Court filing
TRANSCRIPT of Trial Day 3 as to Eric Dean Sheppard held on 11/29/2023 before Judge Beth… — USA v. SHEPPARD (Dkt. 309)
Record facts
| Court | U.S. District Court for the Southern District of Florida |
|---|---|
| Filed | 2025-02-25 |
U.S. District Court for the Southern District of Florida · No. 1:22-cr-20290-BB · Doc. 309 · 2025-02-25 · Docket on CourtListener
Summary
Transcript of Trial Day 3 for November 29, 2023 in United States of America v. Eric Dean Sheppard, Case No. 1:22-cr-20290-BB-1, before the Honorable Beth Bloom and a jury of 12 in the U.S. District Court for the Southern District of Florida, Miami Division. It is Doc. 309, entered on the docket February 25, 2025, and covers pages 1 through 244. The index records three government witnesses, with cross-examination by Mr. Etra and redirect by Ms. Martinez, then a direct examination by Ms. Jimenez with cross-examination by Ms. Weintraub, and a further direct examination. It lists government exhibits admitted, including Exhibits 4-1 through 4-3, 17-1 through 17-12, 18-1 through 18-6 and 19-1 through 19-20, and defense exhibits in the L and M series. Proceedings adjourn at 4:05 p.m.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
CASE NO. 1:22-cr-20290-BB-1
UNITED STATES OF AMERICA,
Plaintiff,
November 29, 2023
9:02 a.m.
vs.
ERIC DEAN SHEPPARD,
Defendant.
Pages 1 THROUGH 244
______________________________________________________________
TRANSCRIPT OF TRIAL DAY 3
BEFORE THE HONORABLE BETH BLOOM
UNITED STATES DISTRICT JUDGE
And a Jury of 12
Appearances:
FOR THE GOVERNMENT: UNITED STATES ATTORNEY'S OFFICE
AIMEE C. JIMENEZ, AUSA
ANA MARIA MARTINEZ, AUSA
99 Northeast 4th Street
Miami, Florida 33132
FOR THE DEFENDANT: SALE & WEINTRAUB, PA
JAYNE C. WEINTRAUB, ESQ.
2 South Biscayne Boulevard, 21st Floor
Miami, Florida 33131
NELSON MULLINS
JONATHAN ETRA, ESQ.
CHRISTOPHER C. CAVALLO, ESQ.
2 South Biscayne Boulevard, 21st Floor
Miami, Florida 33131
COURT REPORTER: Yvette Hernandez
U.S. District Court
400 North Miami Avenue, Room 10-2
Miami, Florida 33128
yvette_hernandez@flsd.uscourts.gov
ALSO PRESENT: Special Agent Sarah Halleran
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Case 1:22-cr-20290-BB Document 309 Entered on FLSD Docket 02/25/2025 Page 1 of 244
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
I N D E X
Certificate..................................... 244
W I T N E S S
ON BEHALF OF THE GOVERNMENT:
PAGE
PHILIP PALMER
CROSS-EXAMINATION BY MR. ETRA
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REDIRECT EXAMINATION BY MS. MARTINEZ
75
MARTIN JOE BEIRNE
DIRECT EXAMINATION BY MS. JIMENEZ
96
CROSS-EXAMINATION BY MS. WEINTRAUB
130
REDIRECT EXAMINATION BY MS. JIMENEZ
179
JAMMIE HUTCHESON
DIRECT EXAMINATION BY MS. JIMENEZ
191
E X H I B I T S
GOVERNMENT'S EX. NO.: OFFERED ADMITTED
15, 15-1, 15-2
5 5
4-1
103 103
4-2
104 104
4-3
105 105
4-5
105 106
4-6
106 106
4-7
107 107
17
196 196
17-1 through 17-12
197 197
18-1 through 18-6
197 197
19-1 through 19-20
197 197
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206 206
8
207 208
DEFENDANT'S EX. NO.: OFFERED ADMITTED
L-43, Page 2
46 46
L-43, complete exhibit
74 75
M-14
133 133
M-11
138 139
M-9
158 158
M-8
163 163
M-3
173 174
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
(Call to order of the Court, 9:02 a.m.)
THE COURT: Good morning to everyone.
MS. MARTINEZ: Good morning, Your Honor.
THE COURT: Go ahead and have a seat.
Let me acknowledge the presence of the Defendant.
I believe we are waiting for one juror who is running
a few minutes late.
Are there items we need to address this morning?
MS. JIMENEZ: Yes, Your Honor.
Good morning. Aimee Jimenez for the United States
here.
I've just been provided a binder for a witness who we
expect to be called today. I see documents in here like a
letter not authored by this witness. I don't know how this
letter comes into evidence. And I'm just starting to review
the binder, so I expect I'll have objections.
MS. WEINTRAUB: May I be heard, Your Honor? Although
I think it's very premature --
THE COURT: All right.
MS. WEINTRAUB: I'm sorry?
THE COURT: Ms. Weintraub, would you like to respond
specifically regarding the letter?
MS. WEINTRAUB: Just for edification, I handed
Ms. Jimenez, in advance of the day, a binder with potential
impeachment material that -- I don't know if I'm going to use
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
it or not, depending on what the witness says. But in the
interest of trying to be candid and disclose it promptly, so
that it's not disrupting the jury's presence, I handed it to
Ms. Jimenez this morning.
The letter is a letter that the witness asked to be
written on his behalf to his bank. I'm sure he's going to
admit it.
MS. JIMENEZ: There are letters. There are records.
There's articles.
MS. WEINTRAUB: As I said, it's potential impeachment.
THE COURT: So there are no issues at this point,
correct? You have been provided a binder of impeachment
materials. And when the issue arises, Ms. Jimenez, you can
bring it to the Court's attention.
MS. JIMENEZ: All right. Thank you, Your Honor.
THE COURT: Okay?
MS. MARTINEZ: Your Honor, just to make the Court
aware, I'm in the same situation just with respect to exhibits
for the witness that is on the stand now. So if -- when issues
come up, I'll like my objection, Your Honor. I'm going through
it now.
THE COURT: Do we have that witness here?
MS. MARTINEZ: Yes, Your Honor.
(Pause in proceedings.)
MS. MARTINEZ: Your Honor, there is one issue. The
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
paralegal is noting that you overruled the objection I believe
with respect to Exhibits 15, 15-1, and 15-2, but in her notes
she doesn't note it as admitted. So before cross-examination
starts, I want to make sure that those are admitted.
THE COURT: All right. Then for purposes of the
record 15-1 and 15-2 -- the Court did overrule the objection --
each admitted into evidence.
MS. MARTINEZ: And there's actually a 15 by itself.
THE COURT: Fifteen. The 1040?
MS. MARTINEZ: Yes.
THE COURT: 15, 15-1, 15-2 --
MS. MARTINEZ: Thank you, Your Honor.
THE COURT: -- each admitted into evidence.
(Government's Exhibits 15, 15-1, and 15-2 received
into evidence.)
THE COURT: Good morning, sir.
THE WITNESS: Good morning.
THE COURT: Go ahead and have a seat.
We're just waiting for the jury.
THE WITNESS: Okay. Thank you.
(Pause in proceedings.)
THE COURT: All of the jurors are present. Are both
sides ready to proceed?
MS. JIMENEZ: Yes, Your Honor.
THE COURT: On behalf of the Defendant?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. ETRA: Ready, Your Honor.
COURT SECURITY OFFICER: All rise for the jury,
please.
(Before the Jury, 9:07 a.m.)
THE COURT: Good morning, Ladies and Gentlemen.
Please be seated, everyone. It is good to see you.
Thank you for being prompt, and we are ready to get right back
to work.
And continuing with the direct examination of
Mr. Palmer. And, sir, let me remind you, you were previously
placed under oath.
MS. MARTINEZ: Your Honor, before cross-examination
begins, may I just state on the record again that you have
admitted Exhibits 15, 15-1 and 2. And the reason for doing
that is when the court reporter transcribes sometimes it starts
from when -- the time the jury comes in. So that just makes
the transcript include what we previously discussed.
THE COURT: Yes. Fifteen, 15-1, and 15-2 are each
admitted into evidence.
MS. MARTINEZ: Thank you, Your Honor.
And the United States concludes its direct
examination.
THE COURT: Thank you. Cross-examination.
(Pause in proceedings.)
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. ETRA: May I proceed?
THE COURT: Yes. Of course.
CROSS-EXAMINATION
BY MR. ETRA:
Q.
Good morning -- Mr. Palmer, correct?
A.
Correct. Good morning.
Q.
Other than exchanging pleasantries yesterday and this
morning, we've never spoken, correct?
A.
Correct.
Q.
You're here as an expert, not as a fact witness, right?
MS. MARTINEZ: Objection, Your Honor.
THE COURT: Basis?
MS. MARTINEZ: Your Honor, the witness testified as an
expert.
THE COURT: Yes. That's the question. Overruled.
MS. MARTINEZ: And Your Honor, likewise --
THE COURT: What is the legal basis for the objection,
please?
MS. MARTINEZ: The legal basis is that the witness is
a dual witness. Also --
THE COURT: The objection is overruled.
You may continue with your cross-examination.
MR. ETRA: Thank you.
BY MR. ETRA:
Q.
Let me ask again. I'm not sure we got the answer. I'll
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
just start again. You're here as an expert, not a fact
witness; is that correct?
A.
I'm here as an expert, correct.
Q.
Okay. Fair enough. And by "fact witness" we mean -- fact
witness is someone who has familiarity with the events that
have happened in this case. You don't have, for example,
dealings with Mr. Sheppard or anything like that, correct?
A.
That would be correct.
Q.
You've never met Mr. Sheppard; is that correct?
A.
Correct.
Q.
You don't know anything about Mr. Sheppard?
A.
Apart from tax filings, that would be correct. Yes.
Q.
Do the tax filings tell you who Mr. Sheppard is?
A.
No.
Q.
You've been with the IRS for about almost 20 years?
A.
A little over 16, correct.
Q.
You're going to be better with the math than I am, I'm
sure, as well as with the taxes.
You've performed tax audits of small businesses and
large businesses, correct?
A.
Correct.
Q.
And you've dealt with all issues, not just employment
issues, especially earlier in your career, right?
A.
Correct.
Q.
And you've -- part of your job was to educate taxpayers on
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
how tax law works, correct?
A.
Correct.
Q.
That's in your resume that you kindly provided, correct?
A.
Correct.
Q.
And you have to educate taxpayers about how tax law works
because some taxpayers don't know some of these things, right?
A.
Correct.
Q.
That's why -- it was such a big part of your job that you
actually dedicated a line of your resume to the fact that part
of your job was educating taxpayers, right?
A.
Correct. Yes.
Q.
And especially with small businesses. Some small business
owners understand the tax laws well and some don't. Is that
your experience?
A.
That's my experience, yes.
Q.
And you have no idea where Mr. Sheppard falls on that
spectrum of small business owners -- how well they understand
or don't understand the tax laws, right?
A.
Correct.
Q.
And you became an employment tax specialist in 2015 or so;
is that right?
A.
That's correct.
Q.
That's really where you developed more of your expertise in
this area of employment issues and 1099s, those kinds of
issues?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
And you actually put in your resume that you built
experience interpreting and applying tax law, right?
A.
That's correct.
Q.
That's somewhat unique to you in the sense that the average
person doesn't have that kind of experience, right?
A.
Correct.
Q.
And you performed employment tax examinations of large
complex businesses with minimal supervision at that point in
your career, right?
A.
Correct.
Q.
And I think you testified on direct that you have
handled -- you've audited some of the most complex employment
tax-related issues I guess in the country. Is that fair?
A.
For this area, correct. South Florida, yes.
Q.
South Florida. Thank you for correcting me. For South
Florida.
And that's -- and now as of the summer you got a
promotion; congratulations -- to lead employment tax
specialist, right?
A.
Correct.
Q.
I guess that's more of a supervisor than the person who is
doing the actual work day to day?
A.
No. It's both.
Q.
Both. Okay. You're still rolling up your sleeves and
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
working on audits and examinations?
A.
Correct.
Q.
And how many small businesses do you think you've audited
over the years?
A.
Hundreds.
Q.
Hundreds. Okay.
Now, you had no contact or involvement with
Mr. Sheppard or any of the companies that he's affiliated with
in your career, correct?
A.
Correct.
Q.
And you were not asked by the Government to conduct an
investigation into Mr. Sheppard or his companies, correct?
A.
I was not asked to do an audit, correct.
Q.
When I said "examination," you said "audit." What's the
difference?
A.
You said "investigation."
Q.
You're right, and that's why I wanted to correct myself.
Thank you. I said "investigation." You said "audit." Tell me
how you use the term and why you answered that way.
A.
An investigation would involve research, research of the
tax modules, research to identify what's been filed and what
hasn't. An audit would be a lot more involved. It would be
speaking with Mr. Sheppard. It would be securing records,
examining physical records.
Q.
So you were not asked to do an audit of Mr. Sheppard or his
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
companies, correct?
A.
Correct.
Q.
And to your knowledge, Mr. Sheppard and his companies have
never been audited by the IRS, right?
A.
To my knowledge. Correct.
Q.
Did you check before you came into court?
A.
I did. Correct.
Q.
And so it's correct, Mr. Sheppard and the -- the IRS has
never chosen to audit Mr. Sheppard or his companies; is that
correct?
A.
Not any of the companies that I reviewed, or Mr. Sheppard,
correct.
Q.
Okay. Did the IRS audit other companies that
Mr. Sheppard's involved with that you did not review?
A.
I can't speak to anything that I didn't look up.
Q.
Right. Which gets to another point. Mr. Sheppard is
involved with other companies, and you did not look at those
other companies, correct?
A.
I looked at the companies associated with his Form 1040.
So if they were reported on his Form 1040, I did take a look at
those.
Q.
So you know the Form -- okay. And so which companies did
you look at?
A.
I would have to go back to the schedule. I believe there
were eight or so companies.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And you looked at the returns for all of them?
A.
I didn't look at the returns. I looked as to whether they
filed returns or not.
Q.
Okay. And you've testified about the ones where the IRS
couldn't find returns, right?
A.
Correct.
Q.
And for the returns that were filed, tell me all the time
you spent reviewing those returns as part of your work for the
Government.
A.
The exact time, I don't know, but a few days.
Q.
I should have asked it differently.
You looked at returns for only some of his companies,
right?
A.
Correct.
Q.
And you spent no time on the other companies, correct?
A.
No time looking at the returns for the other companies.
Correct. Yeah.
Q.
Right. We didn't stop you -- we don't have the ability to
stop you from examining returns filed with the IRS, right?
A.
Correct.
Q.
But the Government just didn't ask you to look at the other
returns?
A.
Correct.
Q.
And you didn't tell the Government: "Look, to do this
properly, I need to look at all the other returns to see how
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
they might relate to each other"?
A.
I don't recall if we had that conversation. But again, to
clarify, I did check the filings of all the entities reported
on his Form 1040 to ensure that there were no other entities
that could have, for example, filed employment tax returns. So
I did do that.
Q.
Okay. That's not my question. I'm talking about reviewing
the tax filings of the companies -- of the rest of the
companies that you did not review.
A.
That were filed. You said: "Tax filings." Doesn't
necessarily mean that they were filed. You mean if I reviewed
the returns that were filed for the other companies? Is
that --
Q.
What's the difference between tax filings and returns? Why
are you --
A.
A tax filing doesn't necessarily indicate that it's been
submitted to the government. It's a term we use because tax
files are a requirement. It doesn't necessarily mean that they
have been submitted.
Q.
So if I use the term "tax returns," it will refer to all
filings -- the way I use the word, and maybe more commonly
used -- that were actually submitted to the government -- to
the IRS, right?
A.
Yes. Correct.
Q.
So to be clear, you did not review the tax returns of all
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
the companies that Mr. Sheppard's affiliated with, right?
A.
That's correct.
Q.
And you didn't think it was necessary to do that for your
testimony, right?
A.
Correct.
Q.
You seemed to hesitate. Why did you hesitate?
A.
I just want to -- I was thinking over the question to make
sure I understood what you're asking.
Q.
Which you're, of course, allowed to do.
A.
Yeah.
Q.
You understand that some of his companies, the way it
runs -- for example, HM Management provides services to other
companies that's affiliated with Mr. Sheppard. You understand
that, right?
A.
I do. Yes.
Q.
And therefore -- and you understand they all use an
accountant named Neal Cupersmith, correct?
A.
I understand the returns that I reviewed had that
accountant's name on them. Yes.
Q.
And did you look into who Neal Cupersmith was?
A.
I did not.
Q.
Did you go online to see his resume to see if he presented
himself as a legitimate and capable accountant?
A.
I did not.
Q.
In your experience with small businesses, do you find they
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
sometimes rely on their accountant?
A.
That's a fair statement. Yes.
Q.
And you did no investigation to determine to what extent
everything you talked about yesterday had to do with the advice
of Neal Cupersmith versus the independent decisions of
Mr. Sheppard?
MS. MARTINEZ: Objection. Counsel is testifying.
THE COURT: It's cross-examination. Overruled.
THE WITNESS: Could you repeat the question?
BY MR. ETRA:
Q.
You did no investigation to determine whether everything
you testified yesterday had to do with the advice and guidance
and -- advice and guidance of the accountant versus the
independent decisions of this small businessman sitting here?
A.
That was not part of the investigation I conducted.
Q.
You weren't even asked to look at that?
A.
I don't believe I was.
Q.
And you understand that -- did you actually understand that
HM Management provided services to the other companies? Did
you say you understood that?
A.
Correct. Yes.
Q.
Okay. So you understand there's an accountant involved,
correct?
A.
Correct.
Q.
A CPA, certified public accountant, right?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Right.
Q.
And notwithstanding the fact that you have tremendous
expertise, you're actually not a CPA, correct?
A.
That's correct.
Q.
And just generally speaking, what's the extra step you have
to do to become a CPA?
A.
You have to take a certification test in four parts, and
you take it with the state that you reside in.
Q.
Takes a few years. It's a long process?
A.
I would say about six to eight months of studying, and then
the test. Yeah.
Q.
Okay. And you understand that as part of doing tax
returns, for example, wages and other costs, or wherever 1099s
go -- and we'll get to that -- there could be an allocation
between where the accountant decides to put those numbers
between the HM Management company that provides the services
and the other companies that might receive the services. You
understand that, right?
A.
I do.
Q.
Okay. So you understand that if you want a picture of the
way Mr. Sheppard's companies report to the IRS about the work
they do, you have to look at all the tax returns together;
isn't that correct?
A.
Yes.
Q.
And you did not do that, correct?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Again, for the years --
Q.
Yes or no, if you can.
A.
I don't think a yes or no would be an accurate answer to
that question.
Q.
Okay. Go ahead.
A.
Yeah. So for the years that I reviewed, for specifically
2019 through 2021, there was no filings related to employment
taxes for any of the entities. So that would give me a
complete picture.
Q.
Okay. Let's talk about 1099. Okay?
A.
Okay.
Q.
Do you know whether -- to determine how much money was
spent or how much is reported to the IRS for labor, whether
it's 1099 -- let's focus on 1099 -- you have to look at all of
the companies together to figure out how that's reported to the
IRS?
A.
Correct.
Q.
Because there could be allocation and overlap, and it gets
complicated with a large set of companies, right?
A.
Correct.
Q.
So you have given no testimony in your direct about how
much money was reported to the IRS for payments made to 1099ed
workers, correct?
A.
That's correct.
Q.
Okay. Okay. So let me take a step back and go in a
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
different direction here. This case involves, among other
things, several workers, individual workers. I'm just going to
mention some names. Okay? Joe Beirne, Maria Ataca -- I'm just
going to mention two. Were you given any of the names of any
of the workers involved in this case to look into?
A.
I can't recall.
Q.
Did you do any work to investigate any of the names --
investigate for purposes of your testimony any of the names of
workers in this case?
A.
I did not. No.
Q.
And your primary testimony I thought was going to be about
the difference between how a company is supposed to treat --
how an employer is supposed to treat the W-2 people -- people
for whom they -- let me start again.
Your -- first part of your testimony was how a
company is supposed to -- what a company is supposed to do for
those employees that it treats as a 1099 -- that files 1099 --
and those that file W-2s, correct?
A.
Correct.
Q.
But you skipped the first step, correct?
A.
With respect to 1099s?
Q.
With respect to how to treat these different people.
A.
I don't believe I did, no.
Q.
Doesn't the company first have to make a decision whether
they are properly most likely considered an employee under the
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
IRS rules or most likely considered an independent contractor
under IRS rules? Isn't that the first part of this process?
A.
That's correct.
Q.
Okay. Right. And that's a large part of the analysis of
how to treat workers, whether they -- whether companies should
treat them -- or file a 1099 or a W-2. That's a big part of
the work you've done for the IRS, right?
A.
That's correct.
Q.
You go in, you look at a company, and you say: "You
know" -- I'm not saying you personally, but your team or
whoever -- say: "Look, I think you treated these people -- you
filed 1099s. I think you misclassified them. They really
should be W-2 workers," and then you have to deal with the IRS
on that. Is that a short version of a lot of what you have
done?
A.
That's correct.
Q.
Called misclassification?
A.
Correct.
Q.
And you understand that it can be complicated figuring out
whether someone is a 1099 or a W-2, right?
A.
It can be. It can be easy as well.
Q.
Sometimes it's hard, sometimes it's easy, right?
And there are some times you've experienced some close
calls, correct?
A.
Correct.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And that's because there's not one simple factor or one
simple rule, like a bright-line test, to make the decision of
W-2 versus 1099; is that right?
A.
It's fact-intensive, yeah. It varies.
Q.
And it's factor-intensive. And, you know, sometimes
companies misclassify. Maybe they do it intentionally, but
sometimes they might do it mistakenly. You know that from your
experience, right?
A.
Correct.
Q.
And sometimes the person sitting atop of the company may
not be even involved in those decisions, correct?
MS. MARTINEZ: Objection. Speculation.
THE COURT: Based on his experience. Overruled.
THE WITNESS: Depending on the size of the company,
that's possible. Yes.
BY MR. ETRA:
Q.
Certainly you've experienced -- you've audited companies
where the person at the top of the company wasn't involved in
that decision of W-2 versus 1099. That's happened to you,
right?
A.
Correct.
Q.
And that's not like a once-in-a-lifetime experience. It
happens with some frequency, correct?
A.
It's been rare in my experience.
Q.
So your experience is that the boss of the company is
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
always involved in making a decision whether to classify
someone as W-2 or 1099?
A.
Not always, no.
Q.
Okay. All right. And often the accountant might be
involved, right?
A.
The accountant can give some advice or I've seen
situations --
Q.
And you've done no investigation to see whether the
accountant gave that advice here?
A.
Have not.
Q.
Or was consulted?
A.
I have not.
Q.
And also, typically, these decisions at least are handled
at sort of the payroll or back-office level. Are those fair
terms to use?
A.
Again, it depends on the size of the company, the amount of
people involved, whether it's a small, large -- how far away
from the day-to-day operations the owner is. So it depends.
Q.
Well, does it sometimes happen that these things are dealt
with in the back office? Correct?
A.
I mean, I would be speculating, but I suppose yes.
Q.
You've never experienced that in all of your audit work,
that it's handled in the back office? Is that your testimony?
A.
When you say "back office," clarify for me what you mean.
Q.
Bookkeeping, payroll department, human resources
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
department, office manager, those types of jobs.
A.
Without any interaction with upper management or the
owners --
Q.
Well, could be some: "Hey, by the way, this just
happened." But in terms of -- where the sausage gets made is
typically in those back office departments, right?
A.
That's possible, yes.
Q.
And you say it depends on the size. I mean, doesn't it
depend on the personality and experiences of the individuals?
A.
That also plays a part, yes.
Q.
Right. And you don't know whether Mr. Sheppard is the kind
of person who might focus on real estate development and
construction and not so much on, you know: "Please fill out
this form and follow this classification"? You don't know one
way or the other, correct?
A.
Correct.
Q.
And you made no attempt at all to find out in your work
before you showed up in court?
A.
I didn't conduct an audit. Correct.
Q.
And in this case did you determine how long Mr. Cupersmith
was the accountant for Mr. Sheppard's companies?
A.
I did not.
Q.
You didn't like to see if he's been doing -- if
Mr. Cupersmith has been advising --
MS. MARTINEZ: Objection. Counsel is about to testify
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
again.
THE COURT: It's a proper question on
cross-examination. Overruled.
MS. MARTINEZ: There's no foundation that there's any
reason that this witness would know --
THE COURT: And the witness can respond accordingly.
You may continue.
BY MR. ETRA:
Q.
You made no attempt to determine whether Mr. Cupersmith's
been advising Mr. Sheppard's companies for maybe 20 years?
A.
My work was primarily centered around the years that I was
given, which I believe was 2018 through 2021, or somewhere
around there.
Q.
So the answer is you didn't?
A.
Correct.
Q.
And in your experience with small business owners -- when
they have long-time accountants, in your experience, does the
accountant tend to get a little more involved or aware of
what's going on in the companies?
A.
Yes.
Q.
Okay. Especially with small businesses, right?
A.
Again, it varies. But yes.
Q.
And it depends on the personality?
A.
Correct.
Q.
The determination about whether someone is classified as a
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
W-2 or it's a 1099, there's several factors, and I want to just
talk a little about what they are.
The different tests -- I'm just going to say them.
Tell me if it is the way you use the term too, because I took
this off the IRS website -- is the behavioral test, a financial
test, and a third, that I'm not finding -- oh, the relationship
test. Does that sound right?
A.
That's correct.
Q.
And generally speaking -- and these are all different
factors and you have to weigh them and balance them. There's
no simple -- there's no formula, right?
A.
Correct.
Q.
So the behavioral test is more about the right to control,
like to set hours, set expectations, that kind of thing?
A.
Correct.
Q.
And -- like nine to five or -- controlling the hours has a
lot to do with that, right?
A.
Correct.
Q.
Okay. And one factor is the financial test. It's the
right to the -- has to do with economic factors, shall we say,
right?
A.
Yes.
Q.
And for example, does the person bring their own equipment
versus does the company supply them?
A.
Correct.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Isn't it true, in particular for construction workers, IRS
has published that even with that issue where typically
bringing your own equipment would push you more in the 1099,
that in the area of construction they tend to be more W-2 --
they tend to be considered more like employees, according to
the IRS?
A.
I don't recall that specifically, but again it would be
based on all the factors combined. So one --
Q.
Certainly if a construction worker brings --
MR. ETRA: You know what? I'd like to pull up Exhibit
L-40 for impeachment and to show the witness.
MS. MARTINEZ: Your Honor, if I may ask counsel to
clarify an employee of which company? The construction
company, the developer?
THE COURT: The question's already been answered. Now
we're on to an item that is to be shown only to the witness.
MR. ETRA: May I proceed?
THE COURT: You may.
MR. ETRA: Thank you.
BY MR. ETRA:
Q.
Do you recognize Exhibit L-40 that's on your screen?
A.
I do, yes.
Q.
Generally speaking, what is it?
A.
This is a publication -- looks like it's pulled from the
IRS website -- discussing the various factors with respect to
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
financial control.
Q.
Right. One of the three tests, right?
A.
Yeah.
Q.
And this one talks about -- for example, one of the issues
within the factors is who brings the equipment and who supplies
the equipment, right?
A.
Correct.
Q.
And if you look at the -- under "Significant Investment,"
in the second sentence, just please read that only to yourself.
A.
(Witness complies.)
Q.
Do you see that?
A.
I do.
Q.
Does that refresh your recollection that the IRS -- the
IRS's position is that while you still have to consider all the
factors, when a construction worker brings all their own
equipment, that doesn't necessarily mean that they're
independent contractors, that they're typically -- that often
they are considered employees, even though they bring their own
equipment? Correct?
A.
Correct.
Q.
Okay.
MR. ETRA: We can take that down.
BY MR. ETRA:
Q.
And again, there's no magic -- and I found that from the
website too -- set of factors or how to apply these factors,
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
right?
A.
Correct.
Q.
And it got more complicated in COVID, didn't it? Let me
ask my question more clearly, because I don't think that was
clear. Weighing the different factors and making the
determination about how to classify a worker got more
complicated in COVID; is that correct?
A.
Some factors would have been affected by stay-at-home
mandates, things of that nature.
Q.
Right. So it's hard to know -- that creates another level
of complication or uncertainty for whoever is making these
decisions, how do you apply these factors when somebody
typically comes to the office and now they're at home, right?
A.
I don't know if I would say that. Because as long as the
worker's status or the duties haven't changed, the location
where it takes place doesn't really matter. So if you had an
administrative assistant who was an administrative assistant in
2018, COVID hit, they're still an administrative assistant. I
don't think it would complicate anything.
Q.
Does it say that on the website?
A.
No. I don't --
Q.
In other words, you're giving your answer as an expert, and
that's perfectly appropriate. But that doesn't mean that the
small business owner necessarily understands that, correct?
A.
I don't know if I can answer that.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And to be clear, you're not providing any expert testimony
about how these workers should have been classified, whether
they're truly employees or truly independent contractors?
MS. MARTINEZ: Objection. What workers? Vague.
THE COURT: Does the witness understand the question?
THE WITNESS: I did not, Your Honor.
Can you clarify?
THE COURT: All right. Just sharpen your question,
please.
MR. ETRA: Thank you.
BY MR. ETRA:
Q.
