usa v karron 07 cr 541 (rpp) frank spring direct examination and cross examination 1

7/28/2019 USA v Karron 07 CR 541 (RPP) Frank Spring Direct Examination and Cross Examination 1

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USA v Karron

Docket 07 CR 541 (RPP)

Sworn Trial Testimony (Under Oath) of

Frank Spring

June 6, 2008

MICHAEL J. GARCIA

United States Attorney for the

Southern District of New York

BY: STEVEN KWOK

CHRISTIAN EVERDELL

Assistant United States Attorneys

RUBINSTEIN & COROZZO, LLP

Attorneys for Defendant

BY: RONALD RUBINSTEIN

Also Present: Special Agent Rachel Ondrik, U.S. Dept. of Commerce

Special Agent Kirk Yamatani, U.S. Dept. of Commerce


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UNITED STATES DEPARTMENT OF COMMERCEThe Inspector GeneralWashington, D.C. 20230

May 1, 2013

The Honorable Frank R. WolfChairman, Subcommittee on Commerce, Just ice, Science,and Related Agencies

Committee on AppropriationsU.S. House ofRepresentativesWashington, DC 20515-6015Dear Mr. Chairman:This further responds to your correspondence ofDecember 18 , 2012, in which you requested thatwe address the current issues involving the Office of Special Counse l (OSC) and the CommerceOffice oflnspector General (010). On January 7, 2013, we responded, indicating that ouractions to address mismanagement and misconduct in our Office of Investigations included anongoing personnel matter that we were not at liberty to repott about at the tim e. We are nowab le to provide addi tional informat ion concerni ng this matter.On April 30, 2013, the U.S . Attorney for the Di strict ofMaryland atmounced that two formerCommerce OIG special agents pleaded guilty to submitting false claims for re location expensesand time and attendance fraud. The investigation was carried out by the FBI and my office. Thisis another serious consequence of the mismanagement we found in our Office oflnvestigations,which we detailed in our January 7, 2013 response.The U.S. Attorney's press release is attached for your in formation. If you have any furtherquestions about this matter, please contact me at (202) 482-466 1.Sincerely,

Todd J. ZinserAttachment


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A cc essi bi li ty | eRulemaking | Freedom of Information Act | Legal Notices | Legal Policies and Disclaim ers | Links | Privacy Pol icy | USA.gov |Wh it e H ou se

FBI.gov is an official site of the U.S. gov ernm ent, U.S. Departm ent of Justice

Two Former Special Agents with Department ofCommerce-Office of Inspector General Plead Guilty

to Submitting False Claims for Relocation Expenses

and to Time and Attendance Fraud

U.S. Attorneys Office

Apr il 3 0, 201 3

District of Maryland

(410) 209-4800

GREENBELT, MDTwo former special a gents wit h th e U.S. Departm ent of Comm erce, Office of

Inspector General, Rachel Ondrik, age 35, of Frederick, Mary land, and Kirk Yam atani, age 38 ,

of Ashbur n, Vir ginia , pleaded guilt y t oday to subm ittin g false claim s for relocation expenses.

Ondrik and Yama tani r esigned their positions with th e Departm ent of Comm erce on March 29,

201 3, as required by t heir plea agreements.

The guilty plea was announced by United States Attorney for th e District of Marylan d Rod J.Rosenstein; Special A gent in Char ge Stephen E. V ogt of the Federal Bureau of Inv estigation; and

Todd Zinser, Inspector Gener al for th e U.S. Departm ent of Comm erce (DOC).

Today s ann ouncement is the result of significan t efforts by t he U.S. Attorney s Office , t he FBI,

and my office to hold law enforcem ent agent s account able for y ears of crimina l misconduct,

said Inspector Genera l Todd Zinser of the U.S. Depart ment of Commer ce. In addition to the

fraud perpetrated on the U.S. taxpay ers, these now former employ ees al so retaliated by

carry ing out a destructiv e campaign of disparagement and false allegations against the Office

of Inspector Gener al (OIG). Mr. Zinser a dded, I comm end the U.S. Attorneys Office and the

FBI for their diligent efforts and persever ance in conducting t his inv estigation.

Ac cordi ng to their plea ag reem ent s, in 2009, Ondr ik a nd Y am at an i t ra nsfer red from t he DOC

OIGs Atlanta, Georgia office to Washington, D.C. Ondrik and Yam atani were au thorized

relocation benefits, including a househunting trip, en route trav el, and temporar y quarters

living expenses. E-mails between Ondrik and Yam atani show t hat both agents were aw are of

th e ru les gover ning th eir relocations and reimbur sements for relat ed expenses, yet both

attempted to secure paym ent from the DOC in am ounts significantly exceeding what wasau thorized and subm itted claim s for relocation related trips they did not take.

For exam ple, Ondrik and Yama tani claim ed $4,058.7 5 and $3,589, r espectively, for

househunting trips, when in fact, they did not ma ke a househunting tr ip during the time

claimed. Ondrik and Yamatini each also falsely claim ed more than $1,500 for trav el to their

new duty station and falsely claimed reimbursement for temporar y quarters liv ing expenses in

an am ount that wa s approximately th ree times what they were auth orized. In all, Ondrik and

Ya mat an i ea ch subm it ted a t l east th re e fa lse v ouch er s seekin g r eim bu rsem ent for $3 9, 56 3.2 5

and $36,305.57 , respectively . When Ondrik and Yamatanis claims for reimbursement were

denied as being ov er wh at th e trav el regulations allowed, Ondrik and Yama tani persisted in

their claim s. On several occasions between 2009 and 2 011 , Ondrik and Yama tani reaffirmed

the earlier false statements in their v ouchers and made false statements regarding the

circumstances of their claims for reimbursement.

Between June 2009 and February 201 1, Ondrik and Yamata ni also comm itted time and

attendance fraud aga inst DOC-OIG, claiming to hav e worked hours tha t th ey did not actuallywor k. Th e loss to th e gov ernm ent at tr ibu ta ble t o each defendan ts con duct wa s appr oxim at ely

$14,000.

The defendants and the gov ernment h av e agreed that if the court accepts the plea agr eement,

Ondrik an d Yama tan i will each be sentenced to a term of probation and ordered to pay a fine of

$28,000. In addition, each defendant will be r equired to pay $14,000 in restitution to the

governm ent. U.S. Magistrate Judge Charles B. Day h as scheduled sentencing for Ju ne 1 9,

2013 , at 2:30 p.m.

United States At torney Rod J. Rosenstein pra ised the FBI and DOC-OIG for their work in the

inv estigation. Mr. Rosenstein tha nked Assistant U.S. At torney s Adam K. Ake and Robert K.

Hur, w ho are prosecuting t he case.

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7/8/13 Former special agents sentenced to 8 months in prison for fraud - Washington Post

articles.washingtonpost.com/2013-06-19/politics/40070556_1_whistleblower-case-agents-special-counsel

Former special agents sentenced to 8 months inprison for fraud

By Josh Hicks, June 19, 2013

A federal judge on Wednesday sentenced two former special agents for the CommerceDepartment Office of the Inspector General to eight months in prison for submitting falseexpense claims and clocking hours they didnt work.

Judge Charles B. Day, of the U.S. District Court in Maryland, ordered Rachel Ondrik, 35, ofFrederick and Kirk Y amatani, 38, of Ashburn into federal custody immediately after theirsentencing.

Its extremelyrare in my experience for law enforcement officers to not be afforded anopportunity to self-surrender, said attorney Steven Levin, who represents Yamatani. Weintend to appeal the sentence as well as the order for immediate detention.

Levin said that theprosecutors had not asked for prison terms and that they stated on the recordthat probation would be appropriate for the defendants.

Ondrik and Y amatani pleaded guilty in April to seeking paym ents of more than $36,000 apiecein false relocation expenses and to comm itting time and attendance fraud. Their penaltiesincluded $42,000 each in fines and restitution, as w ell as one year of supervised release.

Commerce Department Inspector General ToddZinser issued a statement in April accusing thetwo former agents of waging a smear campaignagainst his office while they were underinvestigation for their crimes.

Ondrik and Yamatani filed complaints againstZinser with the commerce secretary, the FBI,the U.S. Attorneys Office and the Office forCivil Rights, according to documents obtained

by The Washington Post.

