.
3 Q. Did you discuss the possibility
4 of putting together a group of shareholders to
5 act together with respect to RJR?
6 A. No.
7 Q. Did you discuss the possibility
8 of approaching various individuals or entities
9 to interest them in purchasing RJR shares for
10 the purpose of supporting a spin-off?
11 A. No.
12 Q. Or other transaction?
13 A. No.
14 Q. No?
15 A. No.
16 Q. Did you discuss the pros and cons
17 of the spin-off?
18 A. No.
19 Q. Did you discuss the terms of an
20 engagement of your firm?
21 A. No.
22 Q. Did you discuss what your firm's
23 assignment might be?
24 A. In a very general way.
25 Q. Do you remember what was said on
CLASSIC REPORTING INC. (212) 268-2590
33
1 Zuckerman
2 that subject?
3 A. I told Ben that I thought we
4 could help him with institutional investors.
5 Q. What do you mean by that?
6 A. In the course of the various
7 incarnations in my life, I have met many
8 institutional investors. And I think I know
9 how to deal with them and to sell ideas to
10 them.
11 Q. What did Mr. LeBow say to that?
12 A. I don't remember his specific
13 response.
14 Q. When you said sell ideas to
15 institutional investors, did you have any
16 particular idea in mind in the context of this
17 conversation?
18 A. I was thinking in terms of the
19 preparation for a proxy fight which might
20 occur in the future.
21 Q. Concerning any particular
22 subject? Proxy fight concerning what?
23 A. Concerning RJR Nabisco.
24 Q. Concerning what aspect of RJR
25 Nabisco's affairs?
CLASSIC REPORTING INC. (212) 268-2590
34
1 Zuckerman
2 A. Obviously having to do with the
3 spinning off of Nabisco and the sitting
4 directors' reluctance to do that.
5 Q. Do you remember anything else
6 that was discussed at this lunch about RJR?
7 A. No.
8 Q. What portion of the lunch was
9 devoted to the subject of RJR?
10 A. I can't answer that question. I
11 don't know.
12 Q. Did you reach any understandings
13 at this lunch?
14 A. No.
15 Q. Did you have any understanding as
16 to what would happen next?
17 A. No.
18 Q. How did this conversation wind
19 itself up?
20 MR. MASHBERG: Wait.
21 Q. Did you say you would be in
22 contact with Mr. LeBow or did he say he would
23 be in further contact with you or did you say
24 nothing on that subject?
25 A. I believe I said, "Well, Ben, if
CLASSIC REPORTING INC. (212) 268-2590
35
1 Zuckerman
2 you are interested in pursuing this further,
3 give me a buzz."
4 Q. What did he say?
5 A. That he would do that if he were
6 interested in continuing the conversation.
7 Q. Now, when was your next contact
8 with Mr. LeBow?
9 A. It's in the documents you have.
10 I don't remember exactly.
11 MR. STERN: I might as well mark
12 as Zuckerman Exhibit 1, four pages that
13 were produced to us this morning.
14 Numbered FZ 11 through FZ 14.
15 (Photocopies of pages from Mr.
16 Zuckerman's calendar book from
17 1995, bearing production Nos. FZ
18 11 through 14, marked Zuckerman
19 Exhibit 1 for identification, as
20 of this date.)
21 MR. STERN: I'm going to staple
22 these together. Any objection?
23 MR. LOGAN: No objection.
24 Q. I'm going to hand you Exhibit 1.
25 I'm going to ask you to identify that
CLASSIC REPORTING INC. (212) 268-2590
36
1 Zuckerman
2 document.
3 A. These are photocopies of pages
4 from my calendar book from 1995.
5 Q. Is that your handwriting on those
6 pages?
7 A. Absolutely.
8 Q. For what purpose do you keep that
9 calendar book?
10 A. So I know what I'm supposed to
11 do.
12 Q. You record your appointments; is
13 that correct?
14 A. Yes. In general. That is the
15 way I answered it.
16 Q. Would you review those pages and
17 tell me if it refreshes your recollection as
18 to when you had your next communication with
19 Mr. LeBow?
20 A. Okay. Reference October 30th.
21 Monday. It says "12:30 Ben LeBow," PBF are
22 the initials of my partner. It's crossed out.
23 I don't know whether or not -- I think that
24 means that we had an appointment that one of
25 us broke. But I just don't remember exactly.
CLASSIC REPORTING INC. (212) 268-2590
37
1 Zuckerman
2 Q. That is October 30th?
3 A. Yes.
4 Q. Can you tell me, based on your
5 diary as it refreshes your recollection, when
6 you had your next communication that was kept?
7 The next appointment that was kept?
8 A. Okay. On Wednesday, December
9 6th, there is a notation of 9:00 a.m. at
10 Carlyle with LeBow. I did go to the Carlyle
11 and have breakfast with LeBow. On or about
12 that date.
13 Q. That is December 6th; is that
14 correct?
15 A. Yes.
16 Q. Sir, did there come a time when
17 you entered a consulting services agreement
18 with Mr. LeBow?
19 A. I believe on December 6th at that
20 breakfast he invited me to join what I call --
21 MR. MASHBERG: Answer the
22 question.
23 A. Rephrase the question.
24 Q. Did there come a time when you
25 signed a consulting agreement with Mr. LeBow?
CLASSIC REPORTING INC. (212) 268-2590
38
1 Zuckerman
2 A. Yes.
3 Q. When was that?
4 A. Late in December.
5 Q. Do you remember when --
6 A. Sometime in December. I don't
7 know when.
8 Q. Do you remember when you began to
9 discuss that subject?
10 A. On December --
11 MR. MASHBERG: With Mr. LeBow?
12 MR. STERN: Yes.
13 A. On December 6th.
14 Q. Or with anyone else?
15 A. I didn't discuss it with anyone
16 else.
17 MR. STERN: I'll have this marked
18 as the next exhibit, documents that
19 were produced to us today from Mr.
20 Zuckerman's file numbered FZ 1 through
21 FZ 10.
22 (Group of documents, bearing
23 production Nos. FZ 1 through 10,
24 marked Zuckerman Exhibit 2 for
25 identification, as of this date.)
CLASSIC REPORTING INC. (212) 268-2590
39
1 Zuckerman
2 Q. Mr. Zuckerman, I'm placing
3 Exhibit 2 before you. I'll ask you if you can
4 identify the documents that are included in
5 Exhibit 2?
6 A. Well, this says on November --
7 yes. I can identify it.
8 MR. MASHBERG: Take a look at all
9 of them.
10 A. Okay. Yes.
11 Q. What is the first document?
12 A. It's a letter from Brooke Group
13 to me saying that you will be nominated for
14 the election of the RJR board.
15 Q. What is the date of that
16 document?
17 A. November 22nd.
18 Q. What is the next document?
19 A. An indemnification agreement.
20 Q. Is that an agreement you signed?
21 A. Yes.
22 Q. What is the date of that
23 document?
24 A. It says agreement dated as of
25 November blank. So it's not dated.
CLASSIC REPORTING INC. (212) 268-2590
40
1 Zuckerman
2 Q. Is there a fax line in that
3 document, sir?
4 A. There is.
5 Q. What is the date on that fax
6 line?
7 A. November 21st.
8 Q. Is there another document in that
9 exhibit, sir?
10 MR. MASHBERG: I want to note for
11 the record, so the record is clear, the
12 document that the witness identified is
13 not a signed document. Your question
14 would make the record a little bit
15 unclear.
16 MR. STERN: Thank you for making
17 that clarification. We will come back
18 to that.
19 Q. Is there another document in that
20 group?
21 A. Yes.
22 Q. What is it?
23 A. Consulting services agreement.
24 Q. What is the date of that?
25 A. November 19th.
CLASSIC REPORTING INC. (212) 268-2590
41
1 Zuckerman
2 Q. Did you sign that document, sir?
3 A. I did.
4 Q. Is that an agreement with Brooke
5 Group or some other entity affiliated with Mr.
6 LeBow?
7 A. Yes.
8 Q. Now, going back to your counsel's
9 observation that the indemnification agreement
10 is unsigned, did there come a time when you
11 signed an indemnification agreement?
12 A. I think so.
13 Q. Did you receive a copy of that
14 agreement signed?
15 A. I can't find a signed one.
16 Q. Do you believe you lost it? Or
17 do you believe that you never received a copy?
18 A. I don't know.
19 Q. Now, sir, having looked at those
20 documents and in particular the dates that
21 appear on those documents, does that refresh
22 your recollection as to when your next
23 communication was with Mr. LeBow after Ben
24 Bensons lunch?
25 A. Must have been before November
CLASSIC REPORTING INC. (212) 268-2590
42
1 Zuckerman
2 22nd. But I don't remember exactly when.
3 Q. Going back to Bensons lunch in
4 the period after --
5 A. Uh-huh.
6 Q. -- with whom -- what is the next
7 communication with anyone that you remember
8 concerning RJR and the spin-off?
9 A. I had a couple of phone calls
10 with LeBow.
11 Q. And do you remember how long
12 after the Bensons lunch these calls took
13 place?
14 A. No, I don't.
15 Q. What was said in these calls?
16 A. At some point, he invited me to
17 join what I call the shadow board of RJR
18 Nabisco.
19 Q. Why do you call it the shadow
20 board?
21 A. There is a term in British
22 politics that the party out of power has a
23 cabinet called the shadow cabinet. Obviously,
24 this is not the real board of RJR, it's to
25 stand for election of whatever it is in May of
CLASSIC REPORTING INC. (212) 268-2590
43
1 Zuckerman
2 1996.
3 Q. After the lunch at Bensons, did
4 you talk to your partner, Mr. Firstenberg --
5 am I pronouncing that correctly?
6 A. Yes.
7 Q. -- about the matters that you
8 discussed with Mr. LeBow?
9 A. You mean telephone conversation?
10 Q. Prior to the telephone
11 conversations after the Bensons lunch?
12 A. Probably, but I'm not sure.
13 Q. Did you perform any research or
14 other analyses with respect to RJR?
15 A. I read analysts' reports.
16 Q. Do you remember which ones you
17 read?
18 A. No.
19 Q. How did you obtain these reports?
20 I'll put another question.
21 From whom did you obtain these
22 reports?
23 A. Out of the library at both
24 Rothschild and Fitch's.
25 Q. Are you affiliated with either of
CLASSIC REPORTING INC. (212) 268-2590
44
1 Zuckerman
2 those entities?
3 A. I was affiliated with Rothschild.
4 I'm no longer. I was and continue to be
5 associated with Fitch's.
6 Q. For the record, would you
7 identify Rothschild?
8 A. Rothschild is Rothschild Inc.
9 which is jointly owned by Rothschild London
10 and Rothschild Paris.
11 Q. And what period of time were you
12 affiliated with them?
13 A. Beginning in January 1995
14 approximately.
15 Q. When did that affiliation end?
16 A. When I agreed to be a party to
17 the Brooke Group actions.
18 Q. Is there any connection between
19 the two events?
20 A. Yes.
21 Q. What was that?
22 A. Rothschild did not wish to
23 continue our relationship, our formal
24 relationship, if I were publicly going to be
25 involved with this activity.
CLASSIC REPORTING INC. (212) 268-2590
45
1 Zuckerman
2 Q. Who told you that? Who at
3 Rothschild told you that?
4 A. Yves Istel. Y-V-E-S.
5 Q. What is his position?
6 A. He's vice chairman of Rothschild,
7 Inc.
8 Q. Did he tell you why he took that
9 position?
10 A. Not as such.
11 Q. What position did you have at
12 Rothschild as of the time that you had this
13 discussion?
14 A. I was an advisor to Rothschild,
15 Inc.
16 Q. Let's go back to Fitch's. For
17 the record, would you identify Fitch?
18 A. Fitch Investors Service.
19 Q. What is that?
20 A. It's a rating agency.
21 Q. Rating?
22 A. Yes.
23 Q. R-A-T-I-N-G?
24 A. Yes.
25 Q. When did you become affiliated
CLASSIC REPORTING INC. (212) 268-2590
46
1 Zuckerman
2 with Fitch?
3 A. In early 1995.
4 Q. And that affiliation continues?
5 A. Yes.
6 Q. What is the nature of your
7 relationship?
8 A. I'm an advisor to Fitch's.
9 Q. Are there any other firms to
10 which you are an advisor?
11 MR. MASHBERG: You mean
12 personally or through his business?
13 Q. Let's start personally.
14 A. No.
15 Q. And through your business?
16 A. My partner and I have a variety
17 of clients for whom we work.
18 Q. What kind of services do you
19 provide to these clients?
20 A. We provide investment banking
21 services broadly defined such as raising money
22 and giving business and financial advice.
23 Q. Is there any particular kind of
24 investment bank service or advisory service
25 that you specialize in that you concentrate
CLASSIC REPORTING INC. (212) 268-2590
47
1 Zuckerman
2 in?
3 A. No.
4 Q. Other than reading some analysts'
5 reports, as you described, did you do any
6 other work with respect to RJR subsequent to
7 the Benson lunch and before your next series
8 of contacts with Mr. LeBow?
9 MR. LOGAN: Object to the form.
10 MR. MASHBERG: Object to the
11 form.
12 A. I looked at Bloomberg, various
13 things on Bloomberg as it related to RJR and
14 Nabisco.
15 Q. Did you have any conversations
16 with any RJR shareholders?
17 A. No.
18 Q. Any persons who were interested
19 in acquiring RJR shares?
20 A. No.
21 Q. Moving to the phone calls that
22 you described with Mr. LeBow in which you
23 indicated that he had suggested that you join
24 a shadow slate --
25 MR. LOGAN: Object to the form.
CLASSIC REPORTING INC. (212) 268-2590
48
1 Zuckerman
2 MR. STERN: I think I was using
3 the --
4 MR. MASHBERG: Read the question
5 back.
6 MR. LOGAN: I don't think he
7 finished the question. I'm sorry.
8 MR. STERN: I don't think it was
9 his --
10 A. I didn't say a word.
11 MR. MASHBERG: Objection to the
12 form of the question.
13 A. That was not his phraseology.
14 That is my phraseology.
15 Q. I'm trying to refer you back to
16 that prior testimony about that conversation
17 or series of conversations. What else do you
18 remember, if anything, about those
19 conversations?
20 A. I told him that if I were to do
21 that, I would lose my Rothschild relationship.
22 Q. What was your basis for telling
23 him that?
24 A. In the spring of 1995, when Kirk
25 Kekorian made his first aborted run at
CLASSIC REPORTING INC. (212) 268-2590
49
1 Zuckerman
2 Chrysler, I was rumored in the press, the
3 electronic and print, to be involved with Mr.
4 Kekorian and Rothschild was not happy about
5 that even though it was not true.
6 Q. You heard about Rothschild's
7 unhappiness from Mr. Istel?
8 A. That's correct.
9 Q. What did Mr. LeBow say when you
10 told him that?
11 A. I don't remember what Mr. LeBow
12 said.
13 Q. What else did you say on the
14 subject of Rothschild's unhappiness?
15 A. I explained that I had a
16 financial relationship with them which would
17 go away if I were to consider joining in this
18 endeavor, that he would have to replace that.
19 Q. What did he say?
20 A. He said he would think about it.
21 Q. Did he say why he wanted you on
22 the slate?
23 A. No.
24 Q. Did he say what he wanted you to
25 do?
CLASSIC REPORTING INC. (212) 268-2590
50
1 Zuckerman
2 A. No.
3 Q. Do you remember anything else
4 about those couple of phone calls that I think
5 you characterized them earlier?
6 A. In those couple of phone calls,
7 he obviously wanted me. I told him I wouldn't
8 do it unless he would replace this lost
9 income.
10 Q. What happened next with respect
11 to RJR?
12 A. He called and agreed that they
13 would do that.
14 Q. Do you remember when you had that
15 call?
16 A. Not exactly.
17 Q. Did he say how he would agree to
18 do it? I'm sorry.
19 Did he say how he proposed to
20 replace the lost income?
21 A. By combination of a director's
22 fee and a consulting fee.
23 Q. Now, what did you say to Mr.
24 LeBow when he told you this?
25 A. I said I would talk to my partner
CLASSIC REPORTING INC. (212) 268-2590
51
1 Zuckerman
2 about it.
3 Q. Did you say anything else?
4 A. No.
5 Q. Did Mr. LeBow say anything else
6 in this conversation?
7 A. Not to my recollection.
8 Q. Now, other than as you've already
9 testified, did you have any other activities
10 or communications with respect to RJR between
11 the Bensons lunch and this conversation with
12 Mr. LeBow that you just described?
13 A. No.
14 Q. Prior to this conversation, had
15 you obtained any documents from Mr. LeBow or
16 anyone associated with him concerning RJR?
17 A. No.
18 Q. Did you talk to your partner
19 after this conversation with Mr. LeBow?
20 A. Yes.
21 Q. And that is Mr. Firstenberg?
22 A. That's correct.
23 Q. What did you say to one another?
24 A. We discussed it and we decided
25 that I should do this.
CLASSIC REPORTING INC. (212) 268-2590
52
1 Zuckerman
2 Q. In the course of this
3 conversation, what did you say to Mr.
4 Firstenberg and he to you?
5 A. I don't remember.
6 Q. What were the reasons for the
7 decision that you should do this?
8 A. Because we hoped that it would
9 generate other business in the future.
10 Q. For your firm?
11 A. Yes. Exactly.
12 Q. Business from Mr. LeBow?
13 A. Business from Mr. LeBow.
14 Q. Any particular kind of business
15 did you have in mind?
16 A. Yes. I thought I could help him
17 with the consent solicitation.
18 Q. Any other business?
19 A. No.
20 Q. After this conversation with Mr.
21 Firstenberg, what did you next do in
22 connection with Mr. LeBow?
23 A. I called Mr. LeBow and said I
24 would do it.
25 Q. What did he say?
CLASSIC REPORTING INC. (212) 268-2590
53
1 Zuckerman
2 A. He said fine. He gave me the
3 name of a lawyer at Milbank whose name escapes
4 me for the moment. And he said work with that
5 lawyer at Milbank. I didn't do that, Mr.
6 Firstenberg did. Mr. Firstenberg is a lawyer.
7 Q. Is the name, to refresh your
8 recollection or to attempt to refresh it, was
9 it Mr. Hirschenfeld?
10 A. I don't believe so.
11 Q. Mr. Letterman?
12 A. No.
13 Q. May I have that document back?
14 A. Of course.
15 Q. Mr. Rothberg?
16 A. No.
17 Q. Anyhow, it was a lawyer from
18 Milbank?
19 A. Yes.
20 Q. You understood that Milbank was
21 representing Mr. LeBow?
22 A. Yes.
23 Q. Did you say anything else to Mr.
24 LeBow in this conversation or did he say
25 anything else to you?
CLASSIC REPORTING INC. (212) 268-2590
54
1 Zuckerman
2 A. I don't remember anything else
3 being said.
4 Q. Did you discuss the fee that you
5 would require for this service?
6 A. He didn't hire me to do anything.
7 He gave me the consulting agreement. But
8 there was no other service to which we agreed.
9 Q. Did you discuss a consulting fee?
10 A. No.
11 Q. What happened next?
12 A. I guess the breakfast at the
13 Carlyle was next.
14 Q. Well, at some point, at some
15 point, you signed various agreements, did you
16 not?
17 A. Yes. Which Paul worked with this
18 lawyer at Milbank and once Paul told me they
19 were okay, I signed them.
20 Q. So the agreements were, in
21 effect, negotiated between Mr. Firstenberg and
22 a lawyer at Milbank acting for Mr. LeBow; is
23 that correct?
24 MR. LOGAN: Object to the form.
25 Q. Is that accurate?
CLASSIC REPORTING INC. (212) 268-2590
55
1 Zuckerman
2 A. Yes. As far as -- yes.
3 Q. As those discussions were going
4 on, did you have any discussions with Mr.
5 Firstenberg concerning Mr. LeBow?
6 MR. MASHBERG: I'm going to
7 caution the witness to the extent that
8 Mr. Firstenberg and you were having
9 communications as attorney and client
10 you should not disclose those
11 communications.
12 To the extent you were having a
13 business conversation with Mr.
14 Firstenberg, not attorney-client
15 communication, that you can disclose.
16 Q. At any time during the course of
17 these activities, did you regard Mr.
18 Firstenberg as acting as your counsel?
19 A. Yes.
20 Q. In that case, my inquiry is
21 limited to questions concerning business
22 matters and not to questions concerning legal
23 matters.
24 A. Then the answer to the question
25 is no.
CLASSIC REPORTING INC. (212) 268-2590
56
1 Zuckerman
2 Q. You discussed only legal matters?
3 A. Only legal matters.
4 Q. So we can proceed with our
5 chronology, am I correct that the next
6 business communication you remember with
7 anyone concerning Mr. LeBow's interest in RJR
8 was a meeting at the Carlyle on December 6th;
9 is that correct?
10 MR. LOGAN: Object to the form.
11 MR. MASHBERG: You can answer.
12 A. Ask the question again.
13 MR. STERN: Read the question.
14 (Record read)
15 A. Yes.
16 Q. Who was at that meeting?
17 A. Mr. LeBow and myself.
18 Q. Who initiated that meeting?
19 A. He did.
20 Q. How did he go about doing that?
21 A. He called me.
22 Q. Do you remember when he called
23 you?
24 A. No.
25 Q. What did he say to you when he
CLASSIC REPORTING INC. (212) 268-2590
57
1 Zuckerman
2 called?
3 A. "Let's get together."
4 Q. Did he say anything, did he say
5 what he wanted to get together to discuss?
6 A. No. Not to my recollection.
7 Q. What did you say to him?
8 A. "Of course."
9 Q. And you agreed to meet at the
10 Carlyle on December 6th; is that correct?
11 A. Yes.
12 Q. Now at that meeting, I may be
13 asking you to repeat yourself, only you and
14 Mr. LeBow were present?
15 A. Yes.
16 Q. How long did that meeting take?
17 A. Less than an hour. A little
18 less.
19 Q. And were there any documents
20 exchanged at the meeting?
21 A. No.
22 Q. What did you say to him and what
23 did he say to you?
24 A. I don't remember the conversation
25 on either side.
CLASSIC REPORTING INC. (212) 268-2590
58
1 Zuckerman
2 Q. Did you discuss RJR?
3 A. Probably.
4 Q. Did you discuss the consent
5 solicitation?
6 A. Probably, but I do not clearly
7 remember what we discussed.
8 Q. Do you have any recollection of
9 what you discussed?
10 A. No. No substantive recollection.
11 Q. I'm entitled to whatever
12 recollection you have, sir.
13 A. Okay. I believe we talked about
14 RJR and the consent solicitation. But I don't
15 remember any other conversation, any specific
16 conversation.
17 Q. What happened next as respects
18 RJR?
19 A. He reminded me or told me that
20 there was a lunch eight days later which he
21 hoped I could make.
22 Q. He told you this at the meeting
23 at the Carlyle?
24 A. I believe so.
25 Q. Did he say what that lunch would
CLASSIC REPORTING INC. (212) 268-2590
59
1 Zuckerman
2 be about?
3 A. Yes. It would be with the other
4 directors.
5 Q. By that time, did you know who
6 the other members of the slate were?
7 A. I had a list of them. Yes.
8 Q. Did you know any of these
9 individuals?
10 A. I'd never met any of them.
11 Q. What did you say when he told you
12 there would be a lunch eight days later?
13 A. I said I would try to come.
14 Q. And did you go to that lunch?
15 A. Yes.
16 Q. Am I correct, then, that that
17 lunch took place on December 14th?
18 A. I believe so.
19 Q. That was at the Friars Club; is
20 that correct?
21 A. Yes, it was.
22 Q. Now, between the meeting with Mr.
23 LeBow at the Carlyle on the 6th of December
24 and the meeting at Friars Club on the 14th,
25 did you have any communications with anyone
CLASSIC REPORTING INC. (212) 268-2590
60
1 Zuckerman
2 concerning RJR?
3 A. Just with LeBow's secretary
4 because the date moved around. It changed
5 from one day to the other. Other than that,
6 no.
7 Q. Scheduling matters?
8 A. Scheduling; correct.
9 Q. Then you did attend this meeting
10 on the 14th?
11 A. Yes.
12 Q. Who was there?
13 A. Most of the other directors.
14 Most or all of the other directors. Plus
15 Rouben Chakalian, who is the head of Liggett.
16 Q. When you say other directors,
17 just so the record is absolutely clear, you
18 are referring to the nominees?
19 A. The director nominees; correct.
20 Q. And Mr. Chakalian?
21 A. And Mr. LeBow, of course, and I
22 believe some other associates and Mr. LeBow
23 but I didn't know them so I can't give their
24 names.
25 Q. Did you ever meet a Mr. Kirkland?
CLASSIC REPORTING INC. (212) 268-2590
61
1 Zuckerman
2 A. No.
3 Q. A Mr. Ressler?
4 A. No. Not to my recollection.
5 Q. Fair enough.
6 Were there any documents
7 exchanged or presented at this meeting?
8 A. No.
9 Q. What was said and by whom?
10 A. It was mostly -- it was mostly
11 lighthearted banter about events of the day.
12 Q. Did these events include anything
13 happening to RJR?
14 A. The answer is yes, but I don't
15 remember what they were. It was just as much
16 about football and skiing and Florida. All
17 sorts of unrelated stuff.
18 Q. Do you remember anything that was
19 said at this meeting about RJR or Mr. LeBow's
20 interest in it?
21 MR. LOGAN: Object to the form.
22 A. Not specifically.
23 Q. What happened next?
24 A. I called Mr. LeBow at least once
25 after the first of the year which I would
CLASSIC REPORTING INC. (212) 268-2590
62
1 Zuckerman
2 characterize as I called to find out how
3 things were going. That's the only events
4 between the Friars Club and now that I can
5 remember.
6 Q. What did Mr. LeBow say to you?
7 A. He told me that he was having
8 conversations with institutional investors.
9 Q. Did he tell you anything else?
10 A. No.
11 Q. Did he tell you anything about
12 this conversation?
13 A. He thought they were going well.
14 Q. Did he tell you why they thought
15 they were going well?
16 A. No.
17 Q. Do you remember any communication
18 with anyone, Mr. LeBow or not, concerning
19 RJR --
20 A. No.
21 Q. -- that you have not testified
22 about?
23 A. No.
24 Q. Did you have any discussion with
25 Mr. Icahn or anyone associated with Mr. Icahn
CLASSIC REPORTING INC. (212) 268-2590
63
1 Zuckerman
2 concerning this matter?
3 A. No.
4 MR. LOGAN: Object to the form.
5 Q. Have you ever heard of Lucia Tan?
6 A. No.
7 Q. Have you ever heard of Michael
8 Price?
9 A. Yes.
10 Q. Who is Mr. Price?
11 A. He's a substantial institutional
12 investor in New Jersey.
13 Q. Did you ever discuss RJR with Mr.
14 Price?
15 A. Yes.
16 Q. When was that?
17 A. It's noted in my calendar book
18 which you have. Or the pages on my calendar
19 book.
20 Q. I'm going to ask you, if you
21 would, to decipher your calendar and tell me
22 what day it was that you had that discussion
23 with Mr. Price.
24 A. On Wednesday, October -- November
25 1st.
CLASSIC REPORTING INC. (212) 268-2590
64
1 Zuckerman
2 Q. Was that a meeting or a telephone
3 call?
4 A. A meeting.
5 Q. Was this a meeting that he
6 initiated or you initiated?
7 A. I initiated.
8 Q. For what purpose?
9 A. I have been trying to see Mr.
10 Price for some time because I was thinking
11 about making a run at RJR with another
12 individual, an independent run at RJR, having
13 nothing to do with Mr. LeBow.
14 Q. What do you mean by run?
15 A. A hostile takeover.
16 Q. How long had you been thinking
17 about that?
18 A. Six to nine months. Like from
19 the first -- early '95.
20 Q. Who is the other individual?
21 A. His name is Chris Andersen. His
22 real name is G. Christian, as you might guess.
23 Q. What is Mr. Andersen's business?
24 A. He was a banker at Drexel in the
25 '70s and '80s.
CLASSIC REPORTING INC. (212) 268-2590
65
1 Zuckerman
2 Q. What is his business today?
3 A. At the time when we first started
4 these conversations, he was vice chairman of
5 PaineWebber.
6 Q. What is he doing now?
7 A. He's no longer vice chairman of
8 PaineWebber. He's working on his own.
9 Q. What was the purpose of your
10 meeting with Mr. Price?
11 A. To hear from Mr. Price what he,
12 as an institutional investor, thought about
13 RJR Nabisco and how it was being managed.
14 Q. What did he tell you?
15 A. I can't answer that specifically.
16 Q. Whatever general recollection?
17 A. In general, he thought the
18 company was not managed very well.
19 Q. Did he say anything else?
20 A. There were some illustrations
21 relating to lost market share and the
22 superior -- by RJR and the superior
23 performance of Philip Morris.
24 Q. Did he say he would support you
25 in the event you decided to proceed in the
CLASSIC REPORTING INC. (212) 268-2590
66
1 Zuckerman
2 course of action that you were considering?
3 A. I don't remember.
4 Q. Did you discuss the consideration
5 you were giving pursuing a hostile takeover of
6 RJR with Mr. LeBow at any time?
7 A. No.
8 Q. I'm sorry?
9 A. My answer is no.
10 Q. Did you discuss Mr. LeBow with
11 Mr. Price at this meeting?
12 A. No.
13 MR. MASHBERG: Let him finish.
14 THE WITNESS: I thought he
15 finished the question.
16 Q. Did Mr. Price bring up the
17 subject of Mr. LeBow in connection with RJR at
18 the meeting?
19 A. No.
20 Q. Did he tell you he had been
21 approached by Mr. LeBow?
22 A. No.
23 Q. Are you still considering making
24 a hostile takeover of RJR?
25 A. No.
CLASSIC REPORTING INC. (212) 268-2590
67
1 Zuckerman
2 Q. When did you stop that
3 consideration?
4 A. When I joined Mr. LeBow's effort.
5 Q. Did you ever hear of Gary Black?
6 A. Yes.
7 Q. Who is Mr. Black?
8 A. Tobacco analyst at Sanford C.
9 Bernstein.
10 Q. Did you have any discussions
11 regarding RJR with Mr. Black?
12 A. No.
13 Q. Did you discuss Mr. Black with
14 Mr. LeBow at any time?
15 A. No.
16 Q. Have you ever heard of Gary
17 Klesch?
18 A. No.
19 Q. I know that you've heard of the
20 firm Wassherstein Parella?
21 A. You bet.
22 Q. You've heard of Mario Biaza; is
23 that correct?
24 A. I have heard of him.
25 Q. Have you ever had any
CLASSIC REPORTING INC. (212) 268-2590
68
1 Zuckerman
2 communications with anyone from Wassherstein
3 Parella concerning RJR?
4 A. No.
5 Q. Have you ever heard of a company
6 called Tabaca Lera?
7 A. Yes.
8 Q. You know that to be a Spanish
9 tobacco company; is that correct?
10 A. I do. Yes.
11 Q. Have you ever had any
12 communications with anyone at Tabaca Lera
13 concerning RJR?
14 A. No.
15 Q. Have you ever discussed Tabaca
16 Lera with Mr. LeBow or any of his associates?
17 A. No.
18 Q. Have you heard of a company
19 called Intabex?
20 A. I don't know. It seems to ring a
21 bell, but I'm not sure that I know hardly
22 anything about it.
23 Q. Did you ever discuss that company
24 with Mr. LeBow?
25 A. No.
CLASSIC REPORTING INC. (212) 268-2590
69
1 Zuckerman
2 Q. Did you ever hear of a fellow
3 named Tony Taberer?
4 A. I know the name.
5 Q. Have you ever discussed him with
6 Mr. LeBow?
7 A. No.
8 Q. Have you ever performed any
9 services pursuant to a consulting agreement
10 that you and Mr. LeBow have?
11 A. Depends on what the definition of
12 services are.
13 Q. In your mind, have you performed
14 any services pursuant to the consulting
15 agreement?
16 A. Broadly defined, I have suggested
17 to Mr. LeBow -- I have given him some
18 suggestions on how to approach institutional
19 investors. Rather than some suggestions as
20 to -- suggestions as to the knowledge that he
21 should have before he approaches institutional
22 investors.
23 Q. Knowledge about what subject?
24 A. About RJR's business.
25 Q. When did you make that
CLASSIC REPORTING INC. (212) 268-2590
70
1 Zuckerman
2 discussion?
3 A. I don't remember. But at various
4 times in the course of our telephone
5 conversations.
6 Q. What aspects of RJR's business
7 were you referring to?
8 A. I thought that institutional
9 investors might well ask him what would be the
10 correct strategy for the Winston brand or the
11 Salem brand. Questions of that nature.
12 Q. Did you share with Mr. LeBow any
13 knowledge of RJR that you had from the time
14 that you served as an officer of RJR?
15 A. No, sir.
16 Q. Are there any other services,
17 however broadly defined in your mind, that you
18 think you performed pursuant to the consulting
19 agreement?
20 A. No. No.
21 Q. Did you ever fill out a
22 questionnaire in connection with your
23 agreement to serve on the slate of nominees
24 proposed by Mr. LeBow?
25 A. I don't remember.
CLASSIC REPORTING INC. (212) 268-2590
71
1 Zuckerman
2 Q. I'm going to show you a document
3 that has been previously marked in another
4 deposition in this matter as Strauss Exhibit
5 2. I ask you if you have ever seen a copy of
6 that document.
7 A. I don't believe so.
8 Q. Have you ever discussed with Mr.
9 LeBow how RJR would be managed in the event
10 that the slate of which you are a member were
11 to be elected?
12 A. Yes.
13 Q. When was that discussion?
14 A. Very recently.
15 Q. Can you give me within the
16 last --
17 A. Within the last couple of weeks.
18 Q. Was that a discussion you
19 initiated or he initiated?
20 A. I don't remember.
21 Q. Was it part of some discussion
22 that you already testified about or is this a
23 different discussion?
24 A. No. I think I initiated it. I
25 had an idea. When Chris Steffen got blown out
CLASSIC REPORTING INC. (212) 268-2590
72
1 Zuckerman
2 of Citicorp, whenever that was. A week or 10
3 days ago. Recently, in any case. I thought
4 that Chris Steffen might be an interesting CEO
5 candidate. I know Chris well. Mr. LeBow said
6 he would. And that he would make an
7 interesting candidate.
8 Q. Did Mr. LeBow indicate that he
9 was going to contact Mr. Steffen?
10 A. He implied that he would contact
11 Mr. Steffen.
12 Q. Do you know if that contact ever
13 took place?
14 A. I don't know that they ever had a
15 meeting.
16 Q. Do you know that they have ever
17 been in contact?
18 A. I think they had a telephone
19 conversation.
20 Q. How do you know that? Or why do
21 you think that?
22 A. Either Mr. Steffen or Mr. LeBow
23 told me that they had a meeting scheduled.
24 Q. You don't know whether the
25 meeting took place?
CLASSIC REPORTING INC. (212) 268-2590
73
1 Zuckerman
2 A. I don't think it took place
3 because of the snowstorm.
4 Q. You understood the purpose of the
5 meeting to be, in general, a discussion about
6 the possibility that Mr. Steffen might be a
7 CEO?
8 A. CEO of --
9 Q. Of RJR?
10 A. Yes.
11 Q. Did you have any other discussion
12 with anyone concerning the management of RJR
13 in the event that the slate were to be
14 elected?
15 A. No.
16 Q. I'm going to show you a document
17 that was marked at Mr. Strauss's deposition as
18 Exhibit 3. I ask you in connection with this
19 RJR matter, whether you have ever seen the
20 document in that form.
21 A. I'm a director of a lot of
22 companies, and nominee as a director of a lot
23 of companies. This form of agreement --
24 MR. MASHBERG: Just answer the
25 question.
CLASSIC REPORTING INC. (212) 268-2590
74
1 Zuckerman
2 A. I don't know.
3 Q. Have you ever had any contact or
4 any discussion of RJR with Mr. Lorber?
5 A. I think I met Mr. Lorber.
6 Q. Where did you meet him?
7 A. I think he was at the lunch at
8 Ben Bensons with LeBow but I'm not sure.
9 Q. Other than as you may already
10 have testified, do you remember any discussion
11 you might have had with RJR -- about RJR with
12 Mr. Lorber?
13 A. I certainly had no private
14 discussion with him. I also believe that he
15 was at the Friars Club.
16 Q. As part of the general
17 discussion; is that what you mean?
18 A. Yes.
19 Q. Have you had any private
20 discussion concerning RJR or Liggett with Mr.
21 Burns?
22 A. No.
23 Q. Mr. Chakalian?
24 A. I met Mr. Chakalian for the first
25 time at the Friars Club luncheon and I asked
CLASSIC REPORTING INC. (212) 268-2590
75
1 Zuckerman
2 him how business was. So the answer is yes.
3 Q. What did he say?
4 A. He was moderately positive.
5 Q. Other than that exchange with Mr.
6 Chakalian, did you have any discussion with
7 him concerning RJR or Liggett?
8 A. No.
9 Q. What about Mr. Frome.
10 A. No.
11 Q. Mr. Lampen?
12 A. No.
13 Q. Mr. Ridings?
14 A. No.
15 Q. Mr. Starbuch?
16 A. No.
17 Q. Mr. Strauss?
18 A. No.
19 Q. I'm going to show you a document
20 that has been marked in Mr. Strauss's
21 deposition as Exhibit 7. I ask you if you
22 have ever seen that document or the documents
23 that are compiled in that exhibit before?
24 A. No, sir.
25 Q. Just to be absolutely certain,
CLASSIC REPORTING INC. (212) 268-2590
76
1 Zuckerman
2 sir, I want to show you a page called "Summary
3 of Transaction." It's numbered PS 226. I ask
4 you to look at that. I ask you to tell me
5 whether you have ever discussed a transaction
6 of the kind outlined in that summary with
7 anyone.
8 A. No, sir.
9 Q. I take it, sir, that it's
10 accurate to say that you have never performed
11 any analysis of a merger or other business
12 combination between Liggett and RJR; is that
13 correct?
14 A. That's correct.
15 Q. Have you performed any analysis
16 of a spin-off of Nabisco?
17 A. The answer is yes.
18 Q. What does that analysis consist
19 of?
20 A. When I was at RJR Nabisco, I
21 thought about that a lot and performed an
22 analysis and gave thought to it. And nothing
23 ever came of that.
24 Q. And when did you leave RJR
25 Nabisco?
CLASSIC REPORTING INC. (212) 268-2590
77
1 Zuckerman
2 A. Approximately September 15, 1993.
3 Q. And did your analysis include
4 analysis of fraudulent conveyance or other
5 legal risks associated with the transaction?
6 A. I read about fraudulent
7 conveyance.
8 Q. I'm talking about the analysis
9 that you performed while at RJR Nabisco.
10 MR. MASHBERG: Listen to his
11 question.
12 Read the previous question back,
13 please.
14 (Record read.)
15 A. Yes.
16 Q. At the time that you were at RJR,
17 did you review your conclusions with anyone at
18 RJR?
19 A. No.
20 Q. And what conclusion did you come
21 to?
22 A. Conclusions as to legal risks?
23 Q. As to the desirability of such a
24 transaction?
25 A. Such a transaction defined as?
CLASSIC REPORTING INC. (212) 268-2590
78
1 Zuckerman
2 Q. The spin-off of Nabisco?
3 A. I came to the conclusion that it
4 was not salable to the people above me or to
5 the board.
6 Q. And who were the people above you
7 at that time. To put the question slightly
8 differently, at that time was KKR --
9 A. KKR was the owner.
10 Q. Now, in evaluating the spin-off
11 at that time, did you consult with any lawyers
12 with respect to legal risks?
13 A. No.
14 Q. You are not a lawyer, are you?
15 A. That's correct.
16 Q. After leaving RJR, did you
17 perform any analysis of the spin-off?
18 A. No.
19 Q. If you are elected a director of
20 RJR, will you vote to support a spin-off?
21 MR. LOGAN: Object to the form.
22 MR. MASHBERG: Object to the
23 form. Calls for speculation.
24 Q. Were it to be proposed?
25 A. Do I have to answer that
CLASSIC REPORTING INC. (212) 268-2590
79
1 Zuckerman
2 question?
3 MR. MASHBERG: Our objection is
4 noted. Why don't we have the question
5 back.
6 A. I'll tell you --
7 MR. MASHBERG: Let's hear the
8 question back.
9 (Record read.)
10 A. I will pay the greatest possible
11 attention to my fiduciary duty given the facts
12 at the time and vote accordingly.
13 Q. Do you believe the board of
14 directors of RJR currently are doing anything
15 differently?
16 MR. LOGAN: Object to the form.
17 No idea what that question means.
18 A. I don't know what the board of
19 directors -- I just don't know what is in
20 their heads.
21 Q. You have no reason to believe,
22 sir, that they are not paying attention to
23 their fiduciary duties, do you?
24 MR. MASHBERG: Wait, wait, wait.
25 THE WITNESS: I wasn't going to
CLASSIC REPORTING INC. (212) 268-2590
80
1 Zuckerman
2 answer that question.
3 (Record read.)
4 MR. MASHBERG: I'll object to the
5 extent it's calling for a legal
6 conclusion.
7 MR. LOGAN: Objection.
8 A. I think it's -- I previously
9 answered that question. I said I have no idea
10 what is in the heads of the existing RJR
11 directors.
12 Q. Sir, did it ever come to your
13 attention from any source that Mr. LeBow or
14 people associated with him have sought to
15 encourage third parties to purchase shares of
16 RJR for the purpose of acquiring --
17 A. No.
18 Q. -- 20 percent or more of the
19 outstanding shares?
20 MR. LOGAN: Object to the form.
21 A. No.
22 Q. Has it ever come to your
23 attention from any source that Mr. LeBow or
24 anyone associated with him has solicited
25 anyone to purchase RJR shares?
CLASSIC REPORTING INC. (212) 268-2590
81
1 Zuckerman
2 A. No.
3 Q. Why did your joining with Mr.
4 LeBow's effort in the way that you described
5 cause you to abandon consideration of making a
6 hostile takeover attempt for RJR?
7 A. I just don't think I can ride
8 both of those horses simultaneously.
9 Q. Why is that?
10 A. I think you have to be on one
11 team or another team. Once I committed to
12 work with Mr. LeBow, I viewed it as unethical
13 to have my own separate effort.
14 Q. Have you given any consideration
15 to what you might do were Mr. LeBow's effort
16 to solicit consents to promote a spin-off fail
17 or be abandoned in some respect?
18 MR. MASHBERG: Object to the form
19 Calls for speculation.
20 MR. LOGAN: Objection.
21 A. No. My answer is no.
22 MR. STERN: Give me a few
23 minutes. And maybe we can call it a
24 day.
25 (Recess taken.)
CLASSIC REPORTING INC. (212) 268-2590
82
1 Zuckerman
2 Q. During the break, did you consult
3 with your counsel about the substance of your
4 testimony?
5 A. Yes.
6 Q. What did you say to them and they
7 to you? I'll ask another question. Did that
8 conference concern any subject other than
9 whether or not an attorney-client privilege
10 should be asserted?
11 A. No.
12 Q. To what question were you
13 considering whether or not an attorney/client
14 privilege should be asserted?
15 MR. LOGAN: Objection.
16 MR. MASHBERG: I'm going to
17 object here. There was no substantive
18 discussion and any discussions that we
19 had are privileged and there was no
20 question pending. And I ask you go on
21 and ask your question. Any discussions
22 that were had are privileged
23 conversations. Please continue.
24 Q. Sir, have you ever been
25 investigated for any violation of securities
CLASSIC REPORTING INC. (212) 268-2590
83
1 Zuckerman
2 laws?
3 A. No.
4 Q. Ever charged with any criminal
5 offense?
6 A. No.
7 Q. Have you ever been a defendant
8 personally in any litigation?
9 MR. MASHBERG: You asked these
10 questions earlier on.
11 MR. STERN: I may have asked that
12 one. If I did, I apologize for
13 repeating myself.
14 THE WITNESS: I believe he asked
15 that.
16 MR. MASHBERG: Ask the question.
17 Q. Were you ever a defendant
18 personally in any litigation?
19 A. In divorce.
20 Q. Apart from divorce?
21 A. No.
22 Q. I want to make sure that the
23 record is clear. With respect to discussions
24 with Mr. LeBow or anyone associated with him
25 concerning the possibility of a business
CLASSIC REPORTING INC. (212) 268-2590
84
1 Zuckerman
2 combination between Liggett and RJR, is your
3 testimony that you never had such discussion
4 or you don't recall one way or the other
5 whether you had discussions?
6 A. I have never had such discussion.
7 MR. STERN: I have no further
8 questions.
9 MR. MASHBERG: I have nothing.
10 MR. LOGAN: No questions. Thank
11 you.
12 (Time noted: 12 Noon)
13 ______________________
14 Frederick W. Zuckerman
15
16 Subscribed and sworn to
17 before me this day
18 of 1996
19 _________________________
20
21
22
23
24
25
CLASSIC REPORTING INC. (212) 268-2590
85
1
2
3 C E R T I F I C A T E
_ _ _ _ _ _ _ _ _ _ _
4 STATE OF NEW YORK )
) ss.:
5 COUNTY OF NEW YORK )
6 I, ARTA PASCULLO, a Registered
7 Professional Reporter and Notary Public
8 within and for the State of New York, do
9 hereby certify:
10 That I reported the proceedings in
11 the within-entitled matter, and that the
12 within transcript is a true record of
13 such proceedings.
14 I further certify that I am not
15 related, by blood or marriage, to any of
16 the parties in this matter and that I am
17 in no way interested in the outcome of
18 this matter.
19 IN WITNESS WHEREOF, I have hereunto
20 set my hand this________day of__________,
21 1996.
22 __________________________
ARTA PASCULLO, RPR
23
24
25
CLASSIC REPORTING INC. (212) 268-2590
86
1
2 January 19
I N D E X
_ _ _ _ _
3
WITNESS PAGE
_______ ____
4 FREDERICK W. ZUCKERMAN
Examination by Mr. Stern 4
5
E X H I B I T S
_ _ _ _ _ _ _ _
6
ZUCKERMAN PAGE
_________ ____
7 FOR_IDENTIFICATION
___ ______________
1 Photocopies of pages from
8 Mr. Zuckerman's calendar book
from 1995, bearing production
9 Nos. FZ 11 through 14 35
10 2 Group of documents, bearing
production Nos. FZ 1 through
11 10 38
12
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING INC. (212) 268-2590
3
==============================================================================
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
CASE NO. 6:95CV00812
RJR NABISCO HOLDINGS
CORP.,
Plaintiff,
-against-
BENNETT S. LEBOW, BROOKE
GROUP LTD. and CARL
C. ICAHN,
Defendants.
- ------------------------- x
100 S.E. 2nd Street
Miami, Florida
Thursday, 9:25 a.m.
January 11, 1996
D E P O S I T I O N
of
BENNETT S. LEBOW
Taken on Behalf of the Plaintiff
pursuant to Notice of Taking Deposition
TAYLOR, JONOVIC & WHITE
(305) 358-9047 Miami, Florida
==============================================================================
==============================================================================
A P P E A R A N C E S
For the Plaintiff: WACHTEL, LIPTON, ROSEN & KATZ
BY: Warren R. Stern, Esq.
and Rachelle Silverberg, Esq.
51 West 52nd Street
New York, New York 10019-6150
and
BELL, DAVIS & PITT
BY: William Kearns Davis, Esq.
635 West 4th Street
Winston-Salem, NC 27101
For the Defendants: MILBANK, TWEED, HADLEY & McCLOY
BY: Michael Hirschfeld, Esq.
1 Chase Manhattan Plaza
New York, New York 10005-1413
Court Reporters: CRAIG W. TAYLOR
GARY O'BRYAN
---------------
I N D E X
WITNESS DIRECT CROSS REDIRECT RECROSS
BENNETT S. LEBOW
(By Mr. Stern) 3
---------------
E X H I B I T S
PLAINTIFF'S PAGE
Exh. Nos. 1, 2 and 3 64
Exh. Nos. 4, 5 and 6 67
Exh. No. 7 79
Exh. No. 8 105
Exh. No. 9 105
Exh. No. 10 108
TAYLOR, JONOVIC & WHITE
(305) 358-9047 Miami, Florida
==============================================================================
==============================================================================
EXHIBITS (Continued)
PLAINTIFF'S PAGE
Exh. Nos. 11 thru 15 116
Exh. No. 16 121
Exh. No. 17 128
Exh. No. 18 131
Exh. No. 19 132
Exh. No. 20 133
Exh. No. 21 134
Exh. No. 22 164
Exh. No. 23 195
Exh. No. 24 197
Exh. No. 25 199
Exh. No. 26 199
Exh. No. 27 218
Exh. No. 28 244
Exh. No. 29 245
Exh. Nos. 30 thru 34 250
Exh. No. 35 256
Exh. No. 36 260
Exh. No. 37 264
Exh. No. 38 264
Exh. No. 39 265
Exh. No. 40 266
Exh. No. 41 267
Exh. No. 42 267
Exh. No. 43 268
Exh. No. 44 268
Exh. No. 45 270
Exh. No. 46 270
Exh. No. 47 271
TAYLOR, JONOVIC & WHITE
(305) 358-9047 Miami, Florida
==============================================================================
1 Thereupon:
2 BENNETT S. LEBOW
3 Having been first duly sworn, was examined and
4 testified as follows:
5 DIRECT EXAMINATION
6 BY MR. STERN:
7 Q. Sir, would you state the place and date of
8 your birth?
9 A. December 20, 1937, Philadelphia,
10 Pennsylvania.
11 Q. Were you raised in Philadelphia?
12 A. Yes.
13 Q. Would you tell me, please, which educational
14 institutions you attended and the dates?
15 A. After public school?
16 Q. After public schools.
17 A. Drexel University, Bachelor of Science in
18 electrical engineering. I spent a year in graduate
19 school in Princeton University.
20 Q. What year did you get your Bachelor's in
21 science?
22 A. 1960.
23 Q. What year were you at Princeton?
24 A. The following year, 1960, 1961.
25 Q. Did you receive a degree from Princeton?
4
1 A. No.
2 Q. What was your first full-time employment?
3 A. After I left Princeton, real full-time
4 employment was with the United States Army.
5 Q. What did you do there?
6 A. I was a First Lieutenant in the United
7 States Army.
8 Q. What years did you serve in that capacity?
9 A. Let's see. 1962 and 1963.
10 Q. In general, what were your duties at that
11 time?
12 A. I was assistant to the Assistant Vice Chief
13 of Staff of the Army in the Pentagon, responsible
14 for computer systems. Actually, during that time I
15 was just an assistant to the Deputy Chief of Staff
16 of the Army.
17 Q. You left the Army in 1963?
18 A. No. I stayed on with the Army as a
19 civilian. I left military service, but I stayed as
20 a civilian employee in the same job -- basically the
21 same job.
22 Q. When were you discharged from the service?
23 A. In 1963.
24 Q. Was it an honorable discharge?
25 A. Yes.
5
1 Q. So, in 1963 you stayed on as a civilian
2 employee --
3 A. Correct.
4 Q. -- of the United States Army.
5 A. Correct.
6 Q. How long did you hold that status?
7 A. Another three years.
8 Q. 1966?
9 A. It was more than that. Yes, that's correct.
10 Q. Your position---
11 A. We are missing a year here somewhere.
12 Excuse me. 1962, 1963, military, 1964, 1965---
13 Till 1967, correct.
14 Q. So, you were employed by the Army in a
15 civilian capacity from 1963 to 1967; is that
16 correct?
17 A. Approximately, correct.
18 Q. What was your position during those years?
19 A. I was assistant to the Assistant Vice Chief
20 of Staff of the Army.
21 Q. Again, sir, what were your responsibilities?
22 A. I was responsible for computer systems
23 throughout the Army.
24 Q. Would your duties be what we would today
25 call MIS?
6
1 A. In that area, yes.
2 Q. What was your next employment after 1966 or
3 1967, whenever it was that you left the Army?
4 A. I formed my own company.
5 Q. That was in 1967?
6 A. 1967, 1968, in that time frame.
7 Q. What was the name of that company?
8 A. DSI Systems.
9 Q. Where was it incorporated?
10 A. Well, I don't know the state of
11 incorporation. I don't recall. Probably Delaware.
12 Q. Where was its principal place of business?
13 A. In Rockville, Maryland, outside Washington.
14 Q. What was the business of DSI Systems?
15 A. It was involved in the computer microfilm
16 business, transferring images from computer systems
17 to microfilm.
18 Q. Were you the owner of DSI Systems?
19 A. I was one of the owners.
20 Q. It was a corporation. Were you the
21 controlling shareholder?
22 A. Yes.
23 Q. Were you employed by DSI Systems?
24 A. Yes.
25 Q. What was your position?
7
1 A. President and CEO, chairman. Chairman,
2 president and CEO.
3 Q. How long did you hold those positions?
4 A. About three or four years.
5 Q. So, now we are up to 1970 or 1971?
6 A. 1971 approximately.
7 Q. Did you terminate your employment with DSI
8 Systems in 1971?
9 A. Yes.
10 Q. What did you do next?
11 A. I became an independent consultant.
12 Q. What happened to DSI Systems after you
13 terminated your employment?
14 A. It was merged into another company.
15 Q. Did you sell DSI, in effect, to another
16 company?
17 A. Correct.
18 Q. Which was the other company?
19 A. The company's name is Conolog Corporation,
20 C-O-N-O-L-O-G.
21 Q. That was sold in that same---
22 A. 1970, 1971, in that time frame.
23 Q. Is Conolog Corporation still in existence?
24 A. To the best of my knowledge, yes.
25 Q. Did either DSI or Conolog Corporation ever
8
1 file a petition under the Bankruptcy Code?
2 A. Not according to my knowledge.
3 Q. Were there any public shareholders of DSI?
4 A. Yes.
5 Q. When did DSI go public?
6 A. 1969.
7 Q. Did it remain a publicly held company until
8 the merger of 1971?
9 A. Yes.
10 Q. Did any shareholder ever bring any claims
11 against you in connection with the business of DSI?
12 A. Not that I recall.
13 Q. Did the Securities Exchange Commission ever
14 commence any investigation with respect to your
15 activities at DSI?
16 A. No.
17 Q. Was there any such investigation -- that is,
18 an SEC investigation -- with respect to the
19 activities of any of the officers or directors of
20 DSI?
21 A. Not to my knowledge.
22 Q. After 1971, you said you became an
23 independent consultant after leaving DSI. Did you
24 have a firm?
25 A. No.
9
1 Q. What kind of consulting did you do?
2 A. I consulted with troubled companies, trouble
3 situations, restructurings, things of that nature.
4 I did some computer-type consulting, also.
5 Q. How long did you do that?
6 A. Till about 1984.
7 Q. In this period that we are talking about,
8 from approximately 1971 to 1984, did you acquire a
9 controlling interest in any company other than your
10 own consulting business?
11 A. What do you define as "controlling"?
12 Q. Well, did you acquire any businesses or
13 acquire the ability to control the affairs of any
14 business other than your own consulting business?
15 A. Yes.
16 Q. Which companies?
17 A. A company called--- Again, along with other
18 partners. I want you to understand that. A company
19 called Sarah Coventry, Incorporated; a company
20 called Tril Laboratories, Incorporated.
21 Q. How do spell that?
22 A. T-R-I-L. A company called Atlas Supply,
23 Incorporated; a company called Saxon Business
24 Products, S-A-X-O-N; a company called CRS Color
25 Labs. There may have been one or two more. I just
10
1 can't recall right now.
2 Q. Did you serve as an officer or director of
3 any of those companies?
4 A. Yes, most of them.
5 Go ahead. I'm sorry.
6 Q. Were any of those companies publicly held
7 companies?
8 A. Tril was public.
9 Read me back the list.
10 (Thereupon, the answer referred to was
11 read by the reporter as above recorded.)
12 A. Tril was the only one in that group that was
13 public.
14 Q. At any time did any of the shareholders of
15 Tril make any claim with respect to your conduct or
16 involvement in the affairs of Tril?
17 A. Not that I recall.
18 Q. Did any of those companies file for
19 bankruptcy protection during the time that you were
20 an officer, director or controlling shareholder?
21 A. No, I don't believe so. I took Tril out of
22 bankruptcy.
23 Q. Do you still own a controlling interest?
24 A. Go back to your question. I'm sorry.
25 Repeat your question.
11
1 MR. STERN: I will ask the reporter to
2 read it back.
3 (Thereupon, the question referred to
4 was read by the reporter as above recorded.)
5 A. There was one other. CRS Color Labs, yes.
6 Q. CRS filed for bankruptcy?
7 A. Yes.
8 Q. What year was that?
9 A. Somewhere in the seventies. I don't recall
10 exactly.
11 Q. Do you remain a controlling shareholder in
12 any of those companies?
13 A. No.
14 Q. Do any of those companies remain in
15 existence today?
16 A. I really don't know. I believe they do, but
17 I don't know, except for CRS I know does not.
18 Q. How did you dispose of your interest in
19 Sarah Coventry?
20 A. I think the actual interest I still own.
21 The company still owns--- The assets were sold over
22 time. The actual stock interest, you know, which
23 has no value today, I believe -- I'm not sure -- I
24 think I still own.
25 Q. Your recollection is that you caused Sarah
12
1 Coventry to sell its assets over a period of time?
2 A. Correct. It was a bankrupt company, also.
3 We bought that out of Chapter 11, also. Again, I
4 deal in bankrupt companies. That's my basic
5 business.
6 Q. I understand.
7 With respect to Tril, did you do the same?
8 Did you sell the assets or cause Tril to sell the
9 assets?
10 A. I sold the stock. Tril is still in
11 business, to the best of my knowledge.
12 Q. When did you sell the stock?
13 A. I don't recall. Late seventies, early
14 eighties, something like that.
15 Q. Atlas Supply, how did that---
16 A. Same thing. I sold the stock.
17 Q. Do you remember when?
18 A. Again, the same time frame, late seventies,
19 early eighties.
20 Q. Saxon Business Products, how did that
21 business wind up?
22 A. It wound up very well. You know, the exact
23 sale of the stock, I don't recall. It was in the
24 early eighties.
25 Q. You ultimately disposed of the stock of
13
1 Saxon?
2 A. I believe so, yes.
3 Q. CRS Labs?
4 A. That went into Chapter 7. It was
5 liquidated.
6 Q. I believe in our chronology we are up to
7 about 1984.
8 A. Correct.
9 Q. What happened in 1984 with respect to your
10 career?
11 A. I acquired a control of MAI Systems,
12 Incorporated.
13 Q. What is MAI Systems?
14 A. It was a computer company involved in
15 worldwide computer sales and services.
16 MR. HIRSCHFELD: Let me just ask for
17 the record, was it owned by that name when you
18 acquired it in 1984?
19 Q. From whom did you acquire control of MAI
20 Systems?
21 A. From the parent holding company. They had a
22 couple of subsidiaries, and I bought one of their
23 subsidiaries basically.
24 Q. Do you recall the name of the parent holding
25 company?
14
1 A. MAI Systems was the name or MAI Corp. I
2 don't know the exact words.
3 I'm sorry. I now recall what he said. It
4 was Management Assistance, Inc. is what it was
5 called. That's what the initials MAI stand for.
6 Q. Did there come a point in time when you took
7 Management Assistance Corporation public?
8 A. Yes.
9 Q. When was that?
10 A. About a year later.
11 Q. Now, at some point Management Assistance
12 changed its name to MAI; is that correct?
13 A. Yes.
14 Q. Do you recall approximately when that was?
15 A. No, I don't recall that.
16 Q. I will refer to that entity as MAI. I think
17 that's how you referred to it; is that correct?
18 A. That's correct.
19 Q. Does MAI still exist today?
20 A. Yes.
21 Q. Do you still have an interest in MAI?
22 A. Yes.
23 Q. Is it still a controlling interest?
24 A. Yes.
25 Q. Did MAI at any time since you acquired your
15
1 interested in it file for protection under the
2 bankruptcy laws?
3 A. Yes.
4 Q. When was that?
5 A. I don't know exactly when it was. 1993,
6 1994. I'm a little fuzzy this morning remembering
7 exact dates. It's a matter of public record,
8 whenever it was.
9 Q. Yes.
10 A. 1994, I suspect.
11 Q. Is it still in bankruptcy?
12 A. No.
13 It must have been 1993. Yes, 1993.
14 Q. Do you remember which court had
15 jurisdiction?
16 A. Delaware.
17 Q. Were you ever the subject of any shareholder
18 complaint in connection with--- Let me ask a
19 preliminary question. Did you serve as an officer
20 and director of MAI?
21 A. Yes.
22 Q. Did you so serve throughout the period of
23 your investment?
24 A. Up till recently, yes.
25 Q. Am I correct that you terminated your role
16
1 as a director and officer of MAI?
2 A. That's correct.
3 Q. When was that?
4 A. This past October, I believe it was, October
5 of 1995.
6 Q. Why did you do that?
7 A. Because I had a minority investment in MAI.
8 I wished to disassociate myself and sell my stock.
9 Q. During the years in which you held a
10 controlling interest and served as an officer and
11 director, were you ever the subject of a complaint
12 by a shareholder about your conduct of the affairs
13 of MAI?
14 A. I don't recall. No. The answer is no, not
15 to the best of my recollection.
16 Q. In our chronology, we are up to 1984 when
17 you acquired your investment in MAI. What was the
18 next event in your career?
19 A. I acquired control of Liggett Group.
20 Q. When was that?
21 A. October of 1986.
22 Q. What is the business of Liggett Group?
23 A. It's a cigarette manufacturer, distributor.
24 Q. From whom did you acquire control?
25 A. Grand Metropolitan.
17
1 Q. You still own an interest in Liggett?
2 A. Yes.
3 Q. Is that a controlling interest?
4 A. Yes.
5 Q. Have you served as an officer and director
6 of Liggett?
7 A. Yes.
8 Q. Since when?
9 A. Since 1986.
10 Q. Do you still hold that position today?
11 A. Yes.
12 Q. Have you ever been the subject of a
13 shareholder complaint concerning your involvement in
14 the affairs of Liggett?
15 A. It's a little difficult. We owned 100
16 percent for a long time. The answer is no.
17 Q. Well, let me ask you this.
18 A. It was public at one time.
19 Q. Was there a period of time when there was a
20 public ownership interest in Liggett?
21 A. Yes.
22 Q. What years were those?
23 MR. HIRSCHFELD: Let me try to clarify
24 something for the record here because I think,
25 Warren, there is going to be needless confusion on
18
1 this point.
2 MR. STERN: That's fine.
3 MR. HIRSCHFELD: You will see I'm not
4 trying to obstruct.
5 Liggett was acquired, 100 percent, in 1986.
6 There was a public offering of a minority interest
7 in 1987. The company that was then known as Liggett
8 and was owned partly by the public continues in
9 existence today as Brooke Group Limited. Its name
10 has been changed. But when you speak of the Liggett
11 Company that Mr. LeBow acquired in 1986, that
12 company is today Brooke Group Limited.
13 In 1990 there was a restructuring internally
14 within Brooke Group Limited so as to create a
15 subsidiary corporation engaged in the tobacco
16 business, which then took the Liggett name; and what
17 was then the parent company, formerly known as
18 Liggett Group Limited, became Brooke Group Limited.
19 If you look at a chart, you can tell the
20 difference because the company that has the name
21 Liggett today is known as Liggett Group, Inc. When
22 it was the public company operating under the
23 Liggett name, it was Liggett Group Ltd.
24 Q. Mr. LeBow, does your counsel's statement
25 comport with your recollection?
19
1 A. Yes.
2 Q. If I understood that correctly, and tell me
3 if I have understood it correctly, I understand in
4 essence that the company now known as Brooke Group
5 is a corporate successor to the Liggett entity that
6 you acquired in 1986; is that correct?
7 A. That's correct.
8 MR. HIRSCHFELD: I would say, Warren,
9 it's not a successor. It's the same company.
10 There's simply been a name change.
11 MR. STERN: I see.
12 Q. Focusing on the period between the public
13 offering in 1987 and the restructuring that, I
14 think, counsel said took place sometime in 1990,
15 during that period there was a publicly held
16 interest in Liggett; is that correct?
17 A. That's correct.
18 Q. During that period, sir, were you the
19 subject of any complaint by any of the public
20 shareholders about your involvement in the affairs
21 of that company?
