Deposition of John Brough (Exhibit 40) — Blue Flame Medical v. Chain Bridge Bank

Summary

Exhibit 40, Document 130-40, filed May 6, 2021 in Case 1:20-cv-00658-LMB-IDD: pages of the Remote Videotaped Deposition of John Brough, dated February 2, 2021, in Blue Flame Medical LLC v. Chain Bridge Bank, N.A., John J. Brough and David M. Evinger, in the Eastern District of Virginia (Alexandria Division). The transcript carries the legend CONFIDENTIAL PURSUANT TO PROTECTIVE ORDER and opens with the caption, appearances and a contents list showing an examination by Mr. White starting at page 9 and by Mr. Orseck at page 343. The testimony pages cover the effect of a large deposit on the bank's balance sheet and a wire of $456 million expected from the State of California.

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Full text

EXHIBIT 40
Case 1:20-cv-00658-LMB-IDD     Document 130-40     Filed 05/06/21     Page 1 of 32
PageID# 1750

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Page 1
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
(ALEXANDRIA DIVISION)
BLUE FLAME MEDICAL LLC
Plaintiff
)Civil Action No.
)1:20-cv-00658(LMB/IDD)
)
vs.
CHAIN BRIDGE BANK, N.A.,
JOHN J. BROUGH and
DAVID M. EVINGER
Defendants
)
)
)
)
)
)
CHAIN BRIDGE BANK, N. A.
)
Third-Party Plaintiffs
vs.
JPMORGAN CHASE BANK, N.A.
Third-Party Defendant
)
)
)
)
)
)
-
CONFIDENTIAL PURSUANT TO PROTECTIVE ORDER -
Remote Videotaped Deposition of John Brough
February 2, 2021
9:35 a.m.
Reported by:
Bonnie L. Russo
Job No. 4398587
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Page 2
Page 4
1 Remote Videotaped Deposition of John Brough
1 APPEARANCES (CONTINUED):
2
2 held through:
On behalf of Third-Party Defendant:
3
3
ALAN SCHOENFELD, ESQ.
WILMERHALE, LLP
4
4
7 World Trade Center
250 Greenwich Street
5
5
New York, New York 10007
6
Veritext Legal Solutions
alan.schoenfeld@wilmerhale.com
6
-and-
7
1250 I Street, N.W.
ALBINAS PRIZGINTAS, ESQ.
8
Washington, D. C.
7
WILMERHALE, LLP
1875 Pennsylvania Avenue, N.W.
9
8
Washington, D.C. 20006
10
albinas. prizgintas@wilmerhale.com
9
-and-
11
MARGARITA BOTERO, ESQ.
10
WILMERHALE, LLP
12
1225 17th Street, Suite 1660
13
11
Denver, Colorado 80202
margarita. botero@wilmerhale.com
14
12
15
13
Also Present:
16
14 Beth Sharon, Chain Bridge Bank
17
David Evinger
15 Ethan Bearman, Blue Flame Medical, LLC
18 Pursuant to Notice, when were present on behalf
Bill Gussman
16 GeoffBassett, Videographer
19 of the respective parties:
17
20
18
19
21
20
21
22
22
Page 3
Page 5
1 APPEARANCES:
1
CONTENTS
2
2 EXAMINATION OF JOHNBROUGH
PAGE
3 On behalf of the Plaintiff:
3 BY MR. WHITE
9
4
PETER WHITE, ESQ.
4 BY MR. ORSECK
343
JASON T. MITCHELL, ESQ.
5
5
EKENEDILICHUKWU E. UKABIALA, ESQ.
GREGORY KETCHAM-COLWILL, ESQ.
6
6
SCHULTE ROTH & ZABEL, LLP
7
901 Fifteenth Street, N.W.
8
7
Washington, D.C. 20005
9
pete. white@srz.com
10
EXHIBITS
8
jason.mitchell@srz.com
11 Exhibit 73 Handwritten Notes
135
ekenedilichukwu.ukabiala@srz.com
CBB00004445
9
gregory.ketchum-colwill@srz.com
10
12
11 On behalf of the Defendants/Third-Party
Exhibit 74 E-Mail Chain dated 3-25-20
151
Plaintiffs:
13
BFM0000 1344 5-448
12
14 Exhibit 75 Incoming Wire Confirmation
181
GARY ORSECK, ESQ.
CBB000019939
13
LESLIE ESBROOK, ESQ.
15
CAROLYN FORSTEIN, ESQ.
Exhibit 76 E-Mail Chain dated 3-26-20
190
14
ROBBINS RUSSELL ENGLERT ORSECK & UNTEREINER
2000 K Street, N.W., Fourth Floor
16
CBB00002725729
15
Washington, D.C. 20006
17 Exhibit 77 E-Mail Chain dated 3-26-20
192
gorseck@robbinsrussell.com
CBB000000807
16
lesbrook@robbinsrussell.com
18
cforstein@robbinsrussell.com
Exhibit 78 Audio Recording
262
17
19
CBB0000254 l
18
20 Exhibit 79 Audio Recording
288
19
20
CBB00002544
21
21
22
22
2 (Pages 2 - 5)
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Page 86
1 2020, when Mr. Gula opened the account for Blue
2 Flame Medical in person?
3
A.
No. I was not at the bank. I was
4 working from -- from home that day.
5
Q.
Were you notified about the opening
6 of the Blue Flame Medical account?
7
A.
I was not notified when the account
8 was opened. However, when -- when Heather
9 found out about the dollar amount of the wire,
10 she did call and e-mail me about it.
11
Q.
And that was after I guess the
12 account had been opened; is that correct?
13
A.
That was after the account had been
14 opened. Correct.
15
Q.
And who was on that phone call
16 with -- excuse me -- with Ms. Schoeppe?
17
A.
I think it was Heather and David and
18 me.
19
Q.
Is that call when you first became
20 aware that Blue Flame was expecting a large
21 wire transfer?
22
A.
Yes.
Page 87
Page 88
1 of view, you know, what would be the best for
2 the client in regards to a deposit of that
3 size.
4
In other words, a deposit of that
5 size is -- is -- only a small fraction would be
6 FDIC insured. So -- so, you know, how are we
7 going to help the client out with that issue as
8 well.
9
So there were many things going
10 through my head.
11
BY MR. WHITE:
12
Q.
One of the things you mentioned was
13 that you had options to minimize the impact of
14 such a large deposit.
15
What would be the impact of such a
16 large deposit if it just came in without you
1 7 exercising any of these options to minimize its
18 impact?
19
A.
It would increase the assets of the
20 bank.
21
Q.
And why is that a potential problem?
22
MR. ORSECK: Object to form.
Page 89
1
Q.
What was your reaction to finding
1 Foundation.
2 out that they were expecting a large wire
3 transfer from the State of California into that
4 account?
5
A.
Well, the dollar amount of the
6 transaction was larger by many multiples than
7 any transaction that -- that any of us had ever
8 seen.
9
Q.
Did that create any problems or
10 concerns on your part?
11
A.
It -- it -- it created a lot of
12 questions that we -- we had to get answered.
13
Q.
Were you concerned about the bank's
14 ability to -- to process or handle such a large
15 wire transfer on its balance sheet?
16
MR. ORSECK: Object to form.
17
THE WITNESS: I was not concerned
18 about that. Because we had many options
19 available to us to minimize the impact of a --
20 of a large deposit. It was -- my primary
21 concern was -- was -- was investigating the
22 wire itself as well as, from the client's point
2
THE WITNESS: I -- to be honest with
3 you, I didn't view it as a problem.
4
BY MR. WHITE:
5
Q.
But what's -- what is the impact
6 that needs to be minimized from a increase to
7 the assets of the bank?
8
A.
Well, that deposit I wasn't as
9 concerned about the impact on the balance
10 sheet. Because Mike Gula had said to Heather
11 that a large portion of it would be wired out
12 shortly.
13
And then we also had the option to
14 take a portion of it and move it off our
15 balance sheet in order to -- to obtain full
16 FDIC insurance for the client.
1 7
Q.
I'm not understanding what the
18 impact of such a large deposit would be such
19 that you had to exercise options to minimize
20 it.
21
22
MR. ORSECK: Object to form.
BY MR. WHITE:
23 (Pages 86 - 89)
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1
Q.
What -- what do --what would the
2 impact be if you did not exercise options to
3 minimize that impact on the bank?
4
A.
Well, if -- if -- none of those
5 other things happened. So if -- if the funds
6 just simply stayed in the account, and if we
7 did not exercise any option to -- to -- to --
8 to safeguard the money for the client, then it
9 would increase the assets of the bank.
10
Q.
Would that have any regulatory
11 impact?
12
A.
No. It would have no adverse
13 regulatory impact.
14
Q.
So that would not affect -- increase
15 in assets of the bank would not affect the
16 capital ratios that we were talking about
17 earlier?
18
A.
Well, like I said earlier, the --
19 any money that just sits in a Federal Reserve
Page 90
20 Bank account would have no impact because it --
21 zero risk weighted -- would have no impact on
22 any of the risk based capital ratios.
Page 91
1
It would have an impact on the
2 leverage ratio. But the impact on the leverage
3 ratio would have been I think probably about 20
4 basis points, which -- which would not be a
5 material change for us.
6
Excuse me.
1
But more importantly, I don't have
2 the document.
3
Can you just say again, Pete, how --
4 how to access this document?
5
MR. WHITE: I'm going to ask -- I'm
6 going to ask my colleague, who's across the
7 table from me, to speak up and let you know.
Page 92
8
MR. KETCHAM-COL WILL: Yeah. So this
9 is Greg.
10
You're going to want to go to the
11 Deposition of John Brough and then click the
12 Marked Exhibits folder. It's -- starts with
13 two explanation points and then says "Marked
14 Exhibits." And you should now see Exhibit 64
15 in the Marked Exhibits folder under Deposition
16 ofJohnBrough.
17
MR. ORSECK: Okay. I don't know
18 what it means to go to the Deposition of John
19 Brough.
20
MR. KETCHAM-COLWILL: Oh, okay. So
21 it's the same platform we were using for
22 Mr. Evinger on Friday. So it's Veritext
Page 93
1 Exhibit Share. In your --
2
MR. WHITE: I feel like -- Gary, let
3 -- let's go off the record --
4
MR. ORSECK: Yeah. I was --
5
6
MR. WHITE: -- for a second.
MR. ORSECK: I was going to suggest
7
Q.
Could you bring up Plaintiffs
7 that.
8 Exhibit 64 previously introduced. You probably 8
Can -- can -- all right. Let's go
9 saw it with Mr. Evinger, Mr. Brough, if you had
9 off.
10 the video on.
10
THE VIDEOGRAPHER: Please stand by
The time now is 11 :27 a.m.
11
It's an e-mail from Mr. Evinger to
11
12 you at the top on March 25th, 2020.
12
We're going off the record.
13
This is the first time we're trying
13
(A short recess was taken.)
14 the technology, Mr. Brough. So I'll rely on
14
THE VIDEOGRAPHER: The time now i
15 you to let me know --
16
A.
Okay. I think I --
1 7
Q.
-- when you have it --
18
A.
This is an e-mail.
19
MR. ORSECK: Hold on just a second.
20
THE WITNESS: All right.
21
MR. ORSECK: First of all, you
22 haven't gotten a question yet.
15 11:31 a.m.
16
We're going back on the record.
17
BY MR. WHITE:
18
Q.
Okay. Mr. Brough, have you had a
19 chance to look at Plaintiffs Exhibit 64 at
20 this point?
21
A.
Yes, I have, Mr. White.
22
Q.
And if you look at the bottom
24 (Pages 90 - 93)
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Page 94
1 e-mail, which I understand to be the first in
2 time sequence, it's an e-mail from Heather
3 Schoeppe to a Wires group address and a
4 Commercial Banking group address.
5
Am I reading that correctly?
6
A
Yes, you are.
7
Q.
Are you part of either of those
8 groups?
9
A
No, I am not.
10
Q.
So you were not on the original
11 e-mail where Heather talks about the --
12 expecting a wire from California for 450
13 million, correct?
14
A
That is correct. I was not on that
Page 96
1
THE WITNESS: I do not know what he
2 meant by that. I can tell you that Mike is
3 over our commercial banking division. He's not
4 in our accounting division. And he is not --
5 he does -- he does not interact on a regular
6 basis with -- with any type of calculation of
7 cap -- capital ratios.
8
BY MR. WHITE:
9
Q.
