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EXHIBIT 35
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UNITED STATES DISTRICT COURT
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FOR THE EASTERN DISTRICT OF VIRGINIA
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(ALEXANDRIA DIVISION)
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_____________________________
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BLUE FLAME MEDICAL LLC )Civil Action No.
Plaintiff )1:20-cv-00658(LMB/IDD)
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)
vs. )
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)
CHAIN BRIDGE BANK, N.A., )
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JOHN J. BROUGH and )
DAVID M. EVINGER )
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Defendants )
_____________________________
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CHAIN BRIDGE BANK, N.A. )
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Third-Party Plaintiffs )
)
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vs. )
)
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JPMORGAN CHASE BANK, N.A. )
Third-Party Defendant )
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______________________________
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- CONFIDENTIAL PURSUANT TO PROTECTIVE ORDER -
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Remote Videotaped Deposition of John Brough
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February 2, 2021
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9:35 a.m.
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Reported by: Bonnie L. Russo
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Job No. 4398587
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to the transaction. Because money was never
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deposited into the account.
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BY MR. WHITE:
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Q. You were listening on Friday when
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Mr. Evinger repeatedly said that money had been
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deposited into their account; isn't that
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correct?
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MR. ORSECK: Wow. Objection.
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Mischaracterizes the testimony.
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BY MR. WHITE:
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Q. Go ahead.
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A. Money was -- the money was not
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deposited into the client's account.
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Q. Where'd it go?
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A. It came into the bank's Federal
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Reserve Bank account, and then it left the
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bank's Federal Reserve Bank account. It never
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was deposited into the client's account.
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Q. So Mr. Evinger was incorrect when he
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said that it had been credited to the account
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when he spoke last week?
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MR. ORSECK: Object to form.
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It was Mr. White who said that the
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money was deposited into the customer account
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during that deposition.
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Object to foundation.
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MR. WHITE: Objection to the
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mischaracterization and the speech.
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BY MR. WHITE:
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Q. You may answer.
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A. I -- I have to tell you, Mr. White,
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I don't recall David saying that the money was
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deposited into the account.
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Q. I believe the word was- - used was
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"credited."
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Are you saying the money was never
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credited to the Blue Flame Medical account?
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A. I'm saying the money was never
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credited, deposited. I mean it was not
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deposited into the client's account.
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MR. WHITE: Do you want to take a
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break now, or do you want to keep going?
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THE WITNESS: We can take a break
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now. That's fine.
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Q. The source of the money ultimately
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was indeed an account for the State of
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California, correct?
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A. That is correct.
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Q. And that's where Mr. Gula had
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represented the money was going to come from,
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correct?
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A. That is correct.
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Q. As a matter of fact, everything in
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the header data of the wire was completely
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consistent with what Mr. Gula had told the
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bank; isn't that right?
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MR. ORSECK: Object to form.
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THE WITNESS: As far as we could
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tell, yes.
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MR. WHITE: I'd like the play a
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later portion starting at 10:30, please.
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(Whereupon, the tape was played.)
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BY MR. WHITE:
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Q. Mr. Brough, who is it who says, "I
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don't like the smell of this"?
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Is that you?
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patched Mr. Gula in?
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A. I don't recall that.
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Q. What do you recall the sequence
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being from this call with Ms. Schoeppe to the
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call with Mr. Gula?
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A. We concluded our call with Heather.
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And then -- and then we -- we -- we decided to
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call Mike Gula to discuss the transaction.
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Just David and I. Not Heather.
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Q. Just the two of you?
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A. Yes. Just David and I.
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Q. Was there any recording of that
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phone call?
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A. No. There wasn't.
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Q. Why not?
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A. It wasn't placed on a recorded line
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at the bank. And it wasn't recorded in any
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other manner.
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Q. There were a number of other phone
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calls that were recorded in connection with the
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transact -- this transaction by some method
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other than the bank's recorded lines; isn't
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that correct?
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A. After the wire arrived, that's
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correct.
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Q. And how were those recorded, the
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ones that weren't on the bank's recorded lines?