22 A. I don't recall any, no.
23 Q. When was the company known as Brooke formed?
24 A. Well, it's the same company from 1986 on.
25 That is the Brooke Group company.
20
1 Q. There have been public shareholders in
2 Brooke Group since its formation, since 1990.
3 A. No. Since 1987 when it went public.
4 Q. I'm speaking imprecisely. I apologize.
5 Since 1990, have any public shareholders in
6 the company now called Brooke Group made any claim
7 against you with respect to your involvement in the
8 affairs of Brooke Group?
9 A. Yes.
10 Q. How many such claims or complaints have been
11 made?
12 A. One.
13 Q. When was it made?
14 A. I don't recall the exact date. 1992, 1993.
15 1993, I suspect, but I don't know exactly.
16 Q. Was it a claim made in litigation?
17 A. Yes.
18 Q. Where was the litigation filed?
19 A. Delaware.
20 Q. Is that litigation continuing today?
21 A. No.
22 Q. How was it resolved?
23 A. There was a Settlement Agreement reached.
24 Q. What were the terms of the settlement?
25 A. There were certain borrowings made by myself
21
1 and the corporation with the approval of the Board
2 of Directors of the corporations. The borrowings
3 were all repaid with interest, in addition to
4 certain legal fees were paid.
5 Q. Did the Complaint concern those borrowings?
6 A. Yes.
7 Q. Was your deposition taken in connection with
8 that litigation?
9 A. Was it?
10 Yes.
11 MR. HIRSCHFELD: Off the record.
12 (Thereupon, a discussion was held off
13 the record.)
14 Q. What year was your deposition taken?
15 A. 1994, sometime.
16 Q. Did the entity that you acquired in 1986,
17 Liggett, subsequently known as Brooke Group, ever
18 file for protection under the bankruptcy laws?
19 A. No.
20 Q. Sir, in our chronology we are up to 1986,
21 which is when I think you told me you acquired
22 control of Liggett. What was the next significant
23 event in your career?
24 A. I acquired control of Western Union
25 Corporation.
22
1 Q. When was that?
2 A. The end of 1987.
3 Q. From whom did you acquire control?
4 A. From the corporation itself.
5 Q. At the time that you acquired control of
6 Western Union, was it in bankruptcy?
7 A. It was about to file bankruptcy.
8 Q. Do you still own your interest in Western
9 Union?
10 A. Yes, indirectly.
11 Q. Why don't you explain what you mean by that,
12 please.
13 A. The interest is owned by Brooke Group. I
14 obviously have an interest in Brooke Group.
15 Q. Is Western Union still known as Western
16 Union?
17 A. No.
18 Q. What is its name today?
19 A. New Valley Corporation.
20 Q. When did it become New Valley Corporation?
21 A. 1991 or 1992. I don't recall the exact
22 date.
23 Q. Did you acquire 100 percent of the interest
24 in Western Union?
25 A. No.
23
1 Q. What percentage did you acquire?
2 A. We acquired about 43 percent of the
3 preferred A stock and about 42 percent of the common
4 stock.
5 Q. Did this give you a controlling interest in
6 the company?
7 A. Yes.
8 Q. Did you become an officer and director of
9 Western Union?
10 A. Yes.
11 Q. You assumed those capacities, I take it, at
12 the end of 1987 when you acquired the company.
13 A. Correct.
14 Q. Do you continue in those capacities today?
15 A. Yes.
16 Q. Was there any public interest in Western
17 Union subsequent to your acquisition of the company
18 or your interest in the company in 1987?
19 A. Say that again.
20 Q. I will rephrase the question.
21 MR. HIRSCHFELD: Let's go off the
22 record a minute.
23 (Thereupon, a discussion was held off
24 the record.)
25 MR. STERN: Back on the record.
24
1 Q. Mr. LeBow, your counsel and I have had a
2 discussion off the record. In light of that
3 discussion, I think the record would be assisted if
4 you could walk us through the history of your
5 investment in Western Union, with particular
6 attention to times when the public has held an
7 interest in that company.
8 A. First of all, the public has held an
9 interest in the company throughout this period, at
10 all times.
11 What my counsel alluded to, what he wanted
12 to clarify is in 1987 I acquired what was called
13 then a Class B common interest in the company and
14 not any preferred interest. Preferred interest was
15 acquired, I believe, about two years later
16 approximately, preferred A interest. Subsequent to
17 that time, up to today, this Class B common interest
18 has become regular common. It's been converted to a
19 regular common interest of about 42 percent of the
20 outstanding common, and then the preferred A
21 interest has grown to approximately a 58 or 59
22 percent interest in the preferred A position. In
23 addition, we have a small interest in what's called
24 the preferred B.
25 Q. In general, am I correct in understanding
25
1 that you have been the controlling shareholder,
2 either directly or indirectly, of Western Union or
3 its successor since 1987?
4 A. That's correct.
5 Q. And at all times there has been a publicly
6 held interest, either direct or indirect, in that
7 company?
8 A. That's correct.
9 Q. Have you ever been the subject of any
10 shareholder complaint with respect to the affairs of
11 Western Union or New Valley?
12 A. There was one shareholder complaint in
13 connection, I believe, with the original
14 acquisition, and it was also a holdover from
15 previous complaints prior to my involvement, and
16 there was another Complaint filed a few years ago by
17 an individual shareholder.
18 Q. What was the claim, if you can recall, of
19 the shareholder complaint that was made in
20 connection with the acquisition?
21 A. I really have no idea what it was.
22 Q. Did this result in litigation?
23 A. Yes.
24 Q. Do you remember what court the litigation
25 was pending in?
26
1 A. Pardon?
2 Q. Do you remember the court in which the
3 litigation was pending?
4 A. In Chicago and New Jersey. Federal Court in
5 Chicago and New Jersey, I believe.
6 Q. Federal Court in Chicago and New Jersey?
7 A. I have to ask my counsel.
8 Q. You don't recall exactly?
9 A. I don't recall exactly the venue.
10 Q. Do you remember the outcome of the case?
11 A. It was settled on our behalf for a very
12 insignificant amount of money, extremely
13 insignificant.
14 Q. Was your deposition taken in connection with
15 that litigation?
16 A. I don't recall. I don't think so.
17 Q. Then, sir, you referred to a holdover
18 litigation that arose prior to your acquisition of
19 Western Union.
20 A. That's basically the same litigation we just
21 discussed.
22 Q. So, the complaint against you, if I
23 understand--- Tell me if I am understanding this
24 correctly. The complaint that came to involve you
25 was an outgrowth of litigation that was already
27
1 pending?
2 A. It was both. It was, you know, a disclosure
3 issue vis-a-vis the 1987 acquisition complaint, and
4 there were some prior disclosure issues, also, I
5 believe.
6 MR. HIRSCHFELD: Don't guess.
7 A. I don't know. You are talking ten years
8 ago. I don't recall exactly.
9 Q. As your counsel indicated, I'm sure you are
10 aware that I don't want you to guess or speculate.
11 A. Fine.
12 Q. Do you remember the name of the counsel for
13 the parties or party who sued you?
14 A. No, I do not.
15 Q. I think you also mentioned, and I may not
16 have understood correctly, I think you also said
17 there was a more recent complaint relating to
18 Western Union; is that correct?
19 A. That's correct.
20 Q. When was that complaint brought?
21 A. I believe in 1991 or 1992.
22 Q. Again, I take it that resulted in
23 litigation.
24 A. Correct.
25 Q. Where was the litigation pending?
28
1 A. Where?
2 Q. Yes.
3 A. New York Federal Court.
4 Q. Federal Court in New York?
5 A. Yes.
6 Q. What was the nature of the claim?
7 A. Failure to disclose certain things.
8 Q. Do you remember the name of the plaintiff's
9 counsel?
10 A. I don't remember the counsel's name, no.
11 Q. Has that litigation ever been resolved?
12 A. Yes.
13 Q. What was the resolution?
14 A. It was dismissed on summary judgment
15 completely.
16 Q. When was that result obtained?
17 A. Six months ago.
18 Q. Was your deposition taken in connection with
19 that litigation?
20 A. Yes.
21 Q. When was that taken?
22 A. About a year ago.
23 Q. Are there any other shareholder complaints
24 concerning Western Union?
25 A. Can I go off the record a second?
29
1 Q. Sure.
2 (Thereupon, a discussion was held off
3 the record.)
4 MR. STERN: Back on the record.
5 Q. Referring back to Western Union, now known
6 as New Valley, since acquiring the company in 1987
7 or acquiring the interest that you described, has
8 that company filed for bankruptcy protection?
9 A. Yes.
10 Q. When was that?
11 A. Let me get the dates straight.
12 Was it March of 1995 or 1994? Let's see.
13 MR. HIRSCHFELD: If you can't remember,
14 just say you can't remember. It's all a matter of
15 public record.
16 A. It's a matter of public record. It was
17 either March of 1994 or March of 1995. I forget
18 what year.
19 Q. What court was that?
20 A. New Jersey Bankruptcy Court, Newark.
21 Q. Does it remain under the protection of the
22 court?
23 A. No.
24 Q. When was it discharged?
25 A. November of 1994, right.
30
1 Excuse me. Now I remember better. It was
2 either 1993 or 1994 it was filed. It must have been
3 March of 1994 or no. I'm really confused. I don't
4 remember what year.
5 Q. I understand your recollection of dates
6 is --
7 A. It's early in the morning.
8 Q. -- not precise.
9 Was your deposition taken in connection with
10 any proceeding relating to that bankruptcy?
11 A. Yes.
12 Q. When was that?
13 A. Six months after the bankruptcy was filed
14 approximately. I don't remember the exact date.
15 Q. Do you remember the name of the lawyer or
16 the law firm who took your deposition?
17 A. No, I don't remember that.
18 Q. Was there a particular proceeding in
19 connection with your deposition that was taken?
20 A. There was various creditor-type litigation
21 ongoing in the bankruptcy, and there was a general
22 creditor-type deposition.
23 Q. We have gotten up to 1987 with the
24 acquisition of Western Union. What do you regard as
25 the next significant event in your career?
31
1 A. From an acquisition point of view, that was
2 pretty much it, from a major acquisition point of
3 view.
4 Q. So, Western Union was your last major
5 acquisition?
6 A. Correct.
7 Q. I have asked you about and you testified
8 about the fact that your deposition was taken one or
9 more times. Other than the times that you have told
10 me about, can you recall any other instances in
11 which your deposition was taken?
12 A. Not offhand, no.
13 Q. Can you recall any instances in which you
14 were a witness testifying at a hearing; in other
15 words, testimony given not in the forum of a
16 deposition, such as the one we are having today, but
17 testimony in a courtroom or other forum?
18 A. In a courtroom?
19 Q. Yes. Have you ever been a witness at a
20 trial or a hearing?
21 A. A couple of judges years ago when I was
22 suing somebody, I remember, 20 years ago in a
23 courtroom. In an actual courtroom, you mean, a
24 trial?
25 Q. In a trial or other kind of hearing where
32
1 you were sitting in a witness chair and there was a
2 judge, an adjudicator, listening to you testify.
3 I'm trying to distinguish between a deposition in a
4 conference room and a proceeding that takes place
5 before an actual adjudicator.
6 A. No, I don't know.
7 Q. Have you ever heard of a company called
8 Skybox?
9 A. Yes.
10 Q. What is Skybox?
11 A. Skybox was a company that sold trading cards
12 -- collectible trading cards to children.
13 Q. Did you ever have an interest in Skybox?
14 A. Yes.
15 Q. What was the nature of that interest?
16 A. It was owned by Brooke Group. Brooke Group
17 owned 100 percent of Skybox at one time.
18 Q. When did Brooke Group acquire its ownership
19 of Skybox?
20 A. It was created -- it was a start-up company
21 within Brooke Group -- in about 1989.
22 Q. Has there ever been any litigation in
23 connection with Skybox in which you have been
24 involved?
25 A. What sort of litigation?
33
1 MR. HIRSCHFELD: That's a broad
2 question.
3 Q. It is a broad question. I will rephrase the
4 question.
5 Creditor litigation, creditors of Brooke
6 Group with respect to Skybox.
7 A. Repeat the question exactly.
8 Q. Let me rephrase the question.
9 Does Skybox exist today?
10 A. No. It was sold to another company.
11 Q. When was it sold?
12 A. Let me get my years straight. About a year
13 ago.
14 Q. Was there any litigation in connection with
15 the disposition of Skybox?
16 MR. HIRSCHFELD: That disposition?
17 MR. STERN: Yes.
18 A. I don't know.
19 Q. Was there ever any proposal to spin off --
20 Brooke Group to spin off Skybox?
21 A. Yes.
22 Q. What did that proposal consist of?
23 A. Just a proposal to spin off Skybox, as you
24 say.
25 Q. When was that?
34
1 A. In October of 1993.
2 Q. How did that matter resolve itself?
3 A. Skybox was spun off.
4 Q. Was there any litigation in connection with
5 that spinoff?
6 A. Yes.
7 Q. Who brought that litigation?
8 A. Some CVR holders.
9 Q. Was that CVR?
10 A. CVR.
11 Q. What are CVR's?
12 A. CVR is an acronym for Contingent Value
13 Rights.
14 Q. Were these securities of some kind?
15 A. Yes.
16 Q. Which entity issued these securities?
17 A. BGLS. Brooke Group. I will correct myself.
18 Q. When did Brooke Group issue the CVR's?
19 A. In October of 1990.
20 Q. To whom did Brooke Group issue them?
21 A. To the shareholders of Brooke Group.
22 Q. What form did the transaction take? Was it
23 a sale or a dividend?
24 A. It was in conjunction with a reorganization
25 of Brooke Group. The public shareholders of Brooke
35
1 Group were issued the CVR security.
2 Q. This reorganization took place in 1990?
3 A. Correct.
4 Q. Why was Brooke Group restructured in 1990?
5 A. We had a couple of private companies outside
6 of Brooke Group. Again, remember, Brooke Group is
7 the old Liggett Group namewise. They wanted to put
8 everything under one umbrella.
9 Q. What was Brooke Group's purpose in issuing
10 the CVR's?
11 A. To guarantee to our shareholders that their
12 stock value would increase over the three-year
13 period of time.
14 Q. Are the CVR's still outstanding?
15 A. No.
16 Q. How did they come to be retired?
17 A. They were redeemed for their contractual
18 amount of money of 36 cents each.
19 Q. When did that take place?
20 A. In November of 1993, when it was due.
21 Q. What was the nature of the claim brought by
22 the CVR holders with respect to the spinoff of
23 Skybox?
24 A. They were claiming that Brooke was making an
25 incorrect spinoff because they were claiming that
36
1 Brooke was insolvent.
2 Q. In what court was that matter brought?
3 A. Delaware Chancery Court.
4 Q. What was the resolution of that case?
5 A. The judge in the court ruled that they were
6 not correct CVR holders, and the spinoff proceeded.
7 Q. Was the case dismissed?
8 A. The actual case is about to be dismissed or
9 settled.
10 Q. What are the terms of the settlement?
11 MR. HIRSCHFELD: It's very complicated.
12 A. It is complicated. The CVR holders are
13 getting some additional amounts of money. In
14 addition, the CVR holders and I are going to
15 institute litigation against the trustee for
16 incorrectly bringing this action, and it's being
17 instituted in conjunction with the CVR holders
18 basically, and we are getting money. Brooke Group
19 is being paid a certain amount of money.
20 Q. Is this settlement embodied in any kind of
21 public document? Has it been described publicly?
22 A. Not yet.
23 Q. When do you anticipate that it will be
24 disclosed?
25 A. Shortly.
37
1 Q. A matter of weeks or months?
2 A. Well, if my counsel stops working on other
3 things, it will be done quicker. It's pretty much
4 agreed to.
5 Q. It's agreed to in principal.
6 Do you remember the name of the lawyer for
7 your adversary in this litigation we are describing?
8 A. No, I do not. I have a propensity not to
9 remember lawyers, to be honest with you, especially
10 ones on the other side.
11 Q. Was your deposition taken in connection with
12 this CVR litigation?
13 A. I'm not sure. I don't think so. I really
14 don't know.
15 Was it?
16 MR. HIRSCHFELD: Yes.
17 A. My counsel reminds me that it was taken.
18 Q. Have you ever been the subject of any
19 investigation by the SEC or any other governmental
20 entity concerning possible violations of the law in
21 connection with securities transactions?
22 MR. HIRSCHFELD: Mr. LeBow personally?
23 Q. Let's start there.
24 A. There was an inquiry by the SEC regarding
25 disclosure in the Western Union original
38
1 acquisition.
2 Q. Did the SEC take your deposition in
3 connection with that inquiry?
4 A. Yes, they did.
5 Q. What was the result of the inquiry?
6 A. It was completely dropped.
7 Q. Are there any other instances in which you
8 have understood yourself to be the subject or target
9 -- personally to be the subject or target of an SEC
10 or similar inquiry concerning securities matters?
11 A. No.
12 MR. HIRSCHFELD: I object to the form
13 of the question.
14 Q. Focusing on any of the entities that you
15 have controlled, have any of the entities that you
16 have controlled to your knowledge ever been the
17 subject or target of an inquiry by the SEC or any
18 other regulatory body concerning securities matters?
19 A. Well, we control today Ladenburg Thalmann.
20 As an investment banking firm, they have normal SEC
21 type inquiries.
22 Q. Other than the matters that have arisen in
23 the course of Ladenburg's business, can you think of
24 any such instances?
25 A. No.
39
1 Q. To your knowledge, have you ever been
2 charged by the United States Government or a
3 government of any state with any violation of the
4 criminal laws?
5 A. No.
6 Q. Any entity that you have controlled or been
7 an officer or director of?
8 A. In any criminal laws?
9 Q. Yes.
10 A. No.
11 Q. Have you ever been, personally now, to your
12 knowledge the subject or target of any Grand Jury
13 investigation by any governmental agency?
14 MR. HIRSCHFELD: Let me interpose an
15 objection. I will let him answer. I will interpose
16 an objection to the form of the question. I'm not
17 sure he understands legally the significance of
18 "subject" or "target." I don't think he understood
19 it the last time when you asked him about the SEC.
20 I don't think he understands in terms of the Grand
21 Jury.
22 MR. STERN: That's a fair objection.
23 Q. Have you ever understood yourself to be
24 under investigation by a federal or state Grand
25 Jury?
40
1 A. No.
2 Q. Other than what you have testified about,
3 have you ever understood yourself to be under
4 investigation by the SEC?
5 A. No.
6 Q. Have you ever made any attempt, either you
7 or any of the entities that you control, to acquire
8 a control of a publicly held company over the
9 opposition of its Board of Directors?
10 A. Yes.
11 Q. One attempt or more than one attempt?
12 A. One attempt.
13 Q. When was that?
14 A. In 1989.
15 Q. What company was involved?
16 A. It was called Prime Computer Corporation.
17 Q. Through which of your entities did you
18 attempt that acquisition?
19 A. MAI Systems, Incorporated.
20 Q. What did MAI Systems do to attempt that
21 acquisition? How did you attempt to bring it about?
22 A. It made a tender offer for all the stock of
23 the company.
24 Q. Did the tender offer succeed?
25 A. No.
41
1 Q. What happened?
2 A. We were outbid by another company.
3 Q. Did you understand that to be a white knight
4 situation?
5 A. It depends which side you are on, I guess.
6 Q. You were outbid. Did you or MAI have an
7 investment in Prime Computer at the time of the
8 tender offer?
9 A. Yes.
10 Q. What happened to that investment?
11 A. We sold it to the tender offeror. The other
12 tender offeror succeeded, and we tendered our stock.
13 We got merged out.
14 Q. Does Prime Computer remain in existence?
15 A. I believe it subsequently went bankrupt.
16 Q. When did that happen?
17 A. I don't really know. I didn't follow its
18 futures after the tender offer.
19 Q. Was there any other instance other than
20 Prime Computer in which you attempted to acquire
21 control of a public company over the opposition of
22 its Board of Directors?
23 A. No.
24 Q. Did there come a time when you made a
25 control transaction with a company called American
42
1 Brands?
2 A. Repeat the question, please.
3 Q. Did there come a time when you or some
4 entity that you controlled made a proposal that
5 involved the acquisition of control of American
6 Brands?
7 A. No.
8 Q. Did you ever attempt to influence the
9 affairs of American Brands?
10 A. No.
11 Q. Did you ever make any proposal of any kind
12 to American Brands?
13 A. Yes.
14 Q. When was that?
15 A. It was in, I believe, 1988 or 1989, again,
16 that time frame. I don't remember exactly when.
17 Q. Which of your entities was involved in that
18 matter?
19 A. Liggett.
20 Q. What was the proposal?
21 A. The proposal was that we acquire their
22 domestic tobacco operation or they acquire my
23 domestic tobacco operation because the two fit, you
24 know, strategically very well together.
25 Q. Your domestic tobacco operation being
43
1 Liggett, correct?
2 A. That's correct.
3 Q. What did American Brands respond?
4 A. They responded that they did not want to
5 entertain it after studying the situation. They
6 responded negatively.
7 Q. After they responded negatively, did you
8 attempt to pursue the proposal?
9 A. No.
10 Q. Did you or Liggett have a share interest in
11 American Brands at the time you made the proposal?
12 A. I don't recall if it was before or after,
13 but I did have some interest, yes.
14 Q. What was the stock interest that you had?
15 A. I don't recall how many shares.
16 Q. What did you do with that interest?
17 A. Subsequently sold it.
18 Q. To whom?
19 A. To the market.
20 Q. Sir, you have testified about several
21 instances in which companies that you have
22 controlled have filed for bankruptcy protection.
23 Other than the instances that you have testified
24 about, are there any other instances in which
25 companies that you have controlled have filed for
44
1 bankruptcy protection?
2 A. You mean while I controlled it?
3 Q. Yes.
4 A. No.
5 Q. What about any instances in which, let's
6 say, within one year subsequent to your disposition
7 of control any such company filed for bankruptcy
8 protection?
9 A. Yes.
10 Q. One instance or more than one?
11 A. I think one.
12 Q. Which one are you referring to?
13 A. There was a company about 20 years ago
14 called Information Displays, Incorporated.
15 Q. I take it at some time you had a controlling
16 interest in Information Displays, Incorporated; is
17 that correct?
18 A. I had a large interest. It wasn't a
19 controlling interest.
20 Q. A large interest, but in your view did it
21 ever become a controlling interest?
22 A. With other people, yes.
23 Q. When did you acquire your interest in that
24 company?
25 A. Sometime in the 1970's. I don't recall
45
1 exactly when.
2 Q. How long did you hold that interest?
3 A. One year or two years.
4 Q. At the end of that period, do I understand
5 that you and your partners disposed of your interest
6 in that company?
7 A. I sold all my interest. Some of my partners
8 stayed on with their interest.
9 Q. And the company, within a year or so, you
10 recall, filed for bankruptcy protection?
11 A. The company--- The controlling interest was
12 then sold to another group, and they subsequently
13 filed bankruptcy.
14 Q. In what court did that filing take place?
15 A. I have no idea.
16 Q. You have testified about several instances
17 in which shareholders have brought claims against
18 you concerning your conduct of the affairs of
19 companies in which they hold minority or
20 noncontrolling interests. Other than the ones that
21 you have told me about, are there any other such
22 instances that you can recall?
23 A. Well, I don't recall any offhand, but there
24 are, you know, like any corporation, what we would
25 call nuisance type lawsuits which may have been
46
1 filed. I don't recall the details of them right
2 now.
3 Q. You may not recall the details, but do you
4 recall which companies were involved in these suits
5 that you believe were nuisances?
6 A. No, I don't recall.
7 Q. Do you remember any of the courts in which
8 they were filed?
9 A. No.
10 Q. Do you have any more recollection about that
11 than you have given me today?
12 A. No, not that I can recall.
13 Q. Was your deposition taken in regard to
14 those?
15 A. Not that I can recall.
16 MR. STERN: Bear with me for a moment.
17 Let's take a short break, and maybe we can
18 change subjects.
19 (Thereupon, a short recess was taken.)
20 Q. (By Mr. Stern) Other than the litigations
21 that we have already talked about, have there been
22 any instances where you have been charged by anyone
23 with fraud or misrepresentation in connection with a
24 business transaction?
25 A. Not that I can recall.
47
1 Q. I believe you testified earlier about a
2 company called Information Displays. Do I have that
3 accurately?
4 A. Correct.
5 Q. I believe you also testified -- again,
6 correct me. I am not trying to mislead you. I am
7 trying to make sure I recall your testimony
8 accurately -- that it was sold in 1984 or
9 thereabouts; is that correct?
10 A. No.
11 Q. When was Information Displays sold?
12 A. It was never sold. I sold my stock
13 position.
14 Q. I see.
15 A. It was a public company. I sold my stock
16 position in 1974, 1975, somewhere in that time
17 frame.
18 Q. Were you ever sued by anyone in connection
19 with Information Displays?
20 A. I think all the directors, a general suit of
21 all directors.
22 Q. Who brought that suit?
23 A. I have no idea.
24 Q. Do you know the outcome of that suit?
25 A. No. It does not exist any longer.
48
1 Q. Do you remember the court in which it was
2 pending?
3 A. No.
4 Q. Did the SEC ever bring any proceeding
5 against anyone that was related to the operations or
6 the disposition of Information Displays while you
7 were involved with the company?
8 MR. HIRSCHFELD: I object to the form
9 of the question. Could you break it up into pieces?
10 Q. I will put a new question.
11 Have you ever heard of a Mr. Weksel?
12 A. Yes.
13 Q. Who is Mr. Weksel?
14 A. He was president and chairman of the
15 company.
16 Q. Information Displays?
17 A. Correct.
18 Q. During what years?
19 A. During the seventies sometime.
20 Q. Was this the period during which you had an
21 interest in the company?
22 A. Some of the period.
23 Q. Were you an officer and director of the
24 company while Mr. Weksel held those positions?
25 A. During some of the period, yes.
49
1 Q. What was the nature of your relationship
2 with Mr. Weksel?
3 A. I knew him. We are friends.
4 You mean the social relationship or business
5 relationship?
6 Q. Business relationship.
7 A. He was chairman and president of the
8 company. I was a director, I believe, and secretary
9 of the company.
10 Q. Do you know whether or not the SEC ever
11 brought charges against Mr. Weksel in connection
12 with Information Displays?
13 A. I believe they did, yes.
14 Q. Do you know the outcome of those charges?
15 A. I don't know the details, no.
16 Q. Was your deposition taken in connection with
17 that SEC matter?
18 A. No.
19 Q. Was your deposition ever taken in connection
20 with a claim by anyone of fraud and
21 misrepresentation relating to Information Displays?
22 A. It was a deposition of some sort, yes, in
23 the seventies. I don't recall exactly when or what.
24 Q. Was that in connection with this litigation
25 against the officers and directors generally that
50
1 you vaguely recall?
2 A. Yes.
3 Q. Do you remember any more about that
4 litigation?
5 A. No.
6 Q. We have talked about cases involving
7 securities claims in which you may have been named
8 as a defendant. Are there any in which you have
9 been a plaintiff?
10 A. Not that I can recall.
11 Q. Did there come a time when you became
12 interested in developing a transaction with RJR?
13 A. Yes.
14 Q. When was that?
15 A. In late 1994.
16 Q. How did it come about that you became
17 interested in such a transaction?
18 A. Being in the tobacco business, I'm
19 constantly studying all the other tobacco companies.
20 We saw that there was a tremendous value somehow
21 locked up in RJR, that it was worth a lot more money
22 than the stock market appeared to be evaluating it.
23 Q. Who is the "we" in that sense?
24 A. We, myself and people within Brooke just
25 analyzing the companies, some analysts I have.
51
1 Q. What are their names?
2 A. Bryant Kirkland is one, and another outside
3 consultant we use on occasion by the name of Richard
4 Ressler is another.
5 Q. Mr. Kirkland is an employee of Brooke Group?
6 A. That's correct.
7 Q. What is his title?
8 A. Analyst.
9 Q. How long has he had that position?
10 A. A couple of years, a year-and-a-half, two
11 years.
12 Q. Mr. Ressler is an outside consultant?
13 A. Correct.
14 Q. How long has he been providing consulting
15 services?
16 A. About three years.
17 Q. What is the name of his firm?
18 A. Orchard Capital.
19 Q. Do you know what Mr. Ressler did before
20 joining Orchard Capital or forming Orchard Capital?
21 A. Yes.
22 Q. What was that?
23 A. He was an officer of Brooke Group and a
24 director.
25 Q. When did he become an officer and director
52
1 of Brooke?
2 A. Sometime in 1989.
3 Q. What did he do before then?
4 A. He was an employee at Drexel Burnham.
5 Q. Do you know how long he had been at Drexel?
6 A. No. I don't know exactly how many years.
7 Q. Do you know what his position at Drexel was?
8 A. It was a senior position. I don't know
9 exactly what position.
10 Q. Do you know what he did there in general?
11 A. Yes, investment banking.
12 Q. In analyzing RJR, what you described, did
13 you or other members of this group -- I think so far
14 you mentioned Mr. Kirkland and Mr. Ressler --
15 generate any documents?
16 A. There were some preliminary projections,
17 some value analyses from the public information.
18 Q. Did you come to any conclusion at that time
19 as to the value of RJR?
20 A. Not in any detail, but we felt there was
21 significant value there that wasn't being recognized
22 by the stock market for some reason.
23 Q. Is there any particular document that you
24 recall that embodied that analysis that led you to
25 the conclusion that you just described?
53
1 A. No.
2 Q. Did you have an order of magnitude as to the
3 significant value, any number that you---
4 A. Not really at this time. It was more
5 intuition than actual value analysis.
6 Q. Did there come a time when you enlisted
7 outside consultants other than Mr. Ressler in this
8 analytic process, in this process that you are
9 describing?
10 A. In this analytic process?
11 Q. The process of becoming interested in and
12 developing your interest in RJR.
13 A. Not during this period, no.
14 Q. What period are you talking about?
15 A. Late 1994, early 1995.
16 Q. What happened in early 1995 that---
17 A. Excuse me. Let me correct that. In late
18 1994 I did have some other people involved.
19 Q. Who was that?
20 A. Some of the people from Ladenburg Thalmann.
21 Q. Any names?
22 A. I don't recall. One of the analysts there
23 did some work on it.
24 Q. You referred to this as a period. That
25 implies, I guess, that there was in your own
54
1 thinking another period or a subsequent period.
2 A. Yes.
3 Q. When did that subsequent period begin?
4 A. You say "period." Do you mean event type
5 period?
6 Q. Yes.
7 A. I would say in May of 1995 events changed.
8 Excuse me. March to May. Let's put it that way.
9 Q. What was the nature of that change?
10 A. One of the primary natures of that change --
11 two primary natures of that change were that the
12 debt restructuring was announced by RJR, and we
13 subsequently had a meeting -- a significant meeting
14 with the principals of the company in May of 1995.
15 Q. In this time frame, late 1994 through the
16 May, 1995 meeting, were there any other people
17 brought into the group that was considering some
18 kind of transaction with RJR?
19 A. I had meetings with quite a few other
20 people, discussing a possible transaction, yes.
21 Q. Who were they?
22 A. Mr. Lorber got involved, also.
23 Q. Who is he?
24 A. He's president of New Valley. We discussed
25 financial -- various financial arrangements with
55
1 some people in Europe and other tobacco companies.
2 We met during this period or I met, I should say --
3 I met with various banks. I had some conversations
4 with an investment banker.
5 Q. Why did Mr. Lorber become involved?
6 A. As an adviser, just because he's part of my,
7 you know, inner circle management team. He gives
8 advice and counsel.
9 Q. Who were the people in Europe that you
10 referred to?
11 A. I worked pretty closely with an individual
12 by the name of Mr. Klesch, who has an investment
13 banking firm in London.
14 Q. You also mentioned other tobacco companies.
15 A. Yes.
16 Q. Who were they?
17 A. I met with the president of -- the owners, I
18 should say, of Rothmans. I met with the president
19 of Tabacalera. I met with some senior people with
20 Reemtsma. I met with some senior people of Imperial
21 Tobacco, also.
22 Q. Can you think of any others?
23 A. Are there any others? No. That's it.
24 Q. You mentioned that you had some conversation
25 or you met with some banks.
56
1 A. Yes.
2 Q. Which banks did you meet with?
3 A. I didn't really meet with any of the banks.
4 Mr. Klesch met with the various banks, discussing
5 possible financing. I had one meeting here at lunch
6 with one banker. I don't recall which banker it was
7 offhand.
8 Q. You said you had some conversations with an
9 investment banker. Who was that?
10 A. Wasserstein, Perella.
11 Q. Did you consult with any law firms?
12 A. Yes.
13 Q. Which ones?
14 Q. Fried Frank, Kelley Drye, and during this
15 period, also, I guess, Milbank.
16 Q. What role did Mr. Klesch play? What was it
17 that you were looking for him to do?
18 A. He was attempting to arrange financing to
19 refinance the bank debt.
20 Q. Is he still working in that capacity?
21 A. No.
22 Q. When did he stop?
23 A. When RJR completed their financing or debt
24 swap, as we call it.
25 Q. Did he do anything else at your request?
57
1 A. Regarding this transaction?
2 Q. Yes.
3 A. No.
4 Q. Regarding RJR.
5 A. No.
6 Q. What was the nature of your conversations
7 with Wasserstein, Perella?
8 A. I was working on another transaction with
9 them at the time, and we started talking about the
10 spinoff transaction here, and they got interested to
11 pursue it, to be an adviser.
12 Q. Whom were you talking with?
13 A. Mario Baeza, B-A-E-Z-A, and Bruce
14 Wasserstein at one point.
15 Q. Did you sign an engagement letter of any
16 kind with Wasserstein, Perella?
17 A. Yes.
18 Q. What did you ask Wasserstein to do? What
19 were their instructions?
20 A. They were attempting at the time to put
21 together a joint venture with myself and Reemtsma to
22 pursue a transaction, and they represented me and
23 Reemtsma.
24 Q. Anything else?
25 A. General advice.
58
1 Q. Are they still working with you in regard to
2 RJR?
3 A. No.
4 Q. When did they stop?
5 A. September approximately -- August, September
6 of 1995.
7 Q. Why did that relationship or engagement
8 terminate?
9 A. They decided on their own not to pursue it
10 any further, pending the Reemtsma/Liggett
11 restructure.
12 Q. Do you have any understanding from any
13 source as to why they made that decision?
14 A. No, I have no understanding.
15 Q. Did you discuss it with Mr. Baeza or
16 Mr. Wasserstein?
17 A. No. I didn't pursue it.
18 Q. In this period of time, from the beginning
19 of your interest in late 1994 through the meeting in
20 May that you described, were you generating any
21 documents that you can recall relating to this
22 process that was taking place?
23 A. Just, you know, very rough projections as to
24 sales and earnings, debt ratios and things of that
25 nature.
59
1 Q. When I say "you," my question was ambiguous.
2 I don't mean you personally.
3 A. Yes, my group.
4 Q. Do you remember reviewing any documents in
5 particular, any kinds of analyses?
6 A. Yes, the public documents and the same type
7 of analysis, yes.
8 Q. Were you considering any particular kind of
9 transaction or kinds of transactions?
10 A. I was considering a transaction to spin off
11 Nabisco and effectuating a combination with another
12 tobacco company in order to refinance the bank debt,
13 which had a restriction against a spinoff.
14 Q. Well, were you contemplating merging Liggett
15 with RJR Tobacco?
16 A. I was contemplating Liggett being the
17 mechanism by which one could achieve the spinoff.
18 Q. Why did you view Liggett as a mechanism by
19 which one could achieve a spinoff?
20 A. Lots of reasons. First of all, we kind of
21 understood -- not kind of understood. We did
22 understand that the prime reason against a spinoff
23 was a fewfold.
24 Number one was the tax-free nature of it. I
25 was advised by my counsel that using Liggett in a
60
1 spinoff would be tax free. They would be prepared
2 to give a tax-free opinion to that effect.
3 I was also advised by various people or in
4 various conversations with people that one of the
5 main reasons against a spinoff was a potential
6 personal liability associated with that for
7 directors and officers, and it was clear, since we
8 have already done a few spinoffs, that the directors
9 and officers of Liggett were prepared to do the
10 spinoff, and it made sense not being involved with
11 two different tobacco companies from various
12 antitrust problems and Clayton Act problems and
13 things of that nature.
14 Q. I didn't understand the last sentence, the
15 last reference you made to antitrust. It made sense
16 not to be involved with two---
17 A. It's difficult being involved with two
18 companies which are competitors. That's a very
19 difficult thing.
20 Q. You saw a merger as a way of addressing that
21 problem?
22 A. That was the least of the reasons. The
23 other reasons, the spinoff reasons were the primary
24 reasons.
25 Q. At the time that you began this process, did
61
1 you or any of your entities own any RJR stock?
2 A. Yes.
3 Q. How much did you own?
4 A. I believe we started buying RJR stock in
5 February of 1995, and we owned -- I don't recall
6 exact numbers, but we can get them for you -- a
7 couple million shares, two or three million shares.
8 Q. At the time that you started the process in
9 late 1994, you did not have any RJR stock; is that
10 correct?
11 A. Nothing significant at that time.
12 Q. How did you see yourself or your companies
13 benefiting from a spinoff, profiting from a spinoff
14 in view of the fact that at the time you started
15 this process you did not have a significant holding?
16 MR. HIRSCHFELD: Objection to the form.
17 A. Two or three million shares is not
18 insignificant.
19 Q. At what point in time did you acquire two or
20 three million shares?
21 A. February of 1995, from what I recall.
22 Q. I'm going to come back to this in a second.
23 First, let me ask you, did you ever see any document
24 request that was made by RJR in this case?
25 A. No, I never saw one.
62
1 Q. Were you asked by anyone to search your
2 files for documents for production in this
3 litigation?
4 A. Yes.
5 Q. What was the nature of your search?
6 A. I searched my files. My secretary searched
7 my files here, and I searched my file at home and
8 provided everything we have.
9 Q. What did you understand the scope of the
10 search to be?
11 A. Anything relating to RJR.
12 Q. Did you provide to someone all the documents
13 that you found as a result of that search that you
14 described?
15 A. Absolutely.
16 Q. To your knowledge, have those documents been
17 either produced to RJR or withheld under a claim of
18 privilege?
19 A. To my knowledge, yes.
20 Q. Do you maintain a personal calendar or
21 diary?
22 A. Yes.
23 Q. Did you check your calendar or diary for any
24 references to RJR?
25 A. No, I did not.
63
1 Q. Did you discuss with anyone whether you
2 should do that?
3 A. Yes, I believe I did.
4 Q. Other than counsel?
5 A. Other than counsel, no.
6 Q. Just so the record is clear, you have not
7 searched your--- Is it a diary or a calendar that
8 would contain---
9 A. It's a small diary with cryptic notes.
10 Excuse me. It's a small calendar, not a diary. I
11 call it a calendar. You mean do I keep a diary of
12 notes? Is that what you're saying?
13 Q. Either a calendar or a diary.
14 A. Only a calendar.
15 Q. That was not checked for references to
16 events relating to RJR?
17 A. No, it was not checked.
18 Q. Can you tell me why that was not checked?
19 A. No one asked me to check it. I specifically
20 asked counsel, "Do you want my calendar?" He said
21 no. On advice of counsel---
22 Q. Mr. LeBow, I am going to ask the reporter to
23 mark three documents as exhibits in this deposition.
24 Off the record.
25 (Thereupon, a discussion was held off
64
1 the record.)
2 MR. STERN: We are going to mark these
3 documents as Plaintiff's Exhibits 1, 2 and 3.
4 (Thereupon, the documents referred to
5 were marked as Plaintiff's Exhibits Nos. 1, 2 and
6 3 for Identification.)
7 MR. HIRSCHFELD: Tell me which are
8 marked.
9 MR. STERN: We have marked as Exhibit
10 Number 1 the document that starts with Number BGL
11 8660, as Exhibit 2 the document numbered BGL 6222
12 and as Exhibit 3 the document marked BGL 8666.
13 Q. Mr. LeBow, I'm going to put all three
14 exhibits before you. I ask you if you have ever
15 seen any copy of these documents before.
16 A. Yes, I recognize them.
17 Q. For the record, could you identify those
18 documents, please?
19 A. These are copies of reports that Accounting
20 puts out as to our share ownership of RJR stock.
21 Q. Did you receive and review these reports in
22 the ordinary course of your business?
23 A. Most likely I did, yes.
24 Q. To your knowledge, do they accurately
25 reflect all purchases of RJR stock by Brooke Group
65
1 or any of its affiliates?
2 A. To my knowledge, yes.
3 Q. I note that purchases were made by New
4 Valley Corporation; is that correct?
5 A. Yes.
6 Q. Why did New Valley Corporation, as opposed
7 to any of your other entities, make these purchases?
8 A. Because New Valley was the most liquid
9 cashwise.
10 Q. Was there any reason relating to the
11 antitrust laws why New Valley made these purchases?
12 A. No, not at all.
13 Q. Am I correct in understanding that New
14 Valley's cash liquidity resulted from certain
15 transactions that took place in connection with its
16 bankruptcy proceeding?
17 A. That's correct.
18 Q. What transactions were those?
19 A. It sold a major asset to another company for
20 cash, a significant amount of cash.
21 Q. Sir, referring to these reports, could you
22 tell me how many shares of RJR Brooke Group had
23 acquired, let's say, as of May, 1995?
24 A. It appears--- Excuse me. It appears that
25 we acquired about 700,000 preferred C shares, which
66
1 have an extra interest in a spinoff, and 100,000
2 common shares.
3 Q. What did you mean by "an extra interest in
4 the spinoff"?
5 A. My understanding is the preferred C's -- if
6 a spinoff does occur, additional consideration is
7 given to preferred C holders. So, we were obviously
8 focused on the preferred C's at that time.
9 Q. In this period leading up to May, 1995, did
10 you perform any analysis of the value of a Nabisco
11 spinoff standing alone; that is, without an
12 associated merger between or involving RJR and
13 Liggett?
14 MR. HIRSCHFELD: Objection to the form.
15 I don't think I understand what you are saying.
16 Q. Let me try again.
17 Just so I'm sure I'm reading this document
18 correctly, can you tell me the total investment
19 dollar amount that New Valley had made through May,
20 1995?
21 A. You have to give me a calculator.
22 Q. I don't mean to ask you to do arithmetic.
23 Would one add the numbers on the right-hand column
24 of my Exhibit 1?
25 A. Yes. It appears to be -- you know, it's in
67
1 the millions of dollars.
2 MR. HIRSCHFELD: Can we just go off the
3 record a moment?
4 (Thereupon, a discussion was held off
5 the record.)
6 MR. STERN: I am going to mark as the
7 next three exhibits -- I think we are up to 4, 5 and
8 6 -- three documents that have been produced to us
9 by the LeBow parties in this case.
10 (Thereupon, the documents referred to
11 were marked as Plaintiff's Exhibits Nos. 4, 5 and
12 6 for Identification.)
13 MR. STERN: So we are all talking
14 literally off the same page, Exhibit 4 is the
15 document starting with BGL 5583. Number 5 is the
16 document starting with BGL 5570, and Number 6 is the
17 document starting with BGL 5601.
18 Q. Mr. LeBow, I place the exhibits in front of
19 you. We both have about the same reach, I'm afraid.
20 Have you seen any of those documents before?
21 A. Yes, I have.
22 Q. Could you identify them, please?
23 A. It looks like the proposed joint venture
24 deal that we were working on in the early part of
25 1995 that we had contemplated.
68
1 Q. So, are these among the--- Let me ask you a
2 prior question. Who generated these documents? Who
3 drafted them?
4 A. I'm not exactly sure who did it totally, but
5 I'm sure the individuals I mentioned before were
6 involved, Mr. Kirkland and Mr. Ressler, those
7 people.
8 Q. Were they done at your instruction?
9 A. Pardon?
10 Q. Were they done at your instruction?
11 A. Yes. It was done, you know--- I don't know
12 if I instructed this to be done, Mr. Ressler did or
13 they--- I don't recall exactly who gave the
14 instruction to do this.
15 Q. I'm sorry I interrupted you.
16 What was the purpose in preparing these
17 documents, if you know?
18 A. Knowing that there was a lot of value locked
19 up in RJR Nabisco, knowing also that the board of
20 RJR was reluctant to do a spinoff, knowing also that
21 the bank debt prohibited a spinoff, we were
22 attempting to put together a partnership arrangement
23 which would effectuate a spinoff. This was a
24 potential arrangement, complicated in the sense that
25 there were a lot of tax issues, a lot of other
69
1 issues that had to be structured. It was one
2 structure that was analyzed.
3 Q. Other than the structures that are put forth
4 in these exhibits, do you know of any other
5 structures of transaction---
6 A. Excuse me. I haven't looked at the other
7 exhibits yet.
8 Q. I'm sorry. Why don't you complete your
9 review.
10 A. These are just samples of the structures to
11 be analyzed over this period. I don't remember how
12 many we analyzed, how many ideas that were--- There
13 were quite a few. It was an attempt to understand
14 the issues.
15 Q. Do you recall analyzing any structure which
16 did not have as a component a combination or merger
17 of Liggett with RJR?
18 A. I think every structure at this point in
19 time involved Liggett, RJR and another tobacco
20 entity, a potential international tobacco entity. I
21 believe at all times it involved all three.
22 Q. So, the answer to that question is yes?
23 A. In combination with a third.
24 Q. At this time, being the period between late
25 1994 and May, 1995 when you had your meeting with
70
1 RJR management?
2 A. Correct.
3 Q. During this period of time, did you develop
4 any estimate of value of any particular alternative
5 transaction from the standpoint of Brooke Group; in
6 other words, the increase in the value of Brooke
7 Group's holdings from proceeding -- and Liggett from
8 proceeding with the transactions?
9 A. Not that I recall directly.
10 Q. Indirectly?
11 A. I don't recall.
12 Q. Did you have any analysis done of the
13 relative values of Liggett and RJR for the purposes
14 of these proposed transactions?
15 A. Independent values, you mean?
16 Q. Yes, what the companies were worth.
17 A. No.
18 Q. You had mentioned in an earlier response
19 that among the reasons or among the factors you were
20 taking into consideration was a perception that
21 there was a concern about personal liability on the
22 part of people at RJR resulting from the spinoff.
23 Now, I know I didn't accurately state your
24 testimony, but have I captured the gist of what you
25 told me?
71
1 A. That was one of their major concerns, yes.
2 Q. I think you said that you had heard things
3 to that effect from various people.
4 MR. HIRSCHFELD: Well, his testimony is
5 whatever it is.
6 MR. STERN: That's right. I'm just
7 trying to refer back to that testimony.
8 A. In analyzing the situation with counsel and
9 other people, I was trying to figure out why Nabisco
10 was not being spun off. We came to the conclusion,
11 you know, considering all of the legal aspects of
12 things, that this was a major -- must be a major
13 consideration. There's nothing else making sense.
14 Q. Who are these other people whom you were
15 referring to?
16 A. Counsel.
17 Q. You said counsel and other people.
18 A. Well, the same people we are talking about,
19 Ressler, Kirkland.
20 Q. Did anybody from RJR ever tell you that
21 concern with personal liability--- I take it we are
22 talking about personal liability of the Board of
23 Directors. Is that accurate?
24 A. And/or officers.
25 Q. Did anyone from RJR tell you that a concern
72
1 with personal liability of the directors and/or
2 officers was a reason why RJR was not proceeding
3 with the spinoff?
4 MR. HIRSCHFELD: At what point in time?
5 MR. STERN: At any point in time.
6 A. To me directly, any officers or directors,
7 no; but to other people, yes.
8 Q. Which other people?
9 A. Counsel and/or my advisers.
10 Q. I take it that was reported to you; is that
11 correct?
12 A. That's correct.
13 Q. Which counsel or adviser reported back to
14 you?
15 A. Again, I don't recall exactly who, but if it
16 was counsel that reported to me, it would be
17 Mr. Hirschfeld here. If it was an adviser, it was
18 either Mr. Baeza and/or Mr. Ressler, who attended
19 these meetings.
20 Q. Just so I understand and the record is
21 clear, did they tell you that they had been told by
22 somebody from RJR that the concern that we are
23 discussing was a factor in RJR's reluctance to
24 proceed with the spinoff?
25 A. Absolutely.
73
1 Q. Whom did they say told them that?
2 A. I believe it was Mr. Goldstone. I was told
3 that, considering--- We presented Mr. Goldstone
4 with a potential, I believe, one sheet or so or even
5 a book -- I forget at the first meeting what we gave
6 him -- a potential transaction involving, as we said
7 before, a spinoff from Nabisco, Liggett and an
8 international joint venture partner, and it was
9 relayed back to me in subsequent meetings that
10 Mr. Goldstone felt for credibility purposes to Wall
11 Street, to the institutional investors, it was
12 important to have the institutional -- excuse me --
13 the international tobacco company as a partner.
14 I was told two things. First of all, he
15 wanted to make sure there was really shareholder
16 support for a spinoff because in the previous
17 resolution a year earlier, he did not receive major
18 support. So, assuming there was support for a
19 spinoff, his next concern is that we have
20 credibility to effectuate it because the words were
21 that he would have a problem with the board doing
22 the spinoff.
23 Q. That's what you were told by one of your
24 advisers, who were reporting back to you on
25 conversations with Mr. Goldstone; is that correct?
74
1 A. That's correct.
2 Q. They talked about shareholder support and
3 credibility as Mr. Goldstone's concerns; is that
4 correct?
5 A. Yes, because the credibility problem being
6 that, although they will never do the spinoff
7 because of the personal liability issues and they
8 understood the Board of Directors of Liggett would
9 do it, you know, on a transaction, it would look a
10 lot better to Wall Street, so to speak, if a major
11 international tobacco company was also involved.
12 Q. Mr. Hirschfeld or Mr. Baeza or Mr. Ressler
13 reported to you that Mr. Goldstone had said that; is
14 that correct?
15 A. Absolutely.
16 Q. Again, just so I'm clear, did they report to
17 you that Mr. Goldstone had said that related to
18 these concerns was a concern about the personal
19 liability of directors?
20 A. Yes.
21 Q. Did they report to you whether or not
22 Mr. Goldstone had explained how the personal
23 liability concern would be addressed by or supported
24 by the two issues, shareholder support and
25 credibility on Wall Street?
75
1 A. Well, if we did the spinoff, there would be
2 no personal liability on behalf of the old
3 directors, the current directors, because they
4 wouldn't be doing it. We would be doing it. So,
5 there was no concern if we did it.
6 Q. Did they tell you that Mr. Goldstone had
7 said there would be no concern if Liggett did it?
8 A. I'm not sure exactly the words, I mean, but
9 the logic was that. I mean, if we did it, there is
10 no concern.
11 Q. Was that Mr. Goldstone's logic or somebody
12 else's logic?
13 A. Mr. Goldstone's logic.
14 Q. Just to be clear again, your recollection is
15 that you were advised by people who were at these
16 meetings that you did not attend that Mr. Goldstone
17 had reason or had expressed the view that, if
18 Liggett did the spinoff, there would not be a
19 personal liability concern to the RJR directors or
20 officers.
21 A. Absolutely. Otherwise, why did they need
22 Liggett? Why did they need me? They know the names
23 of these international tobacco companies that we are
24 talking about. They could do it themselves.
25 Q. Did Mr. Goldstone ever tell you or was it
76
1 ever reported to you that Mr. Goldstone had said
2 that RJR needs Liggett?
3 A. It was reported to me that RJR needed an
4 outside entity to effectuate the spinoff because
5 this board would not do it.
6 Q. Again, this is an important point. I'm not
7 dwelling on trivia here.
8 It was your understanding that Mr. Goldstone
9 or somebody else from RJR in one of these meetings,
10 and we will talk more about them later, with your
11 representatives said, "We have a concern or our
12 directors and officers have a concern about personal
13 liability and, therefore, they are not going to do
14 the spinoff, at least not right now"; is that
15 correct?
16 A. That's basically correct. It was an overall
17 concern about the litigation, the litigants that
18 exist and personal liability.
19 Q. There's a distinction, of course, between a
20 concern about tobacco litigation and a concern about
21 personal liability.
22 A. I'm sorry. It wouldn't make any sense. Why
23 would Liggett be involved at all? Why would we have
24 these meetings? What's the purpose of having these
25 meetings?
77
1 Q. Who proposed the meeting, sir? How did RJR
2 and Liggett--- I'm using "Liggett" to describe the
3 Brooke Group and yourself. How did these meetings
4 come about? Who initiated them?
5 A. I initiated the first meeting with Henry
6 Kravitz the previous December to propose a similar
7 type of transaction. Mr. Kravitz said he would get
8 back to me. He never did. He subsequently sold his
9 stock and resigned, you know, from the situation.
10 After that, I believe what happened was
11 Mr. Harper and Mr. Wasserstein had lunch, and a
12 suggestion was made by Mr. Harper that we all meet
13 and discuss whatever proposal I may have.
14 Q. The meeting with Mr. Kravitz, you initiated
15 that meeting in December; is that correct?
16 A. Mr. Kravitz and Mr. Lorber met socially, and
17 a discussion came up that Mr. Kravitz would be very
18 interested in our involvement because he felt the
19 same problem existed, and he suggested we meet, and
20 we did in December.
21 Q. What was that problem? You said "the same
22 problem."
23 A. Of how to spin off Nabisco.
24 Q. Did you understand that Kravitz had raised
25 this with Lorber, or had Lorber raised it with
78
1 Kravitz?
2 A. They met socially. I'm not sure who
3 initiated the transaction.
4 Q. By this time, by the time they met, the
5 process of review that you have been describing had
6 already begun; is that correct?
7 A. It was very preliminary. They met sometime,
8 I believe, in October of 1994. It was a very
9 preliminary conversation, the analysis that we
10 conducted.
11 Q. That analysis included, even at that point
12 in time, as a component, a combination of RJR and
13 Liggett?
14 A. I don't recall. This was a very preliminary
15 analysis of spinning off Nabisco and why is RJR's
16 value, you know, so low? Why is the stock so low?
17 That was the preliminary analysis, period.
18 Q. That was the entire analysis up until that
19 point; is that correct?
20 A. Pretty much.
21 Q. So that I understand it, Lorber and Kravitz
22 had a conversation, and then you initiated the
23 meeting; is that correct?
24 A. Kravitz suggested it.
25 Q. Kravitz suggested the meeting?
79
1 A. That's my understanding from Mr. Lorber,
2 that we get together as soon as possible to discuss
3 it.
4 Q. When you heard this from Mr. Lorber, what
5 did you do?
6 A. I did some more homework, analyzing the
7 situation. I scheduled a meeting to discuss it.
8 Q. Do you remember reviewing any particular
9 analysis that you reviewed before meeting with
10 Mr. Kravitz?
11 A. I think around this time is when I had
12 Ladenburg do some analysis.
13 MR. STERN: I'm going to mark as
14 Exhibit Number 7 a document that was produced to us
15 by the LeBow parties that starts with Document
16 Production Number BGL 2513.
17 (Thereupon, the document referred to
18 was marked as Plaintiff's Exhibit No. 7 for
19 identification.)
20 MR. STERN: I am afraid I am going to
21 have to ask you to share this one.
22 Q. Mr. LeBow, I have handed you Exhibit 7. Can
23 you identify this document?
24 A. It's something that looks like Ladenburg
25 prepared.
80
1 Q. Is this the document that you referred to
2 that is something that you believe you reviewed
3 prior to your meeting with Mr. Kravitz?
4 MR. HIRSCHFELD: Objection to the form.
5 A. Quite possibly.
6 Q. In response to the objection, I will
7 rephrase the question.
8 Did you review this document before meeting
9 with Mr. Kravitz?
10 A. I either reviewed this document or a similar
11 document, similar information. This is all public
12 information. It appears they put it together in one
13 booklet.
14 Q. Am I correct in understanding that at the
15 time that you met with Mr. Kravitz, you did not have
16 any particular form of transaction in mind? Is that
17 correct?
18 A. Not in any detail.
19 Q. And you did not own any RJR shares at that
20 time, either you or your affiliates.
21 A. Correct.
22 Q. Now, where did you and Mr. Kravitz meet?
23 A. At his offices.
24 Q. Was anyone else present?
25 A. Yes.
81
1 Q. Who else was present?
2 A. On my side, Mr. Lorber, Mr. Kramer from
3 Ladenburg and Mr. Brad Scheler from Fried Frank.
4 Q. Brad Scheler?
5 A. Yes.
6 Q. Who was Fried Frank representing?
7 A. Me.
8 Q. Did you bring any documents to that meeting?
9 A. Not that I recall.
10 Q. Were any documents exchanged at the meeting?
11 A. No.
12 Q. How long did the meeting last?
13 A. About half an hour.
14 Mr. Kravitz had some people with him. I
15 don't recall their names.
16 Q. Colleagues, people whom you understood were
17 from KKR or some other Kravitz---
18 A. Correct.
19 Q. Was anybody present from RJR other than
20 Mr. Kravitz?
21 A. I don't believe so. Well, the other person,
22 I think, was a director of RJR.
23 Q. Do you remember that individual's name?
24 A. One of the KKR people was also there.
25 Q. Who said what to whom?
82
1 A. We just had, you know, a friendly discussion
2 about the issues, about possibly spinning off
3 Nabisco, the business. It was a very preliminary
4 and general meeting.
5 Q. Well, do you remember what was said about
6 the spinoff?
7 A. Yes. I remember I said to Mr. Kravitz that
8 I believe with Liggett's involvement we can
9 effectuate the spinoff for him, providing we could
10 also--- You know, we hadn't explored the financing
11 issues yet, vis-a-vis the banks and so forth, and
12 things of that nature; and if he was interested in
13 proceeding, we would be interested in working with
14 him.
15 Q. What did Mr. Kravitz say?
16 A. He basically was very friendly. We had some
17 lively discussion about this, and he said he would
18 get back to us. He wanted to think about it and get
19 back to me.
20 Q. Did anyone mention personal liability on the
21 part of officers or directors of RJR at that
22 meeting?
23 A. I don't recall.
24 Q. Did anyone mention the possibility of
25 fraudulent conveyance litigation generally?
83
1 A. I don't think so.
2 Q. Did you explain to Mr. Kravitz what you
3 meant by Liggett's involvement?
4 A. I believe what I explained to him is that
5 there were good business reasons -- again, back to
6 the same other reasons, the tax-free reasons and
7 solid business reasons -- for Liggett to effectuate
8 a spinoff. In addition, the Liggett board was
9 prepared to go ahead with it, if he so desired.
10 Q. Well, how did you contemplate Liggett would
11 effectuate a spinoff of Nabisco?
12 A. Liggett would--- Again, this technicality
13 was not worked out, but on some basis the Liggett
14 board would replace the RJR board if we would
15 effectuate the spinoff and so forth, assuming we
16 could refinance the bank debt and do all the other
17 things that were necessary to accomplish the
18 spinoff.
19 Now, you can always come back and say, well,
20 they can do it themselves. Logically, I came to the
21 conclusion, what did they need us for? Well, he
22 wanted to meet and talk about it.
23 Q. So, at this meeting did you discuss with
24 Mr. Kravitz what you just told us; namely, that you
25 had in mind in some fashion that the Liggett board
84
1 would replace the RJR board and effectuate the
2 spinoff?
3 A. In those kind of details, no.
4 Now I'm remembering some more items. We did
5 get into fraudulent conveyance conversations because
6 I remember Mr. Kravitz brought up the issue of
7 Hillsboro and things that he was involved in that
8 had similar problems. This was an attempt to solve
9 those problems. We did have a conversation about
10 that.
11 Q. Was it made explicit in these discussions
12 that a possible structure would include a merger of
13 Liggett and RJR?
14 A. The details, no, were not made specific in
15 this discussion.
16 Q. Was it made explicit in the discussion that
17 in some fashion the Liggett board would take control
18 of RJR for the purposes of this transaction?
19 A. Well, no, because it wasn't necessarily at
20 that point the Liggett board or a new board or what
21 board. I mean his board, it was pretty clear, was
22 not going to spin off Nabisco.
23 Q. Did he say why his board would not spin off
24 Nabisco?
25 A. He must have. I don't recall exactly
85
1 because we did get into conversation about, I
2 recall, the Hillsboro issues and some of those
3 issues that were raised in that situation.
4 Q. What did you understand the Hillsboro issue
5 to be?
6 A. That Mr. Kravitz was very concerned about
7 one piercing corporate veils and getting to him
8 personally, things of that nature. That was the
9 Hillsboro issue.
10 Q. Did Mr. Kravitz say to you that he was
11 concerned about personal liability?
12 A. I don't recall his exact words, but we had a
13 very lively meeting.
14 Q. You recall that Hillsboro was brought up; is
15 that correct?
16 A. I absolutely recall that, yes.
17 Q. But you don't recall whether or not
18 Mr. Kravitz said that he was concerned about
19 personal liability?
20 A. I don't recall him saying that exactly, no.
21 Q. Or that anybody else was concerned about
22 personal liability?
23 A. I don't recall.
24 Q. Do you remember any other discussion about
25 the possibility of a Liggett/RJR transaction of any
86
1 kind with Mr. Kravitz?
2 A. No.
3 Q. You told me everything you remember about
4 that meeting?
5 A. At the present time, that's all I can
6 remember, but he was very interested in talking.
7 Q. So, what happened next?
8 A. I was a little encouraged by what he said,
9 but I realized one of the major problems--- Excuse
10 me. Now I remember one of the things he said. He
11 said, "Can you come up with the money necessary to
12 effectuate this? Can you raise the money?" He had
13 his concerns about that.
14 I said, "Henry, I don't know. Let me see if
15 I can," knowing full well that there was a problem
16 with the bank covenants.
17 Q. Let's dwell on this for a second.
18 A. Be my guest.
19 Q. Why was money needed to effectuate this?
20 A. Because the bank debt had a covenant there
21 prohibiting a spinoff.
22 Q. Whose bank debt?
23 A. RJR's bank debt.
24 Q. Do you remember the amount of that bank
25 debt?
87
1 A. There was $3 billion plus.
2 Q. So, when Mr. Kravitz said, "Can you come up
3 with the money," he meant could you find a way of
4 replacing the bank debt?
5 A. That's correct.
6 Q. That involved an amount in the neighborhood
7 of $3 billion plus; is that correct?
8 A. Absolutely correct.
9 Q. Your recollection is that you responded, "I
10 don't know, but we will see."
11 A. That's correct.
12 Q. Do you remember anything else about that
13 discussion?
14 A. As you talk, more things are coming out, of
15 course.
16 I also recall that when Mr. Lorber and
17 Mr. Kravitz met socially prior to this, the same
18 question came up, "Can he come up with the money,"
19 which was encouraging, that he was prepared to do
20 some sort of deal if we could raise the money.
21 Q. So, am I correct then that your
22 understanding was that Mr. Kravitz' concern was
23 whether or not Liggett or Brooke Group could come up
24 with the money necessary to refinance the bank debt;
25 is that correct?
88
1 A. That was one of his concerns, yes.
2 Q. Did he mention any other concerns?
3 A. I don't recall.
4 Q. I appreciate your going back to expand on
5 your earlier answer, but I think at that point we
6 were at the "What happened next" question.
7 Did you prepare any memorandum or did you
8 see any memorandum summarizing or in any way
9 reflecting what was said at this meeting?
10 A. No.
11 Q. What happened next?
12 A. Then we started doing an analysis to address
13 the $3 billion question, talking to various tobacco
14 companies, banks, et cetera. Everything you see
15 next happened to address the $3 billion question
16 that Mr. Kravitz raised at that meeting.
17 Q. How did you go about addressing the $3
18 billion question?
19 A. I first talked to Mr. Klesch. Well, first I
20 very quickly ascertained that United States banks
21 would not finance a refinancing because my
22 understanding was from the U.S. banks, they wanted
23 to get out, not come more in. They were concerned
24 about the tobacco litigation.
25 Q. So, the U.S. banks were not prepared to lend
89
1 additional funds to a tobacco company.
2 A. Correct.
3 So, I contacted Mr. Klesch in Europe to see
4 if overseas banks had any interest. After about a
5 month or two, he reported back to me that it would
6 be very difficult.
7 Q. For the same reason?
8 A. Well, somewhat, yes, and somewhat, no. We
9 never got to any detail to find out the reasons.
10 Q. Did he explain what the reasons were at all?
11 A. Well, one question was, would this be done
12 on a friendly basis or not. I couldn't answer that
13 at the time. I had not had another conversation
14 with Mr. Kravitz.
15 The other reason was, "Hey, U.S. banks
16 wouldn't do it. Why would foreign banks do it?