From your testimony previously, I
10 take it you would disagree that a deposit of
11 that amount could be problems on the bank's
12 capital ratios; is that correct?
13
A.
I -- I disagree with that, yes.
14
Q.
It appears that the first time the
15 e-mail.
15 e-mail chain is sent to you is when Heather
16
Q.
There's a subsequent e-mail, which
16 Schoeppe sends it to you at 4:22 that day.
17 starts at the bottom of the first page of this
17
Am I reading that correctly?
18 document and the text is on the second page 18
A.
Yes. That's correct.
19 from Mike Richardson.
19
Q.
Do you recall whether you went back
20
Do you see that e-mail?
21
A
Ido.
22
Q.
I know you spoke about Mr.
Page 95
1 Richardson before.
2
That e-mails says: "Anything of
3 that size would need to be known on the front
4 end because that's half our assets size and
5 could be problems on our capital ratios."
6
Do you see that?
7
A.
Yes, I do see that.
8
Q.
Do you know what Mr. Richardson
9 meant when he said "that's half our asset
10 size"?
11
MR. ORSECK: Object to form.
12 Foundation.
13
THE WITNESS: Well, he --what he
14 was saying was that a wire of $450 million
15 would be about half of the asset size of the
16 bank. Around that time I think our asset size
17 was around $900 million or so.
18
BY MR. WHITE:
19
Q.
He also -- he goes on to state "and
20 could be problems on our capital ratios."
21
Do you know what he meant by that?
22
MR. ORSECK: Object to form.
20 and read the entire e-mail chain when it was
21 forwarded to you?
22
A.
I do not recall if I went back and
Page 97
1 read the entire e-mail chain. I think, as soon
2 as I saw that -- the -- the first sentence,
3 that -- that --you know, that's kind of when
4 we sprung into action.
5
Q.
And you forwarded that to
6 Mr. Evinger, is that correct, a few minutes
7 later?
8
A.
I did, yes.
9
Q.
The e-mail from Ms. Schoeppe repeats
10 the expecting a wire for 450 million from the
11 State of California and that the governor of
12 California -- there's a reference to the
13 governor of California.
14
Is this the first you were hearing
15 about -- this e-mail the first you were hearing
16 about this entire transaction?
17
A.
I -- I think this was the first I
18 heard of it, yes. I know there were some --
19 there was a phone call, too, from Heather. But
20 I think I might have received this e-mail
21 first.
22
Q.
Who participated in the phone call
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Page 110
1 under the capital management regulations is the
2 fact that you will manage your asset level.
3
So we would be expected to manage --
4 to -- to manage the -- the capital and the
5 asset level of the bank.
6
Q.
Mr. Brough, maybe you're not
7 understanding my question, although --
8
My question is: What are the things
9 that happens if the leverage ratio gets too
10 low?
11
That was what -- that was your
12 testimony. I'm using your words. Want to
13 understand what you meant.
14
What happens?
15
MR. ORSECK: Objection. Foundation.
16
THE WITNESS: Well, Mr. White, I --
1 7 I think that the -- the regulators have this
18 set up so that -- their primary concern is the
19 erosion of capital, more so than the asset size
20 of your bank.
21
So they become very concerned when
22 you -- when you suffer losses and you have an
Page 111
1 erosion of capital. They expect you to be able
2 to manage the other aspects of -- of -- of
3 certain capital requirements, which we do on a
4 regular basis.
5
BY MR. WHITE:
6
Q.
And if your leverage ratio got too
7 low, you would expect it to have a regulatory
8 impact, correct?
9
A.
The regulators would expect you to
10 take certain actions to prevent that from
11 happening.
12
Q.
And what is your understanding of
13 what happens if a bank does not prevent that
14 from happening?
15
A.
I think that the -- the regulators
16 would make it very clear that you -- that you
17 would have to manage it. You know, they
18 wouldn't let it happen.
19
Q.
Well, they would come in and take
Page 112
1
BY MR. WHITE:
2
Q.
That is one of the options
3 regulators have if someone is not managing
4 their bank consistent with the regulatory
5 requirements, correct?
6
MR. ORSECK: Object to form.
7
THE WITNESS: I think, if the -- if
8 the reduction in the capital ratios comes from
9 the erosion of capital, then there's a chance
10 that they would take the bank over.
11
If the reduction in capital came
12 from an increase in asset size, they would --
13 they would tell you to -- to -- to -- to better
14 manage your asset size.
15
BY MR. WHITE:
16
Q.
So it's your understanding that
17 there would be no regulatory impact if the
18 bank's leverage ratios got too low because of a
19 large deposit like this; is that right?
20
A.
The regulators -- in -- in the case
21 of the -- the ratio declining because of a
22 growth in assets, the regulators wouldn't let
Page 113
1 that happen.
2
Q.
How would they stop that from
3 happening?
4
A.
They would expect you to submit a
5 capital plan that showed you better managing
6 the asset size of the bank.
7
Q.
Is that one of the things that you
8 were concerned about at this point, the
9 leverage ratio?
10
MR. ORSECK: Objection. Foundation.
11
THE WITNESS: I wasn't, no. I was
12 not concerned about that. Because, as I -- as
13 I said before, it would have no impact on our
14 risk based capital ratios.
15
It would decrease our leverage ratio
16 by about 20 basis points or so. And that's in
17 the event that the deposit stayed with us.
18
But Blue Flame had told us that they
19 were going to be wiring portions of it out.
20 over the bank, correct?
20 And we also were encouraging them to take the
21
MR. ORSECK: Objection. Foundation.
21 money and put it into a fully FDIC account
22
THE WITNESS: Not necessarily, no.
22 option.
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1
2
So I --
BY MR. WHITE:
3
Q.
I believe you said that the -- I'm
4 sorry, Mr. Brough.
5
A.
No.
6
Q.
I cut you off.
7
A.
I'm finished.
Page 114
8
Q.
I believe you said that the leverage
9 ratio required at that point was 5 percent; is
1 O that right?
11
A.
That's correct.
12
Q.
And how much cushion did you have on
13 that 5 percent?
14
In other words, would the 20 basis
15 points affect whether you were at 5 percent?
16
A.
No. No. We -- we ended up the
1 7 first quarter with a leverage ratio I think of
18 7.05, 7.04. I don't know -- I don't remember
Page 116
1
And as you pointed out before, the
2 interest on reserves that we earned had dropped
3 significantly. So -- so that was another issue
4 that was -- that was volatile.
5
So that's what I meant by it was --
6 whatever the word I was -- I used was.
7
Q.
I believe what you said was, "our
8 balance sheet is so flush with money."
9
I take it by "money" there you mean
10 cash?
11
A.
Yes.
12
Q.
Okay. And why is it -- why does
13 increasing the amount -- strike that. Let me
14 try this again.
15
The 450 million, unless you did
16 something about it, would be cash as well on
1 7 your balance sheet; is that correct?
18
A.
If we did nothing with it, it would
19 exactly what it was.
19 be cash on our balance sheet.
20
So a reduction of 20 basis points
20
Q.
And why is increasing the cash on
21 would have -- would have still been well above 21 your balance sheet at this time a problem?
22 the -- the regulatory capital min - minimum.
22
MR. ORSECK: Object to form.
Page 115
1
Q.
Later on in the call, at the end of
2 the clip we played, Mr. Brough, was the
3 statement, "Well, on a normal day, I would say
4 that we would do it."
5
That is you, correct?
6
A.
Yes. That was me.
7
Q.
"I mean things are so wacky right
8 now, and our balance sheet is so flush with
9 money."
10
What did you mean by "our balance
11 sheet is so flush with money"?
12
A.
Well, if you recall back during the
Page 117
1
THE WITNESS: Well, as I said
2 before, in this case it really wasn't a
3 problem. Because we were told that large
4 portions of it would be wired out, and we could
5 have taken portions of it and put it into fully
6 FDIC insured accounts.
7
BY MR. WHITE:
8
Q.
But why was there a concern about
9 being -- the balance sheet being so flushed
10 with money then?
11
MR. ORSECK: Object to form.
12
THE WITNESS: I think it was merely
13 start of the pandemic, both the stock and the
13 an observation that -- that -- that we have a
14 bond market were -- were -- were very volatile. 14 lot of cash on the balance sheet. And -- and
15
So there was a lot of -- of -- of --
15 so if -- and -- and Heather was talking in
16 there was a lot of -- ofliquidity in the
16 hypotheticals, you know, should this happen,
17 banking system. You know, people would sell
18 portions of their investments and keep it in
19 cash.
20
And so at the time there was --
21 there was more liquidity than -- than there had
22 been. It was a very volatile time.
1 7 again, would we -- would we want to -- you
18 know, "What should we do if this happens
19 again?" -- which is a good thing for her to
20 ask -- "Then -- then what do you want me to do,
21 John?"
22
And -- and that would require a lot
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Page 118
1 of analysis and thought about what is the best
2 thing to do for the client, what is the best
3 thing to do for the bank.
4
BY MR. WHITE:
5
Q.
The bank balance sheet being so
6 flush with money that you reference in this
7 phone call, that doesn't have anything to do
8 with the client's interest, does it?
9
A.
I think that there's always a
10 connection between the -- the size of the bank
11 and how we are protecting our clients' money.
12
So in other words, ICS and CDARS is
Page 120
1
Q.
I see.
2
Mr. Evinger says, at the end of that
3 comment, "That header data is going to be
4 really important to see."
5
Do you know what he meant by that?
6
MR. ORSECK: Object to form.
7
THE WITNESS: I can't tell you
8 specifically what he meant by that. But I
9 think, in general, what he meant was that we're
10 going to have to really understand, if this
11 wire does come in, where is it from.
12
BY MR. WHITE:
13 a product that we use often for clients who
13
Q.
It -- that's what the header data
14 have large balances who want to make sure that 14 reflects, right?
15 they are able to obtain the maximum amount of 15
It reflects where the money is
16 FDIC insurance.
16 coming from?
17
Q.
I'd like to go forward, ifl could,
17
A.
That's correct. It -- it reflects
18 in the call.
18 who's the sender and other --
19
By the way, you've heard this whole
19
Q.
So --
20 call before, correct?
20
A.
-- information. You know, the time
21
A.
I've -- I've -- I've heard it
21 stamp and that type of thing.
22 before, yeah. I -- I mean I -- not recently.
22
Q.
Right.
Page 119
Page 121
1 But I -- I guess we heard portions of it during
1
But -- but specifically what he's
2 David's deposition.
3
MR. ORSECK: For the record, I
4 believe the meta data shows that this is a 4: 31
5 pm. call. And it was represented to be a 4:46
6 pm. call.
7
I -- I'm not sure of what the
8 disparity is, but I wanted to note that.
9
MR. KETCHAM-COL WILL: Call start and
10 end time.
11
MR. WHITE: Oh, my -- my -- counsel
12 has informed me it's call start and end time.
13 But I accept your representation, Gary, that
14 the call started at 4 :41.
15
Can we go to 8:15 of the call.
16
(Whereupon, the tape was played.)
17
BY MR. WHITE:
18
Q.
Mr. Brough, my first question is
19 there's a comment about: Mike Gula, very
20 entrepreneurial guy. He has a million ideas.
21
Is that you or Mr. Evinger?
22
A.
That's Mr. Evinger.
2 referring to here is it's going to be important
3 for us, the bank, to confirm who the sender of
4 this money is, correct?
5
MR. ORSECK: Object to form.
6 Foundation.
7
THE WITNESS: I think that it's --
8 you know, we're going to have to really
9 understand the wire in its entirety. You know,
10 how -- what -- what are all the details about
11 the wire?
12
BY MR. WHITE:
13
Q.
The header data though specifically
14 references the source of the money, correct?
15
A.
I -- you know, I don't know the
16 reference of the header data. I -- I'm sorry.
17 I -- I -- I think -- I don't know. We'd --
18 we'd have to ask David that question again I
19 guess.
20
But I -- I think that the gist of
21 what David was trying to say was we're really
22 going to have to look at this wire carefully.
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Page 138
1
Q.
Okay. And then the -- the next line
2 appears to be "Mike@BlueFlame" dot something?
3
A.
Agency.
4
Q.
Is that supposed to be an e-mail
5 address or --
6
A.
Yes. Yes. So Mike --
7
Q.
Okay.
8
A.
-- Mike informed us that he was
9 going to be shutting down his -- his political
10 organization -- political consulting
11 organization and -- and going to sell masks
12 full-time and that -- and that the only way to
13 reach him would be through his new e-mail
14 address and his new cell phone number. And --
15 and so he provided those to us.