The Office of Special Counsel has investigatedthe inspector general because of allegations thatfour Commerce agents were blackmailed intosigning gag agreements that kept them from

talking to investigators and the public about undisclosed claims of wrongdoing.

Zinser retracted the non-disclosure agreements after the Merit Systems Protection Board issueda stay order against them.

The four agents involved in the complaints against Zinser said he threatened to place negativeappraisals in their personnel files unless they agreed not to speak out against his office, accordingto the Office of Special Counsel.

The lawyers who represented Ondrik and Yamatani have criticized Zinser for suggesting thattheir clients were connected with the w histleblower case. I n a joint statement issued last month,Levin and attorney Tom Abbenante said: Mr. Zinsers efforts to absolve himself of any of hisown alleged wrongdoing by connecting these two matters in a press release was inappropriate,

We Recommend

Commerce agents plead guilty to fraud against

agency

May 1, 2013

Federal Agents Raid Office of Special Counsel

May 7, 2008

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to say the least. It is our understanding that Mr. Zinsers alleged misconduct against otherspecial agents is a separate and unrelated matter.

The Office of Special Counsel last month said Ondrik and Yamatani did not bring thewhistleblower case against Zinser, who was still under investigation by the agency at the time.

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Comments

rkirlin1 wrote:

Interesting article! These guys will des ervedly spend 8 months in prison for defrauding the federal government.

Another article in today's Post talks about how Boeing overcharged the federal government $13 bill ion for defense

items, including $2300 for a $10 item. Boeing is "working with the government to understand what happened ." I

am sure the Boeing is s hocked, shocked that they could be accused of comm itting fraud by overcharging the

government $13 billi on. Oh, and can Uncle Sam send the check to Boeing headquarters in Chicago right away?

Do you think there will be any jail time for any Boeing employees? Don't hold your breath on that!

IQ168 responds:

I believe they will be punished following the example of Enron. Perhaps not ... but at least private sector

GOP's Dav is Urges Bloch to Quit Specia l Counsel's

Office

May 8, 2008

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8667KAR1

1 UNI TED STATES DI STRI CT COURT

1 SOUTHERN DI STRI CT OF NEW YORK

2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

2

3 UNI TED STATES OF AMERI CA, New Yor k, N. Y.

3

4 v. S2 07 CR 541 ( RPP)

4

5 DANI EL B. KARRON,

5

6 Def endant .

6

7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

7

8

8 J une 6, 2008

9 9: 15 a. m.

9

10

10 Bef ore:

11

11 HON. ROBERT P. PATTERSON, J R. ,

12

12 Di st r i ct J udge

13

13

14 APPEARANCES

14


8/96

15 MI CHAEL J . GARCI A

15 Uni t ed St ates At t orney f or t he

16 Sout hern Di st r i ct of New Yor k

16 BY: STEVEN KWOK

17 CHRI STI AN EVERDELL

17 Assi st ant Uni t ed St ates At t or neys

18

18 RUBI NSTEI N & COROZZO, LLP

19 At t orneys f or Def endant

19 BY: RONALD RUBI NSTEI N

20

20 Al so Present : Rachel Ondr i k, U. S. Dept . of Commerce

21 Ki r k Yamat ani , U. S. Dept . of Commerce

22

23

24

25

SOUTHERN DI STRI CT REPORTERS, P. C.

( 212) 805- 0300


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831

866zkar 4 Ri l ey - r edi r ect

1 MR. EVERDELL: Your Honor , t he government cal l s Fr ank

2 Spr i ng.

3 FRANK SPRI NG,

4 cal l ed as a wi t ness by t he government ,

5 havi ng been dul y swor n, t est i f i ed as f ol l ows:

6 DI RECT EXAMI NATI ON

7 BY MR. EVERDELL:

8 THE COURT: Pl ease, go ahead.

9 Q. Good af t ernoon, Mr . Spr i ng.

10 A. Hel l o.

11 Q. What do you do f or a l i vi ng?

12 A. I serve as a consul t ant worki ng on bookkeepi ng and ot her

13 f i nanci al acti vi t i es f or a number of cl i ent s.

14 Q. What do you mean by bookkeepi ng?

15 A. Wel l , t hese ar e - - gener al l y, I wor k wi t h smal l busi nesses

16 and t hey have var i ous bookkeepi ng needs, keepi ng t r ack of t hei r

17 i ncome and expenses.

18 Q. How l ong have you been doi ng t hat ki nd of a work?

19 A. For , as a f r eel ance consul t ant , ei ght year s.

20 Q. And do you wor k al one or do you wor k f or a company?

21 A. I am subcont r act ed by a gent l eman cal l ed Ken J ackson, who

22 owns a company cal l ed t he J ackson Gr oup, whi ch speci al i zes i n

23 ser vi ces l i ke t hi s.

24 Q. And how l ong have you been worki ng as a subcont r act or f or

25 J ackson Gr oup?


( 212) 805- 0300


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832

866zkar 4 Spr i ng - di r ect

1 A. Si nce t he year 2000.

2 Q. What sor t s of cl i ent s do you have i n doi ng your work?

3 A. Most of t he cl i ent s I wor k f or cur r ent l y ar e smal l

4 busi nesses, whi ch i s t o say t hey mi ght be gr ossi ng about a

5 mi l l i on, a mi l l i on- and- a- hal f dol l ar s a year . We al so wor k f or

6 i ndi vi dual s.

7 Q. And do compani es t hat you deal wi t h as cl i ent s t ypi cal l y

8 come t o you at any par t i cul ar poi nt i n t he l i f e of t hei r

9 company?

10 A. Yes. Fr equent l y t he compani es t hat come t o us, and t he

11 i ndi vi dual s, mi ght be usi ng t he comput er syst ems or sof t ware

12 syst ems t hat we speci al i ze i n, and t hey f i nd t hat t hi ngs are

13 goi ng wr ong, t hey don' t under st and how t o use t he syst em, or

14 t hei r i n- house bookkeeper has not been doi ng t he j ob t o t he

15 company' s sat i sf act i on.

16 Q. And what are t hose syst ems t hat you' r e r ef err i ng t o?

17 A. There are t wo t hat we speci al i ze i n, bot h made by t he same

18 company; i ntui t , and you mi ght be f ami l i ar wi t h t he names

19 Qui cken i s one of t hem whi ch i s adver t i sed wi del y i n t hi s

20 count r y, i t ' s ki nd of a br and name. That ' s used most l y f or

21 f ol l owi ng your per sonal f i nances, f or t r acki ng t hem. And t hen

22 t he ot her system i s cal l ed Qui ck Books, and t hat ' s gener al l y

23 used f or smal l busi nesses.

24 Q. Mr . Spr i ng, do you have any f ormal t r ai ni ng i n account i ng?

25 A. Wel l , what we do i s not account i ng. What we do i s


( 212) 805- 0300


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1 bookkeepi ng, whi ch i s subst ant i al l y di f f er ent . I n f act , par t

2 of t he j ob of a good bookkeeper i s i n f act t o pr epare f i nanci al

3 dat a come t ax t i me, so t hat t he account ant , who i s t he per son

4 act ual l y doi ng t he t ax r epor t , can do i t i n t he most accur at e

5 way possi bl e.

6 Q. What t r ai ni ng di d you r ecei ve i n bookkeepi ng?

7 A. Most l y - - wel l , t her e are t wo aspect s t o t hat . Si nce 1980,

8 I am a smal l busi ness, smal l company owner mysel f . And

9 st ar t i ng i n 1980 I ' ve set up f our compani es, I ' ve owned f our

10 compani es over t he years. And as part of t hat busi ness, ei t her

11 as f ul l owner or co- owner of t hose compani es, I was r esponsi bl e

12 f or t he f i nanci al deal i ngs of t he company, the day- t o- day

13 bookkeepi ng, t he f i nanci al pl anni ng, t he budget i ng, et cet er a.

14 And t hen when I st art ed act i ng, doi ng consul t ancy

15 servi ces f or Mr . J ackson, I was t r ai ned extensi vel y by hi m.