17 There must be a problem here."
18 Q. Did Mr. Klesch say that foreign banks were
19 concerned about lending to tobacco companies?
20 A. Yes, absolutely, correct.
21 Q. What else did you do?
22 A. Well, then I came to the conclusion that, if
23 the banks were not going to refinance the $3
24 billion, I needed a partner to help and preferably a
25 tobacco partner, someone who understood the
90
1 business, not just a financial partner.
2 Q. Again, why did you conclude that you needed
3 a tobacco partner?
4 A. Because we concluded the best way to
5 effectuate the refinancing would be to form a joint
6 venture with some international partner who, at the
7 price of having an international joint venture,
8 would provide the financing necessary to refinance.
9 Q. What kind of joint venture were you
10 contemplating?
11 A. A very complicated one, in order to minimize
12 taxes and maximize gain. That's reflected in some
13 of these analyses that were done.
14 Q. Referring to the exhibits that we marked
15 earlier.
16 A. Yes.
17 Q. These were joint ventures not between
18 Liggett and a foreign tobacco company, but between
19 RJR Tobacco or some portion---
20 A. RJR International and a foreign tobacco
21 company, yes.
22 Q. Did you tell Mr. Kravitz that you were
23 exploring that possibility?
24 A. No.
25 Q. Did you tell anyone from RJR that you were
91
1 exploring that possibility?
2 A. No.
3 MR. HIRSCHFELD: At which point in
4 time?
5 A. At which point? Yes.
6 Q. This is in the period of December, prior to
7 the May meeting.
8 A. No. I never told anyone.
9 Q. Did you contact international tobacco
10 companies?
11 A. Yes. I said that earlier.
12 Q. You mentioned a list of names. How did you
13 go about contacting them?
14 A. Through some associates who put me--- It
15 was obvious who they were, some of the people in the
16 industry.
17 Q. Who were the associates?
18 A. Pardon?
19 Q. Who were the associates?
20 A. One associate was Tony Taberer from Intabex,
21 one of our suppliers of tobacco, and, you know, the
22 internal Liggett people, my own people.
23 Q. Any particular internal---
24 A. Yes, the president of Liggett,
25 Mr. Chakalian.
92
1 Q. Did you meet personally with any
2 representatives of these foreign tobacco companies?
3 A. Yes. I personally met all of them.
4 Q. Which was the first one you met with?
5 A. I don't recall if it's Imperial or Rothmans.
6 I'm not sure which one.
7 Q. Would this have been--- Just trying to put
8 a time frame on this, the meeting with Kravitz was
9 December. When do you think this meeting took
10 place?
11 A. Either right before the meeting with Kravitz
12 or right after.
13 Q. You think you may have met with a foreign---
14 A. I would have to consult my calendar. I
15 really don't know. I mean I kind of think it was
16 after I met with Henry, but I'm not sure 100
17 percent.
18 Q. Prior to your meeting with Kravitz, did you
19 have any meetings with anyone outside your advisory
20 group concerning a possible RJR transaction?
21 A. I really would have to look at my calendar
22 to answer that question.
23 Q. So, at some point you believe, though, early
24 in the process you met with Imperial or Rothmans.
25 With whom did you meet? Do you remember the name of
93
1 the individual at Imperial?
2 A. I met the chairman of Hanson. I met some of
3 their people here--- Excuse me. Not the chairman,
4 but the president of Hanson, which is the owner of
5 Imperial, and I met some of their people here in the
6 United States, and the president of Imperial.
7 Q. Was this one meeting or more than one
8 meeting?
9 A. It was a couple of meetings.
10 Q. Over what period of time?
11 A. A few-week period of time.
12 Q. You were personally present at these
13 meetings?
14 A. Absolutely.
15 Q. Who else was at these meetings?
16 A. Mr. Ressler, and I think Mr. Kirkland was at
17 one of them, also.
18 Q. Mr. whom?
19 A. Mr. Kirkland, the same person.
20 Q. Again, let's focus on the meeting with
21 Imperial or the meetings with representatives of
22 Imperial or affiliates. Were any documents
23 exchanged?
24 A. Yes, I believe so.
25 Q. What was exchanged?
94
1 A. I believe documents similar to these you
2 have here.
3 Q. Could you just refer to the exhibit numbers,
4 sir? You don't have to read---
5 A. Again, I don't remember exactly which
6 document, but something similar to this BGL 5583.
7 MR. HIRSCHFELD: That's Exhibit Number
8 4.
9 Q. Now, do you remember the names of the people
10 from Imperial who were at the meeting?
11 A. Yes. I said the president of Hanson, Derek
12 Sanders, I believe his name is; one of their top
13 merger and acquisition persons from the U.S.; and
14 the president of Imperial.
15 Q. Other than Mr. Ressler, did you have any
16 outside advisers present at these meetings?
17 A. I said Mr. Kirkland was there, and I think
18 in one of the meetings Mr. Klesch may have been
19 there in London.
20 Q. Tell me to your best recollection what was
21 said by whom at these meetings.
22 A. Again, it was the same type of discussion,
23 an international joint venture to help refinance the
24 bank debt.
25 Q. In these discussions, did you relay to them
95
1 that you were contemplating some sort of combination
2 of Liggett and RJR?
3 A. I related everything to them, the spinoff of
4 Nabisco, a combination of RJR and Liggett and a
5 combination of the international tobacco company and
6 RJR with their company.
7 Q. What was their response to this?
8 A. They expressed interest.
9 Q. So, what transpired with respect to the
10 Imperial expression of interest?
11 A. We had another meeting, and after that
12 nothing transpired.
13 Q. How was it left with them?
14 A. They would think about it. They wanted to
15 do some more work. I think what happened is they
16 called and said they were very busy with some other
17 deals at the time. They had some other conflicts,
18 nothing to do with this, some other refinancings or
19 acquisitions or things of that nature.
20 Q. Was there any discussion in these meetings
21 -- in the meeting with Imperial about the percentage
22 of the combined RJR/Liggett entity that would go to
23 Liggett as opposed to the old RJR shareholders?
24 A. I don't think so.
25 Q. Did that subject come up with Mr. Kravitz?
96
1 A. No.
2 Q. What happened next?
3 A. I kept meeting with various tobacco people.
4 Q. I think you mentioned that you met with
5 Rothmans early in this process; is that correct?
6 A. Correct.
7 Q. Was that one meeting or more than one?
8 A. More than one.
9 Q. Over what period of time?
10 A. Over a couple of months, two or three
11 months.
12 Q. Do you remember how many meetings
13 approximately?
14 A. Three or four.
15 Q. Who was present at these meetings?
16 A. I was at a couple of them. Mr. Ressler
17 alone was at a couple of them, and that's it.
18 Q. Who from the---
19 A. I don't recall the names, but I met with
20 Mr. Johann Rupert and a couple of his people up at
21 Rothmans.
22 Q. Where did these meetings take place?
23 A. A couple of them in South Africa and a
24 couple of them in London.
25 Q. Was Mr. Klesch present at any of these
97
1 meetings?
2 A. He may have been at one of the London
3 meetings. I'm not sure.
4 Q. In focusing on the meeting with Rothmans, to
5 your best recollection, sir, what was discussed at
6 that meeting?
7 A. The same type of thing.
8 Q. Including the component of a combination or
9 merger between Liggett---
10 A. What was discussed was a spinoff of Nabisco
11 and a three-way combination and refinancing of the
12 RJR bank debt.
13 Q. What did the people from Rothmans say to
14 you?
15 A. They said -- they told me it's very
16 complicated. They had been working on something
17 like that for a long time, thinking about it. I
18 don't mean something like this particularly, but
19 some sort of joint venture with RJR. They wanted to
20 get back and think about it more, which they did and
21 came back and said it's too complicated right now to
22 be involved.
23 Q. Did they tell you that they were in
24 discussions with RJR about a possible joint venture?
25 A. They didn't say exactly what, but they said
98
1 over the period of a year or so prior to my meeting
2 with them, they had significant discussions with
3 RJR, yes.
4 Q. We have talked about Imperial. We talked
5 about Rothmans, and there were other tobacco
6 companies. What was the next series of meetings,
7 the next company that you approached?
8 A. I also met with Tabacalera, a Spanish
9 tobacco company.
10 Q. Where did those meetings take place?
11 A. In Madrid.
12 Q. When?
13 A. Again, I don't remember the exact date.
14 Q. Was it one meeting or more than one meeting?
15 A. It was a couple of meetings, about two
16 meetings.
17 Q. Were they sort of separated by a trip back
18 or elsewhere?
19 A. No. I think they were separated by
20 overnight.
21 Q. Who was present at those meetings?
22 A. The president of Tabacalera and the CFO and
23 the Wasserstein people.
24 Q. Do you remember the name of the individuals
25 from Tabacalera?
99
1 A. Whoever the president and CFO is.
2 Q. Who from Wasserstein?
3 A. Mario Baeza.
4 Q. Did Wasserstein introduce you to Tabacalera?
5 A. Yes.
6 Q. What was said at these meetings?
7 A. Wait a minute. I take that back.
8 Well, I'm sorry. The same discussion, the
9 same analysis. I was looking for an international
10 tobacco partner to help me refinance the bank debt
11 that existed.
12 Q. What was their response?
13 A. They would have to get approval from the
14 government. They are government owned. It would be
15 too difficult a transaction for them.
16 Q. What was the next meeting or meetings that
17 you remember with a---
18 A. We met with Reemtsma.
19 Q. Could you spell that?
20 A. R-E-E-T-S-M-A.
21 MR. HIRSCHFELD: R-E-E-M-T-S-M-A.
22 A. Sorry.
23 Q. Was that one meeting or more than one
24 meeting?
25 A. It was many meetings.
100
1 Q. Over what period of time?
2 A. Probably a two or three-month period.
3 Q. Where did they take place?
4 A. One took place in Germany, Hamburg, and the
5 others took place in New York.
6 Q. Would I be correct in understanding that we
7 are talking about the February/March period of 1995?
8 A. I think we may be talking about the
9 March/April/May time frame.
10 Q. Who represented the Brooke Group's interest
11 at these meetings?
12 A. Myself, Mr. Ressler and Mr. Kirkland, again,
13 the same people.
14 Q. Anyone from Wasserstein?
15 A. Yes, and Wasserstein.
16 Q. Mario Baeza?
17 A. Yes, Mario and a couple of other people.
18 Q. Any counsel? Anybody from Fried Frank or---
19 A. Yes, Fried Frank was involved.
20 Q. Fried Frank, however, was not involved in
21 the meetings with Tabacalera, Imperial --
22 A. That's correct.
23 Q. -- or Rothmans.
24 A. That's correct.
25 Q. Who was present from Reemtsma?
101
1 A. The initial meeting was the president of
2 Reemtsma and the president -- the president and CFO
3 of the holding company. I don't recall their names
4 offhand. After that, some other individuals got
5 involved in other subsequent meetings, the CFO.
6 Again, I don't recall the names.
7 Q. Senior levels of people at Reemtsma. You
8 don't remember their names; is that correct?
9 A. Yes.
10 Q. Did they have any outside advisers present?
11 A. They hired Wasserstein, and they had
12 counsel, Weil, Gotshal.
13 Q. Am I correct in understanding these meetings
14 became exploring the transaction in greater depth
15 than the other meetings that you described?
16 A. Absolutely, and Mr. Chakalian got involved
17 on my side also at that time.
18 Q. I may be repeating myself, and I apologize
19 if I am. With respect to Imperial, Rothmans and
20 Tabacalera, you don't recall any memoranda or notes
21 being created or taken at the meeting; is that
22 correct?
23 A. By myself?
24 Q. By anybody on your side.
25 A. No.
102
1 Q. Have you ever seen any notes reflecting what
2 transpired in those meetings --
3 A. No.
4 Q. -- the meetings with those other three
5 companies?
6 A. No.
7 Q. Were there any memoranda summarizing what
8 transpired?
9 A. Not to my knowledge.
10 Q. Were there any documents exchanged at those
11 other meetings?
12 A. These type of documents.
13 Q. Referring again to Exhibits---
14 A. Yes, these type of things.
15 MR. HIRSCHFELD: Plaintiff's Exhibit 4
16 and that type.
17 MR. STERN: Thank you.
18 Q. Now, moving into Reemtsma, were there any
19 documents exchanged at these meetings?
20 A. With Reemtsma?
21 Q. Yes.
22 A. Yes, many documents were exchanged.
23 Q. Can you describe the documents that were
24 exchanged?
25 A. I wasn't at all these meetings. I mean my
103
1 people, Mr. Ressler, Mr. Kirkland, Mr. Chakalian.
2 There were a lot of documents back and forth, I'm
3 sure.
4 Q. What documents are you personally aware of,
5 personally, that were exchanged?
6 A. Again, these type of projections and public
7 information type documents.
8 Q. Referring to Plaintiff's Exhibits---
9 A. Four--- Similar, not exactly this one, but
10 documents similar to that.
11 Q. The other documents that were exchanged with
12 them, to the extent that they reflected a structure
13 of the proposed transaction, included a component by
14 which Liggett would merge or otherwise combine with
15 RJR; is that correct?
16 A. In combination with refinancing the bank
17 debt and effectuating the spinoff, yes.
18 Q. Did you obtain any documents from Reemtsma?
19 A. Yes.
20 Q. What kind of documents did you obtain?
21 A. They prepared their own, you know,
22 projections and assumptions and things of that
23 nature. They shared that with us.
24 Q. Projections and assumptions relating to
25 what?
104
1 A. The RJR international tobacco business and a
2 possible combination of Reemtsma.
3 Q. Did you have a Confidentiality Agreement
4 with Reemtsma?
5 A. Yes.
6 Q. Did you have a Confidentiality Agreement
7 with any other of these foreign companies that you
8 were approaching?
9 A. No.
10 Q. How was it left with Reemtsma?
11 MR. HIRSCHFELD: At what time?
12 A. At what time? Yes.
13 Q. Well, did there come a time when it appeared
14 that Reemtsma would be joining with you in the
15 venture that you are describing?
16 A. Yes.
17 Q. At what point in time was that?
18 A. In early May or mid-May of 1995.
19 Q. How did that come to your attention? How
20 was that brought to your attention?
21 A. The Wasserstein people were at many of the
22 discussions that we had.
23 Q. What happened next in respect to that
24 interest of Reemtsma?
25 A. We put together a very preliminary proposal,
105
1 but Mr. Wasserstein, like I said before, had lunch
2 with Mr. Harper, who, my understanding is, expressed
3 serious interest, and a meeting was arranged.
4 Q. So, once you had an expression of interest
5 from Reemtsma, then Mr. Wasserstein approached
6 Mr. Harper; is that correct?
7 A. That's correct.
8 Q. Did you ever reach any kind of agreement
9 with Reemtsma other than the Confidentiality
10 Agreement that we discussed?
11 A. A side agreement of some sort?
12 Q. Yes.
13 A. No.
14 Q. A letter of intent or a memorandum of
15 understanding?
16 A. No.
17 MR. STERN: I am going to mark as the
18 next two exhibits documents that were given to us
19 today by counsel for the LeBow parties.
20 (Thereupon, the documents referred to
21 were marked as Plaintiff's Exhibits Nos. 8 and 9 for
22 Identification.)
23 Q. Mr. LeBow, I'm going to place these
24 documents before you. I only have one copy of these
25 documents.
106
1 Can you recognize those documents?
2 A. Yes. This appears to be a copy of the
3 Confidentiality Agreement that we entered into with
4 Reemtsma.
5 Q. You are referring to Exhibit 8?
6 A. Yes.
7 Q. Is that a document signed by a
8 representative of Brooke Group?
9 A. One is not, and that one is.
10 Q. Which exhibit number is signed by Brooke?
11 A. The May 9th one is signed.
12 MR. HIRSCHFELD: Refer to the exhibit
13 number.
14 Plaintiff's Exhibit Number 9 is signed.
15 A. And Exhibit 8 appears not to be signed.
16 Q. Exhibit 8 has a cover letter; is that
17 correct, sir?
18 A. Correct.
19 Q. Have you ever seen a copy of that cover
20 letter before?
21 A. No.
22 Q. That's on the letterhead of Weil, Gotshal &
23 Manges. Do you see that?
24 A. Yes.
25 Q. It indicates in the text of the letter that
107
1 a Confidentiality Agreement was requested by Brooke
2 Group. Do you see that, sir, in the text of the
3 cover letter?
4 A. Yes.
5 Q. Is that accurate, sir? Did Brooke Group
6 request Reemtsma to enter into a Confidentiality
7 Agreement?
8 A. Only after they requested us to enter into a
9 Confidentiality Agreement first.
10 Q. They made the first request?
11 A. Right. We just reciprocated. This is
12 reciprocal of theirs.
13 Q. Did you have any other reason to enter into
14 a Confidentiality Agreement other than reciprocity?
15 A. No.
16 Q. So, then I take it, did you sign separate
17 Confidentiality Agreements?
18 A. I suspect, yes, yes.
19 Q. Other than Reemtsma, Imperial, Rothmans and
20 Tabacalera, are there any other international
21 tobacco companies that you approached?
22 A. Regarding---
23 Q. Regarding RJR transactions.
24 A. Any kind of RJR transaction or this type of
25 RJR transaction?
108
1 Q. The one that you had under consideration
2 from sometime in late--- The kind of transaction
3 that you were considering from late 1994.
4 A. Until this time frame?
5 Q. Until May, yes.
6 A. No, there was not, that I can recall.
7 MR. STERN: I am going to mark as the
8 next exhibit documents which were produced to us by
9 the LeBow parties.
10 I should say that the document, as I'm
11 marking it, is a compilation of stapled pages which
12 are numbered consecutively with production numbers.
13 The documents were produced to us in unstapled form.
14 Therefore, I want to make it clear that I am not
15 representing that the document that is being marked
16 as an exhibit was a stapled document in the files of
17 the LeBow parties.
18 Perhaps the witness can clarify whether or
19 not these are, in fact, one document or more than
20 one document when we review it.
21 (Thereupon, the documents referred to
22 were marked as Plaintiff's Composite Exhibit No. 10
23 for identification.)
24 Q. I placed Exhibit 10 before you, Mr. LeBow.
25 I will ask you to page through the document and tell
109
1 me if you recognize this exhibit or any portion of
2 it. You can indicate which portions you recognize
3 by reference to the production numbers.
4 Mr. LeBow, have you had an opportunity to
5 review Exhibit 10?
6 A. I see what this one is. Give me a second so
7 I can remember which one this is.
8 This definitely looks like--- It's many
9 things put together into one. Your initial comment
10 is exactly correct. I don't recall this being---
11 This doesn't flow the way it was put together.
12 Q. Let's focus on the first three pages of the
13 document numbered 4313 through 4315. That appears
14 to be a draft of a letter to the Board of Directors
15 of Target Company. Have you ever seen that document
16 before?
17 A. I don't believe so. I mean it appears it
18 was prepared by, the draft, Fried Frank. I don't
19 recall what it refers to.
20 Q. Well, did you ever discuss with anyone in or
21 about February of 1995 sending a letter in the form
22 of the letter that appears as the first three pages
23 of Exhibit 10?
24 A. Absolutely not.
25 Let me read this again.
110
1 MR. HIRSCHFELD: Don't speculate.
2 Q. I will share that.
3 A. I can't interpret this. I have no idea what
4 it was.
5 Q. Well, without reference to this document,
6 sir, did you ever discuss with anyone at any time
7 sending what is called a Bear Hug Letter --
8 A. No.
9 Q. -- to RJR?
10 A. No. Again, without the financing ability to
11 refinance the bank debt, it would be -- it would
12 have no sense.
13 Q. Now, sir, I am going to ask you to look at
14 the document that starts on 4316. It starts at
15 4316. Have you ever seen this document before?
16 A. Yes. Like I say, this is a separate
17 document. This should be separated from all the
18 others.
19 Q. Yes.
20 That document, sir, appears to--- Where
21 does that document appear to end?
22 A. I believe it ends on the last -- Page 16.
23 It's marked as Page 16.
24 Q. I'm sorry. It begins on BGL 4316?
25 A. I'm sorry. It ends on BGL 4334.
111
1 Q. Sir, can you identify that document?
2 A. This was another joint venture proposal or
3 idea in order to finance the $3 billion bank debt
4 and effectuate the spinoff of Nabisco.
5 Q. That document, sir, refers to Intabex as a
6 possible -- as forming an international joint
7 venture with RJR Tobacco. I'm referring to 4316.
8 A. Right.
9 Q. Was Intabex ever considered as a possible
10 joint venture partner?
11 A. Yes.
12 Q. That was Mr. Taberer's organization; is that
13 correct?
14 A. That's correct.
15 Q. Did you have meetings with Mr. Taberer to
16 discuss the possibility of Intabex forming or
17 becoming the joint venture partner?
18 A. We had some discussions, yes.
19 Q. Who was present at those discussions?
20 A. I think they were primarily telephone
21 discussions between myself and Mr. Taberer.
22 Mr. Klesch may have been involved. I'm not sure.
23 Q. Did you exchange any documents in those
24 discussions?
25 A. Other than these, no -- this type of
112
1 document, no.
2 Q. How was that matter left?
3 A. Mr. Taberer owned quite a bit--- I should
4 say his major shareholder is Tabacalera. So, that's
5 what led to a meeting with Tabacalera to discuss any
6 further involvement.
7 Q. Am I correct then in saying and in
8 understanding that Mr. Taberer in some way
9 facilitated a meeting with Tabacalera?
10 A. He suggested it, and Wasserstein, Perella
11 just happened to know the people there, and they
12 arranged the meeting.
13 Q. Tabacalera is a major shareholder of
14 Intabex.
15 A. That's correct.
16 Q. Do you know whether or not Intabex does
17 business with RJR?
18 A. I don't know.
19 Q. The next document in this stapled clip
20 begins on BGL 4335.
21 A. Correct.
22 This is just a discussion of Tabacalera put
23 together by Wasserstein.
24 Q. Did they put this together at your request?
25 A. No. They did it at their own behest.
113
1 Q. Where does that document end, sir?
2 Have you seen that document before?
3 A. I probably have.
4 It looks like it ends on 4349.
5 Q. Then BGL 4350 appears to be a handwritten
6 note. Do you recognize that handwriting?
7 A. Yes. It looks like my handwriting.
8 Q. Can you read to me--- There appears to be a
9 name written there. There is a number and a name.
10 Could you read that to me?
11 A. The name is Rafael Maguiro, who is one of
12 the top people there.
13 Q. Where?
14 A. At Tabacalera.
15 The number, I assume that's one of his
16 numbers.
17 Q. What are the handwritten words underneath
18 that name that you just read?
19 A. That's the other people's name, Pedro Perez.
20 I believe he's the president of Tabacalera. Rafael
21 is just his name repeated.
22 Q. Are these people with whom you met in
23 connection with a possible Tabacalera interest?
24 A. Yes, yes.
25 Q. Then there is a reference to Gary Klesch; is
114
1 that correct?
2 A. Correct.
3 Q. Then just to complete the record on this
4 exhibit, there are pages that follow that note, BGL
5 4351 through 4353. Do you recognize those pages,
6 sir?
7 A. These are taken out of context from
8 something else.
9 Q. Do you know what they were taken out of
10 context for?
11 A. No. I have no way of knowing.
12 MR. HIRSCHFELD: Could I just suggest
13 for clarity of the record, we have a fairly
14 cumbersome document that has been marked as a single
15 exhibit. For facility in handling these documents
16 afterwards, if you can separate out rather than
17 stapling together a bunch of papers, I think it
18 might make it simpler.
19 MR. STERN: That's a perfectly
20 reasonable request. The problem is that the fact
21 that the documents were copied loosely leads to the
22 problem of some of them having been stapled together
23 obviously incorrectly. But I obviously think it's
24 not going to help either side to have exhibits which
25 are, in effect, compound documents. What I propose
115
1 to do with respect to this document is during the
2 break to separate it and to remark it as a separate
3 exhibit.
4 MR. HIRSCHFELD: Let me also say, I am
5 not personally familiar with the first three pages
6 of what was marked as Exhibit 10. On its face it
7 purports to be privileged and confidential. I don't
8 know whether it was prepared by counsel, but I do
9 see that up at the top it does have what looks like
10 a Fried Frank Fax designation on it. So, I have
11 some questions as to whether or not it constitutes a
12 privileged document that was produced inadvertently.
13 I don't know that I can clarify that during
14 the break at lunch, but I'm going to try. If it was
15 inadvertently produced, I think we had an objection
16 in our document response indicating a reservation of
17 the right to withdraw from production anything that
18 was inadvertently produced that was, in fact,
19 privileged.
20 Just so we are absolutely clear, Mr. LeBow
21 is pointing out that the footer appearing at the
22 bottom of the first three pages of Exhibit 10
23 appears to show that the document was created at
24 Fried Frank's New York offices.
25 Q. Putting aside this particular document and,
116
1 again, just so the record is entirely clear, there
2 never came a time when you were discussing with
3 anyone sending a Bear Hug Letter to the board of
4 RJR; is that correct?
5 A. That's absolutely correct.
6 Q. What were the names of the lawyers at Fried
7 Frank who were involved in the RJR deliberations?
8 A. Brad Scheler. What's his name, Specter?
9 Where is the Confidentiality Agreement?
10 Dan Schechter, rather, and there were
11 others. I don't remember the others who were
12 involved. They were the two top attorneys.
13 MR. STERN: I would like to mark as the
14 next five exhibits five documents that were produced
15 to us in this litigation by counsel for the LeBow
16 parties. I will ask the reporter to mark the
17 exhibits and then hand them to Mr. LeBow.
18 (Thereupon, the documents referred to
19 were marked as Plaintiff's Exhibits Nos. 11 through
20 15 for Identification.)
21 Q. Mr. LeBow, I think you have Exhibits 11
22 through 15 before you.
23 A. Correct.
24 Q. Take as much time as you need. The question
25 I have is whether you have seen any of these
117
1 documents before.
2 A. I have seen some of them.
3 Q. Can you tell me which ones you have seen?
4 A. I don't recall exactly.
5 Q. Well, if you would turn, please, to Exhibit
6 11, the second page of that document, BGL 4048,
7 appears to be a Fax cover page from Bennett S.
8 LeBow --
9 A. Correct.
10 Q. -- to Bryant K.
11 A. Correct.
12 Q. Do you see that?
13 A. Yes.
14 Q. Do you know who Bryant K. is?
15 A. That's Bryant Kirkland.
16 Q. Do you recall seeing the document that is
17 attached to that Fax page?
18 A. Yes.
19 Q. What is that document?
20 A. It's, again, what you just showed me before.
21 It's a document prepared by Wasserstein, giving the
22 information about Tabacalera, public information.
23 Q. Turning to Exhibit 12, looking at the second
24 page of Exhibit 12, it's a document that appears
25 over the name Grupo, G-R-U-P-O, Wasserstein,
118
1 Perella. Its cover says March, 1995, Project
2 Cigarerra. Do you remember seeing this document?
3 A. Not off the top of my head, no.
4 Q. Do you remember hearing the name Project
5 Cigarerra in connection with Wasserstein's work?
6 A. These were their own internal code names.
7 Q. Do you understand what Project Cigarerra
8 refers to?
9 A. Yes.
10 Q. What does it refer to?
11 MR. HIRSCHFELD: You guess or---
12 A. No. I know. It was some tobacco or
13 cigarette project.
14 Q. Is it the project you asked them to work on?
15 A. No.
16 Q. Wasserstein, Perella was working on another
17 tobacco project unrelated to RJR?
18 A. Wasserstein, Perella--- Say it again.
19 Q. Were they working in March, 1995 on a
20 tobacco project unrelated to what they were doing
21 for you?
22 MR. HIRSCHFELD: Unrelated to what they
23 were doing for Brooke Group?
24 MR. STERN: Yes.
25 A. I have no idea.
119
1 Q. Why do you believe that Project Cigarerra
2 relates to some other project that Wasserstein was
3 doing?
4 A. I think this was done on Wasserstein's own
5 initiative to try and get me or Liggett or somebody,
6 anybody interested in a tobacco sort of project or
7 relationship.
8 I know, for example, that Consolidated
9 Cigar, Tabacalera was interested in. So, this could
10 have been for Tabacalera.
11 Q. Am I correct then in understanding to say
12 that you don't know if this document was prepared
13 especially for you and your colleagues?
14 A. That's correct. I do not know.
15 Q. Exhibit 13?
16 A. It's the same answer.
17 Q. The same question, same answer?
18 A. Correct.
19 Q. Mr. Carlos Veracossa, is that a name you
20 recognize?
21 A. No.
22 Q. Exhibit 15, the same questions. Do you
23 recognize the document?
24 MR. HIRSCHFELD: We forgot 14.
25 Q. I'm sorry. Exhibit 14.
120
1 A. 14 and 15 are the same thing, just to make
2 it quick. They were not prepared for me.
3 Q. Do you know why these documents were sent to
4 Mr. Kirkland?
5 A. This one refers to Tabacalera. It was sent
6 to me prior to our meeting with Tabacalera. It was
7 background information on Tabacalera.
8 Q. That's Exhibit 11.
9 A. And it looks like 15 has some Tabacalera
10 information in it.
11 Anything referring to Tabacalera was
12 received to give us background information prior to
13 the meeting with Tabacalera.
14 Q. There were references in Exhibit 13 to other
15 companies. Pardon my Spanish, but one is Empresas
16 La Moderna.
17 A. That's correct.
18 Q. Is that a company with whom you were in
19 contact concerning RJR?
20 A. No.
21 Q. Consolidated Cigar Corporation?
22 A. No.
23 Q. American Maize, M-A-I-Z-E?
24 A. No.
25 MR. STERN: I am going to mark as the
121
1 next exhibit a document from the files that were
2 produced to us by the LeBow parties.
3 (Thereupon, the document referred to
4 was marked as Plaintiff's Exhibit No. 16 for
5 identification.)
6 Q. Mr. LeBow, Exhibit 16 has been placed before
7 you. Do you recognize that document?
8 A. Yes. Again, it's one of the documents we
9 produced during this period to reflect, you know,
10 our attempts to spin off Nabisco, have an
11 international joint venture tobacco company and
12 finance the $3 billion bank debt, which was
13 inhibiting a spinoff of Nabisco.
14 Q. I take it the proposed transaction
15 summarized here included a merger of Liggett and
16 RJR; is that correct?
17 A. That's correct.
18 Q. This document on Page 4297 refers to
19 Tabacalera. Do you see that?
20 A. Yes.
21 Q. Was this document given to Tabacalera?
22 A. I believe so, yes.
23 Q. In the course of these meetings that you
24 previously testified about; is that correct?
25 A. That's correct.
122
1 Q. Was a similar document given to Reemtsma,
2 referring to Reemtsma in the text as opposed to
3 Tabacalera?
4 A. I'm sure there were changes made -- various
5 changes made along the way.
6 Q. But the document given to Reemtsma, too,
7 would have included a combination of RJR and
8 Liggett; is that correct?
9 A. And Reemtsma.
10 Q. A joint venture with Reemtsma and at the
11 same time a combination of RJR and Liggett?
12 A. That's correct, and at the same time a
13 spinoff of Nabisco.
14 Q. I want to bring your attention to the May
15 encounter or meeting between Wasserstein -- this is
16 Bruce Wasserstein; is that correct?
17 A. The luncheon?
18 Q. -- and Mr. Harper.
19 A. Yes.
20 Q. This took place in May; is that correct?
21 A. Yes.
22 Q. Now, we started this discussion with your
23 consideration of a possible RJR transaction in late
24 1994, and we are now in May of 1995. Can you recall
25 any meetings with third-party potential financial
123
1 sources that you have not testified about in that
2 time frame?
3 A. No.
4 Q. During that period of time, other than the
5 meeting with Mr. Kravitz, did you meet or did people
6 advising you meet with any shareholders of RJR
7 concerning this subject?
8 A. No.
9 Q. Other than Wasserstein, Perella and the
10 various law firms that you have mentioned and
11 Mr. Ressler, did you engage any outside advisers in
12 connection with this possible transaction during
13 this time period?
14 A. No.
15 Q. Did you personally meet with any banks
16 during this time period?
17 A. Yes. I mentioned I had lunch with one bank
18 in New York. I don't recall which bank it was.
19 Q. You don't recall which bank?
20 A. No.
21 Q. Did you meet with any banks in Europe?
22 A. No.
23 Q. Did you have any conversations with
24 Mr. Wasserstein that led up to his lunch with
25 Mr. Harper?
124
1 A. I had conversations with Mr. -- many
2 conversations with Mr. Baeza when he was talking,
3 and I had conversations with the president of
4 Wasserstein, who I believe went with us on the first
5 meeting even with Mr. Baeza to meet with Mr. Harper.
6 Q. Do you remember that individual's name?
7 A. I don't recall his name offhand, but he's --
8 whoever the president of Wasserstein, Perella is.
9 Q. How did it come about that Mr. Wasserstein
10 went to lunch with Mr. Harper?
11 A. I don't know.
12 Q. Did you ask him to do that?
13 A. No. He told me he had a previously arranged
14 lunch for some other reason -- I don't know what
15 reason -- with Mr. Harper, and he said he would
16 bring--- I was told not directly by Mr. Wasserstein
17 but by Mr. Baeza and by the president that this
18 subject would come up at lunch.
19 Q. What was the subject that would come up at
20 lunch?
21 A. A possible spinoff of Nabisco and a joint
22 venture with Liggett or a merger, we called it, with
23 Liggett and an international tobacco company,
24 without mentioning the Reemtsma name at the time.
25 Q. Why was there an intent not to mention
125
1 Reemtsma's name at this time?
2 A. We had a Confidentiality Agreement.
3 Q. Was having Mr. Wasserstein mention this to
4 Mr. Harper your idea or Mr. Baeza's idea?
5 MR. HIRSCHFELD: Objection to the form.
6 It could have been Wasserstein.
7 A. It was Wasserstein, Perella. It was their
8 idea.
9 Q. Do you know which individual?
10 A. I don't know who.
11 Q. Do you know why whoever made this suggestion
12 thought it was a good idea at the time?
13 A. It was a perfect forum to start discussing
14 it.
15 Q. Why at that point in time as opposed to some
16 earlier or later date?
17 A. Because the negotiation with Reemtsma and
18 the analysis we were doing had advanced to the point
19 where it now became feasible to have an intelligent
20 conversation.
21 Q. Did Mr. Wasserstein or did anyone report to
22 you about Mr. Wasserstein's lunch with Mr. Harper?
23 A. Mr. Baeza.
24 Q. What did Mr. Baeza tell you?
25 A. That Mr. Harper expressed serious interest
126
1 and that he suggested we all get together and
2 discuss it more in his office sometime in the next
3 week or two.
4 Q. Did Mr. Baeza tell you what Mr. Wasserstein
5 said to Mr. Harper?
6 A. He may have, but I don't remember the
7 details.
8 Q. Do you know whether Mr. Wasserstein gave
9 Mr. Harper any paper?
10 A. I don't know.
11 Q. Can you recall any more about what you were
12 told about that conversation than what you have
13 testified about?
14 A. No, I can't recall anything else. I wasn't
15 there. So, I don't know.
16 Q. But you received a report from Mr. Baeza.
17 A. A very brief report, that he wanted to get
18 together and discuss it further.
19 Q. Did you review with Mr. Baeza what
20 Mr. Wasserstein would say before he had that lunch?
21 A. No.
22 Q. What happened after the lunch?
23 A. We worked feverishly to put together a
24 tentative proposal and scheduled a meeting with
25 Mr. Harper.
127
1 Q. How did that meeting come about?
2 A. Baeza picked up the phone and called Harper
3 and set up a meeting, to the best of my knowledge.
4 Q. Baeza called Harper?
5 A. I believe so, yes.
6 Q. When did the meeting take place?
7 A. In May. I believe it was May 24th or 25th,
8 something like that.
9 Q. Who attended the meeting?
10 A. Myself, Mr. Baeza, the president of
11 Wasserstein, Perella -- again, his name I don't
12 recall -- Mr. Harper and Mr. Goldstone.
13 Q. Where did the meeting take place?
14 A. At RJR's headquarters in New York.
15 Q. How long did the meeting last?
16 A. About half an hour.
17 Q. Who said what to whom?
18 A. We presented the idea that we had a proposal
19 to effectuate the spinoff of Nabisco involving
20 Liggett, which would be a tax-free spinoff of
21 Nabisco, and were prepared to get a tax-free opinion
22 from my counsel. We felt it made perfectly good
23 business sense.
24 You know, I'm not sure what--- I know we
25 didn't mention any names, but I'm not sure we even
128
1 mentioned we had an international tobacco company
2 involved with us at the time. I don't recall
3 exactly that we did or didn't. We for sure didn't
4 mention Reemtsma's name, but I'm not even sure we
5 mentioned the fact that they were involved or
6 somebody was involved.
7 Q. Did you do the talking, so to speak, on
8 behalf of--
9 A. Myself and/or Mr. Baeza did.
10 Q. Do you remember anything else that you
11 said?
12 A. We presented them some papers to study,
13 some projections, what we thought the stock values
14 would be, I believe.
15 MR. STERN: I'd like to mark as the
16 next exhibit a document that was produced to us by
17 counsel for the LeBow parties.
18 (Plaintiff's Exhibit 17 was thereupon
19 marked for identification.)
20 Q. (By Mr. Stern) Mr. LeBow, Exhibit 17
21 has been placed before you. Is that a document
22 that you gave to Mr. Harper and the others from RJR
23 at this meeting?
24 A. No, I don't believe it is. All I gave
25 him was a summary, some summary sheets from this
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
129
1 document, not the entire document.
2 Q. Can you identify this document?
3 A. Again, it appears to be a proposal
4 document that we prepared around this period of
5 time, which would involve, you know, the Liggett
6 spinoff of Nabisco and an international joint
7 venture partner. I don't know if the international
8 part is mentioned here at all.
9 MR. HIRSCHFELD: I would just note for
10 the record that certain of these pages appear to be
11 generated by Wasserstein, Perella, and I just
12 wanted to inquire whether that is in fact a
13 document that you know was produced as one or
14 whether it is conceivably a compilation of
15 several. I'm not suggesting that, I have no
16 knowledge one way or the other.
17 THE WITNESS: Your document seems to be
18 different from my document.
19 MR. STERN: Well--
20 THE WITNESS: I'm sorry, no, it's the
21 same thing. It's okay, I'll take that back. They
22 appear at several places.
23 Again, I don't believe we gave the
24 entire thing to Mr. Harper at the time, we just
25 gave some sort of summary to Mr. Harper.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
130
1 Q. (By Mr. Stern) The document that
2 tracks the alternative summaries as summarized in
3 this document include a combination of Liggett and
4 RJR; is that right?
5 A. It includes a spinoff of Nabisco, and
6 and it also includes in your mind but not
7 necessarily to Mr. Harper's an international joint
8 venture partner.
9 Q. I know this may be a composite of
10 documents prepared by different people, but
11 referring your attention to pages 4500 and 4501,
12 4502, who prepared those pages, do you know?
13 A. I believe these were prepared by
14 Wasserstein.
15 Q. By Wasserstein?
16 A. Yes.
17 Q. Would the same be true of 4503 through
18 4508?
19 A. Forty five what?
20 Q. 4503 through 08.
21 A. These pages may have been prepared by
22 us, by Brooke, by Mr. Kirkland.
23 Q. Are you making that distinction because
24 of differences in the type face?
25 A. No, because we did a lot of detail work
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
131
1 and Wasserstein did a lot of the summary work.
2 (Plaintiff's Exhibit 18 was thereupon
3 marked for identification.)
4 Q. (By Mr. Stern) I have marked as
5 Exhibit 18 a document that has on its face Liggett
6 Group, Inc., proposal, May 12, 1995. This document
7 did not come from the files, this was not produced
8 to us by the LeBow parties.
9 Do you recognize this document?
10 A. It appears to be similar to the
11 previous document.
12 Q. Well, is this a copy of the document
13 that you gave to Mr. Harper at the meeting that you
14 described?
15 A. I first recall giving Mr. Harper only a
16 few pages. Now, he may have gotten this subsequent
17 at other meetings with other advisors, by my other
18 advisors, I don't know, but my personal
19 recollection is that we just gave him at the first
20 meeting one, two or three summary pages, I don't
21 remember exactly how many pages.
22 Q. By looking at either Exhibit 17 or
23 Exhibit 18, can you tell us whether the pages that
24 you did give him are included within these
25 documents?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
132
1 A. Again, only to the best of my
2 recollection, I believe we gave him page 4500, I
3 don't recall whether I gave him 4501 or 4502. I'm
4 pretty sure we gave him something, either 4500 or
5 something very similar to it.
6 Q. Referring to Exhibit 17?
7 A. Correct. Whether, you know--this one
8 is dated May 17th, and my recollection to me it was
9 May 14th. Between the 17th and the 24th there
10 could have been some changes, I gave him something
11 slightly different or somewhat different.
12 Q. Do you remember giving him any other
13 pages that are included in either Exhibit 17--
14 A. I don't recall. My recollection is
15 giving him one, two or three summary pages.
16 Exactly how many, I don't recall.
17 (Brief recess.)
18 MR. STERN: I'm going to mark as the
19 next exhibit a document produced to us by the LeBow
20 parties numbered BGL04258 to BGL04268.
21 (Plaintiff's Exhibit 19 was thereupon
22 marked for identification.)
23 Q. (By Mr. Stern) Mr. LeBow, Exhibit 19
24 is before you. Do you recognize that document?
25 A. This appears to be parts of the other
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
133
1 documents you have given me or slightly different,
2 you know, variations thereof.
3 Q. Is this another summary of a possible
4 transaction involving Liggett and RJR?
5 A. This is a summary of another
6 transaction, a spinoff of Nabisco RJR and again
7 Liggett and potentially an international tobacco
8 company.
9 Q. Is this a document that was prepared by
10 people at--
11 A. Appears to be people at Brooke Group.
12 Q. At Brooke Group?
13 A. Yes, it appears to be prepared by
14 people at Brooke Group.
15 Q. I'm going to place before you another
16 document we will have marked as Exhibit 20 produced
17 from the files by the LeBow parties.
18 (Plaintiff's Exhibit 20 was thereupon
19 marked for identification.)
20 Q. (By Mr. Stern) Mr. LeBow, do you
21 recognize that document?
22 A. Yes, it's more of the same.
23 Q. Was this prepared by the Brooke Group?
24 Before you answer that question, you may want to
25 look at BGL4231.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
134
1 A. This was prepared by the Brooke Group
2 and Wasserstein, Perella.
3 Q. And the purpose of this document?
4 A. The same purpose as before, a proposed
5 spinoff of Nabisco to bind Liggett with RJR as a
6 means of spinning off Nabisco and bringing in an
7 international tobacco company, if necessary.
8 MR. STERN: I'm going to next mark as
9 Plaintiff's 21 another document produced by the
10 LeBow parties.
11 (Plaintiff's Exhibit 21 was thereupon
12 marked for identification.)
13 Q. (By Mr. Stern) Sir, Exhibit 21 has
14 been placed before you. Have you ever seen that
15 document before?
16 A. No, I don't recall this.
17 Q. The third page of the document is
18 captioned Brooke Group Limited analysis of
19 long-term debt and there is a reference on the top
20 to Apollo and Lion. What is Apollo?
21 A. Apollo is Apollo Group and Lion is one
22 of their--I believe they're sister companies,
23 subsidiaries, they own the Brooke debt.
24 Q. Sir, do you know whether the analysis
25 reflected on these pages was performed in
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
135
1 connection with Brooke Group's review of a possible
2 transaction involving RJR?
3 A. Well, I don't know how these three
4 pages came together, first of all. The last page
5 has no bearing whatsoever on RJR.
6 Same thing with the second page, has no
7 bearing that I can see with RJR at all.
8 First page refers to Nabisco. I don't
9 recall ever seeing this. Why these three are
10 together, I have absolutely no idea.
11 Q. Just so I'm clear, you don't know why
12 the second two pages, second and third page, were
13 prepared?
14 A. No. They just refer to the Liggett and
15 the Brooke Group debt.
16 Q. Returning to the meeting with Mr.
17 Harper and Mr. Goldstone, do you remember what
18 anyone on the RJR side said to you in response to
19 your presentation or remarks?
20 A. They said that, you know, it was a very
21 interesting proposal and they wanted some time to
22 study it, you know, and get back to us.
23 Q. Did they say anything about a concern
24 with respect to personal liability of directors in
25 the event of a spinoff?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
136
1 A. Not at this meeting, no.
2 Q. Was this your only meeting, did you
3 ever have another meeting personally with any
4 representative of RJR?
5 A. No, but I had telephone conferences.
6 Q. You had a telephone conversation?
7 A. Yes.
8 Q. When was that?
9 A. It was in late August of '95.
10 Q. With whom was that?
11 A. Mr. Goldstone.
12 Q. We will come to that in its sequence.
13 A. All right.
14 Q. Can you remember anything else that
15 transpired at this meeting in May in addition to
16 what you have previously testified about?
17 A. No.
18 Q. Were there any notes taken at the
19 meeting?
20 A. Not by me.
21 Q. Did you ever see any memorandum or
22 prepare any memorandum reflecting what transpired
23 in that meeting?
24 A. I never did, no.
25 Q. Any correspondence relating to the
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
137
1 meeting?
2 A. No.
3 Q. Does Brooke Group have a board of
4 directors?
5 A. Yes.
6 Q. New Valley?
7 A. Yes.
8 Q. Liggett?
9 A. Yes.
10 Q. Did you at any time make any report to
11 the board of directors concerning the RJR project?
12 A. Oh, yes.
13 Q. Which board did you report to?
14 A. I believe all three boards were aware
15 of our interest in RJR.
16 Q. Are minutes kept of the board meetings
17 of these entities?
18 A. Yes.
19 Q. Do you know whether the minutes reflect
20 any discussion of RJR?
21 A. They may or may not. I don't know. We
22 had many discussions at board meetings and outside
23 board meetings.
24 Q. Do you know whether the minutes were
25 reviewed for purposes of responding to a document
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
138
1 request?
2 A. Request what?
3 Q. Were the minutes reviewed for purposes
4 of responding to a document request?
5 A. I don't know.
6 Q. You don't know.
7 Is it accurate to say that the board of
8 New Valley authorized the purchases of RJR business
9 stock?
10 A. That's correct.
11 Q. Do you know when they authorized it?
12 A. In the summertime, over the summertime.
13 Q. The summer of nineteen--
14 A. '95.
15 Q. Now, we have previously reviewed an
16 exhibit, I think it was Exhibit 1, which shows that
17 New Valley began to purchase RJR securities in
18 February. Do you recall that exhibit?
19 A. Yes.
20 Q. Was authorization required by the board
21 of New Valley to make those purchases?
22 A. I don't believe so because we had an
23 understanding with the board that for smaller
24 purchases, meaning purchases under five or ten
25 million dollars, we would not necessarily bring
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
139
1 those to the board of directors, although the
2 executive committee was aware of it.
3 Q. Does the executive committee meet from
4 time to time?
5 A. Yes, informally and formally.
6 Q. Are minutes kept of the executive
7 committee meetings?
8 A. I don't think so, no.
9 Q. We're referring to the executive
10 committee of New Valley?
11 A. Yes.
12 Q. Did the board of Liggett ever formally
13 authorize any action concerning RJR?
14 A. No, no action was done.
15 Q. Did the board of Brooke Group formally
16 authorize any action as respects RJR?
17 A. Excuse me. What period of time are you
18 talking about?
19 Q. At any time now. Let's say between
20 late December when this discussion began and May.
21 A. No, the answer to your question is no,
22 there was no authorization because nothing happened
23 other than preliminary analysis and discussion.
24 Q. Now, subsequent to May did the board of
25 Brooke Group authorize Brooke to take any action
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
140
1 with respect to RJR?
2 A. Yes.
3 Q. What did they authorize?
4 A. They authorized us to expend funds,
5 expenses to begin the consent solicitation
6 currently underway and enter into a joint expense
7 sharing agreement with New Valley, and also to
8 enter the agreements we did enter into with Mr.
9 Icahn.
10 Q. Did the board of Liggett take any
11 formal action after May?
12 A. I don't believe so.
13 Q. I think you told me earlier that the
14 board of New Valley took formal action with respect
15 to share purchases; is that correct?
16 A. That's correct, in the summer.
17 Q. Did the board of New Valley take any
18 other formal action with respect to RJR other than
19 authorized purchases of shares?
20 A. Yes, they approved the same Icahn
21 agreements and sharing agreements and every other
22 agreement and consent solications that are
23 required.
24 Q. Returning to the meeting in May, what
25 happened next?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
141
1 A. I believe a couple of days later we got
2 a phone call from Mr. Goldstone requesting another
3 meeting.
4 Q. Who did he call?
5 A. I'm not sure. I guess either--Mr.
6 Baeza I suspect got the call. I don't know for
7 sure. As a matter of fact, it was Mr. Baeza.
8 Q. Did Mr. Baeza report this call to you?
9 A. Yes.
10 Q. What did he say Mr. Goldstone had told
11 him?
12 A. Mr. Goldstone suggested that next the
13 attorneys and the advisors get together to discuss
14 in further detail the proposal that was presented
15 to Mr. Harper and Mr. Goldstone a couple of days
16 before.
17 Q. Did Mr. Baeza report that Mr. Goldstone
18 had said anything else in that conversation?
19 A. That he was very interested in pursuing
20 it and we should all get together with the
21 attorneys and pursue, you know, the various spinoff
22 issues, litigation issues and personal liability
23 issues.
24 Q. Did Mr. Baeza report to you that Mr.
25 Goldstone had said in that conversation that we
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
142
1 should explore personal liability issues?
2 A. We should explore spinoff and
3 litigation issues and in addition, you know, their
4 concern about potential personal liability.
5 The exact words that were said, again,
6 I wasn't there in the conversation, but the intent
7 was absolutely clear.
8 Q. What I'm trying to--
9 A. Again, secondhand, I'm giving you
10 secondhand information.
11 Q. I appreciate that, but what I'm trying
12 to distinguish is, what I'm asking is between a
13 surmising on your part about what might have been
14 said from actual knowledge about what was said.
15 Do you have actual knowledge that Mr.
16 Goldstone in his conversation with Mr. Baeza made
17 reference to personal liability in connection with
18 this matter?
19 A. In their phone conversation, no, I have
20 no personal knowledge.
21 Q. And he didn't do so, neither he nor did
22 Mr. Harper do so in the prior meeting that you had
23 in Mr. Harper's office?
24 A. The prior meetings, as I recall them
25 now, which involved their request, and it was very
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
143
1 clear that Liggett would be the vehicle to
2 effectuate the spinoff. It was very clear that
3 they had a very difficult problem doing the spinoff
4 themselves and they needed an outside entity to be
5 the mechanism in order to spin off.
6 Did the precise words personal
7 liability concern come out in that first meeting?
8 No, but you're trying to make a very fine
9 distinction between reality and exact words.
10 Q. I'm trying to clearly identify in the
11 record what was said by whom, and I think the
12 record should be clear that at least as far as your
13 recollection is concerned neither Mr. Harper nor
14 Mr. Goldstone explicitly referred to personal
15 liability on the part of anyone in connection with
16 this spinoff.
17 A. In this first meeting?
18 Q. In the first meeting.
19 A. No, correct.
20 Q. Now, with respect to the idea of using
21 Liggett as a vehicle, that suggestion came from
22 you, sir; did it not?
23 A. It was our proposal, yes.
24 Q. They did not suggest to you that
25 Liggett--they being Mr. Harper or Mr.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
144
1 Goldstone--did not suggest to you that Liggett be
2 the vehicle?
3 A. No, but they quickly embraced the idea.
4 Q. That was an idea that you brought to
5 them?
6 A. That's correct.
7 Q. You say they quickly embraced the idea?
8 A. Correct.
9 Q. What did they say that caused you to
10 believe they quickly embraced the idea?
11 A. They requested an immediate--very
12 quickly another meeting, bring the attorneys to
13 bear to understand the concepts involved.
14 Q. Other than requesting a meeting to
15 understand the concepts involved, did they say
16 anything indicating that they were agreeable to
17 this idea?
18 A. They said--again, I was not at the
19 second meeting.
20 Q. I'm asking about the first meeting.
21 A. The first meeting? No.
22 Q. Now, the conversations between Mr.
23 Goldstone and Mr. Baeza that Mr. Baeza reported to
24 you, did Mr. Baeza report that Mr. Goldstone said
25 anything to indicate that RJR was embracing the
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
145
1 idea of the Liggett proposal?
2 A. Yes.
3 Q. What did Mr. Baeza say that Mr.
4 Goldstone had said?
5 A. Mr. Goldstone said let's get the
6 bankruptcy attorneys and the conveyance attorneys
7 together on this side and their side and let's
8 just, you know--why they think this will work
9 against, you know, potential problems they had and
10 will solve some of their problems and could be
11 successful.
12 Q. Did Mr. Goldstone in that conversation
13 mention what the specific problems they had were?
14 A. No.
15 Q. As far as you know?
16 A. I don't recall.
17 Q. What did you tell Mr. Baeza when he
18 reported Mr. Goldstone's conversation to you?
19 A. I said it sounds encouraging. Let's
20 set a meeting, get the lawyers involved, let's get
21 a meeting.
22 Q. Then what happened?
23 A. A meeting was arranged, I don't
24 remember which day, next day, two days later,
25 whatever, by the attorneys, Mr. Baeza, and I
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
146
1 believe Mr. Ressler was there, also, and Mr.
2 Goldstone and other attorneys from the RJR side.
3 Q. Who were your attorneys?
4 A. Mr. Hirschfeld, Mr. Jerome, our
5 bankruptcy expert, conveyance expert, Mr. Ressler,
6 and Mr. Baeza was there.
7 Q. I take it you were not at this meeting?
8 A. I was not at the meeting.
9 Q. But you received a report about the
10 meeting?
11 A. That's correct.
12 Q. From whom did you receive the report?
13 A. From Mr. Ressler and Mr. Hirschfeld.
14 Q. Did they report to you jointly?
15 A. Yes. It was a conference call right
16 after the meeting, or Mr. Baeza was on the phone,
17 also.
18 Q. How long did this conference call last?
19 A. Twenty minutes, half hour.
20 Q. What did they tell you in this
21 conference call?
22 A. They said the meeting went quite long,
23 went for an hour, hour and a half, something of
24 that nature.
25 And the essence of the meeting was two-
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
147
1 or three-fold, that RJR said they understood our
2 proposal, liked it, and had two basic problems.
3 Problem number one is that they wanted
4 to just make sure if we could demonstrate to them
5 shareholders' support they would embrace it
6 further; and they were concerned that Liggett did
7 not have the credibility by itself--credibility
8 meaning credibility for Wall Street or whatever--to
9 the outside world, and they wanted to know if we
10 could bring in another party who was more credible
11 to become a party or whatever. They were very
12 concerned about the credibility of just Liggett,
13 and the words were used, it was proposed to me at
14 least that Liggett was just hired to be the--what's
15 the right word--the straw man or the one to take
16 the risk, the personal risk in doing the spinoff,
17 they didn't want it to look that way to anyone, so
18 could we get somebody else involved with us, then
19 they would seriously consider the proposals.
20 Q. Now, to your knowledge, were there any
21 documents exchanged at this meeting with Mr.
22 Goldstone?
23 A. I wasn't there, so I don't know.
24 Q. In this conversation with your advisors
25 after the meeting in which they reported to you
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
148
1 about the meeting, did you come to any conclusions
2 or give your advisors any further instructions?
3 A. Yes, I was encouraging that the group,
4 the Reemtsma people, they wanted to get more
5 involved with us in this transaction, you know, in
6 effect be--I don't want to use the word coverup--I
7 will use the word coverup--this would make any
8 spinoff look more credible to people.
9 And another open issue, of course, was
10 the debt exchange, we didn't know the status of
11 that at the time.
12 Q. What debt exchange is that?
13 A. Nabisco's debt exchange.
14 By the way, I now recall my meeting
15 with Harper, Mr. Harper mentioned he wasn't sure it
16 was going to go through at all. As you can see
17 from the projections we gave Mr. Harper that first
18 day, there were various alternatives with the debt
19 exchange, without the debt exchange. He said he
20 didn't think it was going to go through that May
21 meeting.
22 Q. By debt exchange, you're referring to
23 the exchange of the debt at the parent company
24 level?
25 A. Yes, it was previously swapped out to
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
149
1 the Nabisco level.
2 Q. How did that transaction, the potential
3 transaction affect your analysis?
4 A. Well, it eliminated the need for three
5 billion dollars if it went through because the
6 banks were being swapped out into Nabisco, it
7 completely would change my thought process.
8 In addition, it would change the value
9 of the stock that could be spun off, the Nabisco
10 stock spun off to shareholders, major shareholders
11 that are reflected on the summary analysis we gave
12 Mr. Harper and Mr. Goldstone.
13 Q. And it would have to lower the value of
14 this spinoff to Nabisco shareholders; is that
15 corect?
16 A. That is Reynolds shareholders?
17 Q. Yes?
18 A. Absolutely correct.
19 Q. That's because they would receive a
20 share of stock in a company encumbered by debt?
21 A. That's absolutely correct.
22 Q. Whereas on the previous scenario
23 Nabisco would be debt free?
24 A. That is absolutely correct.
25 Q. Did you perform any quantification of
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
150
1 the change in value?
2 A. Yes. This is on the summary we gave,
3 you can see the difference with the bond swap, we
4 call it a bond swap, without the bond swap, or of a
5 partial bond swap even.
6 Q. Now, the bond swap would eliminate the
7 problem of having to refinance this bank debt with
8 restrictive spinoff covenants; is that correct?
9 A. It would eliminate the problem for me.
10 I mean RJR will have eliminated the problem
11 themselves. As outsiders it was a problem for me
12 but it would not be a problem for RJR to do that.
13 Q. Did the joint venture to do this debt
14 swap eliminate the need for a joint venture
15 partner?
16 A. Yes, it did.
17 Q. Do you know when the debt swap was
18 completed?
19 A. Yes.
20 Q. When was that?
21 A. Early July, late June, early July.
22 Q. Your recollection is that it was in
23 late June or early July--
24 A. It was still ongoing, it was not
25 completed in May. He related to me that he wasn't
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
151
1 sure it's going to be completed.
2 Q. Did anyone report to you that in this
3 discussion that took place between Mr. Goldstone or
4 among Mr. Goldstone and Mr. Jerome, Mr. Hirschfeld
5 and others that Mr. Goldstone said that his primary
6 concern or RJR's primary concern was the injury to
7 the company that could be posed by litigation
8 relating to the spinoff?
9 A. Not at this meeting. At the time his
10 primary concern was his board, who wouldn't go
11 along with it.
12 Q. Did they report to you what Mr.
13 Goldstone had said at this meeting?
14 A. Yes.
15 Q. What did they say Mr. Goldstone said in
16 that regard?
17 A. They said that Goldstone said very
18 clearly that if we had shareholder support, we
19 could demonstrate shareholder support and we can
20 have a credible--meaning another large
21 company--involved with us in the spinoff, he
22 thought we can maybe get the board to support it.
23 Let me finish. The problem being that it would
24 look terrible to Wall Street if just Liggett were
25 effectuating the spinoff, it would look like they
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
152
1 went and just hired Liggett to do something they
2 were not prepared to do. Those exact words were
3 used.
4 Q. What did you understand would be the
5 function of this other company?
6 A. As I said before two minutes ago, it
7 would be like a coverup to look like it seemed more
8 credible that Liggett just wasn't hired because the
9 board was refusing to do the spinoff.
10 Q. In what way would this other party make
11 it appear more credible?
12 MR. HIRSCHFELD: You're asking the
13 witness if he understands what Mr. Goldstone meant?
14 Q. (By Mr. Stern) What did you understand
15 Mr. Goldstone to mean by credibility?
16 A. Just that the Wall Street Journal was
17 worth the three-way deal, not a two-way deal,
18 Liggett just wasn't hired to affectuate the spinoff
19 because the board or RJR refused to do it.
20 It was just again ideas where a
21 coverup--but the word coverup I must use because
22 that was relayed to us.
23 Q. Let's take it to the next step.
24 What did you do after this conversation
25 with your advisors?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
153
1 A. I don't remember, again remember the
2 timing, but there were other meetings.
3 Again, what's important to us vis-a-vis
4 Reemtsma, anything else, was the debt swap, was
5 that going to go through, was it not going to go
6 through, and somewhere around this point in time
7 Reemtsma got kind of some cold feet about joining
8 us, I don't know what their reason was. They just
9 went to their board and they decided they didn't
10 know if the deal would be successful or not and we
11 just waited to see what happened with the debt
12 swap, you know, whether it would be successful or
13 not with the debt swap from the financial point of
14 view.
15 Q. Did anyone tell you why Reemtsma got
16 cold feet?
17 A. Only thing I heard was from the
18 Wasserstein people.
19 Q. Who at Wasserstein?
20 A. Mr. Baeza was the only one that told
21 me.
22 Q. What did Mr. Baeza say?
23 A. He said basically that they didn't want
24 to get involved in a hostile situation; that if the
25 situation were friendly they would be willing to be
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
154
1 involved.
2 Q. Well, when did Mr. Baeza tell you that,
3 what point in time?
4 A. June sometime, late June, early July.
5 I don't remember exactly when.
6 Q. Well, when did it come to appear to you
7 that the situation might be hostile?
8 A. I don't know. Not until August,
9 sometime in August, because we were talking all
10 along during this period of time, some
11 conversations back and forth.
12 The big issue was the debt swap going
13 through or not.
14 Q. I'm just trying to get the chronology
15 clear.
16 Baeza tells you that Reemtsma is
17 reluctant to become involved in a hostile
18 situation, is backing out?
19 A. Correct.
20 Q. And I think you said that you thought
21 you had that conversation with him sometime in--
22 A. June sometime, late June, something
23 like that.
24 MR. HIRSCHFELD: His testimony was late
25 June or early July.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
155
1 THE WITNESS: Late June or early July.
2 Q. (By Mr. Stern) That was before you
3 yourself perceived the situation to be hostile?
4 A. Yes, because they were still talking to
5 RJR.
6 Q. Do you know why, did anyone tell you
7 why Reemtsma viewed the situation to be hostile in
8 late June or early July?
9 A. They just weren't sure. We don't know
10 because we did not necessarily get a deal struck
11 with RJR at the time.
12 Q. What you know on that subject you know
13 through Baeza; is that correct?
14 A. Correct.
15 Q. You didn't have any direct discussions
16 with Reemtsma?
17 A. Not after they made that decision, no.
18 Q. Between the time that you first met
19 with Harper and from the time you said that
20 Reemtsma was withdrawing from the situation, did
21 you have any meetings with anyone at Reemtsma?
22 A. Yes.
23 Q. With whom do you meet?
24 A. Again--excuse me, I don't remember his
25 name, but the CFO, I met with him in New York, we
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
156
1 had dinner.
2 We're talking about the situation where
3 we had a couple of meetings, my people had meetings
4 with him. There were ongoing meetings in New York.
5 Q. This is after the May encounter with
6 Mr. Harper?
7 A. Yes.
8 Q. What was the purpose of those meetings?
9 A. To continue to--they were still
10 studying the proposal and they wanted to refine the
11 problems, their own projections, you know.
12 There was a major tax issue that
13 Reemtsma had internal to them involving this thing,
14 they had to get over that hump; that was what held
15 up some of their discussions.
16 So this was all ongoing, tax, financial
17 projections, hostile, not hostile, good, all those
18 issues.
19 Q. What did you discuss with them on the
20 question of whether the transaction would be
21 hostile or not hostile?
22 A. We just reported to them assuming what
23 happened at the meetings we had been having with
24 the RJR people, getting them up to speed on
25 everything.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
157
1 Q. You reported to them what you had been
2 hearing from--
3 A. Mr. Baeza.
4 Q. We have covered, we have talked about
5 the meeting with Mr. Harper where you were present
6 and the subsequent meeting between Mr. Goldstone
7 and Mr. Baeza and others, you weren't present but
8 you received a report.
9 Was there a subsequent meeting between
10 representatives of the Brooke Group interest and
11 representatives of RJR?
12 A. There were two or three subsequent
13 meetings.
14 Q. When was the next meeting that you
15 recall?
16 A. Now I'm getting hazy because I don't
17 recall the details of other meetings. I know Mr.
18 Ressler was there at some of the meetings just
19 trying to explore the issues. Exactly what was
20 said or not said, I really don't recall.