You are not giving an opinion as to whether the workers
that are at issue in this case are properly considered
employees under the IRS rules or properly considered
independent contractors under the IRS rules?
MS. MARTINEZ: I renew my objection. Vague. What
workers does he consider to be at issue in this case?
THE COURT: Does the witness understand the question?
THE WITNESS: I don't understand which workers he's
referring to, Your Honor.
THE COURT: All right. Then that should be the end of
the inquiry with regard to that.
MR. ETRA: Okay.
BY MR. ETRA:
Q.
When a company makes a decision, however they make the
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
decision to classify a worker, that doesn't mean they got it
right, correct?
A.
Correct.
Q.
And the IRS doesn't rely necessarily on how the company
made that decision, correct?
A.
Correct.
Q.
Let's talk about terminology. Okay?
A.
Okay.
Q.
You're an expert -- we agree, correct --
A.
Correct.
Q.
-- in this area. And you use terms very precisely because
it's part of your expertise; is that right?
A.
Correct.
Q.
So when you use the term "employee," to you, you use that
term only for someone that should be classified as a -- as an
employee and for whom you should file W-2s, correct?
A.
Correct.
Q.
And when you use the term "employer," also, you're --
employer in relation to a worker, you mean only if they file a
W-2, correct?
A.
I use "employer" to mean the person responsible for making
the wage payments and the corresponding filings for an
employee. Yes.
Q.
For a W-2, right?
A.
For a W-2 employee.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Do you also use the term "employer" to refer to -- take a
step back.
Do you understand that not everyone -- let me start
again.
Do you understand that small business owners may not
use these terms as precisely as you do?
A.
Correct.
Q.
And that some small business owners might refer to their
staff, the people they work with and they see every day, as
their employees, whether in fact they're 1099 -- whether or not
they file 1099s for them or W-2s for them. Do you understand
that?
A.
I do.
Q.
Okay. Same concept with independent contractor -- well,
let me ask you a few different questions about that.
Independent contractor can cover I would say two
categories, and I'll explain and you tell me if I'm right or
not. You know, a company that you hire to do stuff and they
bring their own workers or just a worker for whom you classify
as a 1099. Did I get that kind of right?
A.
Correct.
Q.
Right. And again, you don't know how -- some small
business owners may refer to independent contractors: "Hey,
that's the vendor. That's the company that's coming in to fix
the air conditioner," versus, "Oh, you know, that's Samantha
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
who I work with," right, as a person? Correct?
A.
Correct.
Q.
Same thing with payroll and paycheck. Do you understand
that small business owners sometimes refer to the payments they
make to their workers, whether they're classified as W-2 or
1099, as a payroll check or a paycheck? You understand that
small business owners use the term that way and not as
precisely maybe as you do?
A.
I have heard paycheck before, not necessarily payroll in my
experience.
Q.
But certainly paycheck. You've heard people use that term
to refer to payments not only to W-2 folks but also to 1099
folks?
A.
Correct.
Q.
And you don't know, of course, Mr. Sheppard -- how he uses
those terms, correct?
A.
Correct.
Q.
Let's focus on the term "worker." Right? To you as an
expert that's not a precise term in terms of W-2 versus 1099,
right?
A.
Right. "Worker" is general.
Q.
Right. Right. So there's language in an application that
refers to retained workers. I'm just going to ask you to
assume that. Right? There's a loan application that says --
that talks about retaining workers. That language "worker,"
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
even to an expert, could include an independent contractor,
right?
MS. MARTINEZ: Objection. He's describing a document
that the witness has never seen.
THE COURT: Does the witness understand the question?
THE WITNESS: I did not, Your Honor.
THE COURT: All right. Then let's move forward.
MR. ETRA: Why don't we put up Exhibit C-6 in
evidence.
MS. MARTINEZ: Your Honor, may the witness have the
opportunity to see the entire document? It's hard to ask a
witness a question about a document in the middle of the
document --
THE COURT: Are you asking the witness if the
witness -- what is it that you're asking? The witness has
already stated that he was involved in no investigation
relating to the Defendant.
MR. ETRA: I want to show the language in the
certification and say what that means to an expert.
THE COURT: Okay. Then why don't you direct the
witness to the portion of this multipage document.
MR. ETRA: I apologize.
Okay. So we're on the third page --
MS. MARTINEZ: Your Honor, I object. A witness has to
know the beginning of the document, what is this document, have
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
some opportunity to leaf through it. To be asked a question in
the middle of a document --
THE COURT: I agree. The objection is sustained.
MR. ETRA: I can't ask him about this specific line in
the application?
THE COURT: Why don't you ask him if he even
recognizes the document that you're showing him before we --
MR. ETRA: Your Honor, as an expert, I'd like to show
him a document and ask him what it means to him, and I don't
know that I need to show him the whole document to do that.
MS. MARTINEZ: I object.
THE COURT: It's important to lay a predicate that he
understands what you're showing him first.
MR. ETRA: Fair enough. Fair enough.
BY MR. ETRA:
Q.
Okay. All right. Sir, I'm showing you a form of an
application under the PPP program.
MS. MARTINEZ: Objection. Counsel is testifying.
Your Honor, to show a witness a document he has never
seen --
THE COURT: I agree. The objection is sustained.
Please ask the witness if he understands and he
recognizes what it is that you're showing him.
BY MR. ETRA:
Q.
Let's go to the first page of the document.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Do you understand --
MS. MARTINEZ: Oh, my goodness, Your Honor. I think
the jury -- the gallery -- this is open to the gallery.
THE COURT: No. This should not be shown to the
gallery.
MR. ETRA: Your Honor, it's in evidence.
THE COURT: Oh. My apologies. Actually, this is in
evidence. My apologies. This is not the impeachment exhibit.
This is C-6.
All right. Let's continue.
BY MR. ETRA:
Q.
Sir, do you see the -- what's on the screen in front of
you?
A.
I do.
Q.
Do you recognize that document?
A.
This specific document, I do not.
Q.
The form?
A.
The form -- I have seen the form before, yes.
Q.
And what do you know it to be?
A.
It's the Paycheck Protection Program Application Form.
Q.
Okay.
MR. ETRA: Let's go to the second page. I want to
highlight part of the document.
BY MR. ETRA:
Q.
And sir, if you feel there's another part of the document
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
you need to see to answer my question, you're always welcome to
do that -- to tell me. Okay?
A.
Okay.
Q.
All right. Here, it says: "The funds will be used to
retain workers and maintain payroll." I'm just focusing on the
words "retain workers." Do you see that?
A.
I see that. Yes.
Q.
The word "workers," even to an expert like you, can include
independent contractors, correct?
A.
Not if I -- not as -- based on the statement that I read,
you're asking me to exclude what's directly after the word
"workers." And to me, "retain workers and maintain payroll"
together would, to me, imply employees. But if you're asking
me to just give you the definition of one word in the sentence,
then...
Q.
Right. The word "workers" by itself certainly means --
could include independent contractors, right?
A.
That's correct.
MS. MARTINEZ: Is the question -- Your Honor, is the
question -- I object to the question as vague because it's not
clear whether he's asking --
THE COURT: Is the objection on grounds of vagueness?
Is that the objection?
MS. MARTINEZ: Yes, Your Honor.
THE COURT: Does the witness understand the question?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE WITNESS: I do, Your Honor.
THE COURT: All right. Overruled.
Let's continue.
BY MR. ETRA:
Q.
The answer?
A.
Could you repeat?
Q.
The word "workers" includes independent contractors, right?
A.
It can. Correct.
Q.
And your analysis of how to read this document together is
based on your expertise as an IRS expert, correct?
A.
Could you repeat? Sorry.
Q.
You just gave an answer as to how you interpret the word
"payrolls" in the context of the statement. You're applying
your expertise as an IRS agent, correct?
A.
Yes and no. I just wouldn't pick out one word from a
sentence and interpret it. I would read the whole sentence.
Q.
So you're applying your view -- the way you interpret
sentences?
A.
Correct.
Q.
Okay.
MR. ETRA: Let's put that down.
BY MR. ETRA:
Q.
Is it common for workers to have their status changed from
W-2 to 1099 from one year to the next?
A.
With their duties remaining the same?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Let me first ask that first question and then I'll follow
up. But just generally is it common?
A.
That's not been my experience. No.
Q.
And especially if their duties or the nature of the control
remains the same, you would expect them to stay W-2, right?
A.
I would expect the employer to continue treating them as
W-2.
Q.
Right. Right.
Okay. And do you know whether there were workers for
Mr. Sheppard's companies that were W-2 for a period of time and
then it changed to 1099?
A.
Changed to 1099, no.
Q.
You're not saying -- you're saying you don't know the
answer, right?
A.
Correct.
Q.
Okay. And certainly you don't -- okay.
I'm not sure if you said this in your testimony, but I
have it in your report that -- I'm now on the subject of
payments that the employer has to make. Okay? Now talking --
let me take a step back.
Did you say that you always use the term "employer"
only to refer to the relationship that person has with a W-2
person?
A.
I believe that's what I said, but I misspoke.
Q.
And if that's your testimony, then I suggest to you that's
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
incorrect --
A.
Correct.
Q.
-- based on your testimony yesterday. Do you recall how
you testified yesterday?
A.
You would have to refresh my memory.
Q.
Do you recall?
MS. MARTINEZ: Could I have a reference to the number?
MR. ETRA: Sure. Page 12, Line 20 to 24.
Your Honor, may I put up the transcript from
yesterday?
THE COURT: Is there any objection to that?
MS. MARTINEZ: No, Your Honor.
THE COURT: All right.
MR. ETRA: Just for the impeachment.
Page 12.
BY MR. ETRA:
Q.
Sir, we're looking at Page 12, and I want you to focus at
the bottom. It's Lines 20 to 24. I'm going to ask you if this
question was given and you gave the answer.
Question: "Now, with respect to independent
contractors, does the employer withhold income tax?"
Answer. "No. So non-employee contractors are not
subject to withholding. The employer just reports the gross
amount that's paid to them for the year, the calendar year."
Did you give that testimony yesterday?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
I did.
Q.
So, in fact, the prosecutor used the term "employer" to
refer to someone who pays 1099ed workers, correct?
A.
Correct.
Q.
And you also used the term "employer" to refer to someone
who paid 1099ed workers, correct?
A.
Correct.
Q.
And you're the expert, correct?
A.
Correct.
MR. ETRA: Take it down.
BY MR. ETRA:
Q.
I'm going to talk about contributions made by the
company -- employer or not, however you want to refer to it --
and I think -- tell me if I have this right, that they have to
contribute 7.65 percent for Social Security and Medicare for
each employee; is that correct?
A.
The employer has to withhold that amount from each employee
and also contribute that amount.
Q.
I want to -- fair enough. But for now -- I'm going to talk
about both, but I want to talk about the contribution right
now, okay? Good?
A.
Okay.
Q.
Okay. Thank you.
So -- and I use smaller numbers. It's easier.
Because I used a hundred dollars and you used a hundred
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
thousand. So hopefully people will make more than a hundred
dollars, but could we go with a hundred dollars as a salary for
now?
A.
Okay.
Q.
Okay. So if a company pays a W-2 worker a hundred dollars,
the company has to also go out of pocket $7 and -- $7 and 60 --
$7.65 for Social Security and Medicare; is that right?
A.
Correct.
Q.
Okay. Now, that doesn't mean that if the same person is a
1099 that the employer saves money, correct?
A.
If that same person was a 1099 non-employee, then that
contribution would not be made.
Q.
Right. But if you consider the whole situation --
A.
Uh-huh.
Q.
-- in the end of the day, it has no economic impact on the
employer, correct?
A.
That's not accurate. No.
Q.
Let me follow this through. If the employer pays $7.65 for
Social Security and Medicare, that's out-of-pocket money,
right?
A.
Correct.
Q.
But then when they do their taxes they get to take that
same $7.65 and use that as a deduction, correct?
A.
Correct.
Q.
So it's a wash, correct?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
So again, to the extent a company misclassifies a worker as
W-2 -- 1099 versus W-2, with respect to the contribution they
have to make, it's not like the company is saving money. They
still have to incur the same level of cost, correct?
A.
That's correct.
Q.
Because of the deduction part, right?
A.
Correct. Provided they file all their required returns,
yes.
Q.
Well, provided they -- provided they -- provided they file
their tax returns and get the deduction, correct?
A.
Correct.
Q.
Okay. The same thing is true for the unemployment tax
payment, right? If someone is a W-2, the employer has to go
out of pocket for unemployment tax, but then they get to deduct
that same amount. So it's a wash economically for the company,
right?
A.
Correct.
Q.
Now I want to talk about the withholdings obligation.
Okay?
A.
Uh-huh.
Q.
I have this in your report -- I don't know if you said it
yesterday -- that you said that W-2 employees have to withhold
income tax from their -- excuse me -- employers have to
withhold income tax for their W-2 employees. Did you say that?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
I believe so. Yes.
Q.
And that is not actually correct, right?
A.
Again, it's a fact-intensive situation. So it can be right
and it can change.
Q.
Exactly. Exactly. Because the employee has to come in and
fill out deductions, and those types of things, and then the
company follows what the employee does, correct?
A.
Correct. On Form W-4.
Q.
And there may be situations sometimes where even an
employer doesn't have to withhold income tax, depending on the
circumstances, correct?
A.
Depending on what's on that Form W-4, yes.
Q.
So it's not the case that the employer always has to
withhold income tax, correct?
A.
Always, no.
Q.
But you didn't qualify that yesterday, did you?
A.
I don't recall if I did.
Q.
You also testified -- well, yesterday you testified that
the 1099 -- it was actually the testimony we looked at
earlier -- called it the employer, but we can call them company
if you like -- that the company for a 1099 does not withhold
income tax. Do you recall testifying that -- and I think we
read that today.
A.
Could you repeat that? Sorry.
Q.
Sure. Did you testify -- and I think we read it earlier --
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
that the company that pays a 1099 worker does not withhold
income tax? Correct?
A.
Correct.
Q.
And that also isn't necessarily true, correct?
A.
Income tax, that's correct, yes. It doesn't withhold
income tax on 1099s.
Q.
Never does?
A.
Income tax?
Q.
Yeah.
A.
No. No.
Are you referring to backup withholding?
Q.
If that's what I'm -- I'm asking you the questions.
A.
No. So income tax, no.
Q.
Okay. I want to know where you're coming out before I go
to the next question.
Do you agree that sometimes the company does withhold
income tax from 1099ed workers? Correct?
A.
I would agree that there are situations where withholding
could apply on a 1099ed worker.
Q.
I just -- can you answer my question the way I asked it?
If you can, please do so.
A.
Okay.
Q.
Do you agree that companies can sometimes -- let me start
again.
Do you agree that companies can withhold income tax
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
for a 1099ed worker? Correct?
A.
I would not classify it as income tax. No.
Q.
Okay.
MR. ETRA: Let's put up L-43.
MS. MARTINEZ: If this is not in evidence, are you
just showing it to the witness?
MR. ETRA: Just showing the witness.
BY MR. ETRA:
Q.
Do you recognize this document or did you need to see the
next page?
A.
I need to see the next page.
Q.
All right.
MR. ETRA: Let's go to the next page.
THE WITNESS: I do.
BY MR. ETRA:
Q.
What is the document?
A.
It's Form 1099-NEC, Non-Employment Compensation.
Q.
Okay. NEC. I think you used that term yesterday, right?
A.
Correct.
Q.
What does NEC mean?
A.
Non-employment or non-employee compensation.
Q.
Which is another way of saying: "Samantha, who I pay to
work, but is a 1099, not a W-2," correct?
A.
Correct.
MR. ETRA: Your Honor, I offer Exhibit L-43.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Is there any objection?
MS. MARTINEZ: Your Honor, I have no objection to -- I
have to see what the forms are. This is a multiple --
THE COURT: L-43. It should be identified as L-43.
MS. MARTINEZ: Right. Right. There's just multiple
forms.
MR. ETRA: I'm only seeking to offer the first two
pages.
THE COURT: Is there any objection?
MS. MARTINEZ: I object to the first page. I don't
object to this form that's on the screen.
MR. ETRA: Then we'll just offer the page that's on
the screen.
THE COURT: The first page?
MR. ETRA: Well, it's the second page of the document,
but it's the form.
THE COURT: All right. So Page 2 of L-43, there's no
objection?
MS. MARTINEZ: Your Honor, yes. It's a different time
period, but I have no objection.
THE COURT: All right. Admitted into evidence.
(Defendant's Exhibit L-43, Page 2, received into
evidence.)
MR. ETRA: Okay. Sorry.
Let me go back. We have it on the screen?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Okay. Sorry.
THE COURT: Ladies and Gentlemen, is it on your screen
now?
Thank you.
BY MR. ETRA:
Q.
Sir, this -- again, this is the form that the -- the
company fills out -- is responsible for filling out for 1099ed
workers, right?
A.
Correct.
Q.
It's the actual 1099 form, right?
A.
Correct.
MR. ETRA: Could we take a look at Box 4, please.
BY MR. ETRA:
Q.
What is Box 4?
A.
"Federal Income Tax Withheld."
Q.
Okay. So the IRS, in their own 1099 form, has a place for
the company to fill in withholding of income tax for 1099ed
workers; is that correct?
A.
That's correct.
MR. ETRA: We could take this down.
BY MR. ETRA:
Q.
So the fact that a worker has withholding doesn't
necessarily make them -- doesn't necessarily mean that they're
W-2, correct?
A.
That they're a W-2 employee, correct.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
It doesn't necessarily mean that?
A.
It doesn't necessarily mean that.
Q.
Right. So you could have a list of workers where there's
withholding, and those all could be 1099ed workers, correct?
A.
Correct.
Q.
Okay. You were shown some 940 or 941 forms, and it said
the name Eric Sheppard, and there was some kind of a signature
above that. Do you recall that?
A.
I do.
Q.
And there's a bunch of them, and I'm not going to go
through them if I don't have to, if that's okay?
A.
That's fine.
Q.
Okay. If you need me to, we'll do it, of course.
You don't know anything about whether Eric Sheppard
signed those documents, right?
A.
Other than what we reviewed yesterday, other than the one I
looked at, no.
Q.
You don't know whether Eric Sheppard signed those
documents? Yes or no?
A.
If he physically signed them?
Q.
You don't know whether he signed those documents? Yes or
no?
A.
I just know what's on the paper.
Q.
Right. You don't know who signed those initials, right?
A.
I didn't witness him signing it.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And to the extent Mr. Sheppard did sign them, you don't
know the circumstances that he signed them, correct?
A.
That's correct.
Q.
You don't know what he was told, correct?
A.
Correct.
Q.
W-2 forms are not -- get filed by the company for W-2
workers, correct?
A.
Correct.
Q.
But they're not filed with the IRS, correct?
A.
Correct.
Q.
They're filed with the Social Security Administration?
A.
That's correct.
Q.
I'm not going to ask why. But just we agree that that's
how it's done, right?
A.
Correct.
Q.
Okay. So to be clear, you did not investigate the extent
to which W-2s were filed for any of the workers relating to
Mr. Sheppard's companies, correct?
A.
That is incorrect.
Q.
How is it incorrect?
A.
Because when I researched our internal system for filings,
I didn't see any W-2s on the system.
Q.
Did you look at the -- sorry. Would your system show
whether a W-2 was filed?
A.
They would, yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Okay. So the IRS could tell when a W-2 is filed?
A.
Correct. They're submitted to the Social Security
Administration, but they are also transmitted to us.
Q.
And you searched for which years?
A.
2019 through 2021.
Q.
All right. I want to go through some of the documents --
the returns that you went through yesterday. Okay?
MR. ETRA: So let's put up 12 -- oh. Let me take a
step back -- actually, no. Let's continue.
Let's put up 12-4 in evidence.
BY MR. ETRA:
Q.
Okay. Do you recall testifying about this document
yesterday?
A.
I do.
Q.
Okay. And what you saw was that --
MR. ETRA: Let's just have the whole thing, because
it's a little hard to do this.
BY MR. ETRA:
Q.
If you need any part enlarged, sir, tell me. Okay?
All right. And this is a form that basically says as
of June 4th, 2022, the IRS has not located from their search
tax returns, meaning 1065s, right?
A.
Uh-huh.
Q.
Okay. You're nodding, so that's why I have to say that.
A.
Yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
For the tax years 2018, 2020, and 2021, correct?
A.
Correct.
Q.
Okay. Let me first ask this question: This is about a
search that the IRS does, correct?
A.
Correct.
Q.
And it's true during COVID there was a backup of -- sorry.
Do you know whether Mr. Sheppard files by mail or
electronically?
A.
I think it varies or it would vary. I don't know.
Q.
And do you know whether, to the extent the companies filed
by mail, that there was a problem with COVID with opening the
mail and they had been backed up?
A.
Specifically for the 2020 fax filing, there was a slowdown
for paper-filed returns, yes.
Q.
I just couldn't hear. Your voice trailed.
A.
Sorry. Specifically for 2020, the 2020 calendar -- or tax
year, there was a slowdown for paper-filed returns.
Q.
All right. And so when the IRS does a search, that doesn't
mean -- and they can't find something, it could be that they're
still backed up from COVID; is that correct?
A.
I don't know if that's the case today.
Q.
So you don't know whether they have ever got through the
backlog of opening mail from COVID. You don't know one way or
the other?
A.
I don't know if there's still a backlog that's present
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
today.
Q.
So to the extent for 2020 mailings you don't know -- when
the certificates talk about not finding filings in 2020, it
could very well be that they are in the IRS unopened because of
the backlog from COVID; is that correct?
MS. MARTINEZ: Objection. Speculation.
THE COURT: Overruled. If the witness knows.
THE WITNESS: I wouldn't be able to answer that
appropriately.
BY MR. ETRA:
Q.
You don't know?
A.
I mean, I haven't heard of any backlogs from 2020 currently
existing at this point in time. I know that there was a
slowdown.
Q.
Fair enough. You prepared with the prosecutor to testify
today, correct -- sorry. Let me start again.
Before coming to testify, you prepared with the
prosecutor, correct?
A.
Correct.
Q.
And you knew you would be testifying about these
Certificates of Lack of Record, correct?
A.
Correct.
Q.
And you knew that that included filings for the tax year
2020, correct?
A.
Correct.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And you knew at some point there was a backlog from COVID
of opening returns for 2020, correct?
A.
Correct.
Q.
And yet you didn't check to see the status of that backlog
and how that might affect this information?
A.
Based on my most recent understanding, the backlog was
something that happened, again, in 2022 early. It's not
something that's still existing today. So...
Q.
I'm going to ask the question again.
A.
Sure.
Q.
And I'd ask you to answer it yes or no, if you can, okay?
A.
Okay.
Q.
You did not check to see the status of the backlog and
whether it would affect the information you've been testifying
about today before you came in to testify, correct?
Could I get a yes or no whether you checked?
A.
The research that I did would have provided me an answer on
whether or not there was a backlog. And so --
Q.
How?
A.
Because, again, a backlog would relate to the full return
posting on our system, our internal system, not an indicator
that a return was filed. There would have been some indication
that something was potentially pending or on the way.
Q.
So you're able to say with confidence, then, that the
backlog of COVID had no impact on what you've been testifying
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
about?
A.
I would say that it would have minimal to no impact.
Q.
Let's stick with minimal to no.
Okay. I want to talk more about the concept of the
filings of the HM Management tax returns. These -- whether
they are filed or not have no impact on whether Mr. Sheppard
has paid the amount of taxes he is supposed to pay; is that
correct?
A.
Return filings and payments are separate, yes.
Q.
Right. This is an informational return, correct?
A.
Form 1065 is an informational return.
Q.
Because the money flows out or the income allocation flows
out, correct?
A.
Correct.
Q.
So the fact that there may be non-filings some of these
years has no impact on whether Mr. Sheppard has paid his fair
share of taxes, correct?
A.
The two are separate.
Q.
Thank you.
Okay. And with respect to 2021 -- let's talk about
2021 in here, the year 2021 -- the tax returns first become due
in April, correct?
A.
Correct.
Q.
And many companies --
A.
Well -- sorry -- let me amend that. The Form 1065 is due
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
March 15th of the following year. So --
Q.
When in March is it due?
A.
March 15th.
Q.
Okay. And some companies get extensions for later in the
year, correct?
A.
Correct.
Q.
And you have reviewed enough returns from the companies
Mr. Sheppard's associated with to know he always get
extensions, right?
A.
I have seen it in some instances, yes.
Q.
Have you seen any where they're filed in the spring of --
in the spring?
A.
No. I believe I thought your question was in reference to
whether he filed an extension or not.
Q.
Okay. You're right. Let me be more -- I'll start again,
and I hear what you're saying.
From what you have seen, the tax returns are always
filed later in -- you know, September, October, November of the
year after the tax filing; is that correct?
MS. MARTINEZ: Objection to the word "always."
THE COURT: Overruled. The witness may answer the
question.
THE WITNESS: With respect to his income tax filings,
like the Form 1065 or his 1040, then the answer would be yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MR. ETRA:
Q.
And you were able to determine that based on reviewing the
tax returns you reviewed, right?
A.
Correct.
Q.
Okay. Now, here it says that the search was done as of
June 4th, 2022, correct?
A.
Correct.
Q.
Before you would expect the tax 2021 tax filings to be
filed, correct?
A.
If he filed later in the year, then yes.
Q.
If he filed like he always files, based on what you have
seen, correct?
A.
Correct. Yeah.
Q.
Okay. Yet, you didn't go back and look again after June 4,
2022 to say: "You know what? Let me see if -- in all that
time whether the 2021 tax returns were filed," right?
A.
That's incorrect. I did.
Q.
You did?
A.
I did. Yes.
Q.
Oh. So you personally checked?
A.
Correct.
Q.
But this certification is only through June 4th, 2022,
correct?
A.
Correct.
Q.
But you checked personally?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
Okay. Now, in terms of why tax returns weren't filed, you
don't know why -- you don't know the reason not to file these
returns?
A.
The reason why the taxpayer didn't file?
Q.
You don't know the reason why the returns weren't filed,
correct?
A.
Correct.
Q.
You don't know if it had to do with legitimate issues that
the taxpayer and the accountant were working out, correct?
A.
That's correct.
Q.
You don't know if the accountant was giving advice about
that or not, right?
MS. MARTINEZ: Objection. No foundation. How would
the witness know this question?
THE COURT: Sustained.
BY MR. ETRA:
Q.
Okay. By the way, there's still an extension in place --
there was an extension in place for the 2021 returns, correct,
by IRS because of hurricanes, correct?
A.
I would have to...
Q.
Are you familiar with the fact that the state of Florida
received additional extensions for Hurricane Ian and Nicole?
A.
Not off the top of my head, no.
Q.
You don't know? Yes or no?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
I don't know.
MR. ETRA: Let's go to Exhibit 12-4 -- sorry -- 12-1.
Thank you.
BY MR. ETRA:
Q.
We have up Exhibit 12-1 in evidence.
MR. ETRA: I want to go to the last page, please --
well, let me go to the first page, so you know what we're
doing.
BY MR. ETRA:
Q.
Let's look at the first page. Tell me when you have looked
at it enough so that we can go to the back.
A.
We can go.
Q.
And just tell us what this document is.
A.
This is a Form 1065 for HM Management and Development, LLC
for 2019.
Q.
Okay.
MR. ETRA: Let's go to the last page, please.
BY MR. ETRA:
Q.
Do you recall going over -- testifying about this page of
the return on your direct testimony?
A.
I do.
MR. ETRA: And I want to focus in on the number
485,417, Chris.
BY MR. ETRA:
Q.
And do you recall testifying about that number?
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59
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
I do.
Q.
And do you recall saying that -- and this is the K-1,
right?
A.
Correct.
Q.
Do you recall generally testifying about the K-1s that
these are distributions -- income distributions to the partner,
in this case Mr. Sheppard or his companies? Correct?
A.
Distributions, no. But this is the ordinary income that's
reported to him.
Q.
Okay. Do you --
(Phone ringing.)
MR. ETRA: I am very sorry, Judge. My apologies.
BY MR. ETRA:
Q.
Do you recall testifying about some of these K-1s that it
shows that Mr. Sheppard received that money? Do you recall
testifying that way?
A.
Received distributions, yes.
Q.
Okay. Received distributions. Let's just clarify what
that means. This tells you nothing -- this K-1 -- about any
money going from the company to Mr. Sheppard, correct?
A.
Correct.
Q.
Okay. So it's not like these are distributions -- you
can't say this distribution means that $485,000 went from the
company to Mr. Sheppard, right?
A.
Yeah. The ordinary income amount is not a distribution.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
So...
Q.
So let's talk about what it really is, right? It's an
allocation of income for purposes of Mr. Sheppard's personal
tax returns; is that correct?
A.
That's correct.
Q.
It just means that when he or whoever does -- when his
returns are prepared, in calculating the taxes that
Mr. Sheppard may or may not owe, they have to include this
number 485,000 as income that goes through that calculation,
correct?
A.
Correct.
Q.
You don't know whether all this money actually stayed in
the company, right?
A.
That's correct.
Q.
Okay.
MR. ETRA: Let's go to 15-2 -- actually, let's skip
that. Let's go to 14, please.
BY MR. ETRA:
Q.
And this is the HM Four tax return for 2019; is that
correct?
A.
That's correct.
Q.
Okay.
MR. ETRA: Let's go to Bates Number 34206, Chris.