16 Q. How l ong di d you do t he, your compani es f or ?

17 A. Oh, we set up - - my par t ner and I set up our f i r st company

18 i n 1980.

19 Q. Mr . Spr i ng, di d t her e come a t i me when you met someone

20 named Dr . Kar r on, Dr . Dani el Kar r on?

21 A. Yes.

22 Q. Do you see Dr . Karr on her e i n t he cour t r oom t oday?

23 A. I do.

24 Q. Woul d you pl ease poi nt hi m out and i dent i f y an ar t i cl e of

25 cl ot hi ng he' s wear i ng?


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1 A. I t ' s t he gent l eman over t her e wear i ng a l i ght col or ed t i e

2 and a f l ag pi n, i f my eyes are hol di ng up.

3 MR. EVERDELL: May t he r ecor d r ef l ect t he wi t ness has

4 i dent i f i ed t he def endant ?

5 THE COURT: Yes, t he wi t ness has i dent i f i ed t he

6 def endant .

7 Q. Mr . Spr i ng, how di d you f i r st meet t he def endant ?

8 A. I was i nt r oduced t o hi m by Mr . J ackson.

9 Q. And what was t he occasi on f or t hat meet i ng?

10 A. The f i r st meet i ng, I was asked t o come and meet wi t h Dr .

11 Kar r on, as t her e were some bookkeepi ng needs he need at t endi ng

12 t o f or t he pr oj ect he was worki ng on at the t i me.

13 Q. Do you know what proj ect t hat was?

14 A. I t was t he ATP.

15 THE COURT: Coul d we have dat e?

16 Q. Do you r ecal l t he date of t hat meet i ng, r oughl y?

17 A. I began wor ki ng on t he ATP pr oj ect i n J ul y, l at e J ul y of

18 2002. And i f memory ser ves cor r ect , i t woul d have been shor t l y

19 bef ore t hen, because hi s needs were i mmedi at e.

20 Q. Was t hi s t he f i r st t i me t hat t he def endant had sought out

21 t he servi ces of t he J ackson Gr oup?

22 A. No.

23 Q. Can you expl ai n?

24 A. Ken J ackson and t he J ackson Gr oup had worked previ ousl y

25 wi t h CASI on a proj ect cal l ed DARPA, and t hat woul d have been,


( 212) 805- 0300


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1 I bel i eve t hat was about t wo or thr ee years bef ore t he ATP

2 pr oj ect .

3 Q. Can you say agai n when you were hi r ed by CASI ?

4 A. J ul y of 2002.

5 Q. And how l ong di d you work f or CASI ?

6 A. Up t hrough Oct ober of 2003, about 15 months.

7 Q. Were you pai d f or your work?

8 A. I was.

9 Q. What were you asked t o do, general l y, when you were hi r ed

10 by CASI ?

11 A. Wel l , when I was hi r ed by CASI , t here was al r eady an

12 i n- house bookkeeper worki ng on t he ATP pr oj ect , so I wasn' t

13 i ni t i al l y i nvol ved i n t he day- t o- day acti vi t i es, nor mal

14 act i vi t i es of a bookkeeper , you know, i nput t i ng i nvoi ces,

15 wr i t i ng checks, payi ng st af f , et cet er a. But t her e was a - -

16 one of t he r equi r ement s, one of t he r equi r ement s of t he ATP

17 pr oj ect was t hat t her e was an audi t at t he end of t he f i r st

18 year . Thi s was si mpl y a r equi r ement of t he pr oj ect . And I

19 st ar t ed wor ki ng f or CASI about t en mont hs i nt o t hat f i r st year,

20 so t he audi t was comi ng up and I was asked t o come i n and

21 assi st on pr epari ng t he books f or t he audi t .

22 Q. And who i s conduct i ng t hat audi t ?

23 A. That woul d' ve been J oan Hayes.

24 Q. Now, when you were hi r ed t o par t i ci pat e i n t he audi t , what

25 was t he f i r st t hi ng your - - oh, wi t hdr awn.


( 212) 805- 0300


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836


1 When you were hi r ed, di d you l earn who had been

2 r esponsi bl e f or keepi ng t he books bef or e you ar r i ved?

3 MR. RUBI NSTEI N: Obj ect i on, your Honor .

4 THE COURT: There was someone wor ki ng t here. Di d you

5 meet t he per son worki ng t her e?

6 THE WI TNESS: No, your Honor . There was - - wel l ,

7 t her e was a young woman, Ni ki Wi nter s who had been wor ki ng on

8 t he pr oj ect books bef ore I ent er ed t he scene, and cont i nued t o

9 work on t he books f or I bel i eve another t hr ee or f our mont hs,

10 af t er I st ar t ed at the end of J ul y of 2002. Pr evi ous t o t hat ,

11 I bel i eve - -

12 MR. RUBI NSTEI N: I obj ect .

13 THE COURT: Obj ect i on sust ai ned.

14 Q. Di d you have any conversat i ons wi t h t he def endant about who

15 kept t he books pr i or t o you bei ng t here?

16 A. Yes, I di d.

17 Q. And what was t he nat ure of t hose conver sat i ons?

18 A. Wel l , I asked who had been doi ng t hem, and t he books were

19 i n t wo separat e syst ems, and so I i nqui r ed as t o how t hose were

20 done. And I was t ol d by t he def endant that he had been

21 r esponsi bl e f or some of i t , and t hat ther e had been other

22 bookkeeper s i n t he past .

23 Q. What were t hose t wo syst ems t hat you r ef err ed t o t hat the

24 company used?

25 A. Wel l , t he same company, I ntui t , makes t hese t wo syst ems


( 212) 805- 0300


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1 whi ch I ment i oned a f ew mi nut es ago. One i s t hi s t hi ng cal l ed

2 Qui ck Books, whi ch i s good f or smal l busi nesses, and t hen t he

3 ot her one i s cal l ed Qui cken, whi ch you see adver t i sed maybe a

4 l ot on t el evi si on and t hat ki nd of thi ng. That i s mor e

5 sui t abl e f or househol ds and per sonal st uf f .

6 THE COURT: What ones were t hey usi ng; what syst em,

7 what were t hese t wo syst ems?

8 THE WI TNESS: The CASI and ATP af f ai r s were bei ng r un

9 out of Qui ck Books, and t hen Qui cken was bei ng used t o t r ack

10 t he def endant ' s per sonal f i nances.

11 Q. And di d you have any di scuss i ons wi t h t he def endant about

12 t he part i cul ar syst ems t hat he was usi ng?

13 A. To t he ext ent t hat I had t o become f ami l i ar wi t h t he way

14 t he i nf ormat i on had been i nput t ed up t o my comi ng i nto work on

15 t hese syst ems, and we st ar t ed by l ooki ng at t he per sonal s i de

16 of thi ngs, whi ch was hel d wi t hi n t he Qui cken sof t ware.

17 Q. And what were you asked t o do wi t h r espect t o t he per sonal

18 si de of t hi ngs i n t he Qui cken sof t ware when you arr i ved?

19 A. I was asked by t he def endant t o go i nt o t hose syst ems, and

20 on t he ver y f i r st day t hat I was t her e he sat me down i n f r ont

21 of Qui cken, i n f r ont of t he comput er and he navi gat ed me

22 t hr ough t he Qui cken books, t he per sonal f i nances, and asked me

23 t o ext r act cer t ai n ki nds of expenses f r om t hat , t hat I was t ol d

24 woul d be char ged back t o t he ATP proj ect .

25 Q. And do you r ecal l what sor t s of expenses t hose were?


( 212) 805- 0300


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838


1 A. Wel l , t her e ar e a number of ki nds of cat egori es. Ther e

2 wer e t hi ngs i n t he order of medi cal expenses, equi pment , l ocal

3 t r avel , meal s, et cet er a, smal l er i t ems l i ke t hat .

4 Q. And who t ol d you t hat t hese woul d be ATP al l owabl e expenses

5 when you were asked t o do t hi s?

6 A. I was t ol d by t he def endant .

7 Q. And do you r ecal l when t hese expenses were i ncur r ed?

8 A. I was asked by t he def endant t o go back t o Apr i l of 2002 t o

9 ext r act some of t hese expenses.