21 Q. You were not at any such meetings?
22 A. I was not at any other meetings, no.
23 Q. Now, with respect to the subsequent
24 meetings that you were not at, you said you would
25 receive reports from your advisors; is that
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
158
1 correct?
2 A. Yes.
3 Q. And your advisors that gave you these
4 reports included Mr. Hirschfeld, Mr. Baeza and Mr.
5 Ressler?
6 A. That's correct.
7 Q. Anyone else?
8 A. No.
9 Q. Now, again with respect to these
10 meetings, did any of your advisors report to you
11 that Mr. Goldstone or any of the other RJR
12 representatives had said that they were looking to
13 Liggett to alleviate the problem of personal
14 liability of directors?
15 A. They were looking to Liggett to
16 affectuate the spinoff they could not do
17 themselves, period.
18 Q. Is that all they said?
19 A. Again, I don't recall the exact words
20 after that second meeting, I just don't recall
21 them. Excuse me.
22 MR. HIRSCHFELD: All right.
23 THE WITNESS: I'm sorry.
24 MR. HIRSCHFELD: If you don't recall,
25 you're not obliged to provide any information that
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
159
1 is all speculative in nature.
2 MR. STERN: That's fine.
3 THE WITNESS: I don't recall exactly
4 what was said, but we continued along these lines
5 of discussion.
6 Q. (By Mr. Stern) Now, did there come a
7 time when you attempted to contact shareholders of
8 RJR to determine whether they would support a
9 spinoff, support the kind of proposal that you were
10 discussing with Mr. Harper and Mr. Goldstone?
11 A. No, not at all.
12 Q. Did anyone ever report to you that
13 representatives of Brooke Group told Mr. Goldstone
14 in the course of these meetings that followed upon
15 the meeting with Mr. Harper that Brooke Group had
16 been in contact with RJR, with some number of RJR
17 shareholders, and they were confident that at least
18 30 percent would support the proposal?
19 A. Say that again?
20 MR. HIRSCHFELD: Objection. Let me
21 just have the question again.
22 MR. STERN: Let me rephrase it, maybe I
23 can relieve the objection.
24 Q. (By Mr. Stern) There were meetings
25 that took place subsequent to your May meeting with
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
160
1 Mr. Harper?
2 A. Correct.
3 Q. And these meetings included various
4 representatives of Brooke Group and Mr. Goldstone--
5 A. Uh-huh.
6 Q. -- of RJR; is that correct?
7 A. Yes, correct.
8 Q. Although you were not present you
9 received reports of what transpired in these
10 meetings?
11 A. Correct.
12 Q. You received them from one or more of
13 the advisors who represented you in the meeting?
14 A. Correct.
15 Q. Did it come to your attention in any
16 way that any of your advisors represented Mr.
17 Goldstone that--
18 A. Represented to Mr. Goldstone?
19 Q. Yes, that they were confident that 30
20 percent of the RJR shareholders would support the
21 proposal or the proposal that you were discussing?
22 A. They just voiced their own opinion. I
23 wouldn't know why 30 percent. Why not 50 percent?
24 I don't understand.
25 Q. You're not aware of any efforts by
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
161
1 people representing the Brooke Group to sort of
2 solicit the views of RJR sharehholders in
3 connection with these meetings?
4 A. Absolutely correct.
5 Q. One of the concerns that had been
6 relayed to you by your advisors or one of the
7 problems was the need to demonstrate shareholders'
8 support or the desire on the part of Mr. Goldstone
9 that there be a demonstration of shareholder
10 support?
11 MR. HIRSCHFELD: No, no, that's not
12 what he testified to. He said it was the desire to
13 demonstrate stockholders' support for a spinoff,
14 not for this transaction.
15 THE WITNESS: Correct.
16 MR. HIRSCHFELD: It was for a spinoff.
17 Q. (By Mr. Stern) All right. Is what Mr.
18 Hirschfeld said--
19 A. Absolutely, because he related back to
20 the previous year's annual meeting with the
21 proposal and it got on the ballot and the
22 shareholders did not support it at that time.
23 Q. What did you do if anything to address
24 that concern that had been relayed to you?
25 A. At that point in time, nothing.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
162
1 Q. Did it ever come to your attention in
2 any way that any of your advisors in the course of
3 these meetings with Mr. Goldstone subsequent to
4 your meeting with Mr. Harper suggested to Mr.
5 Goldstone that RJR simply acquire Liggett?
6 A. Say again?
7 Q. Did it come to your attention, did you
8 ever--I will ask a different question.
9 Did you ever discuss with any of your
10 advisors simply having RJR acquire Liggett?
11 A. After we filed Hart-Scott, which RJR
12 was aware of in early August, we started hearing
13 from Mr. Goldstone all kinds of I will call them
14 scare tactics, that this is a disaster, this will
15 do this, this will do that, so forth and so on.
16 I heard from one of my advisors that
17 Mr. Harper then suggested that maybe they should
18 buy Liggett, to which I responded we're a public
19 company, I haven't heard any offers. We'll do what
20 makes sense, and this is ridiculous after we filed
21 Hart-Scott, and they were aware of the Hart-Scott
22 filing.
23 Q. But subsequent to your filing with Mr.
24 Harper, to your knowledge, did any of your advisors
25 ever suggest to Mr. Goldstone that what Mr. LeBow
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
163
1 really wanted was to sell Liggett to RJR?
2 A. Not according to my knowledge.
3 Q. Did you ever discuss with Mr. Baeza
4 whether Mr. Baeza had made any such suggestion to
5 Mr. Goldstone?
6 A. No.
7 Q. If Mr. Baeza had made such a suggestion
8 in this time period prior to the Hart-Scott filing,
9 would he have been doing so without authority from
10 you?
11 MR. HIRSCHFELD: Objection to form.
12 You can answer.
13 THE WITNESS: Mr. Baeza did lots of
14 things without authority from me, as you can see
15 from other documents you just presented me, you
16 know, concerning all kinds of proposals he was
17 trying to dream up.
18 Q. (By Mr. Stern) Did it come to your
19 attention at any time that again prior to the
20 filing of the Hart-Scott that RJR had requested
21 financial information about Liggett?
22 A. Prior to the Hart-Scott filing?
23 Q. Yes.
24 A. No. Liggett finances are all public,
25 there's nothing to request.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
164
1 Q. Did it come to your attention that RJR
2 had requested, again prior to Hart-Scott, had
3 requested from Liggett an estimate of the value of
4 Liggett for purposes of an acquisition?
5 A. No. I think you and I are having a
6 confusion about Hart-Scott, I think that's where
7 our problem is.
8 I know I am correct when I say prior to
9 Hart-Scott--I mean prior to me and former RJR that
10 filed Hart-Scott prior to the approval time.
11 Q. I understand, and we can find a date.
12 A. I believe that it was 30 days before,
13 you know, it was late July. Was Hart-Scott filed
14 early August or late July?
15 Just let me draw the distinction that
16 we have two different times of what I'm thinking
17 and what you're thinking.
18 MR. HIRSCHFELD: Don't assume. I think
19 he understands the time frames.
20 THE WITNESS: Okay.
21 MR. STERN: I'm going to mark as the
22 next exhibit a document from the files produced to
23 us by the LeBow parties.
24 (Plaintiff's Exhibit 22 was thereupon
25 marked for identification.)
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
165
1 Q. (By Mr. Stern) Mr. LeBow, Exhibit 22
2 has been placed before you. Do you recognize that
3 document?
4 A. Yes, it's a copy of the Hart-Scott
5 filing.
6 Q. Did you see that that document is dated
7 August 11th, 1995?
8 A. Yes.
9 Q. Could we agree that the Hart-Scott
10 filing took place on August 11th, 1995?
11 A. Yes, we can.
12 Q. Now, just so the record is clear, the
13 time frame that I'm focusing on is the time frame
14 before your meeting Mr. Harper sometime in the
15 middle of May and the filing of the Hart-Scott
16 retainer.
17 A. Prior to August 11th?
18 Q. Prior to August 11th.
19 A. Okay, fine.
20 Q. In that time frame did it ever come to
21 your attention that there were discussions between
22 anyone representing RJR and anyone else
23 representing Brooke Group about the value of
24 Liggett for the purposes of an acquisition?
25 A. For the purposes of RJR to acquire
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
166
1 Liggett?
2 Q. Yes.
3 A. No, the answer is not on my authority
4 at all.
5 Q. And it never, just to make it clear--I
6 know I'm asking you to repeat yourself but I think
7 it would help the record--it never came to your
8 attention that Mr. Baeza or any other advisor had
9 suggested to Mr. Goldstone that RJR consider
10 acquiring Liggett in this time frame?
11 A. Not to my knowledge.
12 Q. Now, to pick up the chronology, there
13 were some meetings, there were one or more
14 additional meetings among advisors for Brooke Group
15 and Mr. Goldstone that were reported to you in some
16 fashion?
17 A. Correct.
18 Q. Did you receive a report on each
19 meeting?
20 A. Yes.
21 Q. What were you told about the last such
22 meeting? That is the last meeting prior to the
23 filing of the Hart-Scott.
24 A. I don't recall exactly.
25 Q. Well, were you ever told that RJR had
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
167
1 determined not to pursue the proposal that you had
2 presented to them back in May?
3 A. No.
4 Q. Well, how was it left? I mean how did,
5 to your knowledge--
6 MR. HIRSCHFELD: At what point?
7 THE WITNESS: Well, at what point?
8 Q. (By Mr. Stern) You told me you
9 received a report about the first post Harper
10 meeting and two problems were raised, then there
11 was another meeting, is that right, and--
12 A. After the first Harper meeting.
13 Q. There were several?
14 A. It was like four or five meetings.
15 Q. And these meetings all took place prior
16 to August 11th; is that correct?
17 A. No. Some took place after August 11th.
18 Q. With respect to the meetings that took
19 place before August 11h, what were you told about
20 what was said at these meetings?
21 MR. HIRSCHFELD: If you can remember.
22 Q. (By Mr. Stern) If you can remember.
23 MR. HIRSCHFELD: I think he already
24 answered.
25 THE WITNESS: I remember specifically
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
168
1 what happened the second meeting after the first
2 meeting or the Harper meeting, the other couple of
3 meetings between then and August 11th, it was just
4 more of the same type of thing, exact detail of
5 which I don't recall.
6 Q. (By Mr. Stern) What if anything did
7 Brooke Group do to address what had been reported
8 as a concern about credibility?
9 A. We were talking to Reemtsma. I'm
10 trying to remember.
11 Q. Anything else?
12 A. No. Well, talking, bringing Reemtsma
13 into the fold to try to address that.
14 Q. As joint venturers or in some other
15 capacity?
16 A. Joint venture partners.
17 Q. Was that in a different way than you
18 had been discussing with them prior to the May
19 meeting?
20 A. No, nothing changed, it was the same
21 way.
22 Q. In these discussions with Mr.
23 Goldstone, to your knowledge, did anyone ever
24 disclose that there were discussions with Reemtsma?
25 A. No. We had a confidentiality
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
169
1 agreement.
2 Q. In these conversations with Mr. Harper
3 and Mr. Goldstone that were going through this May,
4 June, July period, did anyone from Brooke Group
5 disclose to them that New Valley had acquired
6 several million dollars worth of RJR stock?
7 A. I don't believe so.
8 Q. Was there ever any discussion or
9 consideration about making that fact known?
10 A. No.
11 Q. Now, did you discuss with Mr. Goldstone
12 prior or anyone from RJR prior to the event the
13 filing of the Hart-Scott application?
14 A. No. Prior to the actual filing?
15 Q. Prior to the actual filing.
16 A. No.
17 Q. Was there a reason for not doing so?
18 A. No, no particular reason. It was just
19 something normally kept confidential.
20 MR. HIRSCHFELD: You've answered the
21 question.
22 Q. (By Mr. Stern) What considerations led
23 Brooke Group to file the Hart-Scott application?
24 A. Desire to buy fifteen million dollars
25 worth of RJR stock.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
170
1 Q. Now, up until this point had Mr.
2 Goldstone said that they were giving you any reason
3 to believe that RJR was inclined to pursue this
4 spinoff proposal or any proposal that you had made
5 to them?
6 A. I believe the last thing I heard, again
7 prior to August 11th, was that they were very
8 interested but they wanted to wait a few months and
9 get back to me, something else was cooking or
10 whatever, but they wanted to put the discussion off
11 for a couple of months.
12 Q. What was your reaction to that
13 suggestion?
14 A. At the time? Fine, because again, it
15 was unclear, the effect of the debt swap.
16 Q. Is Wasserstein, Perella still advising?
17 A. No, I already testified no.
18 Q. When did they discontinue that role?
19 A. Right after Hart-Scott became public.
20 Q. Did you discuss with Wasserstein,
21 Perella the filing of the Hart-Scott application
22 before you made the application?
23 A. Yes, they knew what I was doing.
24 Q. With Mr. Baeza?
25 A. Yes.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
171
1 Q. What did he say? Did he comment on the
2 fact that you were going to do that?
3 A. No, that was no big deal.
4 Q. What did he say in the course of the
5 discussion?
6 A. I don't recall exactly, but, you know,
7 he was aware we were filing.
8 Q. How did it come about that Wasserstein,
9 Perella discontinued its work with RJR?
10 A. They didn't want to get involved in a
11 hostile situation, which after it became public,
12 you know, things quickly deterioriated to.
13 Q. When you said after it became public--
14 A. Hart-Scott became public on August
15 28th.
16 Q. Did you have any discussions in advance
17 of filing the Hart-Scott application about whether
18 or not the filing of the Hart-Scott application
19 would cause the transaction to become perceived as
20 hostile?
21 A. No, I had no prior indication of that.
22 Q. What were the considerations that
23 caused New Valley to be the entity that filed the
24 Hart-Scott application?
25 A. New Valley was the one that wanted to
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
172
1 buy the stock.
2 Q. The document Exhibit 22 reflects that
3 the application with the cover letter was filed on
4 the letterhead of Sullivan and Cromwell; is that
5 correct?
6 A. That's correct.
7 Q. Had New Valley engaged Sullivan and
8 Cromwell for purposes of filing the Hart-Scott
9 application?
10 A. That's correct.
11 Q. Did Sullivan and Cromwell have any
12 other responsibilities in connection with the RJR
13 matter other than the Hart-Scott application?
14 A. As of today?
15 Q. Yes.
16 A. They're also our advisor on the 40 Act
17 issues.
18 Q. Does that have anything to do with RJR?
19 A. No, not really, that's true. They're
20 legal advisors regarding, you know, value compiling
21 with what is called the Investment Company Act of
22 1940, that's the only other area they represent New
23 Valley or Brooke.
24 Q. Have you ever discussed with anyone
25 whether there is any relationship between any
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
173
1 Investment Company Act issue respecting New Valley
2 and New Valley's acquisition of RJR shares?
3 MR. HIRSCHFELD: Objection to form.
4 THE WITNESS: Say that again slowly.
5 Q. (By Mr. Stern) I will back up. I will
6 rephrase the question.
7 Has New Valley disclosed that there are
8 Investment Company Act of 1940 issues posed by its
9 ownership of--by its asset base generally?
10 A. By asset base, yes.
11 Q. And it is also disclosed publicly that
12 it's relying on an exemption for registration under
13 the Investment Company Act; is that correct?
14 A. At this time, correct.
15 Q. Has New Valley taken any steps to
16 obtain from the SEC any relief with respect to the
17 Investment Company Act?
18 A. No.
19 Q. Do you have any understanding as to how
20 long a period of time New Valley will be able to
21 rely on the exemption from registration under the
22 Investment Company Act?
23 A. Yes.
24 Q. How long a period of time?
25 A. One year.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
174
1 Q. One year starting when?
2 A. January 18th.
3 Q. 1995?
4 A. Correct.
5 Q. So that one year will expire in a
6 matter of days; is that correct?
7 A. That's correct.
8 Q. What will New Valley do then in order
9 to address its Investment Company Act issue?
10 MR. HIRSCHFELD: I'm going to object to
11 that as being inquiry into the business strategy of
12 New Valley with respect to matters that have
13 nothing to do with RJR and are irrelevant to the
14 litigation.
15 I will direct the witness not to
16 answer.
17 Q. (By Mr. Stern) Have you discussed with
18 anyone--I'm sensitive to the attorney-client
19 privilege here, you can answer that question yes or
20 no--have you discussed with anyone whether or not
21 there is any relationship between the Investment
22 Company Act issues that we have been discussing and
23 the acquisition by New Valley of RJR shares?
24 MR. HIRSCHFELD: Do you understand that
25 question?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
175
1 THE WITNESS: Not totally.
2 Q. (By Mr. Stern) I will put another
3 question.
4 Is the Investment Company Act issue
5 that we have been discussing in any way affected by
6 New Valley's activities with respect to RJR?
7 MR. HIRSCHFELD: I still don't
8 understand the question.
9 Let me just say this for the record, I
10 don't see why we're dancing about this:
11 The allegations that are unambigously
12 made in the complaint is that the concept of
13 merging Liggett with RJR was being pursued by
14 Brooke Group as a means of ameliorating the
15 Investment Company Act problem, whatever that is,
16 that possibly New Valley had, possibly Brooke Group
17 may have, and that is the allegation. I think you
18 ought to ask the witness directly about that.
19 THE WITNESS: If that's the question, I
20 will answer it.
21 MR. HIRSCHFELD: Because you're
22 phrashing your questions so generally that they
23 become almost meaningless and, you know, our
24 response to it could be construed in any one of two
25 hundred different ways, and I think it's not useful
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
176
1 for our purposes.
2 Q. (By Mr. Stern) In framing the Liggett
3 group proposal that eventually was put before RJR,
4 did you take into account in any way the Investment
5 Company Act issue that was confronting New Valley?
6 A. Absolutely no.
7 Q. To your understanding, is the
8 Investment Company Act issue affected in any way by
9 New Valley's acquisition of RJR shares?
10 A. It is affected by New Valley's
11 acquisition of anyone's shares by anyone other than
12 a controlling position.
13 Q. The answer to that question is yes,
14 because they are securities; is that correct?
15 A. That's a general answer in that
16 respect, non-controlling securities.
17 Q. In the last year has New Valley
18 acquired any operating companies other than has
19 been publicly disclosed?
20 A. No, of course not, other than publicly
21 disclosed, no.
22 Q. After the filing of the Hart-Scott
23 application, I think we agreed was August 11th,
24 what happened next as respects to development of
25 the RJR situation?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
177
1 MR. HIRSCHFELD: He already testified
2 as to the communications that apparently took place
3 between Goldstone and Baeza that were reported to
4 him.
5 MR. STERN: Right.
6 MR. HIRSCHFELD: You're asking him in
7 addition to that?
8 THE WITNESS: After?
9 MR. HIRSCHFELD: After.
10 MR. STERN: I will clarify the
11 question.
12 Q. (By Mr. Stern) Were there any
13 subsequent communications between RJR and
14 representatives of Brooke Group subsequent to the
15 August 11th filing of the HSR?
16 A. Yes.
17 Q. When was the first such communication?
18 A. I don't recall the exact first one, but
19 after the Hart-Scott filing was delivered to RJR, I
20 believe from Mr. Baeza, Mr. Goldstone called Mr.
21 Baeza and reiterated that there would be all kinds
22 of problems if you were to pursue the spinoff from
23 Nabisco, litigation problems, God knows, the world
24 would fall apart was the reaction, basically, and
25 someone said to Mr. Baeza, you know, would they be
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
178
1 interested in just selling Liggett, and he
2 requested a meeting as soon as possible with us,
3 Mr. Harper and Mr. Goldstone.
4 Q. Mr. Baeza reported to you that Mr.
5 Goldstone had called him; is that correct?
6 A. Yes, on behest of Mr. Harper, bequest
7 of Mr. Harper.
8 MR. HIRSCHFELD: Bequest?
9 THE WITNESS: Behest or bequest, but
10 not bequest.
11 MR. HIRSCHFELD: He's still living.
12 THE WITNESS: Behest.
13 Q. (By Mr. Stern) Mr. Baeza told you that
14 Goldstone had told him that Harper had asked him to
15 call Baeza?
16 A. I can't say for sure. I'm not sure
17 what Goldstone did on his own, but since Mr. Harper
18 was CEO maybe we just all presumeed it was just Mr.
19 Harper.
20 Q. Did Mr. Baeza tell you the words that
21 Mr. Goldstone had used in this conversation?
22 A. Yes, told me all kinds of horrible
23 things would happen to RJR.
24 Q. What did Mr. Goldstone say would happen
25 to RJR?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
179
1 A. Injunctions all over the place, this
2 would happen, that would happen, all types of
3 terrible litigation issues could occur if I
4 continued down these lines.
5 Q. Did he say anything more than
6 discussing the litigation issues, did Mr. Baeza say
7 that Mr. Goldstone had said anything other than
8 injunctions?
9 A. Yes, the regular, you know, tobacco
10 litigants would be this, that could hurt in the
11 future, God knows what. I mean it was the world
12 would come to an end, in essence.
13 Q. The world would come to an end, those
14 aren't words that Mr. Goldstone used?
15 A. Those are my words, I agree.
16 Q. He didn't say the world would come to
17 an end?
18 A. He didn't say that.
19 Q. You don't know--let's--
20 A. I don't know exact words, but the
21 intent, the flavor I got from Mr. Baeza was pretty
22 close to that.
23 Q. Then did Mr. Baeza report to you that
24 Mr. Goldstone in their conversation had said
25 something about RJR acquiring Liggett?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
180
1 A. Yes.
2 Q. What did Mr. Baeza say to you Mr.
3 Goldstone had said?
4 A. He said I'd like to have a meeting to
5 discuss possibly buying Liggett. Do I have any
6 interest.
7 I said we were a public company, we
8 have to, you know, listen to any proposals, and
9 that Mr. Harper had instructed Wasserstein, Perella
10 to start valuing what Liggett is worth.
11 Q. Was that the first time anyone had
12 discussed with you the possibility of RJR acquiring
13 Liggett?
14 A. Of just RJR acquiring Liggett, yes.
15 Q. As opposed to the proposal?
16 A. As opposed to the proposal, that's
17 correct.
18 Q. What happened next?
19 A. A meeting was held.
20 Q. When was that meeting held?
21 A. Sometime between August 11th and August
22 28th. I mean, I can't tell you exact date.
23 Q. Did you attend that meeting?
24 A. No.
25 Q. Do you know where the meeting took
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
181
1 place?
2 A. No. David Parks' office or RJR's
3 office.
4 Q. Do you know who attended the meeting?
5 A. As far as I know, Mr. Baeza, Mr.
6 Ressler, I believe Mr. Hirschfeld here.
7 Q. Do you know who attended from the RJR
8 side?
9 A. A lot of people. There was Mr.
10 Goldstone, obviously, some other lawyers, Morgan,
11 Stanley represented, as I was told.
12 Q. Well, I guess I should make clear, did
13 you receive a report about this meeting from
14 anyone?
15 A. Yes.
16 Q. From whom?
17 A. Again, Mr. Ressler, Mr. Hirschfeld, Mr.
18 Baeza.
19 Q. Did you receive this report shortly
20 after the meeting took place?
21 A. Yes, by telephone.
22 Q. By telephone, conference call?
23 A. Conference call, right. I think Mr.
24 Stanley.
25 Q. What did they say to you had
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
182
1 transpired?
2 A. They said they were told that Mr.
3 Harper had instructed everyone to come up with a
4 proposal of what their people thought Liggett was
5 worth for purposes of possibly making an offer to
6 acquire Liggett, because what I was proposing to
7 do, to solicit shareholders' support in the future
8 or buy stock or whatever, could lead to God knows
9 what type of consequences, they wanted to forestall
10 that as soon as possible.
11 Q. Did they tell you what their response
12 was to that?
13 A. Whose response?
14 Q. Well, did they tell you, did Mr.
15 Hirschfeld or Mr. Baeza tell you or Mr. Ressler
16 tell you what they had responded at the meeting?
17 A. Morgan and Stanley people was asking
18 information apparently about the values of the
19 tobacco companies. Apparently, according to the
20 information they asked for, the information I got
21 was they did not quite understand the tobacco
22 business, they seemed to be quite naive in the
23 tobacco business. There were first initial
24 meetings trying to educate them on what values are
25 really like in the tobacco business.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
183
1 Q. Did anyone discuss any possible values
2 for Liggett specifically?
3 A. I believe Mr. Ressler threw some
4 numbers out, you know, and/or someone did.
5 I never discussed with Mr. Ressler or
6 with Mr. Baeza or with Mr. Hirschfeld what I
7 thought the real values were.
8 Nabisco threw out some of their own
9 numbers.
10 Q. Do you know what numbers were thrown
11 out?
12 A. Not in detail, no. I mean hundreds of
13 millions of dollars. Exactly, I don't know.
14 Q. Does it refresh your recollection the
15 number four hundred million was thrown out?
16 A. No.
17 Q. Did the people from RJR throw out any
18 numbers?
19 A. No, not that I know of.
20 Q. Do you know whether or not any
21 preparation to the meeting was undertaken prior to
22 the meeting by anyone working with the Brooke
23 Group?
24 A. No.
25 Q. Did you review with anyone prior to the
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
184
1 meeting what they would say about the possible
2 value of Liggett in that transaction?
3 A. No, I did not.
4 Q. What happened next?
5 A. Well, again, I authorized them to tell
6 Morgan and Stanley people only public information,
7 you know, and explain the tobacco business to them.
8 I got a call I guess a few days later
9 saying that they were still having trouble
10 understanding things, and at that point I decided,
11 okay, to really have them understand the values we
12 would give them some of the limited projections of
13 Liggett because I was hearing numbers that just
14 with their projections that they were speculating
15 were totally incorrect from the public
16 information. The public information at the time
17 had a lot of restructuring charges that were
18 apparent, which was difficult to understand.
19 Q. Did your people tell you what things
20 that Morgan and Stanley was having difficulty
21 understanding?
22 A. Restructuring charges, they were asking
23 charges that you can look in public documents they
24 were having difficulty understanding. There were
25 business reports, you know.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
185
1 They didn't understand the business,
2 period, that was my basic feeling.
3 Q. Was there anyone from RJR Tobacco
4 involved in these discussions?
5 A. I don't believe so, not directly.
6 Q. Not that you're aware of?
7 A. Not that I was aware of.
8 Q. Just to understand what you're telling
9 me, there came a point where you authorized your
10 people to provide some internal projections?
11 A. One sheet internal, a few numbers, just
12 to give them a better understanding of the
13 business.
14 Q. At this point who is speaking for
15 Brooke Group in these discussions?
16 A. Mr. Ressler, Mr. Baeza. Mr. Baeza
17 primarily.
18 Q. Now, are we still in the August time
19 frame here?
20 A. Yes, still in the August time frame.
21 Q. What happened next after you--I take it
22 these projections, to your understanding, these
23 projections were delivered?
24 A. One sheet was.
25 Q. What happened next?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
186
1 A. I got a call from Mr. Goldstone, which
2 I responded to. I was in Brazil, I called him from
3 Brazil, as a matter of fact, I recall the call, in
4 which he suggested that what I was planning on
5 doing or thought I was planning on doing--because I
6 didn't even know what I was planning on doing at
7 that point in time--he wanted to try and talk me
8 out of.
9 I said, you know, I don't know what I'm
10 going to do. I'm planning to go ahead, period.
11 It was a very short, curt conversation,
12 about 30 seconds, didn't last more than 30, 45
13 seconds, and that was the end of it.
14 A day later the Hart-Scott was--or two
15 days later, I forgot the exact timing, it was
16 probably maybe four days later--the Hart-Scott was
17 made public.
18 Q. So you were planning on going ahead
19 with what?
20 A. I don't know what. To buy more stocks
21 and have the Hart-Scott be public, that's all that
22 was, go ahead at the time.
23 Q. Now, what happened with respect to the
24 discussions about the possibility of acquisition
25 of--
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
187
1 A. Never heard another word.
2 Q. So after you provided the projections--
3 A. That was the last conversation other
4 than Mr. Goldstone calling me, you know, a few days
5 later, he threatened or he tried to, suggesting
6 that we shouldn't proceed with the Hart-Scott and
7 the purchase of the additional stock.
8 Q. Up to this point in time in these
9 discussions of the possible acquisition, was price
10 discussed?
11 A. By whom?
12 Q. By either RJR or Brooke
13 representatives.
14 A. Mr. Baeza may have thrown out some
15 numbers. I have never authorized a single number
16 to be authorized by anybody. I mean Morgan,
17 Stanley was doing some homework, and I said if they
18 have an offer, let me hear what they're talking
19 about.
20 Q. Did they ever make an offer?
21 A. No.
22 Q. From either side, was there any
23 indication of value or price?
24 A. Not from me.
25 Q. What about from them as reported to you
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
188
1 from RJR?
2 A. No, I just said no.
3 Q. Did the proposal as you expressed it in
4 May to Mr. Harper have an implication as far as
5 what the value of Liggett would be in your mind?
6 A. The proposal I made to Mr. Harper in
7 May had an implication as to the value of the total
8 transaction, not Liggett. This was the value I
9 felt necessary to effectuate the three billion
10 dollar refinancing possibility, give it kickers,
11 whatever you have to do to get the deal going.
12 This was much more complicated than
13 that. It was not reflective of the Liggett value
14 per se, nor was it intended to.
15 Q. What value did you put on the total
16 transaction as applied by the proposal made to Mr.
17 Harper, do you remember?
18 A. I don't think there was a total
19 transaction value. I mean other than, you know,
20 what we thought the value of the stock might be. I
21 don't understand the--it was not an acquisition per
22 se, so I don't know what you're talking about.
23 Q. Well, the transaction would involve a
24 combination between Liggett and RJR; is that
25 correct?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
189
1 A. That's correct, and international--
2 Q. And international. Did you have an
3 estimate of the value of the combined entities?
4 A. Yes, I believe we stated that in the
5 proposals. Again, it's a function of debt still
6 remaining, that type of thing. There were various
7 proposals, with debt restructuring, without debt.
8 Q. What percentage of the combined
9 entities would Liggett have?
10 A. We put an investment banking type
11 percentage--I guess that's not the right word, but
12 a leverage buyout percentage or whatever you want
13 to call it, a normal override type of percentage of
14 20 percent on doing, effectuating the transaction,
15 bringing in three million dollars, doing all these
16 things, what we felt was, you know, a fair element
17 for effectuating the spinoff, refinancing three
18 billion dollars, getting an international tobacco
19 company to come and join in and doing everything we
20 said we wanted to do.
21 In addition to the Liggett piece there
22 was an implied preferred stock of three hundred
23 fifty million dollars.
24 Q. Was that in addition to the 20 percent?
25 A. It was.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
190
1 MR. HIRSCHFELD: Did you finish your
2 answer? I didn't mean to interrupt you.
3 THE WITNESS: But in our minds, in our
4 mind we never got to the point of allocating that
5 20 percent or the three fifty, precisely whether to
6 go to an international joint venturer if they would
7 like it or Brooke or New Valley, that was never
8 allocated, to pay fees or expenses we might have
9 incurred, this was a rough estimate subject to
10 negotiation for effectuating the overall total
11 transaction.
12 Q. (By Mr. Stern) I'm not sure I'm
13 understanding correct what was proposed in May.
14 Was it Liggett or the Brooke Group?
15 A. The total group.
16 Q. The total group?
17 A. Correct.
18 Q. Would take out of this transaction as
19 proposed was 30 percent, 20 to 30 percent of the
20 newly combined entity, plus three hundred fifty
21 million dollars in preferred stock; is that right?
22 A. That's with all the debts staying, with
23 all, you know, tremendous amount of debt, not
24 before the debt changes, there was billions of
25 dollars of debt still there.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
191
1 Q. Now, did the proposal contemplate an
2 alternative if the debt weren't there?
3 A. I don't recall exactly what the
4 proposal was because when you get into the debt
5 being refinanced, it's much more complicated. I
6 would have to look the numbers.
7 My point is, the value of the 20
8 percent changes significantly, depending upon your
9 debt structure.
10 (Brief recess.)
11 Q. (By Mr. Stern) To return for a brief
12 moment to the proposal presented in May and
13 discussed at various times in June, July and
14 perhaps August, the Liggett or the Brooke Group's
15 take from that proposed transaction would be three
16 hundred fifty million preferred stock and 20
17 percent of the combined entities, is that correct,
18 in general?
19 MR. HIRSCHFELD: Objection to form.
20 You may answer.
21 THE WITNESS: I don't like to use the
22 word take, but--
23 Q. (By Mr. Stern) What word would you
24 use? I don't mean to put words in your mouth.
25 A. The compensation for effectuating the
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
192
1 Nabisco spinoff, the compensation for effectuating
2 the three billion dollar refinance, the
3 compensation for bringing in a major international
4 tobacco partner for all of the Brooke Group's
5 constituency, not just Liggett or Brooke or
6 anything like that, and these proposals efficiently
7 proposed a three hundred fifty million dollar some
8 sort of preferred issue and a 20 percent, you know,
9 common position, which again was like an override
10 type of number.
11 Q. And the dollar value of that
12 compensation, would it depend on various
13 assumptions one made about debt repayment and other
14 things?
15 A. That's correct.
16 Q. Did you ever make an estimate of the
17 range of the dollar value of that compensation?
18 A. Not that I recall.
19 Q. Do you have an estimate in mind?
20 A. No, because it was strictly subject to
21 negotiation, it wasn't worth bothering.
22 Q. It would be wrong to believe that the
23 range of the value of compensation might be from
24 seven hundred fifty million to a billion dollars?
25 A. How did you come up with that number,
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
193
1 if I may ask?
2 Q. I'm just asking you, I'm asking you.
3 A. Well, excuse me. That number was for
4 an additional thing, for the acquisition of
5 Liggett; also the value of Liggett, if you want to
6 subtract the implied value of Liggett, you reduce
7 that number significantly.
8 Q. I just didn't follow you.
9 A. You have implied a value or asking me
10 if I implied a value from seven fifty to a billion
11 dollars. I guess I didn't explain it was for many
12 things. It was for effectuating the debt swap, for
13 the value of Liggett, it was for the Russian
14 operations, for the value of many other things.
15 You know, you come up with some kind of
16 implied number in that range if you wish.
17 Q. Depending upon the debt there, more or
18 less?
19 A. Depending upon many, you know,
20 factors. Again, that was strictly an initial
21 negotiating position.
22 Q. But--
23 A. Maybe we should have asked for more.
24 Q. It's not a negotiating position that
25 you have changed, is it?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
194
1 A. I never got to the point of negotiating
2 that item of the proposal.
3 Q. Now, we're up to the conversation that
4 you had with Mr. Goldstone at the end of August or
5 thereabouts, a brief telephone conversation that
6 you have described. What happened next?
7 A. Hart-Scott filing became public and we
8 bought stock and all negotiations between
9 Hirschfeld and RJR or any of other advisors ceased.
10 Q. In this period of time did you continue
11 to have contacts--this period of time being the
12 summer of 1995--did you continue to have contacts
13 with potential international joint venture
14 partners?
15 A. After they said they were no more
16 interested?
17 Q. Yes.
18 A. No, I did not.
19 Q. Did you continue to analyze a proposed
20 transaction structured like the one that you
21 presented in May?
22 A. After the debt swap was completed, the
23 interest, no.
24 MR. STERN: Mark as the next exhibit a
25 document produced by the LeBow parties.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
195
1 (Plaintiff's Exhibit 23 was thereupon
2 marked for identification.)
3 Q. (By Mr. Stern) Sir, Exhibit 23 has
4 been placed before you.
5 A. Correct.
6 Q. Can you identify that document?
7 A. That's some document that was prepared
8 by Mr. Kirkland.
9 Q. Was it prepared at your instruction?
10 A. No, not necessarily. I don't recall
11 but I don't think so. It appears to be that he
12 just took some old document and updated it for the
13 June operating results of RJR and updated it for
14 that. I suspect if you go back to compare to some
15 of the older documents you will see that same
16 thing, with the only difference being that the new
17 publicly released RJR numbers are added.
18 Q. Did you see any copy of this document
19 before today?
20 A. Probably.
21 Q. Would you look at page 8595, please?
22 Do you see that page?
23 A. Yes.
24 Q. Do you see that there is a date in the
25 corner 9-18-95?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
196
1 A. Correct.
2 Q. Am I correct that this document was
3 prepared on or around September 18th, 1995?
4 A. That's what it says.
5 Q. And that document was prepared after
6 your conversation with Mr. Goldstone that you just
7 described, the telephone conversation at the end of
8 August?
9 A. That's correct.
10 Q. Is it correct to say that that document
11 continues, that the document analyzes or makes
12 projections with respect to a transaction that is
13 summarized on page 8594?
14 A. Yes.
15 Q. And that transaction that is summarized
16 includes a merger transaction involving Liggett and
17 RJR; is that correct?
18 A. That's correct. But then again, this
19 is the same one from before, just updated with the
20 new RJR financials for June 30th, 1995.
21 Q. Do you know why Mr. Kirkland was
22 updating that?
23 A. That's the normal thing for him to do,
24 just to keep things, you know, documents up to
25 speed, no particular reason.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
197
1 Q. Did you discuss this analysis with
2 anyone?
3 A. I don't recall.
4 MR. STERN: I'm going to mark as the
5 next exhibit another document produced to us by the
6 LeBow parties.
7 (Plaintiff's Exhibit 24 was thereupon
8 marked for identification.)
9 Q. (By Mr. Stern) Mr. LeBow, Exhibit 24
10 has been placed before you, ask you to identify
11 that document.
12 A. Yes, this is that same kind of thing.
13 I'm happy to report I have very efficient people
14 who every time RJR's numbers come out they update
15 the document. Those are September in it as opposed
16 to June.
17 Q. Would you, sir, look at 8526, and do
18 you see that there is a date on that page November
19 14th, 1995?
20 A. That's correct.
21 Q. Does that suggest to you that this
22 document was prepared on or about that date?
23 A. That's correct.
24 Q. Then this document refers to a
25 transaction that's summarized on page 8525; is that
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
198
1 correct?
2 A. Right, included a spinoff from Nabisco.
3 Q. And merging with Nabisco?
4 A. Includes a lot of things, a spinoff
5 from Nabisco, merging with RJR/Liggett payment of
6 two dollars in dividends.
7 Again, this is strictly an update of
8 what was prepared before.
9 MR. HIRSCHFELD: Let me just state also
10 for the record, I'm saying I probably should have
11 made this observation earlier, I'm looking at what
12 has been marked as Plaintiff's Exhibit 23 and
13 Plaintiff's Exhibit 24 and while there is in each
14 document some number of pages that contain that
15 date you pointed out, Mr. Stern, there are other
16 pages that appear not to contain anything at all,
17 and while some of those undated pages appear to be
18 revised to reflect more current financial
19 information, there are others that appear not to
20 have been changed in any respect. So I can't tell
21 whether they were created at that time or not.
22 I mean, I recall your calling
23 attention, Mr. Stern, to the document page number
24 8594 of Exhibit 23 and page number 8525 of Exhibit
25 24, which as I look at them appear to be identical,
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
199
1 one may have been copied from the other, that's all
2 I'm suggesting, the documents in their entirety may
3 not have been generated on the date suggested by
4 that.
5 THE WITNESS: Just by comparing, also
6 by comparing the assumptions, one can see that just
7 following through from the previous documents,
8 these are updated numbers.
9 Q. (By Mr. Stern) Talking about the
10 analysis you mentioned earlier; is that correct?
11 A. My analyst is doing his job of updating
12 his reports from before, for no particular reason
13 my analyst is updating his reports.
14 MR. STERN: I'm going to ask the court
15 reporter to mark the next two exhibits, two
16 additional documents that were produced to us in
17 the litigation; the first document was produced by
18 the LeBow parties, the second document was produced
19 by Mr. Icahn.
20 (Plaintiff's Exhibits 25 and 26 were
21 thereupon marked for identification.)
22 Q. (By Mr. Stern) Mr. LeBow, I have
23 placed Exhibits 25 and 26 before you, sir.
24 Referring to 25, have you seen any copy
25 of that document?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
200
1 A. Yes, you just showed me a copy. It's
2 the same thing you just gave me two minutes ago.
3 This just happens to have a cover page is the only
4 difference.
5 Q. I will call your attention to the fact
6 that BGL8578 has the date November 15th on it. Do
7 you see that?
8 A. Which one?
9 Q. 8578.
10 A. So did the one you just gave me.
11 They're the same thing.
12 Q. Why is it dated November 14th? Unless
13 I'm--
14 A. Let me look, if you don't mind.
15 Q. Go ahead.
16 A. Where's 24, Exhibit 24?
17 MR. HIRSCHFELD: What's the page on 24?
18 MR. STERN: 8526.
19 THE WITNESS: This date that you so
20 eloquently refer to is the date when the model is
21 printed, not the date when it's necessarily
22 created, this is the day of the print. This could
23 be a year old model and still have that date on
24 it. I mean, I know a little bit about computers.
25 The computer model will print the date of printing,
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
201
1 not necessarily the date of the analysis. It looks
2 like the 14th or 15th, you're looking at the exact
3 same piece of paper that just happens to be printed
4 the next day that these could have been done.
5 Excuse me, that only could have been,
6 you know--since it has September numbers one can
7 assume that it was done sometime in, you know,
8 November.
9 Q. (By Mr. Stern) Do you know why it was
10 printed on November 15th?
11 A. I have no idea.
12 Q. Sir, I'm going to ask you to look at
13 Exhibit 26. Have you ever seen that document
14 before? This document, as I mentioned to you, was
15 not produced by you, it was produced by Mr. Icahn.
16 MR. HIRSCHFELD: Which one?
17 THE WITNESS: Again, it's a rehash of
18 the same thing.
19 Q. (By Mr. Stern) This document contains
20 financial analysis of a combination of RJR and
21 Liggett; is that correct?
22 A. They're all the same.
23 Q. Do you know who created this document,
24 sir?
25 A. Yes, we did, the same people, Mr.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
202
1 Kirkland.
2 Q. Do you know why Mr. Kirkland created
3 this document?
4 A. He was just running one document for a
5 year now, almost a year.
6 Q. Do you know how it came to be in the
7 possession of Mr. Icahn?
8 A. He wanted to look at what they were
9 thinking about, you know, six or eight months ago.
10 As a matter of fact, I think this is
11 really much older. That was when it was created,
12 this one was created much earlier, then it was
13 printed maybe then on October, but I believe it's
14 much older than that.
15 Q. Your understanding of the document is
16 that it was printed on October 31, 1995; is that
17 correct?
18 A. Yes, because Mr. Icahn--somebody
19 requested it.
20 Q. Do you know why Mr. Icahn--
21 A. Or one of his people requested this
22 analysis.
23 Q. Mr. LeBow, to your knowledge, did Mr.
24 Icahn or any of his representatives request the
25 analysis that is in Exhibit 26 at any time?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
203
1 A. No, but I can tell you one thing--I
2 don't know, but I tell you one thing, this document
3 was produced in July or August. The reason I say
4 that, it has only six months of actual RJR numbers
5 in it. Looks like it was produced in the August
6 time frame where I was still in negotiations with
7 RJR. So your dates are absolutely meaningless
8 because they refer to printing dates, not creation
9 dates.
10 Q. You have made the record very clear on
11 that, sir. All I'm asking is whether or not you
12 know why this document was printed on October 31.
13 A. I do not know why.
14 Q. Do you know why it came to the
15 possession of Mr. Icahn?
16 A. I do not know exactly why.
17 Q. Did you ever discuss with Mr. Icahn the
18 earlier proposal that you had made to RJR?
19 A. No, I don't believe I went into it in
20 detail.
21 Q. Did you ever discuss with him your
22 analysis of a merger or combination between RJR and
23 Liggett?
24 MR. HIRSCHFELD: Objection to form.
25 THE WITNESS: He has these numbers, I
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
204
1 went through these numbers with him.
2 Q. (By Mr. Stern) Did you go through
3 these numbers with him?
4 A. Just as a point of reference, yes.
5 Q. As a point of reference as to what?
6 A. For what the values of RJR was.
7 Q. But this is an analysis of a
8 combination of RJR and Liggett; is that correct?
9 A. They're not very much different with
10 Liggett or without Liggett.
11 Q. Why is that?
12 A. Because relative to RJR, Liggett's
13 earnings relative to RJR are not that significantly
14 different.
15 Q. Did you have any analysis of the values
16 of RJR standing alone?
17 A. Yes.
18 Q. Why don't you go through that? Did you
19 go through those analyses with Mr. Icahn?
20 A. Most likely, yes.
21 Q. If you did go through that analysis of
22 RJR standing alone with Mr. Icahn, why then was it
23 necessary to go through an analysis or RJR and
24 Liggett combined?
25 MR. HIRSCHFELD: Objection to form.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
205
1 THE WITNESS: I believe this shows them
2 separately anyway, but it did not go to Mr. Icahn,
3 one of his people requested it.
4 Q. (By Mr. Stern) Could you repeat that?
5 A. This went to one of Mr. Icahn's people,
6 not to Mr. Icahn directly. Whether he saw it or
7 not, I have no idea.
8 Q. How do you know it went to one of his
9 people and not directly to Mr. Icahn?
10 A. Because there's a transmittal page in
11 the back.
12 Q. Referring to, for the record, a letter
13 with Mr. Kirkland's name to Mr. Rubin?
14 A. 806.
15 Q. Sir, this letter dated October the 30th
16 from Kirkland to Rubin is copied to you. Do you
17 see that?
18 A. I guess many things are copied to me.
19 I don't look at everything.
20 Q. Do you remember seeing that?
21 MR. HIRSCHFELD: Just answer the
22 question.
23 THE WITNESS: Yes, I see it says copy
24 to me.
25 MR. HIRSCHFELD: The question was do
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
206
1 you remember seeing this letter.
2 THE WITNESS: No, not at all.
3 MR. HIRSCHFELD: That's the answer.
4 Q. (By Mr. Stern) To be clear, your
5 recollection is that Mr. Icahn or his people were
6 shown projections on RJR standing alone and these
7 projections show RJR and Liggett combined?
8 A. My recollection with Mr. Icahn is that
9 I gave him general numbers of RJR alone, that's
10 what I projected to him, not in detail.
11 I personal didn't give him anything.
12 We just talked in general terms of what the
13 historical public numbers are, what their
14 projections would be.
15 Q. When you say you gave him these general
16 numbers--
17 A. Verbally.
18 Q. And you're saying that you believe
19 other people on your staff may have given him
20 additional information; is that correct?
21 A. Yes, that's what this says.
22 Q. Did there come a point in time--well,
23 obviously there came a point in time when you began
24 discussing RJR with Mr. Icahn; is that correct?
25 A. Uh-huh.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
207
1 Q. When was that?
2 A. Sometime in August.
3 Q. Who initiated those discussions?
4 A. I did. We were socially involved and
5 we started talking a little bit about it.
6 Q. Well, did you raise it at a social
7 occasion?
8 A. Yes.
9 Q. What did you say to Mr. Icahn?
10 A. I told him there was a great value in
11 the RJR situation and I told him approximately what
12 the numbers were.
13 Q. What numbers did you tell him?
14 A. The projected EBIT or last year's EBIT
15 earnings with Nabisco, without Nabisco, et cetera,
16 et cetera.
17 Q. Where did you obtain the projections on
18 RJR?
19 A. Public information, the public
20 information that we just projected ourselves.
21 Q. You shared with him projections on RJR
22 that you had developed yourself?
23 A. But these projections are simplistic
24 projections.
25 Q. Whether they're simple or complicated,
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
208
1 these are projections that you generated yourself?
2 A. Yes. And again, they're strictly
3 approximations.
4 Q. What did Mr. Icahn say?
5 A. He said it sounded interesting to him.
6 Q. Were you proposing something to Mr.
7 Icahn?
8 A. No, not at the time.
9 Q. Well, what sounded interesting to Mr.
10 Icahn?
11 A. The numbers, the projected numbers and
12 the values, the fact that the stock was very under
13 value.
14 Q. Did you describe to him the proposal
15 that you had made before to Mr. Harper?
16 A. No.
17 Q. Was this before or after the Hart-Scott
18 filing which we agreed was August 11th?
19 A. It was possibly around that time, but I
20 don't recall exact date.
21 Q. Did you make a decision to seek out Mr.
22 Icahn to raise this with him or you just happened
23 to run into him?
24 A. No, we happened to be together in a
25 social event.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
209
1 Q. Was there anyone else present in this
2 conversation?
3 A. No.
4 Q. Where did the conversation take place?
5 A. At his home.
6 Q. Did you show him any documents?
7 A. No.
8 Q. Did he discuss with you whether he
9 could participate in any way?
10 A. No, not at all.
11 Q. What happened next after with respect
12 to Mr. Icahn, when did you next discuss with him
13 RJR?
14 A. I'm trying to remember. I really don't
15 recall exactly when, I don't recall.
16 Q. There were subsequent discussions,
17 though?
18 A. Yes.
19 Q. What is the next discussion that you
20 recall?
21 A. He said he liked the idea, he liked the
22 company, and he said he might buy some stock.
23 Q. Is that all he said?
24 A. That's all he said then, yes.
25 Q. Did he say whether he was purchasing
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
210
1 stock in anticipation of a possible transaction?
2 The possible spinoff, for example?
3 A. No. He said he just preferred the
4 stock because he thought the value of this would be
5 realized. It was a very undervalue situation, in
6 his opinion, extremely so.
7 Q. Did he tell you how much stock he was
8 thinking about purchasing?
9 A. No.
10 Q. Did he reach any agreements with you at
11 that time with respect to RJR stock?
12 A. Absolutely not.
13 Q. All right. Now, when do you next
14 recall discussing the subject of RJR with Mr.
15 Icahn?
16 A. Sometime, you know, either late August
17 or early September.
18 Q. In the first discussion did Mr. Icahn
19 indicate to you whether he had already owned any
20 shares of RJR?
21 A. The first discussion?
22 Q. Yes.
23 A. I kind of understood he owned no
24 shares.
25 Q. He owned no shares?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
211
1 A. But I could be--I mean, who knows?
2 Q. This discussion you believe took place
3 at or about the filing of the Hart-Scott
4 application?
5 A. July, August sometime. I don't exactly
6 remember when.
7 Q. Now, in the next discussion with Mr.
8 Icahn, which I believe you said was late August--
9 A. Or early September.
10 Q. Or early September, what was said? Who
11 initiated that discussion?
12 A. We were talking about other things and
13 at some point Mr. Icahn indicated to me he had been
14 buying some stock.
15 Q. Did he tell you how much he acquired?
16 A. No, not exactly, but it was not a
17 significant amount.
18 Q. Not a significant amount?
19 A. No.
20 Q. What did you say?
21 A. Best I could, do what you want.
22 Q. Where did this discussion take place?
23 A. Could have been anywhere. New York
24 somewhere.
25 Q. Was it a business meeting?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
212
1 A. Yes, a business meeting. It could have
2 been by telephone. Again, I don't recall.
3 Q. Was that the sum of that conversation?
4 A. Regarding RJR, yes.
5 Q. What happened next with respect to Mr.
6 Icahn?
7 A. Our filing became public. And again I
8 don't remember the exact date, but Mr. Icahn called
9 me up--this is now sometime September, I suspect,
10 early September, late September--and he said he
11 really liked the situation and he would like to buy
12 more stock, his lawyers had advised him to file his
13 own Hart-Scott application.
14 Q. Did he tell you that these lawyers had
15 so advised him?
16 A. Yes.
17 Q. What did you say?
18 A. I said fine. Do what you want. What
19 could I say?
20 Q. Then what happened?
21 A. He filed Hart-Scott. He waited--my
22 understanding, he waited until he got approval, and
23 he, you know, went and became public that he had
24 filed a Hart-Scott filing.
25 Q. And then what?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
213
1 A. Then I don't remember exactly when but
2 probably a month later, approximately, he called me
3 up and said let's get together and talk some more
4 about joining forces.
5 Q. This is now in September, October?
6 A. Could have been October, late
7 September, early October.
8 Q. Mr. Icahn called you?
9 A. Well, we talk a lot about various
10 things, you know, we have other situations
11 together; and, you know, we were talking about RJR
12 and he suggested let's have lunch and talk some
13 more about it.
14 Q. Did he tell you in particular what he
15 wanted to talk about?
16 A. No.
17 Q. What were you saying about RJR in
18 particular?
19 A. It didn't come up that way. We decided
20 just to have lunch, you know, on a friendly, social
21 basis, nothing--the purpose of lunch was not to
22 discuss RJR specifically or anything like that.
23 Q. Did you have this lunch?
24 A. Yes.
25 Q. Up until this time had you told anyone
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
214
1 else that you were having discussions with Mr.
2 Icahn in which he had mentioned that he had an
3 interest in RJR?
4 A. This is now after he filed Hart-Scott
5 and he's now public. I'm talking about after that
6 point in time.
7 Q. All I'm asking is whether you reported
8 to any of your advisors or your colleagues at
9 Brooke Group that you had had these discussions,
10 these conversations with Mr. Icahn.
11 A. Possibly to Mr. Lorber.
12 Q. You don't recall speaking to anyone
13 else about it?
14 A. I don't think so. Maybe Mr. Ressler,
15 but mostly if anyone it would be Mr. Lorber.
16 Q. Do you remember having a conversation
17 with Mr. Lorber about it?
18 A. Specifically, no.
19 Q. Who attended the lunch? Was the lunch
20 just between you and Mr. Icahn?
21 A. That's correct.
22 Q. Where did the lunch take place?
23 A. In New York.
24 Q. Was it a restaurant?
25 A. A restaurant.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
215
1 Q. What did you and he say to one another
2 on the subject of RJR?
3 A. He started talking that maybe it would
4 be a good idea for the two of us to team up
5 together.
6 Q. What did he mean by that?
7 A. We didn't know. It was strictly an
8 open discussion that he really thought the value
9 was there, he very sincerely believed that, and
10 then maybe he would buy more stock and support me
11 in our venture.
12 Q. What did you say?
13 A. What did I say? I said "Come on in.
14 Fine, Carl, love to have you."
15 Q. At that point what was your venture, in
16 your mind what was the venture in your mind?
17 A. The venture was to acquire stock and
18 to, you know, aggitate for a spinoff of Nabisco in
19 order to achieve the value that we believed was
20 there.
21 Q. Do you remember anything else that you
22 and Mr. Icahn said to one another?
23 A. We got into the discussion of teaming
24 up, you know, together to buy stock and aggitate
25 for a spinoff of Nabisco.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
216
1 Q. Did you discuss whether you would have
2 a formal agreement?
3 A. We discussed having some sort of formal
4 agreement that he would join and lend his support,
5 financial support to this process, in return for a
6 percentage of my profits.
7 Q. Was that a proposal that he made?
8 A. Yes.
9 Q. What was your reaction to that?
10 A. I wanted to think about it, but it
11 sounded interesting and I really wanted to work
12 with him on the project.
13 Q. Up to that point had you ever had any
14 discussion with Mr. Icahn about the possibility of
15 a merger between Liggett and RJR?
16 A. I think around this lunchtime, right
17 around this time, I told him what transpired prior,
18 you know, with Harper and Goldstone and et cetera,
19 et cetera, I told him about that; I had told him a
20 lot of those elements of the transaction.
21 Q. Did you tell him anything that you
22 haven't told us, to your best recollection?
23 A. No.
24 Q. Did you tell him whether or not RJR
25 remained interested in effectuating a transaction?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
217
1 A. At that point specifically I told him
2 there was no interest whatsoever on RJR's part.
3 Q. I'm sorry, did you tell him--
4 A. I told him RJR had no interest
5 whatsoever.
6 Q. Did you tell him the Brooke Group had
7 an interest in proceeding along the lines of the
8 proposal that had been outlined to Mr. Harper in
9 May?
10 A. No. I told him at this point New
11 Valley was going to buy stock and aggitate or do it
12 what it had to.
13 Again, we didn't have a proposal worked
14 out then exactly. What we were going to do is
15 structure the spinoff of Nabisco.
16 Q. Do you remember anything else of that
17 lunch conversation?
18 A. It went on for a couple of hours, so
19 many other things happened in addition to saying
20 the food was good. It was just general
21 conversation of what to do and how to do it.
22 Q. Well, what else do you remember Mr.
23 Icahn saying?
24 A. He kept reiterating he really believed
25 the value was there. He apparently had some of his
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
218
1 own analysis done by independent, you know, Russian
2 bank internal. He really believed the values were
3 significant and he couldn't understand why the
4 stock was still around at this time twenty eight,
5 $29.
6 Q. Did he put an estimate on the values
7 that were there?
8 A. No, he never told me.
9 Q. What did you say to Mr. Icahn?
10 A. I said I agree with you.
11 (Plaintiff's Exhibit 27 was thereupon
12 marked for identification.)
13 Q. (By Mr. Stern) What happened after
14 this lunch?
15 Let me ask a preliminary question. Did
16 you and Mr. Icahn in your own mind reach any
17 agreement in principal or understanding as a result
18 of that lunch?
19 A. On a very rough basis, yes.
20 Q. What was that understanding?
21 A. That he would get about 20 percent or
22 some percentage of my profits if he teamed up with
23 us, I would buy so many shares, he would buy so
24 many shares. A very rough basis.
25 Q. Why did you believe that Mr. Icahn's
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
219
1 participation was worth 20 percent?
2 A. I thought it was significant to the
3 other shareholders that had had a significant
4 interest in the company and I knew what the other
5 shareholders had, their public filings, and I
6 wanted to acquire a significant interest.
7 Q. What happened after this--did you
8 report back to anyone at Brooke Group or among your
9 advisors?
10 A. I talked to my people, meaning Mr.
11 Lorber, Mr. Ressler, and maybe Mr. Hirschfeld.
12 Q. What happened next?
13 A. We entered into some serious
14 negotiations.
15 Q. Who conducted those negotiations?
16 A. I did, Mr. Lorber did, myself and Mr.
17 Lorber from my side and Mr. Hirschfeld for Melbank.
18 Q. Who was participating for the Icahn
19 side?
20 A. Mr. Icahn and Mr. Rachesky.
21 Q. Mr. Rachesky works for Mr. Icahn?
22 A. Yes.
23 Q. Do you know what his position is?
24 A. He's like a senior vice president or
25 something of that nature.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
220
1 Q. Over what period of time did these
2 negotiations take place?
3 A. An agonizing four to six weeks,
4 something like that. I don't recall exactly how
5 long but it seemed like it was an eternity.
6 Q. What were the main issues in the
7 negotiation?
8 A. Lots of details, you know, sharing the
9 profits, what program to go forward with.
10 Q. Did the negotiations culminate in an
11 agreement?
12 A. Yes.
13 Q. In fact, they culminated in several
14 agreements; is that correct?
15 A. Yes.
16 Q. Mr. LeBow, I have placed before you
17 Exhibit 27 and ask you if those are the agreements
18 that you reached with Mr. Icahn.
19 A. They appear to be.
20 Q. Now, did the negotiations leading up to
21 these agreements include discussion of what would
22 happen in the event if Liggett were to combine with
23 RJR?
24 A. Mr. Icahn was very much against any
25 attempt to do that, so he was adamant that this not
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
221
1 occur.
2 Q. Did Mr. Icahn express his reasons for
3 that?
4 A. Yes. His reasons were that we should
5 really go forward to effectuate the spinoff of
6 Nabisco, that was our program and that was what we
7 should be concentrating on, period.
8 Q. Did he say why he felt that way?
9 A. No, he didn't say particularly why, but
10 he said this was the best program.
11 Q. What was your reaction to that?
12 A. I said "I agree with you, at the
13 present time I agree with you."
14 Q. Now, earlier on it was part of your
15 program to include a combination of Liggett and
16 RJR; is that correct?
17 A. Early on it was my program, for the
18 99th time, spin off Nabisco, Liggett to effectuate
19 the spinoff, and also bring in a third party,
20 international major tobacco company to effectuate
21 this whole thing. This was my program from, you
22 know, whenever, up until August.
23 Q. You had reasons for--
24 A. Or July.
25 Q. --business reasons for having as part
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
222
1 of that program a combination of Liggett and RJR;
2 is that correct?
3 A. Business reasons, meaning what, for
4 who?
5 Q. From the point of view of Brooke and
6 the overall transaction.
7 A. From the point of view of RJR and an
8 overall transaction, yes.
9 Q. What were those reasons?
10 A. I'll say them again. I mean number
11 one, a tax-free spinoff, you know, opinion from my
12 lawyers.
13 Number two, there was a solid business
14 reason of Liggett and RJR combining and not being
15 in the food business wanting to spin off from
16 Nabisco.
17 And number three, as stated by the RJR
18 representatives, they wanted someone to help do the
19 spinoff because their board was not prepared to do
20 it.
21 Q. We're not going to go back over the
22 testimony.
23 A. Okay, fine.
24 Q. Let me ask you this: Did any of those
25 reasons change, you know, in October, had any of
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
223
1 those reasons changed by October when you had these
2 discussions with Mr. Icahn?
3 A. Yes.
4 Q. What?
5 A. The debt swap changed everything
6 because they no longer needed an international
7 tobacco company to help raise the three billion
8 dollars.
9 Q. Did any of the reasons relating to the
10 tax-free nature of the spinoff change?
11 A. No, nothing changed there; that was
12 still a good reason.
13 Q. In what respect did the absence of a
14 need for an international joint venture partner
15 affect your thinking about the components of the
16 combination of Liggett and RJR, what would one
17 thing have to do with the other?
18 A. The purpose of Liggett was to put a new
19 board in that would do the spinoff. There was a
20 two-fold purpose for getting that joint venture
21 partner, one is a request by Mr. Goldstone to bring
22 credibility to the process, not just put a new
23 board to do the spinoff.
24 Number two, due to the three billion
25 dollar, you know, debt swap, now the bank issue
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
224
1 went away. Now it came down to just a different
2 process of just telling the board to spin off
3 Nabisco and spin it off now.
4 Q. I understand how the bank debt issue
5 going away eliminating the need for a joint venture
6 partner. What I just don't understand is how it
7 eliminated Liggett to be involved in the way that
8 Liggett was proposed to be involved.
9 A. It was also very clear that Mr.
10 Goldstone no longer had any interest in Liggett.
11 Once the joint venture partner goes away they had
12 no interest in doing anything with Liggett.
13 It was also clear, as soon as our
14 Hart-Scott became public, that they no longer had
15 any interest in Liggett.
16 That's what really happened.
17 Q. How did that become clear?
18 A. Pardon?
19 Q. How did this become clear?
20 A. They stopped talking to us.
21 MR. HIRSCHFELD: They put out a press
22 release.
23 THE WITNESS: They put out a press
24 release, stopped talking to us immediately. We
25 were having conversations the day before the public
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
225
1 notice about the Hart-Scott.
2 Q. (By Mr. Stern) But prior to your
3 meeting with Mr. Harper when you came in with this
4 proposal they had never expressed an interest in
5 Liggett to you, had they?
6 A. Correct, never, no.
7 Q. Now, you reached an agreement with Mr.
8 Icahn with respect to what would happen if there
9 were to be a business combination between Liggett
10 and RJR; is that correct?
11 A. No. I reached an agreement with Mr.
12 Icahn that if any type of transaction, business
13 combination between Brooke and RJR were to take
14 place without his permission, certain things could
15 have occurred, certain penalties can incur.
16 Q. To your understanding, was it discussed
17 at the time with Mr. Icahn that would include some
18 sort of Liggett and RJR--
19 A. It would include any kind of business
20 combination; it would include selling my Russian
21 factory; it would include selling my stock,
22 anything to RJR, any kind of business combination
23 which was specified in the agreement could incur
24 substantial penalties.
25 He did not want me doing any sort of
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
226
1 business combination, period, and accordingly I
2 didn't want to, either. So the penalty was a quid
3 pro quo.
4 Q. What were your reasons for not wanting
5 him to do--
6 A. I didn't want him to do to a greenmail
7 strategy or whatever.
8 Q. Did you discuss that with him?
9 A. Absolutely.
10 Q. What was his response to that?
11 A. He agreed 100 percent.
12 Q. Am I correct then in understanding that
13 as far as you're concerned a combination between
14 Liggett and RJR is a dead letter?
15 A. It's a dead letter.
16 Q. Did that proposal in May have anything
17 to do with assuring a tax-free status of the
18 spinoff, was there any reason between that and the
19 other proposals and the tax-free spinoff?