16
Q.
And did Mr. Gula tell you at that
17 time that he'd spent the past several weeks
18 building this new company to do PPE supply?
19
A.
He said -- I don't know if he gave a
20 time frame or not. But he said that he had
21 been working with -- with John Thomas to set up
22 the company, yes.
Page 139
1
Q.
And I think your notes indicate that
2 he had gotten sick of the political fundraising
3 business that he was involved in.
4
Is that -- am I reading that
Page 140
1 useable anymore; you'd have to use his new
2 contact information he gave you; is that right?
3
A.
That's correct.
4
Q.
And then what is the last thing you
5 said, the -- the -- read -- read the last line
6 for me.
7
A.
We asked him about the con -- the --
8 the -- the contracts.
9
Q.
That word is "contracts"?
10
A.
Yes.
11
Q.
Where does it say "contracts"?
12
A.
I'm sorry?
13
Q.
Where does it say "contracts"?
14
A.
Oh, I'm sorry. We asked him about
15 the transaction. It says "transaction."
16
Q.
I see.
17
A.
"Transaction."
18
Q.
Okay. Did you write something in
19 the middle of your conversation with Mr. Gula
20 that had nothing to do with this transaction in
21 your notes here?
22
A.
That was a -- a password that had
Page 141
1 been written down towards the bottom of the
2 page.
3
Q.
Previous to your having this
4 conversation?
5 correctly from later in your notes?
5
A.
Yes.
Q.
I see.
6
A.
Yes. Yes. He was -- he was telling
6
7 us how he was happy to get out of the business
7
And that password had nothing to do
8 that he was in.
9
Q.
Then there's a "Nonresponsive" piece
10 there.
11
And this ten next line says: "I
12 will not be reachable after" -- you -- you read
13 it to me.
14
What does --
15
A.
"I will not" --
16
Q.
-- that say?
17
A.
"I will not be reachable after this.
18 You have my contact into."
19
And then we asked him about the
20 contracts.
21
Q.
I see.
22
So his old account info would not be
8 with the Blue Flame transaction; is that right?
9
A.
No. No. It had nothing --
10
Q.
Just happened to be a --
11
A.
It just had to be -- I was -- you
12 know, I had my notebook with me. I -- I -- I
13 reset my password. And I just wrote it down on
14 the bottom -- towards the bottom of this page.
15
Q.
Did you take any notes about
16 subsequent conversations involving this
17 transaction in that same notebook?
18
A.
Not on our call with Mike Gula. No
19 other notes on -- with -- about the call with
20 Mike Gula. But I think there were other notes
21 that were taken when the wire came in on the
22 26th.
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Page 142
1
MR. WHITE: Mr. Evinger, I see it's
2 now 12:30 on the dot. I want to be sensitive
3 to your need for a lunch break at some point.
4
Is now a good time for you to take
5 that?
6
THE WITNESS: I'm fine with going
7 for another 15, 20 minutes or so.
8
MR. WHITE: Okay.
9
BY MR. WHITE:
10
Q.
During this call did you or
11 Mr. Evinger ask Mr. Gula to send you any
12 particular documents?
13
A.
Yes. We asked Mr. Gula to send us
14 any type of supporting documents for the
15 transaction, including contracts with the State
16 of California to purchase the masks and
1 7 contracts with any suppliers that they had
18 to -- to -- to source the masks.
19
Q.
None of that is in your notes; is
20 that correct?
21
A.
No. It's not in my notes.
22
Q.
But you remember that from your
Page 143
1 recollection of the conversation?
2
A.
That's correct.
3
Q.
Was there ever any follow-up with
4 Mr. Gula by e-mail or phone requesting this
5 information after this initial call?
6
A.
There was. David sent an e-mail
7 following up and, you know, reiterating the
8 fact that we looked forward to receiving the
9 contracts.
10
Q.
After this call with Mr. Gula, did
11 you -- I take it you weren't -- you doubted
12 whether Blue Flame was actually going to
13 receive this wire transfer from California; is
14 that fair?
15
A.
We were skeptical that it would
16 happen.
1 7
Q.
But the wire in the amount specified
18 from this -- by Mr. Gula -- from the sender
19 specified by Mr. Gula did, in fact, come in the
20 next day is; isn't that correct?
21
A.
The wire did come in, yes.
22
Q.
And it's was from the party he said
Page 144
1 it was going to be from, correct, State of
2 California?
3
A.
Yes. From --
4
MR. ORSECK: Asked and answered.
5
6
It's a matter of record.
BY MR. WHITE:
7
Q.
And your investigation determined
8 that it was, in fact, a wire for the purchase
9 of N95 masks by the State of California,
10 correct?
11
A.
I -- no. I wouldn't characterize
12 our conclusion in that -- in that -- in that
13 way.
14
Q.
What's your understanding of why
15 California sent $456 million to Blue Flame
16 Medical?
17
A.
Well, what we were able to confirm
18 was that the wire was actually from State of
19 California, and the State of California knew
20 that they had sent it. But we had not verified
21 the -- the purpose of the wire.
22
Q.
You ultimately did verify that the
Page 145
1 purpose was to purchase N95 masks from Blue
2 Flame Medical, correct?
3
A.
We -- we -- we were able to, like I
4 said, find out that the -- the wire was
5 actually sent from the State of California, and
6 they knew it.
7
They -- the -- we also were able to
8 confirm that the State of California was under
9 the impression that the money was going to
10 result in them receiving a hundred million
11 masks.
12
Q.
Exactly as Mr. Gula had said,
13 correct?
14
A.
We had many more unanswered
15 questions after we were able to verify that the
16 State of California sent the money and -- and
1 7 they knew that they had sent it.
18
Q.
We'll get to that in a minute.
19
My question is whether the purpose
20 that was confirmed from the State of California
21 was the same as the purpose that Mr. Gula had
22 told you, that being the purpose of paying for
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Page 146
1 the purchase ofN95 masks.
2
A.
That was -- those -- those were data
3 points that we were able to -- to -- to -- to
4 receive acknowledgement on. But there were
5 still many other questions that we had.
6
Q.
Okay. I -- I'm not -- I'm just not
7 sure that I'm getting an answer to my question,
8 which is: Was there a difference between the
9 purpose that Mr. Gula told you the money was
10 going to come from California for and what
11 California told you that they sent the money
12 for?
13
A.
There was consistency there. But
14 there were still many unanswered questions.
15
Q.
Okay. After the conversation with
16 Mr. Gula, did you have a subsequent
17 conversation with Mr. Fitzgerald, the chairman
18 of the bank?
19
A.
Yes. We called -- we called Mr.
20 Fitzgerald to inform him about the transaction.
21
Q.
Do you recall what Mr. Fitzgerald
22 said about it?
Page 147
1
A.
Mr. Fitzgerald also was -- was
2 skeptical about whether or not the transaction
3 would happen.
4
Q.
Did Mr. Fitzgerald say anything
5 about how to handle the wire transfer in the
6 event the bank ended up receiving it?
7
A.
I don't recall him instructing us
8 to -- to -- to -- on how to handle the wire,
9 no.
10
Q.
Do you recall Mr. Gula telling --
11 you going back to your conversation with him.
12
Do you recall Mr. Gula telling you
13 that, although the masks were going to be
14 manufactured in China, the wires out of the
15 account would all be to domestic accounts?
16
Did that come up during your call
17 with Mr. Gula?
18
A.
Mr. Gula made it very clear that the
19 masks were going to be purchased from China.
20 So our -- our assumption was that the funds
21 would have to ultimately be wired to China.
22
Q.
My question was: Did he tell you
Page 148
1 that the wires out of Chain Bridge Bank account
2 would all be domestic?
3
A.
What he told us was that the
4 ultimate recipients would be in China.
5
Q.
I understand that.
6
What I'm -- what I'm asking you is
7 did he tell you that all of the wires out of
8 the account to pay for the masks would be
9 domestic during that call?
10
A.
What he told us was that the
11 ultimate recipients of the wires would be
12 companies in China. So it's not unusual for --
13 when you're sending money abroad, for it to go
14 through multiple banks. But it's all one
15 transaction.
16
So it goes to a domestic bank, who
17 has a sophisticated international platform.
18 And then it's sent from that -- that bank to --
19 to a foreign country.
20
Q.
And did he -- my -- my question is,
21 Mr. Brough: Did he tell you that all of the
22 transfers from Chain Bridge Bank would be to
Page 149
1 such domestic banks; it would not be
2 international transfers --
3
MR. ORSECK: Object to form.
4
BY MR. WHITE:
5
Q.
-- out of the account?
6
MR. ORSECK: Objection. Foundation.
7
THE WITNESS: What he informed us is
8 that there would be a multistep process. And
9 the first part of the process would be sending
10 money from the bank to a domestic bank. And
11 then the funds would be transferred to China.
12
BY MR. WHITE:
13
Q.
And I take it you were aware as well
14 or became aware in March of 2020 that the vast
15 majority of personal protective equipment or
16 PPE in the world is manufactured in China; is
1 7 that right?
18
Did you know that at the time?
19
A.
Yes. I do recall hearing a lot of
20 controversy about that, yes.
21
Q.
So the fact that the masks
22 ultimately were going to be manufactured in
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Page 154
1
Do you see that?
2
A.
I do see that. I guess my reading
3 of that --
4
MR. ORSECK: Wait. Wait. Wait.
5 You have to wait for a question, John.
6
THE WITNESS: Okay. I apologize.
7
BY MR. WHITE:
8
Q.
My question is: Did you or
9 Mr. Evinger ever respond to this e-mail from
10 Mr. Gula?
11
A.
I'd have to look back at the e-mail
12 chains. I don't know if this is the complete
13 chain or not.
14
Q.
Well, do you recall letting Mr. Gula
15 know, to use his words, if you have any
16 questions after this e-mail at 6: 18 on March
17 25th?
18
A.
I -- I don't recall if we had any
19 other e-mails back and forth with him or not.
20 I do not know.
21
Q.
Did you have any other phone calls,
22 phone conversations with Mr. Gula after that
Page 156
1 these transactions?
2
A.
Yeah. Sure. I can explain that.
3 There's a common effort by bad guys to extort
4 money out of individuals by saying to them
5 that, you know, "You've just won a hundred
6 million dollars," or something like that. "In
7 order to secure this prize, or in order to
8 secure this contract, you know, need to send us
9 X dollars in order to secure the contract."
10
And so it's not an uncommon thing.
11 We get -- we get clients in here who -- who
12 want to send money to secure these -- these
13 awards. And -- and of course, you know, it --
14 it never happens.
15
So -- so we just wanted to make sure
16 that Mike wasn't the subject of one of these
17 elaborate efforts.
18
Q.
I think that started with "Nigerian
19 princess," ifl recall my e-mails correctly --
20
A.
I --
21
Q.
-- from back in the day.
22
A.
I think you're right. That was
Page 155
Page 157
1 initial call that you testified about?
2
A.
No, we did not.
3
Q.
And other than this e-mail asking
4 about sending any money to China or others as a
5 fee for these transactions, do you recall any
6 contact you had with Mr. Gula following up on
7 that call?
8
A.
I -- what's your question on --
9 what's your question there in regards to the --
10
Q.
My question is whether --
11
A.
-- the fee for the transaction?
12
Q.
Let me try to ask a different
13 question, Mr. Brough.
14
Other than this contact that you
15 made with Mr. Gula at 6: 17 p.m., Was there any
16 other follow-up efforts that you made with
1 7 Mr. Gula after your telephone call with him?
18
A.
No. There weren't. We --we asked
19 them for the contracts over the telephone call,
20 and we followed up with an e-mail.
21
Q.
And why did you ask whether he had
22 sent any money to China or others as a fee for
1 years and years ago. Yeah. Yeah. It's taken
2 --
3
Q.
Ultimately this was -- I'm sony.
4
A.
It's --
5
Q.
Go ahead.
6
A.
It's been taken up by others as well
7 now, not just Nigerian princesses. Yes.
8
Q.
Ultimately you determined that that
9 was not what was going on here, correct?
10
A.
That is correct.
11
Q.
If you turn to the last page,
12 13448 --
13
A.
Yes.
14
Q.
-- that appears to be a wire
15 instructions for Wingar Industrial with bank
16 information. And the header at the top is:
17 Great Health Companion Group Limited Company.
18
Do you see that?
19
A.
Yes,ldo.