10 Q. Ar e you cer t ai n about t he date Apr i l 2002?

11 A. I am. I - - t he pr oj ect st ar t ed - - I beg your par don. I am

12 get t i ng my year s wr ong. I began i n September of 2002. The

13 proj ect had been goi ng on f or t en mont hs. I t was 2001,

14 Apr i l 2001.

15 Q. So wer e t he charges - - j ust t o be cl ear , you were asked t o

16 go back t o Apr i l 2001 t o l ook at the charges?

17 A. Ri ght , r i ght . The pr oj ect i t sel f st ar t ed i n Oct ober of

18 2001. So, basi cal l y, I was bei ng asked t o go back

19 f our - and- a- hal f , f i ve mont hs bef or e t he st ar t of t he pr oj ect t o

20 ext r act expenses.


22 ext r act i ng t hose expenses pr i or t o t he st art of t he gr ant ?

23 A. Wel l , t o t he extent t hat i t seemed unusual t o me. At thi s

24 poi nt I was - - t hi s i s r eal l y l i t er al l y my f i r st week or so.

25 THE COURT: Di d you have any di scussi ons wi t h t he


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1 def endant i s what you were asked, not what was goi ng on i n your

2 mi nd.

3 A. Wel l - -

4 THE COURT: Di d you have di scussi ons wi t h hi m about

5 i t , yes or no?

6 THE WI TNESS: No. I di d what I was t ol d, basi cal l y.

7 I had no r eason t o t hi nk t hat i f I was asked t o go back t o

8 Apr i l - -

9 THE COURT: No was t he answer . Let ' s go ahead.

10 A. No.

11 Q. Af t er ext r act i ng t he data f r om t he per sonal syst em, what

12 di d you do wi t h t hat dat a?

13 A. Wel l , t he data was ext r act ed by, basi cal l y, t wo methods.

14 One woul d gener ate r epor t s usi ng t he sof t ware, whi ch woul d

15 det ai l what t hese expenses were, and t hen t hose woul d be

16 t r ansf er r ed vi a one met hod or another i nt o Qui ck Books, whi ch

17 was t r acki ng t he ATP expense, as wel l as t he CASI expenses.

18 Q. And when al l t he dat a was i n t he cor por at e Qui ck Books

19 syst em, what , i f anyt hi ng, di d you do t o t he Qui ck Books

20 syst em?

21 A. The Qui ck Book syst em, I t hen began t o gener at e what we

22 woul d cal l i ncome and expense st atement s or pr of i t and l oss

23 st atement s t hat showed t he act i vi t y f or t he pr evi ous 10 or 11

24 mont hs at t hat poi nt .

25 Q. And what , i f anyt hi ng, di d you do wi t h t he expendi t ur es


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1 t hat wer e r ef l ect ed i n t he Qui ck Book syst em?

2 A. There were number of gr oups of expenses. Thi s woul d' ve

3 been - - I woul d have been worki ng several weeks now on t he

4 proj ect and I began t o - - I had begun t o under st and what we

5 were, you know, al l owabl e ATP expenses f r om expenses t hat were

6 not al l owed by t he pr oj ect . And my basi c j ob was t o separate

7 out t he t wo, t hose t hi ngs we coul d al l ow f or t he pr oj ect t o pay

8 f or, and t hose t hi ngs we coul d not .

9 Q. And how di d you become f ami l i ar wi t h what was al l owabl e and

10 what was not al l owabl e?

11 A. I r ead t he r egul at i ons.

12 THE COURT: You say you r ed t he r egul at i on?

13 THE WI TNESS: Yes, si r .

14 THE COURT: What di d you l ook at ?

15 THE WI TNESS: I f memory ser ves cor r ect , i t was about a

16 30 page document produced by ATP whi ch sai d, basi cal l y, t hese

17 are t he dos and don' t , what was al l owabl e expense and what

18 wasn' t .

19 Q. Di d you have any ot her hel p i n deci di ng what was al l owabl e

20 and what was not al l owabl e?

21 A. Wel l , t hi s i s sever al weeks af t er I had st art ed, maybe

22 agai n f our or f i ve weeks. And at t hat poi nt J oan Hayes and, I

23 because t he audi t was i mmi nent and she was aski ng t o have dat a

24 present ed t o her , so she had began begun t o poi nt out t o me

25 cer t ai n t hi ngs t hat wer e not , by her def i ni t i on, al l owabl e.


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1 But by t hi s poi nt I had al so r ead t he document . And J oan Hayes

2 and I al so r evi ewed t he document t o make sur e t hat we bot h

3 under st ood what was an al l owabl e expense and what wasn' t .

4 Q. And by document , you' r e r ef err i ng t o t he document ?

5 A. The r egul at i on, yes.

6 Q. Di d you have any di scussi ons wi t h t he def endant about

7 whet her cer t ai n expense woul d be cl assi f i ed as ATP r el ated

8 expenses versus non ATP r el at ed expenses?

9 A. I di d quest i on a number of t hi ngs as my f ami l i ari t y wi t h - -

10 THE COURT: You' r e asked - -

11 THE WI TNESS: Yes.

12 THE COURT: You wer e asked whet her you had a

13 conver sat i on wi t h t he def endant .


15 THE COURT: I t cal l s f or yes or no answer .


17 Q. What was t he nat ur e of t hose di scussi on you had wi t h t he

18 def endant?

19 A. Wel l , I , as I became more f ami l i ar wi t h what was an

20 al l owabl e expense and what wasn' t , I began t o quest i on why

21 cert ai n expense cat egor i es were bei ng cl assed one way or t he

22 other; general l y, why t hey wer e bei ng cl assed as an al l owabl e

23 expense.

24 Q. And what sor t s of expenses di d you quest i on wi t h t he

25 def endant?


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1 A. Oh, a r ange of t hi ngs; rent , ut i l i t i es, cer t ai n amount s on

2 capi t al expendi t ur es, busi ness, you know, medi cal expenses.

3 Q. And what - - wi t hdr awn. What , i f anythi ng, di d Dr . Kar r on

4 do i f he di sagr eed wi t h your cl assi f i cat i on of whet her t hey

5 were ATP or non ATP r el at ed expenses?

6 A. Wel l , he woul d poi nt out t o me t hat I ei t her di dn' t know my

7 j ob, I di dn' t underst and what an ATP al l owabl e expense was or

8 wasn' t , or that he was i n conver sat i on wi t h t he ATP managers i n

9 Washi ngt on t o ensure t hat t hese expenses, whi ch I underst ood t o

10 be not al l owed by t he pr oj ect , woul d be al l owed i nt o t he

11 proj ect as an expense.

12 Q. Di d you see anythi ng i n part i cul ar r ef l ect ed i n t he books

13 r egardi ng t hese conver sat i ons you had wi t h t he def endant ?

14 A. Wel l , as t he ki nd of person i n charge of keepi ng t he Qui ck

15 Books f i l e cor r ect , I t ook i t upon mysel f t o t ake what was an

16 al l owabl e expense and put i t i nt o t hat cat egor y, and i f i t was

17 not al l owed i nt o ATP, t o put i t i nt o t he gener al CASI expenses.

18 Q. And what , i f anyt hi ng, woul d t he def endant do af t er you di d

19 t hat?

20 A. Normal l y I woul d go away - - I di dn' t wor k at t he of f i ce

21 every day, i t woul d be up t o t hr ee days a week on af t ernoon.

22 And I woul d do my work i n t he of f i ce, go away, pr obabl y f or a

23 coupl e of days, come back f or my next sessi on and f i nd out t hat

24 t he expenses t hat I had t aken out of ATP, t ur ned t hem back i nt o

25 a CASI onl y expense, had been t urned - - had been r ei nput t ed as


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1 an ATP al l owabl e expense.


3 who had done t hat ?

4 A. I di d.

5 Q. And what were t hese di scussi ons?

6 A. He t ol d me he had done i t .

7 Q. And di d he t el l you why he had done i t ?

8 A. Yes. Rat her l i ke I , what I sai d a f ew mi nut es ago, I

9 di dn' t , ei t her di dn' t know what I was doi ng, or t he ATP

10 managers woul d al l ow t hese expenses or I di dn' t , I di dn' t

11 underst and t he ATP r egul at i ons.

