Exhibit 16, Confidential Deposition of John Roselli (March 14, 2024) — United States ex rel. James R. Berkley v. Ocean State, LLC (Dkt. 66-16, D.R.I.)
Summary
Exhibit 16, filed January 6, 2025 as Document 66-16 in the case of the United States, relator James R. Berkley, against Ocean State, LLC and others, No. 1:20-cv-00538, in the U.S. District Court for the District of Rhode Island, reproduces pages from the confidential deposition of John Roselli taken March 14, 2024. Roselli testifies to being an employee of New Harbor, paid a small salary as an operating partner, and to being hired around August of 2019 as interim CEO of Ocean State and executive chair of Blueprint. Roselli testifies to having no carried interest in Fund I, which was Ocean State, and to reporting to the Ocean State board, whose members named include John Pircon, Ed Lhee and Tom Formolo. On further examination by Mr. Renner, Roselli answers no when asked whether 2020 was better than 2019 for Ocean State on a year-over-year basis.
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Cite this document
“Exhibit 16, Confidential Deposition of John Roselli (March 14, 2024) — United States ex rel. James R. Berkley v. Ocean State, LLC (Dkt. 66-16, D.R.I.).”
Original at archive.org. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/declaration-united-states-ex-rel-james-r-berkley-v-ocean-state-llc-dkt-3a1274375b/
, SHA-256 d14a0454e3c2720f59f0ef925c11ae44571778f166901498cb95a89730d2e898.Full text
Case 1:20-cv-00538-JJM-PAS Document 66-16 Filed 01/06/25 Page 1 of 32 PageID
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EXHIBIT 16
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·1· · · · · · ·UNITED STATES DISTRICT COURT ·1· · · · · · · · · · I N D E X
·2· · · · · ·FOR THE DISTRICT OF RHODE ISLAND ·2· ·WITNESS· · · · · · · · · · · · · · · EXAMINATION
·3· ·UNITED STATES OF AMERICA· ·) ·3· ·JOHN ROSSELLI
· · ·ex rel. JAMES R.· · · · · ·) ·4· · ·BY MR. RENNER· · · · · · · · · · · · · ·4, 168
·5· · ·BY MR. MOORMAN· · · · · · · · · · · · · 152
·4· ·BERKLEY,· · · · · · · · · ·)
·6
· · · · · · · · ·Plaintiffs,· · )
·7
·5· · ·vs.· · · · · · · · · · · )· No. 1:20-cv-OO538
·8
· · ·OCEAN STATE, LLC, NEW· · · ) ·9
·6· ·HARBOR CAPITAL FUND LP,· · ) 10
· · ·NEW HARBOR CAPITAL FUND· · ) 11· · · · · · · · ·E X H I B I T S
·7· ·II LP, NEW HARBOR· · · · · ) 12· ·NUMBER· · · · · · · · · · · · · · ·MARKED FOR ID
· · ·CAPITAL MANAGEMENT LP,· · ·) 13· ·ROSELLI Deposition
·8· ·BLUEPRINT TEST· · · · · · ·) · · · ·Exhibit No. 1· · · · · · · · · · · · · ·4
· · ·PREPARATION, LLC,· · · · · ) 14· · ·Exhibit No. 2· · · · · · · · · · · · · ·4
·9· ·FYZICAL ACQUISITION· · · · ) · · · ·Exhibit No. 3· · · · · · · · · · · · · ·4
15· · ·Exhibit No. 4· · · · · · · · · · · · · ·4
· · ·HOLDINGS, LLC,· · · · · · ·)
· · · ·Exhibit No. 5· · · · · · · · · · · · · ·4
10· · · · · · · ·Defendants.· · )
16· · ·Exhibit No. 6· · · · · · · · · · · · · ·4
11
· · · ·Exhibit No. 7· · · · · · · · · · · · · ·4
12· · ·The CONFIDENTIAL DEPOSITION of JOHN ROSELLI, 17· · ·Exhibit No. 8· · · · · · · · · · · · · ·4
13· ·called for examination pursuant to the Rules of · · · ·Exhibit No. 9· · · · · · · · · · · · · ·4
14· ·Civil Procedure for the United States District 18· · ·Exhibit No. 10 (withdrawn)· · · · · · · 4
15· ·Courts pertaining to the taking of depositions, · · · ·Exhibit No. 11· · · · · · · · · · · · · 4
16· ·taken before MARY KAY ANDRIOPOULOS, Certified 19· · ·Exhibit No. 12· · · · · · · · · · · · · 4
17· ·Shorthand Reporter in the State of Illinois, at · · · ·Exhibit No. 13· · · · · · · · · · · · · 4
18· ·300 North LaSalle Street, Illinois, on 20· · ·Exhibit No. 14· · · · · · · · · · · · · 4
19· ·March 14, 2024, at the hour of 10:00 a.m. · · · ·Exhibit No. 15· · · · · · · · · · · · · 4
21· · ·Exhibit No. 16· · · · · · · · · · · · · 4
20
· · · ·Exhibit No. 17· · · · · · · · · · · · · 4
21
22· · ·Exhibit No. 18· · · · · · · · · · · · · 4
22
· · · ·Exhibit No. 19· · · · · · · · · · · · · 4
23 23· · ·Exhibit No. 20· · · · · · · · · · · · · 66
24· ·REPORTED BY: MARY KAY ANDRIOPOULOS, CSR 24
25· ·LICENSE NO.· 084-002248 25
1 3
·1· ·APPEARANCES: ·1· · ***CONFIDENTIAL DEPOSITION OF JOHN ROSELLI***
·2 ·2· · · · · · · · · ·(Whereupon, ROSELLI Deposition
·3· · · · · DUFFY & SWEENEY, LTD. ·3· · · · · · · · · · Exhibit Nos. 1-19 were marked
·4· · · · · BY: MR. ERIC E. RENNER ·4· · · · · · · · · · for identification.)
·5· · · · · 321 South Main Street ·5· · · · · · · · · ·(Whereupon, the witness was duly
·6· · · · · Suite 400 ·6· · · · · · · · · · sworn.)
·7· · · · · Providence, Rhode Island 02903 ·7· · · · · · · · · · ·JOHN ROSELLI,
·8· · · · · 401.455.0700 ·8· ·having been first duly sworn, was examined and
·9· · · · · Erenner@duffysweeney.com ·9· ·testified as follows:
10· · · · · · · ·Representing the Plaintiffs; 10· · · · · · · · · · · EXAMINATION
11 11· ·BY MR. RENNER:
12· · · · · KIRKLAND & ELLIS, LLP 12· · · ·Q.· ·Good morning, Mr. Roselli.· My name is
13· · · · · BY: MR. RYAN MOORMAN 13· ·Eric Renner.· I represent the plaintiff in a
14· · · · · · · MR. PATRICK J. WEEKS 14· ·lawsuit pending in Rhode Island Federal Court.
15· · · · · 300 North LaSalle Street 15· · · · · · I'm here to today for your deposition.
16· · · · · Chicago, Illinois 60654 16· ·I don't know if you've been deposed before or
17· · · · · 312.862.3755 17· ·not.
18· · · · · Ryan.moorman@kirkland.com 18· · · ·A.· ·I have not.
19· · · · · Patrick.weeks@kirkland.com 19· · · ·Q.· ·Never, okay.
20· · · · · · · ·Representing the Defendants. 20· · · · · · So I'll just go over kind of some
21 21· ·ground rules.
22 22· · · · · · I'm going to be asking you questions.
23 23· ·If you don't understand my question, please let
24 24· ·me know, I'll try to rephrase so that you
25 25· ·understand the question; is that okay?
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·1· · · ·A.· ·Yeah. ·1· · · ·A.· ·It's not --
·2· · · ·Q.· ·Do you receive any payment from any New ·2· · · · · · MR. MOORMAN:· You guys are using New
·3· ·Harbor entity? ·3· ·Harbor entities to mean different things.
·4· · · ·A.· ·Yes. ·4· · · · · · You should get clarification of what
·5· · · ·Q.· ·Okay.· Which? ·5· ·New Harbor entities means.
·6· · · ·A.· ·It's from -- I guess, it's from the GP. ·6· ·BY MR. RENNER:
·7· ·I don't really honestly know. ·7· · · ·Q.· ·Sure, okay.
·8· · · · · · It's a New Harbor -- I'm an employee of ·8· · · · · · I'll refer to portfolio companies as
·9· ·New Harbor.· They pay me a small salary to be on ·9· ·one of the portfolio companies that is,
10· ·staff to work in portfolio companies as needed, 10· ·whatever, is owned by one of the New Harbor
11· ·and also do some general things across our 11· ·funds, right?
12· ·portfolio. 12· · · ·A.· ·I'm sorry, say that again.
13· · · ·Q.· ·Okay.· And has that always been the 13· · · ·Q.· ·So portfolio companies, you understand
14· ·case? 14· ·what I'm referring to?
15· · · ·A.· ·Yeah. 15· · · ·A.· ·Yes.
16· · · ·Q.· ·Okay. 16· · · ·Q.· ·All right.· When I say New Harbor
17· · · ·A.· ·Yes. 17· ·entities, I'm referring to, you know, whether it
18· · · ·Q.· ·Okay.· At some point -- maybe you still 18· ·be a fund, from a fund, from the management
19· ·are -- a portfolio operations manager or 19· ·companies.
20· ·director, something? 20· · · ·A.· ·Management, you mean the portfolio
21· · · ·A.· ·I'm an operating partner is the title. 21· ·companies?
22· · · ·Q.· ·Okay.· And what does that entail? 22· · · ·Q.· ·No, like a New Harbor Capital
23· · · ·A.· ·So an operating partner, I work with 23· ·management, for instance.
24· ·the portfolio companies, certain ones that, you 24· · · ·A.· ·Okay.· Like the general partnership?
25· ·know, I'm designated to work with to help with 25· · · ·Q.· ·Yes.
9 11
·1· ·the operations. ·1· · · ·A.· ·Okay.· So I have -- I have no ownership
·2· · · · · · So mostly what you do is you're helping ·2· ·in the general partnership.
·3· ·with new investments to try to implement the ·3· · · ·Q.· ·What about any of the funds?
·4· ·strategy that we want to implement, to maybe ·4· · · ·A.· ·In the funds I have -- I have -- I
·5· ·hire the management team, to get the management ·5· ·mean, there's -- I don't know how you call it.
·6· ·team working well, to kind of be the liaison ·6· ·I wouldn't call it ownership.
·7· ·between the private equity and the management ·7· · · · · · I have the ability to co-invest, so I
·8· ·team, because oftentimes, we're hiring ·8· ·can invest my own money in those funds, and then
·9· ·management that have never worked with private ·9· ·I also have a percentage of carry, of carried
10· ·equity, so I can be the go-between to interpret 10· ·interest in Fund II and Fund III, that's --
11· ·between the two groups.· So that's what I do. 11· · · ·Q.· ·I'm sorry, I didn't mean to cut you
12· · · ·Q.· ·Okay.· And do you have any ownership 12· ·off.
13· ·interest in New Harbor entities? 13· · · ·A.· ·That's over a seven-year period.
14· · · ·A.· ·I have -- I have -- for the entities 14· · · ·Q.· ·Okay.· So carried interest, why don't
15· ·that I have worked in that, you know, I've had 15· ·you explain for me what that is.
16· ·an assignment, like executive chair or interim 16· · · ·A.· ·Okay.· I'll do it to the best of my
17· ·CEO, I will typically get incentive equity, like 17· ·ability.· I'm not an expert in this, and you can
18· ·a management -- like somebody who's a manager 18· ·-- you could read up on this, but basically,
19· ·would get. 19· ·carried interest is, in the world of private
20· · · ·Q.· ·You're referring to from the portfolio 20· ·equity, when you raise money from limited
21· ·company? 21· ·partners, you charge a fee, but you also get a
22· · · ·A.· ·Yeah, from the portfolio company. 22· ·carried interest, which is a percentage of the
23· · · ·Q.· ·What about New Harbor, are there any 23· ·profits of the fund.
24· ·New Harbor entities that you have an ownership 24· · · · · · So it's typically 2 and 20, that's the
25· ·interest in? 25· ·common structure; so 2 percent management fee
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·1· ·annually, and then, you know, when all is said ·1· ·I'll work with them when they look at investment
·2· ·and done in the fund, ten years later, and you ·2· ·opportunities and education, and I'll sort of
·3· ·-- and you add up all the profits, 20 percent of ·3· ·help on the diligent side of things.
·4· ·the profits is the carried interest, and that ·4· · · · · · I'm involved in the investment
·5· ·gets distributed to those that have a carried ·5· ·committee just, you know, so I can keep up to
·6· ·interest. ·6· ·speed on everything that we're looking at
·7· · · ·Q.· ·All right.· So you have some -- ·7· ·investing in, and I also help with, you know,
·8· · · ·A.· ·I have a very small carried interest, ·8· ·connecting the CEOs of all of our portfolio
·9· ·yeah. ·9· ·companies, so we do kind of a quarterly CEO call
10· · · · · · And just to be clear, in Fund I, which 10· ·and CEO networking that I kind of facilitate.
11· ·was Ocean State, I had no carried interest. 11· · · · · · That's pretty much what I do for them,
12· · · ·Q.· ·So we're here obviously to talk about 12· ·but most of my, you know, 90 percent of my work
13· ·the Ocean State. 13· ·is in portfolio companies.
14· · · · · · Going back to the 2019/2020, that 14· · · ·Q.· ·And so when did you start as the CEO at
15· ·timeframe, did you have any kind of ownership 15· ·Ocean State?
16· ·interest in Ocean State? 16· · · ·A.· ·The first day I started -- I mean, the
17· · · ·A.· ·No. 17· ·first time I got involved with New Harbor.
18· · · ·Q.· ·All right.· And at that point, did you 18· · · · · · So I was hired as an operating partner
19· ·have an ownership interest in any of the New 19· ·to be interim CEO of Ocean State and executive
20· ·Harbor companies? 20· ·chair of Blueprint, so it was -- I think, it was
21· · · ·A.· ·Well, I had -- I had -- at the same 21· ·August of 2019.
22· ·time I was working with Ocean State as interim 22· · · ·Q.· ·Who do you report to at New Harbor?
23· ·CEO, I was also executive chair of Blueprint, 23· · · ·A.· ·It depends on what I'm working on.
24· ·which is the Fund II portfolio company, and as 24· · · · · · So, you know, it depends on the
25· ·part of that role, I got -- I got incentive 25· ·portfolio company.· Whoever is the lead partner
13 15
·1· ·equity that vested over a certain period, and ·1· ·on that portfolio company, that's who I report
·2· ·also based on performance. ·2· ·to for that work.
·3· · · ·Q.· ·In what entity? ·3· · · ·Q.· ·What about with respect to Ocean State?
·4· · · ·A.· ·In Blueprint. ·4· · · ·A.· ·With Ocean State, yeah, you know,
·5· · · ·Q.· ·In Blueprint, okay. ·5· ·effectively, I was reporting to the board in
·6· · · ·A.· ·Yeah. ·6· ·that -- in that situation, the board of Ocean
·7· · · ·Q.· ·And at that point, 2019/2020, that ·7· ·State.
·8· ·timeframe, were you also employed by -- directly ·8· · · ·Q.· ·So who was on the board of Ocean State?
·9· ·by a New Harbor company? ·9· · · ·A.· ·Let's see if I can remember everybody.
10· · · ·A.· ·So a portfolio company or -- 10· · · · · · Scott Wilson, I believe, one of the
11· · · ·Q.· ·No, one of like the New Harbor -- 11· ·doctors, Frank D'Alessandro was one of the
12· · · ·A.· ·Well, I was -- I was getting my salary, 12· ·doctors, Rob Crausman, one of the doctors, Ed
13· ·as we discussed earlier, from New Harbor at that 13· ·Kuklenski, who's an independent director.· There
14· ·time, yeah. 14· ·was one other independent director that I'm
15· · · ·Q.· ·All right.· And so maybe you already 15· ·going to forget, and then John Pircon and Ed
16· ·answered this, but with respect to being an 16· ·Lhee and Tom Formolo.