20 A. I've said this five times, haven't I?
21 I still wished to have a tax-free spinoff.
22 I have been assured now by management,
23 not myself directly, but they have assured the
24 public in various statements, so forth, that the
25 tax-free nature of the spinoff exists without
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
227
1 Liggett, they have said that, I have seen that in
2 various analysts' reports that Mr. Harper has made
3 and various statements he made to the press, so
4 forth, the tax-free nature, they done all the
5 work.
6 The tax-free nature of the spinoff
7 exists, so Liggett is not necessary for all that.
8 Q. When did you come to that conclusion?
9 A. When I started seeing the press reports
10 of Mr. Harper telling everybody that the company
11 has analyzed all the aspects of a tax-free nature
12 of the spinoff and they concluded that it is
13 tax-free.
14 Q. Now, in this time frame do you recall
15 when you announced publicly that you were going to
16 solicit consents with respect to RJR?
17 A. I don't remember the exact date, but
18 that's a matter of public record.
19 Q. It is, yes.
20 MR. HIRSCHFELD: We will stipulate it's
21 October 30th.
22 THE WITNESS: Okay.
23 Q. (By Mr. Stern) Did you discuss with
24 Mr. Icahn in your discussions leading up to the
25 agreement that you would then proceed via consent
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
228
1 solicitation?
2 A. Correct.
3 Q. Between October 30th and your
4 discussions with Reemtsma over the summer, did you
5 have any further communications with Europe or
6 foreign tobacco interests concerning RJR?
7 A. Yes.
8 Q. With whom?
9 A. I went on a business trip to Moscow.
10 On the way back I stopped in Manila to see a Mr.
11 Tan.
12 Q. Was the business trip to Moscow in any
13 way related to RJR?
14 A. No.
15 Q. When did this take place?
16 A. Sometime in October.
17 Q. 1995?
18 A. Yes, October.
19 Q. Now, how did you come to meet with Mr.
20 Tan?
21 A. Again, Mr. Taberer was in the Far East,
22 was on a regular business trip, and called me and
23 encouraged me to meet with him, said he might be
24 interested in buying RJR stock and making money.
25 I said fine.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
229
1 Q. So the idea of speaking to Mr. Tan was
2 prompted by Mr. Taberer?
3 A. Correct.
4 Q. And Mr. Taberer said that the contact
5 with him had been initiated by Mr. Tan; is that
6 correct?
7 A. No. I don't know who initiated the
8 contact. I mean Mr. Taberer was in the Far East at
9 the time, he knew I was going to Moscow at the
10 time, so he called me and said if you want why
11 don't you stop in Manila on the way back to the
12 United States.
13 I said okay, fine.
14 First of all, I like to meet foreign
15 tobacco people, speak to other persons for
16 transactions. So it's a little bit out of the way
17 but not that much out of the way coming home.
18 Q. Did you know Mr. Tan?
19 A. No.
20 Q. Did you know who he was?
21 A. Oh, yes.
22 Q. Who is Mr. Tan?
23 A. He's the owner of Philippine Tobacco
24 Corporation, principal shareholder and owner,
25 president.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
230
1 Q. So you don't know, as between Taberer
2 and Tan, who first raised the subject of RJR?
3 A. No, I don't know.
4 Q. You did meet with Mr. Tan?
5 A. Very briefly.
6 Q. Did you have any phone conversations
7 leading up to meeting with anyone about the
8 meeting?
9 MR. HIRSCHFELD: Other than Mr.
10 Taberer?
11 Q. (By Mr. Stern) Other than Mr. Taberer.
12 A. No.
13 Q. Who was present at your meeting with
14 Mr. Tan?
15 A. Mr. Taberer was there, Mr. Tan, he was
16 there for--Mr. Tan was there for like 30 seconds,
17 Mr. Tan's brother, and couple of other, you know,
18 people who work for Mr. Tan or with Mr. Tan.
19 Q. So Mr. Taberer only stayed for a brief
20 part of the meeting?
21 A. No. Mr. Tan only stayed for a brief
22 part of the meeting.
23 Q. I see. Was Mr. Taberer present at any
24 part of the meeting?
25 A. Yes, he was there during the full
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
231
1 meeting.
2 Q. And Mr. Tan only stayed for a minute?
3 A. Thirty seconds. I'm exaggerating.
4 Maybe it was 60 seconds.
5 Q. How long did the meeting last?
6 A. Half an hour.
7 Q. Where did the meeting take place?
8 A. In Mr. Tan's office.
9 Q. What was said?
10 A. I explained to them the values of RJR
11 and tried to encourage them to buy stock and
12 support a spinoff in order to make money.
13 Q. What was the reaction of Mr. Tan and
14 his people?
15 A. They wanted to study it. They asked me
16 to send them some more of the public information,
17 which I did after I got back, and that's the last I
18 heard from them.
19 Q. Did anyone explain to you why Mr. Tan
20 was only staying for 30 seconds?
21 A. He was in the office but he was on 15
22 other phone calls, doing 15 other things at the
23 time.
24 Q. Do you remember the names of any of the
25 people in his organization?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
232
1 A. Yes. His brother was one of them,
2 Harry Tan.
3 Q. Harry Tan?
4 A. Right.
5 Q. Anyone else?
6 A. Someone was present from their bank, I
7 don't remember his name.
8 Q. Did you give him any documents?
9 A. No, but we sent them later the public
10 documents, 10-K, 10-Q, proxy, these kinds of
11 things, press releases.
12 Q. Let me interrupt you for a moment.
13 Did he make any particular amount of
14 investment offer?
15 A. A dollar amount?
16 Q. Yes.
17 A. Yes.
18 Q. Did you discuss with Mr. Tan any
19 transaction in which there would be a change of
20 control of RJR?
21 MR. HIRSCHFELD: Which Mr. Tan?
22 MR. STERN: I'm sorry. You're making a
23 valid point and getting the point made.
24 Q. (By Mr. Stern) Did you discuss at this
25 meeting the possibility of change of control of
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
233
1 RJR?
2 A. I discussed at this meeting we could
3 probably solicit consents at some point in time
4 and, you know, want their support if he bought
5 stock.
6 Q. Did you tell Mr. Tan that you were
7 attempting to form a group to acquire a 20 percent
8 or more interest in RJR stock?
9 A. I told Mr. Tan that I had Mr. Icahn
10 with me and if other people would join at some
11 point, if they desired to, I think we could put
12 together a group.
13 Q. Did you tell Mr. Tan that a group you
14 might be able to put together could exercise
15 effective control of the company? I mean, I'm
16 saying in general.
17 A. I told Mr. Tan that I believed that at
18 this time I could count on support from about 20
19 percent of the shareholders for the proposed
20 spinoff from Nabisco.
21 Q. What was your basis for that statement?
22 A. I had talked to some of the other
23 shareholders, major shareholders.
24 Q. Did anyone at the meeting propose that
25 the Tan group, Tan interest, acquire five percent
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
234
1 of the RJR Nabisco stock?
2 A. I proposed they acquire a hundred
3 percent, whatever, to support the spinoff. There
4 was no specific number thrown out. Maybe Mr.
5 Taberer threw a number out, but it meant nothing,
6 five percent, ten percent.
7 Q. Do you remember anything else of this
8 meeting?
9 A. No.
10 Q. Did anyone at this meeting take notes?
11 A. I didn't.
12 Q. Did you ever--
13 A. I don't think anyone else did.
14 Q. Did you prepare any memorandum about
15 that meeting?
16 A. No.
17 Q. Did you tell anyone about the meeting
18 after you returned?
19 A. Yes, Mr. Lorber.
20 Q. What did you tell him?
21 A. And Mr. Ressler probably.
22 Q. What did you tell them?
23 A. Exactly what I just told you.
24 Q. You told someone to send the Tan people
25 some public information?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
235
1 A. Right, and press releases and so forth.
2 Q. Who did you tell that to?
3 A. Mr. Kirkland.
4 Q. Did he do that, as far as you know?
5 A. As far as I know, yes.
6 Q. You never heard further?
7 A. I never heard further from the Tans.
8 Q. Did you have similar discussions with
9 other people at any time?
10 A. Me personally?
11 Q. Yes.
12 A. Other stockholders, yes.
13 Q. What other stockholders did you
14 communicate with?
15 A. I met with Mr. Price in this period of
16 time, since the public filings. I didn't ask him
17 to join in any group, but I did ask him, you know,
18 if he would buy stock and support any efforts we
19 may have. I explained to him I have belief there
20 is some value here.
21 Q. Anyone else?
22 A. I had been meeting with various
23 analysts, I had been talking to them.
24 Q. When did you start meeting with
25 shareholders seeking their support?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
236
1 A. After the Hart-Scott filing.
2 Q. That would be in August?
3 A. September.
4 Q. In September after the announcement of
5 the Hart-Scott filing?
6 A. Yes, correct. The only shareholder I
7 met with was Mr. Price, that's the only one.
8 Q. When did you meet with Mr. Price?
9 A. Sometime September.
10 Q. Was this a meeting you initiated?
11 A. Yes.
12 Q. Why did you initiate the meeting?
13 A. Well, I learned that he was buying a
14 lot of stock.
15 Q. Who did you hear that from?
16 A. Various, you know, Wall Street houses.
17 Just rumors.
18 Q. How long did the meeting take place?
19 A. Twenty minutes.
20 Q. Did you meet at his office?
21 A. At his office.
22 Q. What was said at the meeting?
23 A. It was just talking general about what
24 we thought the values were there.
25 He said he believed there was strong
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
237
1 value there.
2 Q. Was it at the time you were requesting
3 a consent soliciation?
4 A. We were still considering; we hadn't
5 really had a detailed program worked out yet,
6 though.
7 Q. Did you and he reach any agreement on a
8 course of action?
9 A. Absolutely not.
10 Q. Did he indicate that he would acquire
11 more stock?
12 A. He said he was thinking about it.
13 Q. I think you said to me you did not tell
14 him that you were trying to put a group together.
15 A. Absolutely did not say that. I knew he
16 would never join a group.
17 Q. Why is that?
18 A. Because its public mutual funds, so
19 forth, he just never does that.
20 Q. Do you remember anything else about
21 your meeting with Mr. Price?
22 A. No.
23 Q. Did you discuss that meeting with
24 anyone?
25 A. Yes, Mr. Lorber, Mr. Ressler, the same
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
238
1 people I always talk to.
2 Q. What did you tell them?
3 A. We had a good meeting with Michael
4 Price, he believes in the values like we do.
5 Q. Was that your only meeting with Mr.
6 Price on this subject, or communication?
7 A. The conversation was not with Michael
8 directly but his people.
9 Q. What were those conversations?
10 A. The same conversation, what do you
11 think is happening, what do you hear on the street,
12 et cetera, normal, general.
13 Q. Did you tell Mr. Price or any of his
14 people that you had met with Mr. Tan?
15 A. No.
16 Q. Other than Mr. Price, have you met with
17 any other of the RJR shareholders?
18 A. This past week or so, yes.
19 Q. Past week or so prior to the consent
20 solicitation?
21 A. No.
22 Q. Did you ever meet with anyone else
23 other than the Tan people to discuss joining in a
24 group to acquire shares of RJR?
25 A. Did I?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
239
1 Q. Yes.
2 A. I met with one or two other people.
3 Q. Who were they?
4 A. An individual by the name of George
5 Levin, who was a friend of mine.
6 Q. What business is Mr. Levin in?
7 A. He's strictly an investor type person.
8 Q. When did you meet with him?
9 A. I don't know. Again, the same time
10 frame.
11 Q. October?
12 A. September probably.
13 Q. Was anyone else present?
14 A. Mr. Lorber may have been present. I
15 don't know.
16 Q. Was this at Mr. Levin's home or office?
17 A. In my office down in Florida. Here, as
18 a matter of fact. I mean, we are in Florida.
19 Q. You initiated this meeting?
20 A. Yes. He's an old friend, we talk.
21 Q. On the subject of RJR, what did you and
22 Mr. Levin discuss?
23 A. Just everything I've been saying to
24 you, you know, everything that is public, what the
25 values were.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
240
1 Q. Did you suggest to him that he buy
2 stock?
3 A. Yes, he and people he knows.
4 Q. What did he say?
5 A. He thought it was very interesting.
6 Q. Did he tell you he was going to buy
7 stock?
8 A. He was going to attempt to. He doesn't
9 have the funds himself but he has certain friends
10 that he said could help.
11 Q. Did he mention their names?
12 A. No.
13 Q. Do you know what developed from there?
14 A. As far as I know, nothing.
15 Q. As far as you know, neither he or any
16 of his friends purchased any stock?
17 A. As far as I know.
18 Q. Did you propose to him a buying level
19 of--
20 A. Yes, five percent, ten percent,
21 whatever makes sense.
22 Q. Did you discuss with Mr. Levin the
23 possibility of eventually arranging a business
24 combination between RJR and Liggett?
25 A. No.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
241
1 Q. Did you discuss with him the
2 possibility of having a group take control of RJR?
3 A. No.
4 Q. Did you report back to anyone on the
5 conversation with Mr. Levin?
6 A. Yes. I said Mr. Lorber or whoever may
7 have been there. I don't recall exactly.
8 Q. Did you have any subsequent
9 communication with Mr. Levin?
10 A. Yes, we have done other things
11 together.
12 Q. About RJR?
13 A. About RJR, no, not recently, no.
14 Q. In addition to the Tan people and Mr.
15 Levin, did you meet with anyone else?
16 A. Other than on a general, you know,
17 discussion basis what was public information, that
18 was all.
19 Q. So am I correct in that the only--
20 A. Well, Mr. Icahn constantly, of course.
21 Q. Yes, Mr. Icahn. Putting aside Mr.
22 Icahn, Mr. Tan and Mr. Levin, have you met with
23 anyone to suggest that they align themselves with
24 you in the purchase of RJR stock?
25 A. You mean Mr. Price, Mr. Levin and--you
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
242
1 mean aligning, meaning join a group?
2 Q. Yes.
3 A. I didn't ask any of these people to
4 join a group.
5 Q. Well, I don't want to go back over that
6 because I understood differently.
7 MR. HIRSCHFELD: He clearly said he
8 didn't ask Mr. Price to join a group.
9 THE WITNESS: I didn't ask Mr. Tan to
10 go join a group, either.
11 Let's go back.
12 Q. (By Mr. Stern) Let's go back. Did you
13 propose to Mr. Tan, did you tell Mr. Tan that you
14 were going to form a group to acquire an interest
15 in RJR stock?
16 A. No. I said to Mr. Tan, let's make this
17 clear, the same thing I said to Michael Price, the
18 same thing I said to George Levin, the same thing I
19 said to whoever I may have talked to, it would be
20 my hope that they would buy stock a support a
21 consent of a spinoff of Nabisco and maybe make
22 money, and if they didn't want to be part of a
23 group they can make their own decisions at any
24 time, if they didn't want to join me in any group
25 in any way, shape or manner, absolutely not.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
243
1 Q. Well, did you tell any of these
2 individuals that you thought that if you could get
3 a group together to acquire 20 percent or more of
4 the stock that you could exercise effective control
5 of the company and effectuate the spinoff?
6 A. Yes, it's pretty obvious if you get
7 enough people to vote for a spinoff, either the
8 board will do it or somebody else will do it, but
9 not to form a group with me per se and go public,
10 as you know, 13-D or anything like that nature.
11 Q. Did you tell him how much support you
12 needed as a minimum preliminary in stock to
13 accomplish the--
14 A. I said at the present time from the
15 analysis we looked at and with 20 percent support
16 and if more people would come and support the
17 spinoff, we would get it done, anywhere from ten or
18 20 percent more coming in. That's strictly
19 conjecture based upon people I haven't even talked
20 to yet.
21 Q. Other than conversations you have told
22 me about with Price, with Tan and Levin, any other
23 such conversations?
24 A. No.
25 Q. Did there come a time when you engaged
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
244
1 the Jefferies firm?
2 A. Yes.
3 Q. What was the purpose of that?
4 A. To assist in the consent solicitation.
5 Q. Do you have an engagement letter with
6 Jefferies?
7 A. Yes.
8 Q. Has Jefferies prepared any analyses for
9 you?
10 A. No.
11 Q. Who at Jefferies have you been working
12 with?
13 A. David Eisner is the key person there.
14 MR. STERN: I'm going to ask the court
15 reporter to mark as the next exhibit a document
16 that was produced to us by the LeBow parties.
17 (Plaintiff's Exhibit 28 was thereupon
18 marked for identification.).
19 Q. (By Mr. Stern) Mr. LeBow, the exhibit
20 that is placed before you, can you identify that
21 document?
22 A. No, I can't identify it.
23 Q. You have never seen that document?
24 A. I never read it. I have a copy of it.
25 I never read it.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
245
1 Q. Do you know who generated this
2 document?
3 A. Jefferies generated it, to the best of
4 my understanding.
5 Q. Do you know whether this document is a
6 copy, a complete copy of a document?
7 A. I said I never read it, so I have no
8 idea.
9 MR. STERN: I'm going to mark as a
10 single exhibit just for efficiency documents
11 produced to us from the files by the LeBow parties.
12 (Plaintiff's Exhibit 29 was thereupon
13 marked for identification.)
14 Q. (By Mr. Stern) Mr. LeBow, I have
15 placed that exhibit before you. Have you ever seen
16 any of these documents in that exhibit before?
17 A. No, I have never seen this.
18 Q. Have you seen any report prepared by
19 Jefferies?
20 A. No. I got a copy of this one marked
21 Project Alpha but I never had a chance to read it.
22 Q. Have you had any meetings with
23 Jefferies?
24 A. Yes, many meetings.
25 Q. When did you engage Jefferies?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
246
1 A. Three, four weeks ago, something like
2 that.
3 Q. What is Jefferies' assignment?
4 A. He is to assist in any way investment
5 bankingwise in the consent solicitations.
6 Q. Have you asked him to perform any
7 valuations?
8 A. Yes.
9 Q. What valuations have you asked him to
10 perform?
11 A. To value what the split up of RJR and
12 Reynolds/Nabisco would be to shareholders.
13 Q. What have they reported to you?
14 A. They think a combined company split is
15 about $40 a share.
16 Q. Did they prepare a written report?
17 A. They prepared a slide presentation and
18 various charts.
19 MR. STERN: Do you know whether that
20 has been produced?
21 MR. HIRSCHFELD: I don't think it has
22 been because I don't think it was in existence
23 until very recently.
24 THE WITNESS: Three days ago.
25 MR. HIRSCHFELD: Then it was not in
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
247
1 existence at the time that we made the document
2 production to you.
3 MR. STERN: Then I'm not going to have
4 Rachelle scurrying around the room looking for it.
5 MR. HIRSCHFELD: You can if you want to
6 but it would be futile.
7 Q. (By Mr. Stern) Now, the Jefferies
8 valuation was a valuation of RJR after the spinoff?
9 A. Yes.
10 Q. Did that valuation include a valuation
11 of RJR combined with Liggett?
12 A. No.
13 Q. You may have told me and I'm asking you
14 to repeat, I apologize, did they make their
15 presentation at a meeting?
16 A. No. They gave me slides, you know,
17 charts to be used in a road show.
18 Q. Was there a meeting where you reviewed
19 those charts with them?
20 A. No. They just faxed me some
21 preliminary documents I reviewed and approved and
22 became permanent.
23 Q. Who made the decision to initiate the
24 consent solicitation?
25 A. It was the idea of my counsel. You're
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
248
1 talking about the mechanism or what is your
2 question?
3 Q. We have stipulated that a consent
4 solicitation began on October 30th. Whose idea was
5 that?
6 A. My counsel's.
7 Q. Well, your counsel didn't decide to
8 make it, your counsel may have recommended it. Who
9 decided to make it?
10 A. Well, eventually I did.
11 Q. When did you make it?
12 A. You know, a day or so after he
13 recommended it.
14 Q. When was that?
15 A. It was sometime in September, seems
16 like, or October. I don't remember the exact date.
17 Q. What was your reason for deciding to
18 initiate that?
19 A. Because we had a difference of opinion
20 with the board to spin off Nabisco and we said
21 let's give the board the opportunity to spin off
22 Nabisco; if they spin off Nabisco, that's the end
23 of it, that's fine.
24 Q. What would the consent solication give
25 them in the attempt to spin off Nabisco?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
249
1 A. It would clear up one of Mr.
2 Goldstone's issues, which was to demonstrate
3 shareholders' support for a spinoff after there was
4 an attempt to show them that there really is
5 shareholder support, what he alluded to early on
6 from the May meeting.
7 Q. To demonstrate to Mr. Goldstone and Mr.
8 Harper that there was shareholders' support for the
9 idea of a spinoff?
10 A. Correct.
11 Q. Was there any other purpose?
12 A. Of?
13 Q. The consent solicitation.
14 A. We did change the one bylaw, it was one
15 of the consent solicitation.
16 Q. Have you discussed with anyone your
17 course of action in the event the consent
18 solicitation fails?
19 MR. HIRSCHFELD: Other than counsel?
20 Q. (By Mr. Stern) Other than counsel.
21 A. I don't have a course of action worked
22 out yet in case it does.
23 I mean, let's please define fail.
24 Q. Assume the consent solicitation does
25 not obtain the requisite number of consents or for
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
250
1 whatever reason Nabisco does not effectuate the
2 spinoff--
3 A. You mean RJR?
4 Q. RJR, do you have a course of action?
5 A. No.
6 Q. Have you discussed such a course of
7 action or a possible course of action with anyone?
8 A. No.
9 MR. STERN: Let's take a short break.
10 (Brief recess.)
11 (Plaintiff's Exhibits 30 thru 34 were
12 thereupon marked for identification.)
13 Q. (By Mr. Stern) Mr. LeBow, I have
14 marked as exhibits documents that have been
15 produced to us by your counsel as Exhibits 30
16 through 34. I will place them before you. Can you
17 identify any of those documents, sir?
18 A. This one appears to be an analysis done
19 November 20th, 1995, about RJR. I'm not quite sure
20 who did it.
21 Q. Was it done within the Brooke Group?
22 A. It appears that maybe parts of it was.
23 That's strictly, you know, analysis of RJR.
24 Q. Those parts of it which were not from
25 Brooke Group, sir, do you know where they would
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
251
1 have been done?
2 A. I don't know. They may all have been
3 done--give me a second.
4 Q. Sure. Take as much time.
5 A. Yes, I believe this was all done at
6 Brooke.
7 Q. Referring to Exhibit--
8 A. Thirty.
9 Q. Who performed that analysis?
10 A. Again, it was probably all done by Mr.
11 Kirkland, Bryant Kirkland.
12 Q. What was the purpose of the analysis?
13 A. To have, you know, information
14 available, you know, detailed information about RJR
15 and for consent solicitation purposes if we ever
16 needed it.
17 Q. That was prepared in connection with
18 the consent solicitation, correct, sir?
19 A. Yes, or any investment potential. This
20 is about RJR and all the various issues referring
21 to RJR and kind of superseded the ones you
22 previously showed me which were just updated.
23 Q. What is the next document, sir?
24 A. Shows the rates of return for various
25 companies.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
252
1 Q. Was that prepared at Brooke Group?
2 A. Yes.
3 Q. What was the purpose for preparing
4 that?
5 A. Just to show, you know, the
6 underperformance of RJR compared to its peers.
7 Q. Why did you want to illustrate that?
8 A. Well, when we go out talking to various
9 investors, to have it available.
10 Q. This again is a document that was
11 prepared in connection with the consent
12 solicitation?
13 A. Absolutely, and as a matter of fact,
14 parts of it were part of our consent document.
15 Q. Who prepared that document, sir?
16 A. Mr. Kirkland again.
17 Q. Can you identify the next document,
18 sir, Exhibit number--help me out.
19 MR. HIRSCHFELD: Thirty two.
20 MR. STERN: Thirty two?
21 MR. HIRSCHFELD: Thirty two is the next
22 one.
23 THE WITNESS: It's the same thing,
24 prepared by Mr. Kirkland, just expanded the data.
25 It's the same thing as that with data behind
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
253
1 supporting this.
2 Q. (By Mr. Stern) This being Exhibit 31?
3 A. There is data behind supporting 31 by
4 Mr. Kirkland.
5 Q. Prepared for the purposes of consent
6 solicitation?
7 A. Correct.
8 Q. And Exhibit 33.
9 A. This is a compilation of public
10 documents.
11 Q. Prepared at Brooke Group?
12 A. Yes.
13 Q. By Mr. Kirkland?
14 A. Yes.
15 Q. For the purposes of consent
16 solicitation?
17 A. Yes.
18 Q. Sir, take as much time as you need if
19 you need to review documents.
20 A. This was sent to a reporter who
21 requested information about why we invested in RJR
22 stock.
23 Q. I'm sorry, it was sent to--
24 A. A reporter who I had breakfast with or
25 lunch with who requested some information about why
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
254
1 we possibly invested in RJR stock.
2 Q. Which reporter was that, sir?
3 A. Mr. Gene Marcial.
4 Q. What publication?
5 A. He was just looking for the returns of
6 Brooke, the backup for the Brooke information; he
7 was writing a small article on Brooke.
8 Q. What publication?
9 A. Business Week.
10 Q. Can you identify the next document,
11 which is Exhibit 34?
12 A. It's an analysis of various food
13 companies.
14 Q. To clarify the record, sir, let me ask
15 you a followup question.
16 Was this prepared at Brooke Group?
17 A. I believe so.
18 Q. For what purpose?
19 A. To estimate what we think Nabisco would
20 be worth, you know, trading outside or trading
21 alone or whatever, just to make Nabisco's values.
22 Q. Nabisco as a spinoff entity?
23 A. Or an independent entity. I don't
24 recall exactly the purpose.
25 Q. Who prepared that document?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
255
1 A. Again, Mr. Kirkland did all this work.
2 Q. It was prepared in connection with the
3 consent solicitation?
4 A. Yes.
5 Q. Sir, did the Brooke Group ever prepare
6 any valuation of RJR Nabisco post spinoff standing
7 alone?
8 A. Yes.
9 Q. Do you recall whether any of the
10 documents that I have shown you today would include
11 that valuation?
12 A. I don't know where it is. No, I don't
13 believe so, but it's pretty much the same thing,
14 Jefferies thing that we alluded to before, the same
15 numbers.
16 Q. Who prepared--
17 A. Mr. Kirkland prepared all this stuff.
18 Q. When did he prepare the valuation?
19 A. He has probably been preparing it all
20 along constantly. I mean, it's an ongoing type
21 analysis that's not very difficult, just assume
22 certain multiples and, you know, come to a number,
23 and as I said before, Jefferies came to $47 a share
24 and we came out pretty close to that.
25 (Discussion off the record.)
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
256
1 Q. (By Mr. Stern) We have to do the best
2 we can with these documents.
3 I'd like to mark as the next exhibit a
4 document that was produced this morning, it's
5 labeled BGL 03793, produced by the LeBow parties.
6 I ask you to please look at that, Mr. LeBow.
7 (Plaintiff's Exhibit 35 was thereupon
8 marked for identification.)
9 THE WITNESS; Okay.
10 Q. (By Mr. Stern) Mr. LeBow, can you
11 identify that document, please?
12 A. I believe this is a document that
13 Wasserstein, Perella prepared for Reemtsma.
14 Q. By Reemtsma or prepared for--
15 A. For Reemtsma.
16 Q. For Brooke?
17 A. I believe this was prepared for
18 Reemtsma.
19 Q. Did you ever see that document before
20 today?
21 A. I probably did, yes.
22 Q. When did you see it?
23 A. Back in, you know--it was probably back
24 in May, early May, April. I'm not sure exactly.
25 It must be dated somewhere.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
257
1 Q. How did you come to see it?
2 A. Wasserstein was working for Baeza
3 jointly, so he gave me a copy.
4 Q. Mario Baeza?
5 A. Yes.
6 Q. Did he discuss that document with you?
7 A. Not before it was prepared but after.
8 Q. Did he tell you why Reemtsma asked to
9 prepare that document?
10 A. They wanted it for their board, a
11 document, you know, a summary of everything full of
12 details.
13 Q. Now, I'm going to ask you to focus on
14 pages 3879 through 3881 of that document which
15 starts possible investment consortium in company
16 TF.
17 Do you recognize the acronym TF, do you
18 know what company is referred to there?
19 A. Acronym for tobacco and food.
20 Q. Is that RJR/Nabisco?
21 A. Yes.
22 Q. Did you discuss with anyone at any time
23 the formation of an investment consortium in
24 company TF?
25 A. This was for a 4.99 percent position.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
258
1 Q. I'm sorry?
2 A. For a 4.99 percent position. It was a
3 possible investment consortium in company TF,
4 refers very clearly to some sort of group of
5 investors to buy up to 4.99 percent in conjunction
6 with a mutual transaction. The only ones who could
7 really do that legally would be us and Reemtsma
8 since we were the only that had the information to
9 benefit from that, inside information.
10 It says here, it says precisely here
11 that company L will be like company REE, Reemtsma
12 could acquire up to 4.99 percent.
13 Q. Without publishing disclosure; is that
14 correct?
15 A. Without publishing disclosure, right.
16 Some foresight here, also; here's 15
17 Hart-Scott filings.
18 Q. Was that something you had discussed
19 with anyone from Wasserstein, Perella?
20 A. This was an idea Mr. Baeza had and he
21 presented it to Reemtsma.
22 This is one concept out of a major
23 proposal involving everything I said before, this
24 is just one little element of that total proposal
25 for Reemtsma and Liggett to be involved in.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
259
1 Q. Was this something Mr. Baeza had
2 discussed with you as well, whether or not in that
3 particular form?
4 A. Yes, he discussed it with me.
5 Q. What did you say to him?
6 A. I said let's see the whole thing. This
7 is one element of the entire deal which we put up
8 something beforehand and buy stock prior to doing a
9 deal. At the meantime I had no idea.
10 Q. What happened with respect to that
11 concept?
12 A. This concept was part of the total
13 concept I described earlier. This just died along
14 with the Hart-Scott concept with Mr. Baeza, only
15 myself and Reemtsma could participate, no one else
16 would participate on this. His limited partnership
17 was to meet Reemtsma. We're dealing with inside
18 information here.
19 Q. Inside information with respect to
20 which company?
21 A. In respect to a transaction that we
22 were proposing to RJR, myself and Reemtsma, that's
23 what it refers to.
24 Q. So you took no steps to implement the
25 consortium idea that is referred to there.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
260
1 Did you discuss the proposal or the
2 concept that is outlined here with anyone from
3 Reemtsma?
4 A. No, I did not.
5 Q. Did you ever discuss a possible
6 investment consortium to acquire an interest in RJR
7 with anyone at any time?
8 A. Other than Mr. Icahn, no.
9 MR. STERN: Let me mark as the next
10 exhibit another document that was produced to us
11 day.
12 (Plaintiff's Exhibit 36 was thereupon
13 marked for identification.)
14 Q. (By Mr. Stern) I'm going to place this
15 document before you and ask you if you can identify
16 it.
17 A. I may have seen this back in April.
18 This is another document prepared by Wasserstein,
19 Perella regarding the same issues I've been stating
20 before.
21 Q. Was this a document that was prepared
22 for Brooke Group or a document that was prepared
23 for Reemtsma?
24 A. It was prepared by Wasserstein
25 apparently for everyone. I don't know if it was
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
261
1 prepared--let me take a look at this. It was
2 prepared for Reemtsma again.
3 Q. The document has the heading project
4 international. Do you know what that refers to?
5 A. That's something for Reemtsma.
6 International joint venture it refers to.
7 Q. Let me ask you if you could to just
8 turn to the introductory, this document is attached
9 to a memorandum to the working group from Mario
10 Baeza. Do you see that?
11 A. Correct.
12 Q. It refers to a organizational meeting
13 in this memorandum.
14 A. Correct.
15 Q. Then there is a working group list.
16 A. Correct.
17 Q. Brooke Group and your name is included
18 on that working group list. Do you see that?
19 A. Yes.
20 Q. Did you attend an organizational
21 meeting of the kind described in the cover
22 memorandum?
23 A. Most likely I did, yes.
24 MR. HIRSCHFELD: Do you remember?
25 THE WITNESS: I don't remember
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
262
1 precisely, no.
2 MR. HIRSCHFELD: I don't want you to
3 speculate. If you don't remember, you don't
4 remember.
5 Q. (By Mr. Stern) Did you attend a
6 meeting in which that document was distributed?
7 A. No, I don't recall.
8 Q. Do you know what Mr. Baeza was
9 referring to by the organizational meeting?
10 A. He wanted to organize his own people, I
11 suspect. I don't know, you know, I don't know.
12 This is again a Reemtsma situation with all the
13 lawyers and Brooke Group.
14 Q. Did you make use of any of that
15 document for any Liggett and Brooke Group--
16 A. Regarding what?
17 Q. Regarding RJR.
18 A. No. He made use of my information
19 regarding, you know, providing to put together for
20 Reemtsma, again the same transaction we've been
21 talking about all the time.
22 Q. So there is information in that
23 document that had been prepared by Baeza from the
24 Brooke Group; is that correct?
25 A. Absolutely, and from many other
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
263
1 sources, his own information, public information.
2 I noticed, for example, there is press clippings on
3 Bennett LeBow in this document, he didn't prepare
4 that for me.
5 Q. Were you aware that he was preparing
6 that document?
7 A. Vaguely, yes. This document was
8 prepared for Reemtsma, not for us at all.
9 Q. But it was consistent with his
10 assignment that he had undertaken from you to
11 provide that kind of information?
12 MR. HIRSCHENSON: Object to the form of
13 the question.
14 THE WITNESS: No, we had agreed he was
15 also on an assignment from Reemtsma, he had a joint
16 assignment working for me and for Reemtsma.
17 Q. But you provided him with information
18 knowing that he would share the information with
19 Reemtsma?
20 A. We provided him with information and we
21 had no problem sharing anything I wanted to with
22 Reemtsma.
23 MR. STERN: I'm going to mark as the
24 next exhibit a document produced today with cover
25 page BGL03882.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
264
1 (Plaintiff's Exhibit 37 was thereupon
2 marked for identification.)
3 THE WITNESS: This appears to be an
4 update of the other things you've shown me.
5 Q. (By Mr. Stern) A document prepared by
6 Wasserstein, Perella?
7 A. Yes, for Reemtsma, addressed to
8 Reemtsma, prepared for them at their request.
9 Q. Do you recall seeing a copy of that
10 document before today?
11 A. I don't recall specifically seeing this
12 document.
13 MR. STERN: I'd like the court reporter
14 to mark as the next exhibit a document produced by
15 the LeBow parties, BGL3998.
16 (Plaintiff's Exhibit 38 was thereupon
17 marked for identification.)
18 THE WITNESS: This appears to be
19 information on Reemtsma.
20 Q. (By Mr. Stern) Have you ever seen that
21 document before?
22 A. It says I sent it to him, but that's
23 not my handwriting. This has information on
24 Liggett and I sent it to him and information on
25 Reemtsma.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
265
1 I haven't seen this entire document,
2 no.
3 Q. Do you know who prepared any portion of
4 that document?
5 A. The Liggett pieces came either from
6 Liggett or from--well, here it is. It came
7 directly from Liggett, and the Reemtsma portion
8 came from Reemtsma, I suspect. I don't know where
9 it came from. The document is a report public '93.
10 Q. Do you know for what purpose that
11 document was prepared?
12 A. For Reemtsma again.
13 Q. Was it prepared by Wasserstein?
14 A. Yes, it was. It says it on the front
15 cover.
16 MR. STERN: I'm going to mark as the
17 next exhibit a document presented by the LeBow
18 parties today, cover page BGL3766.
19 (Plaintiff's Exhibit 39 was thereupon
20 marked for identification.)
21 THE WITNESS: There again, more of the
22 same that you've been showing me.
23 Q. (By Mr. Stern) A document prepared by
24 Wasserstein, Perella?
25 A. Yes.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
266
1 Q. For what purpose?
2 A. It says project international, which is
3 Reemtsma's project.
4 Q. Do you remember seeing that document
5 before?
6 A. No, I don't recall seeing this before.
7 MR. STERN: I'm going to have the
8 reporter mark as the next exhibit a document
9 produced by the LeBow parties BGL4127.
10 (Plaintiff's Exhibit 40 was thereupon
11 marked for identification.)
12 Q. (By Mr. Stern) Sir, do you recognize
13 that document?
14 A. This is, you know, a copy of some of
15 the things you showed me before, some of the other
16 documents, prepared back in April for Reemtsma, for
17 the Reemtsma transaction.
18 Q. Do you know if it was prepared by
19 Wasserstein, Perella?
20 A. No, this was prepared by Brooke.
21 Q. Is that a draft or a form of summary?
22 A. This is an early model of the
23 conversation with Reemtsma we conducted.
24 Q. I see that there is a fax cover page on
25 I believe the second page of that clip addressed to
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
267
1 a Mr. Staby.
2 A. Correct.
3 Q. Do you recognize that name?
4 A. Yes.
5 Q. Who is he?
6 A. He's a president of Reemtsma.
7 Q. Is he one of the people with whom you
8 were discussing this possible transaction?
9 A. Yes.
10 MR. STERN: I'm going to mark as the
11 next exhibit a document produced today by the LeBow
12 parties BGL03638.
13 (Plaintiff's Exhibit 41 was thereupon
14 marked for identification.)
15 THE WITNESS: Again, same thing,
16 prepared by Wasserstein, Perella for Reemtsma.
17 Q. (By Mr. Stern) Do you remember seeing
18 it?
19 A. No, not in this form.
20 MR. STERN: Next document produced by
21 the LeBow parties today, BGL3621.
22 (Plaintiff's Exhibit 42 was thereupon
23 marked for identification.)
24 THE WITNESS: It's more of the same.
25 Q. (By Mr. Stern) I'm going to mark as
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
268
1 the next exhibit a document produced by BGL5553 and
2 ask you if you can identify that document. Again,
3 I can't represent that this document was as it was
4 maintained in the files because it had been
5 produced to us in loose page.
6 (Plaintiff's Exhibit 43 was thereupon
7 marked for identification.)
8 THE WITNESS: Same thing. It's
9 another, you know--just part of all the same
10 thing. All these documents are, you know, relating
11 to the same issue, the same time frame, the same
12 thing.
13 MR. STERN: I'm going to ask the
14 reporter to mark as a single exhibit a collection
15 of documents that were provided to us today
16 starting with production number BGL4152 and running
17 through 4280.
18 (Plaintiff's Exhibit 44 was thereupon
19 marked for identification.)
20 Q. (By Mr. Stern) Sir, do you recognize
21 that document?
22 A. There are several different documents
23 in that clip. The first one--it really is a mixed
24 bag of documents.
25 Q. Yes.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
269
1 A. If you want me to I will separate them
2 for you.
3 Q. All I would like you to do is to
4 identify those that you have seen before.
5 MR. HIRSCHFELD: That he has seen
6 before?
7 MR. STERN: Yes.
8 THE WITNESS: Here's one I've seen
9 before, it's a copy of our--appears to be our
10 Hart-Scott filing.
11 Q. (By Mr. Stern) You are referring to
12 the first pages?
13 A. Right. The rest of it is Reemtsma
14 again, the old Reemtsma stuff.
15 Q. If you don't mind, let me just direct
16 your attention to a document toward the end of that
17 clip entitled issues list. Do you see that, sir?
18 Do you recognize those pages?
19 A. No.
20 Q. Do you know who prepared that document?
21 A. No, I do not. This appears to go along
22 with the Weil, Gotshal cover letter, Reemtsma's
23 lawyers, it was not prepared by us.
24 Q. Was it prepared for you?
25 A. No. I mean I don't know.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
270
1 MR. STERN: I'm going to ask the
2 reporter to mark as the next exhibit a document
3 produced today, BGL3644 is on the cover page.
4 (Plaintiff's Exhibit 45 was thereupon
5 marked for identification.)
6 THE WITNESS: This again is just part
7 and parcel of the stuff you've been giving me for
8 the past twenty minutes, Reemtsma prepared
9 documents.
10 Q. (By Mr. Stern) Have you seen the
11 document before today?
12 A. I have seen various versions of this.
13 MR. STERN: I'm going to ask the
14 reporter to mark as the next document a document
15 produced by the LeBow parties today starting with
16 number BGL4199.
17 (Plaintiff's Exhibit 46 was thereupon
18 marked for identification.)
19 Q. (By Mr. Stern) Mr. LeBow, have you
20 ever seen before a copy of that document?
21 A. No, I have never seen this. I don't
22 believe this relates to during the Reemtsma time.
23 The tax structure as I mentioned before, I see this
24 goes through June 16th. We were still discussing
25 with them various tax structures. They had a tax
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
271
1 problem structuring the deal.
2 Q. Am I correct, sir, that on June 16th
3 you were still discussing with Reemtsma the
4 transaction that had been proposed in May?
5 A. That's correct.
6 MR. HIRSCHFELD: All those documents
7 are dated July. I don't know if you're clear that
8 this was still ongoing in July.
9 MR. STERN: We're going to come to
10 that.
11 Would you mark this next document,
12 please?
13 (Plaintiff's Exhibit 47 was thereupon
14 marked for identification.)
15 Q. (By Mr. Stern) Mr. LeBow, I have
16 placed that exhibit before you. Have you seen any
17 copy of that copy of that exhibit before today?
18 A. I have seen a copy, yes.
19 Q. Do you remember when you saw a copy,
20 sir?
21 A. Same time it's dated.
22 Q. That's about August 17th; is that
23 correct?
24 A. That's correct.
25 Q. Down that document shows that it was
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
272
1 over the signature of Mr. Sauter. Can you identify
2 Mr. Sauter?
3 A. Mr. Sauter is the CFO for Brooke.
4 Q. Do you know why he wrote that letter
5 to--
6 A. He did under my attorney's direction.
7 I was most likely out of town when it was done, but
8 we directed him to do it.
9 Q. What was your purpose in doing so?
10 A. We directed him to do it. We had heard
11 some rumors, I believe, that Reemtsma had, you
12 know, intended to disclose our discussions. That
13 was intended to put him on notice not to disclose
14 anything publicly.
15 Q. Who told you that?
16 A. I don't recall, but we heard from
17 somewhere. I sort of reiterated--maybe from them,
18 I'm sorry, maybe we got something from them.
19 Q. Did they tell you why they were going
20 to disclose your discussions?
21 A. No. I mean, something to that nature
22 happened. Exactly, I don't know. We just put them
23 on notice we considered that confidential and to
24 still be bound by the confidentiality agreement.
25 Q. So your objective was to have the
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
273
1 discussions with Reemtsma remain confidential?
2 A. That's correct.
3 Q. And the discussions with RJR?
4 A. Pardon?
5 Q. The related discussions with RJR?
6 A. Whatever the confidentiality agreement
7 called for.
8 Q. Now, sir, did you review this letter
9 before it went out?
10 A. My attorneys did. I didn't see it
11 probably before it went out.
12 Q. You don't mind if I come to your side
13 of the table?
14 Mr. Sauter's letter says, quote, we are
15 continuing to proceed in good faith with the
16 transaction contemplated by the confidentiality
17 agreement, close quote.
18 Was that an accurate statement?
19 A. At this time we were still talking to
20 RJR about the potential transaction, yes, on August
21 17th.
22 Q. Potential transaction involving the
23 joint venture?
24 A. Involving, you know, Liggett, RJR
25 potentially and/or an international joint venture
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
274
1 partner which we didn't need anymore at this point.
2 Q. Did there come a time when you were no
3 longer proceeding with this transaction?
4 A. Yes.
5 Q. When did that--
6 A. When RJR stopped talking to us.
7 Q. If I recall correct, you said that was
8 when--in late August?
9 A. We made the Hart-Scott public, they
10 publicly said so. So we at that point, you know,
11 came to the same conclusion.
12 Q. Sir, you talked about Mr. Klesch
13 earlier in your deposition and I think just in
14 general said that he was involved in contacting
15 sources of financing in Europe. Your testimony is
16 whatever it was, but I just want to make sure that
17 I generally understand that that was his role.
18 A. That's correct.
19 Q. Did there come a point in time when you
20 stopped discussing the RJR transaction with Mr.
21 Klesch?
22 A. Which RJR transaction?
23 Q. RJR generally.
24 A. No.
25 Q. You continue to discuss it with him?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
275
1 A. Correct.
2 Q. What has his role been since the time
3 that I believe you said that he advised you that it
4 would be difficult to line up bank support in
5 Europe?
6 A. We have been discussing with him the
7 potential financing of some option purchases or
8 various other things.
9 Q. Financing option purchases, what do you
10 mean by that?
11 A. For us to buy options, purchase
12 additional options.
13 Q. RJR securities?
14 A. Yes.
15 Q. When did those discussions with Mr.
16 Klesch begin?
17 A. They've been ongoing for the past month
18 or two.
19 Q. What is the purpose of those
20 transactions about?
21 MR. HIRSCHFELD: Wait a minute.
22 All right, you can go ahead and answer.
23 THE WITNESS: When the spinoff occurs,
24 for New Valley or Brooke to make additional profit.
25 Q. (By Mr. Stern) Had you been
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
276
1 negotiating with Mr. Klesch, arranging financing
2 for those purchases?
3 A. It was not a financing issue per se;
4 it's a finding the people look right or the option
5 and financing, some financing. It was not clear as
6 far as how we were going to proceed or what we were
7 going to do.
8 Q. Are there any documents related to
9 those discussions?
10 A. I don't have any, but there might be
11 some.
12 Q. Within Brooke Group?
13 A. I'm not sure.
14 Q. Have you ever seen any such document?
15 A. No, I have never seen any.
16 Q. What is your basis for saying there
17 might be some?
18 A. Well, some of my other people have
19 worked with Mr. Klesch.
20 Q. Who is working with Mr. Klesch?
21 A. Mr. Lorber in that area.
22 Q. What is the size of the option or
23 options?
24 MR. HIRSCHFELD: I'm going to cut it
25 off at this point. I've been allowing the witness
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
277
1 to answer because frankly I don't think that the
2 general subject matter is something that needs to
3 be withheld under this strategy, okay? But when he
4 gets into the specifics of what is contemplated and
5 what amounts and so forth, I think we're touching
6 upon information that is covered by the business
7 transaction objection.
8 MR. STERN: Just so we're clear, what
9 do you mean by business transaction objection?
10 MR. HIRSCHFELD: The plans that the
11 Brooke Group may or may not have with respect to,
12 okay, which situation of options, and the plans
13 that Brooke Group may or may not be considering
14 with respect to the, okay, right ticket as far as
15 the options of RJR I think are part of the ongoing
16 consideration and strategy that Brooke is giving to
17 the evolving drama with RJR, I don't think you're
18 entitled to know that.
19 Also, you know, I don't think it has
20 anything to do with the issues in the litigation.
21 That is the basis of the objection.
22 MR. STERN: The court may not--okay,
23 let's go on.
24 Q. (By Mr. Stern) Have you ever heard of
25 a group called BBV?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
278
1 A. That's a bank, yes, I have heard of.
2 Q. Did you have any discussions with BBV
3 concerning RJR?
4 A. I did not directly, no.
5 Q. Did Mr. Klesch?
6 A. Yes.
7 Q. Did Mr. Klesch report to you on those
8 discussions?
9 A. Yes.
10 Q. What did he tell you?
11 A. He said they were interested.
12 Q. Interested in what?
13 A. Again, the same financing, three
14 billion dollar financing that we were talking about
15 back in April, May.
16 Q. What was the upshot of those
17 discussions?
18 A. Nothing.
19 Q. Did you yourself have any contact with
20 people, with anyone at BBV?
21 A. No.
22 Q. Have you ever spoken with someone named
23 Juan Zorrilla?
24 A. No.
25 Q. Other than the discussions that you
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
279
1 have testified about to this point, did you have
2 any discussions with any other potential joint
3 venturers or partners concerning RJR abroad?
4 MR. HIRSCHFELD: Concerning?
5 Q. (By Mr. Stern) Concerning any efforts
6 abroad concerning RJR.
7 A. Did I personally ever have any
8 conversations with anybody?
9 Q. Yes, other than what you have told me
10 about.
11 A. Through Mr. Levin I talked to one
12 individual in Hong Kong but over the telephone
13 only, as I mentioned, that's the only person.
14 Q. What was the name of the individual in
15 Hong Kong?
16 A. I don't know.
17 Q. Mr. Levin arranged this conversation?
18 A. Yes.
19 Q. When did this conversation take
20 place--at about the time that you spoke with Mr.
21 Levin?
22 A. Yes.
23 Q. What did you say to this individual in
24 Hong Kong?
25 A. We discussed the public information
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
280
1 regarding RJR and the banks.
2 Q. Why did you call him?
3 A. To get some support in the stock,
4 become a potential supporter stockholder for the
5 spinoff.
6 Q. Do you know what that individual
7 decided?
8 A. Best of my knowledge, he decided not to
9 do it.
10 Q. How do you know that?
11 A. Mr. Levin told me.
12 Q. Did Mr. Levin say he had followup
13 discussions with him?
14 A. I don't know.
15 Q. I'm going to place before you a clip of
16 documents that were produced by the LeBow parties
17 and ask the reporter to mark them for
18 identification.
19 (Plaintiff's Exhibit 48 was thereupon
20 marked for identification.)
21 Q. (By Mr. Stern) Sir, do you know if in
22 response to our document request a search was made
23 of your telephone records?
24 A. Yes.
25 Q. And were documents obtained pursuant to
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
281
1 that search?
2 A. Yes.
3 Q. Did you see the documents that were
4 obtained?
5 A. No.
6 Q. Do you recognize these as your
7 telephone records?
8 A. They appear to be, yes.
9 Q. What do you understand--I'm not going
10 to obviously ask you to identify every call, but
11 what do you understand--now, it's obvious that
12 there have been certain redactions made from these
13 records. What do you understand to be the scope of
14 the calls that are reflected on the records as
15 produced to us?
16 A. The scope?
17 Q. Yes. What do these calls represent?
18 A. I have no idea. International calls?
19 Q. You have no idea what--
20 A. They appear to be all international
21 calls.
22 Q. If you don't know, that's--
23 A. I don't know exactly.
24 Q. Now, there are a number of calls you
25 will see to Russia. Did you have any discussions
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
282
1 in Russia with anyone concerning RJR?
2 A. No.
3 Q. There's at least one call and maybe
4 more to Brazil. Did you have any discussions with
5 anyone in Brazil concerning RJR?
6 A. No.
7 Q. Turkey?
8 A. No.
9 Q. Ukraine?
10 A. No.
11 Q. So we should not assume that because
12 they have calls reflected on these records that
13 that was a call that related to RJR?
14 A. That's a reasonable assumption. It's a
15 very good assumption.
16 Q. France, any relation to RJR?
17 A. No.
18 Q. Sir, if you would turn to BGL6484,
19 which is towards the end of the document, you will
20 see several pages.
21 A. 6484?
22 Q. Yes.
23 A. Just a second.
24 Q. These do not appear to be phone
25 records, these appear to be credit card records; is
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
283
1 that correct?
2 A. That's correct.
3 Q. Do you know whether a search was made
4 of your credit card records?
5 A. Yes. You have them.
6 Q. Do you know what information is
7 reflected on this document?
8 A. Airline charges and hotel charges.
9 Q. For travel relating to RJR?
10 A. Let me see. Let me check the dates.
11 Yes.
12 Q. There are charges reflected here
13 reflecting travel in Germany.
14 A. Where do you see Germany?
15 Q. It's 6485.
16 A. That's not me.
17 Q. Do you know whether those entries have
18 anything to do with RJR?
19 A. Oh, yes, they do.
20 Q. What do they represent?
21 A. They represent my visit to Reemtsma.
22 Q. Reemtsma?
23 A. Yes.
24 Q. There are charges reflected to travel
25 to South Africa. Do you see that?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
284
1 A. Yes.
2 Q. Does that relate to this matter?
3 A. Yes.
4 Q. What meeting?
5 A. With the Rothmans people.
6 Q. Sir, I'm going to mark as the next
7 exhibit documents produced by the LeBow parties.
8 First page is BGL4636.
9 (Plaintiff's Exhibit 49 was thereupon
10 marked for identification.)
11 Q. (By Mr. Stern) Sir, can you identify
12 that document?
13 A. It appears to be something prepared by
14 Milbank, Tweed on the consent solicitation.
15 Q. Have you seen this cover letter before,
16 sir?
17 A. I don't know. No.
18 Q. Have you seen the document attached to
19 the cover letter?
20 A. I haven't read it in detail.
21 Q. That appears to be a draft of the
22 consent solicitation?
23 A. Correct.
24 Q. Did you ever see any letters from the
25 SEC concerning the consent solicitation?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
285
1 A. I glanced at some of them, yes.
2 MR. STERN: Mark that as the next
3 exhibit.
4 (Plaintiff's Exhibit 50 was thereupon
5 marked for identification.)
6 Q. (By Mr. Stern) Mr. LeBow, Exhibit 50
7 was placed before you. Have you ever seen a copy
8 of that document?
9 A. Again, as I said previously, I may have
10 glanced at this.
11 Q. Do you recognize this as a letter of
12 comment from the SEC addressed to Mr. Lederman?
13 A. Yes, sir.
14 Q. Concerning the consent solicitation?
15 A. Correct.
16 MR. STERN: Finally I will mark as
17 Exhibit 51 a letter produced by the LeBow parties
18 under the letterhead of Milbank, Tweed.
19 (Plaintiff's Exhibit 51 was thereupon
20 marked for identification.)
21 Q. (By Mr. Stern) Sir, can you identify
22 the document that has been placed before you?
23 A. A letter from Milbank, Tweed to the
24 Securities and Exchange Commission.
25 Q. Concerning the Brooke Group consent
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
286
1 solicitation?
2 A. Yes.
3 Q. Have you seen a copy of that letter
4 before?
5 A. Again, I may have glanced at it. I
6 don't recall.
7 Q. Did there come a time when Brooke Group
8 notified RJR that it was proposing a slate of
9 nominees for election to the board of RJR?
10 A. Yes.
11 Q. Do you recall that that was on or about
12 November 20th, 1995?
13 A. That's correct.
14 Q. How did that slate come to be
15 organized?
16 A. I organized it.
17 Q. How did you go about doing that?
18 A. I called certain people and, you know,
19 asked them if they would join me in a slate.
20 Q. How many people did you call?
21 A. Pretty much just the people on that
22 list.
23 Q. Can you tell us anyone who declined?
24 A. One person, because I called him the
25 day before the slate was due and didn't have time
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
287
1 to think about it, he declined.
2 Q. Who was that?
3 A. Could I have a break on this point? I
4 want to talk to my lawyer about it. I don't think
5 he would want to have his name disclosed.
6 Q. You prefer that he would not want his
7 name disclosed?
8 A. No, not until he decided to do it or
9 not do it, yes.
10 Q. Why don't we, without waiving--
11 A. I prefer to maintain the
12 confidentiality.
13 Q. Without waiving our rights to seek his
14 identity, we can just move on.
15 A. Okay, fine.
16 (Brief recess.)
17 Q. (By Mr. Stern) Mr. LeBow, are you
18 aware of a consulting agreement between Brooke
19 Group and Fred Zuckerman?
20 A. Yes.
21 Q. Who is Mr. Zuckerman?
22 A. He is a director nominee of the RJR
23 board.
24 Q. Apart from that what does he do?
25 A. He's a consultant to various other
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
288
1 companies.
2 Q. What kind of consulting services is he
3 providing to Brooke Group?
4 A. We consult with him on the various
5 strategies for the consent solicitation.
6 Q. What kind of strategies were these?
7 A. We had a couple of meetings discussing
8 the tobacco business, strategies in general.
9 Q. Have you ever discussed with Mr.
10 Zuckerman any potential combination between RJR and
11 Liggett Tobacco?
12 A. No.
13 Q. Have you ever discussed that subject
14 with any of the proposed nominees?
15 A. Not in any detail, no.
16 Q. You said not in any detail. In any
17 respect?
18 A. The only respect was, we gave them--we
19 told them the meetings we had before with RJR. We
20 did not discuss Reemtsma, that I recall; and, you
21 know, we gave them some projections, these old
22 projections, because that's all we had at the time
23 was temporary projections.
24 Q. Did you discuss with them whether or
25 not Brooke Group continued to have any interest in
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
289
1 a merger with RJR?
2 A. We only had interest of any sort over
3 the consent solicitation, if there is any interest,
4 we would have to wait and see because of RJR's
5 spinoff of Nabisco after the consent, that was the
6 end of it, and the board was only proposed because
7 RJR's bylaws required it at that time.
8 Q. I'm sorry, just so I understand the
9 last answer, did you discuss with the nominees at
10 any time whether Brooke Group had any interest in a
11 transaction with RJR other than simply a simple
12 combination of the spinoff?
13 A. We had to by definition talk with them
14 of the possibility, again just the possibility that
15 if RJR did not effectuate the spinoff by
16 themselves, after, assuming RJR shareholders
17 requested it, if RJR did not do it they had to be
18 prepared to do so on some sort of byway or not
19 include Liggett.
20 Q. So assuming that the consent
21 solicitations were successful or further assume
22 that the RJR board did not complete a spinoff, then
23 the nominees who may be elected to replace the
24 board, your slate, would consider--you're telling
25 me they might consider an RJR/Liggett merger?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
290
1 A. The first thing they would have to
2 consider was spinning off Nabisco, that's number
3 one, they must be prepared to do that, and everyone
4 agreed to that, and I say we don't know the
5 structure of this potential new board or new RJR or
6 whatever it is. We have, you know, some idea.
7 I told them how we had in the past
8 proposed a merger, the thing with Liggett with
9 another company not mentioned, Reemtsma's, and it
10 could involve many structures going forward, we
11 don't know what it is at this point.
12 Q. I don't have those structures. You may
13 have given acquisition information to the nominees
14 with Ryan.
15 A. Possibly, and at the time we put
16 together a book for everyone with the public
17 information of RJR and some of these projections
18 that you showed us.
19 Q. Have I shown you that book today?
20 A. You have shown me pieces of that book,
21 some pieces.
22 (Discussion off the record.)
23 Q. (By Mr. Stern) Sir, would you expand
24 on what you mentioned?
25 A. We gave the nominees, you know, at a
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
291
1 meeting copies of public documents, public RJR
2 documents which you have given me here, and a scope
3 of the old projections of RJR so they would have
4 some reference points in which to go forward.
5 Q. How many meetings did you have with the
6 nominees?
7 A. Two we've had so far.
8 Q. When was the first one?
9 A. First one was in early November, prior
10 to the announcement, sometime November.
11 Q. I'm going to show you a document from
12 among the documents that were produced by the LeBow
13 parties and ask you if that refreshes your
14 recollection as to the date of the meeting.
15 A. Yes, that's it.
16 Q. Did the meeting take place on November
17 15th?
18 A. Yes.
19 Q. For the record--
20 A. Whatever. It says the 13th. Was that
21 the date?
22 Q. Let me see.
23 MR. HIRSCHFELD: Let me see. I don't
24 want you to answer--
25 THE WITNESS: It was probably the day
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
292
1 before, either that day or very close to that day.
2 Q. (By Mr. Stern) That day being November
3 15th?
4 A. Correct.
5 Q. Was that the first meeting of the two?
6 A. Right.
7 Q. By the way, for the record, I showed
8 Mr. LeBow a document bearing production number
9 BGL8381.
10 And that meeting was held at the
11 offices of Sard Verbinnen; is that correct?
12 A. That's correct. They're a PR firm.
13 Q. How long did that meeting take place?
14 A. How long did it last, you mean?
15 Q. Yes.
16 A. Under an hour.
17 Q. Am I correct that the materials that
18 you mentioned were distributed to the directors or
19 the proposed directors at this meeting; is that
20 correct?
21 A. Correct.
22 Q. Was there any record kept, did you take
23 any notes at that meeting?
24 A. No.
25 Q. Is there any memorandum prepared
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
293
1 summarizing what transpired at the meeting?
2 A. No.
3 Q. Other than what you have told me, which
4 you testified to already, can you recall what was
5 said at that meeting?
6 A. No. It was just a general update of
7 everything that was publicly available.
8 Q. Did any of the directors ask any
9 questions?
10 A. Some.
11 Q. Did any of the questions relate to the
12 possibility of an RJR/Liggett transaction?
13 A. No.
14 Q. Did you discuss with any of the
15 directors whether or not you were interested in
16 soliciting other shareholders or other people to
17 become substantial RJR shareholders in the way that
18 you had proposed to Mr.--
19 A. Not at that time, no.
20 Q. Did there come a time when you
21 discussed that matter with the proposed directors?
22 A. Not that I recall.
23 Q. When was the next meeting with the
24 proposed directors?
25 A. Middle of December, we had just an
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
294
1 update meeting, luncheon.
2 Q. Where was that?
3 A. New York.
4 Q. At your office?
5 A. No, at a club, a luncheon meeting.
6 Q. What was discussed at that meeting?
7 A. Just update what was happening
8 publicly, just to bring them up to speed. Nothing
9 specifically.
10 Q. Did you discuss with them your approach
11 to Mr. Tan?
12 A. No.
13 Q. Discuss with them your conversation
14 with Mr. Levin?
15 A. No.
16 Q. With the person in Hong Kong?
17 A. No.
18 Q. With Mr. Price?
19 A. No.
20 Q. Either at the first meeting or the
21 second meeting?
22 A. No. That was not important things.
23 Q. Did you discuss with them at the second
24 meeting the possibility that there could some day
25 be a combination of some kind between Liggett and
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
295
1 RJR?
2 A. No.
3 Q. That was your last communication with
4 any of the proposed directors --
5 A. That's correct.
6 Q. -- concerning the consent solicitation
7 of RJR?
8 A. I spoke with Mr. Zuckerman yesterday
9 and he said how are things going. I said fine.
10 That was the essence of it.
11 Q. Have you ever heard of somebody named
12 Gary Black?
13 A. Yes.
14 Q. Who is Gary Black?
15 A. He's a marketing analyst for Bernstein
16 and Company.
17 Q. Is he someone with whom you discussed
18 RJR?
19 A. Yes.
20 Q. When did you have your first discussion
21 with him?
22 A. Concerning what--RJR?
23 Q. RJR.
24 A. Probably April, May, last year, just
25 get his feeling for RJR in that time frame.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
296
1 Q. Did you call Mr. Black?
2 A. I believe Mr. Ressler talked to Mr.
3 Black first, not me.
4 Q. Mr. Ressler initiated the conversation?
5 A. I'm not sure.
6 Q. You don't know how that conversation
7 came about?
8 A. I don't know how it started.
9 Q. But you recall that there was some
10 conversation between Ressler and Black in April or
11 May?
12 A. Correct.
13 Q. Did Mr. Ressler report on that
14 conversation to you?
15 A. He reported to me some of the, you
16 know, concepts that Mr. Black felt about RJ and the
17 values.
18 Q. What did he say that Mr. Black felt?
19 A. Gesturing, quite a lot of things in Mr.
20 Black's research reports.
21 Q. Did you come to read Mr. Black's
22 research reports at any time?
23 A. Yes, I read them all.
24 Q. Did Mr. Ressler tell you that Mr. Black
25 had told him anything that wasn't in those reports?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
297
1 A. No.
2 Q. Do you know whether Mr. Ressler told
3 Mr. Black why Mr. Ressler was inquiring about RJR?
4 MR. HIRSCHFELD: Objection to form.
5 There is no indication from any of the witness'
6 prior testimony that he knows that Mr. Ressler made
7 such a--
8 Q. (By Mr. Stern) Mr. Ressler and Mr.
9 Black had a conversation about RJR; is that
10 correct?
11 A. Probably RJR and other aspects of the
12 tobacco business, American brands and so forth.
13 Q. To your knowledge, did Mr. Ressler tell
14 Mr. Black in this conversation about Brooke Group's
15 interest in a potential RJR transaction?
16 A. No, to my knowledge, no.
17 Q. Now, when did the next contact between
18 anyone at Brooke Group and/or representing Brooke
19 Group with Mr. Black take place concerning RJR?
20 A. Mr. Ressler had talked to him every few
21 weeks about his research reports. I spoke to him,
22 to Mr. Black, once or twice during this period.
23 Q. When did you speak with him?
24 A. I don't recall exactly when.
25 Q. Was it prior to the approach to Mr.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
298
1 Harper, the May approach to Mr. Harper, or after?
2 A. After, I believe.
3 Q. Was it before or after the filing of
4 the Hart-Scott?
5 A. By telephone once or twice before, and
6 then I had lunch with him after the filing of the
7 Hart-Scott.
8 Q. In your telephone conversations with
9 Mr. Black, did you initiate these calls?
10 A. Couple of them he initiated, couple of
11 them I initiated.