20
Q.
I take it these were wire
21 instructions that were sent by Mr. Gula to you,
22 correct?
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Page 158
Page 160
1
A.
That is correct. It's in response
2 --
3
Q.
And it --
4
A.
It's in response --
5
Q.
Please.
6
A.
-- to the very top entry on -- I
7 guess it's at 6: 18 Eastern Time, 3: 18 Pacific
8 Time. In other words that, when we do send
9 this money to China, this is -- this is where
10 we're going to send it.
11
Q.
I see.
12
So this is wire instructions that he
13 had attached showing where the money was going
14 to be wired from this account?
15
A.
That's correct.
16
Q.
Correct?
17
A.
That's correct.
18
Q.
And that repeats the Great Health
19 Companion Group that he had mentioned as a
20 supplier during your telephone call with
21 Mr. Gula, correct?
22
A.
That is correct. It does.
1
I think David -- oh, never mind.
2 You didn't ask a question. Go ahead.
3
Q.
Have you heard of --you're familiar
4 with Bank of the West, I take it, correct?
5
A.
They're a west coast bank. I'm not
6 very familiar with them at all. I know they
7 exist. That's about it.
8
Q.
Right.
9
But that- -you recognize that as
10 the name of the bank -- of a bank on the west
11 coast, the bank name listed here, correct?
12
A.
That's correct.
13
Q.
Did anyone from Chain Bridge Bank
Page 159
14 check on that bank ABA routing number to make
15 sure it was the right routing number for Bank
16 of the West?
17
A.
I don't think that we -- we did, no.
18
Q.
Did anyone make an effort to contact
19 Wingar Industrial, Incorporated, with the
20 address and phone number listed there?
21
A.
I do recall that David did a Google
22 search of them and find -- found out that they
1 were a cutlery company, which, you know, raised
2 more red flags for us.
3
Q.
Well, did -- I take it at that point
4 someone from the bank contacted them to
5 determine whether they were involved in this
6 transaction with Blue Flame Medical?
7
A.
No. We did not reach out to them.
8
Q.
Why not?
9
A.
Well, at this point we -- we hadn't
10 gotten the wire in yet. So -- so we -- we
11 really had -- we -- we -- we weren't inclined
12 to -- to talk to Wingar at that point.
13
Q.
Did someone talk to them after the
14 wire came in?
15
A.
No. Nobody talked to them after the
16 wire came in. We were more focused on trying
17 to answer questions about the incoming wire.
18
Q.
So you did not have a concern about
19 the entity from whom Mr. Gula's company was
20 going to be procuring the N95 masks?
21
MR. ORSECK: Object to form.
22 Foundation.
Page 161
1
THE WITNESS: No. We did have
2 concerns about that.
3
BY MR. WHITE:
4
Q.
Why didn't someone contact Wingar
5 Industrial?
6
MR. ORSECK: Object to form.
7
THE WITNESS: We didn't contact them
8 at this point because we were focused on the
9 incoming wire transfer more so than the
10 outgoing wire transfer.
11
We -- we -- we were concerned that
12 the money was going to a cutlery company rather
13 than a international trade agent or -- or Great
14 Health Companion account here domestically.
15
But -- but our focus really was
16 on -- on figuring out more about the incoming
17 wire transfer.
18
BYMR. WHITE:
19
Q.
In any event, no one satisfied the
20 answers to your concerns about the supposed
21 cutlery company -- company by contacting them;
22 is that correct?
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1
MR. ORSECK: Object to form.
2
THE WITNESS: We did not reach out
3 to Wingar or Great Health Companion.
4
MR. WHITE: If you could bring up
5 Plaintiffs Exhibit 17, please, Greg.
6
THE WITNESS: Ifwe could maybe
7 target to do lunch at 1: 00 or so for --
8
MR. WHITE: It's entirely up to you,
9 Mr. Brough. Any time there's a -- when you've
Page 164
1
A.
Okay.
2
Q.
-- CBB761.
3
Do you have that in front of you?
4
A.
Start on Page 761. Yes, I do.
5
Q.
Okay. The new part of the e-mail,
6 the second e-mail down, is from you to Heather
7 that starts: "David and I spoke to Mike Gula.
8 He is very confident about the transactions,
9 but David and I are very skeptical. We called
10 completed an answer to a question, you can call 10 Peter to bring him up to speed. Peter also
11 a break. We can do it now if you like.
12
THE WITNESS: If-- if it's okay,
13 why don't we go ahead and take a break right
14 now.
15
MR. WHITE: Of course.
16
MR. ORSECK: Before we go off the
17 record, I'd just like to designate this
18 deposition and the transcript confidential
19 under the protective order.
20
MR. WHITE: How long do you need,
21 Mr. Brough?
22
I'm not trying to rush you.
Page 163
1
THE WITNESS: Why don't we get 40
2 minutes. So like 12:35 or so? I'm sorry. 1
3 -- 1:30 --
4
5
6
7
MR. ORSECK: Are we off the record?
THE VIDEOGRAPHER: We will be soon.
MR. WHITE: Okay.
MR. ORSECK: Let's go off the
8 record.
9
THE VIDEOGRAPHER: All right. The
10 time now is 12:55 p.m.
11
We're going off the record.
12
(A short recess was taken.)
13
THE VIDEOGRAPHER: The time now is
14 1:47 p.m.
15
We're going back on the record.
16
BY MR. WHITE:
17
Q.
Mr. Brough, I'm going to have you
18 pull up Plaintiffs Exhibit 17. It a March 25
19 e-mail.
20
You've -- you've seen all but the
21 top two parts of this previously in a prior
22 exhibit. It starts at page --
11 things it's a scam."
12
Why were you and David very
13 skeptical of the transactions at that point?
14
A.
I think it was the magnitude of the
15 transaction. At least that's what I was
16 thinking. I had never seen a transaction of
17 this size ever, by many multiples. And -- and
18 the circumstances surrounding it with the PP --
19 PPE and -- and such, it was -- it was all just
20 very unusual.
21
Q.
You are aware that the State of
22 California and many other people -- or many
Page 165
1 other entities were attempting to buy large
2 amounts of C -- of PPE -- let me start that
3 over.
4
You were aware at the time, like
5 March 2020, that the State of California and
6 many other entities were attempting to procure
7 historically unprecedented amounts of
8 protective equipment in connection with the
9 pandemic, correct?
10
A.
I -- yes. I -- I was aware of that,
11 yes.
12
Q.
There's a note here -- or part of
13 your e-mail to Heather says: "Peter also
14 thinks it's a scam."
15
What kind of scam did you think this
16 was?
17
MR. ORSECK: Object to form.
18
THE WITNESS: To be honest with you,
19 I -- I -- I'm not sure if -- if he -- the word
20 "scam" was used in the context of is Mike Gula
21 being scammed, or is there other -- some other
22 type of scam here.
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1
2
Page 190
MR. KETCHAM-COLWILL: Yes.
MR. WHITE: So that'll be
3 Plaintiffs Exhibit 76. Actually, hold on.
4
MR. KETCHAM-COLWILL: lOB?
Page 192
1 answer all of our questions before we proceeded
2 further.
3
BY MR. WHITE:
4
Q.
Was it your understanding what he
5
MR. WHITE: I meant 1 OB, yeah.
5 was asking there was whether the money was
6 That'll be Exhibit 76.
6 really intended to be sent, or was it something
7
That is an e-mail from
7 else?
8 Mr. Fitzgerald to you. CBB2725 is the initial
8
A.
My reading of Peter's message does
9 page. March 26th.
9 not indicate that -- that he had any questions
10
(Deposition Exhibit 76 was marked
10 about the -- whether or not the money should be
11 for identification.)
11 sent.
12
THE WITNESS: What exhibit number it 12
MR. WHITE: Our internal Tab 11. I
13 is -- is it? I'm sorry. 10, did you say?
13 don't think that --
14
MR. WHITE: 7-6.
14
MR. KETCHAM-COL WILL: No. It hasn't
15
THE WITNESS: Oh, 7-6. I apologize.
16
MR. ORSECK: No. Oh, it's says l0B?
17 It's -- is -- it's PX -- it's Plaintiffs
18 Exhibit 76?
19
MR. WHITE: Correct. That was our
20 internal tab.
21
MR. ORSECK: I got it.
22
THE WITNESS: Okay.
1
2
MR. WHITE: But my co --
BY MR. WHITE:
Page 191
3
Q.
In that e-mail on 12:05, you send an
4 e-mail that says: "Unbelievable. We are going
5 to try to contact the sender"?
6
A.
Yes. That's correct.
7
Q.
I can't tell from this e-mail who it
8 went to.
9
Is it your understanding that this
10 went to Mr. Fitzgerald from you?
11
A.
I think so. Looks like it, yes.
12
Q.
And then Mr. Fitzgerald respond as:
13 "Please put the money in ICS as soon as you
14 determine this money is legitimate."
15
You see that?
16
A.
That's --that's correct. I see
17 that.
18
Q.
What did you understand him to mean
19 by "legitimate" there?
20
MR. ORSECK: Object to form.
21
THE WITNESS: Well, Peter would have
22 wanted to make sure that we had been able to
15 been introduced.
16
MR. WHITE: Will be Plaintiffs
17 Exhibit 77.
18
It's the March 26th e-mail from
19 Mr. Evinger to Jennifer Lincoln and you, Mr.
20 Williamson, and others.
21
(Deposition Exhibit 77 was marked
22 for identification.)
1
BY MR. WHITE:
2
Q.
Do you see that, Mr. Brough?
3
A.
Yes. I'm pulling it up right now.
4 Got it.
5
Q.
Jennifer Lincoln writes to the
Page 193
6 group, 12:06: "We received a large wire today
7 for Blue Flame Medical," account number, "in
8 the amount of," and then the amount we've been
9 discussing.
10
By the way, does that -- 7459, the
11 last four digits, does that jibe with the Blue
12 Flame Medical account number we were looking at
13 before?
14
A.
I think -- I think the other number
15 was 7459, yes.
16
Q.
Okay. And why is Ms. Lincoln
17 sending this e-mail out?
18
MR. ORSECK: Object to form.
19
THE WITNESS: She was letting
20 everybody know that the wire came in.
21
BYMR. WHITE:
22
Q.
And I see her job title is digital
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Page 194
1 banking deposit operations manager.
2
What are -- what are the -- her job
3 responsibilities?
4
A.
Jennifer is a manager in our
5 operations department that occasionally will
6 get involved with wire transfers.
7
Q.
And is she involved in the process
8 that would lead to Mr. Gula being able to see
9 the 456 million plus in his account in his
1 O digital portal?
11
MR. ORSECK: Object to form.
12 Foundation.
13
THE WITNESS: No. She isn't, no.
14
BY MR.WHITE:
15
Q.
You don't dispute though that
16 Mr. Gula would have been able to see this
1 7 amount through the digital portal as having
18 been deposited in his account on March 26th,
19 2020, do you?
20
MR. ORSECK: Objection. Foundation.
21
THE WITNESS: Mr. Gula would not
22 have seen these funds deposited into his
Page 195
1 account. Because they were not deposited into
2 the account. What he would have seen is the
3 memo notice.
4
BY MR. WHITE:
5
Q.
And the memo notice on the portal
6 shows up as a deposit into the account, doesn't
7 it?
8
9
MR. ORSECK: Object to form.
THE WITNESS: No. It shows up as a
10 notice about the transaction. Does not --
11 deposits don't show up until they're actually
12 posted to the account, which doesn't happen
13 until the end of the day.
14
BY MR. WHITE:
15
Q.
So he would have seen a notice that
16 money had come into the account?
17
MR. ORSECK: Object to form.
18 Foundation.
19
THE WITNESS: He would have seen a
20 memo notice that funds had been received.
21
BY MR. WHITE:
22
Q.
Is there a copy of that memo notice
Page 196
1 in bank files anywhere?
2
A.
I don't think there is. I think it
3 -- it's -- it's a notice that appears on -- on
4 your online banking account. In other words,
5 there's not a paper notice that's sent out.
6
Q.
Does that online record exist
7 anywhere in Chain Bridge Bank's records?
8
A.
I don't know the answer to that.
9
Q.
Who would know the answer to that?
10
A.
Thais Ribeiro probably could find
11 the answer to that.
12
Q.
Memo -- or e-mail from Mr. Evinger
13 back says: "Place hold on funds."
14
Do you see that?
15
A.
Yes. I do see that.
16
Q.