17· ·employee of New Harbor, what were your roles and 17· · · ·Q.· ·And those last three, those are the
18· ·responsibilities in the 2020/2019 timeframe? 18· ·upper people?
19· · · ·A.· ·For New Harbor or for portfolio 19· · · ·A.· ·Yes.
20· ·companies? 20· · · ·Q.· ·And was that -- was that true for the
21· · · ·Q.· ·For New Harbor. 21· ·entirety of your time at Ocean State?
22· · · ·A.· ·You know, I don't have -- I mean, 22· · · ·A.· ·Yes.
23· ·basically the responsibilities are -- I have a 23· · · ·Q.· ·All right.· What was your salary at
24· ·background in education and training, and so I 24· ·Ocean State?
25· ·work -- that's one of our investment areas -- so 25· · · ·A.· ·I think they paid me 250 annually, but
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·1· ·then when it really got tight, I reduced that to ·1· ·Island kind of, do you know what I mean?
·2· ·200. ·2· · · ·Q.· ·All right.· If you look at Exhibit 1,
·3· · · ·Q.· ·And when was that? ·3· ·Section 6, and specifically 6.1, it talks about
·4· · · ·A.· ·I think it was in like October, ·4· ·capital contribution?
·5· ·November of 2019, maybe it was a little later ·5· · · ·A.· ·Mm-hmm.
·6· ·than that, maybe it was early 2020, but they ·6· · · ·Q.· ·Do you know generally what does this
·7· ·accrued unpaid, and then eventually when the ·7· ·Section 1 deal with?
·8· ·sale happened, you know, they trued me up. ·8· · · ·A.· ·With contribution -- you know, equity
·9· · · ·Q.· ·So just kind of a line of demarcation, ·9· ·invested into the company.
10· ·this was pre-COVID when you reduced your salary? 10· · · ·Q.· ·All right.· So is it accurate to say
11· · · ·A.· ·Yeah. 11· ·that -- well, the member is Ocean State Buyer
12· · · ·Q.· ·So I take it -- well, maybe correct me 12· ·according to this document, right?
13· ·if I'm wrong -- but I assume you're familiar 13· · · ·A.· ·Mm-hmm, yeah.
14· ·with the relationship, contractual relationship 14· · · ·Q.· ·So is this basically saying that the
15· ·between New Harbor and Ocean State? 15· ·member can make capital contributions to Ocean
16· · · ·A.· ·Yeah, yes. 16· ·State, LLC in its discretion whenever it wants?
17· · · ·Q.· ·Is it fair to say New Harbor purchased 17· · · · · · MR. MOORMAN:· Objection, form.
18· ·a majority ownership in Ocean State in 2017? 18· · · · · · THE WITNESS:· Well, it says the member
19· · · ·A.· ·I believe that's right. 19· ·shall not be obligated to make initial capital
20· · · ·Q.· ·All right.· I want to ask you some 20· ·contributions.
21· ·questions about Ocean State's operations. 21· ·BY MR. RENNER:
22· · · · · · I'm going to show you what's been 22· · · ·Q.· ·All right.· But is it -- just to make
23· ·marked as Exhibit 1. 23· ·sure I understand -- so the member can make
24· · · · · · All right.· Have you seen this document 24· ·capital contributions, but it's not required to?
25· ·before, sir? 25· · · ·A.· ·Yes.
17 19
·1· · · ·A.· ·I have. ·1· · · ·Q.· ·Okay.· I'm going to show you Exhibit 2.
·2· · · ·Q.· ·All right.· Is it correct to say that ·2· ·Specifically, I'm referring to Page 2 of this
·3· ·this is the most recent operative LLC agreement ·3· ·document.
·4· ·for Ocean State? ·4· · · ·A.· ·Mm-hmm.
·5· · · ·A.· ·You know, I believe so, but I know it ·5· · · ·Q.· ·So this organizational chart, does this
·6· ·was amended a number of times, so I don't know ·6· ·reflect the operational structure of Ocean State
·7· ·if this is the final amended version. ·7· ·Urgent Care as it existed in 2020?
·8· · · ·Q.· ·All right.· So if you look at the first ·8· · · ·A.· ·I believe so.
·9· ·paragraph, it refers to Ocean State Buyer, LLC? ·9· · · ·Q.· ·Well, yeah, I --
10· · · ·A.· ·Mm-hmm. 10· · · ·A.· ·I mean, I don't know what the date is
11· · · ·Q.· ·Who owns Ocean State Buyer, LLC? 11· ·of this, so --
12· · · ·A.· ·I believe that's New Harbor Fund I. 12· · · · · · MR. MOORMAN:· You can look at the
13· · · ·Q.· ·All right.· What was Ocean State's 13· ·document if you need to.
14· ·business? 14· · · · · · THE WITNESS:· This is as of '18.· So
15· · · ·A.· ·So we owned -- we ran primary care and 15· ·this is as of '18.
16· ·urgent care offices in Rhode Island. 16· ·BY MR. RENNER:
17· · · ·Q.· ·Primary care, urgent care, is that it? 17· · · ·Q.· ·Right.· I want to know if there were
18· · · ·A.· ·Yeah. 18· ·any changes since this date.
19· · · ·Q.· ·All right.· And just in Rhode Island? 19· · · ·A.· ·If you have a document that you want to
20· · · ·A.· ·Just in Rhode -- we did have one office 20· ·point me to, I'd be happy to look at that
21· ·in Massachusetts. 21· ·document, but as of 2018, this is what it was.
22· · · ·Q.· ·Okay. 22· · · ·Q.· ·All right.
23· · · ·A.· ·Just over the border. 23· · · ·A.· ·I can't really respond unless I see a
24· · · ·Q.· ·All right. 24· ·document related to it.
25· · · ·A.· ·In that area where it's still Rhode 25· · · ·Q.· ·Well, I don't have another document,
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·1· ·but do you have any -- ·1· · · ·A.· ·No.
·2· · · ·A.· ·If this is the most recent one, then ·2· · · ·Q.· ·Okay.· So they were legally distinct
·3· ·this is what it was in 2020. ·3· ·entities from the Ocean State Holdings, Buyer or
·4· · · ·Q.· ·All right.· It appears to me that Ocean ·4· ·LLC?
·5· ·State Holdings, LLC owns 100 percent of Ocean ·5· · · ·A.· ·Mm-hmm.
·6· ·State Buyer, LLC? ·6· · · ·Q.· ·All right.· And was there payroll for
·7· · · ·A.· ·Mm-hmm. ·7· ·each of those 23 entities, they each did their
·8· · · ·Q.· ·That's correct? ·8· ·own -- I mean, maybe I'm wrong.
·9· · · ·A.· ·Yeah. ·9· · · ·A.· ·No, there was a centralized management
10· · · ·Q.· ·And then it turned, Ocean State Buyer, 10· ·services agreement that Ocean State, LLC is
11· ·LLC owns 100 percent of Ocean State, LLC? 11· ·doing the management services.
12· · · ·A.· ·Yeah. 12· · · · · · So at that point they would do the
13· · · ·Q.· ·All right.· And then over to the left, 13· ·payroll for all those entities, but we still had
14· ·it references -- a square or a rectangle that 14· ·separate tax returns for all those entities.
15· ·references 23 Ocean State companies? 15· ·They all had their own tax ID.
16· · · ·A.· ·Yeah. 16· · · · · · We had -- you know, when you, you know,
17· · · ·Q.· ·What are those? 17· ·go to get reimbursement for medical, you know,
18· · · ·A.· ·So those are the -- those are medical 18· ·through Medicare and Medicaid, each entity was
19· ·operations. 19· ·doing that separately, and they were paid
20· · · ·Q.· ·Okay. 20· ·separately, but we had a management services
21· · · ·A.· ·Right. 21· ·company that was managing all of that side.
22· · · ·Q.· ·Like the professional corporations? 22· · · ·Q.· ·I'm going to show you Exhibit 3,
23· · · ·A.· ·Yeah, exactly.· Like there's 23 23· ·please.
24· ·different offices. 24· · · · · · Is this the agreement you're referring
25· · · ·Q.· ·Right. 25· ·to, or is it something else?
21 23
·1· · · ·A.· ·And that's where those entities are, so ·1· · · ·A.· ·I believe this is it.
·2· ·that's where all the clinical operations are. ·2· · · ·Q.· ·All right.· So if you look at
·3· · · ·Q.· ·Like the Barrington location? ·3· ·Exhibit 2, there's, you know, the dotted line
·4· · · ·A.· ·Yeah. ·4· ·between the 23 Ocean State companies and then
·5· · · ·Q.· ·The East Providence location and so ·5· ·Ocean State, LLC?
·6· ·forth? ·6· · · ·A.· ·Yeah.
·7· · · ·A.· ·Yes. ·7· · · ·Q.· ·And it refers to the management
·8· · · ·Q.· ·Okay.· So these 23 -- I'll call them ·8· ·services agreement?
·9· ·PCs -- professional corporations. ·9· · · ·A.· ·Mm-hmm.
10· · · ·A.· ·Mm-hmm, yeah. 10· · · ·Q.· ·Is that Exhibit 3, is that --
11· · · ·Q.· ·Unless you have some other term. 11· · · ·A.· ·I believe -- I believe so.
12· · · ·A.· ·That's fine. 12· · · ·Q.· ·Okay.· So for each of the 23 entities,
13· · · ·Q.· ·All right.· Those -- are those their 13· ·they had employees, I assume, right?
14· ·own legally distinct entity, each one of those? 14· · · ·A.· ·Mm-hmm.
15· · · ·A.· ·Yes. 15· · · ·Q.· ·And those employees --
16· · · ·Q.· ·All right.· And who owns those 23 PCs, 16· · · ·A.· ·Yes.
17· ·or who did in 2020? 17· · · ·Q.· ·For instance, if we take the Barrington
18· · · ·A.· ·Dr. Crausman. 18· ·location, right, there were employees working at
19· · · ·Q.· ·He owned each and every one of them? 19· ·the Barrington location?
20· · · ·A.· ·And then -- well, I don't know how to 20· · · ·A.· ·Yes.
21· ·actually respond to that. 21· · · ·Q.· ·And I only use Barrington, because
22· · · ·Q.· ·Were they owned -- I guess what I'm 22· ·that's where I live, so would those employees --
23· ·getting at -- were they owned by any of the 23· ·would they pay directly by one of those -- like
24· ·either Ocean State, LLC, Ocean State Buyer, 24· ·the Barrington location or were they paid by
25· ·Ocean State Holdings? 25· ·Ocean State, LLC?
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·1· · · ·A.· ·We did -- we had one payroll, but I ·1· · · ·A.· ·I think I just answered that question
·2· ·honestly can't tell you if we had -- if they ·2· ·already.
·3· ·were paid from an entity that was that entity or ·3· · · ·Q.· ·Okay.
·4· ·if it was paid for by the management services ·4· · · ·A.· ·Yeah.
·5· ·agreement.· I just don't know. ·5· · · ·Q.· ·So in this chart we're looking at,
·6· · · ·Q.· ·So I take it from Exhibit 3, the ·6· ·Exhibit 2, you know, the Ocean State --
·7· ·management services agreement, it's -- you know, ·7· · · ·A.· ·Yeah, mm-hmm.
·8· ·New Harbor is providing, you know, management ·8· · · ·Q.· ·I'll call it the Ocean State
·9· ·services, right? ·9· ·organizational chart, which entity is the MSO,
10· · · ·A.· ·No. 10· ·and, you know, when I refer to MSO, do you know
11· · · ·Q.· ·No, okay.· Maybe I'm mistaken then. 11· ·what I'm talking about?
12· · · ·A.· ·Ocean State, LLC is providing 12· · · ·A.· ·Mm-hmm, yeah, I believe it's Ocean
13· ·management services. 13· ·State, LLC.
14· · · ·Q.· ·Oh, I see, yeah.· Never mind. I 14· · · ·Q.· ·Okay.· So what exactly does Ocean
15· ·misspoke. 15· ·State, LLC do?
16· · · · · · Okay.· So Ocean State, LLC is providing 16· · · ·A.· ·It's the management professional
17· ·services to the 23 entities, right and -- right, 17· ·services entity that provides basic operational
18· ·yes? 18· ·management for all the professional services
19· · · ·A.· ·Yes. 19· ·organizations; so payroll, hiring and firing,
20· · · ·Q.· ·All right.· And one of those is payroll 20· ·you know, negotiating benefits.
21· ·services? 21· · · · · · We centralized what's called revenue
22· · · ·A.· ·Yes. 22· ·cycle management, so that's all the work to get
23· · · ·Q.· ·Okay.· So who issued the W-2s for the 23· ·reimbursement from third-party payors.
24· ·employees of those 23 entities? 24· · · · · · All the nonmedical basically.
25· · · ·A.· ·Like the company, the entity or the 25· · · ·Q.· ·That was my next question.
25 27
·1· ·person? ·1· · · ·A.· ·Yeah.
·2· · · ·Q.· ·No, no, no, not the person. ·2· · · ·Q.· ·So I take it Ocean State, LLC does not
·3· · · · · · I'm trying to figure out, you know, did ·3· ·actually provide medical services?
·4· ·-- say I work at the Barrington location. ·4· · · ·A.· ·No.
·5· · · ·A.· ·Yeah. ·5· · · ·Q.· ·So who are Ocean State, LLC's actual
·6· · · ·Q.· ·I don't know, I'm a -- I don't know, ·6· ·employees?
·7· ·I'm not in the healthcare field -- medical ·7· · · ·A.· ·Well, so there were, you know -- you
·8· ·secretary, something, if that even exists, am I ·8· ·know, Sarah Charette, the CFO, there was a head
·9· ·paid by the Barrington location or am I paid by ·9· ·of HR, there was, you know, revenue cycle
10· ·Ocean State, LLC? 10· ·people, there was an IT person.
11· · · ·A.· ·I honestly cannot remember how we did 11· · · · · · You know, there's a lot.· I can't tell
12· ·that to be -- to be quite honest with you. 12· ·you everyone.
13· · · · · · There was one payroll run.· I just 13· · · ·Q.· ·Roughly, how many employees actually
14· ·don't remember if they were paid separately out 14· ·work for Ocean State, LLC?
15· ·of a Barrington account or if it was coming out 15· · · ·A.· ·Yeah, that's a good question.· I don't
16· ·of, you know, just directly out of the Ocean 16· ·totally know.
17· ·State, LLC. 17· · · · · · I mean, I could -- if you put the
18· · · ·Q.· ·All right.· And what would you -- what 18· ·records in front of me, I could identify who
19· ·document would enable you to determine which 19· ·was, but it was probably only -- I don't want to
20· ·entity paid? 20· ·speculate -- but most of the 277 employees that
21· · · ·A.· ·I guess, I'd have to see payroll 21· ·we had were in the -- in the medical operations.
22· ·records. 22· · · ·Q.· ·So Exhibit 3, this services agreement,
23· · · ·Q.· ·All right.· Does the Barrington 23· ·is this the document that governs the
24· ·location -- does it pay the payroll or does 24· ·relationship between Ocean State, LLC and each
25· ·Ocean State, LLC? 25· ·one of the 23 --
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·1· · · ·A.· ·I think earlier I had said that this ·1· ·under the management services agreements?
·2· ·was a professional services between the ·2· · · ·A.· ·Well, I think I answered that
·3· ·management -- the LLC and the medical entities, ·3· ·previously, yeah.
·4· ·but I had that wrong. ·4· · · ·Q.· ·The payroll?