12 Q. What was the subject, what was
13 discussed in these calls?
14 A. His reports and what he felt, you know,
15 about RJR.
16 Q. Did you tell Mr. Black anything about
17 your interest in a transaction with RJR?
18 A. Absolutely not.
19 Q. Did you tell Mr. Black you were a
20 shareholder in RJR?
21 A. No.
22 Q. Did Mr. Black ask you why were you
23 talking to him about RJR?
24 A. He just knew we had an interest and
25 that this may be an undervalue situation he might
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
299
1 have some interest in.
2 Q. After filing of the Hart-Scott you said
3 you had lunch with Mr. Black; is that right?
4 A. That's correct.
5 Q. Is that a lunch that you initiated?
6 A. Yes.
7 Q. Why did you initiate that lunch?
8 A. I wanted to talk to him about Liggett
9 and maybe I can find out that--get their feeling
10 for various issues.
11 Q. Do you remember the issues, any issues
12 in particular that you discussed?
13 A. It was all just public issues,
14 discussing, you know, what this was about, what he
15 thinks the projections show, where he thinks the
16 company was going to go, what they were going to
17 do.
18 Q. Did you discuss with him what Liggett
19 or Brooke Group was going to do?
20 A. No. I mentioned the sense of earnings
21 projections, you know, the cigarette business, so
22 forth, not projecting exactly what our plans were.
23 Q. Prior to these conversations as to
24 which RJR was mentioned, had you had meetings
25 yourself personally with Mr. Black to discuss
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
300
1 anything?
2 A. Yes.
3 Q. To discuss Liggett's performance?
4 A. Yes.
5 Q. So Mr. Black was someone you knew?
6 A. Yes.
7 Q. Did Mr. Black provide you with any
8 analyses in the course of these discussions or in
9 connection with these discussions?
10 A. Yes, he provided in very great details
11 the analysis provided in his reports.
12 Q. Other than what was in his--
13 A. Nothing other than his report, no.
14 Q. Were you aware one way or another
15 whether or not Mr. Black's firm owned RJR shares?
16 A. Yes.
17 Q. You knew that. At what point did you
18 come to know that?
19 A. Exact number you mean or--
20 Q. When did you come to learn that his
21 firm, Bernstein and Company, had shares?
22 A. I don't know when he told me.
23 Q. Did he indicate one way or another
24 whether he believed Bernstein would support your
25 initiative?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
301
1 A. He made it very clear that there was a
2 large Chinese wall between him and the owners
3 of--controlling people at Scott.
4 Q. Did he make any response to anything
5 that you had said?
6 A. No.
7 Q. Did you ask him whether Bernstein at
8 any time would support you?
9 A. Yes, of course I did.
10 Q. When did you ask him?
11 A. I don't recall exactly when.
12 Q. Was it after the Hart-Scott filing?
13 A. Absolutely after.
14 Q. After the luncheon, at this luncheon
15 that you described?
16 A. Could have been.
17 Q. So he didn't know what was the Chinese
18 wall?
19 A. No. He hoped but he didn't know for
20 sure.
21 MR. STERN: Now, I'm going to mark as
22 the next exhibit--I think we're up to 52.
23 MR. HIRSCHFELD: I never got a copy of
24 51.
25 (Plaintiff's Exhibit 52 was thereupon
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
302
1 marked for identification.)
2 Q. (By Mr. Stern) I have placed Exhibit
3 52 before you. Can you identify that document?
4 A. It looks like copies of a research
5 report that Gary Black wrote, or partial copy. I
6 don't think it's a full--doesn't look like a
7 full--well, maybe it is. It's in the wrong order.
8 It's a report that Mr. Black wrote.
9 Q. Have you seen this document before?
10 A. Yes.
11 Q. Did Mr. Black send you a copy of this
12 document?
13 A. I don't recall how we got a copy.
14 Q. I'd like you to if you would look at
15 BGL8563, there's a page there which discusses RJR
16 Nabisco LeBow's incentives. Do you see that?
17 A. Yes.
18 Q. Do you see that the page goes through
19 an analysis and then comes to the conclusion, so it
20 appears, that there is a potential increase in
21 LeBow's BGL value of 250 to 300 million dollars
22 based on the transaction that is assumed on that
23 page? Do you see that?
24 A. Yes, I do.
25 Q. Have you seen this page before?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
303
1 A. Yes.
2 Q. Did you discuss it with anyone?
3 A. My people, internal people.
4 Q. What did you say to them about it?
5 A. I don't believe it. What could I say?
6 Q. Did you discuss--
7 A. Mr. Black put this together entirely by
8 himself.
9 Q. That's based entirely on Mr. Black's
10 analysis?
11 A. One hundred percent. I had no input
12 into this whatsoever.
13 Q. If you keep on going you will see that
14 there is some text at BGL8567, this is a report
15 that's dated September 22nd, 1995.
16 A. Right.
17 Q. Do you see that?
18 A. Yes.
19 Q. Do you see that there's a discussion on
20 page 8568 of incentives?
21 A. Of what?
22 Q. Incentives, it says incentives
23 compelling, win or lose, and there is an exhibit
24 which is another version of that chart we just
25 looked at.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
304
1 Without taking the time to read it into
2 the record, unless you wish to, the entire
3 discussion here, Mr. Black is discussing if LeBow
4 contributes his Liggett stock to an RJR/Liggett
5 merger and claims a 15 percent position in a new
6 RJR/Liggett Tobacco paying a two dollar a share
7 dividend, do you know how Mr. Black developed that
8 scenario?
9 A. Yes.
10 Q. How?
11 A. It's in another report he wrote, he has
12 all his justifications there.
13 Q. Whether it's in this report or in
14 another report, did he develop that scenario in
15 conversations with you?
16 A. No, he justified it himself.
17 Q. I'm sorry, I didn't--
18 A. He justified it himself. If you go
19 back to not that report but some other report I
20 don't have here, you will see his justification.
21 Q. His justification for you will assume a
22 15 percent interest, et cetera?
23 A. Correct.
24 Q. Did he ever discuss with you whether or
25 not you were going to, Brooke or Liggett would take
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
305
1 15 percent interest in the combined entities?
2 A. At what point in time?
3 Q. Any time.
4 A. Well, he asked me my opinion, I
5 believe, you know, after he wrote the reports.
6 Q. Did he ask you to comment on the
7 analysis?
8 A. I made a joke about that when I saw it,
9 I joked. I said "Gary, that sounds very nice."
10 That was the essence of my comment.
11 Q. Did you tell Mr. Black at any time that
12 you had no interest in an RJR/Liggett merger?
13 A. At this point I couldn't say that.
14 Well, what time is this--September? At this point
15 we were only interested in the consent
16 solicitation, but I didn't tell him anything at
17 this point, at this point I told him nothing, I
18 told him substantially nothing of what our--I
19 couldn't agree, I couldn't deny, couldn't do
20 anything.
21 Q. You didn't comment on this at this
22 point in time?
23 A. No, other than make a joke about the
24 numbers.
25 Q. I take it you think the numbers are
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
306
1 high. Is that true?
2 A. I just joked about the comment. I mean
3 people were joking at me, joking about them.
4 Q. Do you think the analysis is
5 well-founded?
6 A. Pardon?
7 Q. Do you think the analysis is
8 well-founded?
9 A. The previous analysis?
10 Q. Well, the same--
11 A. This is a mechanical analysis, you plug
12 in the numbers, that's it.
13 Q. Do you view the assumptions in the
14 Black analysis as unreasonable?
15 A. Well, the only assumption that gets you
16 to the spot, this bottom line, is this 15 percent
17 assumption. You're also making assumptions about
18 dividends. Maybe not unreasonable, may be
19 reasonable. I don't know. The key number is the
20 15 percent.
21 Q. Just so I understand, you never
22 discussed with Mr. Black a percentage that Liggett
23 might take in a combined RJR?
24 A. No.
25 Q. This is a number he developed out?
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
307
1 A. You will see the development of this
2 number in a previous report that Mr. Black did.
3 Q. Is that a report that came entirely
4 from his own thinking?
5 A. Absolutely, his own public information.
6 Q. You gave him no information at all
7 concerning the transaction that you had proposed to
8 Mr. Harper?
9 A. Absolutely not.
10 Q. Sir, I'm going to show you--I'm going
11 to ask the reporter to mark as the next exhibit a
12 printout from Lexis-Nexis reportedly of a New York
13 Times article.
14 (Plaintiff's Exhibit 53 was thereupon
15 marked for identification.)
16 Q. (By Mr. Stern) Sir, this printout, the
17 article reflected in this printout states that you
18 said in an interview, quote, we are not interested
19 in taking control of the company, quote, and that
20 you added, quote, do the spinoff and Carl and I
21 will go away.
22 Did you have an interview with the New
23 York Times on or about October 3lst?
24 A. Yes.
25 Q. Is that an accurate and fair
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
308
1 representation of what you said?
2 A. Yes.
3 Q. And I take it you have made that
4 statement publicly on subsequent occasions?
5 A. That's correct.
6 Q. Was that a true statement when you made
7 it?
8 A. Yes.
9 Q. Does it remain true today?
10 A. Yes.
11 Q. Have you at any time had an interest in
12 taking control of RJR?
13 A. In conjunction with the spinoff, in
14 conjunction with the refinancing of the debt, in
15 conjunction with Reemtsma back then, yes.
16 Q. And you have abandoned that interest;
17 is that correct?
18 A. At the present time, yes.
19 Q. Have you discussed with anyone
20 circumstances in which you may become interested in
21 that again?
22 A. No, no specific--specifically you
23 mean? Be more specific.
24 Q. Have you discussed with anyone whether
25 there may come a time in the future which you
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
309
1 become interested in taking control of the company
2 again?
3 A. What do you define as taking control?
4 Q. Whatever you meant when you talked with
5 the New York Times.
6 A. Well, we proposed a--if you mean, which
7 I don't know, but our proposal slate alone is the
8 means of taking control. I mean, I have to admit
9 we have proposed a slate in that regard.
10 Q. Have you had any discussions with
11 anyone concerning forming, acquiring through your
12 own means or in conjunction with others, enough
13 stock to take control of the company?
14 A. Absolutely no.
15 Q. Have you ever had such discussions?
16 A. Absolutely not.
17 MR. STERN: I'm going to mark as the
18 next two exhibits documents produced to us by the
19 LeBow parties.
20 (Plaintiff's Exhibits 54 and 55 were
21 thereupon marked for identification.)
22 Q. (By Mr. Stern) Sir, can you identify
23 the two documents that have been placed before
24 you? Have you ever seen them before?
25 A. Yes.
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
310
1 Q. Are they lists of people in firms who
2 have worked on the matters that we have discussed,
3 the RJR matters?
4 A. Yes.
5 Q. Sir, other than you have already
6 testified, have you had any discussion with anyone
7 regarding the possibility of a Liggett merger with
8 RJR Tobacco?
9 A. At what point in time?
10 Q. Any time since you began that you can
11 recall.
12 A. Other than my advisors and their
13 associates, no.
14 Q. Let me narrow the time frame and focus
15 in on any time after your discussion in August with
16 Mr. Goldstone.
17 A. After my discussion?
18 Q. Yes, in August with Mr. Goldstone.
19 A. In other words, after the Hart-Scott
20 filing became public?
21 Q. Yes.
22 A. Not in any detail, no.
23 Q. Other than you have testified, have you
24 had any discussion with anyone regarding the
25 formation of a group to acquire a 20 percent or
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
311
1 greater interest in RJR?
2 A. No.
3 MR. HIRSCHFELD: Note my objection to
4 the form. But it's okay. I mean, what do you mean
5 by a group?
6 THE WITNESS: Please define a group for
7 me.
8 Q. (By Mr. Stern) A group of people who
9 are working together to achieve--
10 A. In concert?
11 Q. In concert.
12 A. No.
13 Q. I take it your testimony is, in order
14 to accomodate your counsel's objection, you never
15 had such a discussion of what is called a 13-D type
16 group?
17 A. The answer is no, except Carl Icahn.
18 Q. Did you discuss acquiring more than 20
19 percent with Mr. Icahn?
20 A. Not acquiring more than 20 percent but
21 more than five percent possibly, which would be
22 13-D.
23 Q. When did you have that discussion with
24 Mr. Icahn?
25 A. When we were negotiating the whole--
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
312
1 Q. Did you make a decision as to whether
2 you wished to do that?
3 A. No, the decision is still open.
4 Q. Still a possibility?
5 A. Still a possibility.
6 Q. Did you discuss with Mr. Icahn whether
7 it would be advisable to file a 13-D?
8 A. In my opinion, it didn't make any
9 difference.
10 Q. Did Mr. Icahn express an opinion?
11 A. He felt pretty much the same way, it
12 was not a criteria for us.
13 MR. STERN: We're done.
14 I'm just going to note that there have
15 been certain documents that have been identified as
16 possibly existing that may have been called for,
17 obviously we reserve our rights pending production
18 of those documents.
19 With that I have nothing further.
20 (Thereupon the taking of the deposition
21 was concluded.)
22
23
24
25 ________________________
Bennett S. Lebow
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
313
1
2 Sworn to and subscribed before me this
______ day of __________________ 1996.
3
4
___________________________
5 Notary Public for the State
of Florida at Large
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
314
1
2 CERTIFICATE OF OATH
3 STATE OF FLORIDA:
: SS
4 COUNTY OF DADE:
5 I, the undersigned authority certify
that Bennett S. LeBow personally appeared before me
6 and was duly sworn.
7 WITNESS my hand and official seal this
13th day of January 1996.
8
9
10 __________________________
Craig W. Taylor
11 Notary Public - State of Florida
12
13
14
15
16
17
18
19
20
21
22
23
24
25
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
315
1
2 CERTIFICATE OF REPORTER
3 STATE OF FLORIDA :
: SS
4 COUNTY OF DADE :
5
We, Craig W. Taylor and Gary W.
6 O'Bryan, Notaries Public, do hereby certify that we
reported the deposition of Bennett S. LeBow, a
7 witness in the above-styled cause; that said
witness was duly sworn; that reading and
8 subscribing of the deposition were not waived; and
that the foregoing pages, numbered from 1 to 314,
9 inclusive, constitute a true and correct
transcription of our shorthand report of the
10 deposition by said witness.
11 We further certify that we are not an
attorney or counsel connected with the action, nor
12 financially interested in the action.
13 Dated this 13th day of January 1996.
14
15 _________________________
16
17 STATE OF FLORIDA
COUNTY OF DADE
18
The foregoing certificate was
19 acknowledged before me this _______ day of
________________ 1995 by Craig W. Taylor,
20 personally known to me.
21
22 ________________________________
Notary Public - State of Florida
23
24
25
TAYLOR, JONOVIC & WHITE
MIAMI, FLORIDA (305)358-9047
1
==============================================================================
In The
UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
RJR NABISCO HOLDINGS CORP.,
Plaintiff,
-against-
BENNETT S. LEBOW, BROOKE GROUP LTD.,
and CARL C. ICAHN,
Defendants.
6:95CV00812
DEPOSITION
OF
PETER STRAUSS
JANUARY 17, 1996
[LOGO} TRAVELING
---------------------
TRANSCRIPT[Trademark]
U.S. Patent Pending Classic Reporting, Inc.
Traveling Transcript is a trademark of New York, New York
jack w. hunt & associates, inc. 212-268-2590
==============================================================================
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
-------------------------------------x
:
RJR NABISCO HOLDINGS CORP., :
:
Plaintiff, :
:
-against- : 6:95CV00812
:
BENNETT S. LEBOW, BROOKE GROUP LTD., :
And CARL C. ICAHN, :
:
Defendants. :
:
-------------------------------------x
January 17, 1996
11:35 A.M.
Deposition of non-party witness,
PETER STRAUSS, taken by plaintiff pursuant to
subpoena, at the law offices of Wachtell
Lipton Rosen & Katz, 51 West 52nd Street, New
York, New York 10019, before Arta Pascullo, a
Registered Professional Reporter and Notary
Public within and for the State of New York.
CLASSIC REPORTING, INC. (212) 268-2590
2
1
2 A P P E A R A N C E S:
3 WACHTELL LIPTON ROSEN & KATZ
Attorneys for Plaintiff
4 51 West 52nd Street
New York, New York 10019
5
BY: WARREN L. STERN, ESQ.
6
7 MILBANK, TWEED, HADLEY & McCLOY
Attorneys for Defendants
8 and the Witness
1 Chase Manhattan Plaza
9 New York, New York 10005-1413
10 BY: TONI C. LICHSTEIN, ESQ.
11
PROSKAUER ROSE GOETZ & MENDELSOHN, L.L.P.
12 Attorneys for the Witness
1585 Broadway
13 New York, New York 10036-8299
14 BY: GREGG M. MASHBERG, ESQ.
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
3
1
2 IT IS HEREBY STIPULATED AND AGREED by
3 and between the attorneys for the respective
4 parties herein that the sealing, filing and
5 certification of the within deposition be waived;
6 that such deposition may be signed and sworn to
7 before any officer authorized to administer an
8 oath, with the same force and effect as if signed
9 and sworn to before a judge of this court.
10 IT IS FURTHER STIPULATED AND AGREED
11 that all objections, except as to the form, are
12 reserved to the time of the trial.
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
4
1 Strauss
2 P E T E R S T R A U S S,
3 having been first duly sworn by the
4 Notary Public (Arta Pascullo), was
5 examined and testified as follows:
6 EXAMINATION BY MR. STERN:
7 Q. Mr. Strauss, have you ever been a
8 deposition witness before?
9 A. I have not.
10 Q. Do you understand that this
11 deposition is being taken in a matter pending
12 in the United States District Court for the
13 Middle District of North Carolina captioned
14 RJR Nabisco Holdings versus Bennett LeBow,
15 Brooke Group and Carl Icahn?
16 A. I do.
17 Q. And do you understand that you
18 are being called as a witness in that action
19 by RJR, the plaintiff?
20 A. Yes.
21 Q. Sir, are you here pursuant to a
22 subpoena that was served upon you?
23 A. I am.
24 MR. STERN: I would like the
25 reporter to mark as Strauss Exhibit 1,
CLASSIC REPORTING, INC. (212) 268-2590
5
1 Strauss
2 the subpoena, a copy of that subpoena.
3 (Copy of subpoena marked Strauss
4 Exhibit 1 for identification, as
5 of this date.)
6 Q. Mr. Strauss, I have placed a copy
7 of Exhibit 1 before you. I ask you if you can
8 identify that as a copy of the subpoena that
9 was served upon you with respect to this
10 deposition?
11 A. I can, yes.
12 Q. Mr. Strauss, do you understand
13 that you are obliged as a matter of law to
14 respond to my questions truthfully?
15 A. I do.
16 Q. And you understand that your
17 testimony is being given under penalties of
18 perjury; is that correct?
19 A. Yes.
20 Q. Sir, would you state your current
21 residence address?
22 A. 156 Brite, B-R-I-T-E, Avenue,
23 Scarsdale, New York 10583.
24 Q. And your current business
25 address?
CLASSIC REPORTING, INC. (212) 268-2590
6
1 Strauss
2 A. I have none. My home is my
3 business address.
4 Q. What was the date and place of
5 your birth?
6 A. I was born August 27, 1932 in
7 Stuttgart, Germany.
8 Q. Were you raised in Stuttgart?
9 A. Until I was almost four.
10 Q. Then where did you go?
11 A. Came with my parents to this
12 country.
13 Q. Where was that?
14 A. Originally in New York City for a
15 brief time and then to Hartford, Connecticut.
16 After approximately a year to Lancaster,
17 Pennsylvania where I, in effect, grew up
18 through my attendance of high school.
19 Q. Did you attend college?
20 A. Yes.
21 Q. Where was that?
22 A. Harvard College.
23 Q. Did you receive a degree?
24 A. I did.
25 Q. What degree did you receive?
CLASSIC REPORTING, INC. (212) 268-2590
7
1 Strauss
2 A. AB.
3 Q. What year did you receive it?
4 A. 1954.
5 Q. Have you had any other education
6 past high school?
7 A. I was graduated from Harvard
8 Business School in 1958.
9 Q. With an MBA?
10 A. MBA.
11 Q. Would you tell me your full-time
12 employment history starting with your first
13 full-time employment?
14 A. My first full-time employment was
15 in early summer of 1958 when I joined the
16 General Cigar Company as a trainee. I was
17 with the General Cigar Company which became
18 subsequently part of Culbro in 1976, it was
19 just a name change, until 1977 when I
20 transferred to the distribution division,
21 wholesale distribution division of Culbro.
22 I left General Cigar Company as
23 an executive vice president operations, took
24 over as president and CEO of Metropolitan,
25 what was known then as Metropolitan Tobacco
CLASSIC REPORTING, INC. (212) 268-2590
8
1 Strauss
2 Company and subsequently Metropolitan
3 Distribution Services, Inc. Served in that
4 capacity until 1983 when Culbro purchased a
5 much larger distribution operation in the
6 southeast part of the country. And as a
7 result of the larger distribution business,
8 which amounted to something over a billion
9 dollars, I formed a corporate entity called
10 the SENECO Company, S-E-N-E-C-O, which was
11 actually an acronym for Southeast Northeast
12 Colorado because we had distribution
13 operations in the northeast and southeast and
14 in Colorado.
15 I was president and CEO of that
16 operation until 1986 when Culbro decided to
17 sell the northeast operation. I put together
18 an investment group to purchase it and left
19 Culbro and became president and CEO and
20 part-owner of my former company, Metropolitan
21 Distribution Services, Inc. That status
22 pertained until 1990 when we sold that
23 business after which I became a consultant in
24 the industry or the industries I was
25 associated with and had clients such as
CLASSIC REPORTING, INC. (212) 268-2590
9
1 Strauss
2 American Tobacco, Hershey Chocolate, that kind
3 of company. And did that for about year
4 and-a-half when American Tobacco asked me to
5 join them on a permanent basis, which I did.
6 And in December of '91, I was with American
7 Tobacco until they were purchased by Brown &
8 Williamson in December of 1994 when at the
9 closing all of the executives were immediately
10 terminated. I was senior vice president. I
11 had two jobs, senior vice president of trade
12 marketing and senior vice president of
13 international division of the international
14 business of American Tobacco. Since that
15 time, I've been again a consultant basically
16 in the tobacco industry or with clients such
17 as Rothman International and Havatampa, Inc.
18 Q. In general, what were your
19 responsibilities at General Cigar?
20 A. Well, I was trained in and
21 basically grew up in the manufacturing in the
22 leaf processing end of the business. And
23 eventually, I was in charge of all
24 manufacturing operations, homogenized tobacco
25 operation. International operation primarily.
CLASSIC REPORTING, INC. (212) 268-2590
10
1 Strauss
2 That was my primary areas.
3 Q. What is or maybe I should say
4 what was the business of General Cigar?
5 A. General Cigar is a major cigar
6 manufacturer in the United States. They also
7 at one time were also, when I was involved, in
8 the snuff and chewing tobacco business as
9 well.
10 Q. I may ask you to clarify
11 something you said in your answer. What is
12 the relationship between Metropolitan or what
13 was the relationship between Metropolitan
14 Tobacco and General Cigar.
15 A. In the early -- prior to the
16 1970s basically, the typical relationship
17 between cigar companies and wholesale
18 distributors were that they were franchised.
19 In other words, one distributor franchised by
20 one major company would not handle the
21 products of another major company.
22 Metropolitan Tobacco was the major distributor
23 for General Cigar products in New York and New
24 Jersey.
25 In 1963, Metropolitan was failing
CLASSIC REPORTING, INC. (212) 268-2590
11
1 Strauss
2 as a business and it appeared that one of
3 General Cigar's competitors was interested in
4 buying General Cigar -- Metropolitan so that
5 General Cigar in turn decided to buy
6 Metropolitan. So Metropolitan became a
7 division of General Cigar Company and remained
8 so until my group purchased it in 1986. That
9 system changed subsequent to the '60s.
10 Distributors handled all products of all
11 different companies. They were no longer
12 franchised in the cigar business.
13 Q. Now, you became, I believe you
14 said, correct me if I've misunderstood you,
15 that there came a time when you became
16 president and CEO of a company or an operation
17 called SENECO; is that correct?
18 A. That's correct.
19 Q. At that time, that was a
20 wholly-owned subsidiary?
21 A. I formed that company for Culbro
22 Corporation.
23 Q. And then you became president and
24 CEO of Metropolitan subsequent to a leveraged
25 buyout transaction?
CLASSIC REPORTING, INC. (212) 268-2590
12
1 Strauss
2 A. Correct.
3 Q. At that time, did Metropolitan
4 have any public shareholders?
5 A. No.
6 Q. Then there came a time when you,
7 starting in 1990, when you were performing
8 consulting services for various clients?
9 A. Correct.
10 Q. What was the nature of those
11 services?
12 A. Since I had been a manufacturer
13 and then subsequently a distributor, I was in
14 a kind of an unique position of having
15 activity on both sides of the trade
16 relationship. So that my primary area of help
17 to these companies was in the area of the
18 trade relationships.
19 Q. Trade relationship --
20 A. With our customers.
21 Q. With respect to tobacco products;
22 is that correct?
23 A. Also confectionery products. As
24 wholesale distributor, I handled tobacco,
25 confectionery, grocery, beverages, health and
CLASSIC REPORTING, INC. (212) 268-2590
13
1 Strauss
2 beauty aids, et cetera. I was involved with
3 all the major packaged consumer products
4 companies in the country as I was a customer
5 of all of these companies.
6 Q. Then you went to work for
7 American Tobacco after about a year or two of
8 consulting; is that correct?
9 A. Right.
10 Q. You have given me your titles,
11 can you describe for me your responsibilities
12 at American Tobacco?
13 A. Well, my initial responsibilities
14 were kind of open-ended because they brought
15 me in to try to upgrade their trade
16 relationships. I had a concept that
17 manufacturers could do a better job with their
18 wholesale distributors if they dealt with them
19 in a more evenhanded and consistent way. And
20 I convinced American Tobacco at the time to
21 get into the deep discount business because
22 they were in the discount end of the business,
23 but there was a growing segment below that
24 category that threatened, I thought,
25 threatened to depreciate their discount
CLASSIC REPORTING, INC. (212) 268-2590
14
1 Strauss
2 segment. I said you have no baskets to catch
3 any fallout. So I formed what was called
4 American Value Alliance. That was --
5 eventually became three networks of total of
6 about 625 distributors around the country
7 handling three different deep discount
8 products. And I developed that business.
9 Within a year to 18 months that business
10 became 18 percent of American Tobacco's
11 business. It was a significant part of their
12 portfolio. At the point at which -- at the
13 point -- this American Value Alliance was a
14 growing concern, I basically turned over the
15 day-to-day operations of it to others and
16 became kind of like the mother hen for it.
17 And then they asked me to take over the
18 international operations which I did. And
19 that is where I basically was when the company
20 was taken over.
21 Q. How long were you involved in the
22 international operation at American Tobacco?
23 A. About a year and-a-half.
24 Q. What did you do with respect to
25 international operations?
CLASSIC REPORTING, INC. (212) 268-2590
15
1 Strauss
2 A. I supervised their relationships
3 around the world in terms of sales and
4 marketing the products.
5 Q. Now, several times in your
6 description of your career you used the
7 expression "trade relationships." I wonder if
8 you can explain what you mean by trade
9 relationships?
10 A. Well, the trade is, I guess is a
11 term of art in the industry that relates to
12 the customers. Both wholesale and retail
13 customers. And every consumer -- every
14 package consumer products manufacturer has a
15 direct relationship with wholesale and retail
16 customers. And there is a -- there is a
17 difference the way each customer handles those
18 relationships covering the entire spectrum of
19 such relationships. And it's a key to the
20 success of any major consumer product in this
21 country because it's a large market, very
22 diverse market, and there is no way that
23 manufacturers can deliver their products
24 directly to every retail store door so they
25 rely on other people to do that. Typically, a
CLASSIC REPORTING, INC. (212) 268-2590
16
1 Strauss
2 cigarette manufacturer may only have somewhere
3 around 2500 to 3,000 customers in this entire
4 country whereas I, as Metropolitan
5 distributors, alone had between 8- and 9,000
6 customers in the New York-New Jersey area. It
7 shows you since there are about 300,000
8 outlets in this country that sell these kind
9 of products, it's a major relationship that
10 has to be properly handled in order to be
11 successful.
12 Q. So, then, I'm correct in
13 understanding that your business experience
14 and expertise has been in the field of the
15 distribution of tobacco and other packaged
16 goods products?
17 A. That is part of it.
18 MS. LICHSTEIN: Object to the
19 form.
20 Sorry, go ahead, Mr. Strauss.
21 A. Part of my experience was in that
22 end. I was also part of the supplier side of
23 the equation. Started out that way as a
24 manufacturer in cigars. And other tobacco
25 products and subsequently after my
CLASSIC REPORTING, INC. (212) 268-2590
17
1 Strauss
2 distribution experience applied what I had
3 learned at American Tobacco.
4 Q. With respect to the consulting
5 activities that you performed since leaving
6 American Tobacco, in general, are those the
7 same kind of services that you provided in
8 your prior period of consulting prior to
9 joining American Tobacco?
10 A. In most cases, yes.
11 Q. In what sense? In what respects,
12 if any, have your consulting services changed
13 since the prior period in which you served as
14 consultant?
15 MS. LICHSTEIN: Object to the
16 form.
17 THE WITNESS: Excuse me.
18 Clarification. When you object to the
19 form --
20 MR. MASHBERG: It means that you
21 can answer.
22 MR. STERN: So we are all clear,
23 I have an option to put a different
24 question or to stand on my question and
25 in this case, I have chosen to stand on
CLASSIC REPORTING, INC. (212) 268-2590
18
1 Strauss
2 my question.
3 MR. MASHBERG: If you need a
4 clarification, you can ask for one.
5 MS. LICHSTEIN: I just want to
6 say something on the record. Mr.
7 Strauss, to the extent any of the
8 consulting arrangements that you were
9 engaged in involved confidentiality
10 agreements as to the scope of your
11 assignment between you and the entity
12 for whom you are performing consulting,
13 I think it would be appropriate for you
14 to tell Mr. Stern that so that there
15 would not be an issue here of your
16 breaching any business obligations or
17 contractual commitments that you have.
18 A. With respect to one of my major
19 clients, which is a cigar company, it
20 transcends the trade relationship. Although
21 that is a major portion of it, because of my
22 background in cigar manufacturing and tobacco
23 processing, they have also hired me to review
24 some of their practices in those areas. And
25 also in the area of succession planning.
CLASSIC REPORTING, INC. (212) 268-2590
19
1 Strauss
2 Because the reason they are relying on me is
3 because of a longstanding relationship. They
4 trust me and they can consult with me on a
5 very confidential basis.
6 With regard to my other major
7 client, part of that arrangement was in the
8 nature of a confidential arrangement. But
9 part of it was also because of my reputation
10 and experience in the distribution trade.
11 They hired me to advise them in that area.
12 Q. Sir, I'm not attempting to ask
13 about any business confidence that you have or
14 the specifics of any particular engagement
15 that you may have undertaken. I'm trying to
16 have on the record a clear statement of the
17 scope of your business experience and
18 consulting activities.
19 With the exception of the client
20 that you described in your previous answer, is
21 it accurate to say that your current
22 consulting services generally relate to the
23 manufacture and distribution of tobacco
24 products?
25 A. That is a fair description. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
20
1 Strauss
2 Q. Now, have you ever served on the
3 board of directors of any publicly held
4 company?
5 A. I have not except -- no. I'm
6 sorry. It was not public then. No. I was
7 thinking of my own company.
8 Q. Have you ever been named as a
9 party in any litigation?
10 MS. LICHSTEIN: Do you mean Mr.
11 Strauss personally?
12 MR. STERN: Yes.
13 A. No.
14 Q. To your knowledge, have you ever
15 been the subject of any investigation by the
16 S.E.C.?
17 A. No.
18 Q. By any governmental agency?
19 A. Not to my knowledge.
20 Q. Now, are you represented here
21 today by counsel?
22 A. I am.
23 Q. Can you identify this counsel?
24 A. Yes. Mr. Mashberg from Proskauer
25 and Ms. Lichstein from Milbank.
CLASSIC REPORTING, INC. (212) 268-2590
21
1 Strauss
2 Q. Other than with counsel, have you
3 discussed your deposition appearance today
4 with any other person?
5 A. No.
6 Q. Who is paying the fees of your
7 counsel?
8 A. I don't know that from personal
9 knowledge.
10 Q. Are you planning on paying the
11 fees for your counsel?
12 A. No.
13 Q. Would those fees be paid to any
14 party to this litigation, to your knowledge?
15 A. I do not have that personal --
16 direct personal knowledge.
17 Q. Do you have any understanding in
18 that respect?
19 A. I can only assume that --
20 MS. LICHSTEIN: Mr. Strauss, I'm
21 sure that Mr. Stern would agree that
22 it's your obligation here to testify
23 truthfully as to facts but not to
24 guess or assume or speculate.
25 Q. Sir, if you would look at Exhibit
CLASSIC REPORTING, INC. (212) 268-2590
22
1 Strauss
2 1, please. You'll see that there is attached
3 to the subpoena a schedule that requests
4 documents in various categories. Do you see
5 that?
6 A. Yes.
7 Q. Have you reviewed that document
8 before today?
9 A. I have.
10 Q. Have you performed a search for
11 the documents described in those categories?
12 A. Yes.
13 Q. When did you do that?
14 A. Subsequent to my receipt of the
15 subpoena.
16 Q. And did you discuss with anyone
17 prior to performing that search, the search
18 that you were intending to perform?
19 A. No.
20 Q. What did you do to undertake that
21 search? How did you -- I'll withdraw that
22 question.
23 How did you go about performing
24 that search?
25 A. All the documents asked for in
CLASSIC REPORTING, INC. (212) 268-2590
23
1 Strauss
2 the subpoena were in one file that I had
3 relative to my relationship to the RJR Nabisco
4 situation. And I simply went to that file.
5 Q. Was that a file that you
6 maintained in your home?
7 A. Correct.
8 Q. What was the label on that file?
9 A. RJR.
10 Q. Did you remove the documents in
11 that file?
12 A. I did.
13 Q. What did you do with those
14 documents?
15 A. I sent them to my attorney.
16 Q. Did you send all of those
17 documents to your attorney?
18 A. I did.
19 Q. To your knowledge, has your
20 attorney produced all of those documents to me
21 in connection with this deposition?
22 A. I don't know that.
23 Q. Do you maintain a diary or
24 calendar of personal appointments or phone
25 calls or the like?
CLASSIC REPORTING, INC. (212) 268-2590
24
1 Strauss
2 A. I have a diary. Yes.
3 Q. Do you believe your diary would
4 contain entries reflecting meetings or
5 communications concerning RJR?
6 A. Yes.
7 Q. Did you search your diary to
8 determine if any of those, any pages or
9 entries in the diary, were responsive to the
10 subpoena?
11 A. Yes.
12 Q. Did you find any?
13 A. Yes. Yes. I did.
14 Q. What did you do with those pages?
15 A. I didn't do anything with them.
16 Q. Did you discuss with anyone
17 whether or not those pages were required to be
18 produced pursuant to the subpoena?
19 A. I did not.
20 Q. Did you give consideration to
21 whether or not those pages were called for by
22 the subpoena?
23 MS. LICHSTEIN: Object to the
24 form.
25 A. I did not.
CLASSIC REPORTING, INC. (212) 268-2590
25
1 Strauss
2 Q. Do you have any objection to
3 producing those pages?
4 A. I have not.
5 Q. Do you have your diary with you?
6 A. I do not.
7 Q. Who maintained the file labeled
8 RJR that you searched with respect to the
9 subpoena?
10 A. I do.
11 Q. Do you have a secretary?
12 A. No.
13 Q. What kind of documents did you
14 place within that file?
15 A. There were all the documents that
16 were sent to me by Mr. LeBow's office relative
17 to -- there were analysts' reports, filings, I
18 guess copies of filings relative to the
19 consent solicitation. There was the
20 questionnaire that I filled out with regard to
21 becoming a nominee.
22 There was the draft of the --
23 various drafts of the indemnity agreement that
24 I received from Brooke Group with regard to
25 this matter.
CLASSIC REPORTING, INC. (212) 268-2590
26
1 Strauss
2 There was also a document
3 prepared by, I believe, by the public
4 relations firm with questions and answers with
5 regard to certain issues in this matter that I
6 might be faced with if I were called by
7 anybody.
8 That is the general nature.
9 Q. Did you receive any documents
10 relative to the RJR matter that you did not
11 put in this file?
12 A. No.
13 Q. Did you destroy any documents?
14 A. No.
15 Q. Discard or otherwise discard any
16 documents?
17 A. No.
18 Q. Did you place any documents
19 outside of your possession in any way?
20 A. No.
21 Q. Did you generate any documents
22 relating to RJR to the RJR matter?
23 A. I did not.
24 Q. Am I correct that there came a
25 time when your name was placed in nomination
CLASSIC REPORTING, INC. (212) 268-2590
27
1 Strauss
2 as a director of RJR; is that correct?
3 MS. LICHSTEIN: Object to the
4 form.
5 A. Yes.
6 Q. And your name was proposed by the
7 Brooke Group; is that correct?
8 A. Correct.
9 Q. When did you have your first
10 communication with anyone concerning the
11 subject of your being proposed as a director
12 of RJR?
13 A. I was called by a headhunter on
14 November -- I believe it was November 12th.
15 Sunday, November 12th.
16 Q. Who was the headhunter.
17 A. I believe his name was Chester
18 Hopkins.
19 Q. Is Mr. Hopkins someone that you
20 knew?
21 A. No.
22 Q. So this was a cold call?
23 A. A cold call.
24 Q. What did Mr. Hopkins say to you?
25 A. He asked me whether I was
CLASSIC REPORTING, INC. (212) 268-2590
28
1 Strauss
2 familiar with the RJR Nabisco matter in
3 relationship to Bennett LeBow. And I told him
4 that as a matter of fact at the time that he
5 called me I was sitting reading The New York
6 Times article about Mr. LeBow. So I said I
7 was very generally familiar with the matter.
8 Q. What else did Mr. Hopkins say?
9 A. He asked me whether I was willing
10 to talk with Mr. LeBow. I asked him on what
11 subject. He said he would like to talk to you
12 about this matter with regard to RJR Nabisco
13 and he's coming to New York the following day.
14 Would I be available. I told him that I
15 would.
16 Q. Did Mr. Hopkins say more
17 particularly, what Mr. LeBow wanted to talk to
18 you about?
19 A. I don't recall his being very
20 specific about it.
21 Q. Do you recall anything else that
22 was said by either you or Mr. Hopkins in this
23 conversation?
24 A. I do not.
25 Q. Do you know how it is that Mr.
CLASSIC REPORTING, INC. (212) 268-2590
29
1 Strauss
2 Hopkins happened to call you?
3 MS. LICHSTEIN: Object to the
4 form.
5 A. I have no idea.
6 Q. Had you had any prior business
7 dealings with Mr. LeBow?
8 A. None.
9 Q. Did you know him?
10 A. Only knew him by reputation.
11 Q. And what was the reputation that
12 you knew him by?
13 A. I was a competitor of his. He'd
14 been involved in the industry since I believe
15 it was something in the late '80s. When he
16 became involved with Liggett and he was -- his
17 company was, while the smallest company in the
18 industry, was still a very sizable competitor
19 particularly in the area that I was involved
20 with American Tobacco.
21 Q. That area being?
22 A. The deep discount.
23 Q. Had you had any prior, other than
24 the competitive relationship that you
25 described, had you had any prior dealings with
CLASSIC REPORTING, INC. (212) 268-2590
30
1 Strauss
2 any of the companies associated with Mr.
3 LeBow, particularly Brooke Group or Liggett?
4 A. None other than I was a customer
5 of theirs when I was a distributor.
6 Q. Again, in the ordinary course of
7 business; is that correct?
8 A. That's correct.
9 Q. Did you meet with Mr. LeBow the
10 next day?
11 A. I did.
12 Q. Where did that meeting take
13 place?
14 A. At the Carlyle Hotel.
15 Q. And how long did the meeting
16 last?
17 A. It lasted barely over an hour.
18 Q. Up until the time that you
19 received your call from Mr. Hopkins -- other
20 than The New York Times article that you were
21 reading, what information did you have, if
22 any, about Mr. LeBow's interest in RJR?
23 A. I only recall that -- I was
24 generally familiar that there was an issue and
25 I was not clear as to what the issue was at
CLASSIC REPORTING, INC. (212) 268-2590
31
1 Strauss
2 that time.
3 Q. Was your familiarity the result
4 of reading the newspapers?
5 A. Correct.
6 Q. Or general media?
7 A. Correct.
8 Q. It was not the result of
9 discussion with anyone involved in the
10 situation; is that correct?
11 A. No. No.
12 Q. To aid the record, if you could
13 let me complete my question before answering
14 it, we will not be in a position of talking
15 over one another so that the reporter can
16 accurately transcribe what we are saying.
17 (Discussion held off the record.)
18 MR. STERN: In an off-the-record
19 consultation, we realized that there is
20 possibly some confusion on the record.
21 Mr. Strauss, would you clarify your
22 last answer.
23 A. My only knowledge about the
24 matter between Mr. LeBow and RJR came from any
25 reading I had done in the newspaper.
CLASSIC REPORTING, INC. (212) 268-2590
32
1 Strauss
2 Q. Now, in between the conversation
3 with Mr. Hopkins on that Sunday, and this
4 meeting with Mr. LeBow, did you have any
5 communications with anyone concerning RJR?
6 A. I did not.
7 Q. Did you do any research
8 concerning Mr. LeBow's interest in RJR?
9 A. None.
10 Q. Who else attended this meeting at
11 the Carlyle?
12 A. Howard Lorber.
13 Q. Who is Mr. Lorber?
14 A. He's an associate of Mr. LeBow.
15 Q. Is he someone you knew prior to
16 this meeting?
17 A. Never met him. Never heard of
18 him.
19 Q. Anyone else besides yourself, Mr.
20 LeBow and Mr. Lorber?
21 A. No.
22 Q. To your best recollection, what
23 was said and by whom at this meeting?
24 A. I can only remember the general
25 flow of the meeting. I cannot tell you
CLASSIC REPORTING, INC. (212) 268-2590
33
1 Strauss
2 whether -- what was said by Lorber or by
3 LeBow. Generally, first part of the meeting
4 was just a review of my background although
5 that didn't take very long. And then both
6 LeBow and Lorber, and in what order I can't
7 remember, talked about just a general
8 situation with regard to his relationship with
9 LeBow -- LeBow's relationship with RJR and his
10 desire to initiate a consent solicitation with
11 regard to the spin-off of Nabisco. And the
12 reason we were meeting was because while no
13 effect whatsoever or it may never come to pass
14 because he was under a requirement by the
15 bylaws of RJR Nabisco to produce a slate of
16 nominees if he had ever intended to put one
17 forth by November 20th. He was doing that at
18 this point. And my name came to his attention
19 and he wondered whether I was willing to be
20 such a nominee. And it was their intention of
21 having an informal meeting with all nominees
22 later that week prior to November 20th before
23 they had to submit their list.
24 I think, if I recall correctly,
25 Mr. LeBow was the one who said to me that it
CLASSIC REPORTING, INC. (212) 268-2590
34
1 Strauss
2 would -- I should be clear about the fact that
3 this may never come to pass, this proxy
4 battle, that his primary interest was in
5 having RJR Nabisco spin off the balance of the
6 Nabisco holdings.
7 The other major topic of the
8 meeting was a discussion of the demise of
9 American Tobacco. The fact that Brown &
10 Williamson was under an FTC consent order to
11 divest itself of certain brand assets of
12 American Tobacco. And that was an issue that
13 I was familiar with and the fact that Mr.
14 LeBow and the Liggett group were involved at
15 that time in an effort to secure some of those
16 assets. The discussion was primarily centered
17 around what I knew about those assets. And
18 that part of the meeting probably consumed the
19 lengthiest part of the discussion.
20 Q. Did the discussion about the
21 American Tobacco assets have anything to do
22 with the RJR matter?
23 A. No.
24 Q. Other than what you've testified
25 about, do you remember anything further about
CLASSIC REPORTING, INC. (212) 268-2590
35
1 Strauss
2 what either Mr. LeBow or Mr. Lorber said about
3 the RJR situation?
4 A. I think I communicated to you
5 already about what I remember about that.
6 Q. What did you tell Mr. LeBow and
7 Mr. Lorber?
8 A. What did I tell him?
9 Q. What did you say at the meeting?
10 A. Well, other than the discussion
11 of my background, I discussed my background
12 similar as to what I did today although
13 probably in even briefer terms. In terms of
14 the American Tobacco issue, I told them what I
15 knew about some of the brands and also what I
16 knew about some of the people who were
17 competing to buy those brands from Brown &
18 Williamson as well as the factory, the
19 American Tobacco factory.
20 As far as the other matter was
21 concerned, I didn't comment at all. I
22 listened.
23 Q. Did you make any commitment one
24 way or the other with respect to -- let me
25 withdraw that question.
CLASSIC REPORTING, INC. (212) 268-2590
36
1 Strauss
2 At this meeting, did Mr. LeBow or
3 Mr. Lorber invite you to have your name placed
4 in nomination by the Brooke Group?
5 A. They did.
6 Q. And what did you say to that?
7 A. I said I would consider it and
8 let them know within a day or so.
9 Q. Did you discuss any compensation?
10 A. None.
11 Q. Did you discuss indemnification?
12 A. Did not.
13 Q. Did you discuss the terms of any
14 agreement that you might reach with LeBow or
15 any of his affiliates with respect to that
16 invitation of his?
17 A. Did not.
18 Q. Was anything said at the meeting
19 to suggest how it is that Mr. Hopkins came to
20 identify you as someone to be approached by
21 Mr. LeBow in this meeting?
22 A. Did not.
23 Q. Did you ask that question?
24 A. I did not.
25 Q. Was there anything said in this
CLASSIC REPORTING, INC. (212) 268-2590
37
1 Strauss
2 meeting concerning a possible sale or merger
3 of Liggett?
4 A. None.
5 Q. Was there anything said at this
6 meeting about why Mr. LeBow -- I'm going to
7 withdraw this question and put a different
8 one.
9 Did either Mr. LeBow or Mr.
10 Lorber explain to you at this meeting why they
11 favored a spin-off of Nabisco?
12 A. I cannot remember who said what.
13 But I believe in their general discussion of
14 the purpose of the meeting, indicated that
15 they felt that the spin-off of Nabisco was
16 necessary in order to free the valuation of
17 the RJR Nabisco stock from its doldrums.
18 Q. Did they discuss with you the
19 position that the company, that RJR had taken
20 with respect to a spin-off issue?
21 MR. MASHBERG: Sorry.
22 Q. With respect to a spin-off?
23 A. Yes. They said that up to now,
24 the company had indicated a desire at some
25 point in the future to spin off Nabisco but
CLASSIC REPORTING, INC. (212) 268-2590
38
1 Strauss
2 had no intention of doing so on a timely
3 basis.
4 Q. Did they say anything about why
5 the company had no intention to do so on what
6 they called a timely basis?
7 A. Yes. They indicated that
8 ostensibly, the primary reason was because of
9 the contention that the problems associated
10 with tobacco litigation was a complicated
11 factor.
12 Q. Did you make any comment on Mr.
13 LeBow's or Mr. Lorber's statements about the
14 company's reason for not proceeding with a
15 spin-off on a timely basis?
16 A. I did not.
17 Q. In the course of your career, did
18 you have any responsibilities with respect to
19 tobacco litigation?
20 MR. MASHBERG: Object to the
21 form.
22 A. Do you want to repeat it?
23 MR. STERN: I'll rephrase the
24 question.
25 Q. What did you understand Mr. LeBow
CLASSIC REPORTING, INC. (212) 268-2590
39
1 Strauss
2 to mean by tobacco litigation in the course of
3 the context of this meeting?
4 A. I took it at face value. I did
5 not interpret it.
6 Q. Did you understand it to mean
7 claims by a buyer on behalf of persons who
8 claim to have been injured by the use of
9 tobacco products?
10 A. No. I understood it to mean the
11 whole body of tobacco litigation ongoing at
12 this time.
13 Q. In your career, had you ever had
14 any responsibilities with respect to tobacco
15 litigation of the kind that you understood Mr.
16 LeBow or Mr. Lorber to be referring to?
17 A. I did not.
18 Q. Did Mr. LeBow and Mr. Lorber
19 mention Mr. Icahn at this meeting?
20 A. I believe they did, yes.
21 Q. What did they say about Mr.
22 Icahn?
23 A. Only that Mr. LeBow had entered
24 into certain agreements with Mr. Icahn
25 regarding a purchase of Nabisco stock.
CLASSIC REPORTING, INC. (212) 268-2590
40
1 Strauss
2 Q. Did they say anything more about
3 those agreements?
4 A. No.
5 Q. Did you know who Mr. Icahn is?
6 A. I knew of him. Yes.
7 Q. Who did you understand Mr. Icahn
8 to be?
9 A. He was a well-known investor and
10 venture capitalist.
11 Q. Did either Mr. Lorber or Mr.
12 LeBow at this meeting describe to you any
13 contacts that they had had with RJR on the
14 subject of a spin-off?
15 MS. LICHSTEIN: Object to the
16 form. Other than what was previously
17 discussed at this deposition.
18 MR. STERN: I'll take that.
19 A. No.
20 Q. Did they mention the name Steve
21 Goldstone to you?
22 A. No.
23 Q. Did they mention the name Mike
24 Harper to you?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
41
1 Strauss
2 Q. Did either Mr. LeBow or Mr.
3 Lorber discuss with you any efforts that LeBow
4 or the Brooke group had made to enlist the
5 support of others in this effort to promote a
6 spin-off?
7 A. No.
8 Q. Now, what happened next after
9 this meeting in connection with the RJR
10 matter?
11 MS. LICHSTEIN: May I take a --
12 off the record.
13 (Discussion held off the record.)
14 Q. Let me go back. I'm going to ask
15 you if you have ever heard of several
16 individuals.
17 Lucia Tan?
18 A. No.
19 Q. T-A-N?
20 A. No.
21 Q. Fortune Tobacco?
22 A. I've read about it.
23 Q. What have you read about Fortune?
24 A. Just read the name.
25 Q. Have you read about anything
CLASSIC REPORTING, INC. (212) 268-2590
42
1 Strauss
2 having to do with Fortune Tobacco in the
3 context of RJR?
4 A. In the article, I believe in the
5 article that was written by a reporter for The
6 New York Times it was mentioned, yes.
7 Q. What was said about Fortune
8 Tobacco, do you remember?
9 A. I don't remember.
10 Q. Michael Price?
11 A. Again, same.
12 Q. Sorry --
13 A. Same. I have read about Michael
14 Price, analyst report, and in that article I
15 believe.
16 Q. But you never discussed Mr. Price
17 with Mr. LeBow or any of his associates; is
18 that right?
19 A. I never did. No.
20 Q. Gary Black?
21 A. Gary Black I'm familiar with from
22 reading his work for years.
23 Q. Did you ever discuss RJR with Mr.
24 Black?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
43
1 Strauss
2 Q. Did you ever discuss Mr. Black
3 with Mr. LeBow or Mr. Lorber?
4 A. No.
5 Q. Gerald Levin?
6 A. Heard of him. Yes.
7 Q. Who is Mr. Levin?
8 A. CEO of Time Warner.
9 Q. Have you ever discussed Mr. Levin
10 in the context of RJR?
11 A. I have not.
12 Q. Has his name come up in any of
13 your discussions with Mr. LeBow or Mr. Lorber?
14 A. It has not.
15 Q. Brian Kirkland?
16 A. Brian Kirkland I have spoken to
17 when his faxes did not come through or
18 something like that. That is my only client.
19 Q. Who is Mr. Kirkland?
20 A. I believe he's associated with
21 the Brooke Group.
22 Q. He's someone with whom you have
23 communicated concerning RJR?
24 A. I have not communicated about
25 RJR. I have only communicated with him
CLASSIC REPORTING, INC. (212) 268-2590
44
1 Strauss
2 regarding his faxes coming through.
3 Q. These are faxes concerning the
4 RJR matter; is that correct?
5 A. Correct.
6 Q. Wassherstein Parella.
7 MS. LICHSTEIN: Is that the
8 question, has he ever heard of
9 Wassherstein Parella?
10 MR. STERN: Yes.
11 A. Yes.
12 Q. Have you had any discussion with
13 anyone concerning Wassherstein Parella and Mr.
14 LeBow's interest in RJR?
15 A. No.
16 Q. Mario Biaza?
17 A. No.
18 Q. Have you heard of him?
19 A. No.
20 Q. Tabacalera. T-A-B-A-C-A L-E-R-A.
21 Have you heard of Tabacalera?
22 A. I have dealt with Tabacalera.
23 Q. Have you had any discussion with
24 anyone concerning Tabacalera and Mr. LeBow's
25 interest in RJR?
CLASSIC REPORTING, INC. (212) 268-2590
45
1 Strauss
2 A. I have not.
3 Q. Reemtsma. Have you heard of
4 R-E-E-M-T-S-M-A?
5 A. Yes.
6 Q. Have you had any discussion with
7 anyone concerning that company and Mr. LeBow's
8 interest in RJR?
9 A. I have not.
10 Q. Intabex.
11 A. I know of Intabex.
12 Q. Have you had any discussion
13 concerning Intabex in connection with Mr.
14 LeBow's interest in RJR?
15 A. I have not.
16 Q. Have you ever heard of someone
17 named Tony Taberer?
18 A. Yes.
19 Q. Who is Mr. Taberer?
20 A. He's associated with Intabex.
21 Q. Have you had any discussion with
22 anyone concerning Mr. Taberer and Mr. LeBow's
23 interest in RJR?
24 A. I have not.
25 Q. Gary Klesch. Have you ever heard
CLASSIC REPORTING, INC. (212) 268-2590
46
1 Strauss
2 of Gary Klesch. K-L-E-S-C-H?
3 A. I have not.
4 Q. Have you had discussion with
5 anyone concerning Rothman. I believe you
6 mentioned Rothman earlier. Concerning
7 Rothman's and Mr. LeBow's interest in RJR?
8 A. I have not.
9 Q. What happened next after your
10 meeting with Mr. LeBow and Mr. Lorber
11 concerning RJR?
12 A. I received an -- I believe it was
13 a phone call saying there would be a meeting
14 at the public relations firm SARD. I forget
15 the rest of the name of the company. It's a
16 public relations firm on Third Avenue in New
17 York. I believe it was on the 15th of
18 November. I believe it was a breakfast
19 meeting.
20 Q. From whom did that phone call
21 come?
22 A. I'm not 100 percent certain. I
23 believe Mr. LeBow's secretary.
24 Q. How long after the meeting at the
25 Carlyle did you receive this phone call?
CLASSIC REPORTING, INC. (212) 268-2590
47
1 Strauss
2 A. It was the following day.
3 Q. Did the person who placed this
4 phone call to you say anything other than
5 there would be a meeting?
6 A. No.
7 Q. Did they say who would be at the
8 meeting or what the meeting would concern?
9 A. Only that it was a meeting that
10 Mr. LeBow had -- LeBow or Lorber -- had
11 indicated would take place or the proposed
12 nominees --
13 Q. What did you say to the person on
14 the other end of the phone?
15 A. I said I was available to attend
16 the meeting.
17 Q. Had you by the time you received
18 that call decided to accept the invitation to
19 join the slate?
20 A. I had not fully made up my mind
21 at that point.
22 Q. In between the meeting at the
23 Carlyle and this phone call from -- this phone
24 call concerning the meeting, had you
25 communicated with anyone concerning what you
CLASSIC REPORTING, INC. (212) 268-2590
48
1 Strauss
2 had heard from Mr. LeBow and Mr. Lorber?
3 A. Other than my wife. I
4 communicated with a close friend and my
5 attorney.
6 Q. Who was that?
7 A. Name was Everett Jassy.
8 Q. You said you communicated with a
9 close friend and attorney. I take it Mr.
10 Jassy was both a close friend and attorney?
11 A. Yes.
12 Q. Were you consulting in his
13 capacity as lawyer or friend?
14 A. Both.
15 Q. Did you ask Mr. Jassy for legal
16 advice?
17 MR. MASHBERG: I think he just
18 answered that question.
19 A. Yes.
20 Q. Other than your wife and Mr.
21 Jassy, did you communicate with anyone
22 concerning what you had been told by Mr. LeBow
23 and Mr. Lorber at Carlyle?
24 A. I did not.
25 Q. In reflecting on Mr. LeBow's
CLASSIC REPORTING, INC. (212) 268-2590
49
1 Strauss
2 invitation -- I'll ask a preliminary question.
3 Did Mr. LeBow and Mr. Lorber tell you why they
4 were inviting you as opposed to anyone else in
5 the world to join this slate?
6 A. I don't recall their giving me
7 any specific reason.
8 Q. In reflecting upon their
9 invitation, what considerations did you have
10 in mind?
11 MS. LICHSTEIN: Object to the
12 form.
13 MR. MASHBERG: Do you understand
14 the question?
15 MR. STERN: I'll put a different
16 question.
17 Q. What issues were you considering
18 in reflecting upon the invitation?
19 MS. LICHSTEIN: Object to the
20 form.
21 A. Basically, I put it in the
22 context of what my -- how my career had been
23 shifted since I left American Tobacco. And
24 since I was debating at that time whether I
25 wanted to continue in the consulting
CLASSIC REPORTING, INC. (212) 268-2590
50
1 Strauss
2 environment or whether I wanted to get
3 involved or try to get involved in another
4 organizational effort. In effect, be employed
5 by another organization. And I was in the
6 middle at that time of circulating my resume
7 for that purpose to try to help me make up my
8 mind and whether or not a commitment to become
9 a nominee, were it to in effect happen, how
10 that would fit into my view of my future.
11 Those are the kind of considerations that I
12 was debating.
13 MS. LICHSTEIN: Mr. Stern, I have
14 let this deposition go forward now for
15 an hour and 20 minutes. I have given
16 you considerable leeway in the scope of
17 your questioning. But I think much of
18 your questioning is well beyond the
19 scope permitted by the court and the
20 reasons given by your firm as to why
21 the depositions of potential director
22 nominees would be taken here. You are
23 as aware of what that order says as I.
24 I would respectfully request that we
25 stay within those parameters of that
CLASSIC REPORTING, INC. (212) 268-2590
51
1 Strauss
2 order.
3 MR. STERN: Your position is
4 noted on the record. I disagree with
5 any implication that we have gone
6 beyond the scope of permissible
7 discovery in this deposition.
8 Q. Did there come a time when you
9 decided that you would join the slate?
10 A. Yes.
11 Q. When was that?
12 A. It was after -- it was actually
13 before I attended the breakfast meeting on the
14 15th.
15 Q. Now, between the time of the
16 conversation at the Carlyle and the decision
17 to join the slate, did you have any further
18 discussions with anyone concerning Mr. LeBow's
19 proposal?
20 A. Would you repeat the question?
21 Q. Did you have any further
22 discussion with anyone concerning Mr. LeBow's
23 invitation?
24 A. In what time frame?
25 Q. The time between the Carlyle and
CLASSIC REPORTING, INC. (212) 268-2590
52
1 Strauss
2 the time you joined the slate. Decided to
3 join the slate? Other than what you've told
4 me about?
5 A. I did not.
6 Q. Did you do any research
7 concerning RJR in that time period?
8 A. No.
9 Q. Were you a shareholder of RJR?
10 A. I was.
11 Q. When did you become a shareholder
12 of RJR?
13 A. It was sometime after -- a
14 relatively short time after the RJR Nabisco
15 under the Kravis Kolbert group issued a public
16 offering.
17 Q. How many shares did you have?
18 A. Originally it was 3,000. Then it
19 was a reverse split. Now it's 600.
20 Q. All those shares were purchased
21 at the same time; is that correct?
22 A. Correct.
23 Q. Now, after this conversation with
24 a secretary or whoever it was that told you
25 about this meeting, what was your next
CLASSIC REPORTING, INC. (212) 268-2590
53
1 Strauss
2 communication with anyone concerning the
3 slate?
4 A. I attended the meeting.
5 Q. And that meeting was on November
6 15th?
7 A. Yes.
8 Q. And I think you said it was at
9 the office of the Sard firm; is that correct?
10 A. Yes.
11 Q. Had you communicated to Mr. LeBow
12 or any of his representatives prior to that
13 meeting your intention to accept his
14 invitation?
15 A. No.
16 Q. How long did the meeting last?
17 MR. MASHBERG: This is the
18 November 15th meeting?
19 MR. STERN: Yes.
20 A. I don't remember exactly. But it
21 probably ended somewhere around -- it was
22 before lunch.
23 Q. So part of the morning; is that
24 correct?
25 A. Part of the morning. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
54
1 Strauss
2 Q. Who attended this meeting?
3 A. Obviously Bennett LeBow, Mr.
4 Lorber, and I think Mr. Hirschenfeld from
5 Milbank and several other of the proposed
6 nominees. I don't believe all of them were
7 there. One I don't know. I know who wasn't
8 there because I don't believe he had been
9 named at that point was Fred Zuckerman. The
10 majority of the rest were there. And then
11 there were representatives there from the
12 public relations firm whose names I don't
13 recall.
14 Q. Prior to this meeting, did you
15 know who the other nominees would be?
16 A. No.
17 Q. Had any names been mentioned to
18 you by Mr. LeBow or Mr. Lorber or anyone else?
19 A. Other than Mr. LeBow, himself.
20 Q. What was said and by whom at this
21 meeting?
22 A. First of all, the meeting was
23 very much social in nature just where Mr.
24 LeBow asked each of the people present to
25 spend a little time introducing themselves.
CLASSIC REPORTING, INC. (212) 268-2590
55
1 Strauss
2 That took a great deal of time. After which
3 Mr. LeBow reviewed the situation as it existed
4 which I believe was the first time that I had
5 heard that he had met with Mr. Harper. All he
6 did was report that that meeting resulted in
7 his being convinced that there was no
8 intention of spinning off Nabisco in the very
9 near future which convinced him to proceed in
10 the way he was proceeding. And I think he
11 then laid out a prospective timetable as to
12 what was happening and concentrated pretty
13 much exclusively on the consent solicitation.
14 He indicated that the filing for that consent
15 solicitation had not yet been approved by the
16 S.E.C. And he expected that it would at some
17 point in the near future and that the consent
18 solicitation would probably go out sometime in
19 the January-February period.
20 He said that the shareholders
21 meeting was scheduled for April. He was very
22 clear in his intention that -- this was very
23 clear in my mind in his presentation that if
24 RJR Nabisco made a representation that it was
25 their intention to spin off Nabisco and on a
CLASSIC REPORTING, INC. (212) 268-2590
56
1 Strauss
2 timely basis, that he would drop his efforts
3 and I think his expression was "walk off into
4 the sunset." That was the general nature of
5 the presentation.
6 Q. Did Mr. LeBow say anything else
7 that you can remember?
8 A. Nothing with any specificity.
9 Q. Did anyone else speak at the
10 meeting?
11 MS. LICHSTEIN: Other than the
12 potential director nominees who went
13 around and introduced themselves.
14 Q. So far we heard about the
15 introductions and Mr. LeBow's remarks. Other
16 than those two --
17 A. I think there were -- although I
18 had no -- I asked no questions. There were a
19 few questions from the people. I do not
20 remember what they were. They were additive
21 to the discussion.
22 Q. Did Mr. Hirschenfeld speak?
23 A. I think he participated in the
24 discussion. What he said, I don't know. I
25 don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
57
1 Strauss
2 Q. Did Mr. Lorber say anything?
3 A. I think he also spoke. He also
4 participated in the discussion.
5 Q. Do you remember what he said?
6 A. No.
7 Q. Did anyone from Sard speak?
8 A. Subsequent to Mr. LeBow's
9 presentation, one of the representatives of
10 the public relations firm indicated that it
11 was -- since the slate of nominees had to be
12 submitted by November 20th, there would be a
13 release about that submission on the 20th.
14 But in view of the interest and involvement of
15 The New York Times reporter relative to the
16 article he wrote about Mr. LeBow, they would
17 have a pre-release notification by this
18 reporter probably on the previous Friday. I
19 guess that was the 17th or something like
20 that. And that it was likely if that took
21 place, that one or more of us would be
22 contacted by that reporter. And it was in
23 that regard that they submitted this list of
24 questions and answers which I have included in
25 my submission for this deposition.