(Pause in proceedings.)
MR. ETRA: Sorry, Your Honor. I had the wrong page
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
number.
(Pause in proceedings.)
MR. ETRA: Your Honor, I'm going to use the ELMO
instead. I think that would work better.
THE COURT: All right.
(Pause in proceedings.)
BY MR. ETRA:
Q.
Okay. Sorry about the delay.
Do you recall testifying about this page yesterday?
A.
I do.
Q.
Okay. And I've highlighted the number $109,609, the
distribution line. Do you recall testifying about that?
A.
I do.
Q.
And you referred to that as a distribution to Mr. Sheppard,
correct?
A.
Well, to the partner listed here, which would be Eric and
Jennifer Sheppard.
Q.
And by that you meant that that's how much money he
actually took out, right?
A.
Correct.
Q.
But that's not actually accurate, is it?
A.
That's my understanding. Yes.
Q.
Okay. Let's look at another part of that page.
The bottom corner with the highlighting, do you
recognize that portion of the same page?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
I do.
Q.
And doesn't that show -- well, it shows a few things. It
shows that, for whatever reason, in the world of accounting and
these companies there was a negative beginning capital account,
correct?
A.
Correct.
Q.
I won't get into that, if that's okay with you. But what's
the second line show?
A.
Capital contributed during the year.
Q.
What does that mean in plain English?
A.
Money that the partner in question put into the business.
Q.
Money that Mr. Sheppard put into the business?
A.
The partner listed on the K-1. Yes.
Q.
Which is Mr. Sheppard, correct?
A.
I believe it's Mr. Sheppard and his wife. Yes.
Q.
So he put in $203,000 that year, right?
A.
Correct -- well --
Q.
I know. I'm getting there. And then, when you go to the
line "Withdrawals and Distributions" of 109,000, what does that
show?
A.
Money that was taken out.
Q.
Right. So net-net, if you added it all together, did he
put money in or take money out?
A.
He would have contributed money.
Q.
He put a hundred thousand dollars of his own net-net into
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
this company, correct?
A.
A little bit less, but yes.
Q.
Okay. And net-net, he didn't take any money out of this
company, correct?
A.
Not based on this K-1. Correct.
Q.
And that's consistent with other documents you testified
about. You skipped the other part, which showed that
Mr. Sheppard actually put more money in than he took out; is
that correct?
A.
I didn't intentionally skip anything. I was asked about
the distribution line, and I stated what was there.
Q.
But you didn't clarify that if you look at the other side
of the page it shows that he didn't take any money out. You
didn't clarify that when the prosecutor was asking you
questions, right?
A.
I would have to look at each of the K-1s to know.
Q.
All right. Well, let's keep going then.
MR. ETRA: Let's go to 13-2.
We're going back to the computer, Your Honor, please.
BY MR. ETRA:
Q.
Do you recognize 13-2?
A.
I do.
Q.
And do you see that -- you see the word "distribution" on
the right-hand side -- sorry. What is this document?
A.
This is a Schedule K-1.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
For?
A.
For HM Four, LLC -- or HM-UP Development Alafaya Trails,
LLC, for partner HM Four, LLC.
Q.
Right. And HM Four is owned substantially by Mr. Sheppard
and/or his wife in some respect, correct?
A.
Correct.
Q.
Okay. And you testified about this document yesterday,
correct?
A.
Correct.
MR. ETRA: And let's go to the distributions on the
right-hand side of $210,000.
BY MR. ETRA:
Q.
You testified, based on the questioning of the prosecutor,
that HM Four took out $210,000 from HM-UP during --
MS. MARTINEZ: Are you referring to HM-UP Alafaya?
Did you just say HM Four? Which one are you referring to?
MR. ETRA: I meant to say HM-UP.
THE COURT: HM-UP, which is highlighted; is that
correct?
MS. MARTINEZ: Right. He just misstated HM Four --
THE COURT: He did.
MS. MARTINEZ: -- so I wanted to clarify.
What exhibit are we on?
MR. ETRA: This is 13-2.
MS. MARTINEZ: Thank you.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. ETRA: Let me start again, Your Honor, if I may.
THE COURT: All right.
BY MR. ETRA:
Q.
You testified yesterday, in response to the questions of
the prosecutor, that HM Four took $210,000 out of HM-UP in
2019, correct?
A.
Correct.
Q.
And that was based on this highlighted line of this K-1,
correct?
A.
Correct.
Q.
And that is also not accurate, correct?
A.
It is accurate that that was distributed to the partner,
which is what I stated. Yes.
Q.
Do you think that's a fair description of what's going on
in federal court in a criminal trial?
A.
I don't understand the question. Sorry.
Q.
I'll not re-ask it.
MR. ETRA: Let's go now to the bottom left corner,
same section we looked at with the other document.
BY MR. ETRA:
Q.
Okay. You see that now?
A.
I do.
Q.
Doesn't this show, in fact, that HM Four did not take
$210,000 out of HM-UP in 2019?
A.
If you combine what was contributed and what was withdrawn
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
from the company, then no. But it does show that 210,000 was
taken out. So...
Q.
But if you put it all together -- look at the whole year
together, HM Four invested in this case approximately $39,000
and put it into the company, to HM-UP, correct?
A.
Correct.
Q.
It didn't -- and net-net, it didn't take any money out of
HM-UP, correct?
A.
Correct.
Q.
You agree that's a fairer way of describing the money flow
by looking at this side of the document?
A.
Correct.
Q.
Okay.
THE COURT: Let me know when it might be a good time
to give the jurors a comfort break.
MR. ETRA: Yeah. Sorry. Now is fine, Your Honor.
THE COURT: All right. Ladies and Gentlemen, let's go
ahead and take a 10-minute recess, please.
COURT SECURITY OFFICER: All rise.
(Jury not present, 10:22 a.m.)
THE COURT: Okay. We're on a 10-minute recess.
(Recess from 10:22 a.m. to 10:34 a.m.)
THE COURT: Waiting for Mr. Sheppard?
(Pause in proceedings.)
MR. SHEPPARD: Sorry, Your Honor. I had to go to the
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
restroom.
THE COURT: Of course.
MR. ETRA: Your Honor, could I stand up there -- start
there?
THE COURT: Yes, of course.
Just waiting to see if our jurors are ready.
(Pause in proceedings.)
THE COURT: Okay. Both sides ready to proceed?
MS. MARTINEZ: Yes, Your Honor.
MR. ETRA: Yes, Your Honor.
THE COURT: All right.
COURT SECURITY OFFICER: Please remain standing for
the jury.
(Before the Jury, 10:35 a.m.)
THE COURT: All right. Welcome back, Ladies and
Gentlemen.
Please be seated, everyone.
And we'll continue with the cross-examination.
MR. ETRA: May I proceed, Your Honor?
THE COURT: Yes, you may.
MR. ETRA: Pull up Exhibit 13-2 in evidence.
BY MR. ETRA:
Q.
Run right to the point here. Do you recognize this page or
would you like to see the first page of the document?
A.
I recognize it.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And so, if you can, without looking at the first page,
could you tell us what we're looking at?
A.
This is the Designation of Partnership Representative. In
this case, it's designating HM Four, LLC.
Q.
And just so I understand what the concept is here, some
partners for the ownership are individuals, correct?
A.
Correct.
Q.
So when you have an individual, the IRS knows who to talk
to, right?
A.
Correct.
Q.
So the concept here is if a partner of a company is an
entity or a company, you still have to designate a human being,
right?
A.
Sorry. One more time.
Q.
You have to designate a person, a natural person?
A.
Correct. Yes.
Q.
And all it's saying is that the IRS -- the IRS is basically
saying: "If a partner is a company, I need the name of a
person to talk to if I have a problem, if something comes up,"
right?
A.
Correct.
Q.
And by the way, it should have the phone number there,
shouldn't it?
A.
It should. Yes.
Q.
That's sort of the point, isn't it?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Well, there are other ways we can get in touch, but --
Q.
I'm sure there are.
This doesn't mean that -- this doesn't mean that the
person put here is responsible for the accuracy of the tax
return, correct?
A.
Correct.
Q.
It doesn't mean that the person here -- in this case, Eric
Sheppard -- understands everything in the tax return, correct?
A.
Correct.
Q.
It just means the IRS is saying: "Give us a human being
from the company that we're going to reach out to if we have an
issue," right?
A.
That's right.
Q.
Okay.
MR. ETRA: Let's go to -- take this down, and I have
just some questions.
BY MR. ETRA:
Q.
I want to talk about the -- get into accrual versus cash a
little bit, but let me start with that heading. Okay?
Do you know whether these returns are done on an
accrual basis?
A.
I don't recall.
Q.
Okay. Could you just explain what accrual is versus cash
in terms of the accounting procedures, in simple terms, if we
can.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
I'm afraid I can't, no.
Q.
You can't explain what the accrual method is --
A.
I can explain cash, which is essentially going to be
reporting expenses when they're paid. Whereas accrual you're
accruing potential expenses and income as well. So it's not
necessarily on a calendar year basis, for example.
Q.
Right. So for example, if you're expecting payment -- say
a rent payment, under the accrual system, you accrue, meaning
you say: "I expect to get that revenue every month," correct?
A.
Correct. Before receipt, yes.
Q.
And if the returns are done on an accrual basis, then under
those procedures the accountant really has to put down the
amount being accrued under that system, right?
A.
Correct.
Q.
That doesn't necessarily tell you what cash came in,
correct?
A.
Correct.
Q.
And the same thing with expenses. You accrue expenses
under the -- the way that's done, correct?
A.
Correct. Yes.
Q.
But that doesn't mean that you have paid those expenses,
right?
A.
Correct.
Q.
So you can't just look at the revenue and expenses on a tax
return, if it's by accrual, and say: "That tells me cash in,
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
cash out," right?
A.
That's correct.
Q.
So for example, if you're filling out a document that has
nothing to do with tax returns, say a loan application, it
doesn't necessarily mean you look to the tax return for whether
the information on the loan application is accurate because
they may be under different systems, correct?
MS. MARTINEZ: Objection. No foundation as to asking
this witness about a loan application.
THE COURT: If the witness knows. Overruled.
THE WITNESS: Could you repeat the question?
MR. ETRA: Sure.
BY MR. ETRA:
Q.
So for example, if you're -- there's revenue and there's
expenses and other items that are in the tax return, correct?
A.
Correct.
Q.
And if it's by accrual method, it's done on the accrual
system, like you talked about, right?
A.
Uh-huh.
Q.
Which doesn't necessarily have anything to do with cash in
and cash out?
A.
Correct.
Q.
But separately, if you're not in this world of tax
accounting, right, and you're just a small business owner
filling out an application, you can't necessarily say: Well,
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
the revenue number there is wrong," because it may be different
than the tax return, correct?
MS. MARTINEZ: Objection. Vague.
THE WITNESS: Could you ask that question again?
MR. ETRA: I'm not going to ask it again.
THE COURT: All right. Let's continue.
BY MR. ETRA:
Q.
I want to talk about the -- having an accountant's name or
information in a return. Okay?
A.
Okay.
Q.
Okay. Good. And I'm talking about the name, the
signature, as well as the PTIN number. Okay?
A.
Okay.
Q.
940s and 941s that you have been over, correct --
A.
Yes.
Q.
-- the ones you looked at, was there an -- was there an
accounting -- was the name of an accountant on those forms?
A.
I don't recall that there was.
Q.
Let me just ask it more generally.
A.
Okay.
Q.
The forms themselves have a place for an accountant if it's
appropriate, correct?
A.
They do.
Q.
Okay. And the IRS accepts returns, 940s and 941s, even if
there's no accountant information, correct?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
Because you don't necessarily have to use an accountant to
file a return?
A.
That's correct.
Q.
And the same thing is true with a 1065, correct?
A.
Correct.
Q.
You could have an accountant's name there or not, right?
A.
Correct.
Q.
And these days, certainly with like TurboTax, people can
go -- even companies now can go and get a tax return done
without using a tax preparer, correct?
A.
That's correct.
Q.
Which would mean no tax preparer was there, right?
A.
Correct.
Q.
And when returns are filed with the IRS, it has to have --
the actual original return that's filed with the IRS, if a tax
preparer is involved, it's got to have that guy's -- or the man
or woman's name on it, correct?
A.
Correct.
Q.
But are you familiar with the concept of taxpayers getting
copies of their returns in addition to the ones they file?
A.
I am. Yes.
Q.
Right. Because if someone needs it they can't get back the
original, right?
A.
Correct.
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Miami, Florida 33128
(305) 523-5698
Q.
The copy doesn't have to have -- even if a tax preparer is
involved, are you familiar with the concept that the copy may
not -- let me start again.
Even if an accountant is preparing the tax return,
right -- so his name is on the return as filed. Are you with
me?
A.
Yes.
Q.
Okay. The copy that the taxpayer gets doesn't have to have
the accountant's name on it, right?
A.
The copy that's not to be filed doesn't have to, correct.
Q.
Right. Okay. And -- okay.
MR. ETRA: Okay. Can I just have one moment, Your
Honor?
THE COURT: All right.
(Pause in proceedings.)
MR. ETRA: No further questions.
Thank you.
THE COURT: All right. Any redirect?
MS. MARTINEZ: Yes, Your Honor.
Your Honor, may I first ask if counsel has any
objection to completing his Exhibit L-43? I have had a chance
now to review it, and it's just additional forms and the
instructions.
MR. ETRA: No objection, Your Honor.
THE COURT: All right. Then the complete L-43 will be
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
admitted into evidence.
(Defendant's Exhibit L-43 received into evidence.)
(Pause in proceedings.)
REDIRECT EXAMINATION
BY MS. MARTINEZ:
Q.
Good morning, Mr. Palmer.
A.
Good morning.
Q.
First, counsel asked you about your role in this case.
Just to again clarify, you did help us with a disclosure that
we provided to the Defense, and that you signed, that you would
be testifying as an expert within the field that we offered you
and that the Court approved you for, correct?
A.
Correct.
Q.
Now, because in this case records have been requested from
the IRS, rather than having a custodian from IRS come, you
agreed to answer questions regarding the documents that would
also -- that the IRS had produced to the United States and that
we had provided to the Defense, correct?
MR. ETRA: Objection. Leading.
THE COURT: Sustained.
BY MS. MARTINEZ:
Q.
Were you asked to do anything with respect to the records
that would have otherwise been done by a custodian of records?
A.
No.
Q.
Were you asked to confirm the searches that had been done?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
I was. Yes.
Q.
And were you asked to review the records that had been
previously produced to the United States?
A.
I was. Yes.
Q.
And those are the records that were admitted yesterday,
correct?
A.
Correct.
Q.
Now, you are -- in addition, you confirmed the searches
recently, correct?
A.
Correct.
Q.
Of each of -- each of the ones that there was a
Certification for Lack of Record, correct?
A.
Correct. Yes.
Q.
So that means that there was still nothing there even as
current as...
A.
I confirmed the searches Monday morning of this week, and
there was no updates or changes.
Q.
And in your role at IRS, you're not a criminal
investigator, correct?
A.
Correct.
Q.
That's a separate role for certain IRS agents, correct?
A.
Correct.
Q.
Your role is with respect to businesses and taxpayers and
audits. Am I generally getting it right?
A.
That's correct. Yes.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And as part of that, as indicated in your resume, and as
part of your experience, when you're auditing a taxpayer, what
does it mean to help them to come into compliance?
A.
It's part educational, but it's also correcting filings
that were incorrect or getting them to file where they didn't.
Q.
And as part of that, counsel asked you about your
experience -- whether -- if there was -- possible that there
were times that some taxpayer would be more knowledgeable than
others, correct?
A.
Correct. Yes.
Q.
Now, the taxpayer is still responsible, correct?
A.
Correct. Yes.
Q.
And so when someone has been -- for example, an employer
has had experience as an employer for a good amount of time,
and has filed 941s before, would your understanding of -- that
taxpayer to have an understanding that 941s are required as an
employer?
MR. ETRA: Objection.
THE COURT: The basis?
MR. ETRA: No factual basis for the information
that's -- itself.
THE COURT: Overruled.
THE WITNESS: Yes. That would be correct. In my
experience, employers who have filed previously, submitted
employment tax returns, W-2 informational returns, would have
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
the experience to continue doing so. Yes.
BY MS. MARTINEZ:
Q.
The fact that they have filed it before would show that
they know that it's required?
A.
Correct.
Q.
Now, I could go back to one of the exhibits in this case --
MS. MARTINEZ: Yes. Plug in.
Yes. Could you give me Exhibit 12-3.
Just to identify the top of it, could you just
highlight that.
BY MS. MARTINEZ:
Q.
What is this form?
A.
This is Form 941 for HM Management and Development, LLC,
for the first quarter of 2018.
MS. MARTINEZ: And just highlight the second box -- I
mean the second part.
BY MS. MARTINEZ:
Q.
And again, to clarify, this is the employer's tax return
that includes the withholdings and the Medicare and Social
Security that the employer has to contribute to IRS for those
employees?
A.
Correct. Yes.
Q.
And it also has the number of employees by that company,
correct?
A.
Correct.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. MARTINEZ: Could you go to Page 2, and can you
highlight the signature section.
BY MS. MARTINEZ:
Q.
And whose name is indicated there as signing on behalf of
HM Management?
A.
Eric Sheppard, managing member.
Q.
And the date printed on the return?
A.
It's going to be April 13th, 2018.
Q.
And as we saw for this exhibit, there were multiple
quarters that were filed that year, correct?
A.
Correct.
MS. MARTINEZ: Could you go to the end of the exhibit,
close to the end where we have a transcript.
There we go.
BY MS. MARTINEZ:
Q.
And do you recall what we saw for the last quarter of 2018
for HM Management?
A.
I do. A return was filed for the final quarter ending
December 31, 2018, reporting wages paid; however, there were no
payments made on the taxes owed or no deposits made by the
taxpayer for that quarter.
Q.
And as you recall from yesterday, after that, there were no
more 941s that were filed for this company, correct?
A.
Correct.
Q.
Or indeed for your records there was no 941s for any of the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
companies that you brought records for, Alafaya, HM Four, HM
Management, correct?
A.
That's correct.
Q.
And did you indicate on cross-examination that you had also
looked at all the other companies that were on the Defendant's
1040?
A.
Correct. I did. I looked at all the partnerships reported
on Schedule E, again, for that same period, 2019 through 2021,
and there were no employment tax filings there either.
Q.
And by "employment tax filings," we mean this type of form,
the Employer's Tax Return 941?
A.
Correct. Yes.
Q.
Going back to the signature that we had seen --
MS. MARTINEZ: And you can just go to the third
quarter. There's a signature on -- on any quarter.
That's fine.
BY MS. MARTINEZ:
Q.
So here we're looking at the signature from
July 17th, 2018. That would be the second quarter. What's the
title that it says under Eric Sheppard?
A.
"Managing Member."
Q.
And do you have an understanding of what that means with
respect to a partnership?
A.
Yeah. In my experience, managing member would refer to the
person who was in charge of the majority of the business
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
affairs as it relates to tax as well -- tax matters.
Q.
Thank you.
You were asked on cross-examination about the role of
an accountant with respect to tax returns. From whom does the
accountant get the information to put on the tax returns?
A.
All records and documentation would be provided by the
taxpayer.
Q.
So in your experience, is the person who's knowledgeable
about the facts, and about the company, and about the employees
or independent contractors -- is that the taxpayer or the
accountant in terms of the facts?
A.
It would be primarily the taxpayer.
MR. ETRA: Objection. Could we get clarification of
what taxpayer means in this context?
MS. MARTINEZ: I'm happy to ask the question.
THE COURT: All right.
BY MS. MARTINEZ:
Q.
What do you mean by taxpayer in this context?
A.
Taxpayer would be -- if it's an individual, it would be the
person. In the case of a partnership or a corporation, the
person with that partnership or corporation that's responsible
for the filings.
MS. MARTINEZ: Can you pull up 12-1.
We're there?
Could we go to the second-to-last page.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
The one before that. There's a page just before that.
First -- okay. Can you highlight that.
BY MS. MARTINEZ:
Q.
Could you please read to the jury what it says on the
second-to-last page -- it's Bates label SHEPP 032265.
A.
There it says: "Cupersmith, Wilensky, Stempler & Company,
LLP. To HM Management and Development, LLC, instructions for
filing 2019 Federal Partnership Income Tax Return. We have
prepared and enclosed your 2019 Form 1065 US Return of
Partnership Income for HM Management and Development, LLC, for
the tax year ending December 31, 2019.
"The return was prepared from information furnished to
us. Please review to ensure there are no omissions or
misstatements of material facts.
"The return should be signed and dated by a limited
liability company member and mailed on or before
September 15th, 2020. Retain the duplicate copy for your
records indefinitely."
Q.
Let me -- I'm go --
MS. MARTINEZ: Go ahead to the next one. Next page,
and highlight the whole form.
There you go.
BY MS. MARTINEZ:
Q.
Could you read to the jury what this says.
A.
Sure. This is a declaration from the preparer. It says:
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
"We have prepared the attached tax return for the year ended
December 31, 2019. We prepared the tax return based on the
financial information available today, using the best
information provided to us. We relied upon the information as
prepared and supplied to us by the taxpayer. We did not verify
or observe all of the documentation necessary to prepare this
tax return.
"Once additional information is received, and if any
revised information becomes available for or regarding the
taxpayer that alters the tax return, an amended tax return will
be filed."
Q.
You were asked about sentences in loan documents and the
word "payroll," and you indicated that you understood
maintaining payroll as meaning something in particular. Can
you explain that? What was it that you were trying to say?
A.
Yeah. I believe I was explaining that payroll for me
references an employee receiving wages, salary. That's what I
associate payroll to mean, not independent contractors.
Q.
You were also asked whether it was possible for a taxpayer
to eventually deduct some of the expenses connected with
payroll taxes, and by that I mean the contribution that an
employer has to make for W-2 employees for things like Medicare
and Social Security. With respect to the question as to
whether someone can make a deduction, if a company already has
many other deductions, say, because it's a company that has
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
buildings and has assessed depreciation on those buildings that
has led to numbers that reduce -- that are -- that account like
a negative on the tax return, isn't it also possible that for
some taxpayers this additional deduction would possibly make no
difference and they would still be out of pocket the money that
they paid out for the payroll?
Did you understand my question?
A.
I did. That would be correct, yes. There's a situation --
Q.
Could you explain that better than I did?
A.
Sure. So depending on the other expenses associated with a
business for a particular year, there could be a situation
where the losses are of a certain level that the additional
credit from those taxes that the taxpayer is required to pay
would not benefit them in that year.
Q.
And I'm going to ask you a question --
MS. MARTINEZ: You can remove that from there.
BY MS. MARTINEZ:
Q.
I'm going to ask you a question without showing you a
document. But if you need me to go back to the document that
the Defense counsel showed you, let me know. But I think I can
ask you -- but you let me know.
Counsel asked you about K-1s. Again, to explain to
the grand jury, what is a K-1 -- I'm sorry -- to the jury. I
apologize. To the jury.
A.
A K-1 is an informational form that's attached to, in this
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
case, a partnership, which shows income deduction credit items
that are specific to each partner.
MS. MARTINEZ: May I just ask: Do we have this -- I'm
hiding behind this podium, and I want to try to see if I can
avoid that to some extent.
BY MS. MARTINEZ:
Q.
So you were asked about numbers on the K-1 that were
carried over from a previous year. Do you want me to show you
that again or do you recall that?
A.
I recall it. Yes.
Q.
And those numbers were rather large. Some of them were
over a million dollars negative carried over. I could go back
to show you, if you would like.
A.
Sure.
Q.
Okay.
MS. MARTINEZ: Can you pull up 13.2.
BY MS. MARTINEZ:
Q.
This is the HM-UP Development Alafaya Trails 1069 for --
I'm sorry -- 1065, US Return of Partnership Income for 2019,
correct?
A.
Correct.
MS. MARTINEZ: Could you go to the last page.
Now, again, just to again clarify what's here, just
highlight the first two boxes so we see -- I'm sorry -- the
bottom left -- I'm sorry. There you go.
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Miami, Florida 33128
(305) 523-5698
No. Try again. I did not explain myself.
I would like you to highlight where it says "HM-UP
Development Alafaya Trails" and then "HM Four" so we see the
relationship between the two companies again, including the
amount that HM Four -- there you go.
BY MS. MARTINEZ:
Q.
So again, just to review, HM Four is a partner that has
a -- 99 percent of HM-UP Alafaya Trails?
A.
Correct.
MS. MARTINEZ: Now let's go to the little box on the
bottom left.
BY MS. MARTINEZ:
Q.
This is what we were talking about where it says:
"Beginning capital account," and it says: "Negative
1,821,025." What do you understand that to be?
A.
That's the partner's share or basis in the partnership.
And that's often increased by income or losses from year to
year. So the fact that there is a negative beginning bank of
1.8 million would mean that this was either losses in prior
years -- well, yeah. That's what it would mean.
Q.
And that could be caused by all types of accounting
notations, such as depreciation of physical assets, correct?
MR. ETRA: Objection, Your Honor. Beyond the scope in
terms of negative capital going forward. That was never part
of the cross.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Overruled.
BY MS. MARTINEZ:
Q.
Did you understand or do you remember the question?
A.
Could you repeat it? Sorry.
Q.
Sure. That large -- essentially a carryover loss from a
previous time period -- that large amount could be added up
from items such as large depreciation of physical assets,
correct?
A.
That's correct, yes.
Q.
Could you explain to the jury, what is that --
MR. ETRA: Objection.
BY MS. MARTINEZ:
Q.
-- depreciation of a physical asset?
MR. ETRA: Sorry. I apologize, Your Honor. The
objection is that this is only for an improper purpose.
MS. MARTINEZ: Excuse me?
THE COURT: The objection is for an improper --
MR. ETRA: The objection is that the --
THE COURT: No. Overruled.
You may continue.
THE WITNESS: The easiest way to think of depreciation
is in terms of the useful life of an asset. Non-residential
real estate typically has a useful life of between 28 to 32
years. What that means is the business that purchases that
asset gets to deduct the cost associated with that asset over
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
the useful life.
So again -- and this is a very simplistic explanation,
but if you have a $32 million building with a 32-year useful
life, you would take the purchase price of the asset,
32 million, divide it by the 32 years, and you get to deduct a
million each year as an expense on the return.
Q.
And could you explain to the jury the concept of carrying a
loss over from year to year.
A.
Not all losses incurred in each year are deductible. And
if they're not deductible, then in a lot of situations you're
able to carry them forward to a future year where they could be
deductible.
So for example, if this $1.8 million loss happened in
the prior year -- and there are various tax rules regarding the
deductibility. But if it wasn't allowed as a deduction in the
previous year, then it's been brought forward where it could
potentially be deducted this year. If not, it's carried
forward again.
MS. MARTINEZ: Could you go to -- it's in the middle
of the form, but I'm going to give you the SHEPP number. The
Bates label is 032342. We're in 13.2 -- we're still there.
Stop.
Could you just enhance the middle of the form.
BY MS. MARTINEZ:
Q.
So what does -- this is the same form we were looking at.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
On Line 14, what does it indicate?
A.
Depreciation expense of $475,274.
MS. MARTINEZ: And could you just highlight the top of
the form, just so we could see which schedule this was.
BY MS. MARTINEZ:
Q.
What type of schedule is this?
A.
This is Form 8825, which is Rental Real Estate Income and
Expenses of a Partnership.
Q.
I'm going to take you to an exhibit that was admitted by
the Defense. It's the 1099 Non-Employee Compensation form.
And you wanted to explain something about backup withholding.
I'm going to show you the instructions to the form for the
recipient.
MS. MARTINEZ: May I switch to ELMO?
Thank you.
BY MS. MARTINEZ:
Q.
I just want to show -- what I'm showing you -- this is
what's been admitted into evidence as Defendant's Exhibit L-43.
Seems to be from an IRS website. And this is what had been
previously admitted, Copy A of the Non-Employee Compensation
Form 1099 NEC. Now, this particular form is more recent than
the tax year -- the tax years involved in this case. This is
from 2022, I believe, from what I saw -- yes.
Here. Let me zoom. Can you see that this form was --
is as recent as January 2022?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
That's correct. Yes.
Q.
Now, there's multiple forms, correct? One for the
taxpayer -- I'm sorry -- one for the person paying the money,
one for the person receiving the money. For example, here,
Copy A, can you see -- who is that for?
A.
Yes, I can. Copy A is for the Internal Revenue Service.
Q.
Copy 1?
A.
Copy 1 is for the state tax department.
Q.
Copy 2?
A.
Copy 2 is to be filed with the recipient's state income tax
return when required.
Q.
Copy C?
A.
Copy C is for the payer.
Q.
There's instructions for the payer.
And now Copy B, for recipient, correct?
A.
Correct.
Q.
Now, on the instructions for the recipient, it refers to
Box 4. I'll take you back to the form, so we can see. What
does it say that Box 4 is?
A.
Federal income tax withheld.
Q.
Okay. And what do the instructions for Box 4 indicate?
A.
Box 4 shows backup withholding. "A payer must backup
withhold on certain payments if you did not give your TIN to
the payer. See Form W-9, Request for Taxpayer Identification
Number and Certification for Information on Backup Withholding.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Include this amount on your income tax return as tax withheld."
Q.