·5· · · · · · So this is the agreement between the ·5· · · ·A.· ·Payroll, you know, benefits, revenue
·6· ·LLC and New Harbor. ·6· ·cycle management.
·7· · · ·Q.· ·All right.· And then Exhibit 3 in ·7· · · ·Q.· ·Okay.
·8· ·Section 4 talks about management fees? ·8· · · ·A.· ·Yeah, not everything -- everything
·9· · · ·A.· ·Ah-huh. ·9· ·nonmedical.
10· · · ·Q.· ·So those are management fees paid by 10· · · ·Q.· ·And do you see under management
11· ·Ocean State, LLC? 11· ·services agreements, that references deficit
12· · · ·A.· ·To New Harbor. 12· ·funding loan agreements?
13· · · ·Q.· ·Okay. 13· · · ·A.· ·Mm-hmm.
14· · · ·A.· ·To -- it says the company shall pay to 14· · · ·Q.· ·What are those?
15· ·New Harbor. 15· · · ·A.· ·I don't -- I do not know.
16· · · ·Q.· ·Yeah.· And so is this the 2 and 20? 16· · · ·Q.· ·All right.· But those -- I take it from
17· · · ·A.· ·No. 17· ·Exhibit 2, that those would be agreements
18· · · ·Q.· ·That's separate thing, okay. 18· ·between the 23 entities and Ocean State, LLC?
19· · · · · · So on top of the management fees that 19· · · ·A.· ·I'm not familiar with those agreements,
20· ·Ocean State, LLC is obligated to pay to New 20· ·so I can't really respond to that.
21· ·Harbor, what other fees, if any -- 21· · · ·Q.· ·All right.· Let me show you Exhibit 4.
22· · · ·A.· ·None. 22· · · · · · MR. WEEKS:· Do you know the Bates of
23· · · · · · MR. MOORMAN:· Let him finish his 23· ·this, Eric?· It just got cut off.
24· ·question. 24· · · · · · MR. RENNER:· I know it got cut off
25· · · · · · THE WITNESS:· Oh, sorry. 25· ·because of --
33 35
·1· ·BY MR. RENNER: ·1· · · · · · THE WITNESS:· I see 215 up at the top.
·2· · · ·Q.· ·Are there other fees -- on top of the ·2· · · · · · MR. MOORMAN:· This number.
·3· ·-- I'm just trying to figure out if on top of ·3· ·BY MR. RENNER:
·4· ·the management fee we're talking about in ·4· · · ·Q.· ·It looks like 70004.· I printed it. I
·5· ·Section 4 -- ·5· ·didn't print it in the legal size.· It's what
·6· · · ·A.· ·Yeah. ·6· ·the tif comes out as.
·7· · · ·Q.· ·-- are there other fees that Ocean ·7· · · · · · Have you ever seen this document
·8· ·State, LLC was obligated to pay to New Harbor? ·8· ·before, sir?
·9· · · ·A.· ·Not that I'm aware of, no. ·9· · · ·A.· ·No.
10· · · ·Q.· ·All right.· So you've testified that 10· · · ·Q.· ·All right.· Well, I'll represent -- or
11· ·your understanding is that there are services 11· ·let me know if you disagree -- but it appears to
12· ·agreements between the 23 professional entities 12· ·be a -- well, the PDF of it anyway -- is called
13· ·and Ocean State, LLC, is that right? 13· ·NHC structure chart.
14· · · ·A.· ·Yeah, and I think they're pointed out 14· · · ·A.· ·Mm-hmm.
15· ·right on this document. 15· · · ·Q.· ·It looks to me to be an operational
16· · · ·Q.· ·All right.· That's the management 16· ·chart for the New Harbor Capital Fund, LP?
17· ·services agreements? 17· · · ·A.· ·Mm-hmm.
18· · · ·A.· ·Yeah. 18· · · ·Q.· ·So is this Fund I this is talking about
19· · · ·Q.· ·And can you tell me, is there a 19· ·if you look at the names of these two entities?
20· ·separate management services agreement for each 20· · · · · · MR. MOORMAN:· Objection, foundation.
21· ·of the 23 entities, or is there one that governs 21· · · · · · Just for the record, he's here to
22· ·all of them? 22· ·testify on behalf of Ocean State and not New
23· · · ·A.· ·I honestly don't know. 23· ·Harbor.
24· · · ·Q.· ·All right.· And what kind of services 24· · · · · · If he knows, he can answer it in his
25· ·does Ocean -- or would Ocean State, LLC provide 25· ·personal capacity.
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·1· · · ·Q.· ·So Robert Crausman, is it true that you ·1· ·agreement?
·2· ·replaced him as CEO? ·2· · · ·Q.· ·Well, Exhibit 6, I guess, I'll call it
·3· · · ·A.· ·No. ·3· ·the Deerpath loan agreement.
·4· · · ·Q.· ·No? ·4· · · · · · MR. MOORMAN:· If you need a second to
·5· · · ·A.· ·No, there was a few in between that. ·5· ·skim the documents.
·6· · · ·Q.· ·Okay.· But at some point you became the ·6· · · · · · MR. RENNER:· Yeah, please, don't take
·7· ·CEO? ·7· ·my word for it.· I'm giving you what I
·8· · · ·A.· ·Yeah. ·8· ·understand the document to be, so if you
·9· · · ·Q.· ·And were you also president? ·9· ·disagree, let me know.
10· · · ·A.· ·I didn't have that title.· I was 10· · · · · · MR. MOORMAN:· It is 165 pages long, so
11· ·interim CEO. 11· ·if you need to refer back to it after you skim
12· · · ·Q.· ·Okay.· Scott Wilson, he was one of the 12· ·it, too, by all means, take your time.
13· ·doctors, right? 13· · · · · · THE WITNESS:· Okay.· So it's a fourth
14· · · ·A.· ·Yeah. 14· ·amendment to the loan agreement, this is
15· · · ·Q.· ·And then Mr. Lhee, Formolo and Pircon, 15· ·Exhibit 6, and so that loan agreement by and
16· ·they were new upper people, right? 16· ·among Ocean State, LLC -- yeah, so it's a loan
17· · · ·A.· ·Yes.· So Dr. Crausman and Scott Wilson 17· ·agreement with Deerpath.
18· ·were owners of the business. 18· ·BY MR. RENNER:
19· · · · · · There were five original doctors that 19· · · ·Q.· ·Okay.
20· ·were owners of the business. 20· · · ·A.· ·The fourth amendment.
21· · · · · · Two of those were -- and then those two 21· · · ·Q.· ·Was Deerpath Ocean State's only SBIC
22· ·took the seats, the board seats. 22· ·lender?
23· · · ·Q.· ·Crausman and Wilson? 23· · · ·A.· ·Yes.· I mean, at the time I was
24· · · ·A.· ·Yeah. 24· ·involved in the business.· I don't know about
25· · · ·Q.· ·So getting back to Exhibit 5, the org 25· ·previously.
41 43
·1· ·chart. ·1· · · ·Q.· ·Do you know when Ocean State originally
·2· · · ·A.· ·Exhibit 5, this one?· No. ·2· ·took the loan from Deerpath?
·3· · · ·Q.· ·No, the chart for Ocean State. ·3· · · ·A.· ·I believe it was, you know, when they
·4· · · ·A.· ·Here, there we go, yeah. ·4· ·first -- New Harbor first -- did the first
·5· · · ·Q.· ·So the board of directors, what is the ·5· ·transaction to partner with Ocean State.
·6· ·responsibility of the board of directors? ·6· · · ·Q.· ·What kind of funding was it from
·7· · · ·A.· ·They really oversee the management of ·7· ·Deerpath; was it debt, equity?
·8· ·the business, to hire and fire management, to, ·8· · · ·A.· ·Debt.
·9· ·you know, make decisions for the company. ·9· · · ·Q.· ·When was the last time Ocean State
10· · · ·Q.· ·So the board oversees management, 10· ·received funds from Deerpath?
11· ·ultimately, you as the CEO? 11· · · ·A.· ·It was before I was CEO.
12· · · ·A.· ·Yes. 12· · · ·Q.· ·And so what kind of debt was it; it was
13· · · ·Q.· ·And then you in turn oversee -- 13· ·a revolver loan, is that a fair
14· · · ·A.· ·Yeah. 14· ·characterization?
15· · · ·Q.· ·-- the under people? 15· · · ·A.· ·That was part of it.· I think there was
16· · · ·A.· ·Yeah, mm-hmm. 16· ·--
17· · · ·Q.· ·All right.· I'm going to show you 17· · · ·Q.· ·All right.· Well --
18· ·what's been marked Exhibit 6 and 7, and I will 18· · · ·A.· ·There was senior debt, and there was a
19· ·not be going through this in depth -- so don't 19· ·revolver, too.
20· ·get nervous -- 6 is the fourth amendment and 7 20· · · ·Q.· ·Okay.· Can you describe for me what
21· ·is the second amendment. 21· ·you're referring to?
22· · · ·A.· ·To which agreement? 22· · · ·A.· ·Well, I mean, by the time I got
23· · · ·Q.· ·Well, I'm just saying so you know which 23· ·involved, we had maxed out the revolver, and
24· ·one is 6 and -- 24· ·then there was other -- you know, the original
25· · · ·A.· ·Yeah, but this is amendment to which 25· ·loan, you know, that was issued when they -- New
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·1· ·Harbor did the original transaction, so -- ·1· ·additional roughly 5 million dollar loan to
·2· · · ·Q.· ·What was the amount of the loan, i ·2· ·Ocean State; is that a fair characterization?
·3· ·mean, ballpark? ·3· · · ·A.· ·Again, it was all -- it was all before
·4· · · ·A.· ·Like 14 million something, ·4· ·I was there, so --
·5· ·approximately. ·5· · · ·Q.· ·All right.· So this is dated
·6· · · ·Q.· ·All right.· And so, just so I ·6· ·September 17th, 2019.
·7· ·understand, when you say revolver, that's kind ·7· · · ·A.· ·Okay.
·8· ·of like a line of credit; fair? ·8· · · ·Q.· ·You were at Ocean State at the time?
·9· · · ·A.· ·Yeah, yes. ·9· · · ·A.· ·Yeah, I was -- I was.· I had just
10· · · ·Q.· ·All right.· And then there was some 10· ·joined, yeah.
11· ·other component to the debt? 11· · · ·Q.· ·Did you have involvement in negotiation
12· · · ·A.· ·Yeah. 12· ·or --
13· · · ·Q.· ·What was that? 13· · · ·A.· ·No.
14· · · ·A.· ·It was a -- it was a -- it was senior 14· · · ·Q.· ·-- discussions regarding this loan
15· ·debt. 15· ·agreement?
16· · · · · · I mean, I wasn't at the company when 16· · · ·A.· ·No.
17· ·that was set up, so I really can't talk to the 17· · · ·Q.· ·So who was involved with this loan
18· ·specifics of that. 18· ·agreement?
19· · · ·Q.· ·What do you mean by senior debt? 19· · · ·A.· ·That would have likely been the former
20· · · ·A.· ·They -- well, it just, you know, it's 20· ·CEO and the CFO and New Harbor, because New
21· ·secured, right. 21· ·Harbor is, you know, responsible for the, you
22· · · ·Q.· ·Okay.· By what, the Ocean State, LLC 22· ·know, capital structure, the board is
23· ·assets? 23· ·responsible for the capital structure.
24· · · ·A.· ·You know, again, I wasn't at the 24· · · ·Q.· ·Okay.· And New Harbor is a guarantor
25· ·company when it was -- when it was originally 25· ·under this, right?
45 47
·1· ·issued, so I can't get into the specifics of it. ·1· · · ·A.· ·That's correct.
·2· · · ·Q.· ·All right.· Do you know what the -- ·2· · · ·Q.· ·All right.· So fair to say in September
·3· ·what were the terms of the funding for Deerpath? ·3· ·of 2019 Deerpath made an additional 5 million
·4· · · ·A.· ·I really can't respond to that either. ·4· ·dollar loan to Ocean State?
·5· · · ·Q.· ·All right.· Exhibit 6 generally refers ·5· · · ·A.· ·I don't believe that's right, but I'd
·6· ·to -- ·6· ·have to read through this whole document.
·7· · · ·A.· ·It's clearly in this 165-page document. ·7· · · · · · MR. MOORMAN:· Take your time.· If you
·8· · · ·Q.· ·And again, the document says what it ·8· ·need to look at a document, take your time, and
·9· ·says.· I'm not going to go through it with a ·9· ·if there's a part of the document that's the
10· ·fine tooth comb, but it does refer to Ocean 10· ·source of your question, it might expedite the
11· ·State being in default. 11· ·process if you point to it.
12· · · · · · What can you tell me about that? 12· ·BY MR. RENNER:
13· · · ·A.· ·We were in -- when I joined, we were in 13· · · ·Q.· ·Sure.· Well, Page 30.· So Section 3
14· ·default. 14· ·talks about additional term loan, and it looks
15· · · · · · So they usually have various covenants 15· ·to me -- I could be wrong -- but it looks to me
16· ·within these agreements that you have to 16· ·like this is New Harbor making the additional
17· ·maintain, and we were not meeting those covenant 17· ·5 million dollar loan -- I mean, excuse me --
18· ·requirements, so we were in technical default. 18· ·Deerpath making roughly a 5 million dollar loan?
19· · · ·Q.· ·What was the nature of the default? 19· · · ·A.· ·It says in an amount equal to
20· · · ·A.· ·I honestly don't remember, you know, 20· ·5.1 million to fund the revolver paydown, and
21· ·the specifics of what -- of what the covenants 21· ·pay fees expressed as occurred in connection
22· ·were in this agreement, but whatever the 22· ·with the fourth amendment.
23· ·covenants were, we weren't meeting them. 23· · · · · · So, I mean, this is literally two weeks
24· · · ·Q.· ·It looks to me with Exhibit 6, this 24· ·after I joined the company, so I really wasn't
25· ·fourth amendment, it looks like Deerpath made an 25· ·involved in this.
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·1· · · ·Q.· ·Okay.· All right.· So if you look at ·1· ·BY MR. RENNER:
·2· ·Exhibit 7 then, and this is titled second ·2· · · ·Q.· ·Okay.· We talked earlier about a 5
·3· ·amended and restated guarantee agreement. ·3· ·million dollar guarantee.
·4· · · ·A.· ·Okay. ·4· · · · · · Do you recall in April, specifically
·5· · · ·Q.· ·And again, this is dated ·5· ·April 20th of 2020, New Harbor Capital making a
·6· ·September 17th, 2019? ·6· ·5 million dollar payment to Deerpath?
·7· · · ·A.· ·Yeah. ·7· · · · · · MR. MOORMAN:· Objection, foundation to
·8· · · ·Q.· ·So is it -- based on your testimony a ·8· ·the extent he's asking what you remember New
·9· ·minute ago, is it fair to say that you weren't ·9· ·Harbor doing.
10· ·involved with kind of the negotiation of this 10· ·BY MR. RENNER:
11· ·document? 11· · · ·Q.· ·Well, do you recall -- April 20th of
12· · · ·A.· ·No. 12· ·2020, do you recall a New Harbor Capital entity
13· · · ·Q.· ·All right.· Would you agree it's a fair 13· ·making a roughly 5 million dollar guarantee
14· ·-- it's a fair characterization that Exhibit 7 14· ·payment to Deerpath?
15· ·is a document by which New Harbor is 15· · · ·A.· ·I honestly don't remember the timing of
16· ·guaranteeing the Deerpath loan? 16· ·it.