12 THE COURT: That he woul dn' t al l ow i t or hadn' t

13 al l owed i t , t he ATP manager?

14 THE WI TNESS: No, your Honor t hat I had t aken, t hat I

15 had t aken out somethi ng out of t he ATP and put i t i nt o a

16 gener al CASI expense, and t hat he woul d t hen t ake t hat and put

17 i t back i nt o ATP.

18 THE COURT: I got t hat par t . I ' m t al ki ng about t he

19 conver sat i on af t er wards. Di d he say t hat t hey were - - had been

20 appr oved by - -

21 THE WI TNESS: He sai d t hey were i n t he process of

22 bei ng approved, and t hat he woul d be havi ng meet i ngs wi t h t he

23 ATP manager s t o cl ear up al l of t hese mat t er s t hat I was

24 quest i oni ng.

25 Q. About how many t i mes di d you not i ce changes l i ke t hi s


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1 occur r i ng i n t he books?

2 A. I never di d an exact count , but I woul d say somewher e

3 between one dozen and t wo dozen t i mes.

4 Q. Do you r emember any part i cul ar i nci dent , conver sat i on wi t h

5 t he def endant about t hi s i ssue?

6 A. Oh, yes, t hi ngs woul d get ver y heat ed. Because i t was l i ke

7 a t enni s game. I woul d do what I - - woul d f ol l ow t he

8 r egul at i ons, t ake i t out of ATP, come back a f ew days l ater , i t

9 was back i n ATP. I go away agai n, bang, bang, bang l i ke t hi s.

10 And af t er a coupl e of mont hs of t hi s happeni ng, i t r eached a

11 ki nd of a f ever pi t ch wher e I act ual l y wal ked out of t he

12 cl i ent ' s apart ment whi ch i n what i s now cl ose t o 40 years of

13 bei ng i n busi ness and pr ovi di ng pr of essi onal servi ces - -

14 MR. RUBI NSTEI N: I move t o st r i ke t hat port i on, your

15 Honor .

16 THE COURT: Obj ect i on sust ai ned. You can' t go i nto

17 how l ong you' ve been i n busi ness .

18 THE WI TNESS: Okay.

19 THE COURT: The j ur y wi l l di sr egard t hat par t of i t .

20 Q. You sai d you wal ked out , Mr . Spr i ng?

21 A. Yes.

22 Q. Di d you ever r etur n t o CASI ?

23 A. I di d.

24 Q. Why di d you r et urn?

25 A. Wel l , I pr ovi ded ser vi ce t o cl i ent , and I ' ve al ways t aken


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1 my cl i ent s as t hey are t he peopl e t hat come f i r st . And as part

2 of my j ob t o hel p t hem i n, t o do my j ob, t he j ob I was asked t o

3 do. The r eason I had wal ked out i s t hat I was bei ng asked t o

4 do a j ob and t hen bei ng pr event ed f r om doi ng i t at t he same

5 t i me.

6 Q. Al l r i ght . I ' d l i ke you t o t ake a l ook at what ' s i n f r ont

7 of you Government ' s exhi bi t s 144, what ' s been marked f or

8 i dent i f i cat i on, not yet i n evi dence as Gover nment ' s exhi bi t

9 144, 145, and 149. Can you pul l t hose out , pl ease. You can

10 t ake a l ook at each of t hose i n successi on, pl ease?

11 THE COURT: Bear wi t h us. You can' t l ook at t he

12 document s yet , al l r i ght . They' r e not admi t t ed i n evi dence.

13 Q. Do you see t hose document s, Mr . Spr i ng?

14 A. I do.

15 Q. Do you r ecogni ze t hose document s?

16 A. I do.

17 Q. What ar e t hey?

18 A. These ar e a ser i es of e- mai l chai ns f r om or to - - ei t her

19 f r om or t o mysel f t o t he def endant .

20 Q. And how do you r ecogni ze t hem?

21 A. My name i s on t hem.

22 Q. And can you gi ve a basi c dat e r ange f or these e- mai l

23 str i ngs?

24 A. November t hrough, say, ear l y December of 2002.

25 MR. EVERDELL: Your Honor , t he government of f ers


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1 Gover nment ' s exhi bi t 144, 145 and 149.

2 MR. RUBI NSTEI N: No obj ect i on, your Honor .

3 THE COURT: Al l r i ght 144, 145 and 149 are admi t t ed i n

4 evi dence.

5 ( Government ' s Exhi bi t s 144, 145 and 149 r ecei ved i n

6 evi dence)

7 Q. Let ' s f i r st t ake a l ook at gover nment ' s 144.

8 THE COURT: Do we have a dat e? I see.

9 Q. Si nce t hese ar e e- mai l st r i ngs, we' r e act ual l y goi ng t o go

10 backwards t o f orward, t he ear l y ones what begi n i n t he back.

11 So i f you coul d t ur n, pl ease, t o page t hr ee of Government ' s

12 144?

13 A. Uh- huh.

14 Q. You see t hat e- mai l , page 3, 144?

15 A. Yes, yes. Sor r y.

16 Q. And do you see t he dat e of that e- mai l ?

17 A. Yes.

18 Q. What ' s t hat ?

19 A. November 29th, 2002.

20 Q. And who sent t he e- mai l and who i s i t t o?

21 A. I t i s f r om t he def endant t o mysel f .

22 Q. Al l r i ght . I f you coul d l ook and j ust r ead t he f i r st f ew

23 sent ences up t o, I put the pay- pal st uf f ?

24 A. Thi s i s f r om t he def endant . I f ound a number of er r or s i n

25 t he pr ogr am non- pr ogr am spl i t s. We need t o f i x t hi s. I al so


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1 have pr obl ems wi t h t he ent i r e way you are spl i t t i ng t he cost s

2 bet ween ATP and non- ATP. We need t o f i x t hi s, as st uf f i s

3 f al l i ng i n t he cracks and t her e can be no cr acks f or i t ems

4 mi ssi ng.

5 Q. What di d you under st and t he def endant t o mean about ATP

6 ver sus non- ATP spl i t s t hat he was di scussi ng t her e?

7 A. I t ' s a cont i nuat i on of t he wor k I had st ar t ed doi ng, wher e

8 havi ng become f ami l i ar wi t h t he r egul at i ons by t hi s poi nt i n

9 t he pr oj ect .

10 MR. RUBI NSTEI N: Obj ect i on, and I move t o st r i ke t hi s,

11 your Honor . I t ' s not r esponsi ve.

12 THE COURT: Let me hear t he quest i on.

13 Q. What was your under st andi ng, Mr . Spr i ng, as t o what was

14 meant by t he pr obl ems he was havi ng wi t h your spl i t t i ng t he

15 cost bet ween ATP and non- ATP?

16 A. Wel l , he di dn' t agr ee wi t h t he way, wi t h what I was sayi ng

17 was ATP al l owabl e and what wasn' t . As si mpl e as t hat .

18 Q. Al l r i ght . I f you coul d move now t o page t wo, whi ch i s t he

19 page bef ore t hat .

20 THE COURT: I t ' s t he page af t er , but i t ' s t he day

21 bef or e, t he message af t er t hat . Al l r i ght .

22 MR. EVERDELL: The message af t er t hat , even t hough

23 i t ' s t he page bef ore.

24 Q. I f you coul d l ook at t he e- mai l at the bot t om of t hat page.

25 A. Uh- huh.


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1 Q. And i t i s one f r om your sel f to Dr . Kar r on, i s t hat cor r ect ?

2 A. I t i s.

3 Q. And i s t hat your r esponse t o t hat pr evi ous e- mai l we j ust

4 r ead?

5 A. I t i s.

6 Q. Coul d you r ead t he l ast two paragr aphs of your r esponse,

7 second t wo par agr aphs of your r esponse?

8 A. I r ather doubt your concl usi on about t he number of err ors

9 i n my di vi si on of ATP and non- ATP cost s. I have t r i ed t o

10 squeeze everyt hi ng t hat i s chargeabl e, and t hen some, i nto ATP.