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A. They were recorded on my -- on my
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phone with a -- with a --
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Q. On your --
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A. -- recording option on the phone --
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on the -- not the phone itself but on a -- like
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a tape-recording option.
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Q. On your cell phone?
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A. Yes.
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Q. And was it recorded on the phone you
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were actually using to have the conversation?
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A. No. Because those conversations
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were on David's land line.
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Q. And you used a recording function on
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your cell phone to record at least parts of
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those calls; is that correct?
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A. That's correct.
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Q. Why didn't you record this one with
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Mr. Gula?
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A. Because I was using my cell phone on
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the call itself.
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Q. If you hadn't been using your cell
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phone, would you have recorded this call, if
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you can say?
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A. I --
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MR. ORSECK: Object to form.
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THE WITNESS: I can't say. I --
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probably not. I mean I -- it's not something
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that I usually do.
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BY MR. WHITE:
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Q. How often have you recorded phone
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conversations on your cell phone while you've
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been at Chain Bridge Bank?
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A. This is the only time I can recall.
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Q. So there was never another time when
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you recorded a phone call other than on a
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recorded line in connection with your
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responsibilities at Chain Bridge Bank; is that
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right?
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A. That's correct.
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Q. And I take it Mr. Brough's -- or I'm
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sorry -- Mr. Evinger's line that he was using
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is not one of these recorded lines?
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A. No. It was not one of the recorded
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lines. The -- the individuals who had their
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lines recorded were -- were -- were the
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individuals who were responsible for verifying
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wire transfers.
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And -- and it's -- it was a function
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of COVID. When everybody's working at their
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office, there's an option on some individuals'
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phones to press a button to start recording a
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call.
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But -- but working from home that's
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not possible. So -- so it was set up so that
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the people who verify wires just had their
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calls recorded.
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Q. When you spoke with Mr. Gula on the
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25th, the afternoon of the 25th, did he tell
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you that -- that Blue Flame was in the process
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of selling a large volume of N95 masks to the
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State of California?
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A. He told us that -- that Blue Flame
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was -- was -- was -- was entering into a
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contract to sell a hundred million masks to the
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State of California. I -- I think -- I think
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he did mention they were N95 masks, yeah.
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Q. One of the terms that none of us had
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familiarity with a year ago then. We know now.
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I take it you had heard of N95
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makes, like everyone else, by that point,
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right?
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A. Yes, I had. That's correct.
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Q. And Mr. Gula also told you that he
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was expecting a wire transfer to Blue Flame for
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a portion of the purchase price of those masks
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on that call; isn't that right?
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A. Yes. That's correct.
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Q. Do you recall him saying that it was
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75 percent of the purchase price, or did that
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detail not come up?
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A. That detail may have come up. I
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know that what he said was that this was the
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down payment for -- for the purchase of masks.
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And he -- he did give a percentage. It -- it
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-- it -- I think he probably did say it was 75
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percent.
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Q. And did he tell you that the -- the
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masks would largely or exclusively perhaps be
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manufactured in China?
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Did he mention that?
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A. Yes. He indicated that -- that the
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masks would be sourced from China.
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Q. And that they had a supply contract
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or supply agreement with the company called
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Great Health Companion in China?
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Did that come up in that call?
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A. Yes. Now, whether or not it was --
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he -- he said the word "Great Health
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Companion," I -- I -- I don't know. But he was
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talking about the relationships that he or John
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Thomas had with a supplier in China. And --
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yeah. Yeah.
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Q. Did he mention that over time parts
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of that amount were going to be wired out to
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manufacturers or suppliers of N95 masks from
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the Chain Bridge Bank account?
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A. Yes. He said that.
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Q. Do you recall him mentioning the
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Hakim Unique Internet Company as well, an
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affiliate of Great Health Companion?
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A. Mr. White, I don't recall that name,
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no. But it's possible that he did. I don't --
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I don't -- I don't know.
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Q. Do you recall that he told you as
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well that they had entered into other contracts
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or than with Great Health Companion?
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A. Yes, yes. He did say that they had
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entered into a number of other contracts, some
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with foreign countries, some domestically.