17· · · ·A.· ·I believe it is, yes. 17· · · · · · I actually thought that that was --
18· · · ·Q.· ·And if you turn to Page 5, Section 3, 18· ·that happened in the sale when we actually sold
19· ·it talks about required payments by guarantors, 19· ·Ocean State, and it was from the sale proceeds
20· ·semicolon, guarantor capital calls? 20· ·that that was paid, but, you know, unless you
21· · · ·A.· ·Mm-hmm.· Guarantors, so who is the 21· ·can show me a document that otherwise --
22· ·guarantor? 22· · · ·Q.· ·Okay.· New Harbor might be able to
23· · · ·Q.· ·Well, it looks like -- 23· ·better answer that?
24· · · ·A.· ·New Harbor Fund, yeah, New Harbor Fund 24· · · · · · MR. MOORMAN:· Better answer whether New
25· ·is the guarantor. 25· ·Harbor made a payment?
49 51
·1· · · ·Q.· ·So with respect to the guarantor ·1· · · · · · MR. RENNER:· Right.
·2· ·capital calls, what is that referring to, if you ·2· · · · · · THE WITNESS:· Yeah, I would think so.
·3· ·know? ·3· ·BY MR. RENNER:
·4· · · ·A.· ·You know, does not have sufficient ·4· · · ·Q.· ·So just to be clear, your testimony is
·5· ·funds to pay the guarantor guaranteed obligation ·5· ·you don't recall in April of 2020 whether or not
·6· ·-- the capital call notice to each partner ·6· ·New Harbor made a 5 million dollar payment to
·7· ·defined in the -- ·7· ·Deerpath?
·8· · · ·Q.· ·Is it fair to say -- I mean, basically ·8· · · · · · MR. MOORMAN:· Same objection with
·9· ·what I'm getting at is, does this give the ·9· ·respect to the scope.
10· ·ability of New Harbor to require its limited 10· · · · · · He can answer in his personal capacity
11· ·partners or the investors to contribute more 11· ·if he knows.
12· ·capital? 12· · · · · · THE WITNESS:· Yeah, in my capacity as
13· · · ·A.· ·You know, I wasn't -- 13· ·CEO of Ocean State at the time, I just honestly
14· · · · · · MR. MOORMAN:· Objection, foundation, 14· ·can't remember the timing of those, so --
15· ·same scope limitation as before. 15· ·BY MR. RENNER:
16· · · · · · THE WITNESS:· Yeah, this is a New 16· · · ·Q.· ·So in this litigation you're aware
17· ·Harbor -- you know, you'll have to talk to 17· ·Ocean State is claiming that it qualified for an
18· ·somebody at New Harbor about this. 18· ·exemption from the affiliation rules, because
19· · · ·Q.· ·Are you aware -- 19· ·they received SBIC financing?
20· · · · · · MR. MOORMAN:· We've been going about an 20· · · ·A.· ·Yes.
21· ·hour.· Can we take a break now? 21· · · ·Q.· ·Okay.
22· · · · · · MR. RENNER:· Sure. 22· · · ·A.· ·Not claiming.· That was the fact.
23· · · · · · · · · ·(Whereupon, a short recess was 23· · · ·Q.· ·Fair enough.
24· · · · · · · · · · taken.) 24· · · · · · Would you agree that if Ocean State did
25 25· ·not qualify for that SBIC exemption, that it
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·1· ·would not otherwise have been eligible under the ·1· ·program came out in like late March, and, you
·2· ·affiliation rules due to New Harbor's ownership? ·2· ·know, you were applying like a week later.
·3· · · ·A.· ·Well, that would just be speculation, ·3· · · · · · They had -- they had hotlines that you
·4· ·because we did. ·4· ·could call, e-mails you could send, and nobody
·5· · · · · · Like we had an SBA loan from Deerpath, ·5· ·responded to any of those.· They weren't even
·6· ·and we qualified waiving the affiliation ·6· ·picking up the phone.
·7· ·requirements, so -- ·7· · · · · · So we had to go with, you know, the
·8· · · ·Q.· ·So did you -- when I say you, I mean ·8· ·legal counsel we were getting and --
·9· ·Ocean State -- did Ocean State undertake any ·9· · · · · · MR. MOORMAN:· Don't say anything you
10· ·analysis as to whether or not the affiliation 10· ·talked about with lawyers.
11· ·rules would have precluded it from being 11· · · · · · THE WITNESS:· And, you know, we had to
12· ·eligible if the SBIC didn't apply? 12· ·go with, you know, our banker's advice, and all
13· · · · · · MR. MOORMAN:· Let him finish his 13· ·the webinars we were doing, and all the other
14· ·question. 14· ·things we were doing, and it clearly stated in
15· · · · · · Are you done? 15· ·the Small Business Administration explanation
16· · · · · · MR. RENNER:· Yes. 16· ·documents that you can qualify one of two ways;
17· · · · · · THE WITNESS:· So in the -- in the SBA 17· ·you know, you have 500 or less employees and a
18· ·loan explanations that we got from the Small 18· ·certain amount less revenue, and in that
19· ·Business Administration, it clearly stated in 19· ·situation you have to identify your affiliates,
20· ·there affiliation requirements are waived if you 20· ·or if you're already SBIC qualified, you know,
21· ·already have credit from an SBIC accredited 21· ·getting money from an SBIC qualified lender, you
22· ·lender. 22· ·can waive the affiliation requirements.
23· · · · · · So the affiliation waived the 23· ·BY MR. RENNER:
24· ·affiliation requirements. 24· · · ·Q.· ·All right.· And so if the affiliation
25· ·BY MR. RENNER: 25· ·rules weren't waived, you'd agree that there
53 55
·1· · · ·Q.· ·Fair enough. ·1· ·would have been more than 500 employees, right,
·2· · · · · · My question, though, is if the ·2· ·if you take into account all of the New Harbor
·3· ·affiliation rules weren't waived, would you ·3· ·--
·4· ·agree that Ocean State would not have been ·4· · · ·A.· ·Again, I don't know why we have to
·5· ·eligible for a PPP loan? ·5· ·speculate.· That wasn't the case.· They were
·6· · · ·A.· ·I mean, it -- ·6· ·waived.
·7· · · · · · MR. MOORMAN:· Objection, calls for ·7· · · ·Q.· ·I know, I mean, I know that's what
·8· ·speculation, calls for a legal conclusion. ·8· ·you're saying, but I just want to confirm,
·9· · · · · · THE WITNESS:· So again, we specifically ·9· ·though, that if you -- if Ocean State were to
10· ·waived the affiliation, because we had SBA 10· ·have considered the employees of Ocean State
11· ·lending, so there's no reason to speculate. 11· ·combined with the various other portfolio
12· ·BY MR. RENNER: 12· ·companies owned by New Harbor, then that would
13· · · ·Q.· ·Maybe I'm not asking the question the 13· ·have been more than the 500 employee limit,
14· ·right way. 14· ·right?
15· · · · · · Let's -- well, so is it fair to say 15· · · ·A.· ·Yes.
16· ·then that because Ocean State determined that it 16· · · ·Q.· ·Okay.· And likewise --
17· ·received SBIC funding, it did not undertake any 17· · · ·A.· ·And so that's why the portfolio
18· ·analysis as to whether or not it otherwise would 18· ·companies we had that weren't -- that didn't
19· ·have been precluded under the affiliation rules 19· ·have money from an SBIC lender, did not take PPP
20· ·from eligibility? 20· ·money.
21· · · ·A.· ·So we did quite a bit of analysis and 21· · · ·Q.· ·Okay.· And like for the same reason you
22· ·consultation with the bankers that facilitated 22· ·mentioned, the revenue amount would have
23· ·the loan, our CFO did a whole bunch of webinars 23· ·exceeded the revenue amount allowable --
24· ·to try to understand what was going on. 24· · · ·A.· ·Yes.
25· · · · · · You have to remember, the PPP loan 25· · · ·Q.· ·-- for a PPP program?· Okay.
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·1· · · ·A.· ·If you included all those, although you ·1· ·Rhode Island.
·2· ·didn't have to include all those, because we ·2· · · ·Q.· ·So you think it had to be physically
·3· ·waived -- we were waiving the affiliation ·3· ·signed, like an electronic signature?
·4· ·requirements based on the SBA explanation and ·4· · · ·A.· ·Yeah, it was physically signed, yeah.
·5· ·regulation. ·5· · · ·Q.· ·But you couldn't -- something precluded
·6· · · ·Q.· ·All right.· This is Exhibit 8. ·6· ·you from signing it?
·7· · · · · · Well, before we talk about Exhibit 8, ·7· · · ·A.· ·I honestly don't remember the
·8· ·you just talked a little bit ago about the ·8· ·situation, but I gave approval for her to sign
·9· ·various analyses Ocean State did prior to ·9· ·it, so --
10· ·applying for the loan, right, so you -- what 10· · · ·Q.· ·All right.· Did someone have to give
11· ·input did New Harbor have? 11· ·you approval for --
12· · · ·A.· ·Well, again, you know, for Ocean State 12· · · ·A.· ·Yeah, the Ocean State --
13· ·to take -- to enter into any debt agreement or 13· · · · · · MR. MOORMAN:· Hold on one second.
14· ·credit agreement, it has to be approved by the 14· ·You've got to let Mr. Renner finish.
15· ·board, so as far as New Harbor's on the board, 15· · · · · · THE WITNESS:· Okay.
16· ·they were participating in that. 16· · · · · · MR. MOORMAN:· It's for the court
17· · · · · · They also, for a myriad of reasons, 17· ·reporter.
18· ·right, just general management reasons, there's 18· · · · · · Let him finish.· Make sure he's done,
19· ·always times where you're communicating with New 19· ·and you then you can answer the question.
20· ·Harbor about things unrelated to this, and you 20· · · · · · THE WITNESS:· Okay.
21· ·might share ideas among portfolio companies, so 21· · · · · · MR. MOORMAN:· Go ahead, Eric.
22· ·-- 22· ·BY MR. RENNER:
23· · · ·Q.· ·And fair to say that New Harbor did 23· · · ·Q.· ·Did you have to -- strike that.
24· ·share a whole bunch of ideas and information -- 24· · · · · · Can you read back my question, please?
25· · · ·A.· ·Well, they were trying to -- oh, sorry. 25
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·1· · · · · · MR. MOORMAN:· Why don't you ask your ·1· · · · · · · · · ·(Whereupon, the record was read
·2· ·question again. ·2· · · · · · · · · · as requested.)
·3· ·BY MR. RENNER: ·3· ·BY MR. RENNER:
·4· · · ·Q.· ·So is it fair to say that New Harbor, ·4· · · ·Q.· ·Did someone have to give you approval
·5· ·in fact, did share a whole bunch of advice and ·5· ·as Ocean State's CEO for Ocean State to apply
·6· ·information with Ocean State regarding the PPP ·6· ·for the PPP loan?
·7· ·program? ·7· · · · · · MR. MOORMAN:· Objection, form.
·8· · · · · · MR. MOORMAN:· Objection, form. ·8· · · · · · THE WITNESS:· We had a board
·9· · · · · · THE WITNESS:· So it was more about -- ·9· ·resolution, so the board had to approve it along
10· ·it was more about sharing between, because all 10· ·with Deerpath, because they had rights to block
11· ·the portfolio companies were all looking at, 11· ·any additional debt into the business, so they
12· ·okay, should we be doing this or not, and there 12· ·had to approve it as well.
13· ·was more -- New Harbor was more functioning as a 13· ·BY MR. RENNER:
14· ·conduit so that people can share what they're 14· · · ·Q.· ·All right.· So I went through the
15· ·discovering and what they're finding out. 15· ·documents that have been produced, and it looks
16· ·BY MR. RENNER: 16· ·like Deerpath was involved in Ocean State's PPP
17· · · ·Q.· ·Whose ultimate decision was it whether 17· ·application; is that fair to say?
18· ·or not for Ocean State to apply for the PPP 18· · · ·A.· ·They provided certification that they
19· ·loan? 19· ·were SBIC accredited, and we included that in
20· · · ·A.· ·You know, myself and our CFO approved 20· ·our application, so they had all the information
21· ·by the board of Ocean State. 21· ·they needed to determine if we could get the
22· · · ·Q.· ·Why didn't you sign the loan 22· ·loan or not.
23· ·application that's Exhibit 8? 23· · · ·Q.· ·I'm referring to kind of advice,
24· · · ·A.· ·Because it was the pandemic, and I was 24· ·information regarding the loan.
25· ·in Chicago, and this had to be submitted in 25· · · ·A.· ·Well, so because Deerpath was an SBIC
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·1· ·accredited lender, many of their portfolio ·1· ·remember.· I mean, I'm not a signer to it, so --
·2· ·companies were going through the same process, ·2· ·BY MR. RENNER:
·3· ·so they were being helpful in providing ·3· · · ·Q.· ·Did you have any involvement in
·4· ·information that they were getting, you know, ·4· ·preparing this document, and by you, I mean
·5· ·again, kind of being a conduit for all their -- ·5· ·personally?
·6· ·for all their portfolio companies. ·6· · · ·A.· ·Well, no, I'm not a lawyer.· So a
·7· · · ·Q.· ·Would you say that Deerpath supported ·7· ·lawyer would have written this document.
·8· ·the idea of Ocean State taking out the -- taking ·8· · · ·Q.· ·Do you know who wrote this document?
·9· ·the PPP loan? ·9· · · ·A.· ·I don't.
10· · · · · · MR. MOORMAN:· Objection, form and 10· · · ·Q.· ·But you believe it was a
lawyers?
11· ·foundation. 11· · · ·A.· ·I would assume so.
12· · · · · · THE WITNESS:· So they -- you know, they 12· · · ·Q.· ·Okay.· You just don't -- you're
13· ·provided a certification to us that we 13· ·assuming, you don't know?
14· ·requested. 14· · · ·A.· ·Yeah.· Well, I mean, it's -- I know
15· ·BY MR. RENNER: 15· ·this says McDermott Will and Emery on the top,
16· · · ·Q.· ·Right, but would you say that they 16· ·so yes, I know that this was prepared by
17· ·wanted Ocean State to take the loan? 17· ·McDermott Will and Emery.
18· · · · · · MR. MOORMAN:· When you say they, you 18· · · ·Q.· ·All right.· If you look at -- well,
19· ·mean Deerpath? 19· ·strike that.
20· · · · · · MR. RENNER:· Deerpath. 20· · · · · · All right.· I'll show you Exhibit 10.
21· · · · · · MR. MOORMAN:· Objection, foundation. 21· · · ·A.· ·Yeah.
22· · · · · · THE WITNESS:· I really can't speculate 22· · · ·Q.· ·Take a minute to look at Exhibit 10,
23· ·on what Deerpath was thinking. 23· ·and let me know if you've ever seen this
24· · · · · · I can tell you that our board approved 24· ·document before.
25· ·it, and that they had rights to block it if they 25· · · ·A.· ·Yes, I have seen this document before.
61 63
·1· ·wanted to, and they didn't. ·1· · · ·Q.· ·Did you prepare this document?
·2· ·BY MR. RENNER: ·2· · · ·A.· ·Yes, I believe so, with input from
·3· · · ·Q.· ·You mean Deerpath? ·3· ·others.
·4· · · ·A.· ·Deerpath, yeah. ·4· · · ·Q.· ·And which others are you referring to?
·5· · · ·Q.· ·Again, you know, just based on my ·5· · · ·A.· ·I think Sarah Charette was involved,
·6· ·review of the documents that have been produced, ·6· ·and, I think, there was input from some of our
·7· ·it looks like there was a lot of e-mails going ·7· ·board members as well as New Harbor.
·8· ·back and forth between New Harbor people and ·8· · · ·Q.· ·Can you be more specific, like, which
·9· ·Deerpath and you regarding the PPP loan? ·9· ·specific individuals at New Harbor?
10· · · ·A.· ·Yeah. 10· · · ·A.· ·Probably John Pircon had some
11· · · ·Q.· ·Is that fair to say? 11· ·involvement I would believe.