Now, you were trying to explain how this type of -- even
though it's called withholding, but it's very different from
the withholding that we do from a wage employee. Can you
explain what this is -- why is it this backup withholding is
kept back? Can you explain that? How does that work?
A.
Sure. So for the purposes of non-employee compensation,
backup withholding is a flat tax -- tax rate, which is
determined on a yearly basis. I believe that the current rate
and the year that was -- and the rate that was in effect for
2019 through 2021 was 28 percent. And the only situation where
tax would be withheld in these payments is if the payer was
unable to get the tax ID number for the person that they were
paying.
So as an example, an independent contractor is brought
in to do a job, and the cost of the job is $6,000. Let's just
say an amount in excess of what's required to be reported on
that form. Halfway through the job, that independent
contractor doesn't provide all his details, doesn't provide his
address, doesn't provide his tax ID number. You as the payer
are then required to withhold that amount from the payment that
you make to him. So it's technically income withheld, but we
refer to it as backup withholding.
Q.
And again, this is done by -- according to the payment or
on an annual basis. It's not a biweekly payroll?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
It's -- correct -- well, it depends on the frequency of the
payments. But the moment that the payments being made to the
non-employee exceeds $600, then the withholding should be
collected, whether it's a one-time payment or more frequent
than that.
Q.
But again, it would be when the person getting paid has not
provided such as -- like a Social Security number or some kind
of a company number --
A.
Correct. Correct.
Q.
You were also asked about whether or not there were some
situations where a real employee would not -- would have
elected somehow to tell the employer: "Please don't withhold
from me." How could that be done?
A.
Yeah. So typically, when an employee is brought on, they
are required to submit a Form W-4 to their employer. That
might be a paper form. It could be electronically. And that
form essentially states the amount of dependents, or
exemptions, or special situations that you have with respect to
income withholding.
So Person A might have no dependents or exemptions,
and thus needs to be taxed at the full rate. Person B might be
married with two kids, a special situation, and then would be
taxed at a lower rate. Another person could put that they are
exempt from income tax withholding based on, again, what they
would put on that form.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Isn't it a fact it's the most common thing that employees
typically have withholding?
A.
Correct. It's rare to see someone that's exempt from
federal income tax.
Q.
And in this case, in the forms that we reviewed now on
redirect, we reviewed the 941s that had been filed in 2018 for
HM-UP Alafaya Trails, signed by Mr. Sheppard -- in those forms,
Mr. Sheppard told the IRS that there had been withholding,
correct?
A.
Correct. There was withholding from HM Development, I
believe.
Q.
Oh, you're so good. Thank you. You're right. HM
Management. That's right?
A.
Correct.
Q.
I misspoke. Thank you.
And as we reviewed both in the tax returns, as well as
in the declaration of the preparer, of the accountant, the tax
returns that we have admitted into evidence in this case were
signed by Mr. Sheppard, correct?
A.
That's correct.
Q.
So we just noticed that I had just misspoken, and you
corrected me, correct?
A.
Correct, ma'am.
Q.
Thank you for doing that. Can we confirm again that I
misspoke yesterday when I referred to someone who pays an
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
independent contractor as an employer? Because counsel asked
about you -- that on cross-examination. He said: "The
prosecutor said the employer of an independent contractor," and
you were polite then. You didn't correct me.
MR. ETRA: Objection. Sorry.
THE COURT: What's the question, Ms. Martinez?
BY MS. MARTINEZ:
Q.
The question is: Do you refer to someone who pays an
independent contractor as the employer of the independent
contractor?
A.
Yeah. So an employer doesn't necessarily only have
employees. An employer could also have independent
contractors. So the accurate -- I mean, I know there was some
confusion earlier. But an employer can also pay non-employees.
Everyone who has workers is an employer -- not everyone. Every
business that has workers is an employer.
Q.
And that's in part why they have the Employer
Identification Number?
A.
That's correct.
Q.
But just because we call the person paying an employer does
not make an independent contractor a wage employee?
A.
That's correct.
MS. MARTINEZ: No more questions, Your Honor.
THE COURT: All right. Is the witness excused?
MS. MARTINEZ: Yes, Your Honor.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: On behalf of the Defendant?
MR. ETRA: Yes, Your Honor.
THE COURT: Thank you, Mr. Palmer. You are excused.
(Witness excused.)
THE COURT: And the Government's next witness.
THE WITNESS: Thank you, Your Honor.
MS. JIMENEZ: Thank you, Your Honor. The Government
calls Martin Joe Beirne.
(Pause in proceedings.)
THE COURT: Hi. Good morning, sir.
THE WITNESS: Good morning.
MARTIN JOE BEIRNE, GOVERNMENT WITNESS, SWORN
COURTROOM DEPUTY: Thank you.
Have a seat.
Would you please state your name and also spell it for
the record.
THE WITNESS: Martin J. Beirne, Jr.
COURTROOM DEPUTY: Get a little closer to the
microphone, please.
THE WITNESS: Martin J. Beirne, Jr.
COURTROOM DEPUTY: And the spelling?
THE WITNESS: B-E-I-R-N-E.
COURTROOM DEPUTY: Thank you.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
DIRECT EXAMINATION
BY MS. JIMENEZ:
Q.
Good morning, Mr. Beirne.
A.
Good morning.
Q.
Were you served with a subpoena to come testify at this
trial?
A.
Yes, I was.
Q.
You need to speak up.
THE COURT: Just need you to speak a little closer to
the microphone.
Thank you.
THE WITNESS: Yes, I was.
BY MS. JIMENEZ:
Q.
Where are you from?
A.
Medina, Ohio.
Q.
In what area do you live now?
A.
Satellite Beach, Florida.
Q.
What type of work do you do?
A.
Construction developer.
Q.
Do you know an individual by the name of Eric Sheppard?
A.
I do.
Q.
Do you see him here in the courtroom today?
A.
Yes, I do.
Q.
Can you please identify him by his location in the
courtroom and an article of clothing.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
He's standing over your shoulder in a black suit and tie.
MS. JIMENEZ: May the record reflect the witness has
identified the Defendant?
THE COURT: I don't see anybody standing. Could we be
a little bit --
MS. WEINTRAUB: Judge, we stipulate.
THE COURT: All right. It's appropriately identified.
BY MS. JIMENEZ:
Q.
How long have you known the Defendant, Eric Sheppard?
A.
Approximately 20 years.
Q.
How do you know the Defendant?
A.
I met him at a basketball game.
Q.
Did you ever work for him?
A.
Yes.
Q.
What type of work did you do?
A.
Construction.
Q.
Approximately when did you go work for the Defendant?
A.
2017.
Q.
And what were you hired to do at that time?
A.
I was originally hired to be a project manager. Then I
went on to a property manager.
Q.
Now, when you were hired, where were you living at the
time?
A.
Medina, Ohio.
Q.
And was the project going to be in Ohio or was it going to
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
be somewhere else?
A.
Orlando, Florida.
Q.
What was the project you were hired for?
A.
To be a property/project manager for the Shoppes of
Alafaya.
Q.
And the Shoppes of Alafaya are located in Orlando, Florida?
A.
Correct.
Q.
And generally, what was the job offer you received?
A.
It was to be a project manager on new construction.
Q.
And what was the actual project?
A.
We were to develop a site and put up new shops.
Q.
That was at that same shopping center?
A.
Correct.
Q.
Now, as the project manager, to whom did you report?
A.
At that point, I was directed to work with Eric directly.
Q.
And what was your understanding of the Defendant's role
regarding the project?
A.
He was ownership.
Q.
Now, what was your understanding of the compensation you
were supposed to receive?
A.
Ten thousand dollars a month, plus my rent and my vehicle
and my cell phone to be paid.
Q.
Were you also going to be covered for room and board?
A.
That was part of my housing, my rent.
Q.
Is that typical?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
In the industry, I would think it would be.
Q.
Now, you indicated the Defendant you understood was the
owner?
A.
Correct.
Q.
Did you have contact with anyone else who claimed to be an
owner of that property?
A.
No.
Q.
Do you know an individual by the name of Jennifer Sheppard?
A.
Yes.
Q.
And who is Jennifer Sheppard?
A.
Eric's wife.
Q.
Did you deal with Jennifer Sheppard at all in connection
with this project?
A.
No.
Q.
What about Robert Kallman, K-A-L-L-M-A-N? Do you know that
individual?
A.
No.
Q.
Did you ever deal -- well, did you ever hear that name?
A.
No.
Q.
Approximately how long did you work as the project manager?
A.
Three or four months.
Q.
And what happened?
A.
Toys "R" Us had terminated the lease and Eric said: "I
don't believe I could afford to keep you here at that wage."
And I said I'd be willing to stay on for a lesser wage and take
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
care of the property management, as well as the landscaping.
Q.
Let me just ask you something. You just referred to your
payments as wage. Were you a wage employee, sir?
A.
No.
Q.
Did you ever at any point have any part of the payment that
you received for this job withheld --
A.
No.
Q.
-- for any tax purpose, Social Security, Medicare, income
tax?
A.
No.
Q.
So did you actually mean wages or were you just paid
payments as a worker or contractor?
A.
I'm referring that to a source of income.
Q.
A source of income. What was your understanding of -- do
you file 1099s?
A.
Yes.
Q.
Were you filing 1099s at that point?
A.
Yes.
Q.
So the term "wage" having a specific meaning as wage
employees, were you a wage employee?
A.
No.
Q.
All right. So let's go back to the -- you were saying that
the -- something happened to the Toys "R" Us. Explain what
happened.
A.
They defaulted on their lease. So they weren't able to pay
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
and they vacated the site.
Q.
And where was this Toys "R" Us located?
A.
It was to the north of the project.
Q.
Was it at the shopping center?
A.
Part of Shoppes of Alafaya.
Q.
And then your position as project manager changed; is that
correct?
A.
That is correct.
Q.
All right. So what happened after that? What tasks were
given, if any?
A.
I took the role on as project manager to take care of the
grounds of the property, as well as work with the tenants on a
daily basis.
Q.
Do you mean property manager? Did you become the property
manager?
A.
I became the property manager, yes.
Q.
And so what were your responsibilities as the property
manager?
A.
I would take care of landscaping and I would deal with the
tenants on a daily basis.
Q.
Who were the tenants?
A.
There was Mattress1One. There was a Poke Bowl. There was
a spa, Posh Spa. There was Batteries Plus. There was the
dental -- Aspen Dental. There was DICK'S Sporting Goods.
There was also the Toys "R" Us building.
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Miami, Florida 33128
(305) 523-5698
Q.
And these tenants you're referring to, these are retail
stores located at the shopping center?
A.
That's correct.
Q.
All right.
MS. JIMENEZ: I'd like to show the witness
Government's Exhibits 4-1, 4-2, 4-3, 4-5, 4-6, 4-7.
BY MS. JIMENEZ:
Q.
All right. Let me -- so the jury is not seeing this
currently, Mr. Beirne, so I want to show you Government's
Exhibit 4-1. Do you recognize what this is?
A.
I do. That's J-Petal --
Q.
Without saying what it is, do you recognize what it is?
A.
Yes.
Q.
All right. Is it a fair and accurate depiction or
photograph of that location?
A.
It's a typical tenant. Yes.
MS. WEINTRAUB: Judge, I just want to clarify the year
of the picture, time frame.
BY MS. JIMENEZ:
Q.
Mr. Beirne, what period of time were you the property
manager at the Shoppes at Alafaya?
A.
I believe that would be 2018.
Q.
2000 --
A.
Excuse me. '18. 2018.
Q.
2018 you started?
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Miami, Florida 33128
(305) 523-5698
A.
Correct. Yes.
Q.
Yes?
A.
Uh-huh.
Q.
And is this -- does this photograph fairly and accurately
depict that location during the time period when you were
there?
A.
Yes.
Q.
You were there from 2018 until approximately when?
A.
November 22nd of '20 -- 1920 -- 2020.
MS. JIMENEZ: Government would like to move
Government's Exhibit 4-1 into evidence.
THE COURT: Any objection?
MS. WEINTRAUB: No objection, Judge.
THE COURT: Admitted into evidence.
(Government's Exhibit 4-1 received into evidence.)
BY MS. JIMENEZ:
Q.
So what are we looking at, Mr. Beirne?
A.
We're looking at the front of the shop of a Japanese crepe
and poke bowls.
Q.
This shop J-Petal, Posh Nails, Batteries and Bulbs, and
Aspen Dental down the street there, where are these located?
A.
This is the storefront south on the property.
Q.
The Shoppes of Alafaya?
A.
Correct.
MS. JIMENEZ: Can we show him Exhibit 4-2, please.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
Mr. Beirne, without saying what this is, do you recognize
it?
A.
Yes. This is the --
Q.
I'm sorry. Just without saying what it is.
A.
Yes.
Q.
Okay. Is it a fair and accurate depiction of that
location, of what you're looking at, from the time period when
you were working for Mr. Sheppard?
A.
Yes.
MS. JIMENEZ: I would like to move Government's
Exhibit 4-2 into evidence.
THE COURT: Any objection?
MS. WEINTRAUB: No objection, Judge.
THE COURT: Admitted into evidence.
(Government's Exhibit 4-2 received into evidence.)
BY MS. JIMENEZ:
Q.
All right. So what are we seeing?
A.
Posh Nails, Battery and Bulbs, Aspen Dental.
Q.
This is the same strip mall area?
A.
Shoppes of Alafaya.
MS. JIMENEZ: Can we show him Government's Exhibit
4-3.
BY MS. JIMENEZ:
Q.
Mr. Beirne, do you recognize it?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
This was the Toys "R" Us building north of the property in
Alafaya, Shoppes of Alafaya.
Q.
All right. Is it a fair and accurate depiction of that
Toys "R" Us location at the Shoppes at Alafaya?
A.
Yes.
MS. JIMENEZ: Like to move Government's Exhibit 4-3
into evidence.
THE COURT: Any objection?
MS. WEINTRAUB: No, Judge.
THE COURT: Admitted into evidence.
(Government's Exhibit 4-3 received into evidence.)
BY MS. JIMENEZ:
Q.
Was this the Toys "R" Us that closed down?
A.
Yes.
Q.
And then let's show you Government Exhibit 4-5.
Do you recognize this?
A.
Yes.
Q.
Exhibit 4-5, what is it generally?
A.
DICK'S Sporting Goods, Shoppes of Alafaya.
Q.
All right. Aside from being a little blurry, is it a fair
and accurate depiction of that location?
A.
Yes.
Q.
All right.
MS. JIMENEZ: I would like to move Government's
Exhibit 4-5 into evidence.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Any objection?
MS. WEINTRAUB: No, Your Honor.
THE COURT: Admitted into evidence.
(Government's Exhibit 4-5 received into evidence.)
BY MS. JIMENEZ:
Q.
All right. Where was the DICK'S Sporting Goods?
A.
It was in the middle of the property.
Q.
The Shoppes at Alafaya?
A.
Shoppes of Alafaya.
Q.
All right.
MS. JIMENEZ: Could we show Government Exhibit 4-6.
BY MS. JIMENEZ:
Q.
Mr. Beirne, do you recognize this photograph?
A.
Yes.
Q.
What is it?
A.
Mattress1One at Shoppes of Alafaya.
Q.
All right. So does it fairly and accurately depict the
Mattress1One that was at the Shoppes of Alafaya?
A.
Yes.
MS. JIMENEZ: We would like to move Government's
Exhibit 4-6 into evidence.
THE COURT: Any objection?
MS. WEINTRAUB: No, Judge.
THE COURT: Admitted into evidence.
(Government's Exhibit 4-6 received into evidence.)
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
And where -- relative to that part of the shopping mall
that we saw earlier with the J-Petal, where is this located?
A.
This is the far south property storefront, Shoppes at
Alafaya.
MS. JIMENEZ: Okay. 4-7.
BY MS. JIMENEZ:
Q.
Showing you Exhibit 4-7. And what is that?
A.
Mattress1One.
Q.
All right. Is it -- aside from, again, the blurriness of
the photograph, does it fairly and accurately depict the
Mattress1One that was at the Shoppes of Alafaya when you were
there?
A.
Yes.
MS. JIMENEZ: I'd like to move Government's
Exhibit 4-7 into evidence.
THE COURT: Any objection?
MS. WEINTRAUB: No, Judge.
THE COURT: Admitted into evidence.
(Government's Exhibit 4-7 received into evidence.)
BY MS. JIMENEZ:
Q.
All right. So as property manager, you -- what kinds of
responsibilities did you have?
A.
I maintained the grounds, the landscaping, I leased out
space, and I provided daily management to the tenants.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And the tenants are the retail stores; is that right?
A.
Correct.
Q.
To whom did you report when you were property manager for
the Shoppes at Alafaya?
A.
My contact was mostly with a lady by the name of Jeanette
in the office.
Q.
What was Jeanette's position?
A.
I believe it was office manager.
Q.
For whom did Jeanette work?
A.
Eric Sheppard.
Q.
Did you also have interaction with someone by the name of
Jeff Vasilas, V-A-S-I-L-A-S?
A.
Later on while I was working there I did.
Q.
But not in the day-to-day as project -- I'm sorry -- as
property manager?
A.
Correct.
Q.
All right. Now, did there come a time when a Burlington
Coat Factory came to -- retailer came to that shopping center?
A.
Yes.
Q.
And what -- what was happening with that Burlington Coat
Factory?
A.
We were fortunate enough to get a lease on the property.
Q.
And then did you have any responsibilities relative to the
Burlington Coat Factory?
A.
Yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
What were they?
A.
The property manager to oversee the property. We had
leased it twice to another tenant for temporary leases there.
Q.
And that was -- did Burlington Coat Factory seek to occupy
the space that Toys "R" Us left behind?
A.
Yes.
Q.
All right. And then you had tenants in between the Toys
"R" Us and the Burlington arriving, correct?
A.
Yes. We had a Halloween store.
Q.
And then when you say you leased it out, were you the party
who signed the lease agreements on behalf of the shopping
center?
A.
I didn't sign a lease, but I helped negotiate the lease.
Q.
And so the Burlington Coat Factory, did they move in right
away?
A.
No.
Q.
What happened?
A.
There was construction that had to be made for their tenant
build-out.
Q.
That -- and you were property manager at that time,
correct?
A.
Correct.
Q.
For that construction project for the retail store, was
there a general contractor?
A.
Yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Did you deal with the general contractor?
A.
Yes.
Q.
What were your dealings with the general contractor?
A.
Day-to-day operations.
Q.
And was the general contractor Mr. Vasilas or somebody
else?
A.
No. Somebody else.
Q.
Did that general contractor remain on the job until --
well, was the Burlington Coat Factory project completed at some
point?
MS. WEINTRAUB: Judge, excuse me. I'm going to
object. And I apologize to the Court. I'd ask for a sidebar,
very brief.
THE COURT: All right. Come on forward.
(At sidebar on the record.)
THE COURT: If everyone will take a microphone,
please. So you can speak into the microphone, please.
MS. WEINTRAUB: I apologize, Judge. I did not realize
she was going to do this with this witness. This is one of our
motions in limine that the Court said that it would consider as
it's coming in.
I believe that the prosecutor is going to elicit
information that the first general contractor wasn't paid, and
so he left, starting a whole string of so and so -- hearsay --
so and so said they weren't paid, so they left, or he didn't
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
pay him. He doesn't know and he doesn't have any personal
knowledge.
THE COURT: All right. But to the extent that
Ms. Jimenez seeks to elicit hearsay, you can object and I'll
rule on it. But why do we need a sidebar for this?
MS. WEINTRAUB: Because I don't want this testimony
coming in, and --
THE COURT: Are you intending to ask those questions?
MS. JIMENEZ: I'm not going to ask him: "What did the
general contractor tell you?"
MR. WEINTRAUB: She's going to say: "Why did he
leave?"
THE COURT: Well, what's wrong with asking why he
left?
MS. WEINTRAUB: Because she knows that it's calling
for a hearsay response.
THE COURT: Well, it's his reason why he left.
MS. WEINTRAUB: No. No. No, not this person.
THE COURT: Well, why would someone else leave? Are
you seeking to ask about other individuals?
(Court reporter interruption.)
THE COURT: You have to speak into the microphone.
MS. JIMENEZ: I'm going to elicit from him that there
was a general contractor, and what happened with the general
contractor, and what he knows about it.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Okay. So you're not seeking to elicit
hearsay. You're seeking to elicit based on his observations?
MS. JIMENEZ: Yes.
THE COURT: But the only way he would know why
somebody left would be from conversations that he had, correct?
MS. JIMENEZ: Potentially.
THE COURT: Right. So why would that be permitted?
MS. JIMENEZ: Well, I would ask, and I will not elicit
hearsay. In other words, I'm not going to ask him -- I'm going
to ask him, you know: "What happened with the general
contractor?" He's going to say: "He left the job."
THE COURT: Okay. So is that all, just: "He left the
job"? Is that all you're seeking to elicit, is that he left
the job?
MS. JIMENEZ: Well, he left the job, and I was going
to ask him, you know: "Do you know why he left the job?"
THE COURT: Right. But the basis of his knowledge
would be based on hearsay statements, right? He can observe
somebody leaving the job. He can have that personal knowledge.
But the reason why somebody left the job would be based on --
unless he had a conversation with Mr. Sheppard. That's a
little bit different.
MS. JIMENEZ: Okay. I will ask him that.
THE COURT: Okay. Well, then that's not hearsay. I
mean, it's an exception.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
All right. Let's continue.
(End of discussion at sidebar.)
THE COURT: All right. Let's continue.
BY MS. JIMENEZ:
Q.
Yes. Mr. Beirne, you said that there was a general
contractor for the Burlington project?
A.
Yes.
Q.
You had dealings with that general contractor?
A.
Yes.
Q.
Did the general contractor remain for the duration of the
project?
A.
No.
Q.
Did he leave?
A.
Yes.
Q.
Did you have any conversations with the Defendant as to why
the general contractor had left?
A.
I can't remember.
Q.
Did someone come and replace the general contractor?
A.
Yes.
Q.
Who was that?
A.
A gentleman by the name of Jeff Vasilas.
Q.
Now, for whom did Jeff Vasilas work?
A.
I believe Eric Sheppard.
Q.
Was Mr. Vasilas a general contractor?
A.
Not to my knowledge.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
So how did he perform that job?
A.
Repeat the question.
Q.
Yes. How -- how did he perform the job of a general
contractor?
A.
He would bring on subcontractors to work on the facility.
Q.
Did Mr. Vasilas have a general contractor's license?
A.
Not to my knowledge.
Q.
Was a general contractor -- did Mr. Sheppard have someone
else as a general contractor who had a license at that job?
MS. WEINTRAUB: Judge, I'm -- I'm going to object and
ask to his knowledge and what would that be based on.
THE COURT: All right. Well, that would be based on
his personal knowledge. You may continue.
THE WITNESS: Yes.
BY MS. JIMENEZ:
Q.
Was that general contractor on the jobsite?
A.
He did perform service on the site.
Q.
Now, did you on a day-to-day basis, however, deal with
Mr. Jeff Vasilas?
A.
Yes.
Q.
Was Jeff Vasilas located in Orlando or was he located
somewhere else?
A.
Miami area, to the best of my knowledge.
Q.
How often did you see Mr. Jeff Vasilas in Orlando?
A.
Approximately two to three days a week.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Was that the case for the duration of the project?
A.
Yes.
MS. WEINTRAUB: Excuse me, Your Honor. Could we have
a time frame for these questions? He started working in 2018.
We haven't heard another date.
THE COURT: I believe it was to November 2020, was his
testimony.
MS. JIMENEZ: That's correct.
THE COURT: You may continue.
MS. WEINTRAUB: I apologize. I must have missed it.
BY MS. JIMENEZ:
Q.
Approximately when was the Burlington Coat Factory project
completed?
A.
My last date was 10/22/20, date of occupancy and of
Burlington taking over the premises.
Q.
Did you leave your position as property manager at that
point?
A.
I was not the property manager at that point. I was a
construction manager underneath Jeff Valeras [sic].
Q.
Vasilas?
A.
Vasilas.
Q.
All right. So your position changed from property manager
to?
A.
Construction manager.
Q.
Construction manager under Jeff Vasilas?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
All right. And what type of responsibilities did you have
working under Jeff Vasilas?
A.
Well, he asked me for help because of my construction
experience over 40 years of running the -- help him run the
facility, the construction project.
Q.
Was there someone else who was property manager of the
shopping mall who took over?
A.
Jeff eventually took over the running of the whole center.
Q.
That's Jeff Vasilas?
A.
Yes.
Q.
So Jeff Vasilas took over the position of property manager
and general contractor of sorts?
A.
Yes.
Q.
And you worked under him?
A.
Yes.
Q.
The shopping center had a number -- or did it have a number
of other retail shops that were occupied when Burlington Coat
Factory was under construction?
A.
Yes.
Q.
And under construction -- I mean, was the structure already
there, it was being built out?
A.
The shell of the facility was there of the Burlington Coat
Factory. We built out the interior and did exterior work also.
Q.
And there was electrical work to be done as well, correct?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Correct.
Q.
All right. So going back to how you were paid, Mr. Beirne,
how often were you paid?
A.
As construction manager.
Q.
Well, when you were property manager and then as
construction manager?
A.
I went from property manager to -- once a month, to once a
week under Jeff Vasilas.
Q.
And the -- were you paid by check, or direct deposit, or
cash, or how?
A.
As property manager, I was paid by direct deposit. As
construction manager, I was paid by check.
Q.
And as property manager, direct deposit, what entity --
what business entity paid you?
A.
Repeat the question.
Q.
Yeah. What company -- company name, if you recall, paid
you?
A.
As a project manager, I was paid by HM.
Q.
Hold on. You were project manager, then property manager,
then construction manager?
A.
Yes.
Q.
All right. So initially you were paid by HM?
A.
Correct.
Q.
And then did you receive payments from any other business
entity?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
As a construction manager, I was.
Q.
What companies?
A.
There was three or four companies that paid me.
Q.
What were the names of the companies?
A.
As a construction manager, I was paid for HM-UP.
Q.
Is that HM-UP Development Alafaya Trails?
A.
Yes. Flagler something. Diamonds Men's Club.
Q.
All right.
A.
That's the best of my knowledge that I can remember.
Q.
So HM Management -- what was your understanding of who was
the owner of HM Management?
A.
Eric Sheppard.
Q.
What about HM-UP Development Alafaya Trails?
A.
Eric Sheppard.
Q.
What about Flagler, Flagler Company?
A.
Eric Sheppard.
Q.
What about the Diamonds Club?
A.
To the best of my knowledge, there was ownership in that.
Q.
And what was the Diamonds Club?
A.
It was a gentlemen's club.
Q.
And when you were construction manager, you said you
received checks?
A.
Yes.
Q.
Who was paying you those checks?
A.
Jeff would hand out the checks.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And the checks that came from Jeff, was it your
understanding the Defendant was supplying the funds for those
checks?
A.
Repeat the question.
Q.
Yes. The money that you were being paid, did it come --
was it Jeff's money or Eric Sheppard's money?
MS. WEINTRAUB: Objection. If he knows.
THE COURT: If the witness knows.
BY MS. JIMENEZ:
Q.
If you know.
A.
I don't know.
Q.
So up until you were construction manager, the money came
from Eric Sheppard?
A.
Yes.
Q.
And then you were working in the last portion as
construction manager under Jeff Vasilas, correct?
A.
Correct.
Q.
Was it your understanding that Jeff Vasilas worked for Eric
Sheppard?
A.
Jeff said a lot of things.
Q.
Well, did -- okay. Was it your understanding that he was
working for Eric Sheppard?
A.
At one time he stated he was a partner.
Q.
Partner of Eric Sheppard?
A.
A partner of the construction job.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
All right. Now -- and was that -- was he Eric Sheppard's
partner?
A.
That's what he claimed.
Q.
All right. Now, your payments -- you indicated that you
were always paid as a contractor; is that correct?
A.
Yes. My whole life.
Q.
Independent contractor?
A.
Yes, ma'am.
Q.
Was there -- did you know other people who were working at
the shopping center or at that project, the Burlington project?
A.
Yes.
Q.
Was there a Sam Seprish?
A.
Yes.
Q.
Who is Sam Seprish?
A.
A friend of mine.
Q.
Did he do any work there?
A.
Yes.
Q.
What work did he do?
A.
Painting, metal stud, acoustic ceiling, drywalling.
Q.
Was he a contractor or a wage employee?
A.
Yes.
Q.
I'm sorry. Which?
A.
Contractor.
Q.
Did you know a Carlos Granda?
A.
Yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Who is Carlos Granda?
A.
Electrical contractor.
Q.
Independent contractor?
A.
Yes.
Q.
Did you have any discussions with the Defendant about being
a contractor or a wage employee?
A.
No.
Q.
Now, your payments -- did there come a time when your
payments were not regular?
A.
Yes.
Q.
What happened?
A.
I continued to use my services --
MS. WEINTRAUB: Objection, Judge.
THE COURT: The basis of the objection?
MR. WEINTRAUB: For reasons previously stated, Your
Honor, 403, the 404 notice.
THE COURT: Overruled.
BY MS. JIMENEZ:
Q.
Mr. Beirne, were you owed money when you were working for
Eric Sheppard?
A.
Yes.
Q.
How much money?
A.
Approximately $50,000 as a property manager.
Q.
And then you -- did you remain at that jobsite after you
were owed $50,000?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
And then -- is that when you became the construction
manager under Mr. Vasilas?