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Q. And those are contracts to purchase
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N95 masks that would ultimately be sold to
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California, correct?
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A. Oh, no. I apologize. I
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misunderstood your question.
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Mike said that they had a number of
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other contracts to sell masks to other
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entities, both foreign and domestic,
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municipalities and such.
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MR. WHITE: What is our --
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BY MR. WHITE:
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Q. I believe you took handwritten notes
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during this call that were produced to us.
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Do I have that right?
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A. Yes.
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MR. WHITE: I'd like the bring those
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up for you.
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What is the next sequential exhibit
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number, Greg?
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MR. KETCHAM-COLWILL: 73.
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MR. WHITE: So this will be marked
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Plaintiff's Exhibit 73. The Bates Nos. CBB4445
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are the last four digits.
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And the top line, I believe, if I'm
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reading it correctly, says: "Blue Flame formed
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with John Thomas" and the date.
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(Deposition Exhibit 73 was marked
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for identification.)
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THE WITNESS: I'm sorry. I don't
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have that yet.
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Is it going to show up in the --
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MR. WHITE: I think it is,
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Mr. Brough. It takes a minute to download.
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THE WITNESS: Exhibit 73?
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MR. WHITE: Correct.
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THE WITNESS: Okay. I have it.
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BY MR. WHITE:
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Q. Is that your handwriting?
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A. It is.
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Q. The -- the second dashed entry I
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believe indicates: 100 million masks sold
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$450 million State of California.
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Am I reading that correctly?
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A. Yes. That is correct.
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Q. And then "Great Health Companion,"
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the reference to supplier in China?
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A. That is correct.
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Q. I think the next line reads: "Also
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have entered into other contracts."
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Is that what that says?
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A. Yes. That's what that says.
22
Q. And is that referring to other
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contracts with suppliers like Great Health
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Companion or other contracts to sell, or do you
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remember?
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A. From what I remember, it's other
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contracts to sell.
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Q. What does the next line say?
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A. You know, I -- it says: 337 million
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purchased by.
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And I -- I don't know what that is.
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I don't -- I know he was talking about foreign
11
countries. But it also looks like it might be
12
Baltimore. But I don't -- he -- I think he
13
mentioned Bahrain at some point. I don't know.
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Q. So you don't -- you don't remember
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what that reference is to?
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A. Yeah.
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Q. I can't read it.
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And you can't read it, then we don't
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have any chance of reading it; is that correct?
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A. No. But he was -- he was -- he was
21
talking about other large contracts that they
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had signed to sell masks to other entities.
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Q. Okay. And then the -- the next line
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appears to be "Mike@BlueFlame" dot something?
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A. Agency.
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Q. Is that supposed to be an e-mail
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address or --
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A. Yes. Yes. So Mike --
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Q. Okay.
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A. -- Mike informed us that he was
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going to be shutting down his -- his political
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organization -- political consulting
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organization and -- and going to sell masks
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full-time and that -- and that the only way to
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reach him would be through his new e-mail
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address and his new cell phone number. And --
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and so he provided those to us.
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Q. And did Mr. Gula tell you at that
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time that he'd spent the past several weeks
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building this new company to do PPE supply?
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A. He said -- I don't know if he gave a
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time frame or not. But he said that he had
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been working with -- with John Thomas to set up
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the company, yes.
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Q. And I think your notes indicate that
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he had gotten sick of the political fundraising
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business that he was involved in.
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Is that -- am I reading that
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correctly from later in your notes?
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A. Yes. Yes. He was -- he was telling
7
us how he was happy to get out of the business
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that he was in.
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Q. Then there's a "Nonresponsive" piece
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there.
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And this ten next line says: "I
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will not be reachable after" -- you -- you read
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it to me.
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What does --
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A. "I will not" --
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Q. -- that say?
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A. "I will not be reachable after this.
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You have my contact into."
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And then we asked him about the
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contracts.
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Q. I see.
22
So his old account info would not be
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useable anymore; you'd have to use his new
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contact information he gave you; is that right?
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A. That's correct.
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Q. And then what is the last thing you
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said, the -- the -- read -- read the last line
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for me.