12· · · ·A.· ·Yes. 12· · · ·Q.· ·Ed Lhee?
13· · · ·Q.· ·All right.· So getting back to 13· · · ·A.· ·Ed Lhee probably had some review
14· ·Exhibit 8. 14· ·capability.
15· · · ·A.· ·Yeah. 15· · · · · · I pretty much wrote this myself, but I
16· · · ·Q.· ·Is it correct that this is a copy of 16· ·think they --
17· ·the loan, the PPP loan application that Ocean 17· · · ·Q.· ·Tom Formolo?
18· ·State submitted? 18· · · ·A.· ·Likely as a board member, like all the
19· · · ·A.· ·Yes. 19· ·board members reviewed it of Ocean State.
20· · · ·Q.· ·All right.· I'll show you Exhibit 9. 20· · · ·Q.· ·So in Exhibit 8 --
21· · · · · · Have you seen this document before, Mr. 21· · · ·A.· ·Exhibit 8.
22· ·Roselli? 22· · · ·Q.· ·-- it identifies 277 employees --
23· · · · · · MR. MOORMAN:· Take your time to review 23· · · ·A.· ·Yeah.
24· ·it if you need to. 24· · · ·Q.· ·-- that Ocean State, LLC was using to
25· · · · · · THE WITNESS:· I honestly don't 25· ·calculate the average payroll, right?
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·1· · · ·A.· ·Yes. ·1· ·BY MR. RENNER:
·2· · · ·Q.· ·So we -- I mean, we went through this ·2· · · ·Q.· ·All right.· Mr. Roselli, you have
·3· ·before, but those 277 employees, those are not ·3· ·before you now what's Exhibit 20?
·4· ·just employees of Ocean State, LLC, but that ·4· · · ·A.· ·Mm-hmm, yes.
·5· ·also includes 23 professional entities, right? ·5· · · ·Q.· ·And this is the redacted version of the
·6· · · ·A.· ·Yes. ·6· ·May 7, 2020 Ocean State memo, right?
·7· · · ·Q.· ·Okay. ·7· · · ·A.· ·Yes.
·8· · · · · · MR. MOORMAN:· Eric, could we take a ·8· · · ·Q.· ·All right.· I also want to refer you
·9· ·break real quick? ·9· ·back to Exhibit 8, which is the PPP application.
10· · · · · · I think this document has a missing 10· · · ·A.· ·Yes, yes.
11· ·redaction on it, and I just want to confirm 11· · · ·Q.· ·So you see here Ocean State lists
12· ·whether this has to be clawed back. 12· ·1,263,920 for the average monthly payroll; do
13· · · · · · I think there were other versions of 13· ·you see that?
14· ·this document that correctly redacted a portion 14· · · ·A.· ·Yes.
15· ·that's not redacted in this version of the 15· · · ·Q.· ·All right.· And again, I don't want to
16· ·document. 16· ·have you restate your testimony, but that's the
17· · · · · · Can we take a quick break? 17· ·payroll for the 277 employees that you testified
18· · · · · · MR. RENNER:· Yes. 18· ·includes -- also includes the 23 professional
19· · · · · · · · · ·(Whereupon, a short recess was 19· ·corporations?
20· · · · · · · · · · taken.) 20· · · ·A.· ·Yes.
21· · · · · · MR. MOORMAN:· All right.· We're back on 21· · · ·Q.· ·All right.· So this 1.263 million
22· ·the record. 22· ·number that's in Exhibit 8, so is it correct to
23· · · · · · Ocean State is clawing back Exhibit 10, 23· ·say this payroll does not all relate to Ocean
24· ·which is PPPLITDEFS_00074573, because there was 24· ·State, LLC payroll; is that fair?
25· ·a portion of it that should have been redacted 25· · · · · · MR. MOORMAN:· Objection, form.
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·1· ·for legal advice. ·1· · · · · · THE WITNESS:· It's the payroll of all
·2· · · · · · This is an Ocean State memo drafted by ·2· ·the employees of the Ocean State, LLC and all
·3· ·John Roselli. ·3· ·the employees of the -- of the medical
·4· · · · · · We've since provided to Mr. Renner ·4· ·companies.
·5· ·another version of this document that contains ·5· ·BY MR. RENNER:
·6· ·the proper redaction. ·6· · · ·Q.· ·All right.· And so Ocean State, LLC
·7· · · · · · I don't know if you want to introduce ·7· ·aggregated that payroll together to come up with
·8· ·that as Exhibit 11 or a new Exhibit 10, it's up ·8· ·the number claimed in Exhibit 8?
·9· ·to you. ·9· · · ·A.· ·Yes.
10· · · · · · MR. RENNER:· Yeah, I'll make it 10· · · · · · MR. MOORMAN:· Objection, form.
11· ·Exhibit 20 just because that's what -- rather 11· ·BY MR. RENNER:
12· ·than having to review all the exhibits. 12· · · ·Q.· ·Yes?
13· · · · · · · · · ·(Whereupon, ROSELLI Deposition 13· · · ·A.· ·Yes.
14· · · · · · · · · · Exhibit No. 20 was marked for 14· · · ·Q.· ·What analysis, if any, did Ocean State,
15· · · · · · · · · · identification.) 15· ·or anyone on its behalf, undertake to determine
16· · · · · · MR. RENNER:· All right.· Do you have 16· ·the propriety of aggregating that payroll?
17· ·anything else? 17· · · ·A.· ·Well, since the inception of this
18· · · · · · MR. MOORMAN:· No. 18· ·structure of the business, you know, with New
19· · · · · · MR. RENNER:· All right.· I'm just going 19· ·Harbor partnering with the former owners, that
20· ·to state for the record, and reserve my 20· ·was the structure that they always paid the
21· ·objection to challenge the clawback and dispute 21· ·payroll.
22· ·whether or not the document contains privileged 22· · · · · · Like the medical companies, they
23· ·work product information.· I'm just reserving 23· ·effectively had no real bank accounts.· It was
24· ·that right. 24· ·all held at the Ocean State, LLC level.
25 25· · · · · · Ocean State paid all their bills and
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·1· ·all their, you know, payroll and everything, ·1· ·but it was -- I can tell you how the money
·2· ·right. ·2· ·flowed.
·3· · · ·Q.· ·But you testified earlier that Ocean ·3· ·BY MR. RENNER:
·4· ·State, LLC, you know, provided as part of its -- ·4· · · ·Q.· ·Yeah, sure, please.
·5· ·under its management services -- ·5· · · ·A.· ·You get -- you get payments from
·6· · · ·A.· ·Yeah. ·6· ·third-party payors that come into the each 23
·7· · · ·Q.· ·-- agreement, it provided payroll ·7· ·different entities, right.
·8· ·services, right? ·8· · · ·Q.· ·Like insurance companies, what do you
·9· · · ·A.· ·Yeah. ·9· ·mean?
10· · · · · · MR. MOORMAN:· Let him finish the 10· · · ·A.· ·Yeah, I mean, that's -- if you're a --
11· ·question. 11· ·I mean, I don't need to get into the specifics
12· ·BY MR. RENNER: 12· ·of the physician practice, you can do that on
13· · · ·Q.· ·Right, but the payroll itself -- I 13· ·your own, but you get, you know, the third-party
14· ·understand that Ocean State, LLC, you know, 14· ·payors, that's who pays for all this is all the
15· ·helped out with that -- but ultimately, you 15· ·insurance companies, they pay the 23 entities,
16· ·know, the payroll was the responsibility for the 16· ·right.
17· ·23 entities, right? 17· · · · · · We're actually managing that at the LLC
18· · · · · · MR. MOORMAN:· Objection. 18· ·level, because we have revenue cycle management
19· ·BY MR. RENNER: 19· ·people that manage all that, but they're -- you
20· · · ·Q.· ·Taking out -- stripping out, you know, 20· ·know, it's under the tax -- individual tax IDs
21· ·actual Ocean State, LLC employees, getting back 21· ·of all those different entities.· The money
22· ·to like Barrington, the Barrington location 22· ·flows into the accounts of those different
23· ·example, right, you know, it's that Barrington 23· ·entities, but then it's all transferred up to
24· ·PC that's responsible for paying its employees, 24· ·the LLC entity that pays everything, right.
25· ·right? 25· · · ·Q.· ·The LLC basically facilitates payment
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·1· · · · · · MR. MOORMAN:· Objection, form. ·1· ·for the 23 entities, correct?
·2· · · · · · THE WITNESS:· I mean, the structure was ·2· · · · · · MR. MOORMAN:· Objection, form.
·3· ·set up such that the LLC would do -- would ·3· ·BY MR. RENNER:
·4· ·manage all the nonmedical, and so as I talked ·4· · · ·Q.· ·Correct?
·5· ·about earlier, payroll benefits, you know, they ·5· · · ·A.· ·Yes.
·6· ·managed all that, and they paid all that, right, ·6· · · ·Q.· ·Okay.· Why didn't each of those 23
·7· ·and so there were collections, you know, from ·7· ·entities apply for a PPP loan itself as opposed
·8· ·third-party payors in the world of a physician ·8· ·to Ocean State, LLC?
·9· ·practice, collections were done by the 23 ·9· · · ·A.· ·Because they were, one, they're just
10· ·entities, but that money coming in was 10· ·medical offices.· They don't have any financial
11· ·ultimately always transferred up to the LLC, and 11· ·resources to do that, right, and --
12· ·then all the bills and all the payroll and 12· · · ·Q.· ·What do you mean by that?
13· ·everything was paid out of that LLC. 13· · · · · · MR. MOORMAN:· Let him -- let him finish
14· ·BY MR. RENNER: 14· ·his answers, too.
15· · · ·Q.· ·I guess -- 15· · · · · · THE WITNESS:· They're doctors, and
16· · · ·A.· ·For all -- for all employees of that -- 16· ·they're physician assistants, so the structure
17· ·of those medical companies. 17· ·is, is that you have a management company that
18· · · ·Q.· ·I guess, what I'm trying to figure out 18· ·manages all the business capabilities and the
19· ·is, at the end of the day, whose money was 19· ·nonmedical, as I've talked about a couple times
20· ·paying that Barrington employee; was it the 20· ·now, and, you know, so that's the structure of
21· ·Barrington practice's or was it Ocean State, 21· ·it.
22· ·LLC's money? 22· ·BY MR. RENNER:
23· · · · · · MR. MOORMAN:· Objection, form. 23· · · ·Q.· ·That was the structure imposed by New
24· · · · · · THE WITNESS:· Yeah, I mean, I don't 24· ·Harbor?
25· ·know if I can get into the legal side of things, 25· · · · · · MR. MOORMAN:· Objection, form.
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·1· · · · · · THE WITNESS:· It was a structure ·1· ·does that still exist there?
·2· ·created by the structuring of this whole thing, ·2· · · ·Q.· ·Yeah, Bristol County Savings Bank?
·3· ·and it's a structure basically any physician ·3· · · ·A.· ·Yeah, I think they acquired Freedom
·4· ·practice group is structured this way.· There's ·4· ·Bank.
·5· ·thousands of them, thousands of them in America, ·5· · · ·Q.· ·What about Deerpath?
·6· ·they're all structured this way. ·6· · · ·A.· ·I don't believe we -- we may have, but
·7· ·BY MR. RENNER: ·7· ·I don't remember.
·8· · · ·Q.· ·Okay.· I guess, I'm just still unclear ·8· · · ·Q.· ·What about anyone from New Harbor?
·9· ·why -- is there any other reason why each of ·9· · · ·A.· ·I'm sure we had discussions with them
10· ·those 23 entities didn't file their own PPP 10· ·about it, but I can't recall specifically.
11· ·application, was it just because New Harbor -- 11· · · ·Q.· ·Anyone else?
12· ·or Ocean State, LLC had more -- 12· · · ·A.· ·Probably -- well, probably the board of
13· · · ·A.· ·We had a -- 13· ·Ocean State.· There was probably discussions at
14· · · · · · MR. MOORMAN:· You guys -- 14· ·the board meetings.
15· · · · · · THE WITNESS:· Oh, sorry. 15· · · ·Q.· ·Law firms?
16· · · · · · MR. MOORMAN:· You guys keep talking 16· · · · · · MR. MOORMAN:· Again, you can answer
17· ·over each other.· You've got to let him finish, 17· ·that question yes or no, like, did you talk to a
18· ·and you've got to let him finish.· You guys keep 18· ·law firm about this issue?
19· ·talking over each other. 19· · · · · · THE WITNESS:· Yes.
20· · · · · · Can you read back the question? 20· · · · · · MR. MOORMAN:· And nothing else.
21· · · · · · · · · ·(Whereupon, the record was read 21· ·BY MR. RENNER:
22· · · · · · · · · · as requested.) 22· · · ·Q.· ·Did Ocean State, LLC, or anyone on its
23· · · · · · THE WITNESS:· So there's a -- as we 23· ·behalf, conduct any kind of need-based analysis
24· ·talked about in -- let me just pull out an 24· ·in advance of applying for the PPP loan?
25· ·exhibit here, if I can find it. 25· · · ·A.· ·Yes.
73 75
·1· · · · · · As we talked about on Exhibit 2, there ·1· · · ·Q.· ·And when I said -- I mean before
·2· ·is a management service agreement between Ocean ·2· ·April 3rd?
·3· ·State Companies and Ocean State, LLC that ·3· · · ·A.· ·Yes.
·4· ·manages that relationship. ·4· · · ·Q.· ·Okay.· And describe for me what that
·5· · · ·Q.· ·Did Ocean State, LLC undertake any kind ·5· ·involved.
·6· ·of analysis to determine whether it was ·6· · · ·A.· ·Well, so, you know, my understanding
·7· ·appropriate for Ocean State, LLC to submit the ·7· ·was, we -- as I remember, you had to show -- we
·8· ·PPP application after aggregating those 23 ·8· ·went in -- had to show a need based on -- you
·9· ·entity's employees? ·9· ·know, it was the Payroll Protection Act, PPP,
10· · · · · · MR. MOORMAN:· I'm going to caution you 10· ·right, so, you know, they wanted you to maintain
11· ·not to share any communications you had with 11· ·your employees and -- but, I mean, it was a very
12· ·attorneys beyond saying you consulted with 12· ·clear need.
13· ·attorneys. 13· · · · · · I mean, the business was not paying its
14· · · · · · THE WITNESS:· Yeah, yeah, we did quite 14· ·creditors, right, literally not paying Deerpath
15· ·a bit of analysis. 15· ·for all the money they loaned us, right, we had
16· ·BY MR. RENNER: 16· ·to -- we had had to lay off a number of
17· · · ·Q.· ·Okay.· Who was involved in that 17· ·employees previous to all this.
18· ·analysis? 18· · · · · · We -- then as COVID hit, our urgent
19· · · ·A.· ·Sarah Charette mainly, and probably -- 19· ·care business went to zero.· Nobody came in from
20· ·we probably discussed it with our bankers. I 20· ·one day to the next, gone, right.· Nobody could
21· ·don't think anybody else beyond that. 21· ·go into a primary care office.
22· · · ·Q.· ·Who were your bankers? 22· · · · · · We were able to transition to
23· · · ·A.· ·It was Freedom Bank, but now they got 23· ·telemedicine that reimbursed it about half what
24· ·-- they merged with somebody else.· I can't 24· ·normally would have been reimbursed at, and then
25· ·remember the -- Bristol Bank or something now -- 25· ·eventually, we were able to start providing
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·1· ·respiratory services. ·1· · · ·Q.· ·And was that communicated to Ocean
·2· · · · · · We got designated by the state of Rhode ·2· ·State or someone at New Harbor?
·3· ·Island as our respiratory services care offices, ·3· · · ·A.· ·Ocean State.
·4· ·like, five or six of our locations, and so we ·4· · · ·Q.· ·So was that communicated to you
·5· ·provided -- we were providing COVID testing, ·5· ·personally?