11 Exampl e: I t r i ed t o get t hr ough payment s you made t o J i l l

12 Fel dman at t he begi nni ng of 2002, and Penni e & Edmonds.

13 However , J oan' s eagl e eye caught t hese and i s unl i kel y t o al l ow

14 t hem t o get t hr ough, par t i cul ar l y t he l egal f ees whi ch go back

15 t o patent i ssues r el ated t o 1998- 1999. J oan made ext ensi ve

16 notes yest erday r el at i ng t o t hese and many other t hi ngs she

17 want s to t ake a cl oser l ook at so some of what you want t o do

18 she shoul d be i nvol ved i n. Ot her wi se, ther e i s not hi ng but

19 more t i me, and money, expended put t i ng i t ems i n, t hen t aki ng

20 t hem out , t hen put t i ng t hem i n, ad nauseam.

21 Q. Al l r i ght . Let ' s t ake a l ook at i ndi vi dual thi ngs i n

22 t her e. You say - - f i r st , do you r ecal l who J i l l Fel dman i s?

23 A. Yes. She i s an account ant t hat CASI had used pr evi ousl y.

24 Q. And do you r ecal l Penni e & Edmonds, what t hat was?

25 A. Yes, t hey, t hey are a l aw f i r m who wer e worki ng on patent ,


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1 t hese pat ent i ssues I r ef er r ed t o l at er i n t he par agr aph.

2 Q. You ment i oned t hat you were t r yi ng t o squeeze everyt hi ng

3 t hat i s chargeabl e i nt o ATP; what di d you mean by t hat ?

4 A. Ri ght . We - - wel l , I was wi l l i ng t o gi ve t he def endant t he

5 benef i t of t he doubt wi t h hi s cont i nual l y t el l i ng me he was

6 goi ng t o get t hese char ges approved by t he ATP managers, so I

7 woul d l eave t hi ngs i n i n t he hopes t hat t hey woul d get

8 approved.

9 Q. You see i n t he second paragraph t hat you r ead, your comment

10 t hat t her e' s not hi ng but more t i me money expended put t i ng i t ems

11 i n and t aki ng t hem out , put t i ng t hem i n ad nauseum; you see

12 t hat?

13 A. Yes.

14 Q. What di d you mean by t hat ?

15 A. Wel l , as I al l uded t o pr evi ousl y - -

16 THE COURT: I t ' s what you' r e r ef er r i ng t o pr evi ousl y,

17 i s t hat r i ght ?

18 THE WI TNESS: That ' s r i ght , your Honor .

19 THE COURT: Al l r i ght , next quest i on.

20 Q. Al l r i ght . I f you coul d t ur n t o t he pr evi ous page, whi ch

21 i s act ual l y t he next e- mai l r esponse t o your e- mai l , f r om t he

22 def endant . I f we coul d bl owup t hat e- mai l . I f you woul d l ook,

23 pl ease, at t he second gr oupi ng t her e, t hat l ooks l i ke a

24 paragraph?

25 THE COURT: What date ar e we t al ki ng about ?


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1 Q. What ' s t he dat e of t hat e- mai l , Mr . Spr i ng?


3 Q. I s t hat t he day af t er t he - - wel l , i s t hat t he same day as

4 t he e- mai l t hat we j ust r ead?

5 A. I t i s t he same day. The pr evi ous e- mai l was wr i t t en at

6 9: 00 o' cl ock i n t he mor ni ng on Sat ur day. Thi s e- mai l you' r e

7 r ef er r i ng i s now was wr i t t en at a l i t t l e af t er 2: 00 p. m. on

8 t hat same day.

9 Q. Woul d you pl ease r ead t hat second par agr aph, the

10 def endant ' s r esponse?

11 A. Ri ght . Thi s i s f r om t he def endant . You and she need t o

12 keep gr i ndi ng away on di sal l owed i t ems. Power , J i l l Fel dman,

13 Sol omon and Ber nst ei n, Pet er Ber ger , et cet er a, et cet er a, et

14 cet er a, ar e al l act ual l y and par t l y al l owabl e. Rent , some

15 cabl e, some t el ephone are not yet al l owed. I may get an

16 al l owance on r ent al of t he l i vi ng r oom t o t he pr oj ect, as i t i s

17 cl earl y compl et el y t aken over by t he pr oj ect .

18 Q. Say agai n what ' s t he date of t hat e- mai l was?


20 Q. So about how l ong af t er t he st ar t day of t he gr ant was t hat

21 e- mai l sent by t he def endant?

22 A. The gr ant st ar t ed i n Oct ober - - on Oct ober 1st , 2001, so by

23 t hi s dat e, end of November of 2002, we are i nt o t he second

24 mont h of t he, of f i scal year t wo, 14 mont hs af t er t he st ar t of

25 t he pr oj ect .


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1 Q. To your knowl edge, di d t he def endant ever get an al l owance

2 f or rent and ut i l i t i es, t hi ngs l i ke t hat , f r om t he peopl e at

3 ATP?

4 A. No.

5 Q. Al l r i ght . Now i f you woul d l ook at Gover nment ' s 145 and

6 149. St ar t i ng wi t h 145. Wi t hout put t i ng i t on t he boar d, i f I

7 j ust t ake a l ook at . Ar e t hese e- mai l s, 145 and 149, par t of

8 t he same e- mai l chai n, or ar e t hey a br and new e- mai l chai n?

9 A. These are actual l y part of t he same chai n. They' r e dated

10 t he day bef or e, November 29t h, 2002.

11 Q. Let ' s l ook at Gover nment ' s 145, page t wo. I ' m sor r y, i f we

12 coul d l ook at page t hr ee, f i r st .

13 J ust i dent i f y t hi s t o or i ent our sel ves, t hat e- mai l

14 t hat you sent t o Dr . Karr on, i s t hat t he one we r ead bef ore,

15 about squeezi ng t he charges i nto t he ATP?

16 A. I t i s, on November t he 30t h.

17 ( Cont i nued on next page)

18

19

20

21

22

23

24

25


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8667KAR5 Spr i ng - di r ect

1 BY MR. EVERDELL:

2 Q. Now, i f we coul d go t o page 2, whi ch i s a l at er e- mai l , t he

3 previ ous page, and you see your response t o Dr . Kar r on on t he

4 bot t om of t he page t her e?

5 A. I do.

6 Q. I f you coul d r ead, pl ease, t he second t wo paragr aphs

7 st ar t i ng wi t h "hopef ul l y".

8 A. "Hopef ul l y, you wi l l r et ur n f r om Washi ngt on wi t h a cl ear er

9 i dea of what t hey are goi ng t o al l ow and not al l ow as

10 chargeabl e i t ems. Thi s r emai ns t he bi ggest hang- up, wi t h you

11 want i ng t o i ncl ude ever ythi ng ( i ncl udi ng t he ki t chen si nk) and

12 J oan r esi st i ng you at ever y move, as she i s doi ng her j ob t o

13 t he l et t er of t he l aw, whi ch I f ul l y agr ee wi t h.

14 "Sayi ng t hat CASI can char ge t hi s and t hat i t em i s al l

15 ver y wel l , but J oan wi l l want wr i t t en conf i r mat i on of t hat f r om

16 t he gal s at NI ST, and hopef ul l y you wi l l be abl e t o get t hat

17 ( or at l east set t he wheel s i n mot i on) when you are i n D. C. "

18 Q. Mr . Spr i ng you r ef er r ed t o a t r i p t o D. C. Who i s goi ng t o

19 D. C. ?

20 A. The def endant .

21 Q. And what do you mean when you say "hopef ul l y you wi l l

22 r et ur n f r om Washi ngt on wi t h a cl ear er i dea of what they ar e

23 goi ng t o al l ow"?

24 A. I am suggest i ng t her e t hat t her e was st i l l t he hope t hat he

25 woul d be abl e t o get - - t he def endant woul d be abl e t o get


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1 t hese i t ems whi ch were by t he l et t er of t he l aw nonchargeabl e

2 or nonal l owabl e, he woul d somehow be abl e t o get t hose i nt o t he

3 pr oj ect .

4 Q. Was t he def endant goi ng t o meet wi t h peopl e at NI ST i n

5 D. C. ?

6 A. I bel i eve so, wi t h t he pr oj ect manager s.

7 Q. What ar e you r ef err i ng t o when you are sayi ng " t hey wi l l

8 want wr i t t en conf i r mat i on f r om t he gal s at NI ST?