A.
That is correct.
Q.
Now, you were paid by Mr. Vasilas thereafter?
A.
He would hand me the check, yes.
Q.
And then did there come a time when Mr. Vasilas also owed
you money, sir?
A.
Yes.
Q.
How much did he owe you?
A.
Little under 10,000.
Q.
Did you try to speak to the Defendant about the payments
that he owed you?
A.
Yes. I asked for my subcontractor wages.
Q.
Well, are they wages or are they payments that you
received?
A.
They are payment for my bill that I gave him --
Q.
All right.
A.
-- as a contractor.
Q.
And did Mr. Sheppard tell you anything?
A.
No.
Q.
Did he respond to your inquiries about being paid?
A.
Mr. Sheppard?
Q.
Yes.
A.
No.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
In 2020, you were working at the shopping center, the
Burlington Coat Factory build-out, correct?
A.
Correct.
Q.
And were you still working there after the COVID pandemic
began?
A.
I don't know the date that it ended.
Q.
You mean the project ended?
A.
I know the date of the project. I don't know when the
COVID date ended.
Q.
Okay. But in 2020 were you still working there when COVID
came upon us?
A.
Yes.
Q.
All right. Did you assist the Defendant at any point with
any application for a Paycheck Protection Program loan?
A.
I did.
Q.
What did you do?
A.
I presented a package that was given to me to a bank in
Orlando.
Q.
You received a package, you just said, from whom?
A.
Eric.
Q.
Eric Sheppard?
A.
Yes.
Q.
What did Eric Sheppard tell you the package was or the
package was for?
A.
Pertaining to a loan.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And what did you do with that package?
A.
I brought it to one of my Bible study class bankers.
Q.
What bank was that; do you recall?
A.
Something Bank of Florida.
Q.
Was the bank located in Miami or was the bank located in --
A.
Orlando.
Q.
So this was a bank in Orlando?
A.
Yes.
Q.
And do you know what was contained in the package?
A.
No. I did not open it.
Q.
And what did you do with the package?
A.
Gave it to my friend of the bank.
Q.
And for what purpose did you give the banker the package
from Mr. Sheppard?
A.
For an application for a loan.
Q.
And then what was the result of that application for a
loan?
A.
He gave me the paperwork back and said it didn't qualify
for the loan.
Q.
Was this a Paycheck Protection Program loan?
A.
To the best of my knowledge.
Q.
Did you communicate with Mr. Sheppard after that about this
loan?
A.
Yes.
Q.
What did you tell him?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
I said they didn't submit the application because they said
it wasn't qualifying.
Q.
"They," the bank, did not submit it?
A.
The bank. Correct.
Q.
What did Mr. Sheppard tell you?
A.
Nothing.
Q.
You indicated that you stopped working there at the
completion of the Burlington project.
A.
That's correct.
Q.
And that was approximately November of 2020, correct?
A.
Yes.
Q.
Did you at any point recover the money that you were owed
by either Mr. Sheppard or Mr. Vasilas?
A.
No.
Q.
Did you attempt to make efforts to recover the money?
A.
Yes.
Q.
What did you do?
A.
I was hoping that once Burlington got occupied and threw
off a cash flow -- I was hoping that Eric would settle up with
me.
Q.
Have you spoken with or seen Eric Sheppard between then and
today at any point?
A.
Not to the best of my knowledge.
Q.
Have you spoken to him on the phone or seen him in person?
A.
I have not seen him on person. I might have -- speak to
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
him on the phone.
Q.
At any point did Mr. Sheppard indicate to you that he was
applying or getting Paycheck Protection Program money and was
going to pay you the money that he owed you?
A.
No.
MS. JIMENEZ: If I could have a moment, Your Honor.
THE COURT: All right.
(Pause in proceedings.)
BY MS. JIMENEZ:
Q.
Mr. Beirne, just to clarify, at what point in time were you
the construction manager under Jeff Vasilas, if you recall,
approximately?
A.
It was like February of 2020.
Q.
So essentially the 2020 period?
A.
Yes.
Q.
All right.
MS. JIMENEZ: I have nothing further of the witness,
Your Honor.
THE COURT: All right. Is there much
cross-examination or is this a good time to take a lunch break?
MS. WEINTRAUB: This would be a great time to take a
lunch break.
THE COURT: All right. Then, Ladies and Gentlemen, as
you can see, it's 12:10. Let's take a one-hour recess for
lunch. I'll see you back here at 1:10.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Have a pleasant lunch break.
COURT SECURITY OFFICER: All rise.
(Jury not present, 12:05 p.m.)
THE COURT: Mr. Beirne, we will see you back here at
1:10. Now, you are on the witness stand so you're not to
discuss your anticipated testimony, the testimony of any
individual, or any other aspect of the case. All right, sir?
We'll see you back here at 1:10. Have a pleasant
lunch.
MS. WEINTRAUB: Judge, before you leave, there is --
I'm just waiting for Mr. Beirne to leave.
THE COURT: Okay. We'll see you back here at 1:10,
sir.
(Pause in proceedings.)
THE COURT: Yes, Ms. Weintraub?
MS. WEINTRAUB: Judge -- thank you. There is an issue
of Jencks.
THE COURT: Go ahead and have a seat.
What is the issue?
MR. WEINTRAUB: The issue is that we have a two-page
302 on this witness that never mentions anything about a PPP
loan whatsoever. It was all about how -- it was all about
independent contractor versus W-2.
Moreover, the prosecutor has gone out of her way -- or
their way -- over the past several months to send me email
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
disclosures, and calls it Jencks-ish, without having a 302,
saying: "We interviewed this witness. We want you to know
that they said this or that."
So they are aware, obviously, of their ongoing duties
and obligations to furnish us with statements that are made. I
had no disclosure of this whatsoever. I'm glad we're taking a
lunch break.
THE COURT: Ms. Jimenez?
MS. JIMENEZ: Your Honor, I have complied with my
discovery obligations. I have turned over Jencks of this
witness and the other witnesses we expect to call. I have --
the only thing I referred to as Jencks-ish was something that I
do not consider Jencks. It was the transcript of the testimony
of Ms. Harris that she provided in another case that I had
received.
I don't have any written statement of this witness. I
do not have any recorded statement of this witness. I do not
have any Jencks of this witness, aside from the Jencks that we
provided the Defense, which was a text message the witness
wrote to the agent that we preserved and turned over to the
Defense.
THE COURT: All right. So you turned over an email
and a 302 related to Mr. Beirne, correct?
MS. JIMENEZ: That's correct.
THE COURT: Then what's the issue?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. WEINTRAUB: Judge, the email was that he didn't
appreciate being called by Defense counsel and that he didn't
want to talk to us. That's the email. So to be clear --
THE COURT: All right. But the Government turned it
over. So what is the issue?
MS. WEINTRAUB: The issue that the 302 never mentions
the PPP, which was the thrust of the testimony.
MS. JIMENEZ: She could ask the witness.
MS. WEINTRAUB: I intend to.
THE COURT: Okay. I'm not certain what relief you're
seeking. If the 302 doesn't mention it, then there's no
further information to turn over.
MS. WEINTRAUB: That was what I was seeking, to
ascertain whether or not there were any other statements.
THE COURT: Okay. All right. Have a pleasant lunch.
I'll see you here at 1:10.
COURT SECURITY OFFICER: All rise.
(Recess from 12:09 p.m. to 1:10 p.m.)
THE COURT: Welcome back. I hope everyone had a nice
lunch.
Are we ready to get back to work?
MS. WEINTRAUB: Yes, Your Honor.
THE COURT: We have all our jurors?
COURT SECURITY OFFICER: Yes, ma'am.
THE COURT: All right. Let's bring them in.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Thank you.
COURT SECURITY OFFICER: All rise for the jury.
(Before the Jury, 1:12 p.m.)
THE COURT: All right. Welcome back, Ladies and
Gentlemen.
Please be seated, everyone.
I hope that you had a pleasant lunch and ready to get
back to work.
And we will begin with the cross-examination.
Ms. Weintraub?
MS. WEINTRAUB: Thank you, Your Honor.
I think we're all height challenged, all the lawyers.
CROSS-EXAMINATION
BY MS. WEINTRAUB:
Q.
Good afternoon, Mr. Beirne.
Mr. Beirne, you and I have spoken one time, right,
very briefly?
A.
(No verbal response.)
THE COURT: Sir, could you answer into the microphone.
THE WITNESS: I've never met you before personally.
BY MR. WEINTRAUB:
Q.
I'm sorry?
A.
I never met you before personally.
Q.
That's correct.
I want to pick up where the prosecutor was talking to
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
you about Toys "R" Us. It goes out of business in 2018, and it
was the anchor store at Alafaya, right, at the shopping center?
A.
Yes.
Q.
Created a huge gap when Toys "R" Us went out of business
and the store was empty, agreed?
A.
Yes.
Q.
Burlington Coat Factory replaces Toys "R" Us? Yes?
A.
Yes.
Q.
Huge property, right?
A.
Yes.
Q.
And you were involved with -- from the beginning, with the
demolition of Toys "R" Us to convert it to meet the
specifications of Burlington Coat Factory, right?
A.
Yes.
Q.
You discussed the demolition and the changes with
Mr. Sheppard before they were done?
A.
Yes.
Q.
Now, in 2020, you are inside working on the demolition,
correct?
A.
Yes.
Q.
And there had to be new flooring put in, right?
A.
Yes.
Q.
New walls. The walls were 24 feet high, right?
A.
Approximately.
MR. WEINTRAUB: Judge, with the Court's permission,
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
I'd like to show the witness M-14, which has been shown to the
prosecutor. I don't know if there's an objection to the
introduction of that.
MS. JIMENEZ: I'm sorry. What number?
MS. WEINTRAUB: The video.
MS. JIMENEZ: Oh, the video. No. No objection.
THE COURT: All right. No objection to its
introduction into evidence?
MS. JIMENEZ: Yes, Your Honor.
THE COURT: All right. M-14.
BY MS. WEINTRAUB:
Q.
I'm going to ask you, Mr. Beirne, if you can look at this
video. It's --
MS. JIMENEZ: Whoa. Whoa. Hold on. I'm sorry. I
thought you were going to show him to see if he identifies it.
I'm sorry. No.
THE COURT: That's why I asked if there's an objection
to its introduction.
MS. JIMENEZ: Yes. I'm sorry. I apologize, Your
Honor. I mean, I think that I would like to witness -- so yes,
I think counsel needs to lay a foundation whether the witness
can identify this location.
BY MR. WEINTRAUB:
Q.
Mr. Beirne, can you identify --
MR. WEINTRAUB: Can we play this for the witness and
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
see if he can identify what this is?
THE COURT: All right. Only for the witness.
(Video played, no sound.)
THE WITNESS: It is the inside space for Toys "R" Us.
BY MR. WEINTRAUB:
Q.
You can tell that already?
A.
(No verbal response.)
MS. JIMENEZ: No objection.
THE COURT: All right. Admitted into evidence.
(Defendant's Exhibit M-14 received into evidence.)
MR. WEINTRAUB: Can we now go back and play it from
the beginning for the jury, Your Honor?
THE COURT: Yes, we may.
(Video played, no sound.)
BY MS. WEINTRAUB:
Q.
Mr. Beirne, 60,000 square feet is a huge store, a big
project, right?
A.
It is a big box, correct.
Q.
To get done in three months?
A.
Yes.
Q.
Now, you were at the beginning hiring electricians to come
in, correct?
A.
No.
Q.
You did not -- did you work with electricians?
A.
Yes.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Did you work and observe the AC units on the rooftop being
installed?
A.
I observed, yes.
Q.
Did you work with Eric Sheppard on budgets and pricing out
subcontractors for the jobs?
A.
I can't remember.
Q.
You kept a daily log in December and January --
December '19, January '20 of the tasks and work that you were
doing, right?
A.
Yes.
Q.
And you sent the ledger to Mr. Sheppard, right?
A.
Yes.
Q.
Keeping him informed of all the progress as it was being
done? Yes?
A.
Yes.
Q.
By February a lot of progress has been made? Yes?
A.
Yes.
Q.
And then March 18th COVID hits and the world shuts down
essentially. Do you agree?
A.
That's an opinion.
Q.
Yes. Do you agree that -- let me ask it this way: Did the
subcontractors and a lot of people working leave the site when
COVID hit?
A.
People worked through the epidemic.
Q.
And didn't Jeff Vasilas have to hire people back and, in
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
fact, recruit additional people to work during the pandemic?
A.
Jeff hired people to come back -- hired people to work
there.
Q.
And he was hiring back whatever workers he could that were
already working, say, for one of the electrical companies or
the plumbing companies, right, to come back to work for them?
A.
There was multiple electrical contractors.
Q.
Okay. You were paid during COVID, weren't you?
A.
Yes.
Q.
Your son worked on the jobsite as well, right?
A.
Yes.
Q.
You knew a lot of other workers that were working on the
project during COVID, right?
A.
Yes.
Q.
For example, Brad Schleper was working? Yes? Do you know
who he was?
A.
That name does not ring a bell.
Q.
What about Carlos De Leon?
A.
There's a couple Carloses.
Q.
Carlos Diaz. Did you know him?
A.
I don't remember last names.
Q.
Okay. How about Kerby Kleef?
A.
Yes.
Q.
How about Mercedes Fonseca? Do you know who she was?
A.
I met her.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Mo Wimbley. You remember him?
A.
No.
Q.
Rich Bank?
A.
Yes.
Q.
Sam Seprish? These are all people that worked during COVID
on the project, right?
A.
Yes.
Q.
As a matter of fact, you brought Sam in?
A.
Yes.
Q.
Troy Bennett?
A.
No.
Q.
Is it fair to say that when COVID hit there was still a lot
of work to be done to get Burlington delivered in May of 2020?
A.
Yes.
Q.
They needed -- there were over 600 lights that had to be
installed?
A.
I do not know the number.
Q.
Wiring had to be cut down before new lights were installed,
right?
A.
Yes.
Q.
So things had to be ripped out before they're replaced. Is
that fair?
A.
Correct.
Q.
Same with the flooring. Had to be ripped out before it
could be replaced, right?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Not necessarily.
Q.
Wasn't it vinyl floors when it was Toys "R" Us?
A.
My opinion, the floors shouldn't have been ripped out.
Q.
Do you agree that a lot of jobs were created and people
were paid to get this job done during COVID?
A.
A lot of jobs were created.
Q.
Now, you told the prosecutor -- strike that.
MR. WEINTRAUB: I meant to make it a composite
exhibit. Let me bring up the pictures of M-11 as a composite
exhibit. Do you have an objection, Government?
MS. JIMENEZ: He needs to identify...
THE COURT: All right. Just the witness.
How many pictures are in M-11?
MS. WEINTRAUB: Fourteen, Your Honor, as a composite
exhibit.
MS. JIMENEZ: And the time period, please.
THE COURT: All right. So just lay the foundation,
then, for the 14 pictures.
MR. WEINTRAUB: March 30th, 2020, approximately.
MS. MARTINEZ: No. The witness has to lay --
MS. WEINTRAUB: Oh. I thought you were asking me for
the time period.
THE COURT: No. If you'll lay the foundation with the
witness. Show M-11 to the witness only.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. WEINTRAUB:
Q.
Mr. Beirne, do you remember being present for a strategy
meeting going forward with Mr. Sheppard and Mr. Schleper on how
to proceed because of COVID?
A.
I don't remember.
Q.
Looking at these pictures, does it look familiar to you?
A.
Yes.
Q.
Do they accurately depict what the site looked like in
March of 2020?
A.
Yes.
MR. WEINTRAUB: With that, Your Honor, I would seek to
move in Composite Exhibit --
MS. JIMENEZ: He hasn't seen them all.
MS. MARTINEZ: We need to let the witness see all the
pictures.
THE COURT: Okay. Hold on. One objection from one
lawyer's mouth.
Let's show the witness all 14 of the pictures.
BY MS. WEINTRAUB:
Q.
Do you recognize those photos, all of them?
A.
To the best of my knowledge.
Q.
Is this the site that you were working on?
A.
Yes.
MR. WEINTRAUB: With that, Your Honor, at this time I
would seek to move composite M-11 into evidence.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Any objection?
MS. JIMENEZ: No objection.
THE COURT: As a composite, admitted into evidence.
(Defendant's Exhibit M-11 received into evidence.)
MR. WEINTRAUB: Let's go back to the one with Jeff.
Can you zoom in on the top half of that picture or no?
BY MR. WEINTRAUB:
Q.
Do you recognize the person who would be on your left as
Jeff Vasilas?
A.
It's fuzzy, but it looks like him on the shadow.
Q.
And on the next page, do you know -- I forgot -- I'm sorry.
Do you know who Brad Schleper is? Is that him, or you don't
know?
A.
I don't remember him.
Q.
Now, you told the prosecutor --
MR. WEINTRAUB: You can take it down.
Thank you.
BY MR. WEINTRAUB:
Q.
You told the prosecutor that you delivered a loan
application and a package of papers to take to a bank. Do you
remember that?
A.
Yes.
Q.
Are you sure it wasn't for a line of credit?
A.
There was a discussion of a line of credit.
Q.
Okay. Because at that point, when you took that batch of
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
papers to the bank, PPP loans had not started yet, had they,
now that you think about it?
A.
Papers I brought was for the PPG [sic].
Q.
How do you know that? You didn't open the package, did
you?
A.
I did not open the package.
Q.
And weren't you discussing getting a line of credit?
A.
Earlier.
Q.
Sorry?
A.
Earlier in the year we had.
Q.
Well, if you didn't open the package, and you didn't know
what was in it, and you talked about a line of credit, how can
you be so sure that it was after PPP was offered?
A.
You said "line of credit."
Q.
You don't remember having any discussions about that, and
saying that you were going to take papers to a bank to try and
get a line of credit?
A.
That was earlier in the year. The papers I delivered was
for a second round of -- application for the PPG.
Q.
How do you know that, that that was for a second round?
Were you there in 2021?
A.
I was there because I discussed it with the bank. We
didn't hit the first round of PPG that this bank was doing. We
hit the second round.
Q.
Okay. So let me see if I understand this. Didn't you
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
leave in 2020?
A.
Correct.
Q.
Are you aware of the fact they didn't even have a second
round until 2021? I'm just trying to jog your memory, I guess,
because I think it's not thinking correctly, politely, to say
that there was no second round of PPP when you were doing this,
was there --
A.
It was the second round for the institution that I brought
the paperwork to.
MS. WEINTRAUB: Could I have a moment, Judge?
THE COURT: Certainly.
(Pause in proceedings.)
BY MS. WEINTRAUB:
Q.
You spoke to the FBI in this case, right?
A.
Yes.
Q.
And you were interviewed and what we call debriefed? Yes?
A.
I was talked to, yes.
Q.
And you were talked to in detail about how much money you
were paid, how you were paid, right?
A.
Yes.
Q.
You were talked to in detail about working for Eric
Sheppard, right?
A.
Maybe not detail, but I was asked questions.
Q.
Okay. And -- and you told them about -- first you were
working for $10,000, then you were working for the $5,000,
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
right?
A.
Yes.
Q.
Now, you made the -- and then you agreed to -- when you
agreed to work for the $5,000, you had been there for a few
months and got 10, right?
A.
Yes.
Q.
Okay. Then he reduces it or you agree to the reduction,
correct --
A.
Yes.
Q.
-- of $5,000, because it was better than nothing, right?
A.
I chose to, yes.
Q.
And you were still getting the car, cell phone, and
housing, right?
A.
No.
Q.
You were not?
A.
No.
Q.
Do you remember signing a lease in 2019 with Tammy
Roussell?
A.
I don't remember.
Q.
Yes?
A.
I don't remember.
MR. WEINTRAUB: Can you bring up just for the witness
M-15. Specifically show him the signature page on 6 of 18.
BY MR. WEINTRAUB:
Q.
Is that your name as the signator right there?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
That is my name.
Q.
And who is the landlord signature? Is that Tammy Roussell?
Yes?
A.
I see her name there.
Q.
And was this a house or an apartment building?
A.
Would you state what this lease is for?
Q.
Oh. Sure. 12795 Forestedge Circle in Orlando. Is that
the house that you were living in?
A.
I was a resident there.
Q.
Sorry?
A.
I was a resident there.
Q.
Okay. And Tammy Roussell is the landlord and you're the
tenant, right?
A.
I'm assuming that. I don't remember.
Q.
I'm showing you a copy of the lease. Do you remember it
now?
A.
I've seen a lot of leases.
Q.
Did you see a lot of leases with your name on it
DocuSigned?
A.
Yes.
Q.
Do you see a lot of leases with your name DocuSigned to a
place of residence that you were a resident at that you didn't
execute?
A.
Repeat the question.
Q.
Sure. You said you're not sure if this is a lease. But
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
you said you were a resident at that address, right?
A.
I've signed a lot of leases in my life.
Q.
Okay. But you were a resident at that address, were you
not?
A.
Yes.
Q.
And do you sign a lot of leases for addresses where you
live that you don't recognize?
A.
I lived at that property. I don't remember the name of the
landlord.
Q.
And you don't recognize your name and DocuSign?
A.
I do recognize my name.
MR. WEINTRAUB: Judge, at this time I would move M-15,
the lease, into evidence.
MS. JIMENEZ: Objection, Your Honor. He doesn't
recall -- I don't think -- I think the witness could be asked
questions about where he lived or --
THE COURT: What's the basis of the objection?
MS. JIMENEZ: The witness doesn't recognize the
lease -- the document that he's being shown.
THE COURT: He recognizes his name. He doesn't
recognize the document, correct?
MS. JIMENEZ: That's correct.
THE COURT: Ms. Weintraub, the document has not been
sufficiently identified. The objection is sustained.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. WEINTRAUB:
Q.
So I started asking you what you were talking about with
the FBI. You didn't mention to the FBI anything about a PPP
loan, did you?
A.
I wasn't asked the first time.
Q.
And were you interviewed a second time by the FBI?
A.
I talked to the FBI, yes.
Q.
And you mentioned the PPP then?
A.
I would only answer the question if I was asked.
Q.
Okay. So we weren't there, so I'm asking you. Were you
asked? Did it come up?
A.
Yes.
Q.
And you told the FBI agent about it?
A.
Yes.
Q.
Do you know the FBI agent's name?
A.
I don't remember.
Q.
Was it a male or female?
A.
It was a female.
Q.
Was it Ms. Halleran who is sitting at counsel table with
the prosecutors from the FBI?
A.
I don't know a Ms. Halleran.
Q.
Now, you claim that you're owed $50,000, right?
A.
Correct.
Q.
And isn't the $50,000 that you were owed because after you
were leaving, and you had taken a reduction in rent, you wanted
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
the original 10,000 a month, which would mean 5,000 for the 10
months, which would be $50,000?
A.
That is not correct.
Q.
So you said that it was from earlier. When was it from?
A.
When I was a property manager.
Q.
When he was paying you 10,000 a month?
A.
No. I was being paid five at that time.
Q.
Okay. So you're claiming that you were not paid the 5,000
a month?
A.
That is correct.
Q.
In fact, sir, you were paid $77,000 that year, were you
not?
A.
I do not know.
Q.
You don't know?
A.
No. I don't know.
Q.
You didn't keep track of how much money you were paid?
A.
Yes. I don't have it with me and I don't have it in my
head.
Q.
Your checks were direct deposited, right?
A.
Correct.
Q.
And you started having them direct deposited because you
asked Jeanette Gonzalez to write a letter for you. Do you
remember that?
A.
I asked for direct deposit.
Q.
Do you remember asking Jeanette Gonzalez to write a letter
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
for you? That's a yes-or-no question.
A.
I can't remember.
Q.
Let me see if I can refresh your recollection.
MR. WEINTRAUB: M-2. Can you show M-2 just to the
witness.
MS. JIMENEZ: I'm sorry. What number?
MS. WEINTRAUB: Sorry?
MS. JIMENEZ: What number?
MS. WEINTRAUB: M-2.
BY MS. WEINTRAUB:
Q.
Do you see what's on the screen?
A.
Would you repeat the question?
Q.
Sure. Does this now refresh your recollection that you
asked Jeanette Gonzalez, the executive assistant of HM-UP
Development, to write a letter to the bank confirming that you
were employed at HM-UP?
A.
I do not remember asking for this.
Q.
You never asked for this? You think that Jeanette
Gonzalez -- is that your bank that it was sent to?
A.
I don't see a bank name on that paper.
Q.
Do you think that Jeanette Gonzalez would write that letter
in April 2018 saying that you were --
MS. JIMENEZ: Objection. The letter is offered for
the witness to refresh his recollection. He says it doesn't
refresh his recollection. Now she's reading the letter.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Sustained.
BY MS. WEINTRAUB:
Q.
Mr. Beirne, do you think that Jeanette Gonzalez would have
requested or communicated with your bank about your employment
to give you direct deposit rights without your permission?
A.
I do not see a bank name on this document.
Q.
Okay. So you're saying that that wasn't done?
A.
I can't remember.
(Pause in proceedings.)
MR. WEINTRAUB: I am waiting for an exhibit, Your
Honor, to be pulled up.
(Pause in proceedings.)
BY MR. WEINTRAUB:
Q.
Sir, now, you said you were not paid $77,000?
MS. JIMENEZ: Objection. Misstates the testimony.
MS. WEINTRAUB: Excuse me?
MS. JIMENEZ: I said: "Objection. Misstates the
testimony."
THE COURT: Overruled.
BY MS. WEINTRAUB:
Q.
Were you paid $77,000 by Eric Sheppard's companies?
A.
I do not remember.
Q.
Did you tell the FBI you were only paid 20 to 30,000
dollars?
A.
By who?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
By Eric Sheppard's companies.
A.
During what times?
Q.
I'm sorry?
A.
During what times was I supposedly paid 20 to 30,000
dollars?
Q.
From the time you came back in 2020 through the time you
left in April 2020.
A.
I never left the site.
Q.
You came there in 2017 and you stayed there?
A.
Yes.
Q.
Well, when you told the agent that you were only paid 20 to
30,000 dollars, what time period were you telling her that
about?
A.
What agent?
Q.
The FBI agent.
A.
Would you repeat the question?
Q.
Sure. Do you remember telling the FBI agent that you made
between 20 and 30,000 dollars?
A.
I don't remember.
Q.
Do you remember telling the FBI agent that you received a
total between 20,000 to 30,000 in paid funds, but that Sheppard
still owed you -- "owed him $50,000." Did you say that?
A.
I don't remember.
Q.
Would you mention 20 to 30,000 dollars if you were paid 77?
A.
This is the first time I heard $77,000.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Okay.
MR. WEINTRAUB: Can we pull up just for the witness as
a composite exhibit...
BY MR. WEINTRAUB:
Q.
I'm going to ask you to look at some checks. See if you
signed the back, and if they're made out to you, and if you
received them.
Is that a check made out to you with your signature on
the back?
A.
I'm seeing a lot of checks right now.
Q.
Okay. And they're all made out to Martin Beirne, right?
MS. JIMENEZ: Can we identify the exhibit, please.
THE COURT: Exhibit number, please.
MR. CAVALLO: It's M-17.
MS. JIMENEZ: There's -- I don't know how many pages.
MS. WEINTRAUB: It's a composite exhibit.
MS. JIMENEZ: It's 50 pages -- 30 pages?
MS. WEINTRAUB: They are all checks made out to M.
Beirne --
THE COURT: M-17 is a composite exhibit. So let's
continue. It's being shown only to the witness.
BY MR. WEINTRAUB:
Q.
Mr. Beirne, are these checks made out to you?
A.
I see one check for $1,500 made out to me in front of me.
Q.
Okay.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. WEINTRAUB: Go to the next one.
BY MR. WEINTRAUB:
Q.
See that check?
A.
I see one check for $900 in front of me.
MR. WEINTRAUB: And go to the next one.
THE WITNESS: I see one check for $7,400 in front of
me.
BY MR. WEINTRAUB:
Q.
Are these checks all made out to you, Mr. Beirne? Go
through them. They say "payroll" on them?
A.
Repeat the question.
Q.
My question is: Do you acknowledge that these are checks
that were paid to you?
A.
I see checks in front of me made out to me.
Q.
I'm sorry?
A.
I see checks in front of me made out with my name on them.
Q.
Do you acknowledge receiving them and depositing them?
A.
No.
Q.
This isn't your first time in court, is it?
A.
Yes.
Q.
It is?
A.
As far as a witness.
Q.
I didn't ask you that, sir. I asked you --
A.
Question --
Q.
I asked you if this is your first time in court. You've
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Miami, Florida 33128
(305) 523-5698
been in lots of courts?
A.
I've been in court before, yes.
Q.
Sorry?
A.
Yes, I have been in court before.
Q.
You've been in court a lot, right?
MS. JIMENEZ: Objection.
THE COURT: Sustained.
BY MS. WEINTRAUB:
Q.
You told the agent that you got a call from Eric Sheppard
in 2019 -- that you called Sheppard in 2019 saying your
business was slow and asked if he could use you to work for
him, right?
A.
Yes.
Q.
And that was because you were not living there in Orlando
at the site then in 2019. You were living back in Ohio,
weren't you?
A.
Yes.
Q.
Okay. So when you said you didn't leave before, that
wasn't true. You did leave. You came in 2017 or '18. You
left, you went back to Ohio, and then you came back to Miami --
I mean to Orlando, right?