Why did Mr. Evinger order a hold on
1 7 the funds?
18
MR. ORSECK: Object to form.
19
THE WITNESS: I'm not sure why David
20 placed a hold on the account. I can't say for
21 sure.
22
But what I can tell you is that, as
Page 197
1 soon as the wire came in, we understood that we
2 would have to conducted our investigation. And
3 until that was done, the funds -- the funds
4 were going to be held.
5
BY MR. WHITE:
6
Q.
Meaning that the funds could not be
7 accessed by the clients during that time
8 period; is that correct?
9
A.
That is correct, along with making
10 sure that final disposition can be -- can be --
11 can be conducted, whatever that might be.
12
Q.
What does that mean?
13
A.
Well, either deposited into the
14 account that night or returned.
15
Q.
Were you involved in making the
16 decision to place the hold on these funds?
17
A.
I think that I had almost
18 simultaneously told them to put a hold on the
19 funds as well, from what I recall.
20
Q.
Had you or anyone else from Chain
21 Bridge Bank spoken to anyone from JPMorgan
22 prior to putting a hold on the funds?
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1
A.
No. I think that the first call
2 from JPMorgan came in around 1:20, if that's --
3 if I'm -- if I'm recollecting correctly,
4 thereabouts.
5
Oh, no.
6
Q.
Chain Bridge --
7
A.
12 -- 12:40. 12:40. Sorry. It's
8 12 -- 12:20. 12:20. Sorry.
9
Q.
What was 12 --
10
A.
That's when David --
11
Q.
What happened at --
12
A.
That's when JPMorgan contacted us.
13
Q.
Did they contact you first, you
14 being Chain Bridge Bank; or did Chain Bridge
15 Bank contact JPMorgan first?
16
A.
JPMorgan contacted us first.
17
Q.
I understand Chain Bridge Bank has a
18 funds availability policy that limits -- as I
19 understand it, limits access to funds deposited
20 for a certain period of time.
21
Do I have that right?
22
A.
That is correct.
Page 200
1 to make policy exceptions to Regulation J, does
2 it?
3
MR. ORSECK: Object to form.
4
THE WITNESS: The bank -- the bank
5 cannot make any policy exceptions to the Bank
6 Secrecy Act. So in other words, if there's --
7 if there is a transaction that is unusual or
8 out of pattern, then it the must be
9 investigated.
10
MR. WHITE: That's nonresponsive.
11
BY MR. WHITE:
12
Q.
The question is: Does the bank have
13 the authority to make exceptions to
14 Regulation J?
15
MR. ORSECK: Object to form.
16
THE WITNESS: I think that, if you
17 -- you need to take the Regulation J in context
18 with the Bank Secrecy Act. And we cannot make
19 any policy exceptions when it comes to the Bank
20 Secrecy Act.
21
BYMR. WHITE:
22
Q.
Where is the source for your
Page 199
Page 201
1
Q.
And how long a period of time is
1 authority that the bank has the authority to
2 that?
3
A.
Depends on the type of transaction.
4
Q.
What about for a wire transaction?
5
A.
For an account opened within the
6 past 30 days, the funds aren't available until
7 the next day.
8
Q.
That's an internal policy at Chain
9 Bridge Bank; is that correct?
10
A.
That's an internal policy that's
11 consistent with Regulation CC.
12
Q.
The bank has the authority to make
13 exceptions to that; isn't that true?
14
A.
The -- the bank has authority to
15 make exceptions to many policies at the bank.
16
Q.
I'm just asking about this one.
17
A.
Like I said, I mean the bank and
18 bank personnel, based on their knowledge of a
19 situation, may make policy exceptions for --
20 for a wire transfer of $456 million. I would
2 make exceptions to Regulation J?
3
MR. ORSECK: Objection. Lack of
4 foundation. Mischaracterizes the testimony.
5
THE WITNESS: Well, the bank -- the
6 bank cannot make exceptions to the Bank Secrecy
7 Act regulations and law, which must be taken
8 into consideration when looking at any type of
9 transaction. A wire transaction or a check
10 transaction or a loan currency transaction, it
11 has to be taken into consideration with all
12 those different types of transactions.
13
BYMR. WHITE:
14
Q.
So is it your testimony that the
15 Bank Secrecy Act gives Chain Bridge Bank the
16 authority to ignore the requirements of
17 Regulation J?
18
MR. ORSECK: Objection. Misstates
19 the testimony.
20
THE WITNESS: The Bank Secrecy Act
21 not expect anybody to make a policy exception. 21 requires us to do certain things before we can
22
Q.
The bank does not have the authority
22 -- before we can act on a transaction.
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Page 218
1
Q.
You --
2
A.
-- request.
3
Q.
You don't have to honor that
4 request, do you?
5
A.
The FedLine platform is a -- a very
6 serious platform. Any type of transactions
7 that are conducted through it are -- they're
8 done through wire for a reason. And the
9 cancellation of a wire is done for a reason.
10 And it has to be a very good reason.
11
And JPMorgan is a trusted
12 counterparty. We've never had an issue with
13 JPMorgan in the past. And their request to
14 cancel the wire seemed to us to be a reasonable
15 request in light of all the questions that we
16 had and that they had that hadn't been
17 answered.
18
Q.
My question was: Was Chain Bridge
19 Bank required to honor that request?
20
MR. ORSECK: Object to form.
21
THE WITNESS: Chain Bridge Bank --
22 Chain Bridge Bank is required to conduct due
Page 219
1 diligence on transactions before acting. And I
2 feel like we did that here. If we had not
3 returned the wire, then -- then who knows would
4 have what -- who knows what would have happened
5 in regards to the unanswered questions that we
6 had?
7
BY MR. WHITE:
8
Q.
Was Chain Bridge Bank required to
9 honor JPMorgan's request to recall the wire?
10
MR. ORSECK: Hold on. We spent the
11 last two hours, Pete, having you ask this
12 witness to interpret what Reg J provides and
13 how it applies. The hole line of questioning
14 is improper. He's doing his best to ask [sic]
15 them. And you're visibly frustrated that he's
16 not a law professor.
17
You can easily argue what the law
18 provides. And I can argue something different
19 ifl want. And this all is entirely improper.
20
MR. WHITE: That's incorrect.
21
MR. ORSECK: That --
22
BY MR. WHITE:
1
Q.
Answer the question.
2
A.
Well, let me answer the question
3 this way: If this -- ifwe had no questions
4 about the transaction; if JPMorgan had no
5 questions about the transaction; and if the
Page 220
6 State of California had no questions about the
7 transaction; if this transaction had been for
8 $456,000, which is still a lot of money; and if
9 it -- if everything checked out; and if we
10 received a -- instructions to cancel and return
11 the wire from JPMorgan, we probably would have
12 asked questions of them -- Why are you
13 cancelling this wire? What -- what's wrong
14 here? -- before we returned it.
15
But -- but that wasn't the case. It
16 was for $456 million. And there were many
17 unanswered questions.
18
Q.
My question is: What is your
19 understanding as to whether or not Chain Bridge
20 Bank had to honor JPMorgan's request?
21
Either you --
22
A.
Oh.
Page 221
1
Q.
-- thought that you had to, or you
2 thought they didn't have to, or you don't know.
3
A.
Let me --
4
MR. ORSECK: Object to form.
5
THE WITNESS: Let me clarify my
6 answer then.
7
If it was a totally clean
8 transaction, no -- no issues whatsoever, then
9 we may not have honored their request.
10
BY MR.WHITE:
11
Q.
So Chain Bridge Bank had the
12 authority not to enter the -- honor the
13 request.
14
Is that -- is that your
15 understanding?
16
MR. ORSECK: Object to form.
17
THE WITNESS: It's my understanding
18 -- it -- sorry.
19
It's my understanding that, had
20 there been no BSA questions involved, then we
21 could have not honored the request. But
22 because --
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Page 222
Page 224
1
BY MR. WHITE:
2
Q.
You made the call --
3
A.
-- there were all of these --
4
Q.
Sorry.
5
A.
But because there were all of these
6 BSA questions that hadn't been answered, then
7 we were going to honor their request, let there
8 be a cool-down period, let -- let all the
9 issues -- let all the questions be answered,
10 and -- and then maybe the transaction does
11 happen.
12
Q.
Chain Bridge Bank had the authority
13 as well to hold the funds while all those
14 questions were answered; isn't that correct?
15
A.
We --
16
MR. ORSECK: Object to form.
17
THE WITNESS: We probably would have
18 held the funds had we not received a request to
19 return the funds.
20
BY MR. WHITE:
21
Q.
So Chain Bridge Bank did have that
22 authority to continue to hold the funds while
1 receiving the request from JPMorgan, in your
2 understanding?
3
MR. ORSECK: Object to form. Calls
4 for legal analysis.
5
THE WITNESS: I think at that point,
6 what we probably would have done was, as Pete
7 suggested, bring in the regulators or engage an
8 attorney. But we didn't do that because we
9 received the request to return the wire.
10
BY MR.WHITE:
11
Q.
After receiving the request to
12 return the wire, isn't it true that Chain
13 Bridge Bank had the ability to hold the funds
14 and call in the regulators or attorneys before
15 returning those funds back to the State of
16 California; isn't that true?
17
MR. ORSECK: Same objection.
18
THE WITNESS: Could you repeat that
19 one more time.
20
21
22
BY MR. WHITE:
Q.
Sure.
Isn't it true that, even after
Page 223
Page 225
1 answers are obtained; is that correct?
2
A.
If -- if --
3
MR. ORSECK: Object to form.
4
THE WITNESS: Ifwe had not received
5 the request to return the wire, then I'm almost
6 sure that we would have held the funds, yes.
7
BY MR. WHITE:
8
Q.
Even after receiving the request to
9 return the funds, Chain Bridge Bank still had
10 the authority to hold the funds until those
11 questions were answered; isn't that correct?
12
MR. ORSECK: Object to form.
13
THE WITNESS: Well, that's
1 receiving the request from JPMorgan, Chain
2 Bridge Bank had the authority to hold the funds
3 and bring in attorneys or regulators or anyone
4 else to answer the questions and not return
5 those funds as requested by the State of
6 California?
7
MR. ORSECK: Object to form.
8
THE WITNESS: In the event that we
9 did not honor the request to return the funds
10 and we received the advice of counsel that it
11 was okay to put a hold on those funds, then --
12 then, yes, we could have done that.
13
BY MR. WHITE:
14 speculation. Because that's not what happened. 14
Q.
And you already had a hold on the
15 And we were -- we were -- we were asked to
16 return the wire, and we honored that request.
17
BY MR. WHITE:
18
Q.
Well, my question is not one -- it's
19 not a speculative one. It's -- it's one of
20 authority.
21
Did Chain Bridge Bank have the
22 authority to continue to hold the funds after
15 funds, correct?
16
A.
Yes. We -- we did have a hold on
1 7 the funds.
18
Q.
And you could have -- Chain Bridge
19 Bank could have continued that hold while you
20 got answers to the questions that you still
21 had, correct?
22
MR. ORSECK: Object to form. Asked
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1 and answered.
1 the State of California?
2
THE WITNESS: I -- I don't know the
2
A.
And JPMorgan.
3 answer to that question. Because we would hav( 3
Q.
And JPMorgan.
And the State of California and
4 -- we would have engaged counsel to extend tha1
4
5 hold greater than the period beyond our funds
5 JPMorgan confirmed for you that they did intenc
6 availability policy.
7
BY MR. WHITE:
8
Q.
Who made the decision to honor
9 JPMorgan's request to return the funds?
10
A.
It was jointly made by David and I.
11
Q.
And speaking for yourself, why did
12 you honor that request as opposed to holding
13 the funds and getting answers to your
14 questions?
15
A.
Well, JPMorgan, the originator,
16 had -- had requested the funds be returned.
6 to send this wire to Blue Flame Medical,
7 correct?
8
MR. ORSECK: Object to form. Asked
9 and answered many times.
10
THE WITNESS: We were able to verify
11 that the wire was originated by the State of
12 California and that they knew that they
13 originated it.
14
What was unanswered was whether or
15 not the transaction was fully vetted, let's
16 say.
17 And we had no reason not to honor that request. 17
BY MR. WHITE:
18
Q.
Did you contact Mr. Gula at any
18
Q.
What do you mean by that?
19 point on March 26th, prior to Chain Bridge Ban1 19
A.
What I mean by that is one of our
20 returning the funds to JPMorgan and the State
20 questions was does the State of California have
21 of California?