CLASSIC REPORTING, INC. (212) 268-2590
58
1 Strauss
2 And this person also singled me
3 out as well as a couple of others I believe as
4 likely candidates for that call.
5 Q. Did the person say why you were
6 singled out?
7 A. For two reasons I think. One --
8 yes. One was my background in this business.
9 And secondly because I was clearly not
10 associated with Mr. LeBow.
11 Q. Did the Sard representative say
12 anything else to you on the subject of press
13 contacts?
14 A. I don't remember them saying
15 anything.
16 Q. Did this person tell you how to
17 deal with press contacts?
18 MR. MASHBERG: Deal with --
19 MS. LICHSTEIN: Press contacts.
20 A. No. No. Gave me no
21 instructions.
22 Q. Do you recall anything else being
23 said by anyone at this meeting?
24 A. Only that we would be kept
25 informed as to the progress of the matter.
CLASSIC REPORTING, INC. (212) 268-2590
59
1 Strauss
2 That Mr. LeBow office would be submitting to
3 us any thing related to the matter on an
4 ongoing basis.
5 Q. Were there any documents
6 distributed at the time at this meeting?
7 A. No. Other than the questions and
8 answers, no.
9 I'm sorry. I need to amend that.
10 That is when I got the questionnaire with
11 regard to my nominee status.
12 Q. Was anything said at this meeting
13 about the terms of any agreement that might be
14 reached between Brooke Group and members of
15 the proposed slate?
16 A. Yes. There was one other thing I
17 believe. They indicated that we would be paid
18 a fee for our involvement from then until the
19 resolution of the matter.
20 Q. Who said that?
21 A. To my best recollection, it was
22 Mr. LeBow.
23 Q. Did he say what that fee would
24 be?
25 A. I don't recall the amount that
CLASSIC REPORTING, INC. (212) 268-2590
60
1 Strauss
2 was communicated at that meeting. I do not
3 know that for sure.
4 Q. Did he indicate a range.
5 A. No. No.
6 Q. Was there anything else said
7 about the terms -- I'll ask a different
8 question.
9 Did Mr. LeBow or anyone else
10 indicate what that fee would cover?
11 MS. LICHSTEIN: Object to the
12 form.
13 A. I believe I indicated already
14 that they indicated that the fee would cover
15 our availability for this service between then
16 and when the matter was resolved.
17 Q. Was there any discussion of
18 indemnification or any other term of an
19 agreement that might be reached between the
20 Brooke Group and others in the room?
21 MS. LICHSTEIN: Objection. Asked
22 and answered.
23 A. No.
24 MR. STERN: I would like the
25 reporter to mark as Exhibit 2, a
CLASSIC REPORTING, INC. (212) 268-2590
61
1 Strauss
2 document, number on the first page PS
3 9, that was produced this morning.
4 (Document headed "Questions &
5 Answers," bearing production Nos.
6 PS 9, 10 and 11, marked Strauss
7 Exhibit 2 for identification, as
8 of this date.)
9 Q. Mr. Strauss, Exhibit 2 is before
10 you. Can you identify that document?
11 A. Yes. This is the document that
12 was presented to us at the breakfast meeting
13 at the PR firm.
14 Q. I only have that copy. I didn't
15 have the time to make extra copies which means
16 we will have to pass it back and forth to each
17 other.
18 Did anyone say anything at the
19 meeting about who prepared this document,
20 Exhibit 2?
21 A. I do not recall.
22 Q. There is handwriting on Exhibit
23 2. Can you identify the handwriting?
24 MS. LICHSTEIN: Wait a minute.
25 Can you give us a chance to get on the
CLASSIC REPORTING, INC. (212) 268-2590
62
1 Strauss
2 same page.
3 MR. MASHBERG: I have another
4 copy of the document which I'll be
5 happy to show you.
6 MR. STERN: Thank you. That will
7 be much easier.
8 MR. MASHBERG: I'm handing the
9 witness a copy of the document.
10 Q. PS 10 has handwriting on it. Is
11 that your handwriting?
12 A. Yes.
13 Q. Can you read at this time?
14 A. It says "External and internal."
15 Q. What does that refer to?
16 A. I believe that refers to someone
17 and I don't know who it was in the group
18 indicated whether there had been any
19 consideration given to who would be running
20 the company if, in fact, a proxy battle were
21 conducted and was successful.
22 Q. Were you given by anyone any
23 instructions with respect to this document at
24 the meeting?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
63
1 Strauss
2 Q. What did you understand the
3 purpose of this document to be?
4 MS. LICHSTEIN: Object to the
5 form. Asked and answered.
6 A. It was very clear to me that
7 because they had indicated we would be
8 possibly contacted by the newspaper, a
9 newspaper that this was produced and it would
10 be helpful to us in answering any questions
11 that might be asked.
12 MR. STERN: I would like to mark
13 as Exhibit 3, a document that was
14 produced this morning, first page No.
15 PS 134.
16 (Document headed "Questionnaire
17 for Nominees," bearing production
18 Nos. PS 134 through 156, marked
19 Strauss Exhibit 3 for
20 identification, as of this date.)
21 Q. Mr. Strauss, can you identify
22 that exhibit?
23 A. Yes. That was the questionnaire
24 I answered with regard to my participation as
25 a nominee.
CLASSIC REPORTING, INC. (212) 268-2590
64
1 Strauss
2 Q. Was a form of that questionnaire
3 distributed at the meeting?
4 MR. MASHBERG: November 15th
5 meeting?
6 MR. STERN: Yes.
7 A. I believe that is when I received
8 it, yes.
9 Q. I'm sorry. May I have that back
10 again?
11 A. Yes. That is my recollection.
12 Q. Sir, you note that the first page
13 of the document requests that a copy be
14 returned no later than November 14, 1995?
15 A. Right.
16 Q. Do you see that?
17 A. Yes.
18 Q. Is it still your recollection
19 that this document was distributed at the
20 meeting that you described?
21 A. Yes.
22 Q. Which I believe you said took
23 place November 15th?
24 A. That is the only time I could
25 have received it.
CLASSIC REPORTING, INC. (212) 268-2590
65
1 Strauss
2 Q. In addition to Exhibit 2 and 3,
3 were any other documents distributed at this
4 meeting?
5 A. Not to my recollection.
6 Q. Now, you indicated that Mr.
7 LeBow, in the course of his comments at the
8 meeting, made reference to a meeting that he
9 had with Mr. Harper; is that correct?
10 A. Yes.
11 Q. Do you remember anything else
12 that he said about that meeting?
13 A. There were no details as I
14 recall -- there were no details at that
15 meeting discussed.
16 Q. Did Mr. LeBow say that the
17 proposal he had made to Mr. Harper included as
18 one part of it; a merger between Liggett and
19 RJR?
20 A. I don't recall his mentioning
21 that part in this discussion at all.
22 Q. Did Mr. LeBow say at the meeting
23 that it was subsequent to his meeting -- that
24 it was as a result of his meeting with Mr.
25 Harper that he concluded that RJR would not
CLASSIC REPORTING, INC. (212) 268-2590
66
1 Strauss
2 spin off Nabisco in the near term?
3 A. That is my recollection.
4 Q. After this meeting, what happened
5 next? What did you do next in connection with
6 the RJR matter?
7 A. I believe I returned to my friend
8 and my lawyer to report about the meeting.
9 And also discuss with him -- that is when the
10 issue of indemnification came out. He
11 introduced me to one of his partners.
12 MS. LICHSTEIN: Excuse me. Under
13 the attorney-client privilege,
14 substantive communications with your
15 attorney wherein you were seeking legal
16 advice and making communications to
17 your attorney for the purposes of
18 rendering legal advice are exempt from
19 discovery under the Federal rules. I
20 would like to advise you of that in
21 framing your answer. Excuse me.
22 A. I visited my attorney and that is
23 the extent of my answer.
24 Q. After visiting your attorney,
25 what did you next do in connection with RJR?
CLASSIC REPORTING, INC. (212) 268-2590
67
1 Strauss
2 A. I called up Mr. Lorber with the
3 specific question with the intention of
4 indemnification.
5 Q. When did this call take place in
6 relation to the meeting that you had just
7 described?
8 A. After the meeting.
9 Q. The same day?
10 A. I believe it was later that day.
11 Yes.
12 Q. And what did you say to Mr.
13 Lorber and what did he say to you?
14 A. I asked him what the intention of
15 Brooke Group was with regard to
16 indemnification of the nominees. What
17 litigation might ensue. He indicated that it
18 was absolutely their intention.
19 Q. Did you say anything else to Mr.
20 Lorber?
21 A. No.
22 Q. Anything else said in the course
23 of this call?
24 A. No.
25 Q. What happened next?
CLASSIC REPORTING, INC. (212) 268-2590
68
1 Strauss
2 A. The next -- the only thing that
3 happened next was that there was a series of
4 back and forth between my attorney and Milbank
5 with regard to that indemnification.
6 Q. Did there come a time when you
7 signed an indemnification agreement?
8 A. Yes.
9 Q. Do you remember when that was?
10 A. I don't recall. I don't recall
11 when that was resolved.
12 MR. STERN: I'm going to have
13 marked as the next exhibit a document,
14 the first page of which is numbered PS
15 20.
16 (Multipage document, top
17 transmittal fax dated November
18 21, 1995, bearing production Nos.
19 PS 20 through 26, marked Strauss
20 Exhibit 4 for identification, as
21 of this date.)
22 Q. Mr. Strauss, can you identify
23 Exhibit 4?
24 A. That was one of the drafts, I'm
25 not sure which one, of the indemnification
CLASSIC REPORTING, INC. (212) 268-2590
69
1 Strauss
2 agreement.
3 Q. Did there come a time -- I
4 believe you said there came a time when you
5 signed an indemnification agreement?
6 A. I did. Yes.
7 Q. Is that correct?
8 A. Yes.
9 Q. Do you have the agreement that
10 you signed in your possession?
11 A. I've been going through my files
12 and I recognized that I do not have the final
13 copy of what I signed. My attorney has it
14 apparently.
15 Q. Is that Mr. Jassy?
16 A. Yes.
17 Q. The document that was marked as
18 Exhibit 4 has on its cover a date November 21.
19 It appears to be a draft. Can you tell me the
20 date that you signed the actual agreement?
21 A. I don't recall that date.
22 Q. What happened next? We've had
23 the meeting in the Sard office. And there was
24 communication concerning indemnification. And
25 ultimately a signed indemnification agreement.
CLASSIC REPORTING, INC. (212) 268-2590
70
1 Strauss
2 Was there anything else happening in this time
3 frame relating to RJR that you were involved
4 in?
5 A. That I -- do you want to rephrase
6 the question?
7 Q. What do you recall happening next
8 with respect to RJR?
9 MR. MASHBERG: In your
10 involvement.
11 A. The only thing that happened next
12 was that once I had signed the consent to be a
13 nominee and learned that there would be a
14 public release of that information, I advised
15 certain of my close friends and associates,
16 particularly those in the industry about the
17 fact before they would read it in the paper.
18 Q. Other than these conversations
19 with friends and associates, other than
20 advising them of the fact that you would be a
21 nominee, did you discuss the substance of the
22 consent solicitation?
23 A. I did not.
24 Q. Anything substantively done
25 concerning RJR or the spin-off proposal?
CLASSIC REPORTING, INC. (212) 268-2590
71
1 Strauss
2 A. I did not.
3 Q. What happened next?
4 A. There was a period of time when
5 we were -- when we received a lot of the
6 information that I had submitted here. The
7 fax from the Brooke Group and then the next
8 thing that happened was that we were advised
9 of a luncheon meeting that would be held, I
10 believe it was December the 14th at the Friars
11 Club at which all of the nominees would be
12 invited.
13 Q. Who advised you of this meeting?
14 A. I believe again it was Mr.
15 LeBow's secretary.
16 Q. Do you recall when she so advised
17 you?
18 A. I do not.
19 Q. When did you receive this advice?
20 A. I don't remember.
21 Q. How far in advance of the 14th
22 was it?
23 A. I don't even recall that.
24 Q. Were you told what the subject of
25 the meeting would be?
CLASSIC REPORTING, INC. (212) 268-2590
72
1 Strauss
2 A. It would be a luncheon meeting
3 for the nominees to get together and get to
4 know one another.
5 Q. Did that meeting in fact happen
6 on December 14th?
7 A. Yes I believe it was December
8 14th.
9 Q. Now, I take it that between the
10 meeting on the 15th, November 15th, and this
11 meeting on the 14th, you received information
12 by fax; is that correct?
13 A. That's correct.
14 Q. From whom did you receive the
15 information?
16 A. I believe all of it came from the
17 Brooke office in Miami.
18 Q. Do you know who at the Brooke
19 office was sending you the information?
20 A. Well, most of it I think was from
21 Brian Kirkland's office.
22 I would like to amend my answer
23 before. I think I also -- some of the
24 information was faxed from the public
25 relations firm, too.
CLASSIC REPORTING, INC. (212) 268-2590
73
1 Strauss
2 Q. Do you know why you were being
3 sent this information?
4 A. Pursuant to Mr. LeBow's
5 indication that we would be kept informed of
6 matters related to this issue.
7 Q. Were you asked to comment on any
8 of this information?
9 A. I was not.
10 Q. Did you ever hear of New Valley
11 Corporation?
12 A. Yes.
13 Q. What is New Valley Corporation?
14 A. I know very little of the company
15 other than it's a holding company owned by Mr.
16 LeBow.
17 Q. Have you had any business
18 dealings with New Valley?
19 A. I have not.
20 Q. In any of your contacts with Mr.
21 LeBow or anyone else concerning the RJR
22 matter, was there ever any discussion about
23 New Valley?
24 A. No.
25 MR. STERN: I'm going to place
CLASSIC REPORTING, INC. (212) 268-2590
74
1 Strauss
2 before the witness a collection of
3 documents that were among the documents
4 that were produced by the witness or on
5 his behalf this morning. And I would
6 like to mark the entire set as Strauss
7 Exhibit 5.
8 (Collection of documents, bearing
9 production Nos. PS 1 through 222,
10 marked Strauss Exhibit 5 for
11 identification, as of this date.)
12 Q. I place before you the collection
13 of documents that have been marked as Exhibit
14 5. I'm going to ask you, if you would, to
15 take a moment, sir, to review that collection
16 of documents and tell me if these are the
17 materials that were faxed to you from Brooke
18 Group or others associated with Mr. LeBow that
19 you have just testified about?
20 MS. LICHSTEIN: Your question is
21 including the PR group?
22 MR. STERN: Yes.
23 MR. MASHBERG: Can you represent
24 that you tried to take out from the
25 produced documents all the faxes that
CLASSIC REPORTING, INC. (212) 268-2590
75
1 Strauss
2 appeared to be in that production?
3 MR. STERN: I can with one
4 exception. There is an agreement
5 signed by Mr. Strauss that has a fax
6 line on it that I will ask him about
7 subsequently. The only other documents
8 that I took out were either documents
9 that had been previously marked today
10 or were documents that upon very
11 cursory review do not appear to have a
12 fax line.
13 I believe there is a pending
14 question.
15 (Record read)
16 A. Yes.
17 Q. Sir, having reviewed those
18 documents as briefly as I know you did, does
19 it refresh your recollection as to any other
20 communications you may have had concerning RJR
21 between the meeting on November 15th and the
22 meeting at the Friars Club about which we will
23 speak in a minute, communications that you
24 have not already testified to?
25 A. Only that it clarified that I was
CLASSIC REPORTING, INC. (212) 268-2590
76
1 Strauss
2 notified about the meeting on the 15th. On
3 actually late on the 13th. I thought it was
4 the following day.
5 Q. Just so the record is clear, what
6 in that exhibit clarified that for you?
7 A. The fax that was dated November
8 13th from Bennett LeBow, from his office,
9 saying that we have scheduled a breakfast
10 meeting of the proposed RJR directors for
11 Wednesday, November 15th at 9:A.M. at the
12 offices of Sard.
13 Q. Thank you.
14 Now, you've testified about an
15 indemnification agreement that you recall
16 signing. Did you have any other agreements
17 with anyone concerning this matter?
18 A. I have not.
19 MR. STERN: I'm going to have
20 marked as Exhibit 6 a document that was
21 produced this morning, PS 192.
22 (One-page letter dated November
23 22, 1995, bearing production No.
24 PS 192, marked Strauss Exhibit 6
25 for identification, as of this
CLASSIC REPORTING, INC. (212) 268-2590
77
1 Strauss
2 date.)
3 Q. Sir, Exhibit 6 that has been
4 placed before you, can you identify that
5 document?
6 A. Yes. There was an agreement -- a
7 letter that notified me of the amount of money
8 that would be paid for my agreeing to be a
9 nominee.
10 Q. Is that your signature on the
11 bottom of that page?
12 A. Yes. Right.
13 Q. That is an agreement between you
14 and Brooke Group with respect to the RJR
15 matter; is that correct?
16 A. Right. Yes.
17 Q. And you also recall signing an
18 indemnification agreement?
19 A. Correct.
20 Q. Do you have any other agreements
21 with Brooke Group or Mr. LeBow concerning this
22 matter?
23 A. I do not.
24 Q. I include within "agreement" any
25 oral understandings or commitments. With that
CLASSIC REPORTING, INC. (212) 268-2590
78
1 Strauss
2 clarification, is your answer the same?
3 A. My answer is the same.
4 MR. MASHBERG: Object to the
5 form.
6 Q. Have you agreed with Mr. LeBow
7 that in the event that you become a director
8 of RJR that you will vote to support a
9 spin-off proposal?
10 A. I have not.
11 Q. Let's go to the meeting on
12 December 14th. The meeting was held at the
13 Friars Club; is that correct?
14 A. Yes.
15 Q. And how long did that meeting
16 last?
17 A. As I recall, we were out of there
18 by two o'clock in the afternoon.
19 Q. And what time did it begin,
20 approximately?
21 A. It began shortly after -- I think
22 it was between -- really didn't begin until
23 about 12:30.
24 Q. And this was a luncheon meeting;
25 is that correct?
CLASSIC REPORTING, INC. (212) 268-2590
79
1 Strauss
2 A. Yes.
3 Q. Who was present?
4 A. Mr. LeBow and Mr. Lorber. Mr.
5 Hirschenfeld of Milbank. And I believe all of
6 the nominees. That was the first time I met
7 Mr. Zuckerman.
8 Q. Were there any documents
9 exchanged at the meeting?
10 A. No.
11 Q. Let me back up. Did you take any
12 notes at this meeting?
13 A. I did not.
14 Q. Did you take any notes at either
15 of the prior meetings that you told me about?
16 A. I did not.
17 Q. Did you see anyone else taking
18 any notes at any of these meetings?
19 A. I do not recall that.
20 Q. To your best recollection, what
21 was said and by whom at this meeting?
22 A. First of all, the meeting was
23 very, very largely social. It was in the
24 middle of a holiday season. There was a lot
25 of banter back and forth about nothing to do
CLASSIC REPORTING, INC. (212) 268-2590
80
1 Strauss
2 with this issue. At some point, during the
3 session, Mr. LeBow brought us up to date on
4 what was happening. And basically the only
5 thing we knew really was the fact that the
6 consent solicitation papers still had not
7 been, I believe, approved by the S.E.C., but
8 we still expected that to happen. That, I
9 believe he indicated that he would be
10 requesting the board of directors of Nabisco
11 to establish the record date for the consent
12 solicitation which I believe he indicated had
13 been requested for January 12th. And he had
14 no indication of whether or not that would be
15 accepted.
16 They informed us that the board
17 could establish its own record date. And of
18 course I think the centerpiece of the
19 discussion was the fact that I believe by
20 then, if I'm not mistaken, the indications
21 were that the CEO's position at RJR Nabisco
22 had shifted from Mr. Harper to Mr. Goldstone.
23 Then there was a discussion back
24 and forth around the table whether that change
25 changed anything with respect to the people
CLASSIC REPORTING, INC. (212) 268-2590
81
1 Strauss
2 around the table. Expected that that changed
3 anything with respect to the company's
4 willingness to spin off Nabisco on a more
5 timely basis. And the conclusion was clearly
6 that in that regard, nothing had changed.
7 That is pretty much my
8 recollection of the substance of anything
9 discussed with regard to the Nabisco matter.
10 Q. Did you say anything at the
11 meeting concerning RJR?
12 A. I don't recall saying anything or
13 asking any questions.
14 Q. Other than Mr. LeBow, did anyone
15 else from Mr. LeBow group, that is, Mr.
16 Hirschenfeld or Mr. Lorber say anything to the
17 group concerning RJR?
18 A. Well, Mr. Lorber was very much
19 involved with the conversation. He is, by
20 nature, a very ebullient person. He commented
21 on everything that was discussed.
22 Q. Do you remember anything Mr.
23 Lorber said?
24 A. No. Not specifically.
25 Q. Did Mr. Hirschenfeld say
CLASSIC REPORTING, INC. (212) 268-2590
82
1 Strauss
2 anything?
3 A. I believe he did, but I don't
4 recall what it was.
5 Q. Can you recall anything else that
6 was said at this meeting concerning RJR?
7 A. No. I think I related what I
8 recall.
9 Q. What happened next with respect
10 to RJR?
11 A. Nothing. Just a continuation of
12 the faxes and I believe in addition to faxes,
13 we had a Fed Ex on that big thing. I forget
14 when that came. I don't recall when that was
15 given to us. That big book on RJR Nabisco.
16 Q. Did you have any further
17 communications with Mr. LeBow on RJR Nabisco?
18 A. No.
19 Q. With Mr. Lorber?
20 A. No.
21 Q. With Mr. Hirschenfeld?
22 MR. MASHBERG: Other than in
23 preparation for this deposition.
24 Q. You can answer that question for
25 the moment yes or no.
CLASSIC REPORTING, INC. (212) 268-2590
83
1 Strauss
2 A. Yes. I was -- I believe I was
3 contacted by somebody with respect to the fact
4 that I might be asked to attend a deposition
5 with regard to this matter and whether or
6 not --
7 MR. MASHBERG: Don't go into the
8 details.
9 Ask him separate from the
10 deposition.
11 Q. Who contacted you?
12 A. I believe it was Mark Bell.
13 Q. Who is Mark Bell?
14 A. I think he's associated with the
15 Brooke Group. I don't know Mark Bell.
16 Q. What did Mr. Bell say to you and
17 you say to him?
18 MR. MASHBERG: One second.
19 (Discussion held off the record.)
20 A. Whether or not a subpoena for
21 such a deposition should be sent to me or
22 whether the firm of Milbank can receive it on
23 my behalf. And I indicated that it would be
24 preferable to me if the firm accepted it on my
25 behalf. Subsequently I got it anyway.
CLASSIC REPORTING, INC. (212) 268-2590
84
1 Strauss
2 Q. Other than this conversation --
3 after this conversation with Mr. Bell, what
4 was the next communication you had with anyone
5 concerning RJR?
6 A. After I received the subpoena.
7 Q. What did you do then?
8 A. I called Mr. Hirschenfeld.
9 Q. Was Mr. Hirschenfeld acting as
10 your counsel at that time?
11 A. Not my personal counsel, no. But
12 since he was counsel with regard to -- for the
13 Brooke Group in this matter, I contacted him.
14 Q. What did you two say to each
15 other?
16 MS. LICHSTEIN: One minute. I
17 would like to talk to the witness for a
18 moment about the parameters of the
19 attorney-client relationship. And I
20 will not discuss with him, Mr. Stern,
21 any matters of substance.
22 (Recess taken.)
23 MR. MASHBERG: We will assert the
24 privilege with respect to any
25 conversation between the witness and
CLASSIC REPORTING, INC. (212) 268-2590
85
1 Strauss
2 Mr. Hirschenfeld and attorneys for
3 Milbank on this matter at this point.
4 MR. STERN: Is it your position
5 that Mr. Hirschenfeld was acting as
6 counsel in the context of this
7 conversation?
8 Q. Is that your understanding, Mr.
9 Strauss?
10 A. Yes. It was clarified for me.
11 Q. Other than conversations, then,
12 with Milbank lawyers or other counsel, have
13 you had any discussions concerning RJR that
14 you have not told me about?
15 A. I have not.
16 MR. STERN: I would like to mark
17 as the next exhibit a document that was
18 produced to us this morning by the
19 witness.
20 (Multipage document, bearing
21 production Nos. PS 223 through
22 359, marked Strauss Exhibit 7 for
23 identification, as of this date.)
24 MR. STERN: The first page is PS
25 223. It's a loose document. It ends
CLASSIC REPORTING, INC. (212) 268-2590
86
1 Strauss
2 at PS 359.
3 Q. Sir, the exhibit has been placed
4 before you, can you identify that document?
5 A. Yes. This is a series of sheets
6 that were -- it's really presented to me as a
7 book by Brooke Group regarding the RJR Nabisco
8 matter. And it contains analysts reports and
9 financial statements and 10-Ks kind of
10 material.
11 Q. May I have that back, please.
12 A. Yes.
13 Q. When was that produced to you by
14 the Brooke Group?
15 A. It was in that November period.
16 I don't know when.
17 Q. Was it at a meeting?
18 A. No. This was sent to me.
19 Q. Do you know who sent it to you?
20 A. The Brooke Group.
21 Q. You don't know the individual,
22 though?
23 A. I do not remember the name on the
24 Fed Ex document.
25 Q. What was the purpose, if you
CLASSIC REPORTING, INC. (212) 268-2590
87
1 Strauss
2 know, of Brooke Group sending you this
3 document?
4 MS. LICHSTEIN: Object to the
5 form.
6 A. Background material.
7 Q. Did you discuss this document
8 with anyone?
9 A. I have not.
10 Q. I think you said that you
11 received this document in the November period.
12 Can you be any more precise as to the date?
13 A. No.
14 Q. But in any event, it was after
15 November 15th; is that correct?
16 A. Yes.
17 Q. Sir, if you can turn to Page 226
18 of this document. PS 226. Let me first ask
19 you, did you read this document when you
20 received it?
21 A. I went through the document.
22 Q. Did you also review the faxes?
23 Did you read the faxes as you received them?
24 A. Yes. Yes.
25 Q. Do you see that this page
CLASSIC REPORTING, INC. (212) 268-2590
88
1 Strauss
2 reflects a summary of a transaction. Do you
3 see that?
4 A. Yes.
5 Q. And then it goes through four
6 steps describing a transaction which includes
7 a merger. Do you see that?
8 A. Correct.
9 Q. Did you discuss this page with
10 anyone at any time?
11 A. I have not.
12 Q. Did you discuss that transaction
13 with anyone at any time?
14 A. I have not.
15 Q. Did Mr. LeBow or anyone from
16 Brooke Group ever indicate to you that were
17 you to become a director of RJR, Brooke Group
18 or Mr. LeBow might propose a business
19 combination of some kind between Liggett and
20 RJR?
21 A. They did not.
22 MR. STERN: I'm going to have
23 marked as the next exhibit, a document
24 that was produced by Mr. Strauss this
25 morning. It's PS 27 through PS 115.
CLASSIC REPORTING, INC. (212) 268-2590
89
1 Strauss
2 (Multipage document, bearing
3 production Nos. PS 27 through
4 115, marked Strauss Exhibit 8 for
5 identification, as of this date.)
6 Q. Mr. Strauss, can you identify
7 that document?
8 A. Yes. This was another document
9 that was sent to me by the Brooke Group which
10 basically presents the slate of nominees and a
11 copy of a letter that was sent by the group to
12 RJR Nabisco with regard to complying with
13 certain bylaw requirements regarding the
14 annual meeting.
15 Q. Do you know or do you remember
16 when you received that document?
17 A. In the month of December at some
18 time.
19 Q. Do you remember who sent it to
20 you?
21 A. The Brooke Group sent it to me.
22 Q. Do you know why it was sent to
23 you?
24 MS. LICHSTEIN: Object to the
25 form.
CLASSIC REPORTING, INC. (212) 268-2590
90
1 Strauss
2 A. It was sent to me again to keep
3 me informed as to what was going on.
4 Q. Did you have any discussions with
5 anyone concerning that document?
6 A. I have not.
7 Q. Sir, other than what you've
8 already testified or communications with
9 counsel, have you had communications with
10 anyone concerning the subject of RJR?
11 MS. LICHSTEIN: Object to the
12 form. In his whole life?
13 Q. Since you received the phone call
14 from Chester Hopkins?
15 A. Have I had any discussions?
16 Q. Yes. Concerning RJR?
17 A. I simply replied to questions
18 from friends about the issue. That is all.
19 Q. Other than the materials that you
20 received from Brooke Group and that you've
21 identified in the course of this deposition,
22 have you done or performed any research or
23 analysis concerning RJR since you were
24 approached by Mr. Hopkins?
25 A. I have not.
CLASSIC REPORTING, INC. (212) 268-2590
91
1 Strauss
2 Q. Have you had any communications
3 concerning RJR with the Jeffries firm?
4 A. I have not.
5 Q. Sir, if you would turn to Exhibit
6 7 for one moment. I ask you to turning to
7 Page 227.
8 Do you have any understanding of
9 who prepared the projections reflected on that
10 page?
11 A. I do not.
12 Q. Have you received any projections
13 from Brooke Group at any time concerning RJR
14 that are not among the documents that you made
15 available to us this morning?
16 A. I have not.
17 Q. Have we marked for identification
18 in the course of this deposition all the
19 documents that were in your file concerning
20 RJR?
21 MR. MASHBERG: Let me answer.
22 MR. STERN: I'll accept your
23 counselor's assistance.
24 MR. MASHBERG: We produced to
25 you, Mr. Stern, all the documents that
CLASSIC REPORTING, INC. (212) 268-2590
92
1 Strauss
2 the witness produced to Proskauer in
3 response to your subpoena.
4 MR. STERN: No documents have
5 been withheld on the ground of
6 privilege?
7 MR. MASHBERG: That's correct.
8 MR. STERN: I have no further
9 questions.
10 MS. LICHSTEIN: I have no
11 questions.
12 MR. MASHBERG: I have nothing.
13 (Time noted: 2 P.M.)
14 ______________________
15 Peter Strauss
16
17 Subscribed and sworn to
18 before me this______day
19 of_________________1996.
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
93
1
2
C E R T I F I C A T E
3
STATE OF NEW YORK )
4 ) ss.:
COUNTY OF NEW YORK )
5
I, ARTA PASCULLO, a Registered
6
Professional Reporter and Notary Public
7
within and for the State of New York, do
8
hereby certify:
9
That I reported the proceedings in
10
the within-entitled matter, and that the
11
within transcript is a true record of
12
such proceedings.
13
I further certify that I am not
14
related, by blood or marriage, to any of
15
the parties in this matter and that I am
16
in no way interested in the outcome of
17
this matter.
18
IN WITNESS WHEREOF, I have hereunto
19
set my hand this__17th__day of_January,
____ _______
20
1996.
21
__________________________
22 ARTA PASCULLO, RPR
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
94
1
2 January 17, 1996
3 I N D E X
_ _ _ _ _
4 WITNESS PAGE
_______ ____
PETER STRAUSS
5 Examination by Mr. Stern 4
6 E X H I B I T S
_ _ _ _ _ _ _ _
STRAUSS
_______
7 FOR_IDENTIFICATION PAGE
___ ______________ ____
1 Copy of subpoena 5
8
2 Document headed "Questions
9 & Answers," bearing production
Nos. PS 9, 10 and 11 61
10
3 Document headed "Questionnaire for
11 Nominees," bearing production
Nos. PS 134 through 156 63
12
4 Multipage document, top transmittal
13 fax dated November 21, 1995,
bearing production Nos. PS 20
14 through 26 68
15 5 Collection of documents, bearing
production Nos. PS 1 through 222 74
16
6 One-page letter dated November
17 22, 1995, bearing production
No. PS 192 76
18
7 Multipage document, bearing
19 production Nos. PS 223 through
359 85
20
8 Multipage document, bearing
21 production Nos. PS 27 through 115 89
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
1
==============================================================================
In The Matter Of:
RJR NABISCO HOLDINGS CORP. v.
BENNETT S. LEBOW et al.
----------------
WILLIAM H. STARBUCK
Vol. 1, January 29, 1996
----------------
CLASSIC REPORTING, INC.
13 WEST 36th STREET
NEW YORK, NY 10018
(212) 268-2590
Original File ws012996.asc, 115 Pages
Min-U-Script[Registered] File ID: 0919285540
Word Index included with this Min-U-Script[Registered]
==============================================================================
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
-------------------------------------x
:
RJR NABISCO HOLDINGS CORP., :
:
Plaintiff, :
:
-against- : 6:95CV00812
:
BENNETT S. LEBOW, BROOKE GROUP LTD., :
And CARL C. ICAHN, :
:
Defendants. :
:
-------------------------------------x
January 29, 1996
2:15 P.M.
Deposition of non-party witness,
WILLIAM H. STARBUCK, taken by plaintiff
pursuant to subpoena, at the law offices of
Wachtell Lipton Rosen & Katz, 51 West 52nd
Street, New York, New York 10019, before
Angela Castoro, a Shorthand Reporter and
Notary Public within and for the State of New
York.
CLASSIC REPORTING, INC. (212) 268-2590
2
1
2 A P P E A R A N C E S:
3 WACHTELL LIPTON ROSEN & KATZ
Attorneys for Plaintiff
4 51 West 52nd Street
New York, New York 10019
5
BY: WARREN L. STERN, ESQ.
6
7 MILBANK, TWEED, HADLEY & McCLOY
Attorneys for Defendants
8 and the Witness
1 Chase Manhattan Plaza
9 New York, New York 10005-1413
10 BY: TONI C. LICHSTEIN, ESQ.
11
PROSKAUER ROSE GOETZ & MENDELSOHN, L.L.P.
12 Attorneys for the Witness
1585 Broadway
13 New York, New York 10036-8299
14 BY: GREGG M. MASHBERG, ESQ.
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
3
1
2 IT IS HEREBY STIPULATED AND AGREED by
3 and among the attorneys for the respective parties
4 herein that the sealing, filing and certification
5 of the within deposition be waived; that such
6 deposition may be signed and sworn to before any
7 officer authorized to administer an oath, with the
8 same force and effect as if signed and sworn to
9 before a judge of this court.
10 IT IS FURTHER STIPULATED AND AGREED
11 that all objections, except as to the form, are
12 reserved to the time of the trial.
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
4
1 Starbuck
2 W I L L I A M H. S T A R B U C K,
3 having been first duly sworn by the
4 Notary Public (Angela Castoro), was
5 examined and testified as follows:
6 EXAMINATION BY MR. STERN:
7 Q. Will you state your name and
8 address for the record, please.
9 A. William H. Starbuck, 2 Washington
10 Square Village, New York, New York 10012.
11 Q. Mr. Starbuck, have you been
12 deposed before?
13 A. No.
14 Q. Mr. Starbuck, you understand that
15 my firm represents the plaintiff, RJR Nabisco
16 Holdings Corporation; is that correct?
17 A. I understand that.
18 Q. And I am going to be asking you a
19 number of questions today. You understand
20 that?
21 A. Yes.
22 Q. And you understand that you are
23 obliged to answer the questions truthfully, do
24 you understand that?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
5
1 Starbuck
2 Q. And if I ask you a question which
3 you don't understand, please tell me and I
4 will do my best to rephrase the question so
5 that we do understand one another. Is that
6 agreeable?
7 A. Okay.
8 Q. And if you need to take a break
9 for any reason to refresh yourself, please let
10 me know and I will try to accommodate you.
11 A. Okay.
12 Q. Mr. Starbuck, do you understand
13 that you are here pursuant to a subpoena which
14 was issued in the RJR litigation?
15 A. I have been told that.
16 Q. Have you seen a copy of that
17 subpoena?
18 A. No.
19 Q. Are you aware that the subpoena
20 had attached to it a document request, a list
21 of documents that you were requested to bring
22 to the deposition with you or have made
23 available in advance of the deposition? Did
24 you understand that?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
6
1 Starbuck
2 Q. I'm sorry?
3 A. No.
4 Q. Did you have any discussions with
5 anyone concerning this deposition?
6 MS. LICHSTEIN: To the extent
7 that the witness can answer that
8 question without disclosing the
9 contents of attorney-client
10 communications, he should. Other than
11 that, I would instruct him not to
12 discuss any communications with your
13 attorneys.
14 Q. For the moment, I am not looking
15 for the substance of the communications. I am
16 asking you the question whether you had
17 discussed this deposition with anyone.
18 A. Yes.
19 Q. And with whom? With whom have
20 you discussed it?
21 A. Greg Mashberg, Toni Lichstein.
22 Q. They're your counsel; is that
23 correct?
24 A. Yes.
25 Q. On each occasion when you
CLASSIC REPORTING, INC. (212) 268-2590
7
1 Starbuck
2 discussed this deposition with them, were they
3 acting as your counsel?
4 MR. MASHBERG: Objection to form.
5 You can answer.
6 A. I believe so.
7 Q. Other than with your counsel as
8 you indicated in your previous answer, have
9 you discussed this deposition with anyone?
10 A. What do you mean by have I
11 discussed this deposition? My wife knows I
12 have come here.
13 Q. Anyone other than your wife.
14 A. No.
15 Q. Did you discuss the substance of
16 your testimony with your wife?
17 A. No.
18 Q. How did you come to learn that
19 your deposition had been requested?
20 A. I don't remember. I may have
21 been sent a letter. It may have been
22 telephonic.
23 MR. STERN: I am going to mark as
24 the first exhibit, a document that was
25 produced to us on behalf Mr. Starbuck,
CLASSIC REPORTING, INC. (212) 268-2590
8
1 Starbuck
2 WS 77.
3 (Subpoena, bearing production No.
4 WS 77, marked Starbuck Exhibit 1
5 for identification, as of this
6 date.)
7 Q. Mr. Starbuck, Exhibit 1 has been
8 placed before you. Have you seen any copy of
9 that document before today?
10 A. Any copy of it? You mean have I
11 ever seen the original?
12 Q. Or any copy.
13 A. I don't remember exactly. I
14 infer only --
15 MR. MASHBERG: Don't infer.
16 Q. Have you ever seen that document
17 before?
18 A. I don't remember.
19 Q. Looking at Exhibit 1, does it
20 refresh your recollection how you learned that
21 your deposition had been requested in this
22 matter?
23 A. No, because as I told you before,
24 I don't recall whether I was telephoned or
25 received a letter.
CLASSIC REPORTING, INC. (212) 268-2590
9
1 Starbuck
2 Q. Have you ever heard of a Marc
3 Bell?
4 A. I don't recall.
5 Q. I am correct, however, that there
6 came a --
7 A. Oh, wait. Is he a lawyer for --
8 is he?
9 MS. LICHSTEIN: Mr. Starbuck --
10 A. I am not sure.
11 MS. LICHSTEIN: He is not
12 obligated to answer any of your
13 questions. If he wants to as a matter
14 of courtesy, he may but he need not.
15 MR. MASHBERG: He is going to
16 move on this very quick I am sure.
17 Q. There came a time when you
18 learned that your deposition had been
19 requested; is that correct?
20 A. Evidently, yes.
21 Q. You don't remember how you
22 learned that fact?
23 A. No.
24 Q. Do you remember what you did in
25 connection with the upcoming deposition after
CLASSIC REPORTING, INC. (212) 268-2590
10
1 Starbuck
2 learning that it would be taken?
3 A. Nothing. No, I don't remember.
4 Q. Did you do anything to prepare
5 yourself for the deposition?
6 MR. MASHBERG: Other than meet
7 with counsel?
8 Q. Other than meet with counsel.
9 A. No.
10 Q. Did you search your files?
11 A. No.
12 Q. Do you know whether anyone
13 searched your files in connection with this
14 deposition?
15 MR. MASHBERG: He doesn't mean --
16 A. The files you are talking about
17 are a pile of papers on my desk. My cleaning
18 lady might have shuffled them around. I don't
19 know what you mean by search them.
20 MS. LICHSTEIN: Can we go off the
21 record.
22 (Discussion held off the record)
23 Q. Did you have any papers in your
24 possession concerning RJR?
25 A. Sure.
CLASSIC REPORTING, INC. (212) 268-2590
11
1 Starbuck
2 Q. Did you make those papers
3 available to your counsel?
4 A. I tried to, yes.
5 Q. Who asked you to do that?
6 A. He did.
7 Q. Your counsel; is that right?
8 A. Yes.
9 Q. What did you do to comply with
10 his request?
11 A. I took the pile of papers that
12 was on my desk and I put them in an envelope
13 and a courier came and picked them up.
14 Q. What did that pile of papers
15 comprise?
16 A. I don't recall. You I believe
17 have copies of them.
18 Q. What kinds of papers were in this
19 pile?
20 A. Faxes, I think a book that we had
21 been given in November.
22 Q. I am not asking for an
23 enumeration of the documents. I have received
24 a pile of documents from your counsel. I can
25 look at it myself. What I am asking you is,
CLASSIC REPORTING, INC. (212) 268-2590
12
1 Starbuck
2 is generically what was in this pile of
3 documents that you made available to your
4 counsel? Put another way, how did you come to
5 assemble that pile of documents?
6 A. They were in a pile on my desk.
7 Q. When a document came in, what
8 determined whether it went on that pile or
9 some other pile?
10 A. If I thought it was related to
11 Brooke Group.
12 Q. Your documents related to Brooke
13 Group?
14 A. Yes.
15 Q. When did you start that pile?
16 A. In early November.
17 Q. Any document that you obtained
18 that related to Brooke Group was added to the
19 pile; is that correct?
20 A. Yes.
21 Q. Is there any other place in your
22 office or among your files where you would
23 have maintained any documents relating to RJR?
24
25 MR. MASHBERG: Object to the
CLASSIC REPORTING, INC. (212) 268-2590
13
1 Starbuck
2 form.
3 A. Yes.
4 Q. Where would that be?
5 A. Well, I was told today that I
6 left some things out of this that other people
7 had given you.
8 MR. MASHBERG: Don't repeat what
9 you have been told. Just answer his
10 questions.
11 A. Anyway, I was apparently sent a
12 letter that they were going to pay me $30,000.
13
14 MR. MASHBERG: Read me the
15 question back. Just answer his
16 question.
17 (Question read.)
18 A. I didn't intend to do anything
19 else. But what do you mean by document?
20 Q. Any letter, any written
21 communication of any kind, notes, letters.
22 A. On paper or not on paper?
23 Q. Or in computer.
24 A. I received various faxes that are
25 in my computer.
CLASSIC REPORTING, INC. (212) 268-2590
14
1 Starbuck
2 Q. You received faxes via computer;
3 is that correct?
4 A. Yes.
5 Q. Did you print out any of these
6 faxes?
7 A. Some yes and some no.
8 Q. For those that you printed out,
9 what did you with them?
10 A. I put them in the file.
11 Q. The pile that you testified
12 earlier?
13 A. Yes.
14 Q. And some that remained in your
15 computer?
16 A. Yes.
17 Q. Mr. Starbuck, this happens with
18 everyone, but you and I will have to -- you
19 will have to let me finish my answer before
20 you reply or else the transcript will become
21 horrible.
22 The computer, the documents in
23 the computer, other than faxes, is there any
24 other computerized information that is in your
25 computer but did not end up in printed form in
CLASSIC REPORTING, INC. (212) 268-2590
15
1 Starbuck
2 the pile that you described?
3 A. No.
4 Q. Who sent you these faxes?
5 A. That are in the computer?
6 Q. Yes.
7 A. It would -- either or both of
8 Brooke Group or Milbank Tweed. I am certain
9 there is something there from Milbank Tweed, I
10 am not sure but there is something from Brooke
11 Group.
12 Q. Milbank Tweed, perhaps Brooke
13 Group, anybody else that would have sent you
14 faxes?
15 A. No.
16 Q. Other than the computer, and the
17 pile that you described, are there any other
18 places in which you would expect to find
19 documents relating in any way to RJR?
20 A. Yes.
21 Q. Where would that be?
22 A. I have a W-2 form, 1099
23 miscellaneous form in my tax folder.
24 Q. In what respect would a 1099
25 miscellaneous form relate to RJR?
CLASSIC REPORTING, INC. (212) 268-2590
16
1 Starbuck
2 A. It's a statement of the payments
3 that are made to me in 1995.
4 Q. Statement of a payment who made
5 to you?
6 A. Brooke Group.
7 Q. How much was that payment?
8 A. $30,000.
9 Q. What did the payment relate to?
10 A. My availability as a nominee,
11 potential nominee, for the board of directors.
12 Q. Were you in fact paid $30,000 by
13 Brooke Group for making yourself so available?
14 A. Yes.
15 Q. When was that payment made?
16 A. Early December.
17 Q. Other than the computerized
18 facsimile information that you mentioned, the
19 pile of documents which you provided to your
20 counsel, and this 1099 form, are there any
21 other documents in your possession that relate
22 to RJR in any way?
23 A. Not that I am aware of.
24 Q. To your knowledge or
25 recollection, have you discarded any documents
CLASSIC REPORTING, INC. (212) 268-2590
17
1 Starbuck
2 relating to RJR?
3 A. Yes.
4 Q. What documents were those?
5 A. Well, I think at one point I
6 discarded a draft indemnification agreement.
7 Q. Anything else?
8 A. I don't recall anything else.
9 Q. Did you destroy any documents
10 relating to RJR?
11 MS. LICHSTEIN: Object to the
12 form.
13 MR. MASHBERG: He means ripped up
14 in little pieces.
15 MS. LICHSTEIN: Shred.
16 MR. MASHBERG: Rather than throw
17 away.
18 A. I just threw them away.
19 Q. Other than the indemnification
20 agreement, any other documents that you
21 received relating to RJR --
22 A. It would have been a draft of the
23 indemnification.
24 Q. A draft of an indemnification
25 agreement, the pile of documents, documents in
CLASSIC REPORTING, INC. (212) 268-2590
18
1 Starbuck
2 the computer -- is that the 1199 form that you
3 described?
4 A. 1099.
5 Q. 1199 is a union now that I think
6 about it.
7 The draft indemnification
8 agreement, was that an agreement between you
9 and Brooke Group or a draft of an agreement
10 between you and Brooke Group?
11 A. Yes, I guess so. It came from
12 Milbank Tweed.
13 MR. MASHBERG: Don't guess.
14 Q. That related to your availability
15 to serve on a slate of directors; is that
16 correct?
17 MS. LICHSTEIN: Object to the
18 form.
19 A. I actually don't remember what
20 the thing says.
21 Q. Did you read it before you
22 discarded it?
23 A. Yes.
24 Q. Did there come a time when you
25 signed a final version of that draft
CLASSIC REPORTING, INC. (212) 268-2590
19
1 Starbuck
2 agreement?
3 A. I signed the last page of it.
4 Q. Did you retain a copy of that
5 page?
6 A. I don't recall.
7 Q. What did you do with the last
8 page that you signed?
9 A. I think a courier came and picked
10 it up.
11 Q. Had you ever received a copy of
12 the agreement in its final form?
13 A. No. I have been wondering about
14 that.
15 Q. In connection with your having
16 agreed to make yourself available to be on a
17 slate of directors, have you given assignments
18 to any assistants?
19 MR. MASHBERG: Objection to form.
20 A. I have no assistants.
21 Q. So the answer is no; is that
22 correct?
23 MS. LICHSTEIN: Mr. Starbuck, you
24 are going to have to make an oral sound
25 because the court reporter has a
CLASSIC REPORTING, INC. (212) 268-2590
20
1 Starbuck
2 difficult time getting it.
3 A. No.
4 Q. From time to time, have you had
5 meetings with anyone concerning RJR?
6 A. Yes.
7 Q. Do you keep an appointment
8 calendar or diary that reflects a schedule of
9 your meetings?
10 A. Sort of.
11 Q. What do you mean by sort of?
12 A. Its incomplete. I leave lots of
13 things out of it.
14 Q. When you say "it," is it an
15 appointment booklet of some kind?
16 A. It's one of these little
17 computerized schedule things.
18 Q. If we call it a computerized
19 calendar, would you agree with me that that's
20 close enough for purposes of this deposition?
21 A. Yes.
22 Q. Have you reviewed that
23 computerized calendar to see if it had any
24 entries relating to RJR?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
21
1 Starbuck
2 Q. And did it?
3 A. Yes.
4 Q. Is it possible to print, to make
5 a printout of a page from that computerized
6 calendar?
7 A. I don't know. I have never done
8 that.
9 MS. LICHSTEIN: Off the record.
10 (Discussion off the record)
11 MR. STERN: Off the record Mr.
12 Starbuck's counsel agreed to have typed
13 out any entries relating to RJR and
14 that's agreeable to me.
15 Q. Let me ask you this, do you have
16 the computerized calendar with you here today?
17 A. Yes.
18 Q. To your knowledge, do you have
19 any documents regarding RJR that have not been
20 produced to us in connection with this
21 deposition?
22 A. Yes.
23 Q. What were those? Other than the
24 1099 that you described.
25 A. And the things that were in the
CLASSIC REPORTING, INC. (212) 268-2590
22
1 Starbuck
2 computer that I didn't print out.
3 Q. Anything else?
4 A. At some point yes -- to answer
5 yes or no, yes.
6 Q. What document or documents are
7 you referring to now?
8 A. I was apparently sent a letter
9 saying that they would pay me $30,000.
10 Q. Saying who would pay you $30,000?
11 A. Brooke Group.
12 Q. What happened to that letter?
13 A. I don't know. I recall seeing
14 it, I don't --
15 Q. You no longer have it; is that
16 correct?
17 A. Gregg says it is not in the pile
18 that I gave to you.
19 MR. MASHBERG: Don't say what I
20 say, okay.
21 Q. Do you remember destroying that
22 letter or discarding it?
23 A. No.
24 Q. Mr. Starbuck, I am going to ask
25 you a few questions of biographical background
CLASSIC REPORTING, INC. (212) 268-2590
23
1 Starbuck
2 at this point. Would you tell me the place
3 and date of your birth, please?
4 MS. LICHSTEIN: Object to the
5 form. Mr. Stern, we discussed ad
6 nauseam in these depositions why the
7 place of the witness's birth can have
8 no conceivable relevance other than
9 harassment.
10 MR. STERN: I will stand on the
11 question.
12 MR. MASHBERG: Just move through
13 this very quickly. I think you have a
14 lot of this information in the
15 materials.
16 You may answer his questions.
17 A. Portland, Indiana, September 20,
18 1934.
19 Q. Where did you receive your
20 secondary, post-secondary education?
21 A. Post-secondary, you mean college?
22 Q. College.
23 A. Harvard College.
24 Q. Did you receive a degree?
25 A. From Harvard College, yes.
CLASSIC REPORTING, INC. (212) 268-2590
24
1 Starbuck
2 Q. What degree is that?
3 A. Bachelor of arts and physics.
4 Q. What year was that?
5 A. 1956.
6 Q. Any further education?
7 A. Yes.
8 Q. What was that?
9 A. Master of science and industrial
10 administration, Carnegie Institute of
11 Technology, 1959. Ph.D. in industrial
12 administration Carnegie Institute of
13 technology, 1964.
14 Q. Any other degrees?
15 A. Yes. I have an honorary degree
16 1995, University of Stockholm. That's a
17 doctor of philosophy.
18 Q. Honorary Ph.D., is that what you
19 said, sir?
20 A. Yes.
21 Q. What was your first full-time
22 employment?
23 A. Are you talking about summer
24 jobs?
25 Q. Full-time employment, unless you
CLASSIC REPORTING, INC. (212) 268-2590
25
1 Starbuck
2 consider it a significant employment.
3 A. I worked full time.
4 MR. MASHBERG: Do you want to say
5 after college.
6 Q. I am not interested in your
7 college summer jobs.
8 MS. LICHSTEIN: We made
9 remarkable strides here.
10 A. Purdue University beginning in
11 1960.
12 Q. What were you doing there?
13 A. I was an instructor.
14 Q. In what field?
15 A. Well, I think they called it
16 industrial management or industrial management
17 and economics. I believe in fact it was a
18 joint appointment with industrial management
19 and economics.
20 Q. How long did you have that
21 position?
22 A. Well the job title changed but I
23 stayed at Purdue until 1967.
24 Q. Teaching industrial management
25 and economics; is that correct?
CLASSIC REPORTING, INC. (212) 268-2590
26
1 Starbuck
2 A. Yes.
3 Q. What did you do next?
4 A. I was a visiting professor at
5 Johns Hopkins University 1966 to '67 in a
6 department they called social relations. I
7 was officially at Purdue at that time.
8 Q. Were you teaching at Johns
9 Hopkins?
10 A. Yes.
11 Q. What were you teaching?
12 A. Social relations.
13 Q. What field is that? What does
14 that encompass?
15 A. They would call that probably
16 sociology at most of the universities.
17 Q. After Johns Hopkins?
18 A. Cornell University.
19 Q. Starting 1967?
20 A. Until I believe '71.
21 Q. What did you do at Cornell?
22 A. Professor of sociology and of
23 business administration. I know what the
24 field was, I don't know what the job title was
25 but I think it was business administration.
CLASSIC REPORTING, INC. (212) 268-2590
27
1 Starbuck
2 It's on my resume.
3 Q. After 1971, what did you do?
4 A. I was at London Business School
5 for one year as a visiting professor, business
6 administration.
7 Q. Then where did you go?
8 A. International Institute of
9 Management in Berlin. That was three years.
10 Q. '71 to '73; is that correct?
11 A. Yes.
12 Q. Then what?
13 A. University of Wisconsin
14 Milwaukee.
15 Q. Again teaching?
16 A. Yes.
17 Q. Management?
18 A. Yes.
19 Q. What years were you there?
20 A. Until January of '85.
21 Q. And then where did you go?
22 A. While I was at Milwaukee, I went
23 off and visited on short stints to Norway and
24 Sweden.
25 Q. Teaching as well?
CLASSIC REPORTING, INC. (212) 268-2590
28
1 Starbuck
2 A. Yes.
3 Q. What happened in 1985?
4 A. I moved to NYU.
5 Q. Again on a teaching position?
6 A. Yes.
7 Q. What subjects?
8 A. Well, the department is called
9 management. My job title is ITT professor of
10 creative management.
11 Q. You have been at NYU continuously
12 since 1985; is that correct?
13 A. Yes.
14 Q. So you are still there today; is
15 that correct?
16 A. Yes.
17 Q. Have you had any employment other
18 than this series of positions that we have
19 just described, that you just described?
20 A. What do you mean by employment?
21 Q. Have you engaged in any
22 occupation other than the occupations that you
23 described? Have you had any jobs other than
24 what you told me?
25 A. You mean compensated employment?
CLASSIC REPORTING, INC. (212) 268-2590
29
1 Starbuck
2 Q. Yes.
3 A. No. I don't think so. I mean I
4 have been on various committees and things.
5 Professional service type of things.
6 Q. Committees relating to the
7 academic fields in which you specialize; is
8 that correct?
9 A. Yes.
10 Q. Any other kinds of committees?
11 MS. LICHSTEIN: You got to say
12 the words.
13 A. No.
14 Q. Have you sat on any boards of
15 directors?
16 A. I am on the board of governors of
17 the Academy of Management.
18 Q. Academy of Management?
19 MS. LICHSTEIN: Of management.
20 Q. How long have you had that
21 position?
22 A. I have been on the board of
23 governors for four and-a-half years.
24 Q. What is the Academy of
25 Management?
CLASSIC REPORTING, INC. (212) 268-2590
30
1 Starbuck
2 A. It's a professional society
3 mainly for professors of management.
4 Q. Have you been on the board of
5 directors of any business corporation?
6 A. No.
7 Q. Do you own any RJR shares?
8 A. Yes.
9 Q. How many?
10 A. 1,000.
11 Q. When did you acquire them?
12 A. November 14 or 15, 1995.
13 Q. What led you to acquire RJR
14 shares on that date?
15 A. I expected to be a nominee for
16 the board. Possibly I should say a possible
17 nominee.
18 Q. Why do you say possibly?
19 A. Well, because it wasn't clear
20 whether I would ever be nominated.
21 Q. Is it clear today whether you
22 will be nominated?
23 A. No.
24 MS. LICHSTEIN: Object to the
25 form.
CLASSIC REPORTING, INC. (212) 268-2590
31
1 Starbuck
2 Q. What did the expectation of being
3 a possible nominee to the board have to do
4 with your decision to purchase shares at RJR?
5 A. I don't understand that question.
6 Q. Why did you purchase shares?
7 A. Because I thought I might be a
8 nominee for the board.
9 Q. Did anyone suggest to you that
10 you do so?
11 A. No.
12 Q. Why did you think that your
13 status as a possible nominee for the board was
14 a reason to purchase shares?
15 A. I was just interested.
16 Q. I take it you used your own
17 money; is that correct?
18 A. Yes.
19 Q. Do you know Carl Icahn?
20 A. No.
21 Q. Have you ever spoken with him?
22 A. No.
23 Q. Do you know Bennett LeBow?
24 A. I have met him.
25 Q. When have you met him?
CLASSIC REPORTING, INC. (212) 268-2590
32
1 Starbuck
2 A. I met him on November 14th. I
3 met him on November 16th, I met him in
4 December maybe about the 9th, it was a
5 Thursday. If we would look at the calendar we
6 could find out. December 9th? Did I say
7 December 9th?
8 Q. Yes.
9 MS. LICHSTEIN: He said December.
10 A. At the luncheon at the Friars
11 Club.
12 Q. Any other meetings with Mr.
13 LeBow?
14 A. No.
15 Q. Did you ever communicate with Mr.
16 LeBow prior to November 14th?
17 A. No. Well, he called me on
18 November 12th and asked me to meet him on the
19 14.
20 Q. November 12th was your first
21 communication of any kind with Mr. LeBow; is
22 that correct?
23 A. Yes.
24 Q. Mr. LeBow called you; is that
25 correct?
CLASSIC REPORTING, INC. (212) 268-2590
33
1 Starbuck
2 A. Yes.
3 Q. What did he say to you and you to
4 him?
5 A. He said could I come for
6 breakfast on November 14th, Tuesday morning.
7 Q. Did he tell you why he wanted to
8 see you for breakfast on the 14th?
9 A. To talk to me about my
10 possibility of being a nominee.
11 Q. Did he tell you anything else?
12 A. No.
13 Q. Did he tell you how he came to
14 call you?
15 A. No. I don't think so.
16 Q. Do you know from any source why
17 Mr. LeBow called you for that purpose?
18 A. Yes.
19 Q. Why is that?
20 MS. LICHSTEIN: Object to the
21 form.
22 Q. What reason was that?
23 A. I had a phone call from Larry
24 Lederman a few days earlier.
25 Q. Was Mr. Lederman someone that you
CLASSIC REPORTING, INC. (212) 268-2590
34
1 Starbuck
2 knew?
3 A. Yes.
4 Q. How did you know Mr. Lederman?
5 A. How did I meet him?
6 Q. How did you meet Mr. Lederman?
7 A. I did a study on Wachtell Lipton
8 Rosen & Katz.
9 Q. When did you do that study?
10 A. I am not absolutely sure. In
11 1992 approximately. He had left Wachtell at
12 that point.
13 Q. How did your study of Wachtell
14 Lipton bring you into contact with Mr.
15 Lederman?
16 A. I talked to lots of people about
17 Wachtell. He had written a book which was
18 controversial in a way.
19 Q. So I take it, am I correct, then,
20 that you contacted Mr. Lederman as part of the
21 study that you were --
22 A. Because I had read his book, yes.
23 Q. And you interviewed him in
24 connection with your study; is that correct?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
35
1 Starbuck
2 Q. When was your next encounter with
3 Mr. Lederman?
4 A. Well, he -- he has come to my
5 class each semester and talked to the students
6 about mergers and acquisition negotiations.
7 He has been there I think three times.
8 Q. I take it he started that after
9 you contacted him about your interest in
10 Wachtell Lipton; is that correct?
11 A. Yes.
12 Q. Any other connection with Mr.
13 Lederman other than your having interviewed
14 him for purposes of your study and having had
15 him as a guest, so to speak, in your classes?
16 A. I once met him at Christie's.
17 Q. I take it that was simply a
18 social encounter at an auction?
19 A. It was just an accident.
20 Q. When Mr. LeBow called you, did he
21 say Larry Lederman suggested that he give you
22 a call?
23 MS. LICHSTEIN: Objection.
24 A. I don't recall.
25 Q. Let me put a different question.
CLASSIC REPORTING, INC. (212) 268-2590
36
1 Starbuck
2 A. I don't recall what he said.
3 Q. How much before Mr. LeBow's call
4 to you did you receive a call from Larry
5 Lederman that you described?
6 A. Three or four days.
7 Q. What did Mr. Lederman say to you?
8 A. He said, do I think I might be
9 interested in being a nominee.
10 Q. Did he say anything else to you?
11 A. He said that -- after I said yes,
12 I might be interested, he said, I would have
13 to be checked out by the Brooke Group.
14 Q. Well, did he describe the
15 background for his call? Did he, for example,
16 tell you the name of the company that he had
17 in mind when he asked if you would be
18 interested in being a nominee?
19 A. He did say it was RJR Nabisco.
20 MS. LICHSTEIN: Objection to
21 form.
22 Q. He mentioned Brooke Group; is
23 that correct?
24 A. Yes, he did.
25 Q. Did he describe Brooke Group's
CLASSIC REPORTING, INC. (212) 268-2590
37
1 Starbuck
2 interest in RJR?
3 A. In that phone call, no.
4 Q Did he say anything about a
5 consent solicitation in that call?
6 A. No.
7 Q. Did he say anything about a
8 possible spin-off of RJR's food operation in
9 that call?
10 A. No. The call was very short.
11 Q. Did he mention Mr. LeBow in that
12 call?
13 A. I don't think so.
14 Q. Did you know the name Brooke
15 Group before receiving that call?
16 A. Yes.
17 Q. What did you know about Brooke
18 Group?
19 MR. MASHBERG: Object to the
20 form.
21 A. I knew that they were proposing
22 to try and spin off Nabisco.
23 Q. How did you learn that?
24 A. I read it in The Wall Street
25 Journal.
CLASSIC REPORTING, INC. (212) 268-2590
38
1 Starbuck
2 Q. Other than what you may have read
3 in the newspapers, did you have any knowledge
4 about Brooke Group prior to the time of that
5 call?
6 A. Yes.
7 Q. What knowledge was that?
8 A. What Larry Lederman had said in
9 my class.
10 Q. What did Mr. Lederman say in your
11 class?
12 A. He said that he was -- that was
13 the case he was currently working on, that he
14 gave his theory why separating Nabisco from
15 RJR might increase stock value. A student
16 asked him about contingent liability and he
17 gave the student a response saying why he did
18 not think contingent liability was a serious
19 issue.
20 Q. When was this class?
21 A. I think it may have been
22 Halloween evening, Tuesday evening.
23 Q. That was in 1995?
24 A. Yes, it would be on my records,
25 if I need it.
CLASSIC REPORTING, INC. (212) 268-2590
39
1 Starbuck
2 Q. Your recollection is that it was
3 on or about Halloween 1995; is that correct?
4 A. Yes. I believe The Wall Street
5 Journal story was the previous day on Monday
6 the 30th. That's why it came up in the class.
7 Lederman did not come to the class to discuss
8 RJR, it was just a small segment at the very
9 end of the class.
10 Q. How did the subject of RJR come
11 up in the course of Mr. Lederman's discussion
12 with your class?
13 A. I raised it because I had seen
14 The Wall Street Journal article.
15 Q. What did you say when you raised
16 it? What did you say when you raised it?
17 A. I said -- he was talking to the
18 class and it was near the end and I asked him
19 did he feel comfortable saying something to
20 the class about what he was doing in that
21 regard about that matter.
22 Q. You knew then that Mr. Lederman
23 was representing Brooke Group; is that
24 correct?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
40
1 Starbuck
2 Q. How did you know that?
3 A. I don't recall, whether it was in
4 the newspaper story or whether it's something
5 he said to me.
6 Q. What did Mr. Lederman say about
7 why the separation of Nabisco from RJR might
8 increase stockholder value?
9 A. You mean what was his theory?
10 Q. What did he say? I am not asking
11 you to read his mind. I am simply asking you
12 if you remember what he said.
13 A. He likened the situation to a
14 closed-in stock funds which he said have
15 depressed prices, that is, they sell less than
16 market value because it's difficult to
17 separate the different things that they own,
18 and that when you make them -- when you make
19 them open-ended stock funds, then the value
20 goes up. He said that earlier in his career
21 as a lawyer that one of his jobs was I believe
22 bond funds, that is what he did.