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A. We asked him about the con -- the --
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the -- the contracts.
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Q. That word is "contracts"?
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A. Yes.
11
Q. Where does it say "contracts"?
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A. I'm sorry?
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Q. Where does it say "contracts"?
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A. Oh, I'm sorry. We asked him about
15
the transaction. It says "transaction."
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Q. I see.
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A. "Transaction."
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Q. Okay. Did you write something in
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the middle of your conversation with Mr. Gula
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that had nothing to do with this transaction in
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your notes here?
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A. That was a -- a password that had
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recollection of the conversation?
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A. That's correct.
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Q. Was there ever any follow-up with
4
Mr. Gula by e-mail or phone requesting this
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information after this initial call?
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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.
17
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?
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A. The wire did come in, yes.
22
Q. And it's was from the party he said
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it was going to be from, correct, State of
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California?
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A. Yes. From --
4
MR. ORSECK: Asked and answered.
5
It's a matter of record.
6
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
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purpose was to purchase N95 masks from Blue
2
Flame Medical, correct?
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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
17
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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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
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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
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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
17
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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BY MR. WHITE:
2
Q. Please answer the question.
3
MR. ORSECK: Object to form.
4
THE WITNESS: When we received the
5
wire -- before we received the wire, we had
6
many questions. When we received the wire, we
7
had more questions.
8
It was a red flag to us that the
9
account had been opened just the day before.
10
It was a red flag to us that Blue Flame was
11
founded three days before. It was a red flag
12
to us that we were called by JPMorgan. The
13
fact that the wire was for $456 million was a
14
red flag.
15
So there was a preponderance of Bank
16
Secrecy Act and customer due diligence
17
questions that had not been answered. So when
18
we received notice from the sender to return
19
the wire, we honored that request.
20
BY MR. WHITE:
21
Q. You said previously that Reg J
22
governs FedLine transactions, correct?
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A. Reg J does govern FedLine
2
transactions. The Bank Secrecy Act also covers
3
wire transfer transactions.
4
Q. This was a FedLine transaction,
5
correct?
6
A. It was a FedLine transaction.
7
Q. So it is governed by Regulation J,
8
correct?
9
A. It is governed by Regulation J and
10
by the Bank Secrecy Act.
11
Q. Did you consider the impact of
12
Regulation J at any time during this process in
13
considering the decision to honor the request
14
from the State of California?
15
MR. ORSECK: Object to form.
16
THE WITNESS: Our concern was
17
getting answers to all of the questions that we
18
had about the wire transfer.
19
BY MR. WHITE:
20
Q. So then you did not consider
21
Regulation J at any point in this process; is
22
that accurate?
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MR. ORSECK: Object to form.
2
THE WITNESS: We considered the
3
impact in the -- our responsibilities under law
4
of the Bank Secrecy Act.
5
BY MR. WHITE:
6
Q. So you did not consider
7
Regulation J?
8
MR. ORSECK: Object to form.
9
THE WITNESS: We considered all of
10
the questions that we had that were unanswered,
11
and many of these questions coming from
12
customer due diligence and Bank Secrecy Act
13
issues.
14
MR. WHITE: This is all
15
nonresponsive, and everyone here knows it.
16
BY MR. WHITE:
17
Q. Mr. Brough, did you or anyone else
18
consider Regulation J in connection with this
19
decision?
20
MR. ORSECK: Object to form. Asked
21
and answered.
22
THE WITNESS: Knowing the importance
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of the Bank Secrecy Act and the consequences of
2
not following the Bank Secrecy Act, we had many
3
unanswered questions in regards to this
4
transaction. And they were not answered.
5
And when we received the
6
instructions to return the wire, we honored
7
that request.
8
BY MR. WHITE:
9
Q. None of that has anything to do with
10
Regulation J.
11
Could you please answer my question
12
about whether Regulation J was considered by
13
you?
14
MR. ORSECK: Form. Asked and
15
answered.
16
And this'll be the last time.
17
MR. WHITE: Until we go to the
18
court. We'll get the court on the line if we
19
need.
20
MR. ORSECK: Then you should do
21
that.