21 the information that we have about the sellers
22
A.
Yes, we did.
22 of the product.
Page 227
Page 229
1
Q.
When was that?
1
Q.
So what was unanswered for you was
2
A.
I don't know the exact time. It was
2 whether the State of California had done an
3 -- it was before we returned the wire. And
4 I -- I sent him a message saying that we have
5 in -- received instructions from the sender to
6 return the wire, and we are going to honor that
7 request.
8
And then he came into the bank. And
9 we had a conversation with him about it. And
10 he offered no objections. He apologized,
11 actually. And -- and then the wire was
12 returned.
13
Q.
Did anyone contact Mr. Gula on March
14 26th to get answers to any of the questions
15 that you've been referencing about the wire
16 transfer?
17
A.
Our questions were -- were more
18 focused on the other parties of the transaction
19 than they were on Mike Gula at that time. We
20 had gathered information from Mike Gula the day
21 before.
22
Q.
And "the other parties," you mean
3 adequate job of vetting their counterparty
4 prior to wiring the money?
5
Do I have that correct?
6
A.
That's correct.
7
Q.
Do you view it your job as Chain
8 Bridge Bank to vet procurement contracts for
9 the State of California?
10
A.
We have an obligation, under the
11 Bank Secrecy Act, to vet all transactions that
12 flow through the bank.
13
Q.
Are you aware that, at some point
14 during the day on March 26th, that bank
15 employees were informed not to have any
16 communication with Mr. Gula?
17
A.
Yes.
18
Q.
And were you involved in the
19 decision to tell people not to have contact
20 with Mr. Gula?
21
A.
Yes, I was.
22
Q.
If there was a concern about
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Page 230
1 contracts, which you mentioned earlier, why did
2 you tell people at the bank not to have any
3 contact with Mr. Gula?
4
MR. ORSECK: Object to form.
5
THE WITNESS: Mr. Gula and Mr.
6 Thomas called the bank repeatedly to ask one
7 question, and that was whether or not the wire
8 had -- had come in.
9
And so I saw no productive reason
10 for -- to take up our staff time to continue to
11 answer the phone to -- to get the same
12 question.
13
BY MR. WHITE:
Page 232
1 transaction; isn't that right?
2
MR. ORSECK: Object to form.
3
THE WITNESS: The --the Bank
4 Secrecy Act does operate on thresholds. I mean
5 there are certain thresholds that, if the
6 certain thresholds are met, then certain
7 reports have to be filed.
8
So the magnitude of the transaction
9 certainly is something that the Bank Secrecy
10 Act contemplates.
11
BY MR. WHITE:
12
Q.
And what is that threshold?
13
A.
It depends on the type of
14
Q.
I take it, given the confirmation
14 transaction. If it's a cash transaction, or if
15 you got from the State of California, as of
15 it's a suspicious activity, if it's a monetary
16 March 26th your concern was not whether there 16 instrument transaction. Depends on the type of
17 was a contract between Blue Flame Medical and 17 transaction.
18 the State of California, correct?
18
Q.
What about for this transaction?
19
A.
I -- I think that our concern was
19
A.
This would really fall under the red
20 whether or not there was a contract where both
21 parties had provided full disclosure about
22 their needs and capabilities.
Page 231
1
Q.
Is that something that you as a
2 banker typically get involved in for incoming
3 wires?
4
A.
Certainly for a wire of 456 -- 400
5 and whatever it was.
6
Q.
$456 million?
7
A.
$456 million, yes.
8
Q.
So are the Bank Secrecy Act
9 requirements different for deposits or wires
10 for $456,000 than $456 million?
11
A.
I -- no.
12
MR. ORSECK: Object to form.
13
THE WITNESS: That -- that -- that's
14 not what I mean -- meant to imply. I think
15 your question was specifically me. Was I. And
16 yes. Certainly. I mean, for a transaction
17 that large, I would expect to be included in
18 the conversations about -- about the
19 transaction itself.
20
BY MR. WHITE:
21
Q.
The Bank Secrecy Act requirements
22 are the same regardless of the size of the
20 flags or suspicious activities. And it -- it
21 does meet that threshold.
22
Q.
Were you aware that, shortly after
Page 233
1 the bank received the wire from California,
2 that Blue Flame requested that the bank send an
3 outgoing wire transfer?
4
Were you involved in that at all?
5
A.
I was not involved with that. I do
6 think I recall somebody at some point saying,
7 "They've sent us instructions to send money
8 out."
9
And -- but it didn't come from John
10 Thomas or Mike Gula. It didn't come from
11 either of the signers on the account, which is
12 also another red flag.
13
And the outgoing wire was not going
14 to the -- the location that Mike had -- had
15 sent information on the night before, which is
16 another red flag.
17
Q.
In fact, it was going to a -- a -- a
18 different supplier; is that right?
19
A.
That's correct. A supplier that we
20 hadn't heard of before. And the request came
21 from a person who we didn't have any -- who we
22 didn't know.
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Page 278
1
A.
Yes, it was. Yes, it was.
2
Q.
Did you have --
3
MR. ORSECK: I'm sorry. I'm sorry
4 to interrupt.
5
But Mr. White gave you an either-or
6 question. And so you need to say whether it
7 was in your pocket or on the table or something
8 else.
9
THE WITNESS: It was on the table.
10
BY MR.WHITE:
11
Q.
Is this Ms. Fee Chang that you're
12 speaking -- that Mr. Evinger is speaking with
13 here?
14
A.
Yes,itis.
15
Q.
Why didn't you let Ms. Chang know
16 that the call was being recorded?
17
A.
I didn't think it was necessary.
18
Q.
Shortly after this call, did you
19 receive a call from the California State
20 Treasurer's Office?
21
A.
Yes. I -- I don't remember the
22 exact sequence, but -- but Fee did contact the
Page 279
1 treasurer's department, and they did call us,
2 yes, at some point.
3
Q.
And was that a call with Mr. Hariri
4 and Ms. Gonzales, Natalie Gonzales?
5
A.
Yes. That's correct.
6
Q.
Were you on that call?
7
A.
I was on most of that call, yes.
8
Q.
Did you record that call?
9
A.
No, I did not record that call.
10
Q.
Why didn't you record that call?
11
A.
I must not have had my phone with
12 me.
13
Q.
And is this the call where you
14 shared information with the State of California
15 regarding the accounts and the identity of the
16 person who opened it?
17
A.
That's correct. Yes.
18
Q.
And I say "you."
19
I -- I'm assuming that -- did you
20 speak on the call as well, or was it just
21 Mr. Evinger?
22
A.
I recall us both speaking.
1
Q.
Did you relay the information that
2 had been relayed to you by Mr. Gula the day
3 before?
4
A.
I -- you mean in regards to where
5 the supplies were coming from or -- let me
6 answer the question directly.
7
We did not discuss everything that
8 Mike Gula brought up, no. I mean --
9
Q.
Did you --
10
A.
Well --
11
Q.
-- mention that -- oh, I'm sorry.
Page 280
12
A.
What we might have discussed -- what
13 we might have discussed was the dollar amount
14 of the transaction and the -- the number of
15 masks. But I don't know if -- if they brought
16 that up or ifwe brought that up. But -- but
17 we did discuss that, I'm sure.
18
Q.
Did you let them know that the
19 information the bank had received from Mr. Gula
20 so far had been corroborated?
21
A.
Well, we had not yet received the
22 contract or information from Mr. Gula. So
Page 281
1 there was nothing to corroborate the actual
2 transaction.
3
Q.
Well, there was $456 million to
4 corroborate the transaction by that point,
5 wasn't there?
6
A.
That's true. There was that.
7
Q.
And there was their statement about
8 what it was for, correct?
9
MR. ORSECK: Object to form.
10
I think we've covered this.
11
THE WITNESS: That was one of the
12 many questions that we had. And there was --
13 it was -- I don't even know ifwe had
14 discussion. I mean it really wasn't an issue
15 because the dollar amount of wire was so large
16 to begin with.
17
But I don't think we talked about
18 down payments or -- maybe we did, 75 percent
19 down, 25 percent to follow. I don't know.
20
BY MR. WHITE:
21
Q.
Did you express concern to
22 Mr. Hariri and Ms. Gonzales about Mr. Gula or
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1 Mr. Thomas?
2
A.
No. No. We didn't express concern.
3 We did express that they had -- to our
4 knowledge, they had no experience in medical
5 supplies and that this was -- that their
6 profession was in the political world.
7
Q.
And why did you let the California
8 representatives know about that?
9
A.
Well, I -- I thought it was relevant
10 information that we find out if they -- if they
11 knew -- whether or not they knew the
12 information that we had about the seller of the
13 masks.
14
Q.
Did you express any concerns, in
15 words or substance, about fraud in connection
16 with this transaction to Mr. Hariri or
17 Ms. Gonzales?
18
A.
No, we did not.
19
Q.
I take it you were no longer
20 concerned that the transaction was a scam at
21 this point; is that right?
22
A.
Well, there are many different types
Page 283
1 of scams. We were comfortable that it wasn't a
2 scam related to somebody who was trying to
3 infiltrate their -- their network or the -- the
4 -- the coffers of the State of California. The
5 -- that -- that obviously didn't happen.
6
I mean the transaction was -- was
7 actually processed knowingly by the State of
8 California.
9
Q.
How did Mr. Hariri and Ms. Gonzales
10 react to the information that you shared with
11 them?
12
A.
They were very surprised.
13
Q.
What did they tell you?
14
A.
They -- they told us that -- that
15 they didn't really know anything about Blue
16 Flame and that this was all a surprise, that --
17 that they didn't have experience in the medical
18 supply business, and that they were political
Page 284
1 it was a Fortune 500 company?
2
A.
I'm not sure what impression they
3 were under.
4
Q.
Do you know whether Mr. Hariri or --
5 or Ms. Gonzales were involved in the diligence
6 of the transaction for the State of California
7 with Blue Flame?
8
A.
I do not know.
9
Q.
Do you know whether they were the
10 counterparties that -- were among the
11 counterparties that Mr. Gula or Mr. Thomas were
12 dealing with in the State of California?
13
A.
I did not know who -- other than
14 Michael Wong, I did not know who Mike Gula and
15 John Thomas who had -- had communicated with in
16 the -- in the State of -- of California.
17
We did start off our search with
18 Michael Wong.
19
Q.
Did Mr. Hariri or Ms. Gonzales
20 indicate that they had dealt directly with
21 representatives of Blue Flame during the
22 contracting process?
Page 285
1
A.
They did not make that statement.
2
Q.
Did you indicate or Mr. Evinger
3 indicate during this call that Chain Bridge
4 Bank would be happy to return the wire?
5
A.
I think that we did say that --
6 that -- we were discussing options, and one of
7 the options -- we would cooperate if -- if it
8 came to them cancelling the wire transfer.
9
Q.
Why did you say that?
10
A.
Well, we wanted to make sure that
11 they understood that we were going to be
12 cooperative and not resist that -- that option.
13
Q.
Given that Blue Flame Medical was
14 your customer, why would you want to be
15 cooperative with a request to return a wire
16 that was meant to be sent to them?
17
A.
We still had many unanswered
18 questions. And had we been able to get
19 operatives and not -- not a Fortune 500 company 19 satisfactory answers to all those questions,
20 that usually is involved in transactions of
20 then we would not have returned the wire.
21 this size.
21
Q.
What were the remaining questions
22
Q.
Were they under the impression that
22 that you needed satisfactory answers to in
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Page 286
1 order to not return the wire?
2
A.
All part of the due diligence
3 process: copies of the contracts, copies of
4 purchase orders from suppliers, the more
5 details on how they were going to execute
6 the -- the -- and who they were going to send
7 the money to. More questions to answers about
8 the -- the -- the founders of Blue Flame; their
9 expertise in the areas; did the State of
10 California -- the people who made the decision
11 to purchase the masks and the State of
12 California, were they aware of -- of the
13 details of Blue Flame.
14
Those are just some of the questions
15 that we had.
16
Q.
Why didn't you conflact [sic] --
17 contact Blue Flame to get this information on
18 March 26th before returning the wire?
19
A.
Well, by that time I think it was
20 pretty obvious that -- that many of these
21 questions could not be answered, especially in
22 short order. And obviously California and
Page 287
1 JPMorgan had questions.
2
So when we received the request or
3 the instructions to return the wire, we honored
4 those instructions.
5
Q.