9 A. Wel l , i t ' s ver y cl ear f r om t he r egul at i ons and t he

10 cont r act - - t hi s was a gover nment cont r act af t er al l - - t her e

11 was nothi ng t hat one coul d j ust say, wel l , f i ne, somebody t ol d

12 me t hi s. I t woul d have t o be wr i t t en because, you know, i t was

13 goi ng out si de t he st andar d r egul at i ons t hat I had r evi ewed.

14 Q. To your knowl edge, di d t he def endant ever get wr i t t en

15 appr oval f r om t he peopl e at NI ST f or t hese i t ems?

16 A. To t he best of my knowl edge, no.

17 Q. I f you coul d now l ook at Government ' s 149, and goi ng t o

18 page 2. Fi r st j ust t o or i ent our sel ves, do you see t he e- mai l

19 i n t he mi ddl e of t he page f r om you t o Dr . Karr on?

20 A. I do.

21 Q. I s t hat t he e- mai l we j ust r ead f r om?

22 A. Yes.

23 Q. Now, coul d you l ook at Dr . Kar r on' s r esponse at the t op of

24 t he page.

25 A. OK.


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1 Q. What ' s t he f i r st l i ne of t hat r esponse?

2 A. " I under st and. "

3 Q. Al l r i ght . Mr . Spr i ng, you ment i oned r ent payment s, r ent

4 char ges you had not i ced i n t he books. I s t hat r i ght ?

5 A. That ' s cor r ect .

6 Q. Di d you have any di scussi ons wi t h t he def endant about r ent

7 char ges, i n par t i cul ar r ent payment s?

8 A. Wel l , I di d. Especi al l y - - I di d. I di d. Yes.

9 Q. And what was t he nat ure of t hose di scussi ons t hat you had

10 wi t h t he def endant ?

11 A. That , you know, we had not r ecei ved any wr i t t en

12 conf i r mat i on or any other conf i r mat i on t hat t hese woul d be

13 al l owabl e expenses, so t hey have t o come out of an al l owabl e

14 expense; and gi ven t hat i t was r ent on t he apar t ment , t hese

15 were t hi ngs t hat woul d happen every si ngl e mont h, so t he

16 conver sat i on came up a l ot , unt i l f i nal l y i t r eached a cl i max

17 i n one of our more heat ed debat es, wher e t he def endant t ol d me

18 he woul d t el l t hem, by whi ch I t hi nk he meant t he ATP managers

19 - -


21 THE COURT: J ust gi ve t he st at ement s, don' t say what

22 you bel i eved.

23 A. Al l r i ght . The def endant t ol d me he woul d t el l t he ATP

24 managers t hat he l i ved i n Connect i cut .

25 Q. Di d t he def endant i n f act l i ve i n Connect i cut , t o your


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1 knowl edge?

2 A. Absol ut el y not .

3 MR. RUBI NSTEI N: Obj ect i on. I move t o st r i ke t hat .

4 THE COURT: Wel l , t he j ur y i s not t o - - t he j ur y i s t o

5 di sr egar d t he concl usi on of t he wi t ness t hat t he def endant di d

6 not l i ve i n Connect i cut . I t ' s hear say. I t woul d be based on

7 hearsay i nf ormat i on.

8 Q. Al l r i ght . Mr . Spr i ng, besi des t he i ssue wi t h t he r ent

9 t hat you j ust di scussed, di d you have any di scussi ons wi t h t he

10 def endant about ot her expenses?

11 A. Yes, medi cal expenses f or exampl e; t he cl eaner, t hi ngs

12 r el at ed t o t he r ent , ut i l i t i es, capi t al i mpr ovement s on t he

13 apar t ment , whi ch was usi ng ATP money.

14 Q. Let ' s st ar t wi t h medi cal expenses. What , i f anyt hi ng, di d

15 you di scuss wi t h t he def endant about medi cal expenses?

16 A. Wel l , a l ot of t he medi cal expenses went back t o f i ve

17 mont hs bef ore t he st ar t of t he pr oj ect , t hat he was get t i ng ATP

18 t o pay f or . That was a bi g i ssue as I l earned about t he

19 r egul at i ons f or t he ATP pr oj ect , you know, sever al weeks i nt o

20 st ar t i ng - -

21 MR. RUBI NSTEI N: I ' m goi ng t o obj ect t o t hi s. He has

22 not been qual i f i ed as an exper t on t he ATP r egul at i ons. I t ' s

23 sel f ser vi ng.

24 THE COURT: The j ury i s i nst r ucted he i s not an expert

25 on t he ATP r egul at i ons; however , he may st at e what hi s


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1 unders t andi ng of t hose r egul at i ons was at t he t i me.

2 A. May I cont i nue?

3 Q. Yes, pl ease.

4 A. My unders t andi ng of t he ATP r egul at i ons was such t hat t here

5 woul d be no empl oyee benef i t s al l owed t o be pai d f or by ATP

6 such as medi cal expenses, i f t he r eci pi ent ' s company - - CASI i n

7 t hi s case - - di d not have a f ormal empl oyee benef i t s pl an,

8 whi ch CASI di d not have.

9 Q. What sor t of expenses di d you t al k t o t he def endant about ?

10 A. On t he medi cal expense si de t her e was a l arge amount of

11 expenses t o doct ors, and one t hat got my i mmedi at e at t ent i on

12 was f or el ect r ol ysi s.

13 Q. How di d you know i t was f or el ect r ol ysi s?

14 A. The def endant when he was doi ng hi s own dat a ent r y had

15 not ed t hese t hi ngs as zappi ng.

16 Q. What i s el ect r ol ysi s?

17 A. That ' s when you have al l of or some hai r removed f r om your

18 body. Hai r r emoval .

19 THE COURT: Al l t hese expenses were wi t hi n t he grant

20 per i od?

21 THE WI TNESS: No, your Honor . A number of t hem

22 pr edat ed t he st ar t of t he gr ant by f our or f i ve mont hs.

23 Q. And what i f anyt hi ng di d t he def endant say t o you when you

24 di scussed t hese expenses wi t h hi m?

25 A. I woul d get the usual r ef r ai n, whi ch I al r eady ci t ed t wi ce,


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1 whi ch i s t hat I di dn' t know what I was doi ng, I di dn' t

2 underst and t he ATP r egul at i ons, or t hat he was seeki ng approval

3 of t hese t hi ngs af t er t he f act f r om t he ATP manager s.

4 Q. Al l r i ght . I want you t o l ook at Gover nment Exhi bi t 143,

5 whi ch i s not i n evi dence yet . Do you see t hat document ?

6 A. I do.

7 Q. Do you r ecogni ze t hat document ?

8 A. I do.

9 Q. What i s i t ?

10 A. I t ' s anot her chai n of e- mai l s f r om t he same t i me per i od.

11 Q. Bet ween who and who?

12 A. Bet ween mysel f and t he def endant and - - yes, between mysel f

13 and t he def endant .


15 Government Exhi bi t 143.

16 THE COURT: 143 i s admi t t ed i n evi dence.

17 ( Gover nment ' s Exhi bi t 143 r ecei ved i n evi dence)

18 Q. Al l r i ght . Mr . Spr i ng, i f you coul d pl ease l ook at t he

19 l ast t wo pages of t hat exhi bi t - - t he l ast t hr ee pages of t hat

20 exhi bi t . Wi t hout r eadi ng di r ect l y f r om t he exhi bi t , coul d you

21 summar i ze t he di scussi on goi ng on bet ween your sel f and t he

22 def endant .

23 MR. RUBI NSTEI N: Do we have a page t hat he i s on, your

24 Honor ?

25 THE COURT: St ar t at t he back and st ar t r eadi ng


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1 f orward.

2 Q. The l ast t hr ee pages, i f you coul d j ust summari ze a bi t

3 what you are di scussi ng t here, wi t hout havi ng t o r ead t hr ough

4 t he whol e e- mai l .

5 A. OK, r i ght . Thi s act ual l y r eal l y br eaks i nt o t wo par t s.

6 One i s st i l l addr essi ng some of t he i ssues we have been t al ki ng

7 about her e t oday r egardi ng what was ATP al l owabl e and not , as

8 wel l as t he ot her ar ea I was worki ng on whi ch were budget f or

9 t he upcomi ng f i scal year .