22
BY MR. WHITE:
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Q. Answer the question.
2
MR. ORSECK: Object to form.
3
THE WITNESS: Our concern was our
4
requirements under the Bank Secrecy Act and the
5
questions that we had in regards to all the red
6
flags about the transaction.
7
And so, when we received the -- the
8
instructions from the State of California to
9
return the wire, we honored that request.
10
BY MR. WHITE:
11
Q. Did anyone mention Regulation J
12
during this process?
13
A. Our conversations resolved around
14
the Bank Secrecy Act and our requirements in
15
regards to wire transfers and how the Bank
16
Secrecy Act applies to those wire transfers.
17
Q. Did anyone mention Regulation J?
18
A. The Bank Secrecy Act is one of the
19
many laws and regulations that apply to wire
20
transfers. The Bank Secrecy Act puts a high
21
expectation on banks to monitor transactions
22
and to identify out-of-pattern transactions and
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to take action when those are identified. And
2
that's what we did.
3
Q. Did anyone mention Regulation J?
4
A. Wire transfers are probably the --
5
one of the most high-risk transactions on the
6
BSA red flag list. Specifically there are red
7
flags noted that large dollar transactions on
8
newly opened accounts, large dollar
9
transactions on newly formed entities.
10
Just a few days before, FinCEN, the
11
Financial Institution Crime Enforcement
12
Network, I think -- I'm not sure exactly what
13
it stands for -- issued a notice to banks to be
14
on the lookout for COVID-related --
15
COVID-related suspicious or unusual
16
transactions. So -- so we did that.
17
I recall seeing that notice from
18
FinCEN. And -- and it was in the back of my
19
mind, it was in the front of my mind, when
20
trying to figure out what we needed to do and
21
the questions that we needed to ask and the
22
questions that we needed to have answered. And
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none of those questions were answered to our
2
satisfaction.
3
In the meantime, we received notice
4
from the State of California to return the
5
wire. And so that, along with questions from
6
the State of California and JPMorgan, led us to
7
honor that request.
8
Q. In the course of --
9
MR. ORSECK: I --
10
BY MR. WHITE:
11
Q. -- these discussions, did anyone
12
mention Regulation J?
13
MR. ORSECK: Excuse me. I need to
14
take a bathroom break.
15
MR. WHITE: Of course.
16
MR. ORSECK: Let's go off the
17
record.
18
THE VIDEOGRAPHER: Please stand by.
19
The time now is 2:48 p.m.
20
We're going off the record.
21
(A short recess was taken.)
22
THE VIDEOGRAPHER: The time is 2:59
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p.m.
2
We're going back on the record.
3
BY MR. WHITE:
4
Q. Mr. Brough, you're aware that
5
Regulation J is triggered by the acceptance of
6
a Fedwire into Chain Bridge Bank; is that
7
correct?
8
MR. ORSECK: Object to form.
9
THE WITNESS: Regulation J would
10
apply to wire transfers received into the bank,
11
yes.
12
BY MR. WHITE:
13
Q. Like this one, correct?
14
A. Yes. Like this one.
15
Q. Did anyone mention Regulation J in
16
the discussions you had about this wire?
17
A. I don't specifically recall if we
18
discussed the details of Reg J.
19
I do know that we did discuss the
20
mechanics of honoring JPMorgan's request to --
21
to return the wire.
22
Q. And do those mechanics have anything
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to do with Regulation J?
2
A. They do. Regulation J provides the
3
mechanism to cancel a wire. And -- and that
4
involves a service message being sent by the --
5
the originator of the wire and then the
6
receiving bank using a return code, a special
7
FedLine return code, to honor that request.
8
Q. Regulation J also spells out the
9
circumstances under which the wire can be
10
returned by service message; isn't that
11
correct?
12
MR. ORSECK: Object to form.
13
THE WITNESS: That's a -- a legal
14
question. If it's in there, then -- then I
15
believe you.
16
BY MR. WHITE:
17
Q. Well, is it your understanding that
18
Regulation J sets out the circumstances by
19
which that can occur?