·6· ·and, I think, at one point we were the largest ·6· · · ·A.· ·Yes.
·7· ·provider of COVID testing in Rhode Island, but, ·7· · · ·Q.· ·All right.· So someone from Deerpath --
·8· ·you know, that didn't reimburse very well, so ·8· ·you asked someone from Deerpath -- let me finish
·9· ·our revenues dropped, if I remember correctly, ·9· ·--
10· ·by about half from the previous year, so it was 10· · · ·A.· ·Yeah.
11· ·a very clear need. 11· · · ·Q.· ·You -- is it your testimony that you
12· · · · · · If we didn't get that loan, we were 12· ·went to Deerpath, and said, hey, Deerpath, you
13· ·going to be closing entirely. 13· ·know, we want to reach out to see about getting
14· · · ·Q.· ·To be clear, I'm talking about before 14· ·a loan from a bank to, you know, fulfill our
15· ·the April 3rd, 2020 application. 15· ·needs during COVID, and Deerpath responded that
16· · · ·A.· ·Yeah, that's what I just explained to 16· ·they were vetoing you doing that?
17· ·you. 17· · · ·A.· ·So from the time I joined Ocean State,
18· · · ·Q.· ·I just want to understand. 18· ·we hadn't paid Deerpath any interest.· We were
19· · · · · · I'm talking about analysis that was 19· ·in technical default, and I was having weekly --
20· ·performed before the application. 20· ·I had a weekly call with the representative from
21· · · ·A.· ·And that's what I just explained to 21· ·Deerpath, Mauricio, we just talked through how
22· ·you. 22· ·the business was going, you know, were we making
23· · · ·Q.· ·Okay.· Did Ocean State, or anyone on 23· ·progress on the turnaround, so various times
24· ·its behalf, reach out to any banks to see if it 24· ·throughout those weekly calls for, you know,
25· ·could obtain a loan? 25· ·months and months, I'm sure we discussed that at
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·1· · · ·A.· ·So as I explained earlier, Deerpath was ·1· ·some point.· I can't recall exactly.
·2· ·our senior lender. ·2· · · ·Q.· ·But I'm saying -- my question is kind
·3· · · · · · They had veto rights on any additional ·3· ·of a specific timeframe, though, it's, you know,
·4· ·debt we could take. ·4· ·March is, you know, COVID comes along, and then
·5· · · · · · They had told us you can't take ·5· ·that timeframe between onset of COVID in March
·6· ·additional debt, so what would have been the ·6· ·and --
·7· ·point of reaching out to other banks? ·7· · · ·A.· ·Yeah.
·8· · · ·Q.· ·So no was the answer? ·8· · · ·Q.· ·-- then the April 3rd, 2020
·9· · · ·A.· ·No. ·9· ·application, did you reach out to Deerpath and
10· · · · · · MR. MOORMAN:· No wasn't his answer. 10· ·inquire whether they would allow Ocean State to
11· · · · · · He explained his answer, which was they 11· ·take a loan from another bank?
12· ·couldn't reach out to other banks. 12· · · ·A.· ·Again, I was talking to Mauricio
13· ·BY MR. RENNER: 13· ·weekly, so during that time, yes, we probably
14· · · ·Q.· ·All right.· Did you ask Deerpath, hey, 14· ·discussed that.
15· ·Deerpath -- 15· · · ·Q.· ·Again, are you speculating or can you
16· · · ·A.· ·Yes. 16· ·recall a specific conversation?
17· · · ·Q.· ·-- can we reach out to other banks? 17· · · · · · MR. MOORMAN:· Objection, asked and
18· · · ·A.· ·Yes. 18· ·answered.
19· · · ·Q.· ·And what -- their answer was no? 19· · · · · · THE WITNESS:· Yeah, I think, I answered
20· · · ·A.· ·There answer was no. 20· ·your question.
21· · · ·Q.· ·And why was their answer no?· What 21· ·BY MR. RENNER:
22· ·answer was given to you? 22· · · ·Q.· ·You probably did.· Is that what you're
23· · · ·A.· ·I can't give you their reasoning. 23· ·saying?
24· · · · · · I can just tell you that they had the 24· · · ·A.· ·I've answered your question.
25· ·right to say no, and they said no. 25· · · ·Q.· ·You haven't answered my question, sir.
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·1· · · · · · MR. MOORMAN:· You can provide another ·1· ·weekly, but I'm sure we had that discussion.
·2· ·answer.· It's up to you. ·2· · · ·Q.· ·But you can't point to a specific
·3· · · · · · Why don't you read the question back, ·3· ·conversation; is that fair to say?
·4· ·and you can answer the question. ·4· · · · · · MR. MOORMAN:· Asked and answered.
·5· · · · · · · · · ·(Whereupon, the record was read ·5· · · · · · He's told you that he is sure he had
·6· · · · · · · · · · as requested.) ·6· ·that specific conversation three times.
·7· · · · · · THE WITNESS:· Again, I had weekly ·7· ·BY MR. RENNER:
·8· ·discussions with him. ·8· · · ·Q.· ·So Exhibit 20 is the memo you prepared
·9· · · · · · We had discussed -- we discussed this a ·9· ·dated May 7, 2020, right?
10· ·number of times. 10· · · ·A.· ·Yeah.
11· · · · · · We weren't paying our interest at the 11· · · ·Q.· ·Are there any other memos prepared
12· ·time, and hadn't for months, and, like, on my 12· ·similar to this prior to May 7?
13· ·weekly call, did I ask them every time will you 13· · · ·A.· ·Well, we had a number of drafts if
14· ·let us borrow money, more money, I'm sure we 14· ·that's, you know -- but this is the -- I believe
15· ·discussed that at various points. 15· ·this is the final version.
16· ·BY MR. RENNER: 16· · · ·Q.· ·All right.· Getting back.· So we talked
17· · · ·Q.· ·But again, you don't have a specific 17· ·about obviously conversations with Deerpath
18· ·recollection? 18· ·about reaching out to banks, right?
19· · · · · · MR. MOORMAN:· Are you -- he answered 19· · · ·A.· ·Mm-hmm.
20· ·this question. 20· · · ·Q.· ·Did -- was there any thought given to
21· · · · · · Are you asking him, like, does he 21· ·New Harbor Capital going to its investors for
22· ·remember the date and time of the conversation? 22· ·funds?
23· · · · · · MR. RENNER:· No, I'm trying to -- so 23· · · ·A.· ·Yes.
24· ·COVID -- 24· · · ·Q.· ·Okay.· And can you describe for me
25· · · · · · MR. MOORMAN:· He said -- he said it 25· ·those conversations or that thought process?
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·1· ·three times, Eric, I talked about this with ·1· · · ·A.· ·Well, as we talked about earlier, they
·2· ·Mauricio on our weekly calls. ·2· ·had -- in September there was additional funding
·3· · · · · · MR. RENNER:· He didn't say -- he ·3· ·from Deerpath, and then there was a guarantee
·4· ·probably -- he said he probably talked to him. ·4· ·that New Harbor provided on some of that, and at
·5· · · · · · THE WITNESS:· I did talk to him about ·5· ·that point they -- it was clear that -- and they
·6· ·that. ·6· ·said specifically -- this is the last thing we
·7· ·BY MR. RENNER: ·7· ·can do.
·8· · · ·Q.· ·About what? ·8· · · ·Q.· ·And who is they?
·9· · · ·A.· ·That could we borrow more money, and ·9· · · ·A.· ·Both Deerpath and New Harbor.
10· ·the answer was no. 10· · · ·Q.· ·Okay.
11· · · ·Q.· ·But was this after the onset of COVID? 11· · · ·A.· ·Both of them.
12· · · ·A.· ·Why would that have changed anything? 12· · · ·Q.· ·So we talked about Deerpath, right?
13· · · ·Q.· ·Well, it would have changed anything in 13· · · ·A.· ·Yeah.
14· ·this way. 14· · · ·Q.· ·So New Harbor, you, John Roselli, as
15· · · · · · So COVID comes along, right, Ocean 15· ·Ocean State CEO, did you have discussions with
16· ·State has a choice, it can apply for a PPP loan 16· ·anyone from New Harbor about obtaining money
17· ·or it can first go to Deerpath, and say, hey -- 17· ·from investors.
18· · · ·A.· ·Yeah. 18· · · ·A.· ·Yes.
19· · · ·Q.· ·-- can we reach out to one of our 19· · · ·Q.· ·Okay.· And what were those discussions?
20· ·banks, or a bank, and get a loan instead of 20· · · ·A.· ·So, you know, with John Pircon and Ed
21· ·taking PPP money, I'm trying to figure out if 21· ·Lhee, we talked about could we, you know, get
22· ·you had that discussion with Mauricio. 22· ·more equity infusion into the business from New
23· · · ·A.· ·I'm sure I did. 23· ·Harbor at any point, and those discussions
24· · · · · · I mean, I can't remember specific 24· ·happened in September after we did the
25· ·discussions I had since I was talking to him 25· ·guarantees, and they were, like, that's it, we
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·1· ·can't do any more. ·1· · · ·Q.· ·Prior to the April 3rd, 2020 PPP
·2· · · ·Q.· ·Okay.· But specifically, the timeframe ·2· ·application, did Ocean State undertake any kind
·3· ·March, April, May of 2020, were those ·3· ·of formal cash flow analysis in connection with
·4· ·conversations -- ·4· ·its need-based analysis?
·5· · · ·A.· ·Yes. ·5· · · ·A.· ·So cash was very tight, so we managed
·6· · · ·Q.· ·-- that took place? ·6· ·cash -- we actually did a daily cash analysis,
·7· · · ·A.· ·Yes. ·7· ·daily and weekly analysis, so yeah, we were
·8· · · ·Q.· ·Okay.· And those conversations, can you ·8· ·doing it a lot.
·9· ·describe those for me? ·9· · · ·Q.· ·And was a cash flow analysis conducted
10· · · ·A.· ·Well, I mean, we -- you know, I had 10· ·specific -- specifically in connection with the
11· ·weekly calls with the New Harbor teams, so 11· ·decision process whether or not to apply for a
12· ·during those calls, we would talk about other 12· ·PPP loan?
13· ·sources of funding, and they said numerous times 13· · · · · · MR. MOORMAN:· Objection, form.
14· ·New Harbor cannot provide any more equity. 14· · · · · · THE WITNESS:· I mean, since we were
15· · · ·Q.· ·Why? 15· ·doing daily and weekly, there -- we didn't have
16· · · · · · MR. MOORMAN:· Why did they say or why 16· ·to do a specific analysis for a PPP loan.· We
17· ·couldn't New Harbor, because there's a 17· ·were doing it on a daily basis already, we did
18· ·foundation objection to the latter? 18· ·have to -- oh, never mind, strike that.
19· ·BY MR. RENNER: 19· · · · · · MR. MOORMAN:· That's the first time
20· · · ·Q.· ·Why did they say? 20· ·that's ever happened.
21· · · ·A.· ·Why did they say, I mean, so -- 21· ·BY MR. RENNER:
22· · · · · · MR. MOORMAN:· Objection, form. 22· · · ·Q.· ·This is the first time I'll ask this.
23· · · · · · THE WITNESS:· You know, the business 23· ·What were you just about to say?
24· ·had struggled for a very long time, and they 24· · · ·A.· ·Nothing.
25· ·were trying to support it as much as they could, 25· · · ·Q.· ·Nothing?
85 87
·1· ·but ultimately, you know, they have a fiduciary ·1· · · ·A.· ·Mm-hmm.
·2· ·duty to their investors, and they had determined ·2· · · ·Q.· ·Okay.· You said we did have to, and
·3· ·that they had invested as much as they could, ·3· ·then we stopped.· What were you going to say?
·4· ·and any more dollars invested would have not ·4· · · ·A.· ·Nothing.
·5· ·been a good investment for their investors, so ·5· · · ·Q.· ·All right.· I'll show you Exhibit 11.
·6· ·they determined not to provide funding. ·6· ·Do you recognize this document, sir?
·7· ·BY MR. RENNER: ·7· · · ·A.· ·Yes.
·8· · · ·Q.· ·And who did you have those ·8· · · ·Q.· ·All right.· And why does this document
·9· ·conversations with? ·9· ·have a Blueprint letterhead?
10· · · ·A.· ·John Pircon and Ed Lhee. 10· · · ·A.· ·So Blueprint had worked on a similar
11· · · ·Q.· ·Anyone else? 11· ·document, and we were just -- we were just
12· · · ·A.· ·I don't believe so. 12· ·borrowing this first paragraph on there from
13· · · · · · Probably other board members, too, 13· ·them, and -- because everything else is totally
14· ·because these were discussions that probably 14· ·related to Ocean State, we just -- there was
15· ·happened in board meetings. 15· ·just some good language that I wanted to use,
16· · · ·Q.· ·Ocean State board members? 16· ·and I had seen this, so I just, you know,
17· · · ·A.· ·Ocean State board members, right. 17· ·borrowed it, and we do that in the private
18· · · ·Q.· ·So, I mean, there's only so many of 18· ·equity world.· There's constantly sharing among
19· ·them. 19· ·companies for various things, not even related
20· · · · · · That would Tom Formolo, did you have 20· ·to financial.
21· ·conversations with him? 21· · · ·Q.· ·So just the first paragraph --
22· · · ·A.· ·Not directly. 22· · · ·A.· ·Yeah.
23· · · · · · Ed was the lead partner, and John 23· · · ·Q.· ·-- that you borrowed from Blueprint?
24· ·Pircon was vice president on it, so I would have 24· · · ·A.· ·It might be -- let me just keep going.
25· ·had discussions with them directly. 25· ·Yeah, probably just that.
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·1· ·rapidly.· So we had discussions with our board, ·1· ·assume.
·2· ·and there were sort of verbal approval to move ·2· · · · · · At the time of this written consent, do
·3· ·forward, but, you know, we needed to move ·3· ·you know whether or not you had written your
·4· ·quickly to get this done, and so we determined ·4· ·May 7th memo?
·5· ·to do the unanimous board consent documentation ·5· · · ·A.· ·You know, this is not a signed
·6· ·of it post doing the actual loan. ·6· ·document, so I don't know when it was signed.
·7· · · ·Q.· ·All right.· So in the fourth whereas ·7· · · ·Q.· ·Well, it's signed, and I only brought
·8· ·paragraph, Page 1; do you see that? ·8· ·one copy, but there are several versions each
·9· · · ·A.· ·Yeah. ·9· ·signed by --
10· · · ·Q.· ·It references an April 4th, 2020 10· · · ·A.· ·No date.
11· ·letter? 11· · · ·Q.· ·There is not a date, but this one, for
12· · · ·A.· ·Mm-hmm. 12· ·instance, is signed by Tom Formolo, but I'll
13· · · ·Q.· ·That it says the board carefully 13· ·represent to you there are other versions signed
14· ·reviewed? 14· ·by other board members.
15· · · ·A.· ·Mm-hmm. 15· · · ·A.· ·Okay.· But there's no date on this
16· · · ·Q.· ·Do you know when the board reviewed 16· ·document.
17· ·that April 4, 2020 letter; was it in May or was 17· · · ·Q.· ·There's not.
18· ·it back in April before the application? 18· · · ·A.· ·So I need to see a date in order to,
19· · · ·A.· ·I honestly can't remember that. 19· ·you know, understand when it was signed.
20· · · · · · Can I see the letter?· Do you have the 20· · · ·Q.· ·So you don't -- you don't know one way
21· ·letter in your -- in the documentation? 21· ·or another whether or not this is before or
22· · · ·Q.· ·I do.· I have one copy of it, but I'll 22· ·after your May 7th memo?
23· ·show it to you. 23· · · · · · MR. MOORMAN:· Objection, form.