23 Q. Did he say anything else on the
24 subject of why he believed spinning off RJR
25 might increase stockholder value?
CLASSIC REPORTING, INC. (212) 268-2590
41
1 Starbuck
2 A. I don't think so.
3 Q. I think in response to an earlier
4 question, correct me if I am misstating what
5 you said, that someone in the class asked
6 about contingent liabilities?
7 A. Yes.
8 Q. What do you mean by contingent
9 liabilities?
10 MS. LICHSTEIN: Object to the
11 form.
12 Q. Who raised that question, was
13 that a student?
14 A. Yes.
15 Q. A student?
16 A. Yes.
17 Q. What did the student mean by
18 contingent liability that you know?
19 MS. LICHSTEIN: Objection.
20 A. I am not even sure they used that
21 exact phrase. They were talking about
22 possible suits by cigarette smokers.
23 Q. What did Mr. Lederman say about
24 that?
25 A. He said that he thought that was
CLASSIC REPORTING, INC. (212) 268-2590
42
1 Starbuck
2 not a serious concern.
3 Q. Why did he say that?
4 MS. LICHSTEIN: Object to the
5 form.
6 Q. It's a prompt objection. Did Mr.
7 Lederman offer reasons as for that conclusion?
8 A. Yes.
9 Q. What did he say?
10 A. He said first that in terms of
11 getting an injunction to prevent the
12 separation from taking place, no judge had
13 ever granted such an injunction against a
14 company that is profitable. And second, that
15 liability would only exist if RJR went
16 bankrupt within seven years.
17 Q. Now I take it you are not a
18 lawyer; is that correct?
19 A. That's right.
20 Q. Did you have any basis to either
21 agree or disagree with Mr. Lederman when he
22 made these comments?
23 MR. MASHBERG: Object to the
24 form.
25 MS. LICHSTEIN: Object to the
CLASSIC REPORTING, INC. (212) 268-2590
43
1 Starbuck
2 form.
3 Q. Let me put a different question.
4 Did you agree with Mr. Lederman's
5 conclusions?
6 MS. LICHSTEIN: Object to the
7 form.
8 A. I have no basis for agreeing or
9 disagreeing.
10 Q. Did Mr. Lederman say anything
11 else during this classroom presentation on the
12 subject of Brooke Group or RJR that you can
13 recall?
14 A. I don't recall what else he might
15 have said.
16 Q. Did he talk about a possible
17 proxy contest?
18 A. I don't think he explained in
19 detail what he was talking about. I do think
20 that that -- if you will check back, that's
21 the article in The Wall Street Journal, but I
22 am not positive.
23 Q. What was the scheduled theme, if
24 you will, of the class? What was the subject
25 on which Mr. Lederman was generally addressing
CLASSIC REPORTING, INC. (212) 268-2590
44
1 Starbuck
2 that evening?
3 A. Emanating negotiations in
4 general.
5 Q. Focusing on QVC Paramount?
6 A. Yes, Viacom Paramount.
7 Q. Now between sometime after that
8 classroom presentation by Mr. Lederman, you
9 received a call from Mr. Lederman; is that
10 correct?
11 A. Yes.
12 Q. Between those two events, the
13 classroom presentation and the telephone call,
14 did you have any communications with anyone
15 concerning either RJR or Brooke Group?
16 A. No.
17 Q. Did you have any prior business
18 dealings with Brooke Group?
19 A. No.
20 Q. With Leggett Corporation?
21 A No.
22 Q. New Valley?
23 A. No.
24 Q. Do you know a Mr. Resseler?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
45
1 Starbuck
2 Q. Mr. Kirkland?
3 A. No.
4 Q. Let me just make sure I remember
5 your testimony accurately. Did Mr. Lederman
6 suggest that you give consideration to joining
7 a slate that was being put together by Brooke
8 Group in his call?
9 MS. LICHSTEIN: Object to the
10 form. Asked and answered.
11 A. I think he asked me if I was
12 interested in considering it.
13 Q. What did you say to him?
14 A. I said yes.
15 Q. Did you discuss compensation?
16 A. No.
17 Q. Did you discuss indemnification?
18 A. He said I would be indemnified.
19 That's not a discussion.
20 Q. Did he say what you would be
21 indemnified for?
22 A. No, I wondered.
23 Q. Did you ask him?
24 A. No.
25 Q. Why did you tell him that you
CLASSIC REPORTING, INC. (212) 268-2590
46
1 Starbuck
2 would be interested in the possibility that he
3 was raising?
4 MR. MASHBERG: What did he tell
5 him, or why was he interested?
6 Q. Let's start with what you told
7 him. Did you tell him why you would be
8 interested?
9 A. He didn't ask.
10 Q. Did you tell him anyway?
11 A. No.
12 Q. Why did you tell him that you
13 would be interested?
14 A. Because I was interested.
15 Q. Why?
16 A. Two reasons. First, I thought
17 that separating Nabisco from RJR was a good
18 idea.
19 Actually three.
20 Secondly, I had the impression as
21 an outsider that neither RJR nor Nabisco has
22 been very well managed lately. Lately, for
23 several years.
24 Third, I was interested in seeing
25 the inside on an M&A takeover attempt.
CLASSIC REPORTING, INC. (212) 268-2590
47
1 Starbuck
2 Q. Now, prior to this discussion
3 with Mr. Lederman, had you performed any
4 financial analysis of RJR and Nabisco?
5 A. No.
6 Q. What was the basis for your
7 belief that separating Nabisco and RJR would
8 be a good idea?
9 A. My observation was just a sort of
10 casual observation of things that have
11 happened with Nabisco and RJR that led me to
12 believe neither -- well, certainly Nabisco
13 wasn't being treated very well.
14 Q. What information did you have in
15 that respect?
16 A. Just newspaper stories, magazine
17 stories, things like that, over the years.
18 Q. Did you follow RJR or Nabisco?
19 A. No. Just a casual observer.
20 Q. What was the basis for your
21 impression that RJR and Nabisco had not been
22 well managed in recent years?
23 A. I don't think I could enumerate
24 all the instances. I recall one very early
25 instance that sort of attracted my attention.
CLASSIC REPORTING, INC. (212) 268-2590
48
1 Starbuck
2 Q. What was that?
3 A. Northwest Airlines announced that
4 they would make all flights in the U.S.
5 nonsmoking flights whereupon Nabisco fired its
6 advertising agency.
7 Q. Do you remember when that was?
8 A. No, it would be easy to find out,
9 though, when Northwest made this announcement.
10 Q. What was the connection between
11 that Northwest announcement, the firing of the
12 advertising agency and your conclusion or
13 observation that the company was not well
14 managed?
15 A. If this was the best advertising
16 agency to handle Nabisco's account, what was
17 there about the ad agency's willingness to run
18 ads about nonsmoking that suddenly made it a
19 less good advertising agency to handle
20 Nabisco's account. I inferred that Nabisco is
21 being compelled to hire a second class, less
22 good advertising agency, less appropriate one,
23 not because it was a better advertising agency
24 but because the other advertising agency had
25 supported nonsmoking.
CLASSIC REPORTING, INC. (212) 268-2590
49
1 Starbuck
2 Q. What was the source of your
3 information about this incident? Was it
4 newspapers and magazines?
5 A. Yes. It was widely reported in
6 the press at the time.
7 Q. Apart from this incident that you
8 described, was there any other reason why you
9 had the impression that Nabisco and RJR --
10 A. There are a series of these
11 things.
12 Q. -- had not been well managed?
13 A. There are a series of things that
14 had gone on through the years.
15 Q. Can you remember any others?
16 A. I recall one other.
17 Q. What's that?
18 A. The transfer of debt from RJR to
19 Nabisco. $4 billion worth of debt,
20 transferred last year.
21 Q. When did you learn about that?
22 A. Last year.
23 Q. From the newspaper?
24 A. Yes.
25 Q. Any other source of information
CLASSIC REPORTING, INC. (212) 268-2590
50
1 Starbuck
2 about it?
3 A. Well, LeBow talks about it, too.
4 Q. I take it Mr. LeBow's comments on
5 that subject --
6 A. I wouldn't call it a source of
7 information.
8 Q. Mr. LeBow's comments on that
9 subject have been since October and November;
10 is that correct, at least you have heard it
11 from him since that time?
12 A. Yes.
13 Q. Going back to the time when it
14 happened, were you aware that it was
15 happening?
16 A. Yes.
17 Q. You learned this from the
18 newspapers?
19 A. Yes.
20 Q. What conclusion did you draw at
21 the time?
22 A. Well, once again, it's a story of
23 Nabisco being saddled with problems that are
24 really problems of the other parts of the
25 corporation.
CLASSIC REPORTING, INC. (212) 268-2590
51
1 Starbuck
2 Q. How was the debt restructuring an
3 instance of saddling Nabisco with problems
4 from another part of the corporation?
5 A. Well, the debt was originally
6 held at the holding company level.
7 Q. Prior to this classroom with Mr.
8 Lederman, this lecture or discussion that you
9 described that Mr. Lederman had with you and
10 your students, had you discussed RJR with
11 anyone?
12 A. Well, my wife.
13 Q. Did you discuss these business
14 issues that you were --
15 A. Yes, at various times through the
16 years.
17 Q. Is your wife an RJR shareholder?
18 A. No.
19 Q. Is she a student of management as
20 well?
21 A. She has a MBA degree but she is
22 not a student.
23 Q. From time to time you have
24 discussed RJR with your wife; is that correct?
25 A. Yes.
CLASSIC REPORTING, INC. (212) 268-2590
52
1 Starbuck
2 Q. Apart from discussions with your
3 wife, have you discussed RJR with anyone until
4 the encounter with Mr. Lederman in your class?
5 A. I may have but I don't recall.
6 Lots of people read Barbarians At The Gate.
7 Q. Did you read that book?
8 A. I read part of it, I haven't read
9 it all. It's sort of history at the moment,
10 sick history.
11 Q. Then, I think you said your third
12 reason was that you were interested in seeing
13 the inside of an M&A takeover attempt. What
14 was your reason for wishing to see the inside
15 of such an attempt?
16 A. I study these, I teach them.
17 Q. Can you remember anything else
18 about the phone call between you and Mr.
19 Lederman in which he raised the possibility of
20 your joining a slate?
21 A No, this was a very short phone
22 call.
23 Q. Did you agree to join the slate
24 in that call?
25 A. No, I agreed to consider it.
CLASSIC REPORTING, INC. (212) 268-2590
53
1 Starbuck
2 Q. After that call, what did you do,
3 if anything, in connection with RJR?
4 A. Nothing.
5 Q. How did you go about considering
6 it? Did you talk to anyone about RJR?
7 A. No.
8 Q. Did you --
9 A. I talked with Ben LeBow.
10 Q. You are about to tell me about a
11 telephone conversation that you had with Mr.
12 LeBow; is that correct, and you mentioned that
13 conversation earlier?
14 A. No, I talked with him on Tuesday
15 morning.
16 Q. When did you get the call from
17 Mr. Lederman?
18 A. Thursday or Friday I would think,
19 9th or 10th of November.
20 Q. And then a few days later Mr.
21 LeBow called you; is that correct?
22 A. On Sunday.
23 Q. Had Mr. Lederman indicated to you
24 that Mr. LeBow was going to call you?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
54
1 Starbuck
2 Q. Between the time that you hung up
3 the phone with Mr. Lederman and picked up the
4 phone with Mr. LeBow, did you do anything --
5 A. I didn't do anything.
6 Q. You did nothing in connection
7 with RJR during that time period; is that
8 correct?
9 A. Correct.
10 Q. I asked that question only
11 because we were speaking over one another.
12 A. I took it not at all seriously at
13 that point.
14 Q. Did Mr. LeBow call you at home?
15 A. Yes.
16 Q. Did he tell you that Mr. Lederman
17 had suggested that he give you a call?
18 A. I don't recall.
19 Q. What did he say?
20 A. He said he was Ben LeBow and
21 could I meet with him on Tuesday for
22 breakfast.
23 Q. Do you remember anything else in
24 that call?
25 A. I don't.
CLASSIC REPORTING, INC. (212) 268-2590
55
1 Starbuck
2 Q. Did you tell him that you would
3 meet with him for breakfast?
4 A. Yes.
5 Q. Where did you meet?
6 A. At the hotel where he stays.
7 Q. Is that the Carlyle?
8 A. Yes.
9 Q. Between the call with Mr. LeBow
10 on whenever it was, Sunday, I think you said
11 and this Tuesday meeting --
12 A. No, I did not.
13 Q. -- did you do anything in
14 connection with RJR?
15 A. I did not.
16 MR. MASHBERG: You have to wait
17 until he finishes the question. I know
18 it's frustrating.
19 Q. You met with Mr. LeBow on
20 Tuesday, correct?
21 A. Yes.
22 Q. How long did that meeting last?
23 A. Four to five minutes.
24 Q. Who was there?
25 A. Mr. LeBow and Mr. Lorber.
CLASSIC REPORTING, INC. (212) 268-2590
56
1 Starbuck
2 Q. Do you remember the date of this
3 meeting?
4 A. Tuesday the 14th.
5 Q. Did you know Mr. Lorber prior to
6 the meeting?
7 A. No.
8 Q. How was Mr. Lorber introduced to
9 you? How was he described to you when you met
10 him?
11 MR. MASHBERG: Object to the
12 form.
13 A. I think Ben LeBow said that he
14 was an old friend and close associate.
15 Q. Were you shown any documents or
16 pieces of paper at this meeting?
17 A. No.
18 Q. Did you take any notes?
19 A. No.
20 Q. Did either Mr. LeBow or Mr.
21 Lorber take any notes?
22 A. I don't know.
23 Q. Other than Mr. LeBow and Mr.
24 Lorber and yourself, was there anyone else at
25 this meeting during any part of it?
CLASSIC REPORTING, INC. (212) 268-2590
57
1 Starbuck
2 A. No.
3 Q. What was said and by whom at the
4 meeting?
5 A. I can't reconstruct this very
6 well. I only remember small fragments. Ben
7 LeBow had said he had been out last night
8 playing with the boys. I asked him what did
9 he mean. He said he had been playing poker at
10 the Waldorf. I can't reconstruct very well
11 what he said about -- I mean, he did explain
12 what is Brooke Group, what is New Valley or at
13 least that they are related organizations.
14 And he explained that they were trying to
15 persuade the stockholders of RJR Nabisco to do
16 two things: One was to change the rule about
17 who could call a meeting and the second was to
18 ask for an immediate spin-off of Nabisco.
19 And he said that the only reason
20 he was talking about nominating people for
21 board of directors was that there was a
22 requirement that they turn in such information
23 to RJR Nabisco like one -- I remember the 20
24 but I am not positive of that.
25 Q. Is there anything else?
CLASSIC REPORTING, INC. (212) 268-2590
58
1 Starbuck
2 A. I am sure there is. We talked
3 quite a lot. He asked me if there were things
4 in my background that -- nefarious -- that I
5 didn't want anybody to know about. I asked
6 him had he not had me checked out? He said he
7 had not. Mr. Lorber and I exchanged things
8 about Starbuck's coffee. And at some point, I
9 asked Lorber what his connection was with all
10 this and I think he explained he is the
11 president of New Valley. So then I asked him
12 what is New Valley. But that was after LeBow
13 had left. That is, LeBow left and Lorber and
14 I talked for 45 minutes.
15 Q. Can you remember anything else
16 about the meeting, what was said at the
17 meeting?
18 A. Probably but right this minute it
19 is not coming into my head.
20 Q. Did Mr. LeBow identify any of the
21 boys with whom he was playing poker the
22 previous night?
23 A. He did.
24 Q. Who did he name?
25 A. He named several people. I only
CLASSIC REPORTING, INC. (212) 268-2590
59
1 Starbuck
2 remember Carl Icahn's name but he did name
3 several.
4 Q. So he said to you that he had
5 been playing with Carl Icahn the previous
6 evening, playing poker with Carl Icahn, that
7 would be November 13th?
8 A. Yes.
9 Q. Did he mention Michael Price to
10 you?
11 A. No.
12 Q. Did Mr. LeBow say why he was
13 interested in having your involvement in the
14 slate that he was going to name?
15 A. No, he did not. I asked him --
16 MR. MASHBERG: Just answer the
17 questions.
18 Q. Did you ask him why he wanted to
19 consider him in the slate?
20 A. I asked him, he said he trusted
21 Lederman's judgment.
22 Q. So you asked him how it is he
23 came to you and he said he trusted Mr.
24 Lederman's judgment?
25 A. Yes, that is correct.
CLASSIC REPORTING, INC. (212) 268-2590
60
1 Starbuck
2 Q. When he asked you whether there
3 were things in your background, what did you
4 say to him?
5 A. I said I was pretty much an
6 establishment person.
7 Q. What did you mean by that?
8 A. I haven't done anything seamy, I
9 am forthcoming president of the Academy of
10 Management. Got an honorary degree, I've got
11 a fancy professorship.
12 Q. Did you discuss the pros and cons
13 of the spin-off with Nabisco at the meeting?
14 A. Yes.
15 Q. What was said on that subject?
16 A. Well, I think Ben LeBow went
17 through -- my recollection is he went through
18 his set of the numbers, which are different
19 from Lederman's set of the numbers. And he
20 talked about how many votes, what percentage
21 of the votes he would need. That is, of
22 stockholder votes.
23 Q. Did he say anything else of the
24 pros and cons of the spin-off?
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
61
1 Starbuck
2 Q. When you say Mr. LeBow went
3 through his set of the numbers, what kind of
4 numbers?
5 A. Well, if they were separated,
6 Nabisco would be worth so much and RJR would
7 be worth so much.
8 Q. Do you remember what he said
9 Nabisco would be worth if they were separated?
10 A. I do not.
11 Q. What RJR would be worth?
12 A. I don't remember either of these
13 numbers. They come up -- I could recall a
14 total in the forties.
15 Q. Did he show you any numbers, show
16 you any spreadsheets or analysis?
17 A. No.
18 Q. You said they were different from
19 Mr. Lederman's set of numbers.
20 A. Yes.
21 Q. When did Mr. Lederman provide you
22 with a set of numbers?
23 MS. LICHSTEIN: Object to the
24 form.
25 MR. MASHBERG: Object to the
CLASSIC REPORTING, INC. (212) 268-2590
62
1 Starbuck
2 form.
3 MR. STERN: I will put a
4 different question.
5 Q. What do you mean by different
6 from Mr. Lederman's set of numbers?
7 A. Well, I recall that Lederman in
8 my class said that he thought that RJR and
9 Nabisco would each be worth maybe $21 as
10 separate stocks. Thus the total price --
11 separated would be like $42. I recall that
12 Ben LeBow got a total somewhat like that but
13 allocating the prices differently between RJR
14 and Nabisco.
15 Q. So if I understand you correctly,
16 the total came out to about the same but the
17 components were valued differently?
18 A. That's right.
19 Q. What did Mr. LeBow say about the
20 percentage of votes he would need?
21 A. He thinks --
22 MR. MASHBERG: What did he say?
23 A. He said 85 percent would be
24 conclusive. Well, 85 percent of the people
25 would vote. And if he had 43 percent, he
CLASSIC REPORTING, INC. (212) 268-2590
63
1 Starbuck
2 would have a majority but he didn't think that
3 a majority was going to be persuaded. Later
4 he said 60 to 70 percent of those who vote. I
5 don't recall whether he said that on the 14th.
6 Q. Was Mr. LeBow referring to a
7 consent solicitation here or was he referring
8 to a subsequent proxy contest involving a
9 slate of directors when he was talking about
10 these percentages?
11 A. I don't recall clearly. I think
12 he is talking about the consent solicitation.
13 I am positive on the 60 to 70 percent he is
14 talking about the consent solicitation.
15 Q. What did he say about the 60 to
16 70 percent?
17 MS. LICHSTEIN: Object to the
18 form. Asked and answered.
19 A. That for the current board of
20 directors of RJR Nabisco to consider this a
21 mandate from the stockholders you would have
22 to have a very high percentage.
23 Q. Did he say whether he had been in
24 touch with any RJR shareholders?
25 A. On the 14th?
CLASSIC REPORTING, INC. (212) 268-2590
64
1 Starbuck
2 Q. Yes.
3 A. No, he did not.
4 Q. Can you remember anything else
5 that Mr. LeBow said at this meeting?
6 A. Probably but again --
7 Q. Do you remember anything that you
8 said other than --
9 MS. LICHSTEIN: Other than what
10 you already testified to.
11 Q. Other than what you testified to.
12 A. Not that I recall.
13 Q. Anything else that Mr. Lorber
14 said?
15 A. No, just our talking about
16 Starbuck's coffee.
17 Q. So the record is clear, are you
18 in any way connected with Starbuck's coffee?
19 A. I own stock in it, too. Fewer
20 shares.
21 Q. Is it simply a coincidence that
22 the Starbuck Company is named Starbuck?
23 A. Yes. When you want quality.
24 Q. Did you and Mr. LeBow or Mr.
25 Lorber reach any agreements or understanding
CLASSIC REPORTING, INC. (212) 268-2590
65
1 Starbuck
2 at this meeting?
3 A. I agreed to be a nominee.
4 Q. Did you discuss compensation at
5 the meeting?
6 A. I wouldn't call it a discussion.
7 Ben LeBow stated flatly that he was going to
8 pay me $30,000.
9 Q. What did you say to that?
10 A. I said I was less motivated by
11 money than he was, but that more was better
12 than less.
13 Q. Did you discuss indemnification?
14 A. No.
15 Q. Other than as a poker partner the
16 night before, did Mr. Icahn's name come up?
17 A. I don't think so.
18 Q. Did Mr. LeBow indicate whether he
19 was working with Mr. Icahn on this matter?
20 A. Whatever was in The Wall Street
21 Journal from far back in August.
22 Q. So you were aware of it; is that
23 correct?
24 A. Yes.
25 Q. After the meeting at the Carlyle
CLASSIC REPORTING, INC. (212) 268-2590
66
1 Starbuck
2 that you just described what, if anything, did
3 you do with respect to RJR?
4 I will put a different question.
5 A. As an individual?
6 Q. Let me put a different question.
7 Did you consult with counsel
8 before agreeing to serve on the slate?
9 A. No.
10 Q. Going back to the previous
11 question. After this meeting, what did you as
12 an individual with respect to RJR?
13 A. Nothing.
14 Q. I think you said that, earlier in
15 your deposition, that you had a meeting with
16 Mr. LeBow on November 16th; is that correct?
17 A. Yes. Yes, everyone or most
18 everyone met on the 16th.
19 Q. What is this meeting on the 16th
20 that you are describing?
21 Let me ask a different question.
22 Who was at the meeting that you are describing
23 on November 16th?
24 A. Most, but I think not all, of the
25 people on this list. I think Fred Zuckerman
CLASSIC REPORTING, INC. (212) 268-2590
67
1 Starbuck
2 was not present.
3 Q. Referring to Exhibit 1?
4 A. Yes. Rouben Chakalian, Bob
5 Frome, Harry Ridings, myself, Peter Strauss.
6 It was in the offices of Sard Verbinnen and he
7 was there. There was the woman whose name has
8 escaped me. Of course Lampen was there, yes.
9 Richard Lampen.
10 Q. Was this a meeting that included
11 among its participants other people that had
12 agreed to be on the proposed slate?
13 A. That was its purpose.
14 Q. How did you learn that that
15 meeting was going to take place?
16 A. I may have been invited to it on
17 Tuesday morning.
18 Q. By Mr. LeBow or Mr. Lorber; is
19 that correct?
20 A. Yes. I am not positive.
21 Q. Now, between your meeting at the
22 Carlyle on the 14th and this meeting on the
23 16th, did you have any communication with
24 anyone concerning RJR?
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
68
1 Starbuck
2 Q. Did you perform any analysis or
3 research concerning RJR?
4 A. No.
5 Q. Going to the meeting on the 16th,
6 was Mr. LeBow at the meeting?
7 A. Yes.
8 Q. Mr. Lorber?
9 A. Yes.
10 Q. How long did that meeting last?
11 A. Well, with everyone present, it
12 was only about 30 minutes, I think. One
13 person came about fifteen or 20 minutes late
14 and that person left after about a half an
15 hour.
16 Q. Who was that?
17 A. I believe that was Arnie Burns
18 who came late and left early.
19 Q. Did you know any of the
20 individuals on the proposed slate prior to
21 meeting them in connection with Mr. LeBow's
22 efforts?
23 A. Only LeBow and Lorber.
24 Q. Were any documents distributed at
25 this meeting?
CLASSIC REPORTING, INC. (212) 268-2590
69
1 Starbuck
2 A. Yes.
3 Q. What was distributed?
4 A. I believe you have a copy of a
5 book.
6 Q. Before I mark it, I am going to
7 show you a document and ask you, this is a
8 document that's been produced to us, WS 221
9 through 357, is that the book that was
10 distributed?
11 A. I believe so. It doesn't look
12 exactly like my copy.
13 Q. We will come back to that.
14 A. My copy had a shiny cover.
15 MR. MASHBERG: Just take a look
16 through it.
17 A. It looks familiar.
18 Q. I have shown you the document.
19 A. I recall the Bernstein Research
20 thing.
21 Q. Let me say I am showing you the
22 document exactly the way I received it from
23 counsel.
24 MR. MASHBERG: It is photocopy
25 which was a bound volume.
CLASSIC REPORTING, INC. (212) 268-2590
70
1 Starbuck
2 MS. LICHSTEIN: I think the
3 record will be clear that shiny covers
4 don't duplicate.
5 MR. STERN: Why don't we mark
6 this as Exhibit 2 and while you are
7 doing that, we will take a break.
8 (Multipage document titled "RJR
9 Nabisco Selected Documents,"
10 bearing production Nos. WS 0221
11 through WS 0317, marked Starbuck
12 Exhibit 2 for identification, as
13 of this date.)
14 Q. I am going to place Exhibit 2
15 before you, Mr. Starbuck. Is that the
16 document that was given to you at this
17 meeting?
18 A. I believe so.
19 Q. Who distributed that document?
20 MS. LICHSTEIN: Object to the
21 form.
22 A. I am not sure.
23 Q The question is who handed it
24 out.
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
71
1 Starbuck
2 Q. Did you read that document at any
3 point in time?
4 A. I read parts of it. I didn't
5 read it all.
6 Q. Was that document discussed at
7 the meeting?
8 A. No.
9 Q. Were there any other documents
10 distributed at the meeting?
11 A. I don't think so.
12 Q. Did you ever see a draft of
13 questions and answers that had been prepared
14 by someone in connection with Brooke Group or
15 Sard for use with the press should the press
16 make contacts on this matter?
17 A. I think such a document was
18 mentioned. I don't recall having had a copy
19 of that myself.
20 Q. Was the document --
21 A. But it might be that they handed
22 it to us and we looked at it and we handed it
23 back or something like that. I don't -- I am
24 pretty vague. Was such a document in my
25 papers?
CLASSIC REPORTING, INC. (212) 268-2590
72
1 Starbuck
2 Q. Mr. Starbuck, I am going to show
3 you a document that was previously marked as
4 Exhibit 2 at the deposition of Peter Strauss.
5 Do you know Mr. Peter Strauss?
6 A. Yes.
7 Q. Mr. Strauss is another member of
8 the possible slate; is that correct?
9 A. Yes.
10 Q. Is that the connection in which
11 you met Mr. Strauss?
12 A. I met him on the 16th.
13 Q. He was present at the meeting on
14 November 16th that you described?
15 A. Yes.
16 Q. I am showing you that exhibit and
17 I will ask you if you have ever seen that
18 before minus the handwriting.
19 A. I am not actually sure I have. I
20 do recall a conversation on the 16th of a
21 question-and-answer sheet. I do not recall
22 having actually had that document.
23 Q. What was said about a
24 question-and-answer sheet on the 16th and by
25 whom?
CLASSIC REPORTING, INC. (212) 268-2590
73
1 Starbuck
2 A. I don't recall.
3 Q. Was there anything said at the
4 meeting about how to deal with press
5 inquiries?
6 A. Yes.
7 Q. What was said on that subject?
8 A. I referred them to Anna Cordasco
9 or Sard Verbinnen.
10 Q. Who said that?
11 A. Anna Cordasco and Sard Verbinnen
12 and I think Ben LeBow.
13 There was talk about having two
14 people available to talk with reporters, a
15 reporter the next day.
16 Q. Who were those people?
17 A. Peter Strauss and myself.
18 Q. Did you talk with the reporter
19 the next day?
20 A. I did not.
21 Q. Did Mr. Strauss, to your
22 knowledge?
23 A. I don't know. He was quoted in
24 the paper the next week but whether it was
25 that day, I don't know.
CLASSIC REPORTING, INC. (212) 268-2590
74
1 Starbuck
2 Q. Did anyone at the meeting ask you
3 to make yourself available to the press?
4 A. Yes.
5 Q. What did you stay?
6 A. I said I would be available.
7 Q. Was that the last you heard of
8 it?
9 A. Yes.
10 Q. Was there anything said at the
11 meeting about the pros and cons of that
12 business of a Nabisco spin-off?
13 A. I don't recall for sure.
14 Q. Was there anything said at the
15 meeting about indemnification for the members
16 of the proposed slate?
17 A. I don't recall.
18 Q Can you recall any discussion at
19 the meeting other than that to which you
20 already testified?
21 A. Yes.
22 Q. What do you recall?
23 A. Ben LeBow started talking about
24 the debt that was transferred, that I
25 mentioned to you earlier, the debt that was
CLASSIC REPORTING, INC. (212) 268-2590
75
1 Starbuck
2 transferred from the holding company to
3 Nabisco.
4 Q. What did he say about that?
5 A. That it seemed to be a transfer,
6 in his opinion, was made to benefit Henry
7 Kravis personally rather than for the benefit
8 of the companies.
9 Q. Did he tell you how this transfer
10 benefited Henry Kravis personally?
11 A. Yes.
12 Q. What did he say?
13 A. That it paid off banks that it
14 had loaned money -- much of the transfer of
15 funds was used to pay off banks that had
16 loaned money that Kravis might want to use
17 again at a future date.
18 Q. Did he say anything else on this
19 question, on this debt transfer?
20 A. No.
21 Q. How did the subject of the debt
22 transfer come up?
23 A. I don't recall.
24 Q. Do you remember Mr. LeBow saying
25 anything else at the meeting on any subject?
CLASSIC REPORTING, INC. (212) 268-2590
76
1 Starbuck
2 A. No, not beyond what we already
3 discussed.
4 Q. I think you said Mr. Lorber was
5 at the meeting; is that correct?
6 A. Yes.
7 Q. Did Mr. Lorber say anything?
8 A. I don't recall. I am sure he
9 did, but I don't recall.
10 Q. Do you recall anything that was
11 discussed at the meeting other than what you
12 already described?
13 A. The meeting was mainly people
14 introducing themselves to each other. Who am
15 I, who are you.
16 Q. So the people at the meeting, did
17 you go around the table and each person
18 described themself or herself briefly?
19 A. Correct.
20 Q. How did the meeting resolve
21 itself in terms of what would happen next, was
22 there any discussion of that?
23 MR. MASHBERG: Objection to form.
24 A. What do you mean?
25 Q. Was there any discussion of what
CLASSIC REPORTING, INC. (212) 268-2590
77
1 Starbuck
2 the next step would be with respect to the
3 effort in which the people in the room were
4 engaged?
5 A. I don't know about discussion.
6 There was this discussion about was there
7 anyone there who could be available to talk to
8 a reporter. And they did not want anyone who
9 was closely affiliated with LeBow for that
10 purpose. So that's why Strauss and I became
11 alternatives. And they talked about filing
12 papers with RJR Nabisco the next week and thus
13 things would have to be signed before that
14 occasion.
15 Q. Who had that discussion, who was
16 speaking about that?
17 A. I don't know.
18 Q. Did anyone give a reason why the
19 persons available to the press should not be
20 closely affiliated with Mr. LeBow?
21 A. No.
22 Q. Can you remember anything about
23 the meeting that you haven't testified about?
24 A. I don't recall anything else.
25 Oh, yes.
CLASSIC REPORTING, INC. (212) 268-2590
78
1 Starbuck
2 Q. What is that?
3 A. Someone remarked to me that when
4 the boys played poker, they play for $10,000 a
5 card.
6 Q. Who made that remark?
7 A. I don't recall, one of the other
8 people.
9 Q. What was that person referring
10 to?
11 A. Oh, the Monday night poker games
12 at the Waldorf.
13 Q. Was that the poker game that Mr.
14 LeBow had mentioned to you at your first
15 meeting?
16 MS. LICHSTEIN: Object to the
17 form.
18 A. It's a regular weekly game, I
19 believe. That's my understanding.
20 MR. MASHBERG: Testify what was
21 said.
22 A. Yes. No, then, it was not that
23 specific.
24 Q. Mr. LeBow is a regular player in
25 the game; is that correct?
CLASSIC REPORTING, INC. (212) 268-2590
79
1 Starbuck
2 MS. LICHSTEIN: Object to the
3 form.
4 A. I don't know.
5 Q. Were any other names mentioned,
6 that is, players, names of players in this
7 game?
8 A. We only discussed earlier that
9 someone had mentioned Carl Icahn and other
10 names. LeBow had mentioned Icahn and other
11 names but I don't recall what they were.
12 Q. Can you remember anything else
13 that was said by anyone at this meeting?
14 A. No.
15 Q. What was your next communication
16 with anyone concerning RJR?
17 A. I don't recall. I exchanged many
18 faxes with people from Milbank Tweed about
19 indemnification agreements. I have given you
20 all the things I had. I have received many
21 faxes from Brooke Group, mostly newspaper
22 stories.
23 Q. Did you receive anything from
24 Brooke Group other than newspaper stories?
25 A. I don't recall.
CLASSIC REPORTING, INC. (212) 268-2590
80
1 Starbuck
2 Q. Did there come a time when you
3 completed a questionnaire concerning
4 membership on a Brooke Group --
5 A. Yes. That was pretty -- that
6 surely had to be on Friday, Monday or Tuesday
7 immediately after the 16th because they were
8 going to file these papers the next week.
9 Q. "These papers" referring to
10 papers to be sent to RJR with respect to the
11 names of the proposed slate; is that correct?
12 A. That's right.
13 Q. And you obtained that
14 questionnaire from the Milbank firm; is that
15 correct?
16 A. Yes. That was sent to me by fax
17 and is in my computer. And I completed it in
18 the computer and sent it back out of the
19 computer. So you may not have it there.
20 Q. Other than filling out the
21 questionnaire and receiving faxes from the
22 Brooke Group and from Milbank of the Milbank
23 firm, did you communicate with anyone
24 concerning RJR in this period between the
25 meeting at Sard and the next meeting which I
CLASSIC REPORTING, INC. (212) 268-2590
81
1 Starbuck
2 think you said earlier was December 9th?
3 A. I didn't communicate with anyone.
4 Q. Concerning RJR.
5 A. That's a very --
6 MS. LICHSTEIN: Why don't we say
7 did you have any conversations or
8 meetings? Could we try that, Mr.
9 Stern?
10 Q. We will try that, I will accept
11 that if that makes it easier.
12 A. No, I didn't have any business
13 meetings with anyone. I exchanged many faxes
14 or received many faxes.
15 Q. Did you perform any analysis of
16 RJR or Nabisco?
17 A. No.
18 Q. Did you consult with any lawyers?
19 A. No, I did not.
20 Q. I am not playing a trick. Other
21 than your communications with Milbank, did you
22 consult with any lawyers about the situation?
23 A. No, I did not.
24 Q. Did you discuss the terms of an
25 indemnification agreement with anyone?
CLASSIC REPORTING, INC. (212) 268-2590
82
1 Starbuck
2 A. No, I did not.
3 Q. Did you discuss with anyone
4 whether a director who approved the spin-off
5 of Nabisco should be concerned about personal
6 legal liability?
7 MS. LICHSTEIN: Objection to the
8 form.
9 MR. MASHBERG: Time frame.
10 Q. At any time.
11 A. I had a conversation with someone
12 who raised the question themselves who knew I
13 was involved in this and he said, "Should you
14 get separate liability insurance?"
15 Q. Who said that?
16 A. I don't recall. Presumably a
17 colleague at the school but I can't recall.
18 Q. What did you say?
19 A. I said this isn't an issue yet, I
20 am not a nominee yet.
21 Q. If and when you become a nominee
22 do you know whether that becomes an issue?
23 MS. LICHSTEIN: Object to the
24 form.
25 A. Let's wait and see what happens.
CLASSIC REPORTING, INC. (212) 268-2590
83
1 Starbuck
2 We're currently hoping you see that this won't
3 happen.
4 Q. What do you mean by that?
5 MR. MASHBERG: Just answer his
6 questions, okay.
7 A. Well, my understanding is that
8 the purpose of the consent solicitation is to
9 get the stockholders to persuade the current
10 board of directors to spin it off.
11 Q. And if that happens, then the
12 slate will not run; is that correct?
13 A. That's right.
14 Q. Have you committed to anyone to
15 support an immediate spin-off of Nabisco if
16 you should be elected an RJR director?
17 MS. LICHSTEIN: Object to the
18 form.
19 A. No.
20 Q. So you didn't make that
21 commitment with Mr. LeBow; is that correct?
22 MS. LICHSTEIN: Objection to the
23 form.
24 MR. MASHBERG: Asked and
25 answered.
CLASSIC REPORTING, INC. (212) 268-2590
84
1 Starbuck
2 A. No.
3 Q. Is it correct that your next
4 meeting with Mr. LeBow was December 9th?
5 A. That's the date that's in my
6 head.
7 Q. Was that a meeting at the Friars
8 Club?
9 A. Yes.
10 Q. Do you remember how you learned
11 that that meeting was to take place?
12 A. No, I don't. Well, I was
13 telephoned.
14 Q. Who told you that?
15 A. The secretary from Brooke Group
16 asked would I be available and I think they
17 asked me about more than one day. Like maybe
18 Wednesday or Thursday.
19 Q. I assume you said yes; is that
20 correct?
21 A. Yes.
22 Q. Did you go to that meeting?
23 A. Yes.
24 Q. Who was present?
25 A. Lorber, Lampen, Burns, Chakalian,
CLASSIC REPORTING, INC. (212) 268-2590
85
1 Starbuck
2 Frome.
3 MR. MASHBERG: Let the record
4 reflect that the witness is looking at
5 Exhibit 1.
6 A. I don't remember whether Barry
7 Ridings was there, Peter Strauss was there.
8 And Ben LeBow.
9 Q. Just so the record is clear, in
10 your earlier answer did you mean to refer to a
11 Rouben Chakalian as being present at the
12 meeting?
13 A. Yes.
14 Q. What was said and by whom at the
15 meeting?
16 A. Lots of things. It was a lunch,
17 it went on for an hour and-a-half.
18 Q. Was RJR discussed at the meeting?
19 A. Yes.
20 Q. And what was said on the subject
21 of RJR?
22 A. It seems like you are kind of --
23 I don't know quite how to respond to such an
24 open-ended statement.
25 Q. Were any documents distributed at
CLASSIC REPORTING, INC. (212) 268-2590
86
1 Starbuck
2 the meeting?
3 A. I don't recall that.
4 Q. Did anyone take notes at the
5 meeting?
6 A. No, I don't think so. I don't
7 remember anyone.
8 Q. You didn't take notes?
9 A. No.
10 Q. Did Mr. LeBow address the group?
11 A. I wouldn't say addressed the
12 group, we were sitting around the table and he
13 spoke as well as others.
14 Q. Do you remember what Mr. LeBow
15 said about RJR?
16 A. Well, I think he mostly talked
17 about what he was doing rather than about RJR.
18 He said that they were about to -- that they
19 were planning to mail out their consent
20 solicitation at the end of December so that
21 people would receive it soon after the New
22 Year. That he was planning to visit the large
23 stockholders himself. That they had different
24 people who were going to see different levels
25 of stockholders.
CLASSIC REPORTING, INC. (212) 268-2590
87
1 Starbuck
2 Q. Did he mention any shareholders
3 he was planning to visit?
4 A. By name, no.
5 Q Did he ask any of the people
6 present to contact anyone?
7 A. No, he did not.
8 Q. Contact anyone concerning RJR.
9 A. I don't recall that he did.
10 Q. Did Mr. LeBow say anything else
11 at this meeting?
12 A. I am sure he did. Yes.
13 Q. To the extent that you recall.
14 A. I am sure he did.
15 Q Can you recall anything else that
16 Mr. LeBow said concerning RJR?
17 A. Yes.
18 Q. What else did he say on that
19 subject?
20 A. He said he was uncomfortable
21 talking to the large stockholders and not
22 mentioning his hope of possibly merging
23 Liggett with RJR.
24 Q. Had Mr. LeBow ever mentioned to
25 you prior to this occasion a hope of merging
CLASSIC REPORTING, INC. (212) 268-2590
88
1 Starbuck
2 Liggett with RJR?
3 MS. LICHSTEIN: Object to the
4 form.
5 A. Yes.
6 Q. When did he raise that with you?
7 A. When we ate breakfast on the 14th
8 of November.
9 Q. What did Mr. LeBow say on that
10 subject at that time?
11 MS. LICHSTEIN: Object to the
12 form.
13 A. I regret to say I am pretty
14 vague. I don't recall whether he said that he
15 had once had that thought or whether he said
16 that he still had that thought. I just recall
17 that he said that that idea had been
18 someplace.
19 Q. Did he say why -- referring to
20 the first discussion I think on November
21 14th -- did he say why he had that thought?
22 A. No, he did not.
23 Q. Did he say anything more that you
24 can recall in November?
25 A. November 14th?
CLASSIC REPORTING, INC. (212) 268-2590
89
1 Starbuck
2 Q. Yes.
3 A. No, I only have the vaguest
4 recollection. I am trying to remember what he
5 said and I cannot.
6 Q. Moving forward to December 9th,
7 do you remember anything else at the December
8 9th meeting that he said on the subject of a
9 possible merger between Liggett and RJR?
10 A. Will, when he raised this and
11 said he was uncomfortable, Lorber pointed out
12 to him that if the consent solicitation
13 succeeded that this would not be an issue and
14 LeBow said yes, you are right.
15 Q. Did Mr. Lorber say anything else
16 on that subject?
17 A. No, he just said that basic -- I
18 mean, I am putting words in his mouth but he
19 basically said to LeBow you are spinning your
20 wheels about a thing that isn't an issue now.
21 Q. Did you have any understanding as
22 to why Mr. Lorber believed that a possible
23 Liggett merger would not be an issue if the
24 consent solicitation succeeded?
25 MR. MASHBERG: Don't speculate,
CLASSIC REPORTING, INC. (212) 268-2590
90
1 Starbuck
2 just answer his question with facts.
3 A. Both LeBow and Lorber made
4 statements indicating that they thought there
5 was a good chance that a very high percentage
6 of the current stockholders might vote for an
7 immediate spin-off. And hence that the
8 current board might be motivated to do
9 something. Let us say they were optimistic.
10 Q. How would the event that you just
11 described affect a possible Liggett/RJR
12 merger, to your understanding?
13 MS. LICHSTEIN: Object to form.
14 A. I don't know.
15 Q. Did Mr. LeBow --
16 MR. MASHBERG: Wait. Are you
17 done with your answer?
18 THE WITNESS: Yes.
19 Q. Did Mr. LeBow say at any time in
20 your presence that he was considering pursuing
21 a business combination of some kind between
22 RJR and Liggett?
23 MR. MASHBERG: Object to the
24 form.
25 You can answer.
CLASSIC REPORTING, INC. (212) 268-2590
91
1 Starbuck
2 A. Back on November 14th, he either
3 said he had been or that he still was. And I
4 think on December 9th he implied that he still
5 was but that that was not an immediate issue.
6 Q. Do you remember anything else
7 that was said on the subject of RJR at this
8 December 9th meeting?
9 A. I think somebody said that RJR
10 had filed suit.
11 Q. Who said that?
12 A. Possibly Lorber but I am not
13 certain.
14 Q. Do you remember what was said on
15 the subject of an RJR suit with --
16 A. What I recall was that someone
17 representing RJR had gone to people in the Far
18 East and asked them for depositions.
19 Q. Do you remember that being said
20 at the meeting?
21 A. That's what I recall.
22 Q. Who said that?
23 A. Possibly Lorber. And LeBow said
24 oh, that must be people I talked with.
25 Q. Did Mr. LeBow say who he had
CLASSIC REPORTING, INC. (212) 268-2590
92
1 Starbuck
2 spoken to?
3 A. I think one or two specific names
4 were mentioned. I recall the Philippines and
5 Hong Kong name mentioned.
6 Q. Was Lucio Tan mentioned?
7 A. That's the one name that I
8 vaguely recall.
9 That in the Philippines?
10 Q. Did Mr. LeBow or Mr. Lorber
11 mention Lucio Tan?
12 A. One of them.
13 Q. Did either Mr. LeBow or Mr.
14 Lorber mention that Mr. Tan was located in the
15 Philippines.
16 A. That's my recollection.
17 Q. Did either Mr. LeBow or Mr.
18 Lorber mention that Mr. LeBow had been in
19 contact with someone in Hong Kong?
20 A. That's what I recall.
21 Q. Did either gentlemen mention the
22 name of the person in Hong Kong?
23 A. Possibly, I don't recall.
24 Q. Did either Mr. LeBow or Mr.
25 Lorber mention why they had, LeBow, had been
CLASSIC REPORTING, INC. (212) 268-2590
93
1 Starbuck
2 in contact with Mr. Tan?
3 A. Only that it rejected RJR.
4 Q. Did Mr. LeBow or Mr. Lorber say
5 why LeBow had been contact with a gentleman in
6 Hong Kong?
7 A. No, again the same answer.
8 Q. I think in an earlier answer you
9 said something about people seeking
10 depositions from people in the Philippines or
11 Hong Kong; did I remember that correctly?
12 A. Something like that is what I
13 recall, yes. You need to understand this is a
14 very vague recollection.
15 MR. MASHBERG: Just answer the
16 question.
17 Q. Did that comment come from either
18 Mr. LeBow or Mr. Lorber?
19 A. I believe so.
20 Q. Do you remember which one?
21 A. No.
22 Q. Did the speaker say how he came
23 to know about that?
24 A. No, I don't think so.
25 Q. Was anything else said on the
CLASSIC REPORTING, INC. (212) 268-2590
94
1 Starbuck
2 subject of contacts in the Far East?
3 A. I don't recall anything else.
4 Q. Was this the first time you had
5 heard the name Lucio Tan?
6 A. Yes.
7 Q. Do you remember anything else
8 that either Mr. LeBow or Mr. Lorber said at
9 the Friars Club meeting?
10 A. Yes.
11 Q. What do you remember?
12 A. Michael Price.
13 Q. What was said about Michael Price
14 and by whom?
15 A. LeBow. Said that Michael Price
16 had been buying RJR stock, he was now a
17 substantial stockholder. That he had filed a
18 report I believe at the end of September or
19 something like that. Stating that he had a
20 large amount of stock but in fact he had more
21 stock than appeared to be the case on the
22 report because he had been buying it since
23 that time that LeBow had met with him and
24 discussed the spin-off.
25 Q. Mr. LeBow say anything more about
CLASSIC REPORTING, INC. (212) 268-2590
95
1 Starbuck
2 Mr. Price that you can recall?
3 A. I don't recall anything else.
4 Q. Did he say when he met with him?
5 A. No.
6 Q. Did he say --
7 A. I had the impression it was very
8 recent.
9 Q. Did he say what Mr. Price had
10 said to him about the spin-off?
11 A. Yes.
12 Q. What did he say?
13 A. That he was fully supportive.
14 Q. Did he say how much stock Mr.
15 Price had purchased since filing his report?
16 A. Well, he said how much he had in
17 total.
18 Q. How much was that?
19 A. I don't recall the number.
20 Q. Do you recall it being more than
21 a million shares?
22 A. I recall it being a lot of
23 shares.
24 Q. But you don't recall how many?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
96
1 Starbuck
2 Q. Did Mr. LeBow say anything to
3 indicate to that he had been attempting to
4 interest other people in purchasing RJR
5 shares?
6 MR. MASHBERG: Object to the
7 form.
8 MS. LICHSTEIN: Object to the
9 form.
10 MR. STERN: It's a bad question,
11 let me rephrase it.
12 Q. Did Mr. LeBow say anything either
13 at this meeting or any earlier meeting to
14 indicate that Mr. LeBow had solicited anyone
15 to purchase shares of RJR?
16 A. No, he did not.
17 Q. Did you have any understanding
18 from any source that he was doing so?
19 A. No, I did not.
20 Q. Do you remember anything else
21 that Mr. LeBow and Mr. Lorber said at this
22 Friars Club meeting?
23 A. Not immediately, no.
24 Q. Did Mr. LeBow or Mr. Lorber say
25 what he expected yourself and the other
CLASSIC REPORTING, INC. (212) 268-2590
97
1 Starbuck
2 members of the possible slate to do next in
3 connection with RJR?
4 MS. LICHSTEIN: Object to the
5 form.
6 A. I don't recall.
7 Q. What was your next conversation
8 with anyone concerning RJR after this meeting?
9 Let me ask a prior question.
10 Do you recall any earlier
11 discussion about RJR at the meeting apart from
12 what you testified about?
13 A. Not immediately, no.
14 Q What was your next contact about
15 RJR?
16 A. I think that was when I received
17 the fax stating that I was going to be asked
18 to give a deposition.
19 MR. STERN: Just for the record,
20 the witness was pointing to Starbuck
21 Exhibit 1.
22 A. And this is the correct document,
23 yes.
24 Q. Is that it, sir?
25 A. December 19th, yes. It must be.
CLASSIC REPORTING, INC. (212) 268-2590
98
1 Starbuck
2 And it came at my office and I think I
3 mentioned this to someone who was in my
4 office.
5 Q. To whom did you mention it?
6 A. Sorry, I don't recall.
7 Q. What did you do, what was the
8 next event after receiving that fax concerning
9 RJR?
10 A. I had some exchange with Marc
11 Bell in January. He said that he had been
12 trying to serve me, I think he telephoned.
13 People had been trying to serve me with a
14 subpoena and they thought I was hiding. I
15 said I had been to Disney World with my
16 granddaughter. Anyone who came to Disney
17 World could have found me. He said well,
18 would you sign the form allowing Milbank to
19 take the subpoena on your behalf, so I did
20 that.
21 Q. What was your next communication
22 with anyone concerning RJR?
23 A. Probably a phone call from
24 Milbank telling me to go meet with Gregg
25 Mashberg.
CLASSIC REPORTING, INC. (212) 268-2590
99
1 Starbuck
2 MS. LICHSTEIN: Mr. Starbuck,
3 your communications with Milbank Tweed
4 and Proskauer need not be testified to,
5 they entail attorney-client
6 communications.
7 Q. I am not interested in your
8 conversations with your attorneys for purposes
9 of seeking legal advice with respect to this
10 deposition.
11 Other than those kinds of
12 conversations, have you had any conversations
13 with anyone concerning RJR other than that
14 about which you already testified?
15 A. I don't recall any.
16 Q. Have you performed any financial
17 analysis of RJR?
18 A. No.
19 Q. Did you ever hear any further
20 reference to Mr. Tan?
21 A. No.
22 Q. Did you ever hear of George
23 Levin?
24 A. No.
25 Q. I know you heard of Mr. Price.
CLASSIC REPORTING, INC. (212) 268-2590
100
1 Starbuck
2 Have you had any discussions about Mr. Price
3 other than the one that you told me about?
4 A. No.
5 Q. Did you ever hear of Gary Black?
6 A. Is he one of the financial
7 analysts in the stock for Bernstein?
8 Q. I am asking you whether you heard
9 of Mr. Black.
10 A. That's what comes into my head.
11 In this document is a report from Bernstein.
12 Q. The witness is referring to
13 Exhibit No. 2.
14 A. Starbuck 2.
15 Q. Is that how you have heard --
16 A. I will look.
17 MR. MASHBERG: You asked the
18 question.
19 A. Gary Black, yes.
20 Q. You recognize the name Gary Black
21 as an analyst?
22 A. From this document.
23 Q. But you haven't had any
24 discussions with Mr. Black?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
101
1 Starbuck
2 Q. Have you had any discussions with
3 anyone about Mr. Black?
4 A. No.
5 Q. Have you ever heard of Gary
6 Klesch?
7 A. No, I don't think so.
8 Q. Have you heard of a firm
9 Wassherstein Parella?
10 A. Yes.
11 Q. You know them to be an investment
12 banking firm?
13 A. Yes.
14 Q. Did you ever discuss Wassherstein
15 Parella with Mr. LeBow?
16 A. No.
17 Q. Did it ever come to your
18 attention that Wassherstein Parella and Mr.
19 LeBow were at one time consulting about RJR?
20 A. No.
21 Q. Do you know Baeza?
22 A. No.
23 Q. Have you ever heard of a company
24 called Tabaca Lera?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
102
1 Starbuck
2 Q. Intabex?
3 A No.
4 Q. Have you ever heard of a
5 gentleman named Tony Taberer?
6 A. No.
7 Q. Have you heard of the company
8 Rothman Tobacco?
9 A. Cigarette company in Britain, I
10 believe.
11 Q. Are you aware of any discussions
12 between LeBow and Rothmans concerning RJR?
13 A. No.
14 Q. Have you ever heard of someone
15 named Mike Hirschfeld?
16 A. Is this a lawyer at Milbank?
17 Q. There's a lawyer at Milbank named
18 that. Did you have any discussions with Mike
19 Hirschfeld concerning RJR?
20 A. I think so but I don't remember.
21 Q. Don't tell me what you said.
22 When did you have those discussions or did you
23 have one discussion with Mr. Hirschfeld or
24 more than one?
25 A. My recollection is that he is the
CLASSIC REPORTING, INC. (212) 268-2590
103
1 Starbuck
2 one that handled the indemnification
3 agreement.
4 Q. You discussed the indemnification
5 agreement that you previously testified about
6 with Mr. Hirschfeld?
7 A. Yes.
8 Q. What did you and he say to each
9 other?
10 A. He said please sign this thing,
11 thinks like that.
12 Q. You recall no further discussion
13 on it?
14 A. He probably also handled the
15 application -- the form --
16 Q. I am not asking you to speculate.
17 A. Information paper I filled out he
18 probably sent to me. I filled it and sent it
19 back.
20 Q. Did you have any discussions of
21 substance with Mr. Hirschfeld?
22 A. No.
23 Q. Have you ever heard of an entity
24 called Steel Partners?
25 A. No.
CLASSIC REPORTING, INC. (212) 268-2590
104
1 Starbuck
2 Q. Have you ever heard of the name
3 W. Lichtenstein in connection with RJR?
4 A. No.
5 Q. Have you had any discussions with
6 anyone at any time concerning the application
7 of the Investment Company Act of 1940 to New
8 Valley?
9 A. No.
10 Q. Other than the indemnification
11 agreement that you told me about and the
12 $30,000 payment, do you have any agreements or
13 understanding with Brooke Group?
14 A. No.
15 Q. With Mr. LeBow?
16 A. No.
17 Q. With anyone else concerning RJR?
18 A. No.
19 Q. Have you ever done any financial
20 analysis of Liggett Corporation?
21 A. No.
22 Q. Other than what you may have
23 testified about, have you discussed with
24 anyone the business combination of any kind of
25 Liggett and RJR?
CLASSIC REPORTING, INC. (212) 268-2590
105
1 Starbuck
2 A. No.
3 Q. Have you discussed with anyone
4 how RJR would be managed in the event that the
5 slate of which you are a member would be
6 elected to the board of directors of RJR?
7 A. No.
8 Q. Have you ever been made aware
9 that Mr. Zuckerman was at one time considering
10 a hostile takeover of RJR?
11 A. No.
12 Q. Have you ever heard of someone
13 named Chris Andersen?
14 A. No.
15 Q. At the meeting at the Friars
16 Club, was there any discussion with Mr. Icahn?
17 A. I don't recall any.
18 Q. In any of your discussions with
19 Mr. LeBow, has the subject of greenmail ever
20 come up?
21 A. No.
22 Q. Did you ever discuss, in any of
23 the meetings that you described with Mr.
24 LeBow, did the subject of Mr. LeBow or Mr.
25 LeBow's agreements with Mr. Icahn come up?
CLASSIC REPORTING, INC. (212) 268-2590
106
1 Starbuck
2 A. No.
3 Q. Did anyone ever discuss a $50
4 million payment that Mr. LeBow and Mr. Icahn
5 or their affiliates had agreed to make under
6 certain circumstances?
7 A. No one has discussed it. It's in
8 these documents.
9 Q. Referring to --
10 A. Solicitation.
11 Q. Referring to the RJR
12 solicitation; is that correct?
13 A. Yes.
14 Q. When was the last time that you
15 discussed RJR with Mr. Lederman?
16 A. The 12th of November.
17 Q. Was that the occasion --
18 A. Pardon me, not the 12th, the 9th
19 or 10th.
20 Q. When he called you to solicit
21 your interest in the slate, is that right?
22 A. Right.
23 MR. STERN: Let me just mark as
24 the next exhibit, a document that was
25 produced to us by or on behalf of Mr.
CLASSIC REPORTING, INC. (212) 268-2590
107
1 Starbuck
2 Starbuck, 129 to 217.
3 (Group of documents, bearing
4 production Nos. WS 129 through
5 217, marked Starbuck Exhibit 3
6 for identification, as of this
7 date.)
8 Q. Mr. Starbuck, Exhibit 3 has been
9 placed before you. Can you identify that
10 document, please?
11 A. It appears to be the document
12 sent to RJR Nabisco on November 20, 1995.
13 Q. With respect to the proposed
14 slate of directors; is that correct, sir?
15 A. Yes.
16 Q. Have you read that document
17 before today?
18 A. Let us say I looked at it. In
19 November.
20 I have not read it --
21 Q. Did you read it carefully?
22 A. No, I have not.
23 Q. Sir, I am going to have marked as
24 a single exhibit, a collection of what appear
25 to be faxes from your file. I am going to ask
CLASSIC REPORTING, INC. (212) 268-2590
108
1 Starbuck
2 you if you can simply identify these exhibits
3 and confirm to me that these are the press
4 releases and news articles and related
5 materials that you received by fax from the
6 Brooke Group.
7 MR. MASHBERG: Maybe I can help
8 out, Mr. Stern. I can represent that
9 these documents, Bates stamp WS, I
10 don't know if these are all in order.
11 Documents that the witness provided to
12 me and I had copied and caused to be
13 delivered to you. And these are
14 responsive to your subpoena to Mr.
15 Starbuck.
16 (Group of documents, bearing
17 production Nos. WS 0005 through
18 WS 0071 marked Starbuck Exhibit 4
19 for identification, as of this
20 date.)
21 MR. MASHBERG: I don't know that
22 he can identify each and every one.
23 A. I am sure I cannot.
24 MR. STERN: Well, with counsel's
25 representation, I think the record is
CLASSIC REPORTING, INC. (212) 268-2590
109
1 Starbuck
2 sufficient for the present purposes.
3 MR. MASHBERG: Thank you.
4 MR. STERN: I am going to mark as
5 the next exhibit, three documents that
6 were given to us on behalf of Mr.
7 Starbuck, WS 1 through 4 and WS 65
8 through 68.
9 (Three documents, letters to RJR
10 Nabisco stockholders, bearing
11 production Nos. WS 1 through 4
12 and WS 65 through 68 marked
13 Starbuck Exhibit 5 for
14 identification, as of this date.)
15 Q. Those documents appear to be
16 letters to shareholders, do you see that,
17 letters to RJR shareholders?
18 A. Yes.
19 Q. What were your sources of those
20 letters?
21 MR. MASHBERG: Where did he get
22 them from?
23 Q. Where did you get them?
24 A. I believe these came as faxes to
25 me, although it's possible by December 19th
CLASSIC REPORTING, INC. (212) 268-2590
110
1 Starbuck
2 that Mr. Goldstone was writing to me as a
3 stockholder.
4 Q. In your capacity as a
5 shareholder?
6 A. Yes.
7 Q. If they came by fax, they would
8 have come from Brooke Group; is that correct?
9 A. Yes.
10 I'd have to look at the originals
11 to see whether they were faxes or letters. I
12 have received something from RJR as a
13 stockholder.
14 Q. Offhand, you don't recall what
15 you got from them?
16 A. RJR's own consent solicitation or
17 nonconsent solicitation.
18 MS. LICHSTEIN: Solicitation of
19 consent.
20 MR. STERN: Finally I'd like to
21 mark what is going to be the last
22 exhibit, a document that came from Mr.
23 Starbuck, WS 12 through WS 54.
24 (Consent solicitation, bearing
25 production Nos. WS 12 through WS
CLASSIC REPORTING, INC. (212) 268-2590
111
1 Starbuck
2 54, marked Starbuck Exhibit 6 for
3 identification, as of this date.)
4 Q. Mr. Starbuck, Exhibit 6 has been
5 placed before you, do you recognize that
6 document?
7 A. This appears to be the consent
8 solicitation from Brooke Group.
9 Q. Who sent that copy to you, sir?
10 A. Well, I have torn off the cover
11 sheet but it says New Valley Corp. at the top.
12 Q. You recognize New Valley as an
13 affiliate of Brooke Group; is that correct?
14 MS. LICHSTEIN: Object to the
15 form.
16 Q. You can answer.
17 A. Yes.
18 Q. Having looked as quickly as you
19 have at the last set of exhibits, have I
20 refreshed your recollection as to any
21 communications you had with anyone concerning
22 RJR since October 1995?
23 MR. MASHBERG: Object to the
24 form. Beyond what he has already
25 spoken about here?
CLASSIC REPORTING, INC. (212) 268-2590
112
1 Starbuck
2 MR. STERN: Yes.
3 A. Not beyond what we already
4 covered.
5 Q. Have you discussed with anyone,
6 with Mr. LeBow or Mr. Lorber or anyone else
7 associated with Brooke Group a possible
8 transaction involving options on securities of
9 RJR?
10 A. No.
11 MR. STERN: I have no further
12 questions at this time. We reserve our
13 right to question Mr. Starbuck further
14 should developments in this case
15 warrant or should further questioning
16 be indicated by the supplemental
17 document production that I anticipate
18 that Mr. Starbuck's counsel will make.
19 (Continued on next page.)
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
113
1 Starbuck
2 MS. LICHSTEIN: I believe that
3 the deposition is concluded. Thank you
4 very much.
5 (Time noted: 4:30 P.M.)
6 _____________________________
7 William H. Starbuck
8
9 Subscribed and sworn to
10 before me this______day
11 of_________________1996.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
114
1
2
C E R T I F I C A T E
_ _ _ _ _ _ _ _ _ _ _
3
STATE OF NEW YORK )
4 ) ss.:
COUNTY OF NEW YORK )
5
I, ANGELA CASTORO, a Shorthand
6
Reporter and Notary Public within
7
and for the State of New York, do
8
hereby certify:
9
That I reported the proceedings in
10
the within-entitled matter, and that the
11
within transcript is a true record of
12
such proceedings.
13
I further certify that I am not
14
related, by blood or marriage, to any of
15
the parties in this matter and that I am
16
in no way interested in the outcome of
17
this matter.
18
IN WITNESS WHEREOF, I have hereunto
19
set my hand this__29th__day of_January,
____ _______
20
1996.
21
__________________________
22 ANGELA CASTORO
23
24
25
CLASSIC REPORTING, INC. (212) 268-2590
115
1
2 January 29, 1996
3 I N D E X
_ _ _ _ _
4 WITNESS PAGE
_______ ____
WILLIAM H. STARBUCK
5 Examination by Mr. Stern 4
6 E X H I B I T S
_ _ _ _ _ _ _ _
7 STARBUCK
________
FOR_IDENTIFICATION PAGE
___ ______________ ____
8 1 Subpoena, bearing production
No. WS 77 8
9
2 Multipage document titled
10 "RJR Nabisco Selected Documents,"
bearing production Nos. WS 0221
11 through WS 0317 70
12 3 Group of documents, bearing
production Nos. WS 129 through
13 217 108
14 4 Group of documents, bearing
production Nos. WS 0005
15 through WS 0071 109
16 5 Three documents, letters to
RJR Nabisco stockholders, bearing
17 production Nos. WS 1 through
4 and WS 65 through 68 109
18
6 Consent solicitation, bearing
19 production Nos. WS 12 through
WS 54 110
20
21
22 DOCUMENT_REQUEST
________ _______
PAGE LINE
____ ____
23 21 11
24
25
CLASSIC REPORTING, INC. (212) 268-2590