20
MR. ORSECK: Object to form.
21
Foundation.
22
THE WITNESS: It's my understanding
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that there are reasons why a wire may be
2
cancelled. And -- and -- and then there's a
3
mechanism to cancel the wire and then a
4
mechanism -- mechanism to return the wire.
5
BY MR. WHITE:
6
Q. And Regulation J limits the
7
circumstances under which that can occur; isn't
8
that correct?
9
MR. ORSECK: Object to form.
10
Foundation.
11
THE WITNESS: The -- the limited
12
circumstances are really a -- a matter I think
13
that -- that the attorneys need to work out in
14
regards to whether or not the Bank Secrecy Act
15
can be waived in the return of -- of -- of a
16
wire or nonreturn of a wire.
17
BY MR. WHITE:
18
Q. Whose decision was it to return the
19
wire?
20
A. Well, it was the State of
21
California's and JPMorgan's decision to cancel
22
the wire. And we honored that --
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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
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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
if I want. And this all is entirely improper.
20
MR. WHITE: That's incorrect.
21
MR. ORSECK: That --
22
BY MR. WHITE:
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Q. Answer the question.
2
A. Well, let me answer the question
3
this way: If this -- if we had no questions
4
about the transaction; if JPMorgan had no
5
questions about the transaction; and if the
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.
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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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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
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and answered.
2
THE WITNESS: I -- I don't know the
3
answer to that question. Because we would have
4
-- we would have engaged counsel to extend that
5
hold greater than the period beyond our funds
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.
17
And we had no reason not to honor that request.
18
Q. Did you contact Mr. Gula at any
19
point on March 26th, prior to Chain Bridge Bank
20
returning the funds to JPMorgan and the State
21
of California?
22
A. Yes, we did.
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are handled through some type of a letter of
2
credit.
3
So perhaps we didn't -- we never
4
accused Mike of the transaction not being
5
legitimate. We were simply asking him many
6
questions about it and expressing our surprise
7
that this was all happening.
8
Q. Did you tell him, on the 25th when
9
you spoke with him, that there were red flags
10
around this transaction that would cause
11
problems for you in terms of processing it?
12
Did you tell him that?
13
MR. ORSECK: Object to form.
14
THE WITNESS: I don't recall telling
15
him that, no. And I --
16
BY MR. WHITE:
17
Q. And why --
18
A. I think I actually said to him that,
19
you know, "Well, we can handle this. We need
20
to make sure that we put you into fully FDIC
21
insured product." And that's when we talked
22
about ICS and CDARS.
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But no. I -- I guess we were a bit
2
surprised that this was coming up and didn't
3
come up when the account was being opened.
4
But, you know, what's done is done. It's
5
unfortunate that he didn't say it then.
6
Q. Didn't say what then?
7
A. When he was opening the account with
8
Mariano that he was expecting a $456 million
9
wire.
10
Q. What makes you think he didn't?
11
A. Well, that's not what was recorded
12
in our records. When an -- when an account is
13
opened, we ask questions about wire
14
transactions. And --
15
Q. Didn't he open this contract with --
16
MR. ORSECK: Wait. Wait. Wait.
17
No. No. No. No. No. You can't interrupt
18
him.
19
MR. WHITE: He had paused.
20
BY MR. WHITE:
21
Q. Go ahead.
22
You got more to say?
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But I think it was maybe five wires, and the
2
total the amount for the month 25 million. So
3
that would be 5 million each.
4
Q. When you called the California
5
Department of General Services, were you
6
seeking to obtain information from them?
7
A. I think it was expected to be
8
sharing of information. So, for example, if --
9
you know, once -- once we were comfortable that
10
they had done their due diligence on the
11
seller, then we would have moved to the next
12
step, but -- but that -- the con -- the -- the
13
telephone conversation didn't last very long at
14
all, maybe three minutes, and -- and -- and
15
that was it.
16
Q. And the aspect of sharing
17
information about the seller -- the seller, by
18
the way, that's your client, right, Blue Flame
19
Medical?
20
A. Yes.
21
Q. You sought to share information with
22
California about your customer; is that
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correct?