Well, I think you said you weren't
6 concerned at that point about whether there was
7 an agreement and what the terms to the
8 agreement were between Blue Flame Medical and
9 the State of California, correct?
10
MR. ORSECK: Objection. Misstates
11 testimony.
12
THE WITNESS: No. I don't think
13 that's what I said. Because we never saw the
14 contract, and we never received comfort that
15 the people who made the decision to execute the
16 contract understood all the details that --
17 of -- of Blue Flame.
18
BY MR. WHITE:
19
Q.
After the conversation with
20 Mr. Hariri and Ms. Gonzales, you have a
21 subsequent conversation with Mr. Koipal; is
22 that correct?
Page 288
1
I'm sorry. Just make sure I've got
2 this right.
3
Yes. With Mr. Koipal.
4
A.
Okay.
5
Q.
Do you remember that?
6
MR. ORSECK: Object to form.
7
THE WITNESS: I think -- I think I
8 recall that conversation, yes.
9
MR. WHITE: We'll play a recording
10 of the call. It is -- this a new exhibit?
11
MR. KETCHAM-COLWILL: Yeah.
12
MR. WHITE: So this will be
13 Plaintiffs Exhibit 76.
14
Do I have that correct?
15
MR. KETCHAM-COL WILL: This will be
16 79.
17
MR. WHITE: 79. I wasn't close.
18
Audio recording of a March 26th
19 phone call, I believe 1:34 pm.
20
(Deposition Exhibit 79 was marked
21 for identification.)
22
(Whereupon, the tape was played.)
Page 289
1
BY MR. WHITE:
2
Q.
Whose voice is on that call,
3 Mr. Brough?
4
A.
That's David's, I think I said a
5 couple of words, and -- and the representative
6 from JPMorgan.
7
Q.
And did you record that call?
8
A.
I did.
9
Q.
Again, on your cell phone?
10
A.
That's correct.
11
Q.
It appears to pick up in the middle
12 of the call.
13
Do you know why?
14
A.
Same reason the other one did.
15 Because I wasn't in the room at the beginning
16 of the call. The call came in to David's desk.
17 He notified --
18
Q.
And I take it --
19
A.
And he --
20
Q.
I'm sorry.
21
A.
He notified me that the call had
22 come in. So then I entered his office.
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Page 298
1 receiving bank, if I'm using the right term,
2 indemnified for any damages to its customer as
3 a result of that recall of the wire, to your
4 knowledge?
5
A.
As long as the recall notice --
6 it's -- it's my understanding that, as long as
7 the recall notice does not stipulate without
8 indemnification, that indemnification is
9 granted.
10
Q.
And did this recall notice stipulate
11 without indemnification?
12
A.
It did not.
13
Q.
So in your understanding, JPMorgan
14 would be required to indemnify Chain Bridge
Page 300
1
THE WITNESS: It's my understanding
2 that it would be covered by Regulation J or the
3 UCC or -- or -- or -- or something. Yes.
4 That's correct. I didn't know the exact verse
5 at the time.
6
BY MR. WHITE:
7
Q.
But the indemnification obligation
8 from the recalling bank to the receiving bank
9 flows from one of those sources, to your
10 knowledge; is that right?
11
MR. ORSECK: Object to form.
12
THE WITNESS: That -- that is my
13 understanding.
14
BY MR. WHITE:
15 Bank for any damages flowing from its custome 15
Q.
And you believed it was possible to
16 in connection with this recall due to the fact
1 7 that they initiated the recall?
16 reverse California's wire transfer at this
17 point?
18
MR. ORSECK: Object to form.
18
MR. ORSECK: Objection to form.
19
BY MR. WHITE:
19
THE WITNESS: Could you repeat the
20
Q.
Is that correct?
21
A.
I think that we're getting into
22 legal issues here.
1
I was comfortable that we were
2 protected by receiving the -- the recall
3 notice.
Page 299
20 question again.
21
MR. WHITE: Yes. Let me ask a
22 different question.
Page 301
1
BY MR. WHITE:
2
Q.
At the time did you have a belief
3 that returning -- or agreeing to return the
4
Q.
Protected from what?
4 funds to JPMorgan in the State of California
5
A.
Just protected from -- we're --
5 was consistent with Regulation J?
6 we're covering our bases. We're getting proper
6
Did you have a belief one way or the
7 documentation for the return of the wire.
7 other?
8
Q.
And what does that protect you from
8
MR. ORSECK: Object to form.
9 if you have proper documentation?
9
THE WITNESS: Sorry, Gary.
10
A.
If any future issues should arrive.
10
I believed that we were complying
11
Q.
Including a lawsuit from your
11 with -- with banking regulations.
12 customer, Chain Bridge -- or Blue Flame
12
BY MR. WHITE:
13 Medical?
13
Q.
And did you have a specific belief
14
A.
I guess that could be one of the
14 as to compliance with Regulation J at the time?
15 things, yes. That -- to be honest with you,
15
A.
I felt that honoring their recall
16 that wasn't what was on our mind at the time.
16 request would -- would help us comply with the
17 We simply just wanted to make sure that we had 17 Bank Secrecy Act; it would help us comply with
18 proper documentation.
19
Q.
And this indemnification, to your
20 understanding, does that also flow from
21 Regulation J?
22
MR. ORSECK: Object to form.
18 any other type of funds transfer regulations
19 that may exist.
20
Q.
Including complying with
21 Regulation J?
22
MR. ORSECK: Object to form.
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Page 302
1
THE WITNESS: Including complying
2 with Regulation J.
3
BY MR. WHITE:
4
Q.
Does Chain Bridge Bank have policies
5 and procedures regarding when incoming wires
6 can be returned?
7
A.
We do not have specific policies in
8 that regard. No. Each -- each recall request
9 is -- is examined based on -- on the -- the --
10 the content of the request.
11
Q.
How often, in your experience -- I'm
12 sorry. I thought --
13
A.
In other words --
14
Q.
-- you had finished.
15
A.
In other words, if the recall
16 request comes a month after the wire was sent
17 and the money is gone, then we can't honor the
18 request.
19
But if the recall request comes the
20 same day and the funds are still there in our
21 Fed account, they haven't been credited to the
22 -- to the -- to -- deposited into the client's
Page 303
1 account yet, and if the merits of the -- of the
2 recall requests seem to be legitimate, then we
3 would return the wire.
4
Q.
A recall request a month after funds
5 have been credited, that -- that would be
6 extremely unusual, wouldn't it?
7
A.
It depends on the situation.
8
Q.
Have you seen recall requests a
9 month after -- a month or more after money has
10 been deposited into a customer account?
11
A.
I -- I don't -- I can't list for you
12 the time frame of all the recall requests that
13 we receive. I do know that they're not all the
Page 304
1 agreeing to return the funds to JPMorgan?
2
A.
Given the fact that -- the magnitude
3 of the wire, the $456 million amount, the
4 unanswered questions that -- that we had about
5 the transaction, the State of California's
6 concerns, as well as JPMorgan's concerns, we
7 were comfortable returning the wire.
8
Q.
Did you have any concerns with
9 whether returning the wire was the appropriate
10 course of action at that point?
11
A.
I thought that returning the wire at
12 that point was the appropriate and responsible
13 thing to do.
14
Q.
Did you discuss any concerns about
15 returning the wire with anyone else at the
16 bank, other than Mr. Evinger we have already
1 7 discussed?
18
A.
I think that -- I -- I don't recall.
19 Betsy may have been involved in some of the
20 conversations. I -- I don't know.
21
But certainly David and I were
22 speaking to each other about it.
Page 305
1
Q.
Did you have any concern that Chain
2 Bridge Bank might be liable to Blue Flame
3 Medical if it agreed to return these funds?
4
MR. ORSECK: In answering that
5 question, John, if you recall what you were
6 thinking. You're not to disclose anything that
7 may have been communicated to you by Chain --
8 Chain Bridge Bank's in-house or outside
9 counsel.
10
THE WITNESS: So your question is
11 did we have concerns that Blue Flame would take
12 action against the bank for returning the wire.
13
BYMR. WHITE:
14 same day. Some are subsequent to the day of
14
Q.
That's a fair paraphrase, yes.
15 the -- of the transfer.
15
A.
Given -- given Mike Gula's reaction
16
Q.
How often, in your experience, does
16 when we told him that we were going to honor
17 Chain Bridge Bank get recall requests for wires 17 the request to return the wire and the fact
18 incoming into your client accounts?
18 that it hadn't yet been returned when we talked
19
A.
I don't have the detailed
19 to him, he offered no resistance.
20 information on that. What I can tell you that
20
He simply apologized. He apologized
21 it -- is that it's not unusual.
22
Q.
Did you have any concerns about
21 for -- for the transaction. And he said, "I'm
22 sorry."
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Page 306
1
And -- and so there was -- there was
1
Page 308
A.
We had had that conversation with --
2 no indication that -- that there was any issue
3 with this.
4
Q.
Did you tell him that he had an
5 option as to the return of the funds?
6
A
We told him that we were going to
7 honor the request. And he provided no
8 resistance whatsoever to that -- to that
9 statement.
10
He didn't say, "Would you please
11 reconsider? No. Don't do that."
12
He offered no objections. He -- he
13 apologized.
14
Q. If he had objected, would you have
15 done anything differently?
16
A
Well, he didn't object. So I can't
17 tell you what we would have done.
18
Q.
So you're saying that he didn't
19 offer resistance, as if that mattered.
20
Did it matter?
21
If he offered resistance, would it
22 have made a difference?
Page 307
1
MR. ORSECK: Object to form.
2 Mischaracterizes the testimony.
3
THE WITNESS: Well, you originally
2 I guess it was Tim Coffey that you're referring
3 to when they told us they were going to recall
4 the wire. And we told them -- we told them
5 that we wanted official notice.
6
Had we not received official notice,
7 then we would have -- would have made sure that
8 we either did or -- I'm not sure what we would
9 have done.
10
Q.
You had already received official
11 notice by the time you met with Mr. Gula; isn't
12 that correct?
13
A.
I don't know the timing. I know
14 that we received the verbal instructions. I'm
15 not sure ifwe had received the instructions
16 over FedLine or not.
17
Q.
Without telling me the content of
18 conversations, did you have any conversations
19 with inside or outside attorneys on March 25th
20 or March 26th regarding the handling of this
21 transaction?
22
It's a yes-or-no question.
1
2
3
A.
Yes.
Q.
And with what attorneys?
A.
Betsy Sharon.
Page 309
4 asked me if, when we returned the wire, were w~
4
Q.
Any other attorney?
5 concerned about Blue Flame taking action
6 against us.
7
And based on Mike Gula's reaction
8 when we instructed him that we were going to
9 honor the request, I didn't have any concerns.
10
BY MR.WHITE:
11
Q.
Ifhe had -- ifhe had given
12 resistance to that or asked you to reconsider,
13 would you have changed your course of action?
14
MR. ORSECK: Object to form. Asked
15 and answered.
16
THE WITNESS: I don't know what we
5
A.
No other attorney.
6
Q.
And when were your conversations
7 with Ms. Sharon?
8
A.
I -- I do not know when they were.
9
Q.
Do you recall when in the process?
10
A.
I do not recall when in the process,
11 no.
12
Q.
Do you recall whether you spoke with
13 Ms. Sharon on the 25th?
14
A.
I don't recall if we talked to Betsy
15 on the 25th. I don't recall that.
16
Q.
Do you know whether you talked with
17 would have done. Because he offered no
17 her on the 26th before the decision was made to
18 resistance whatsoever.
18 return -- to honor the request to return the
19
BY MR. WHITE:
19 funds?
20
Q.
At that point hadn't you already
20
A.
I don't know if we did or not. I
21 told JPMorgan that you were going to honor the 21 know that we did talk to Betsy about the
22 recall?
22 transaction.
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1
Q.
What -- if I'm reading what you're
2 saying correctly, you know that you spoke with
3 Ms. -- with Betsy about the transactions; you
4 just don't know whether it was before or
5 afternoon the decision was made to return --
6 honor the return to the funds to California?
7
Do I have that correct?
8
A.
That's correct.
9
Q.
Were any of the communications with
10 Ms. Sharon by e-mail, or were they in person or
11 by phone?
12
A.
I think they were probably by phone.
13 She wasn't here. So it would not have been in
14 -- by in person.
15
Q.
Have you ever seen an -- or
16 requested an indemnity lever -- letter covering
1 7 an agreement to return funds sent pursuant to a
18 Fedwire transfer?
19
A.
Yes.
20
Q.