24· · · · · · I think I brought a copy of it.· You 24· · · · · · THE WITNESS:· It's not a signed
25· ·know what, I have notes on this, so I'm not 25· ·document.
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·1· ·going to give it to you. ·1· · · · · · MR. MOORMAN:· Hold on.· Objection,
·2· · · · · · MR. MOORMAN:· That's fine. ·2· ·objection to form.
·3· ·BY MR. RENNER: ·3· · · · · · Why don't you restate the question.
·4· · · ·Q.· ·All right.· So do you know -- are you ·4· ·BY MR. RENNER:
·5· ·familiar with this April 4th, 2020 letter that's ·5· · · ·Q.· ·Well, I'm trying to figure out,
·6· ·being referenced, do you know what that letter ·6· ·right -- so Exhibit 20 is your memo that we
·7· ·is? ·7· ·talked about, right, the May 7th --
·8· · · ·A.· ·I do not, but I'm happy to look at it. ·8· · · ·A.· ·Yeah.
·9· · · ·Q.· ·I didn't bring it as an exhibit today, ·9· · · ·Q.· ·-- 2020 memo?
10· ·so we'll have to ask someone else. 10· · · ·A.· ·Yeah.
11· · · · · · MR. MOORMAN:· Just so we're clear -- 11· · · ·Q.· ·I'm trying to figure out whether or not
12· · · · · · THE WITNESS:· I'm sure I've seen the 12· ·this -- I'm trying to figure out whether
13· ·letter, but I need to see it in front of me in 13· ·Exhibit 20 was prepared before or after
14· ·order to talk intelligently about it. 14· ·Exhibit 12 was signed, and Exhibit 12, as you
15· ·BY MR. RENNER: 15· ·noted, does not have a date on it, so I don't
16· · · ·Q.· ·All right.· All right.· Exhibit 12 also 16· ·know when it was prepared.· I'm asking -- I'm
17· ·references on Page 2 your May 7th memo? 17· ·trying to get that from you.
18· · · ·A.· ·Yeah.· Where do you see that? 18· · · ·A.· ·Well, I didn't prepare this document,
19· · · ·Q.· ·It's on Page 2.· It's the fifth whereas 19· ·so it's very hard for me to speculate when it
20· ·paragraph. 20· ·was prepared.
21· · · ·A.· ·Okay.· And there's an exhibit, was it 21· · · · · · I reviewed it, and I'm sure -- and it
22· ·attached, it says Exhibit B? 22· ·was signed and dated at some point, but this --
23· · · ·Q.· ·Well, it says a PPP qualification and 23· ·the exhibit you're showing me is not dated.
24· ·needs memo, which I can only assume is referring 24· · · ·Q.· ·This is the exhibit that I was given,
25· ·to your -- you know what, I'm not going to 25· ·so that's what I have.
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·1· · · ·A.· ·And so I don't think I can respond to ·1· · · ·A.· ·I don't.
·2· ·your question. ·2· · · ·Q.· ·You don't, is that the answer?
·3· · · ·Q.· ·Okay.· All right.· I'm showing you ·3· · · ·A.· ·I don't.
·4· ·Exhibit 13.· Have you seen this document before, ·4· · · ·Q.· ·Is there any reason why New Harbor
·5· ·sir? ·5· ·didn't make a payment in the amount of 5 million
·6· · · ·A.· ·Yes, I have seen this document. ·6· ·dollars, or some lesser amount, to Ocean State
·7· · · ·Q.· ·All right.· This is dated April 20, ·7· ·that could have been used by Ocean State to fund
·8· ·2020, right? ·8· ·its ongoing operations?
·9· · · ·A.· ·Yes, it is. ·9· · · · · · MR. MOORMAN:· Objection, foundation.
10· · · ·Q.· ·All right.· So you testified earlier 10· · · · · · THE WITNESS:· Yeah, I can't respond on
11· ·about, you know, Deerpath vetoing Ocean State 11· ·New Harbor's rationale.
12· ·taking on another loan from a bank, right? 12· ·BY MR. RENNER:
13· · · ·A.· ·Yes. 13· · · ·Q.· ·Well, this is a loan agreement which
14· · · ·Q.· ·Why did Deerpath allow Ocean State to 14· ·Ocean State is a party, right?
15· ·take out a PPP loan? 15· · · ·A.· ·Yes.
16· · · · · · MR. MOORMAN:· Objection, foundation. 16· · · ·Q.· ·And you were at this time the CEO of
17· ·BY MR. RENNER: 17· ·Ocean State, right?
18· · · ·Q.· ·Or what reason was given by Deerpath? 18· · · ·A.· ·Mm-hmm.
19· · · ·A.· ·Well, at the time the CARES Act was 19· · · ·Q.· ·So I take it you must have been aware
20· ·created, and we were eligible for -- the 20· ·of the fifth amendment to the loan agreement
21· ·business was eligible for the loan, and so 21· ·that's Exhibit 13, right?
22· ·Deerpath approved it. 22· · · ·A.· ·Yes.
23· · · · · · I can't get into why they did that. 23· · · ·Q.· ·All right.· But what involvement, if
24· ·That's their decision, but they did. 24· ·any, did you have in this loan agreement?
25· · · ·Q.· ·Okay.· Did they ever give you an 25· · · ·A.· ·Well, you know, I worked with Deerpath
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·1· ·explanation about their decision? ·1· ·and New Harbor to put this together.
·2· · · ·A.· ·They provided a certification that, you ·2· · · · · · You know, we had lawyers obviously
·3· ·know, they were SBIC qualified lender, but no, ·3· ·document the whole thing.
·4· ·they didn't. ·4· · · ·Q.· ·You signed this document, though,
·5· · · ·Q.· ·Well, no, but didn't Ocean State -- it ·5· ·right?
·6· ·had to go and get approval from Deerpath to take ·6· · · ·A.· ·Yeah.
·7· ·out the PPP loan, right? ·7· · · ·Q.· ·And if you look at Bates 74126, that's
·8· · · ·A.· ·Correct. ·8· ·your signature?
·9· · · ·Q.· ·All right.· And what reason, if any, ·9· · · ·A.· ·Mm-hmm.
10· ·was given by Deerpath to Ocean State as to why 10· · · ·Q.· ·All right.· So you signed the document,
11· ·it was allowed -- why Deerpath was allowing 11· ·and on Page 1 it references a 5 million dollar
12· ·Ocean State to take out a PPP loan? 12· ·payment from New Harbor to Deerpath, right?
13· · · ·A.· ·We were eligible, and they said yes, 13· · · ·A.· ·Yeah.
14· ·you can do it. 14· · · ·Q.· ·All right.· I'm just trying to get from
15· · · ·Q.· ·Nothing else? 15· ·you the details of that 5 million dollar
16· · · ·A.· ·Nothing else. 16· ·payment, why it was made, if you know?
17· · · ·Q.· ·All right.· Exhibit 13, the first page, 17· · · · · · MR. MOORMAN:· Objection, form and
18· ·if you look at Recital C. 18· ·foundation.
19· · · ·A.· ·Mm-hmm. 19· · · · · · THE WITNESS:· So in this document
20· · · ·Q.· ·It references a 5 million dollar 20· ·Deerpath is consenting to the PPP loan.· That's
21· ·payment from New Harbor to Deerpath; do you see 21· ·on Item D.
22· ·that? 22· ·BY MR. RENNER:
23· · · ·A.· ·Yes. 23· · · ·Q.· ·But really what I'm trying to figure
24· · · ·Q.· ·Do you recall the details surrounding 24· ·out is why was it that New Harbor chose to pay 5
25· ·that 5 million dollar payment? 25· ·million dollars to Deerpath as opposed to paying
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·1· ·that money to Ocean State, and help out Ocean ·1· · · ·A.· ·But again, the guarantors are Ocean
·2· ·State during COVID? ·2· ·State.
·3· · · · · · MR. MOORMAN:· Objection, foundation, ·3· · · · · · New Harbor isn't a party to this
·4· ·and scope to the extent you're asking for New ·4· ·agreement.
·5· ·Harbor's rationale, and I also object, I think, ·5· · · ·Q.· ·Okay.· So then -- well, it refers to
·6· ·you're misstating what this agreement -- what is ·6· ·Ocean State Holdings, right?
·7· ·happening in this agreement. ·7· · · ·A.· ·Mm-hmm.
·8· ·BY MR. RENNER: ·8· · · ·Q.· ·Okay.· So then why didn't Ocean State
·9· · · ·Q.· ·Guarantors, the guarantors are who? ·9· ·Holdings make a payment to fund Ocean State, LLC
10· · · ·A.· ·I'm going to have to read this really 10· ·to help out during COVID?
11· ·closely. 11· · · · · · MR. MOORMAN:· Again, objection,
12· · · · · · MR. MOORMAN:· While he's reading it, is 12· ·foundation.
13· ·this the amendment that relates to the same 13· · · · · · He's here to discuss the reasons,
14· ·series of amendments that you showed him dated 14· ·perspectives of why Ocean State, LLC, the
15· ·back to 2019? 15· ·defendant in this case, not why any of the New
16· · · · · · MR. RENNER:· Yes. 16· ·Harbor entities did anything.
17· · · · · · THE WITNESS:· Yes, exhibit -- fourth 17· · · · · · I also continue to object to the
18· ·amendment. 18· ·characterization that this was a 5 million
19· · · · · · MR. MOORMAN:· And is there -- was this 19· ·dollar payment, the obligation of which is
20· ·the original guarantee or were there guarantees 20· ·stated here.
21· ·before this? 21· ·BY MR. RENNER:
22· · · · · · MR. RENNER:· That would be a stated 22· · · ·Q.· ·So are you able to testify as to
23· ·guarantee, and I assume that there is reference 23· ·details concerning this 5 million dollar payment
24· ·to a document. 24· ·referenced in Exhibit 13?
25· · · · · · MR. MOORMAN:· Okay. 25· · · ·A.· ·I would need to read through the entire
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·1· · · · · · THE WITNESS:· So the guarantors are all ·1· ·-- not only this fifth amendment -- but all
·2· ·the various Ocean State entities; Ocean State, ·2· ·other amendments to really get a full
·3· ·LLC, Ocean State Holdings. ·3· ·understanding of this.
·4· ·BY MR. RENNER: ·4· · · ·Q.· ·As you sit here today, do you have a
·5· · · ·Q.· ·So you're saying that the guarantors ·5· ·recollection of the details concerning this 5
·6· ·are not Deerpath -- I mean, excuse me, strike ·6· ·million dollar payment in April of 2020?
·7· ·that. ·7· · · ·A.· ·I don't have a recollection of this.
·8· · · · · · The guarantors, your understanding is ·8· · · ·Q.· ·Okay.
·9· ·that that doesn't refer to New Harbor? ·9· · · ·A.· ·I -- yeah.
10· · · ·A.· ·I don't see New Harbor referenced here 10· · · ·Q.· ·All right.· I'll show you Exhibit 14,
11· ·in the first paragraph at all. 11· ·and just let me know if you recognize this
12· · · ·Q.· ·All right.· So then by that, is Ocean 12· ·document.
13· ·State making the 5 million dollar payment? 13· · · ·A.· ·I would really have to just read
14· · · · · · MR. MOORMAN:· Objection again to the 14· ·through this whole document to understand it and
15· ·extent that it mischaracterizes this series of 15· ·recollect.
16· ·documents. 16· · · ·Q.· ·All right.· But as you sit here today,
17· ·BY MR. RENNER: 17· ·you don't have an independent recollection of
18· · · ·Q.· ·I'm just trying to figure out who made 18· ·this document?
19· ·this 5 million dollar payment to Deerpath. 19· · · ·A.· ·No.
20· · · ·A.· ·I'm going to have to read this 20· · · ·Q.· ·Okay.· So I want to refer --
21· ·document, like, the whole document to understand 21· · · · · · MR. MOORMAN:· You can stop reading the
22· ·it, so if you would like me to do that, I can. 22· ·document.· He's going to ask you questions.
23· · · ·Q.· ·You know, I mean, it sounds like we 23· ·BY MR. RENNER:
24· ·might need to ask New Harbor, they might be able 24· · · ·Q.· ·So I want to refer you back to March
25· ·to -- 25· ·and April of 2020, that timeframe.
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·1· · · · · · Was Ocean State, LLC, was it ordered by ·1· ·companies.
·2· ·any kind of governmental entity to shut down? ·2· · · · · · You have charges that you set, you
·3· · · ·A.· ·Well, I think there was -- there was -- ·3· ·know, as provider, and you submit those claims.
·4· ·you know, at the time Rhode Island had their ·4· · · · · · The insurance companies might have a
·5· ·state requirements about how you could operate a ·5· ·negotiated rate, might not.
·6· ·doctor office. ·6· · · · · · They'll come back to you for that
·7· · · · · · Initially, you had to -- what I do -- ·7· ·claim, that code, we pay this much, and it might
·8· ·what I recollect is it took them a few weeks to ·8· ·be 30 percent under what you actually, you know,
·9· ·come out with pronouncements about how you could ·9· ·charge.
10· ·operate in certain settings, and they had 10· · · · · · I think, if I remember correctly, with
11· ·guidelines around a doctor's office setting, and 11· ·Ocean State, we had about -- it was from charges
12· ·yeah, so we had requirements from the state of 12· ·to actual collections, there was like a
13· ·Rhode Island. 13· ·30 percent, 35 percent discount from that.
14· · · ·Q.· ·But did Ocean State ever have to 14· · · ·Q.· ·Yeah, maybe I didn't word my question
15· ·actually shut down and close its operations? 15· ·correctly.
16· · · ·A.· ·No. 16· · · · · · When I'm referring to collections, I
17· · · ·Q.· ·What were the relevant industry trends 17· ·mean, like, actually getting the money from the
18· ·for Ocean State's line of business as of April 18· ·insurance company.
19· ·2020? 19· · · ·A.· ·Yeah.
20· · · · · · MR. MOORMAN:· Objection to foundation. 20· · · ·Q.· ·They might mark it down, but they
21· · · · · · THE WITNESS:· I don't have any trend. 21· ·always pay, right?
22· ·BY MR. RENNER: 22· · · ·A.· ·No.
23· · · ·Q.· ·Well, what was the general -- in March 23· · · ·Q.· ·No?
24· ·and April of 2020, what was the general outlook 24· · · ·A.· ·No, you've got to -- you've got to --
25· ·for, you know, the healthcare industry? 25· ·yeah, I mean, there's -- it's a lot of work to
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·1· · · ·A.· ·You know, I didn't get sort of trend ·1· ·manage the revenue cycle side of a physician
·2· ·information from anywhere. ·2· ·practice group, and, you know, you've got to
·3· · · · · · I mean, you know, it's healthcare, ·3· ·always be following up, and they often will come
·4· ·right, everybody needs healthcare all the time, ·4· ·back and not pay on claims, and then you have to
·5· ·so -- but as far as like did I get trend ·5· ·go back and forth with them, and, you know,
·6· ·analysis from various research organizations, ·6· ·fight over that.
·7· ·no, I haven't -- I didn't see that at that time. ·7· · · · · · You might have miscoded something, they
·8· · · ·Q.· ·What were Ocean State's revenues driven ·8· ·might have misread something, you know, and you
·9· ·by, like, you referenced third-party payors ·9· ·just kind of -- and then sometimes you have to
10· ·before, you know, is that largely from insurance 10· ·write things off.
11· ·companies, private individuals or something 11· · · ·Q.· ·As of March 31, 2020, how much cash did
12· ·like -- 12· ·Ocean State have on hand?
13· · · ·A.· ·Well, revenue is driven by patient 13· · · ·A.· ·As of what date?
14· ·visits, right, so patients come in, and most 14· · · ·Q.· ·March 31, 2020.