2
A. We -- we wanted to find out if the
3
State of California had done their due
4
diligence on the seller.
5
Q. Why?
6
A. It's our obligation, under the --
7
under the laws of the United States and
8
specifically the Bank Secrecy Act, to -- to do
9
our -- our customer due diligence and our
10
transaction monitoring.
11
Q. Well, your customer due diligence is
12
in connection with opening the account,
13
correct?
14
A. Oh, no. The ongoing monitoring
15
lasts for the life of the account.
16
Q. So this was in connection with your
17
monitoring responsibility for the account?
18
A. Yes.
19
Q. Correct?
20
A. Correct. Yes. Correct. Sorry.
21
Q. Why did you want the State of
22
California to know this information about your
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customer?
2
MR. ORSECK: Object to form.
3
Foundation.
4
THE WITNESS: It was more us wanting
5
to make sure that they knew who they were
6
transacting business with.
7
BY MR. WHITE:
8
Q. Was it your intention to get the
9
State of California to recall the wire?
10
A. No. That was not our intention.
11
Q. Why did you tell the bank -- why did
12
you tell the State of California that the
13
company had just been set up?
14
A. When we asked the State of
15
California if -- if they had done due diligence
16
on the seller, they didn't have any response to
17
that. They -- they indicated that they -- that
18
they didn't know anything about them. And -- I
19
don't know if that's the exact words they used.
20
But it was pretty clear that --
21
because we -- we did tell them that the
22
business was formed three days ago, and they
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didn't know that.
2
Q. Had they been told something else?
3
A. I don't -- I don't know what they
4
were told, but they didn't have that piece of
5
information.
6
Q. If a counterparty bank called you
7
out of the blue as the originating bank and
8
gave you information about your transaction
9
counterparty, as you did with California here,
10
wouldn't you expect their reaction would be to
11
get suspicious about the transaction?
12
MR. WHITE: Tell you what. I'm
13
going to withdraw that question before you
14
object, Gary.
15
BY MR. WHITE:
16
Q. Was your purpose in this call to let
17
the State of California know about the red
18
flags that you had seen in connection with the
19
transaction?
20
A. I would portray the purpose of our
21
call to simply answer many of the questions
22
that we had about the transaction.
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Q. Was the State of California asking
2
you questions about the transaction?
3
A. Yeah, they -- they did. I don't
4
remember the specific questions that they asked
5
us. But I think they asked us, "Well, you
6
know, what else about this company?"
7
And that's when we -- so what we
8
told them was that -- that the company had been
9
opened three days before, that the bank account
10
had been opened the day before, and that we
11
knew that one of the principals had -- and
12
actually we told them that both of the
13
principals -- because Mike Gula told us a
14
little about John Thomas -- did not have any
15
experience in providing medical supplies.
16
Q. Did you tell them that they were
17
lobbyists?
18
A. I think we did, yeah. I think we
19
did.
20
Q. You're aware that they are --
21
neither of them are, in fact, lobbyists,
22
correct?
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MR. ORSECK: Object to form.
2
THE WITNESS: I -- I know that they
3
are political operatives. I mean, for me it's
4
all kind of the same thing: political
5
fund-raiser, lobbyist.
6
I will tell you that Mike Gula, when
7
he was opening another account with us that I
8
guess is somehow or another tied into all of
9
this -- Redline Strategies is the account -- he
10
did say that it was going to be their lobbying
11
arm. And that was --
12
BY MR. WHITE:
13
Q. But you're aware --
14
A. And that was about --
15
Q. I'm sorry.
16
A. -- a week before the -- the
17
transaction.
18
Q. You're aware that Mr. Gula's
19
business during the time he was the bank's
20
customer for those ten years was as a political
21
fundraiser, correct?
22
MR. ORSECK: Object to form.
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for identification.)
2
(Whereupon, the tape was played.)
3
MR. WHITE: Pause there for a
4
moment.
5
BY MR. WHITE:
6
Q. Mr. Brough, that's your voice on the
7
call doing most of the talking on your end; is
8
that correct?
9
A. Yes. That's correct.
10
Q. How did this call come to be
11
recorded?