A.
I can't remember.
Q.
Now, when you told the agent that your business was slow,
that wasn't really true either, was it?
A.
I can't remember.
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Miami, Florida 33128
(305) 523-5698
Q.
Well, your business was pretty non-existent because you had
22 pending lawsuits at the time, didn't you?
MS. JIMENEZ: Objection.
THE COURT: The basis of the objection?
MS. JIMENEZ: It's not relevant, Your Honor.
THE COURT: Sustained.
MR. WEINTRAUB: Your Honor, under 608, I believe it
is.
THE COURT: The objection is sustained.
MS. WEINTRAUB: Yes, ma'am.
BY MR. WEINTRAUB:
Q.
Were you sued for fraud and misrepresentation?
MS. JIMENEZ: Objection.
THE COURT: Sustained.
BY MS. WEINTRAUB:
Q.
Do you know who Patricia Irwin is?
A.
Yes.
MS. JIMENEZ: Objection. Outside the scope.
THE COURT: Overruled.
BY MS. WEINTRAUB:
Q.
Who is it?
A.
It was an investor.
Q.
An investor. And what did she invest with you?
A.
In a real estate development.
MS. JIMENEZ: Objection. Outside the scope.
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Miami, Florida 33128
(305) 523-5698
THE COURT: Overruled at this point.
BY MS. WEINTRAUB:
Q.
She invested $300,000 -- her retirement fund with you,
didn't get her investment, and sued you, right?
MS. JIMENEZ: Objection.
THE COURT: Sustained.
BY MR. WEINTRAUB:
Q.
You were buddies with LeBron James, right?
MS. JIMENEZ: Objection.
THE COURT: Basis?
MS. JIMENEZ: Relevance.
THE COURT: Sustained.
BY MS. WEINTRAUB:
Q.
You did business with LeBron James, didn't you?
MS. JIMENEZ: Same objection.
THE COURT: Sustained.
(Pause in proceedings.)
BY MS. WEINTRAUB:
Q.
Now, when you were getting paid when you worked during
COVID, you said that you were paid by checks from an HM
company; is that right?
A.
Yes.
Q.
And you also mentioned a Diamonds company, right?
A.
Yes.
Q.
And you said that you thought that that was a gentlemen's
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Miami, Florida 33128
(305) 523-5698
club?
A.
Correct.
Q.
Now, did you know that that was owned by Jeff Vasilas and
not by Eric Sheppard?
A.
No.
Q.
Were you aware of the fact that Mr. Sheppard was going to
buy the property, after that club closed down, from Jeff
Vasilas?
A.
No.
Q.
Now, you were not privy to the financial arrangements
between Eric Sheppard and Jeff Vasilas, were you?
A.
No.
Q.
And Jeff Vasilas would go down to Miami from Orlando from
the job to get paychecks, and go back up to Orlando and give
out the paychecks, right?
A.
Yes.
Q.
Now, you don't know the amount of checks or the monies that
Eric Sheppard gave to Jeff Vasilas, do you?
A.
Correct.
Q.
And so when you got checks from Diamond something, you
don't know that it was because Jeff Vasilas has already gotten
money from Eric Sheppard and just didn't pay it out? You don't
know that, do you?
A.
Would you repeat that?
Q.
Sure. You don't know that people weren't getting paid --
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
you don't know if Eric had already given money to Jeff Vasilas
to bring back to Orlando as paycheck money. You don't know
that, do you?
A.
Repeat that.
Q.
Do you know how much money Eric Sheppard gave Jeff Vasilas
to do payroll in Orlando?
A.
No.
Q.
Now, initially, you thought that Jeff Vasilas was a good
guy, he was doing his best, right?
A.
No.
Q.
You never said that?
A.
Not that I can remember.
Q.
You don't remember saying that initially to the FBI?
A.
I said that Jeff was trying to do his job.
Q.
Okay. And that was at the beginning, right?
A.
Correct.
Q.
But there came a point -- you knew that Jeff was under a
lot of pressure, right?
A.
Yes.
Q.
Now, in fact, you did write a letter about money that you
were owed, didn't you?
A.
Yes.
Q.
You sent an email to Jeff Vasilas?
A.
Yes.
MR. WEINTRAUB: Can you pull up only for the witness's
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
sight -- no. The 9,000 handwritten.
BY MR. WEINTRAUB:
Q.
Looking at M-9, do you recognize that handwriting?
A.
Yes.
Q.
Is that your handwriting?
A.
Yes.
MS. WEINTRAUB: Your Honor, at this time I would move
M-9 into evidence.
THE COURT: Any objection?
MS. JIMENEZ: Can the witness identify what it is?
Can the witness identify what it is?
MS. WEINTRAUB: He just said it was his handwriting.
Can it be moved into evidence and we can discuss it?
MS. MARTINEZ: What time period? I'm sorry.
THE COURT: All right. You've asked if that's his
handwriting. Why don't you ask him if he can identify what it
is.
MS. WEINTRAUB: Yes, Your Honor.
BY MS. WEINTRAUB:
Q.
Do you see the date 10/5 at the top?
A.
Yes.
Q.
Does that tell you what date it was written?
A.
This was an invoice.
Q.
This is an invoice from you to Jeff Vasilas, right?
A.
It's an invoice.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Well, who's it to?
A.
Doesn't say the name of who it's on.
Q.
Who did you send it to?
A.
I handed it to Jeff.
Q.
Okay. So this is an invoice that you handed to Jeff, with
your handwriting on it.
MR. WEINTRAUB: May we now move it into evidence, Your
Honor?
THE COURT: Any objection?
MS. JIMENEZ: No. No objection.
THE COURT: Admitted into evidence, M-9.
(Defendant's Exhibit M-9 received into evidence.)
MR. WEINTRAUB: Can we publish this.
BY MR. WEINTRAUB:
Q.
Mr. Beirne, this is something -- an invoice that you handed
to Jeff Vasilas, and you said that you were owed $9,723?
A.
For my contract wages, yes.
Q.
And you were being paid $35 an hour?
A.
That is a fee I charged for my services.
Q.
Now, Jeff, you just said, was under a lot of pressure at
the time, right?
A.
Yes.
Q.
He was stressed out because Burlington was over budget, and
that's his -- on him, right, as the project manager?
A.
Repeat the question.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Sure. One of the reasons Jeff Vasilas was stressed out was
time was ticking and they needed to get Burlington built,
right?
A.
We needed to get Burlington in there.
Q.
And Jeff Vasilas is the one that's in charge of getting
that done?
A.
Yes.
Q.
So he's under a lot of pressure to get it delivered by May,
right?
A.
Yes.
Q.
Did you know that he was over budget and underfunded?
A.
I knew there was a problem with funds because the
subcontractors weren't getting paid.
Q.
Okay. Now, you also knew that at that time Jeff was pretty
desperate for money. He was owing people money, right?
A.
I know he owed me money.
Q.
Sorry?
A.
I knew I had invoices that were unpaid.
Q.
Okay. And I think you said -- and so -- I mean, have we
established that Jeff was over his head, he was behind on some
payments, and stressed out? Right?
A.
I don't know his peace of mind. I know that he was trying
hard to get the job done.
Q.
Okay. And you do know that -- you could obviously see he
was stressed, yes?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: Objection. Relevance.
THE COURT: Sustained.
BY MS. WEINTRAUB:
Q.
You told the FBI agent that you could relate to that?
A.
I've been in the contracting business for over 40 years.
Q.
Yep. And?
MS. JIMENEZ: Objection.
BY MS. WEINTRAUB:
Q.
You also declared bankruptcy, right?
THE COURT: Sustained.
MS. JIMENEZ: Objection.
THE COURT: Sustained.
(Pause in proceedings.)
BY MS. WEINTRAUB:
Q.
Talking about the $50,000. So if you were owed that money
from an earlier time when you came back in 2019 -- why did you
come back in 2019 if you were owed $50,000 already?
A.
I said I did not leave the job. I was there the whole
time. You keep saying I'm coming back. I don't understand the
question.
Q.
Okay. In 2019, you told the FBI that you called Eric
Sheppard because your business was slow and you wanted to know
if he had any work for you; is that right?
A.
What was that date again?
Q.
The end of 2019.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes. I believe that's correct.
Q.
Okay. So you call him the end of 2019 and you ask him if
he has any work for you. Now, if he owed you $50,000, why
aren't you saying: "Hey, Eric, where is my money?" Why aren't
you sending Eric Sheppard an invoice or a bill?
A.
2019 -- would you repeat the question?
Q.
If Eric Sheppard owed you $50,000, why did you continue to
work for him?
A.
I wanted to get the job done.
Q.
Out of the goodness of your heart?
A.
I was funded enough to live and survive and do what I was
doing in Orlando.
Q.
Can you answer the question?
A.
What is the question?
Q.
Question is: You didn't send Eric Sheppard an invoice, you
didn't send him a bill of any kind for $50,000, did you?
A.
Yes, I did.
Q.
You did? Do you have it?
A.
I sent it to Jeanette.
Q.
Huh?
A.
Yeah. I do have a copy of that somewhere.
Q.
Did you give it to the FBI?
A.
I wasn't asked.
Q.
So you say that you came back to work for $50,000?
A.
You said that.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Well, did you come back to work when he was still owing you
money?
A.
I never left.
Q.
Okay. So you continued to work, and he owed you $50,000,
and you worked another two years?
A.
He was back on his payments -- he was late on his payments.
I was getting funds the whole time.
Q.
There came a point in time when from initially you thought
Jeff was doing his job to basically hating Jeff Vasilas for
lying, cheating, and stealing; is that right?
A.
That's a term from the fellowship of Alcoholics Anonymous
that cheating can be for cheating a time. Go ahead.
Q.
Did you write --
MR. WEINTRAUB: Can you pull up the email for just the
witness.
This is M-8.
THE COURT: M-8?
MS. WEINTRAUB: Yes, Your Honor.
THE COURT: All right.
BY MS. WEINTRAUB:
Q.
Do you recognize this email?
A.
I do.
Q.
You sent this email to Jeff Vasilas on March 13th, 2021?
A.
Yes, I did.
Q.
And this is after you wrote the $9,723 in hand that we've
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
already seen, right? You reference it.
A.
I don't remember.
Q.
Well, look at it. It's right there.
A.
I remember the paper that you put in front of me. That was
my invoice.
Q.
No. No. No. You just identified an invoice for $9,723,
right? Do you remember that a few minutes ago?
A.
Yes.
Q.
Okay. So what I'm telling you is that four lines up from
the bottom of your email you reference that $9,000, right?
MS. JIMENEZ: It's not in evidence. Okay? Objection.
THE COURT: It's not in evidence. It's been
identified.
MS. WEINTRAUB: And I'm moving -- move to admit it in
evidence, Your Honor.
THE COURT: Is there any objection?
MS. JIMENEZ: Yes. Objection. Hearsay.
THE WITNESS: Overruled.
MS. WEINTRAUB: Is it in evidence, Your Honor?
THE COURT: M-8 is in evidence. You may publish to
the jury.
(Defendant's Exhibit M-8 received into evidence.)
MS. WEINTRAUB: May I publish to the jury?
THE COURT: You may.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. WEINTRAUB:
Q.
Can you read this email for the jury, Mr. Beirne.
A.
Are you asking me the question?
Q.
Yes, sir.
A.
"Jeff, I have great difficulty with what you did to Rich,
Sam, Mattie, and the promises that you made to me. I watched
your back for almost a year and have been doing nothing but
prayer for you and for you -- and to try to always build you
up. Never have I tore you down. You have become a dishonest
person. This is what a lier [sic], cheat, and a thief does.
This is the man you have become; no honor, no principals [sic],
no morals. That $9,723 was earned. My last week I didn't even
put on the books. You need to look at the person you have
become. Still a friend in yours of Christ, Joe."
(Pause in proceedings.)
MR. WEINTRAUB: Your Honor, I would ask at this time
for a sidebar based on the Court's ruling before this -- before
my examination is over.
THE COURT: All right. Is it with regard to a
particular exhibit?
MS. WEINTRAUB: Yes.
THE COURT: All right. Come on forward and bring the
exhibit, please.
(At sidebar on the record.)
THE COURT: Okay. Please use the microphones.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. WEINTRAUB: Judge, the Court stopped me on several
occasions from getting into and asking him about his specific
acts of fraud, lying, and cheating. And I believe not only
under 608 am I entitled to do that, but under US v. Ramirez
Rivera, 800 F.3d 1, 2015, specifically --
THE COURT: And those are with regard to criminal
conduct, correct? You asked him about pending civil lawsuits.
You asked him about lawsuits that were filed.
MS. WEINTRAUB: That's correct.
THE COURT: That was the question. And does that case
say that pending civil lawsuits are admissible?
MS. WEINTRAUB: It says -- it says it's discretionary
of the Court.
(Court reporter interruption.)
THE COURT: You need to use the microphone.
MS. WEINTRAUB: Sorry. And I quote: "New Federal
Rule of Evidence 608(b) says, except for criminal conviction
under 609, extrinsic evidence is not admissible to prove
specific instances of a witness's conduct in order to attack or
support the witness's character for truthfulness. However, the
rule says the court may, on cross-examination, allow the
specific instances of conduct to be inquired into if they are
probative of the character for truthfulness or untruthfulness
of this witness. Thus, while 608 leaves the court the
discretion to allow the specific instances of conduct to be
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
probed, defendant does not have to go into the specific
details."
I brought a copy for the Court.
THE COURT: Okay.
MS. WEINTRAUB: And my problem is this -- and I would
like to make a proffer.
THE COURT: Okay.
MS. WEINTRAUB: Yes, Your Honor.
There were 22 civil lawsuits. There's a bankruptcy.
There is -- he -- it's -- what he does is he cons people to
give him money, like he did Eric -- he cons them to give him
money. Then he doesn't pay them back. They sue him. He hires
a lawyer, doesn't pay the lawyer. The lawyer sues him. And
then what he does is he settles as it's going to trial for like
20 cents on the dollar. And he, you know, Skypes them --
whatever that word is -- the money, and keeps it.
And this went on for 10 years. He tells the FBI
agent, oh, his business was slow. No. He had two court
appearances.
And this is what -- and LeBron James is -- you know,
he touted himself all over the news about being friends with
him. He built a building for LeBron James, then it's
foreclosed and LeBron James suffered whatever losses because
they had to move their whole organization.
THE COURT: Okay. And once again, these are pending
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
lawsuits and not determinations --
MS. WEINTRAUB: Now they are disposed of. I'm sorry.
THE COURT: Okay. They are disposed of in terms of a
specific finding by a jury that the witness committed fraud?
MS. WEINTRAUB: No. By a settlement and by an
admission.
THE COURT: And do you have that admission?
MS. WEINTRAUB: I have the settlement.
THE COURT: Well, the settlement agreement would never
be admissible. So for purposes of Rule 608 -- for purposes of
Rule 608, with regard to extrinsic conduct, that's extrinsic
conduct where there's been a determination that this witness
committed fraud.
So where would there be evidence that this witness
committed fraud either of a criminal nature or a civil nature?
MS. WEINTRAUB: A complaint.
THE COURT: A complaint are only allegations.
MS. WEINTRAUB: Judge, then let him answer it. But,
you know, 22 times in three years, when he claims he was
working for Eric, just doesn't fly. And the Court has the
discretion to permit, on cross-examination, specific acts of
misconduct.
THE COURT: Acts of misconduct, what you're saying
constitute lawsuits being filed on a bankruptcy?
MS. WEINTRAUB: Well, no. The bankruptcy was by 59
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
creditors that he had of $10 million.
THE COURT: All right. Is that the extent of the
proffer, are the civil lawsuits that have been filed and the
bankruptcy?
MS. WEINTRAUB: Yes.
THE COURT: All right. Response?
MS. JIMENEZ: Your Honor, the bankruptcy doesn't go to
anyone having committed fraud or being untruthful or deceitful.
MS. WEINTRAUB: Well, he didn't tell the FBI about it
when they were asking him about his background.
THE COURT: Anything --
MS. JIMENEZ: No -- no one has asked him if he filed
for bankruptcy.
MS. WEINTRAUB: I did. You objected.
MS. JIMENEZ: No. No. No. I don't understand where
you're getting information the FBI asked him about --
MS. WEINTRAUB: I gave him a certified copy of his
bankruptcy.
MS. JIMENEZ: Right now?
MS. WEINTRAUB: Yeah. It's in the binder.
MS. JIMENEZ: Nobody's asked him about --
THE COURT: So Ms. Jimenez, you have no objection to
the introduction of evidence of the witness's bankruptcy?
MS. JIMENEZ: I have objection to all of it. First of
all, bankruptcy doesn't go to truthfulness --
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Yeah. I must say --
MS. WEINTRAUB: I think lying to 55 to a hundred
creditors --
THE COURT: There hasn't been a determination,
Ms. Weintraub. I understand there have been lawsuits, and
there may be hundreds of lawsuits. But unless there's been a
determination under Rule 608, the request to use that for
purposes of impeachment is denied.
MR. ETRA: What about the fact, if I may --
(Court reporter interruption.)
MR. ETRA: Sorry. What about the fact that -- if he
says he told the FBI one thing about why he came, and these
documents would tend to show that he wasn't being truthful to
the FBI, but he really came to escape his creditors and his
past?
THE COURT: That's collateral impeachment. And once
again, the collateral impeachment relates to allegations that
have been made in a civil lawsuit to which there's been no
determination. We're back to where we started.
All right. Let's continue.
MS. WEINTRAUB: Judge, I'm going to also ask -- Judge,
I'm going to ask for a few minutes to confer --
THE COURT: Hold on. Hold on. Hold on.
MS. WEINTRAUB: Obviously, this witness has become
more than hostile, and I'm going to ask for a few minutes. I
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
need to confer with my client because there's certain other
matters that he wants me to discuss that --
THE COURT: I don't know what you're -- let's continue
with the cross-examination.
MS. WEINTRAUB: Judge, I'm done. And I'm asking for
five minutes to confer with my client.
THE COURT: You've been continuing -- just finish the
cross-examination. If you want to confer with Mr. Sheppard
right now, do it before you conclude your cross-examination.
MS. WEINTRAUB: Thank you.
(End of discussion at sidebar.)
THE COURT: Okay. Thank you for your patience, Ladies
and Gentlemen. Let's continue with the cross-examination.
(Pause in proceedings.)
THE COURT: All right. Any further cross-examination?
BY MS. WEINTRAUB:
Q.
Mr. Beirne, you've known Eric Sheppard for almost 20 years?
A.
Approximately.
(Court reporter interruption.)
BY MR. WEINTRAUB:
Q.
You've known Eric Sheppard for about 20 years?
A.
Approximately.
Q.
And you say prayers for him every day?
A.
I do.
Q.
And do you remember around the time that you were working
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
for him in '20 and '21 that -- in '21, actually, that he was
attending regularly his daughter's state championship
basketball games and you would go with him?
MS. JIMENEZ: Objection. Outside the scope,
relevance.
THE COURT: Sustained.
BY MS. WEINTRAUB:
Q.
When the FBI was interviewing you about Mr. Sheppard, did
they ask you about your background?
A.
Not that I can remember.
Q.
Did they ask you any questions about your business?
A.
What business?
Q.
Any business that you had.
A.
I don't remember.
Q.
I'm sorry?
A.
I don't remember.
Q.
The only thing that they asked you about was whether you
were a 1099 or W-2 employee of Eric Sheppard?
A.
That was one of the questions.
Q.
Can you think of another?
MS. JIMENEZ: Objection. Vague.
THE COURT: Overruled.
(Pause in proceedings.)
THE COURT: Sir, are you able to answer the question?
THE WITNESS: I need the question repeated, please.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. WEINTRAUB:
Q.
You told them all about how Eric Sheppard owed you money,
right?
A.
Told who?
Q.
Told the FBI. We're talking about what the FBI asked you
and what you said.
A.
I told them there was an invoice still out there.
Q.
But you didn't give it to them and they didn't ask you?
A.
No.
Q.
To both questions?
MR. WEINTRAUB: Sorry. I should not have asked two
questions at once. I apologize to the Court.
BY MR. WEINTRAUB:
Q.
They did not ask you, did they, for the invoice?
A.
Not that I can remember.
Q.
And they did not ask you about even your background with
Eric Sheppard because you didn't tell them that you worked
there in 2017 and '18, did you?
A.
I can't remember.
Q.
Now, we talked a lot before about the direct deposit, and I
pulled up -- one of the things I pulled up was the lease
agreement that you signed with the landlord. Remember that,
with Tammy Roussel?
MS. JIMENEZ: Objection. He didn't identify the
lease.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: If you could identify it by its exhibit
number and then please show the witness.
MR. CAVALLO: M-15.
BY MR. WEINTRAUB:
Q.
And now I'm going to show you just for your eyes only M-3.
It's a direct deposit setup form.
THE COURT: I'm sorry. So not M-15? Now it's M-3?
BY MS. WEINTRAUB:
Q.
I asked you about M-15, and now I'm asking you about M-3.
I asked you about setting up a direct deposit. Do you remember
that?
A.
Do you want me to look at my monitor?
THE COURT: Yes. If you'll show M-3 to the witness
only.
BY MR. WEINTRAUB:
Q.
You see that?
A.
Yes.
Q.
Is that your signature?
A.
Yes.
Q.
And that says "Employee Agreement," right?
A.
(No verbal response.)
Q.
Yes? It's highlighted for you. "Employee Agreement."
A.
I do see that now, yes.
MR. WEINTRAUB: Your Honor, we would move M-3 into
evidence.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Any objection?
MS. JIMENEZ: No objection.
THE COURT: All right. Admitted into evidence.
(Defendant's Exhibit M-3 received into evidence.)
BY MR. WEINTRAUB:
Q.
Now, Burlington was supposed to be delivered May 1st,
right?
A.
I don't remember the exact date.
Q.
But you do know it wasn't delivered May 1st, right?
A.
I do know that. Yes.
Q.
And you do know that there were a lot of penalties that
were imposed, right?
A.
I wasn't privileged to that.
Q.
You do know when there -- there was a Certificate of
Occupancy. You know that, right?
A.
I know there was a Certificate of Occupancy, yes.
Q.
As a matter of fact, did you claim that you got that?
A.
I helped facilitate that.
Q.
And you helped Mercedes Fonseca?
A.
No.
Q.
How did you help facilitate it?
A.
By getting the job done.
Q.
Oh. But you get the permit and you didn't get the CO, did
you?
A.
I facilitated the help to get the job done.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Okay. Well, you didn't really get the job done because
there was a 55-page punch list, wasn't there?
A.
Yes. There was a punch list.
Q.
Fifty-five pages worth?
A.
It was a lot of pages.
Q.
Do you dispute that it was 55?
A.
I do not know the exact amount of pages.
Q.
Okay.
MR. WEINTRAUB: Chris, that's it.
BY MR. WEINTRAUB:
Q.
Do you agree that there was a large punch list of things
that still had to get done for Burlington?
A.
There was a punch list.
Q.
Did you hear the question?
A.
Repeat the question.
MS. JIMENEZ: Objection. Asked and answered.
THE COURT: The witness said there was a punch list.
MS. WEINTRAUB: Well, Judge, there's a difference
between a 55-page punch list and a two-page punch list. And if
I have to --
THE COURT: He stated that he didn't know the exact
amount of pages.
BY MS. WEINTRAUB:
Q.
Well, then we'll refresh your recollection.
MR. WEINTRAUB: Pull that up.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Exhibit number, and the witness only.
MR. CAVALLO: This will be Defendant's Exhibit M-18.
MS. JIMENEZ: Government has not seen this exhibit,
Your Honor.
MR. CAVALLO: That's correct.
BY MS. WEINTRAUB:
Q.
While we're waiting for that, what is a punch list,
Mr. Beirne?
A.
It is a list of things that need to be done on a big box.
Q.
When you say "big box," do you mean on the jobsite of
60,000 square feet?
A.
Yes.
Q.
And do you agree that 60,000 square feet is the size of a
football field?
A.
It's big.
Q.
Is that a yes that you agree?
A.
Yes.
Q.
So I'm showing you now a copy of the punch list. Do you
agree that's the copy of the punch list?
A.
I saw a punch list. I can't remember if this is the
specific one.
Q.
Did you see many for October 29th, 2020, for Burlington?
A.
I remember seeing punch lists for Burlington.
Q.
On the direct deposit form, on M-3 that we just looked at,
the Employee Agreement that you signed, you signed it knowing
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
that you were saying you're an employee, right?
A.
No. That was a form letter from the bank.
Q.
Oh. So did you say: "No. I'm not an employee" and cross
it off?
A.
No.
Q.
You just signed it?
A.
That was a form letter from the bank for direct deposit.
Q.
Okay. But if there was a form letter that -- maybe there's
a form letter that says: "I'm not a W-2 employee. I'm a
1099ed employee." Did you ask?
A.
That was a form letter from the bank for direct deposit.
Q.
You're not answering my question.
A.
Repeat the question.
Q.
Did you ask if there's a different form?
A.
No.
Q.
And isn't it true that you considered yourself to be
employed by Eric Sheppard's companies?
A.
No.
Q.
No?
A.
I'm a general -- I'm a contractor. I'm not an employee.
Q.
Did you work for him every day for three years?
A.
I was on the site for three years, yes.
Q.
Every day?
A.
Pretty much.
Q.
You worked for him every day for three years, and you
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
signed an Employee Agreement because it was given to you, and
now you're saying you weren't employed by him? Is that your
testimony?
A.
I'm saying that this was a form letter that I signed for
direct deposit.
Q.
Are you saying --
MS. JIMENEZ: Objection. The question has been asked
and answered.
THE COURT: Let me hear the next question and I'll be
able to rule on it.
MS. WEINTRAUB: I was trying.
THE COURT: All right. What's the next question?
BY MS. WEINTRAUB:
Q.
Is it your testimony that you were not an employee because
you are not -- because Eric Sheppard didn't withhold taxes and
you went to pay your own?
A.
Repeat the question.
Q.
As a 1099ed employee, you had to pay your own taxes, right?
A.
I pay my own taxes, yes.
Q.
And as a 1099ed employee, that's your responsibility? Yes?
A.
Yes.
Q.
What other difference was there aside from being a 1099 or
W-2 employee, as far as you were concerned, working?
A.
Repeat the question.
MR. WEINTRAUB: I have no further questions.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: All right. Any redirect?
MS. JIMENEZ: Sure.
REDIRECT EXAMINATION
BY MS. JIMENEZ:
Q.
Mr. Beirne, the form that you were shown for direct
deposit, that was provided to you by the bank; is that right?
A.
Yes.
Q.
And in order to be paid, you needed to sign that form?
MS. WEINTRAUB: Objection. Leading.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
Did you need to sign the form in order to receive your
direct deposit?
A.
Correct.
Q.
Is there any question in your mind whether the payments
that you received was for your work as a contractor or as a W-2
employee?
MS. WEINTRAUB: Objection, Your Honor. Leading.
THE COURT: Overruled. I'll allow it.
THE WITNESS: Can you repeat that question?
BY MS. JIMENEZ:
Q.
Yes, sir. Was there any question in your mind as to
whether you were paid as a contractor or paid as a W-2
employee?
A.
Repeat the question.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Sure. Were you paid as a contractor or were you paid as a
W-2 wage employee?
A.
I was a contractor.
Q.
And you are a contractor and a developer by trade; is that
correct?
A.
Yes. That's correct.
Q.
Is that normally how you're paid?
A.
Yes.
Q.
Did Mr. Sheppard withhold any Medicare taxes from any
payments you received?
A.
I was not on payroll.
Q.
Did Mr. Sheppard withhold any Social Security taxes from
the payment you received?
A.
No. No.
Q.
Did he withhold at any point any income tax from the
payments you received?
A.
No.
Q.
The letter you -- or the email that you conveyed to
Mr. Vasilas, was that -- I don't know what exhibit number it
was.
MS. MARTINEZ: Do you need me to find it?
MS. JIMENEZ: Yes.
BY MS. JIMENEZ:
Q.
That exhibit, M-8, that was shown to you with the email you
conveyed to Mr. Vasilas, where you called him a liar and a
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
cheat, do you recall that?
A.
I do.
Q.
What was the dispute that you were having with Mr. Vasilas
at that time?
A.
I was trying to get an invoice paid.
Q.
You were trying to get yourself paid?
A.
I was trying to get an invoice paid, yes.
Q.
Now, were you calling him a liar and a cheat for that
reason, because you were not -- because you had been promised
you were going to be paid and you weren't paid?
A.
Correct.
Q.
And that occurred in 2020 when you were working directly
under Mr. Vasilas; is that right?
MS. WEINTRAUB: Objection. Leading.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
In what year were you working directly under Mr. Vasilas
when Mr. Vasilas was paying you?
A.
I believe that letter was made in 2021, after I had already
left the job. So it was an invoice that was due.
Q.
And the work that you did under Mr. Vasilas, in what year
was that?
A.
2020.
Q.
And was it the case that you were paid more frequently when
you went to work under Mr. Vasilas than you had been
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
frequently -- than you had been -- I'm sorry -- before, when
you were working directly under Mr. Sheppard?
A.
That was the end of the job. I also had expenses that I
had put on my credit card to help get material for the job. So
it was wages -- and wages is something that we base our hourly
rate on through our experience.
Q.