Did Chain Bridge Bank seek an
Page 312
1
Has Chain Bridge Bank ever received
2 one of those from a counterparty bank in that
3 situation?
4
A.
I don't know the answer to that. I
5 do know that the indemnity letters are usually
6 used for the situation that I'm -- that I just
7 referred to.
8
Q.
And that's to hold the bank harmless
9 if there is any action by the counterparty for
10 the improper return of those funds; is that
11 correct?
12
A.
That is correct.
13
MR. WHITE: Can you pull up
14 Plaintiffs Exhibit 48, please.
15
This is -- CBB2529 is the first
16 page.
17
THE WITNESS: Is this an audio, or
18 is this a --
19
MR. WHITE: This is a -- a physical
20 document.
21 indemnity letter from JPMorgan at the time it
21
THE WITNESS: Okay.
22 agreed to return the funds?
22
MR. WHITE: My understanding is that
Page 311
Page 313
1
A.
We did not.
2
Q.
Whynot?
3
A.
Indemnity letters are typically used
4 when a -- I'll give you an example.
5
Yesterday we had a client who
6 requested that we recall a wire that they had
7 sent -- I'm not sure exactly what the timing
8 was -- but a wire that they had previously
9 sent. I don't know if it was the same day or
10 the next day or what.
11
So we sent a wire for a client. The
12 client came to us and asked us to reverse the
13 wire. We did so. We sent a service message
14 request asking them to return the wire. They
15 returned the wire. And we received an
16 indemnity letter from our client.
1 7
So it was an agreement between --
18 between our client and -- who had requested
19 that -- that we recall the funds.
20
Q.
Specifically what I'm speaking of
1 it is a history print from the Chain Bridge
2 Bank general ledger. But I'm going to ask you
3 what it is.
4
THE WITNESS: Okay. And what is the
5 exhibit number?
6
MR. KETCHAM-COLWILL: 48.
7
8
MR. WHITE: 48.
THE WITNESS: Okay.
9
MR. ORSECK: Take a minute and --
10
THE WITNESS: I have it --
11
MR. ORSECK: Take a minute and
12 review it.
13
THE WITNESS: Okay.
14
BY MR. WHITE:
15
Q.
Do you recognize this document?
16
A.
Yes, I do.
17
Q.
What is it?
18
A.
It's a listing of general ledger
19 activity for the bank.
20
Q.
And is it specific to a -- a
21 here is an indemnity letter from a counterparty
21 particular time?
22 bank who was asked to have the funds recalled. 22
A.
March 26th.
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Page 342
Page 344
1
MR. ORSECK: Object to form.
1 mind opening it -- opening that up, I'll ask
2
THE WITNESS: We returned the money
3 to the State of California because we received
4 a -- a request for us to return the money back,
5 a recall notice, whatever you want to call it.
6 And we honored that request.
7
BY MR. WHITE:
8
Q.
Did JPMorgan and the State of
9 California tell you that they were concerned
10 that Blue Flame Medical was involved in
11 fraudulent activity?
12
A.
They did not make that statement to
13 us, no. They did say at one point that they
14 were a bit unsure. And JPMorgan at one point
15 said that their investigation was leading to
16 not good places. So -- so that's -- that's
17 all.
18
Q.
And when you said they were not
19 sure, that's referring to the State of
20 California?
21
A.
That's correct.
22
MR. WHITE: Okay. That's all the
Page 343
1 questions I have, Mr. Brough.
2
MR. ORSECK: Counsel, I have a few
3 follow-up questions. And I can do those right
4 now.
5
Alan, are -- do you have no
6 questions? I -- I --
7
MR. SCHOENFELD: Yeah. Please --
8 please go ahead.
9
MR. ORSECK: Okay.
10
EXAMINATION BY COUNSEL FOR DEFENDANT AND
11
12
THIRD-PARTY PLAINTIFF
BY MR. ORSECK:
13
Q.
John, I just want to follow up on a
14 few points that counsel raised.
15
You were asked some questions about
16 some handwritten notes you took on a little
17 notebook.
18
Do you remember that exchange with
19 Mr. White?
20
A.
Yes, I do.
21
Q.
I think those notes are at Exhibit
22 73 that were introduced. So if you wouldn't
2 you some questions.
3
A.
Okay. I have it opened.
4
Q.
And am I right that the first page
5 reflects handwritten notes that you took on
6 March 25th?
7
A.
That's correct.
8
Q.
And I recall you saying that these
9 are notes that reflect the phone conversation
10 at or around 5:45 p.m. that you and Mr. Evinger
11 had with Mr. Gula; is that accurate?
12
A.
That is correct.
13
Q.
You took these when you were at home
14 that afternoon?
15
A.
Yes, I did.
16
Q.
My questions are going to be focused
17 on the lower portion of the page. There's a
18 dash and then a reference to Brent Case.
19
Can you read the text that follows
20 that?
21
A.
Case - known Mike for 30 years.
22 Best man in his wedding. And he was in
Page 345
1 employment practice law in Denver.
2
Q.
Was Mr. Case on the phone call with
3 you and David Evinger and Mike Gula?
4
A.
Yes, he was. When we called Mike, I
5 think he was already on the phone with -- with
6 Brent Case. That's my understanding, at least.
7
Q.
And did Mr. Case or Mr. Gula tell
8 you why Brent Case was on the call?
9
A.
I -- yes. From what I recall --
10 like I see -- you know, Mike had known him for
11 a long time, trusted him, and he was an
12 attorney.
13
So I guess Mike was -- I'm -- I'm
14 not sure why Mike was talking to him. I mean,
15 it did kind of ask -- beg some questions. You
16 know, why is Mike talking about this
1 7 transaction with an employment practices
18 attorney? You know, why isn't he talking to
19 this -- about this with a contracting attorney
20 or a -- a medical supply attorney.
21
But, you know, whatever. I mean he
22 had an attorney present.
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Page 346
1
Q.
As far as you could tell, was Mr.
2 Case present for the entire call?
3
A.
I -- I think he was. Yes. I think
4 he was.
5
Q.
There's another dash just below
6 the -- the Brent Case entry.
7
Would you read that for us?
8
A.
This would be something that Mike
9 said he's shutting down his D.C. office. He's
10 "sick of it. This is my payday." So --
11
Q.
Did -- well, let me ask you some
12 questions.
13
Did -- what, if anything, do you
14 recall Mr. Gula saying regarding "shutting down
15 D. C. office, sick of it"?
16
A.
Mike talked for a while about how
Page 348
1
Q.
You said that the next entry he
2 wrote was "this is my payday," correct?
3
A.
That's correct.
4
Q.
Were those Mr. Gula's words?
5
A.
From what I recall, they were.
6 Yeah.
7
Q.
What do you remember regarding the
8 context of that statement on the call?
9
A.
The context was, "I've had it. I'm
10 burned out. This opportunity came up. This is
11 my payday. I'm going to take it."
12
Q.
Anything else?
13
A.
He did talk about how he was happy
14 to be doing this, that he was happy to be
15 supplying PPE to -- to organizations, cities,
16 states that need it. I mean he felt like it
17 unhappy he was doing the line of work he was
17 was a good thing to do.
18 doing and that, you know, this opportunity came 18
Q.
Just below the -- the entry that
19 up for him to do something different, and he
20 grabbed it. And he was just going to shut it
21 down in D.C. and -- and get out of town.
22
Q.
Did he say he was going to get out
Page 347
19 says "Nonresponsive," you have another entry.
20 And if I'm reading it correctly, it says: "I
21 will not be reachable after this. You have my
22 contact into."
1 oftown?
1
Page 349
Have I read that correctly?
2
A.
He pretty much said that, yeah. I
2
A.
That's correct.
3 mean, you know, he was leaving. He was -- he
3
Q.
What do you recall Mr. Gula saying
4 was leaving. As a matter of fact, a couple
5 days later -- I don't know what magazine
6 article it was, but there was an article in
7 either the Politico or The Hill or something
8 on -- on his departure from -- from -- from his
9 firm. And --
10
Q.
Did you tell -- I'm sorry.
11
A.
And -- and the fact that he had an
12 out-of-office e-mail set up that basically, you
13 know, said, "I'm shutting. And you can't --
14 you're not going to be able to get in touch
15 with me."
16
Q.
Did he tell you that he was sick of
17 his work as a political operative?
18
A.
Yes, he did. He said he was very
19 unhappy in his -- in his current profession.
20 He was just -- he was burned out.
21
Q.
Did he tell you that?
22
A.
That was the implication, yes.
4 about not being reachable?
5
A.
Well, he didn't have a problem with
6 us calling him. In other words, that's why he
7 gave us his new e-mail address, which is up
8 there above, Mike@BlueFlame.agency, and then
9 his tele -- new -- new cell phone number.
10
But he said, you know -- he said
11 that, "Only a handful of people have this
12 information, but I will give it to you."
13
But all of his other ways of
14 reaching him he was just going to shut down.
15
Q.
Did he tell you why he would not be
16 reachable?
17
A.
I think because he wanted to -- he
18 wanted to focus on his new endeavor.
19
But it does kind of create more
20 questions. You know, why not sell your
21 business? I know it was a pretty successful
22 business. Why not sell it? Why not slowly
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Page 350
1 roll it up -- roll it down? You know, why do
2 you feel like you have to immediately just
3 disappear?
4
Q.
Okay. Thank you.
5
You -- you mentioned, during your
6 testimony today on a few occasions, that you
7 believed there were red flags presented
8 regarding this transaction; is that accurate?
9
A.
Yes. "Red flags" has come up a lot.
10
Q.
All right. I want to focus your
Page 352
1 amount of the transactions didn't match up with
2 press releases from the State of California.
3
So I think it was before we called
4 Mike -- or that evening. I'm not sure when it
5 was -- we looked up any press releases from the
6 State of California. We did find one that had
7 been issued a couple days before that mentioned
8 that $30 million had been allocated for the
9 purchase of a million masks and the hiring of
10 nurses and the purchase of ventilators. And
11 attention on the time period at which JPMorgan 11 that was a press release issued by
12 told you, Mr. Coffey told you, that it was
12 Governor Newsom.
13 recalling the wire.
13
But there was nothing about this
14
You remember we listened to that
14 transaction, which would have been 20 times
15 phone call?
15 larger.
16
A.
Yes.
16
Q.
Mr.--sorry.
17
Q.
As of that point in time, what red
17
Mr. Brough, by the -- by the time
18 flags were on your mind regarding this
19 transaction?
20
A.
There were many. Every -- every --
21 every few minutes another one would pop up.
22 But I mean just going back to the -- the sheer
Page 351
1 size of the wire.
2
Q.
Why was the size of the wire itself
3 a red flag?
4
A.
A wire of $456 million is multiple
5 times larger than any other wire that the bank
6 had received, I -- I think by a multiple of
7 about 22 times. So in other words, the
8 previous largest wires that we got were around
9 $20 million. And so that's -- that's -- that's
10 the biggest red flag right there.
11
And the fact that it was -- it was
18 that JPMorgan recalled the wire, you knew the
19 transaction was larger than that, right, than
20 one you'd read about?
21
A.
Oh, yes. Definitely. Oh, yeah.
22 We -- we knew about that on the -- the 25th.
Page 353
1
Q.
So far as you're aware, did
2 Mr. Gula, at the time he opened the account on
3 the 25th, let anybody at the bank know that he
4 was expecting a wire of more than $450 million~
5
A.
No, he did not.
6
Q.
Was that a red flag, in your mind?
7
A.
Yes. That's --
8
Q.
Why?
9
A.
Well, he knew at the time that he
10 was going to be receiving a wire of $456
11 million. And when asked about -- when -- in
12 sent into -- or I'm sorry -- it was sent to a
12 order to open the account, we asked that
13 company that had just opened their bank accoun 13 question, you know: What are your anticipated
14 the previous day and had -- had opened their
15 business three days before. That's a -- that's
16 a very standard red flag.
1 7
There was the red flag that Mike
18 Gula and John Thomas were not in the medical
19 supply business. They were in the political
20 influence business. And that's quite a
21 different profession than medical supplies.
22
The number of masks and the dollar
14 wire volumes?
15
And he gave us an answer. And it
16 was nowhere near $450 million. As a matter of
1 7 fact, I think the average wire size was going
18 to be about 5 million.
19
Q.
Were you aware of this as of the
20 time that JPMorgan recalled the wire?
21
In other words, did you know what
22 Mr. Gula had said to Mariano Castagnello at the
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