10 Q. I f we coul d now di spl ay page 2 of t hat exhi bi t , and i f you

11 coul d l ook at t he f our t h par agr aph t her e. Fi r st of al l , who

12 sent t hat e- mai l t o who?

13 A. Thi s i s f r om t he def endant t o mysel f .

14 THE COURT: Thi s i s t he next t o l ast page of t he

15 exhi bi t ?

16 MR. EVERDELL: Sorr y. Thi s i s page 2 of t he exhi bi t .

17 And we are at t he f our t h paragr aph f r om t he t op.

18 THE COURT: Al l r i ght .

19 Q. So, thi s i s an e- mai l f r om t he def endant t o your sel f ?

20 A. That ' s cor r ect .

21 Q. Wi l l you pl ease r ead t hat paragr aph, t he f our t h paragr aph.

22 A. "What cost i t ems di d I submi t t hat J oan i s di sal l owi ng?

23 Any heal t h or f r i nge cost i t ems? I can over r ul e/ al l ow t hose

24 cost s even t hough CASI does not have a f ormal wr i t t en benef i t s

25 pl an based on t he behavi or of t he company i n t he past and


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1 showi ng i t i s consi st ent t hr ough t he pr oj ect . Even i f i t i s

2 not consi st ent t hr ough t he pr oj ect i t i s st i l l my opt i on do t o

3 t hese t hi ngs wi t h an unwr i t t en benef i t s pl an. "

4 Ther e ar e some t ypos i n t her e, I am af r ai d.

5 Q. Let ' s t al k about t he capi t al i mpr ovement equi pment expenses

6 you ment i oned bef or e.

7 A. Yes.

8 Q. Di d you have any di scussi ons wi t h t he def endant about t hese

9 capi t al i mprovement equi pment expenses t hat you had ment i oned

10 bef ore?

11 A. We ar e at thi s poi nt l i t er al l y t wo mont hs i nt o t he f i scal

12 year two of t he pr oj ect , and i t was my est i mat i on t hat t he cash

13 f l ow was goi ng t o be adver sel y af f ect ed because of t he amount

14 of money t hat was bei ng spent on t he pr oj ect . The f unds t hat

15 wer e bei ng t apped f r om ATP at t hat t i me weren' t goi ng t o al l ow

16 t he pr oj ect t o cont i nue t o f unct i on f i nanci al l y, and some of

17 t hi s had t o do wi t h capi t al expendi t ur e or equi pment

18 expendi t ur e.

19 Q. Why exact l y di d t hi s have t o do wi t h capi t al expendi t ur es

20 or equi pment expendi t ures?

21 A. The ATP pr oj ect I bel i eve f or al l t hr ee of t he year s t hat

22 t he pr oj ect woul d have r un f or , t he r eci pi ent coul d access t he

23 f unds on a r egul ar basi s, and i n t he case of year t wo i t was on

24 a mont hl y basi s, and when I r an some pr oj ect i ons i t was obvi ous

25 t o me t hat we were t appi ng i nt o t oo much money t oo soon, and


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1 t heref ore we woul d r un out of money bef ore t he end of f i scal

2 year t wo.

3 Q. Di d you have any conversat i ons wi t h t he def endant about

4 t hat i ssue, about runni ng out of money?

5 A. Wel l , when i t began t o af f ect t hi ngs l i ke payr ol l , I

6 cer t ai nl y di d.

7 Q. How di d i t af f ect payr ol l ?

8 A. Wel l , we got - - at one poi nt - - I don' t r emember t he exact

9 dat e - - i t was my est i mat i on t hat payrol l coul dn' t be met ; and

10 as a busi ness owner mysel f t hat seemed ext r aor di nar y.


12 Q. Al l r i ght , wi t hout addi ng t hose comment s, di d you have a

13 di scussi on wi t h t he def endant about t hi s i ssue of cash f l ow?

14 A. I di d.

15 Q. And what i f anyt hi ng di d t he def endant say t o you about

16 t hi s i ssue of cash f l ow?

17 A. I n r egar ds t o payr ol l ?

18 Q. I n r egar ds t o payr ol l .

19 A. I n r egards t o payr ol l he t ol d me t hat peopl e woul d get pai d

20 when t hey get pai d.

21 Q. I woul d l i ke you t o l ook at Gover nment Exhi bi t 142 whi ch i s

22 not yet i n evi dence.

23 Do you see t hat document?

24 A. I do.

25 Q. Do you r ecogni ze t hat document ?


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1 A. I do.

2 Q. And what i s i t ?

3 A. Thi s i s an e- mai l chai n f r om mi d- November of 2002.

4 Q. Bet ween who and who?

5 A. I t i s bet ween t he def endant and mysel f and - - yes, no one

6 was copi ed on t hose e- mai l s - - j ust t he def endant and mysel f .


8 Exhi bi t 142.

9 MR. RUBI NSTEI N: No obj ect i on, your Honor .

10 THE COURT: 142 i s admi t t ed i nto evi dence.

11 ( Gover nment ' s Exhi bi t 142 r ecei ved i n evi dence)

12 Q. Pl ease t ur n t o t he l ast page of t hat exhi bi t , page 4. I s

13 t hat an e- mai l f r om your sel f t o Dr . Kar r on?

14 A. I t i s .

15 Q. Coul d you pl ease l ook at where you have poi nt f i ve. Coul d

16 you r ead out poi nt f i ve?

17 A. "Transf er r i ng 40K woul d mean t hat i n j ust over si x weeks

18 i nt o year t wo of t he pr oj ect CASI has t aken over 30 percent of

19 t hi s year ' s f undi ng. I f you f act or ed i n ( as i f t hey wer e pai d)

20 t he addi t i onal $110, 000 pl us due CASI vendor s, t hi s woul d mean

21 t hat CASI has act ual l y used up cl oser t o 50 per cent of t he

22 NI ST- suppl i ed f unds. J ust somet hi ng t o ponder . . . "

23 Q. What di d you mean by sendi ng t he def endant t hat e- mai l ?

24 A. Wel l , t hi s i s mi d- November , f i scal year t wo, one and a hal f

25 mont hs i nt o t he begi nni ng of f i scal year t wo, and what I am


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1 sayi ng t here i s t hat we woul d have used up 50 per cent of t he

2 year ' s f undi ng si x weeks i nt o i t , si x weeks i nt o t he pr oj ect .

3 Q. Does t hi s r el ate t o t he cash f l ow pr obl emyou ment i oned

4 bef ore?

5 A. Oh, absol ut el y.

6 Q. What i f anythi ng was t he def endant ' s r esponse af t er t hi s?

7 A. Pr et t y much i t was hi s company and he woul d do what he

8 want ed.

9 Q. Al l r i ght . You ment i oned cl eani ng expenses.

10 MR. RUBI NSTEI N: I s he r eadi ng f r om an e- mai l or

11 somet hi ng?

12 THE COURT: No, he wasn' t r eadi ng f r om an e- mai l . He

13 j ust gave hi s answer .

14 Q. Let ' s t al k about cl eani ng expenses whi ch you ment i oned

15 bef ore. You had some di scussi ons wi t h t he def endant about

16 cl eani ng expenses?

17 A. I di d.

18 Q. What di d you mean by cl eani ng expenses?

19 A. Wel l , t here were weekl y char ges.

20 THE COURT: Let me go back. You ment i oned 40, 000.

21 THE WI TNESS: Yeah, 40K.

22 THE COURT: A t r ansf er . What di d t hat r ef er t o? Do

23 you r emember ?

24 THE WI TNESS: The $40, 000, t he way one accessed t he

25 ATP f unds was t hat i t was al l done el ect r oni cal l y. ATP di d not


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1 send CASI a check. We were abl e t o - - Dr . Karr on was abl e t o

2 get onl i ne and access t he ATP f unds and shi f t t hem t o t he CASI

3 bank account . And t hat ' s what I meant by a t r ansf er .

4 THE COURT: A dr aw- down.

usa v karron 07 cr 541 (rpp) frank spring direct examination and cross examination 1

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