Okay. But they are not wages because they are not W-2 --
MS. WEINTRAUB: Objection, Your Honor. And we can
swear counsel in, but she's testifying.
THE COURT: Is that grounds of leading?
MS. WEINTRAUB: Yes, Your Honor. Sorry.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
Mr. Beirne, were you paid W-2 wages or you were you made
payments as a contractor?
A.
We're paid by our experience that we have, which is -- in
the construction industry, is a wage versus hourly rate. You
as a client -- or you as a lawyer bill somebody your wage or
your hourly rate. We call them wages, I guess, out in the
construction field. So...
Q.
Did you ever receive a W-2 from Mr. Sheppard?
A.
No.
Q.
Were you paid on a more regular basis when you were working
directly under Mr. Vasilas than you were previously under
Mr. Sheppard?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
And the money that you were owed by Mr. Sheppard, had you
performed work to earn that money?
A.
Yes. Those were back wages for me being the property
manager.
MS. WEINTRAUB: Objection, Your Honor. There's no
question pending.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
You were asked questions about the Burlington project, and
were asked if it was -- if it involved jobs created and people
paid. Do you recall that?
A.
I don't remember.
Q.
And were there people who were not paid?
A.
Yes.
MS. WEINTRAUB: Objection, Your Honor. It calls for a
hearsay response.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
Well, you yourself were not paid; is that correct?
A.
Yes.
Q.
The project -- I think there were questions about whether
it was over budgeted and underfunded. What was your
understanding as to who owned the shopping mall where the
Burlington Coat Factory was located?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. WEINTRAUB: Objection, Your Honor, unless I can
have recross because that wasn't the question.
THE COURT: Hold on. What's the legal basis of the
objection?
MS. WEINTRAUB: Beyond the scope. Misstating the
evidence.
THE COURT: Overruled. Overruled.
You may continue.
THE WITNESS: Repeat the question.
BY MS. JIMENEZ:
Q.
Yes. The Alafaya Trails shopping center, is that where
Burlington was located?
A.
Yes.
Q.
What was your understanding of who owned the shopping
center where Burlington was located?
A.
Eric Sheppard owned the shopping center.
Q.
Who would have provided the funding for that -- or who
provided the funding for that Burlington build-out, if you
know?
MS. WEINTRAUB: Objection, Your Honor. Outside the
scope of his knowledge. Calls for hearsay.
THE COURT: If the witness knows.
MR. WEINTRAUB: And it's beyond the scope.
THE COURT: If the witness knows. Overruled.
THE WITNESS: Repeat the question.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
Yes. Who funded the Burlington Coat Factory project
build-out?
A.
Eric Sheppard.
Q.
Now, did you send a -- some type of invoice to the
Defendant to be paid?
A.
Yes. To the office manager Jeanette.
Q.
Did she receive it?
MS. WEINTRAUB: Objection, Your Honor.
BY MS. JIMENEZ:
Q.
Do you know whether she received it?
MS. WEINTRAUB: Objection.
THE COURT: Sustained.
THE WITNESS: Repeat the question.
THE COURT: There's no need. You can ask a different
question or you can let the Court know if you're done with the
redirect.
BY MS. JIMENEZ:
Q.
Did you follow up with Mr. Sheppard at any point to be
paid?
A.
Repeat the question.
Q.
Did you -- did you follow up or communicate with
Mr. Sheppard about being paid?
A.
We talked about him getting the contract funded.
Q.
What did he tell you?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. WEINTRAUB: Objection. Can we have a time frame?
THE COURT: Do you want to clarify in terms of if he's
aware of the time frame?
BY MS. JIMENEZ:
Q.
When you had -- when you talked, approximately when was
that, if you remember?
A.
2020.
Q.
What did he tell you?
A.
He was trying to --
MS. WEINTRAUB: Excuse me. I object. I'd like some
context. 2020 is a long time --
THE COURT: It was the conversation that he had. It's
proper. Overruled.
THE WITNESS: Repeat the question.
THE COURT: You may answer the question.
BY MS. JIMENEZ:
Q.
Well, the conversation that you had with Mr. Sheppard about
being paid, what did Mr. Sheppard tell you?
A.
He was trying to provide financing for the project to get
it done, to get Burlington in there.
Q.
What reason did he give you for not paying you?
MS. WEINTRAUB: Objection. Leading.
THE COURT: Overruled.
MS. WEINTRAUB: It's assuming facts not in evidence --
THE COURT: Overruled.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. WEINTRAUB: -- that he gave any explanation.
THE COURT: Overruled. You may answer the question.
THE WITNESS: I need you to repeat the question.
BY MS. JIMENEZ:
Q.
Sure. What reason did Mr. Sheppard provide you for not
paying you?
A.
He was trying to get Burlington in to get his cash flow
going.
Q.
Did he tell you that he was getting PPP money?
MS. WEINTRAUB: Objection, Your Honor, whatever the
rest of the sentence is.
THE COURT: And the basis?
MS. WEINTRAUB: Leading, Your Honor.
THE COURT: Sustained. All I need from everyone, if
you're making an objection: "Objection," legal basis, and then
I can rule.
The objection is sustained. Your next question.
BY MS. JIMENEZ:
Q.
On the Paycheck Protection Program package that you
provided to the bank, I think you indicated that you believed
it was second round. In terms of time frame, in what year was
this that you recall?
A.
This was 2020.
Q.
And do you know if there was funding provided more than
once in 2020?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. WEINTRAUB: Objection, Your Honor. Leading.
MS. JIMENEZ: I'm asking the question.
THE COURT: Overruled. You may ask the question.
BY MS. JIMENEZ:
Q.
Sir -- yes.
A.
Can you repeat the question?
Q.
Yes. I apologize. Do you know if there was funding more
than once in 2020?
A.
Yeah. The institution I brought him to had a second round
of funding. We didn't get the application in for the first
round, so we got it in for the second round.
Q.
But that wasn't --
A.
That particular institution.
Q.
And that was in 2020?
A.
That was in 2020.
Q.
You testified that subcontractors were not getting paid.
How do you know that?
MS. WEINTRAUB: Objection, Your Honor. Leading and
assuming facts not in evidence.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
You were asked questions about going back to Ohio and
coming back to South Florida. Do you recall being asked about
leaving and coming back?
A.
Yes.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Can you explain?
A.
I can't. I was -- I made a commitment to get the
Burlington done and I fulfilled my obligation.
Q.
Did you return to Ohio at any point to visit family or for
other reasons?
A.
Yes.
MS. WEINTRAUB: Judge --
MS. JIMENEZ: I have nothing further, Your Honor.
MS. WEINTRAUB: Excuse me, Ms. Jimenez. I would
object. I would renew my motion at sidebar on 608, now that
it's been discussed and asked by the Government just now, and I
would ask for recross briefly.
THE COURT: The question called for a yes-or-no
response and it's proper. Is there any further redirect?
MS. JIMENEZ: No, Your Honor.
THE COURT: All right. Thank you.
Is the witness excused, Ms. Jimenez?
MS. JIMENEZ: From the Government, yes, Your Honor.
THE COURT: On behalf of the Defendant?
MS. WEINTRAUB: May I have recross, Your Honor?
THE COURT: The request for recross is denied. Is the
witness excused, Ms. Weintraub?
MS. WEINTRAUB: I'm conferring with my co-counsel, if
I might, Your Honor.
(Pause in proceedings.)
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. WEINTRAUB: Yes, Your Honor.
THE COURT: All right. Thank you, sir. You are
excused.
(Witness excused.)
THE COURT: And Ladies and Gentlemen, let's take a
10-minute recess, please.
COURT SECURITY OFFICER: All rise.
(Jury not present, 2:32 p.m.)
THE COURT: All right. Thank you, sir. You are
excused.
And the Government's next witness will be?
MS. JIMENEZ: Your Honor, the Government's next
witness is Jammie Hutcheson.
THE COURT: All right. Is that individual here?
MS. JIMENEZ: Yes.
THE COURT: Okay. We're on a 10-minute recess.
(Recess from 2:33 p.m. to 2:47 p.m.)
THE COURT: All right. Welcome back.
Let me acknowledge the presence of the Defendant.
Both sides ready to continue?
MS. JIMENEZ: Yes, Your Honor.
THE COURT: All right. I do want to remind you that
we will be adjourning at four p.m. today.
Okay. Let's bring in the jury, please.
COURT SECURITY OFFICER: Remain standing for the jury,
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Miami, Florida 33128
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please.
(Before the Jury, 2:48 p.m.)
THE COURT: All right. Welcome back, Ladies and
Gentlemen.
Please be seated.
And the Government's next witness, please.
MS. JIMENEZ: Yes, Your Honor.
The Government calls Jammie Hutcheson.
(Pause in proceedings.)
THE COURT: Good afternoon.
COURTROOM DEPUTY: Please raise your right hand for
me.
JAMMIE HUTCHESON, GOVERNMENT WITNESS, SWORN
COURTROOM DEPUTY: Thank you.
Have a seat.
Would you please state your name and also spell it for
the record.
THE WITNESS: Jammie, J-A-M-M-I-E. Hutcheson,
H-U-T-C-H-E-S-O-N.
COURTROOM DEPUTY: Thank you.
DIRECT EXAMINATION
BY MS. JIMENEZ:
Q.
Good afternoon, Ms. Hutcheson. Were you served with a
subpoena to appear at this trial?
A.
Yes, I was.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Where do you work?
A.
I work for PayPal.
Q.
What is PayPal?
A.
PayPal is an online Fintech company primarily focused on
sending online payments; however, we have expanded services to
other services to benefit small businesses, including loan
processing.
Q.
You mentioned the word Fintech. What is Fintech?
A.
Financial tech, technology.
Q.
Can you describe briefly your work experience at PayPal.
When did you join PayPal?
A.
Yes. I joined PayPal in November of 2003. So I've been
there for 20 years and have held a number of different roles in
that time. I started in customer service, and have led many
different customer service teams, account managers, sales reps.
And I was customer experience manager for financial services in
2020. And then, most recently, I'm now a product operations
manager.
Q.
What was -- what did you do as a customer experience
manager in the -- what time period did you do that in?
A.
I did that from 2018 to 2022.
Q.
What was that? What were your responsibilities?
A.
I was in business financial services, and I oversaw the
customer experience for all of PayPal loan products,
understanding the customers' needs and wants, and how they use
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our loan products. Also handled different complaints from
customers or if a customer were to have any issues with a loan,
if they filed a Better Business Bureau complaint, CFPB. Also
helped customers if they were having any questions that
couldn't get answered through our customer lines. And so I was
like an escalated point of contact.
Q.
Now, in what city and state is your office located?
A.
I'm in Omaha, Nebraska.
Q.
Does PayPal have offices in other locations?
A.
We do.
Q.
In other states?
A.
Yes. In several other states, including Arizona, Delaware,
Maryland.
Q.
Was PayPal involved in the processing of Paycheck
Protection Program loans?
A.
Yes, we were.
Q.
For both the first round in 2020 and also -- for the first
rounds in 2020 and also in 2021?
A.
Yes.
Q.
Did PayPal work with any lenders in -- in the work that it
did in connection with the Paycheck Protection Program?
A.
Yes. PayPal was the processor and servicer of the PPP
loans. WebBank was the lender.
Q.
I'm sorry. Who was the lender?
A.
WebBank.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Where is WebBank located?
A.
They're located in Utah.
Q.
Now, were all of the Paycheck Protection Program loans that
PayPal processed -- were they all on behalf of WebBank?
A.
Yes, they were. They are our exclusive lender for PPP.
Q.
Through your work at PayPal, did you become familiar with
the policies and procedures that PayPal had in place to process
the PPP loan applications?
A.
Yes.
Q.
What did PayPal do in connection with the Paycheck
Protection Program?
A.
We would -- we had an online portal where customers could
apply for the Paycheck Protection Program loans. And customers
would submit their application, along with any documentation,
through our loan portal. PayPal would review those loan
documents and review the -- the applicant's qualification based
off of the SBA guidelines set forth. And then we would make a
recommendation to the bank, to WebBank, on whether or not that
loan should be funded.
Q.
Was -- you said the review of the loan applications, it was
based on guidance you received from the SBA. And did you have
any -- was WebBank involved also in the processes that you put
in place for the determinations that you made?
A.
Yeah. The guidance was primarily from the SBA for the PPP
loans; however, we did have a credit policy with WebBank that
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(305) 523-5698
was applicable to all of our loan products, which oversaw how
we would verify customers' identity under Know Your Customer.
Q.
Now, in this process, did WebBank undertake an independent
review of the applications you submitted to them or was
generally your tentative recommendation what they accepted and
funded?
A.
They accepted our recommendation.
Q.
All right. Where were PayPal's servers located in 2020 and
2021 to receive loan application information and documentation?
A.
Nevada, Arizona, and Utah.
Q.
Now, where were PayPal's offices that actually processed
loan applications under the PPP?
A.
Arizona, Delaware, and Maryland.
Q.
All right. Now, in 2020 and 2021, how would someone go
about applying for a PPP loan from WebBank?
A.
It was all done online through PayPal's online portal. So
you could go to paypal.com/ppp. The customer would fill out
the application. And as I mentioned earlier, there was a
portal that they could submit documentation through.
Q.
All right. Did PayPal produce records in response to a
subpoena relating to a company by the name of HM-UP Development
Alafaya Trails, LLC?
A.
Yes, we did.
MS. JIMENEZ: Your Honor, may I approach the witness?
THE COURT: You may.
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Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
Ms. Hutcheson, I'm showing you Government's Exhibit 17. Do
you recognize that?
A.
Yes, I do.
Q.
Do you know what it is?
A.
Yes. It's a disk containing the documents that PayPal
supplied as a result of the subpoena. I reviewed the disk and
documentation yesterday and initialed the disk with the date.
Q.
All right.
MS. JIMENEZ: The Government moves Government's
Exhibit 17 into evidence.
THE COURT: Is there any objection?
MR. ETRA: Sorry. Could I just confer briefly with
counsel?
THE COURT: All right.
MR. ETRA: May I confer briefly with counsel, Your
Honor?
THE COURT: Yes.
(Pause in proceedings.)
THE COURT: Any objection?
MR. ETRA: Your Honor, based on the testimony, we
can't object, so we won't object.
MS. JIMENEZ: Your Honor --
THE COURT: Seventeen admitted into evidence.
(Government's Exhibit 17 received into evidence.)
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Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: -- we also have a series of sub-exhibits
which come from the records that were produced -- well, the
sub-exhibits were also produced. The sub-exhibits are
contained on the disk, and they are Exhibits 17-1 through
17-12, 18-1 through 18-6, and 19-1 through 19-20. We would
like to move those into evidence.
THE COURT: And they are all part of Exhibit 17?
MS. JIMENEZ: They are.
THE COURT: Is there a need to introduce them
separately once again if they are already in 17?
MS. JIMENEZ: Well, they are broken out because the --
PayPal's production is large. So they are individual documents
broken out.
THE COURT: All right. Is there any objection?
MR. ETRA: No objection, Your Honor.
THE COURT: All right. All admitted into evidence.
(Government's Exhibits 17-1 through 17-12, 18-1
through 18-6, and 19-1 through 19-20 received into evidence.)
MS. JIMENEZ: All right. If we could show Government
Exhibit 17-1.
Could we make that a little bigger.
Just this page -- every page.
BY MS. JIMENEZ:
Q.
Showing you a portion of Government's Exhibit 17-1. Do you
recognize this?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes. These are screenshots of PayPal's application process
that was done online for applicants to submit for the Paycheck
Protection Program loan.
Q.
When someone goes into the PayPal portal to apply for a PPP
loan in 2020, is this something that they would see?
A.
Yes, it is.
Q.
Now, to submit an application, do you have an actual form
online that they fill out or are they answering questions?
A.
Yes. This is the form.
Q.
Well -- okay. So this is the form.
A.
Yes.
MS. JIMENEZ: Can you go back to the regular screen.
BY MS. JIMENEZ:
Q.
On the form on this page, generally what information are
you asking the applicant to provide?
A.
We're asking for the business name, the applicant's name,
email address, and then down below there's a number of
questions.
Q.
Okay.
MS. JIMENEZ: Let's -- can we go to the next page.
BY MS. JIMENEZ:
Q.
All right. Here, the first entry for the first box says
what?
A.
"Business Entity Type."
Q.
Now, there's a little arrow next to it. Is that a drop
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
box?
A.
Yes. It's a drop box with a number of different selections
that they could make to indicate the industry type.
Q.
Well, this would be the business entity type. So this
would be -- are they an LLC, are they a sole proprietorship?
Does it have those kinds of options?
A.
Yes. Exactly.
Q.
And then the next box indicates trade name or d/b/a. Do
you know what a d/b/a is?
A.
Yes. It's "doing business as." So if a business was doing
business under another name, they would indicate that here.
Q.
Is a d/b/a supposed to be a reference to the same company
as the business entity?
MR. ETRA: Objection. Leading.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
Explain further -- what is a d/b/a?
A.
It is when a business is doing business under another name,
generally the same business or connected businesses.
Q.
All right. Going down to "Business Industry," on the same
page, there is a drop box as well; is that right?
A.
Yes, it is.
Q.
Generally, what's contained in the drop box?
A.
It would be the type of industry they're in. So it could
be construction. It could be building. It could be
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
photographers, landscapers.
Q.
All right. And then there's a box asking for number of
employees; is that right?
A.
Yes, there is.
Q.
And what individuals is a -- if someone is applying as a
business with employees, who are the people who are supposed to
be designated as their employees?
A.
These would be employees of the business that they pay
directly, generally considered W-2 employees where they
withhold taxes, they may offer benefits, things like that.
Q.
And then the Average Monthly Payroll, what is the applicant
supposed to fill in?
A.
They are supposed to put in the payroll for those
employees.
Q.
For what period of time?
A.
For one month.
Q.
All right.
MS. JIMENEZ: Let's go to the next page.
BY MS. JIMENEZ:
Q.
Generally, on this page, it says: "Enter personal
information." Whose personal information would be entered on
this page?
A.
This would be the applicant who would be authorized to
apply for a loan on behalf of the business.
Q.
So it's the person who's filling out the questionnaire for
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
that business, right?
A.
Correct.
Q.
All right. Toward the bottom of the page it asks a
question.
MS. JIMENEZ: Can we highlight the bottom.
Yeah.
BY MS. JIMENEZ:
Q.
It asks: "Are there any other business owners with
20 percent or more ownership?"
Why do you want to know that?
A.
Under the SBA guidelines, if there were other business
owners with more than 20 percent ownership, they would also
have to apply and be aware of the loan.
Q.
All right. And then the next question is: "Are you a
controlling manager of the business?"
What does that mean?
A.
It means somebody with stake in the business, as in an
owner greater than 20 percent or authorized business
representative to apply for a loan on behalf of the business.
Q.
All right.
MS. JIMENEZ: Next page.
All right. Next page.
All right. Could we expand it.
Yes.
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400 North Miami Avenue, 10-2
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(305) 523-5698
BY MS. JIMENEZ:
Q.
And then here what are you asking the applicant -- the
first question?
A.
We're asking for the purpose of the loan, and we ask that
they select all that would apply. So under SBA guidelines,
they could use the loan for things like payroll, rent,
mortgage, utilities, et cetera.
Q.
All right. And then the question below the franchise, what
are you asking?
A.
"Is the applicant or any owner of -- the applicant an owner
of any other business or have common management with any other
business?"
Q.
What does that mean?
A.
It's are they owners of other businesses.
Q.
Like affiliates, related companies?
A.
Yes.
Q.
All right.
MS. JIMENEZ: Next page.
That's the same page.
All right. Yes. Go ahead.
Thank you.
BY MS. JIMENEZ:
Q.
And what is on this page?
A.
This page has a number of certifications that we ask the
applicant to review and that they're agreeing to by completing
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(305) 523-5698
the application.
Q.
Can you read the first certification.
A.
"I certify that I have read the statements included in this
form, including the statements required by law and executive
orders, and I understand them."
Q.
All right. And then the next sentence, please.
A.
"The applicant is eligible to receive a loan under the
rules in effect at the time this application is submitted that
have been issued by the Small Business Administration
implementing the Paycheck Protection Program under Division A,
Title 1, of the Coronavirus Aid, Relief, and Economic Security
Act."
Q.
Thank you.
All right. Then just one more paragraph, the next
one, please.
A.
"The applicant is an independent contractor, eligible
self-employed individual, or sole proprietor, or employs no
greater than -- greater of 500 or -- employees or, if
applicable, the size standard in number of employees
established by the SBA in 13 CFR 121.201 for the applicant's
industry."
Q.
All right. And so was it the case that under this
paragraph the applicant would be either an independent
contractor, or a sole proprietor, or a business with no more
than 500 employees? Is that right?
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(305) 523-5698
A.
That is correct.
Q.
All right.
MS. JIMENEZ: Is there another page?
No. No.
BY MS. JIMENEZ:
Q.
All right. On this page the second -- the second sentence
provides what?
A.
"All SBA loan proceeds will be used only for
business-related purposes, as specified in the loan application
and consistent with the Paycheck Protection Program rule."
Q.
All right. And so after someone answers these questions
and reviews the certifications --
MS. JIMENEZ: Can you go back to the regular page.
All right. Then the very last box. Just the very
last box.
BY MS. JIMENEZ:
Q.
All right. So the very last paragraph they are submitting
the application at this point; is that right?
A.
Correct.
Q.
And what are they agreeing to do?
A.
They're agreeing to all of the certifications and
authorizations above, as well as these two check boxes. The
first is to receive legal disclosures electronically, and the
second is authorizing us to pull personal and business credit
reports and evaluate eligibility.
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Miami, Florida 33128
(305) 523-5698
Q.
All right. So they submit it for you to evaluate their
eligibility; is that right?
A.
Correct.
Q.
So -- and this is submitted electronically to one of the
PayPal servers; is that right?
A.
Yes.
Q.
Okay.
MS. JIMENEZ: Can we go to Exhibit 17-2, please.
BY MS. JIMENEZ:
Q.
Looking at Exhibit 17-2, what is it?
A.
This is lead information. So after an applicant submits --
MR. ETRA: Objection. I don't think there's a
question pending.
THE COURT: That's correct.
MS. JIMENEZ: I asked --
BY MS. JIMENEZ:
Q.
Well, what is -- can you explain what is in this exhibit.
A.
This is a screenshot of PayPal's customer relationship
management tool. This information is gathered from the
application that is submitted.
Q.
Now, on this -- and so is this some of the information you
would see that is submitted when questions are answered in
response to the form that we saw, Exhibit 17-1?
A.
Yes, it is.
Q.
All right. Now, here, who is the owner listed?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Eric Sheppard.
Q.
And in what city is Eric Sheppard listed as being located?
A.
Bal Harbour, Florida.
Q.
What is the phone number provided?
A.
(305)582-5529.
Q.
What is the email address that's provided?
A.
Eric.sheppard10@gmail.com.
MS. JIMENEZ: I'd like to move Government's
Exhibit 69, which is AT&T records.
THE COURT: Is there any objection?
MR. ETRA: May I just have a moment, Your Honor?
THE COURT: Did you say 69?
MS. JIMENEZ: I said 69, yes.
THE COURT: Docket 126 only goes up to 56-2.
MS. MARTINEZ: It's Docket 137.
THE COURT: Okay. Thank you.
Is there any objection?
MR. ETRA: Aimee, is there a cert on this?
MS. JIMENEZ: Yes.
MR. ETRA: No objection, then.
THE COURT: All right. Admitted into evidence.
(Government's Exhibit 69 received into evidence.)
MS. JIMENEZ: Can we take a look at Exhibit 69, Page
18, please.
I'd like to move Exhibit 69 into evidence, if it's
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(305) 523-5698
not -- okay. It's published.
Okay. The next -- is this Page 18?
Eighteen. Page 18.
Can we go down to the User Information.
BY MS. JIMENEZ:
Q.
All right. Can you please read the MSISDN number that's
listed.
A.
(305)582-5529.
Q.
Does it indicate who the user is of this phone number?
A.
The name is Eric Sheppard.
Q.
All right.
MS. JIMENEZ: Go back to Exhibit 17-2. Can we -- we'd
like to move in Exhibit 8, which is Google.
MR. ETRA: Which one?
MS. JIMENEZ: Google, Exhibit 8.
MR. ETRA: Eight?
MS. JIMENEZ: Yeah.
THE COURT: Is there any objection?
MR. ETRA: Your Honor, I'd like to look at it briefly,
please.
(Pause in proceedings.).
MR. ETRA: All our 8s are 8 dash something.
MS. JIMENEZ: All of 8.
THE COURT: 8-1, 8-2, 8-3?
MS. JIMENEZ: It's 8-1 through 8-3, yes.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Any objection?
MR. ETRA: I have to open each one individually. So
while normally I wouldn't have an objection if there's a
certification, I just have to be able to look at it before I
can say --
THE COURT: All right.
(Pause in proceedings.)
MS. JIMENEZ: Your Honor, for the record, all of these
exhibits were provided with certifications and...
MR. ETRA: No objection, Your Honor.
THE COURT: All right. Admitted into evidence.
(Government's Exhibits 8-1, 8-2, and 8-3 received into
evidence.)
MS. JIMENEZ: All right. Could we show Exhibit 8-1,
please.
BY MS. JIMENEZ:
Q.
All right. This is Google Subscriber Information. Do you
see that?
A.
Yes.
Q.
What is the name of the subscriber?
A.
Eric Sheppard.
Q.
What is the email address?
A.
Eric.sheppard10@gmail.com.
MS. JIMENEZ: Can we go back to Exhibit 17-2, please.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
All right. Now, this record there is -- the bottom of the
left column there's something that says: "IP address." What
is that?
A.
That's the IP address from which the applicant application
was submitted.
Q.
All right. Now, for -- what is the business that is
applying for this loan?
A.
HM-UP Development Alafaya Trails, LLC.
Q.
How many employees does this form indicate that HM-UP
Development Alafaya Trails has?
A.
Eighty employees.
Q.
All right.
MS. JIMENEZ: Can you go down to the second page.
BY MS. JIMENEZ:
Q.
There is a number, 236220. What is that?
A.
That's the industry code that -- based off the industry the
applicant submitted. When they were filling out the
application, and there was the drop-down box for the industry,
they selected Commercial and Institutional Building
Construction.
Q.
And that was a selection made by the applicant; is that
right?
A.
Correct.
Q.
Okay.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: Can we go to Exhibit 17-4.
BY MS. JIMENEZ:
Q.
What is 17-4?
A.
This is application data also taken from the application
that was submitted online.
Q.
Does this form tell you the date on which that online
information was provided?
A.
Yes. Down in the lower right, there's Application
Submitted Date, April 15th, 2020.
Q.
Is that when the information was provided to your servers?
A.
Yes, it is.
Q.
All right. Now, this has some of the information that was
on the other document, right, the original lead information?
A.
Correct.
Q.
Here, it also indicates the business ownership percentage.
And what is that? Do you see that at the left side?
A.
Yes. Fifty-two percent ownership.
Q.
All right.
MS. JIMENEZ: Can we go to --
BY MS. JIMENEZ:
Q.
And then two boxes down, it indicates: "Doing business as,
d/b/a," and what was the -- what was the information provided
there?
A.
The d/b/a submitted at the time of application was HM
Management and Development.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
And so, from your standpoint, what is HM Management and
Development?
A.
It's another name that the business is doing business
under.
Q.
So that is another name for HM-UP Development Alafaya
Trails?
A.
Correct.
Q.
All right.
MS. JIMENEZ: Can we go to the spreadsheet, 17-3.
BY MS. JIMENEZ:
Q.
All right. Showing you Exhibit 17-3.
MS. JIMENEZ: Is this the top?
BY MS. JIMENEZ:
Q.
What is this?
A.
This is a Paycheck Protection Program loan calculator.
This is a form that PayPal had available to applicants when
they were applying for the PPP loan to help guide them through
how much of a loan they would be eligible for and what
documentation would be required when applying.
Q.
Is this something that the person applying for the loan
would see when they are filling out the other information?
A.
Yes, it is.
Q.
All right. And then is this also something that the
applicant submits to PayPal electronically?
A.
Yes. They can. It's not required. But this was
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
submitted.
Q.
All right. Now, what time frame -- well, what is the time
frame indicated here for? What is it for?
A.
I'm sorry. I'm not sure I understand the question.
Q.
Sure. So there is some date ranges about the middle of the
page.
A.
Okay. Yeah. So this would guide the applicant towards
what documentation they would be providing and how they would
calculate payroll costs for that period. So if a business was
active throughout all of 2019, they could submit all of the
first option from January 1st through December 31st of 2019
documentation. There's other options for seasonal businesses
and new businesses that may not have been active for the full
calendar year of 2019.
Q.
All right.
MS. JIMENEZ: Let's go down this page.
I'm sorry. Let's go back to that date range.
BY MS. JIMENEZ:
Q.
And so, for this applicant, the date range selected was the
calendar year 2019; is that right?
A.
Yes, it is.
Q.
Okay.
MS. JIMENEZ: Let's go down the page.
BY MS. JIMENEZ:
Q.
What was indicated as total gross, salaries, wages, and
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
commissions?
A.
$582,926.33.
Q.
Now, the notes -- what do the notes on the right-hand side
indicate about the payroll costs, Line A?
A.
That this would be the total gross salaries.
Q.
And so, if you're applying as a sole proprietor, then it
would be your total salary; is that right?