12
A. I recorded it on -- on my -- my
13
phone, my -- you know, an app on the phone.
14
Q. Where was your phone when you
15
recorded it?
16
A. I think it was sitting on David's
17
desk.
18
Q. Did you tell Mr. Evinger that you
19
were going to record the call?
20
A. I -- I don't remember that I didn't
21
tell him I was going to record the call. I --
22
I -- I certainly didn't hide it. I took -- you
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know, I had the recording app out, and I
2
pressed "record." And it was -- it was plainly
3
on his desk.
4
Q. And -- and it doesn't appear that
5
the recording starts at the beginning of the
6
call.
7
Why is that?
8
A. That's because I did -- I was not --
9
I was not in the off -- in David's office at
10
the beginning of the call.
11
Q. Did you tell Mr. Korpal that you
12
were recording the call?
13
A. No, I did not.
14
Q. Why not?
15
A. I guess I didn't see the need to
16
tell him.
17
Q. Well, you're aware that your
18
recorded lines -- your bank policy requires
19
your bank employees to let people know when
20
they're on a recorded line, correct?
21
MR. ORSECK: Object to form.
22
Foundation.
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THE WITNESS: I think that, for the
2
purposes of recording a verification of a wire
3
transfer, then yes, we -- we notify them that
4
just as a courtesy.
5
BY MR. WHITE:
6
Q. Did you extend that courtesy to
7
Mr. Korpal?
8
A. No, I did not.
9
Q. Was Mr. Korpal in the State of
10
California when you called him?
11
A. I do not know where Mr. Korpal was.
12
Q. This transaction was with JPMorgan
13
in the State of California, correct?
14
MR. ORSECK: Object to form.
15
Foundation.
16
THE WITNESS: JPMorgan has locations
17
across the country. I -- I don't know which
18
one of their locations handles the relationship
19
with the State of California.
20
BY MR. WHITE:
21
Q. Well, you are aware that it violates
22
California law -- California criminal law to
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they had some type of an agreement with the
2
State of California. That's -- there's --
3
there's no -- there's no doubt about that.
4
Whether or not that agreement was
5
obtained by full disclosure, I can't answer
6
that question. If it was, then I doubt that
7
they would have recalled the wire.
8
BY MR. WHITE:
9
Q. Did you hear a voicemail left by Fee
10
Chang for Mr. Evinger, Fee Chang of the
11
Department of General Services, confirming that
12
the 450 million was a legitimate wire transfer?
13
Did you hear that on March 26th?
14
A. Yes, I did.
15
Q. So did Mr. Evinger play that for
16
you?
17
A. Yes, he did.
18
Q. And in that voicemail, Ms. Chang
19
left a recall number and confirmed that the
20
amount was a legitimate transfer; is that
21
correct?
22
A. She -- she did acknowledge that it
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was a legitimate transfer, which meant to us
2
that the State of California did originate the
3
wire, which -- which was one of our concerns,
4
was one of our questions, one of our many
5
questions.
6
MR. WHITE: If you could pull up
7
Plaintiff's Exhibit 68. This is another short
8
recording of a phone call.
9
(Whereupon, the tape was played.)
10
BY MR. WHITE:
11
Q. Is that your voice on the call, or
12
is that Mr. Evinger?
13
A. That's Mr. Evinger's voice.
14
Q. Did you record that call?
15
A. Yes, I -- yes, I did. Yes.
16
Q. And was it the same method of
17
recording with your cell phone?
18
A. Yes.
19
Q. Was your cell phone on the table for
20
this one as well, or was it --
21
A. Yes.
22
Q. -- in your pocket or somewhere else?
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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, it is.
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
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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.
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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.
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 if we 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
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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 if we 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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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
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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
19
operatives and not -- not a Fortune 500 company
20
that usually is involved in transactions of
21
this size.
22
Q. Were they under the impression that
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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?
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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
satisfactory answers to all those questions,
20
then we would not have returned the wire.
21
Q. What were the remaining questions
22
that you needed satisfactory answers to in
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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
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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. Korpal; is
22
that correct?
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