A.
Yes, it is.
Q.
And sole proprietor for the PPP program, were they capped
at a certain amount if it's just one person?
A.
Yes.
Q.
What is that amount?
A.
I don't recall off the top of my head.
Q.
Okay. And then, if you're an independent contractor, that
is just one person?
A.
Correct.
Q.
All right. Now, a business with employees, they can count
the wages of who?
A.
Of their employees. So that would be employees which
they're paying direct salaries, typically withholding taxes,
maybe paying benefits.
MR. ETRA: Objection, Your Honor.
THE COURT: Basis?
MR. ETRA: The witness is giving her opinion about a
document. I don't know that she is competent to do that of her
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
own personal knowledge. I don't understand what -- that's the
basis. That's the objection.
THE COURT: Sustained.
BY MS. JIMENEZ:
Q.
So in -- on this form -- and you're familiar with this form
based on the work that you did related to the PPP program,
correct?
A.
Yes.
Q.
The total gross salaries, wages, and commissions for
someone applying as a business with employees, the employee
information that's provided here generally consists of what?
A.
Of the salaries they're paying their direct employees.
Q.
Okay. And then there's Row E for employee benefits,
correct?
A.
Yes.
Q.
All right. And so the total payroll costs for this
applicant was how much?
A.
Total payroll cost of 703,000 -- $703,006.
Q.
All right. Now, that payroll cost, under the PPP program,
you take that amount to determine what?
A.
You use that to determine their eligible loan amount. So
you would divide the total payroll costs by 12 to get the
monthly payroll, and then take that times 2.5.
Q.
All right. And so the payment -- the loan payment they're
entitled to is essentially two and a half times -- I'm sorry --
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
two and a half months of their payroll; is that right?
A.
That's correct.
Q.
And for this business, what was that amount?
A.
$146,460.
Q.
All right.
MS. JIMENEZ: Can we go to the next tab,
"Documentation Required."
BY MS. JIMENEZ:
Q.
What is this?
A.
This is documentation that the applicant can submit to show
their eligibility for the loan. And it's broken out based off
of the type of business and whether or not they had filed tax
returns.
Q.
All right. Now, here, the right-hand side is what type of
documentation?
A.
It would be payroll processing data, other --
Q.
I'm sorry. The right-hand side. That's your right hand
too. Yes.
Okay. Yes. The right-hand side. If you had filed
your 2019 tax returns --
A.
Yeah. Consider these forms of verification.
Q.
So let me ask you this question: Did you have -- did you
ask applicants to submit different types of documents based on
whether or not they had in 2019 already filed their tax
returns?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
And if they had filed their tax returns in 2019 -- this
being April of 2020 -- for an LLC, what tax documents would
they provide?
A.
If they had provided -- if they had filed tax returns, they
would provide their IRS forms. Either IRS Form 1120, 941 or
944, or 940.
Q.
And if they are a partnership and indicated they were a
partnership, what tax forms would they provide?
A.
IRS Form 1065, 941 or a 944, or 940.
Q.
And if they had not filed their tax returns, would you, at
this point in 2020, accept unfiled, unsigned tax returns?
A.
We would not.
Q.
So if you have not yet filed your tax returns, what did you
ask them to provide?
A.
We asked them to provide payroll processing data, bank
statements, any receipts, or other verifiable documentation.
Q.
If you're applying as a business with employees, what are
the bank statements supposed to reflect?
A.
It would reflect wages paid and money coming in and out of
the business.
MS. JIMENEZ: Could we go down.
Okay. All right. Can we show Exhibit 17-5.
All right. 17-5, could we just highlight the top
here.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
What is this?
A.
This is a bank statement we received. It's from SunTrust
Bank.
Q.
You received this bank statement for the application of
HM-UP Development Alafaya Trails, correct?
A.
Yes, we did.
Q.
What is the name of the business on this account?
A.
CJUF III Flagler, LLC.
MS. JIMENEZ: Can we show Exhibit 17-6, please.
BY MS. JIMENEZ:
Q.
What is this Exhibit 17-6?
A.
It's a bank statement from Bank of America.
Q.
Is this something that you received in connection with this
same application?
A.
Yes, it is.
Q.
And the entity -- the bank account is in what entity's
name?
A.
HM Management and Development, LLC.
Q.
Is this the entity that was represented as the d/b/a of
HM-UP Development Alafaya Trails?
A.
Yes, it is.
MS. JIMENEZ: Can you show 17-7, please.
BY MS. JIMENEZ:
Q.
Did you also receive this for this application, this
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
document?
A.
Yes, we did.
Q.
Okay.
MS. JIMENEZ: Let's go back.
BY MS. JIMENEZ:
Q.
So in those bank statements would have been various
payments; is that right?
A.
Yes.
MS. JIMENEZ: Can we go to 17-8, please.
BY MS. JIMENEZ:
Q.
What is this?
A.
This is a document supplied as part of the application, and
it indicates it's a payroll report for the time period of
January 1st to December 31st, 2019.
Q.
You received this document with this application; is that
right?
A.
Correct.
Q.
There's a column for withholdings on this document. Do you
see it?
A.
Yes.
Q.
Generally, what does that indicate to you, PayPal,
receiving this document?
A.
That would be funds withheld from the salary, generally tax
withholdings.
Q.
For W-2 employees?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MR. ETRA: Objection. Leading.
THE COURT: Overruled. I'll allow it.
THE WITNESS: Yes. That's correct.
BY MS. JIMENEZ:
Q.
Do you see the same Martin J. Beirne here, or Beine,
B-E-I-N-E [sic]?
A.
Yes, I do.
Q.
Do you see the name Jeff Graff here?
A.
Yes.
Q.
Do you see the name Maria Del Pilar Ataca?
A.
Yes.
Q.
Do you see Elva Baluarte?
A.
Yes.
Q.
All right. And the payroll determination -- is that on
this page as well, that is the payroll figures that were
provided to you?
A.
Yes. It has salary.
Q.
And the total at the bottom is $582,000 -- I'm sorry --
$582,926; is that right?
A.
Correct.
Q.
That was the payroll information that was provided with the
application, correct?
A.
Yes, it is.
Q.
Plus the insurance benefits that were provided of 120,000.
Do you see that on the far right?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes.
Q.
And so the total -- the two added is the roughly $700,000
of payroll from which the loan amount would be determined; is
that right?
A.
That's correct.
Q.
Now, what would the loan amount that you would authorize be
if all of these individuals were provided to you with
information that they were 1099 contractors?
A.
Payroll costs were not applicable for individual
contractors. We would only look at payroll costs of employees,
owners.
Q.
And so, my question to you is: What would the loan amount
be if the information for these individuals provided to PayPal
included the information that they were 1099 contractors?
A.
For all of them or...
Q.
All of them.
A.
Then we would not have issued a loan.
MS. JIMENEZ: Can we go to 17-9, please.
BY MS. JIMENEZ:
Q.
What is this?
A.
This is a copy of the Florida driver's license we received
as part of the application and documentation.
Q.
Is this something you required?
A.
Yes, we did.
Q.
Why did you require this?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
To know that the person applying was, in fact, a real
individual, and it's part of that Know Your Customer verifiable
documentation of a state-issued ID or passport.
Q.
All right. At some point, did you approve this application
that was submitted?
A.
Yes, it was.
Q.
With these supporting documents?
A.
Yes, we did.
Q.
And then did you involve WebBank?
A.
Yes. Once the application was approved, we sent it to
WebBank for funding.
Q.
Did WebBank fund this loan?
A.
They did.
Q.
Now, at some point, do you provide the applicant a form --
an SBA form for them to DocuSign?
A.
Yes. Once we have tentatively approved the application, we
would send the applicant a DocuSign package, electronic forms
that -- where they would agree to -- all of the information in
the application on those forms is correct and agreeing to the
loan terms.
Q.
That's before you would send it to WebBank for them to fund
the loan; is that right?
A.
Yes. The DocuSign must be completed before the loan is
funded.
MS. JIMENEZ: Can we look at Exhibit 17-11, please.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
What is this?
A.
This is the SBA form for Paycheck Protection Program,
referred to as the SBA 2483 Form.
Q.
Was that the one executed in connection with this
particular loan application?
A.
Yes, it is.
Q.
All right. And so the loan amount in the middle box was
based on the average monthly payroll, right?
A.
That's correct.
Q.
Okay.
MS. JIMENEZ: Let's go down -- go back out. Let's go
back to the document.
All right. Let's go to the bottom set of questions,
please.
All right. I'm sorry. Let's go to the next page.
Let's do the first set of certifications.
BY MS. JIMENEZ:
Q.
Did the document, the 2483, contain certifications?
A.
Yes. It had a number of certifications listed here in the
bullet points.
Q.
Would you send the loan packet to WebBank if the
certifications are not initialed and signed by the applicant?
A.
We would not.
Q.
I'm sorry?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
No, we would not.
Q.
Okay.
MS. JIMENEZ: All right. Let's go to the bottom set
of certifications.
Okay. Let's go to the bottom before the signature.
The last two before -- nope.
Sorry. The last two before the signature.
Those two. Yeah.
BY MS. JIMENEZ:
Q.
All right. Now, can you read the: "I further certify"
paragraph please -- or the -- I'm sorry -- the first sentence.
A.
"I further certify that the information provided in this
application and the information provided in all supporting
documents and forms is true and accurate in all material
respects."
Q.
Did PayPal rely on the certification that all of the
information being provided and all of the documentation being
provided was true and accurate in all material respects?
A.
Yes, we did.
Q.
If that item had not been initialed, would you have
provided the loan packet to WebBank to fund?
A.
No. This is a required fill that must be initialed before
we would fund a loan.
Q.
All right.
MS. JIMENEZ: Can you -- all right. Can you go back
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
out.
BY MS. JIMENEZ:
Q.
Did -- did you independently verify the information or
documents that were provided with this loan application?
A.
No. We don't independently verify the documentation. We
require -- we rely on the applicant to supply accurate
documentation as stated.
Q.
Did you go out and interview employees of the business or
do any other kind of independent investigation to determine the
accuracy of the information or the accuracy of the documents
provided?
A.
No, we did not.
Q.
Why not?
A.
The Paycheck Protection loan was set up by the SBA to move
very quickly. And as part of that, the guidance was that you
rely on the documentation provided by the applicant. And
that's the reason for the certifications here, is we're relying
on the applicant to submit accurate documentation, and that's
what the loan is based off of.
Q.
Right. Now, the bottom section --
MS. JIMENEZ: If we can zoom out again.
BY MS. JIMENEZ:
Q.
-- this is -- it says: "DocuSigned." Do you see that?
A.
Yes.
Q.
You work for PayPal. Are you familiar with DocuSign?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
Yes. We use it for a number of different electronic
signing for various loans.
Q.
And generally what would the applicant -- how would the
applicant end up DocuSigning this document?
A.
It's done electronically. So when DocuSign is sent, the
applicant can either choose a preselected signature, or if they
have a mobile device they can sign using like their finger on
the screen.
Q.
Okay.
MS. JIMENEZ: Let's go to the -- is there a next page
here? Is there another page?
BY MS. JIMENEZ:
Q.
All right. What is this?
A.
This is the loan note that further describes the terms of
the loan for Paycheck Protection Program.
Q.
And in this case, the loan was signed on what day?
A.
It was signed on May 1st.
Q.
For that loan amount, correct, 146,457?
A.
That's correct.
Q.
All right.
MS. JIMENEZ: Let's go down.
BY MS. JIMENEZ:
Q.
What were the terms of the loan?
A.
It was the loan amount, one percent interest rate.
Q.
Okay.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
MS. JIMENEZ: Let's go down. Can we find the
DocuSign? Is that on here?
BY MS. JIMENEZ:
Q.
This is the signature on the note; is that right?
A.
That's correct.
MS. JIMENEZ: Let's go down. I think the DocuSign is
here.
All right.
BY MS. JIMENEZ:
Q.
All right. So what is this document?
A.
This is a Certificate of Completion. So after a DocuSign
form is completed and signed, DocuSign sends this back to
PayPal, so that we have electronic record of that.
Q.
All right. Now, here, with -- in the middle of the page,
where it has the DocuSign signature, underneath it it says:
"Signature adoption drawn on device." What does that mean?
A.
That's like I was describing. So if you have like a tablet
or a smartphone, you can use your finger to sign on your
device.
Q.
So you can actually sign yourself as opposed to just
selecting the style -- the preselected style; is that right?
A.
That's correct.
Q.
Now, there's an IP address underneath the signature. What
does that mean?
A.
That's the IP address that was used when submitting the
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
DocuSign. So it would be the IP address of the applicant that
signed.
Q.
All right.
MS. JIMENEZ: For the record, this is part of Exhibit
17-11.
BY MS. JIMENEZ:
Q.
As part of your work with PayPal during the Paycheck
Protection Program, were you involved in any forgiveness
application work?
A.
Yes, I was.
Q.
Generally, what was required for someone to receive
forgiveness for a PPP loan?
A.
It depends on the loan amount. Initially, the SBA required
documentation showing that they paid the loan out for wages, or
mortgage, or other allowed costs.
Later, the SBA loosened guidelines and offered, for
loan amounts under $150,000, that the applicant could fill out
the forgiveness form and certify that they used the loan
proceeds appropriately, but they did not have to provide
documentation.
Q.
Okay. Now, to be eligible for forgiveness, did the
business need to be a business that should have been entitled
to receive the loan proceeds in the first place?
A.
Yes.
Q.
Was the forgiveness application also submitted
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
electronically to PayPal?
A.
Yes, it was.
MS. JIMENEZ: Can we show Exhibit 18-1, please.
BY MS. JIMENEZ:
Q.
What is this, Exhibit 18-1?
A.
This is the PPP Loan Forgiveness Application Form from the
SBA, Form 3508EZ.
Q.
All right. And here, the applicant, HM-UP Development
Alafaya Trails, indicated that they had how many employees at
the time they applied?
A.
Eighty employees.
Q.
And then how many employees at the time of forgiveness?
A.
Sixty-one.
Q.
Then there's below it a covered period. What is that
intended to reflect?
A.
That reflects the period in which they paid payroll to
those employees.
Q.
All right.
MS. JIMENEZ: Can we go back out.
All right. Let's go to the second half of this page.
BY MS. JIMENEZ:
Q.
And then, what is this supposed to be, these numbers?
A.
This shows the forgiveness amount calculation, which would
include payroll costs. It could include business rent,
mortgage, interest payments, utilities, et cetera.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
All right. And would these be eligible costs, that is
costs eligible for forgiveness if you use these funds during
the covered period -- or spent these funds during the covered
period?
A.
Yes, it would.
Q.
All right.
MS. JIMENEZ: Can we go back out to the second page.
BY MS. JIMENEZ:
Q.
Now, this is part of that document. And it's
hand-initialed and hand-signed with a date of
February 5th, 2021. Do you see that?
A.
I do.
Q.
Is this something that -- like the previous form that we
saw, Exhibit 17-11, that you would have sent back to the
borrower?
A.
We did not. Because this is hand-signed, that indicates
that we did not send it. It was not through DocuSign. This
particular form was signed by the applicant and then uploaded
into our portal.
Q.
And you know what? Let me back up just for a moment. The
DocuSign document that we reviewed that contained the loan
application information, was that filled out by PayPal or was
that filled out by the applicant?
A.
It was filled out by PayPal, with the exception of the
certificates, the initials.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
So it was filled out by PayPal based on what?
A.
The information the applicant had submitted with their
application and the documentation.
Q.
And that document was sent back to the applicant to execute
and certify; is that right?
A.
Yes. They are certifying that all information on that form
is correct.
Q.
This one is different.
A.
Correct. The applicant put in all of this information
themselves.
Q.
And why did the applicant at this point not just go online
and fill out the forgiveness application information with
PayPal?
A.
PayPal's loan forgiveness was not yet open. We took the
guidance of the SBA, and it took a little while to get that
built out into the online portal. So we had let our customers
know, you know, we're looking at applications for forgiveness
but we'll open the portal at a later time. So it wasn't open
yet for them to submit electronically, but some users would
send in forms themselves ahead of time.
Q.
All right.
MS. JIMENEZ: Can we go to Exhibit 18-3.
If we could expand the top there.
BY MS. JIMENEZ:
Q.
What is this?
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
This is a document submitted along with the forgiveness
application.
MS. JIMENEZ: Can you go back in and -- go down, like
the first third of the page.
There. Okay.
BY MS. JIMENEZ:
Q.
So this was submitted with that February 5th document?
A.
Yes, it was.
Q.
All right. It indicates in the fourth column -- what does
it indicate?
A.
Wages paid.
Q.
All right. Can you see -- can you look at the second name
on this list.
A.
Second name, Martin J. Beirne.
Q.
Martin J. Beirne. Okay.
A.
And the amount, wages paid $1,395.
MS. JIMENEZ: Can you go down.
BY MS. JIMENEZ:
Q.
And do you see the name Sam Seprish?
A.
Yes.
Q.
He, too, was paid wages according to this document; isn't
that right?
A.
Yes, he was.
Q.
All right.
MS. JIMENEZ: Can we go to 18-4.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
BY MS. JIMENEZ:
Q.
What is 18-4?
A.
This is another document submitted along with the
forgiveness application.
Q.
Does this also indicate that wages were paid?
A.
Yes, it does.
Q.
All right.
MS. JIMENEZ: Now let's go to 18-6.
Is there a next page?
How about 18-5?
All right. Here we are.
BY MS. JIMENEZ:
Q.
What is 18-5?
A.
This is the PPP Loan Forgiveness Application Form
350S [sic], Simple, Revised January 19th, 2021.
Q.
All right. So is this the forgiveness application that
PayPal put in place when it finally got its portal up?
A.
Yes. And this is only for applications of $150,000 or
less.
Q.
So it was intended to be expedited; is that right?
A.
Exactly.
Q.
Did someone have to submit documentation to have their loan
forgiven using this form?
A.
No. Based on SBA guidelines, if the loan was under
$150,000, they did not have to submit the documentation.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Now, this business is HM-UP Development Alafaya Trails
doing business as HM Management and Development, correct?
A.
That's correct.
Q.
All right. Let's go -- and the amount spent on payroll,
according to this document, was how much?
A.
$488,338.81.
Q.
And that would have been during the six-month period
between May and October of 2020?
A.
Yes. That covered period.
Q.
All right.
MS. JIMENEZ: Can we go down.
BY MS. JIMENEZ:
Q.
Did this document also have a certification?
MS. JIMENEZ: Let's go down.
THE WITNESS: Yes, it did.
BY MS. JIMENEZ:
Q.
What were the certifications for?
A.
It's for their eligibility for forgiveness.
Q.
And so the first certification says the amount of PPP loan
proceeds that must be used for payroll costs, but let me back
up. It asks -- it indicates that the borrower has complied
with all requirements of the PPP program rules, correct?
A.
It does.
Q.
All right. Including the rules related to the amount of
PPP loan proceeds that must be used for payroll costs; is that
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
correct?
A.
Correct.
Q.
It also says that: "The information provided in this
application is true and correct in all material respects."
Do you see that?
A.
Yes.
Q.
Did PayPal rely on that?
A.
We did.
Q.
Did you conduct any independent investigation whether this
business paid its wage employees any payroll during that
period?
A.
We did not. It was not required by the SBA.
Q.
All right.
MS. JIMENEZ: Go back out.
Can we just go down to the signature.
BY MS. JIMENEZ:
Q.
When was this -- who is the person indicated as having
signed this?
A.
Eric Sheppard.
Q.
On what date?
A.
May 19th, 2021.
Q.
Was that loan that you -- that WebBank funded in 2020 --
was it forgiven in 2021?
A.
Yes, it was.
Q.
I want to go back to one thing regarding the April
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
application.
MS. JIMENEZ: Can we go to Exhibit 17-12, please.
BY MS. JIMENEZ:
Q.
What is this record?
A.
This is the Paycheck Protection Program Loan Agreement.
Q.
Okay.
MS. JIMENEZ: Could we go down.
Keep going.
BY MS. JIMENEZ:
Q.
All right. Here, does it indicate that loan applied for by
HM-UP Development Alafaya Trails, doing business as HM
Management -- to what account did it go?
A.
They specified to deposit the funds to SunTrust Bank, with
the routing and account number reflected there.
Q.
That's account ending in 7571, correct?
A.
Yes, it is.
Q.
All right. Now, was there another application submitted by
the same applicant, HM-UP Development Alafaya Trails, in 2021?
A.
Yes. Under the second round of the Paycheck Protection
Program loans offered through the SBA, there was a second
application submitted.
Q.
And in 2020 did there come a time when you stopped
processing PPP loan applications?
A.
In 2020, yes.
Q.
In 2020.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
When the funds --
Q.
Do you know approximately how long after you started
processing loan applications did you stop processing loan
applications?
A.
It was months when the funds were depleted by the SBA.
Q.
A few months?
A.
Yeah. I want to say like May time frame.
Q.
All right. Okay. So going to 2021, you were aware that
the Congress appropriated additional funds for 2021?
A.
Correct.
Q.
And PayPal was involved in processing loans in 2021,
correct?
A.
Yes, we were.
Q.
And was this also on behalf of WebBank?
A.
It was.
Q.
Thank you.
A.
PayPal was the service provider and WebBank was the lender.
Q.
All right.
MS. JIMENEZ: Let's go to Exhibit 19-1.
Can you make that a little bigger?
BY MS. JIMENEZ:
Q.
So looking at 19-1, generally what are we looking at?
A.
These are screenshots of the application process that any
applicant would go through on our website through the loan
portal to apply for a loan in 2021.
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
Q.
Was it essentially the same process or the same portal?
A.
It's the same portal and same process, slightly different
questions based off of the SBA guidance for this round.
Q.
All right.
MS. JIMENEZ: Let's go to the next page.
All right. Let's go to the next page.
Now -- yeah. Can we expand this.
BY MS. JIMENEZ:
Q.
If -- Box 9: "Has the applicant previously received a PPP
loan?" Do you see that?
A.
Yes.
Q.
Were there certain requirements for a business that had
previously received a loan in 2020?
A.
Yes. If they previously received a loan in 2020, then this
would be considered a second draw loan, and there's different
requirements for a second draw loan.
Q.
All right.
MS. JIMENEZ: Let's go to Exhibit 19-2.
BY MS. JIMENEZ:
Q.
Let me ask you: In 2021, someone would go online to your
portal. Were your servers still located in the states that you
previously mentioned?
A.
Yes, they were.
Q.
All right. Looking at this document, Exhibit 19-2, what is
it?
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
A.
This is the lead information, which contains the
information collected from the application submitted online
through the loan portal.
Q.
Now, the owner for the business was listed as whom?
A.
Eric Sheppard.
Q.
And this was the same address in Bal Harbour, Florida?
A.
Correct.
Q.
Was this the same phone number and email?
A.
Yes.
Q.
All right. Now -- and the business is the same, HM-UP
Development Alafaya Trails. Do you see that?
A.
Yes, it is.
Q.
All right. And then the number of employees listed is how
many?
A.
Eighty employees.
Q.
And at the bottom, you -- did you capture an IP address
when this information was submitted?
A.
Yes. This is the IP address at the time the application
was submitted online.
Q.
All right.
MS. JIMENEZ: Let's go to the second page here.
BY MS. JIMENEZ:
Q.
All right. Now, here, the number 531120, what is that?
A.
That's the industry code based off of the industry the
applicant submitted at the time of application, and it
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
corresponds to the description of lessors of non-residential
buildings.
Q.
Now, was this a different industry information than was
provided with the first application?
A.
Yes, it is.
Q.
Did the SBA provide rules regarding what the industry was
supposed to have been?
A.
Yes. The SBA, for this round, specified that they should
use the industry code as reflected on their tax returns.
THE COURT: Ms. Jimenez, just let me know when it
might be a good time to adjourn for the evening.
MS. JIMENEZ: We can stop, Your Honor.
THE COURT: All right. Ladies and Gentlemen, we are
going to adjourn for the evening. Please remember that, as you
leave the courthouse, you are not to discuss this case with
anyone, nor permit anyone to speak with you. Everything
learned about the case is learned in this courtroom. You're
not to conduct any independent research.
I will see you tomorrow morning. It will be a
somewhat full day. We'll begin right at nine a.m. and we will
conclude at 4:30.
All right. Have a pleasant evening, and I'll see you
tomorrow morning at nine a.m.
COURT SECURITY OFFICER: All rise.
(Jury not present, 4:01 p.m.)
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Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Ms. Hutcheson, we'll see you tomorrow at
nine a.m. Have a nice evening.
Ms. Hutcheson, let me remind you that you are on the
witness stand. You're not to discuss your testimony, the
testimony of any other individual, or any aspect of the case.
All right?
THE WITNESS: Yes, ma'am.
THE COURT: All right. Go ahead and have a seat.
If the Government can advise, following Ms. Hutcheson,
of the witnesses that it anticipates calling tomorrow.
MS. JIMENEZ: Yes, Your Honor. I'm going to be
calling David Toye from Northeast Bank, Mr. Ian Zalewski from
ACAP SME, Carlos Granda. I don't know how much farther we'll
get.
THE COURT: Do you think that will take us through the
day?
MS. JIMENEZ: This is a -- yes.
THE COURT: All right. Then if I may ask if the
attorneys can confer and advise each other of the exhibits that
you're going to be introducing into evidence, and the
impeachment exhibits that you may be using, so that we don't
take unnecessary time away from the jury to review exhibits,
particularly those that are -- have been listed on the exhibit
list. All right?
MS. JIMENEZ: Yes. Thank you.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
THE COURT: Is there anything further that we need to
address this evening?
MS. WEINTRAUB: Judge, could I just get some
clarification about the impeachment exhibits? Are you ordering
us to give them early?
THE COURT: When do you anticipate -- do you have
impeachment exhibits for David Toye, Ian Zalewski, and Carlos
Granda?
MS. WEINTRAUB: I might on Granda.
THE COURT: So when would you --
MS. WEINTRAUB: Tomorrow morning.
THE COURT: -- ordinarily give those exhibits?
MS. WEINTRAUB: You know when I got Jencks, Judge, for
the witness that we had today for three hours who was
interviewed by the FBI about a PPP loan we never saw? I never
got it.
THE COURT: All right. Well --
MS. WEINTRAUB: And for impeachment, Judge, honestly,
I don't know what the witness is going to say. I try to
presume --
THE COURT: I understand that there may be
unanticipated issues moving forward. I'm speaking of what you
already know you're going to be using with witnesses. It just
moves it along if you can -- and I'm really directing this
first to the Government, since you're directing this witness.
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400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
With regard to Jammie Hutcheson, if there are
additional exhibits, as well as Mr. Ploy [sic], Zalewski, and
Grande [sic], just advise ahead of time so that we can address
any issues ahead of time and not take time away from the jury.
MS. JIMENEZ: Yes. And I have provided -- we provided
a physical copy of all of the exhibits and asked before this
trial for a stipulation as to all of these records that have
certifications. We were not able to obtain a stipulation for
records that have certifications so we can just move them in.
MS. WEINTRAUB: And we didn't have a problem with the
authentications, we didn't make them bring custodians in, and
we told them before the trial, as we're doing now, we just want
to understand what the admissibility is. I'm not going to
stipulate, you know, the evidence in against my client just
without seeing it. Sorry.
THE COURT: All right.
MS. WEINTRAUB: And as far as PayPal is concerned,
Judge, just so the Court knows, Mr. Etra provided the PayPal
impeachment potentially to the Government this morning. So
they already have that.
MS. JIMENEZ: Two volumes of binders.
MR. ETRA: This afternoon, to be fair.
MS. WEINTRAUB: Oh. I'm sorry.
MR. ETRA: That's okay.
THE COURT: All right. Have a pleasant evening.
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Case 1:22-cr-20290-BB Document 309 Entered on FLSD Docket 02/25/2025 Page 242 of 244
243
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
The courtroom will be open at 8:30 this morning -- I
mean tomorrow morning. This evening, the doors will be locked.
So we will not need to use the courtroom.
MS. WEINTRAUB: Thank you, Judge. Have a good night.
THE COURT: Have a nice evening.
COURT SECURITY OFFICER: All rise.
(Proceedings adjourned at 4:05 p.m.)
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Case 1:22-cr-20290-BB Document 309 Entered on FLSD Docket 02/25/2025 Page 243 of 244
244
Yvette Hernandez, Official Court Reporter
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
UNITED STATES OF AMERICA )
ss:
SOUTHERN DISTRICT OF FLORIDA
)
C E R T I F I C A T E
I, Yvette Hernandez, Certified Shorthand Reporter in
and for the United States District Court for the Southern
District of Florida, do hereby certify that I was present at,
and reported in machine shorthand, the proceedings had the 29th
day of November, 2023, in the above-mentioned court; and that
the foregoing transcript is a true, correct, and complete
transcript of my stenographic notes.
I further certify that this transcript contains pages
1 - 244.
IN WITNESS WHEREOF, I have hereunto set my hand at
Miami, Florida, this 25th day of February, 2025.
/s/Yvette Hernandez
Yvette Hernandez, CSR, RPR, CLR, CRR, RMR
400 North Miami Avenue, 10-2
Miami, Florida 33128
(305) 523-5698
yvette_hernandez@flsd.uscourts.gov
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Case 1:22-cr-20290-BB Document 309 Entered on FLSD Docket 02/25/2025 Page 244 of 244File and source
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