15· ·patients have insurance, they provide us their 15· · · ·A.· ·You know, you're going to --
16· ·insurance information, and they might have a 16· · · ·Q.· ·I mean, I'm not asking to the penny,
17· ·co-pay, so they pay their co-pay, and then you 17· ·but if you have an idea.
18· ·will create a claim for their visit, and you put 18· · · ·A.· ·I mean, approximately, I would say we
19· ·the claim through a clearinghouse, and those go 19· ·had maybe $500,000 on hand.· This is prior to
20· ·out to their insurance companies, and then the 20· ·getting the PPP loan.
21· ·insurance companies ultimately pay back to the 21· · · ·Q.· ·Right.
22· ·business based on the negotiated rate, right. 22· · · ·A.· ·I think I saw documents earlier at some
23· · · ·Q.· ·What about collections, are collections 23· ·point we had about 350.· I don't know if it was
24· ·an issue with insurance companies or not? 24· ·that date.· It was around the date that we got
25· · · ·A.· ·Yes, it can be an issue with insurance 25· ·the PPP loan.
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·1· · · · · · MR. MOORMAN:· Objection.· He can answer ·1· ·April 1.
·2· ·the question if he knows in his personal ·2· · · ·Q.· ·Okay.· And did -- this is an unsigned
·3· ·capacity, but not on behalf of -- he's not here ·3· ·document --
·4· ·to testify on behalf of New Harbor. ·4· · · ·A.· ·Okay.
·5· · · · · · THE WITNESS:· Yeah, so I'm not -- I ·5· · · ·Q.· ·-- I'll tell you, sir, but do you know
·6· ·can't really respond to New Harbor's ·6· ·if Ocean State ultimately did end up in engaging
·7· ·perspective, but typically, what they would do ·7· ·Livingstone?
·8· ·is just have any business that was kind of ·8· · · ·A.· ·Yes.
·9· ·reaching -- you know, typically we own a ·9· · · ·Q.· ·And do you know when, roughly, the
10· ·business for five years or more, and so you'd 10· ·date?
11· ·have stuff in there that is around that vintage, 11· · · ·A.· ·It was around this date.· Obviously, it
12· ·and, yeah, so -- 12· ·wasn't before April, but it was close to that.
13· ·BY MR. RENNER: 13· · · ·Q.· ·All right.· So is it accurate to say
14· · · ·Q.· ·So are you aware whether as of March 14· ·that as of April 1, 2020, Ocean State had
15· ·2020, there was a plan to exit from Ocean State? 15· ·engaged Livingstone in connection with the sale
16· · · ·A.· ·As of March 2020, we were not working 16· ·of Ocean State?
17· ·on an exit, from an Ocean State perspective, we 17· · · ·A.· ·Yes.
18· ·were not working at all on selling the business. 18· · · · · · MR. MOORMAN:· Objection, objection,
19· · · ·Q.· ·Okay.· But are you able to testify as 19· ·form.
20· ·to from a New Harbor perspective? 20· · · · · · Are you talking the sale that
21· · · ·A.· ·Probably not.· I think that would be a 21· ·ultimately happened or are you talking about a
22· ·New Harbor question. 22· ·potential sale here, that's the form objection,
23· · · ·Q.· ·But you're not able to testify to that, 23· ·because there was a sale.
24· ·is that what you're saying? 24· · · · · · MR. RENNER:· I'm referring to a
25· · · ·A.· ·Yes. 25· ·potential sale.
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·1· · · ·Q.· ·Okay.· All right.· Could you look at be ·1· · · · · · THE WITNESS:· Okay.· Potential sale.
·2· ·Exhibit 16, please? ·2· ·BY MR. RENNER:
·3· · · ·A.· ·Okay.· Got it. ·3· · · ·Q.· ·So why did Ocean State engage
·4· · · · · · MR. MOORMAN:· Eric, this handwriting on ·4· ·Livingstone?
·5· ·top, is that -- ·5· · · ·A.· ·To explore a potential sale of Ocean
·6· · · · · · MR. RENNER:· That's not mine.· It's the ·6· ·State.
·7· ·original. ·7· · · ·Q.· ·Okay.· And so is it fair to say that as
·8· · · · · · THE WITNESS:· Yeah. ·8· ·of April 1, 2020, Ocean State had engaged
·9· · · · · · MR. RENNER:· The 16, no, it's not mine, ·9· ·Livingstone to explore the potential sale of
10· ·not my handwriting. 10· ·Ocean State?
11· ·BY MR. RENNER: 11· · · ·A.· ·Yes.
12· · · ·Q.· ·Have you seen this document before, 12· · · ·Q.· ·All right.· So is it fair to say then
13· ·sir? 13· ·that as of April 1, 2020, Ocean State was
14· · · ·A.· ·Yes. 14· ·contemplating the potential sale of Ocean State?
15· · · ·Q.· ·All right.· Who is Livingstone 15· · · ·A.· ·Yes.· I just should be clear, though,
16· ·Partners, LLC? 16· ·that this is like the first step.
17· · · ·A.· ·They're an investment bank. 17· · · · · · Like, when you start to consider exit,
18· · · ·Q.· ·All right.· Is it a fair 18· ·the first thing you do is hire an investment
19· ·characterization -- well, strike that. 19· ·bank, so this was the beginning of that.
20· · · · · · Did Ocean State have discussions with 20· · · ·Q.· ·Did you have discussions with
21· ·Livingstone regarding selling Ocean State? 21· ·individuals from Livingstone?
22· · · ·A.· ·Yeah. 22· · · ·A.· ·Yes.
23· · · ·Q.· ·All right.· And do you know when those 23· · · ·Q.· ·Okay.· And when did those discussions
24· ·discussions with Livingstone first took place? 24· ·first --
25· · · ·A.· ·It would be on and around this date of 25· · · ·A.· ·On and around --
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·1· · · · · · MR. MOORMAN:· You guys -- ·1· · · · · · MR. MOORMAN:· Objection, form.
·2· · · · · · THE WITNESS:· I'm sorry. ·2· · · · · · THE WITNESS:· It typically flows
·3· · · · · · MR. MOORMAN:· -- you've got to give him ·3· ·directly to the owners of the business when you
·4· ·time to ask his question. ·4· ·sell a company, and you'll have a -- you'll have
·5· ·BY MR. RENNER: ·5· ·a funds flow, and it will have, you know, the
·6· · · ·Q.· ·When did you first have discussions ·6· ·owners and their, you know, bank accounts, and
·7· ·with Livingstone about the sale -- or potential ·7· ·the money gets wired directly to the owners.
·8· ·sale of Ocean State? ·8· ·BY MR. RENNER:
·9· · · ·A.· ·On or around this date. ·9· · · ·Q.· ·All right.· But my question, I guess,
10· · · ·Q.· ·When Ocean State certified in its PPP 10· ·is when Ocean State certified that the PPP loan
11· ·application that it needed the PPP loan, were 11· ·was necessary --
12· ·the proceeds of a potential sale of Ocean State 12· · · ·A.· ·Yeah.
13· ·considered? 13· · · ·Q.· ·-- did Ocean State give any
14· · · · · · MR. MOORMAN:· Objection, form. 14· ·consideration to there being a potential sale of
15· · · · · · THE WITNESS:· Yeah, can you -- can you 15· ·Ocean State?
16· ·be more specific or elaborate a little bit more 16· · · · · · MR. MOORMAN:· Objection, form.
17· ·what you're asking? 17· · · · · · THE WITNESS:· Well, it was contemplated
18· ·BY MR. RENNER: 18· ·at some point that we would sell the business,
19· · · ·Q.· ·Well, I assume -- correct me if I'm 19· ·but you understand, if you sell a business -- if
20· ·wrong -- but Ocean State anticipated that if and 20· ·you start the process of selling a business,
21· ·when it was sold, there would be proceeds from 21· ·it's three to five months before you ever
22· ·the sale coming to Ocean State, correct? 22· ·actually sell the business, and we were running
23· · · ·A.· ·Mm-hmm, mm-hmm. 23· ·out of money immediately, like, we weren't -- we
24· · · · · · MR. MOORMAN:· Hold on.· Coming to who? 24· ·weren't going to be able to make payroll in two
25· · · · · · MR. RENNER:· To Ocean State. 25· ·weeks, so it wouldn't have been a source of
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·1· · · · · · THE WITNESS:· Well, it would have been ·1· ·funding.
·2· ·coming to the owners of Ocean State. ·2· · · · · · We would have, you know, closed up
·3· ·BY MR. RENNER: ·3· ·shop, and there would be nothing to sell.
·4· · · ·Q.· ·Okay.· When it made that -- when Ocean ·4· ·BY MR. RENNER:
·5· ·State made the, you know, economic necessity ·5· · · ·Q.· ·How was Ocean State funded in the past?
·6· ·certification in its PPP loan application, did ·6· · · · · · MR. MOORMAN:· Objection, form.
·7· ·it consider the fact that there would be ·7· ·BY MR. RENNER:
·8· ·proceeds from the potential sale coming in? ·8· · · ·Q.· ·Like we talked about Deerpath, right?
·9· · · · · · MR. MOORMAN:· Objection, form. ·9· · · · · · MR. MOORMAN:· Objection, form.
10· · · · · · THE WITNESS:· Again, a potential sale 10· · · · · · THE WITNESS:· Funded in the past, well,
11· ·would provide -- would provide -- the dollars 11· ·you know, it was funded through the operations
12· ·would flow to the owners.· It may not 12· ·of the business and then some loans, but, you
13· ·necessarily flow into the business. 13· ·know, it's usually you want a business to be
14· · · · · · When you sell a business, it's equity 14· ·funded through the operations of the business in
15· ·to the owners and paying off the debt, and there 15· ·order to be a viable business.
16· ·-- you know, there may not be any additional 16· ·BY MR. RENNER:
17· ·capital invested in the business. 17· · · ·Q.· ·Well, I'm just trying to get a sense of
18· ·BY MR. RENNER: 18· ·all the available sources of funding.
19· · · ·Q.· ·Well, this isn't invested in the 19· · · · · · You talked about operations revenue,
20· ·business, it's proceeds of a sale -- 20· ·right?
21· · · ·A.· ·That goes to the owners of the 21· · · ·A.· ·Earnings, not revenue.
22· ·business. 22· · · ·Q.· ·Fair enough, earnings.
23· · · ·Q.· ·Well, it would come to the business, 23· · · · · · Well, Ocean State had utilized SBIC
24· ·and then would be distributed to the owners; is 24· ·funding as a source of -- as a source before,
25· ·that fair to say? 25· ·correct?
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·1· · · ·A.· ·Correct. ·1· · · ·A.· ·To fund operations.
·2· · · ·Q.· ·And had Ocean State used New Harbor as ·2· · · ·Q.· ·All right.· And why was that funding
·3· ·a source of funding in the past? ·3· ·made or provided -- provided -- why was that
·4· · · ·A.· ·Well, they provided equity investments, ·4· ·funding provided by New Harbor?
·5· ·yeah, not debt, but equity. ·5· · · · · · MR. MOORMAN:· Objection, foundation,
·6· · · ·Q.· ·Do you know how much? ·6· ·also scope.
·7· · · ·A.· ·You know, it probably would be ·7· · · · · · He's here to talk about Ocean State,
·8· ·difficult for me to answer that question. ·8· ·not New Harbor.
·9· · · ·Q.· ·All right.· So other than New Harbor ·9· · · · · · THE WITNESS:· So I can tell you from a
10· ·and Deerpath and earnings, what other funding 10· ·-- from an Ocean State perspective, we were
11· ·sources were there for Ocean State? 11· ·running out of funding.
12· · · · · · MR. MOORMAN:· Objection, form. 12· · · · · · We were not operationally cash-flow
13· · · · · · THE WITNESS:· I think at some point 13· ·positive, so we needed additional equity.
14· ·some of the other owners, the doctors that owned 14· ·BY MR. RENNER:
15· ·might have done some pro rata, you know, equity 15· · · ·Q.· ·How did Ocean State request that
16· ·injections when that was done, but I -- it was 16· ·additional equity?
17· ·before I was there. 17· · · ·A.· ·That would be difficult for me to ask
18· · · · · · They didn't do that after I was there. 18· ·-- or answer, because they did that before I was
19· ·BY MR. RENNER: 19· ·even involved.
20· · · ·Q.· ·What about funding through investors? 20· · · · · · Like, it funded right after I got
21· · · ·A.· ·You'd have to be more specific about 21· ·involved, but the discussions started before I
22· ·what do you mean by investors? 22· ·was interim CEO of the business.
23· · · ·Q.· ·Well, the LPs in the fund? 23· · · ·Q.· ·So I want to focus on the timeframe
24· · · · · · MR. MOORMAN:· Objection, form. 24· ·just prior to the April 3rd, 2020 PPP
25· · · · · · THE WITNESS:· Yeah, I think you're 25· ·application.
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·1· ·going to have to talk to New Harbor about that. ·1· · · · · · Did Ocean State have access to a
·2· ·BY MR. RENNER: ·2· ·revolving line of credit from Deerpath?
·3· · · ·Q.· ·All right.· How would Ocean State get ·3· · · ·A.· ·We had a revolving line of credit with
·4· ·funding from New Harbor Capital, like, what's ·4· ·Deerpath.
·5· ·the process? ·5· · · ·Q.· ·Was there credit available?
·6· · · · · · MR. MOORMAN:· Objection to form. ·6· · · ·A.· ·No.
·7· · · · · · THE WITNESS:· Yeah, again, as an Ocean ·7· · · ·Q.· ·No.· It had been used up, is that
·8· ·State CEO from September 19th or, you know, ·8· ·right?
·9· ·early September onward, we didn't get any equity ·9· · · ·A.· ·That's correct.
10· ·infusions from New Harbor, so I have difficulty 10· · · ·Q.· ·And I take it from your earlier
11· ·answering that question. 11· ·testimony, Ocean State didn't submit any loan
12· ·BY MR. RENNER: 12· ·applications at other -- for non-PPP funds?
13· · · ·Q.· ·That would be something New Harbor 13· · · ·A.· ·No.
14· ·would have to answer? 14· · · ·Q.· ·And I take it from your prior
15· · · ·A.· ·Yeah, I would think so, yeah. 15· ·testimony, Ocean State didn't request funding
16· · · ·Q.· ·So in 2019 is it correct that New 16· ·from Deerpath?
17· ·Harbor Capital provided funds to Ocean State for 17· · · ·A.· ·No, that's not what I said earlier,
18· ·working capital? 18· ·but, you know, I don't know if I want to get
19· · · ·A.· ·I'm sorry, when? 19· ·into this again, but --
20· · · ·Q.· ·In 2019 do you recall New Harbor 20· · · ·Q.· ·These were the discussions with
21· ·providing 2 million dollars roughly in funds to 21· ·Mauricio you talked about?
22· ·Ocean State? 22· · · ·A.· ·I had weekly discussions with Deerpath
23· · · ·A.· ·Yes. 23· ·from the time I started in September.
24· · · ·Q.· ·Okay.· And what was the purpose of that 24· · · ·Q.· ·So without the PPP loan, how would
25· ·2 million dollars? 25· ·Ocean State have survived?
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·1· · · ·A.· ·Well, I think it would be fair to say ·1· ·loan -- from the time I got involved until, you
·2· ·that it probably wouldn't have. ·2· ·know, after COVID, we weren't paying on our
·3· · · ·Q.· ·So it would have shut down? ·3· ·loan, so they could have done that at any point,
·4· · · ·A.· ·It wouldn't have been able to pay its ·4· ·but they felt like we were working hard to try
·5· ·employees. ·5· ·to turn the business around, and as a -- just
·6· · · ·Q.· ·New Harbor -- your understanding is ·6· ·basically a lender, they have no ability to run
·7· ·that New Harbor would have just let it fail? ·7· ·a primary care, urgent care business, so they
·8· · · · · · MR. MOORMAN:· Objection.· He's here to ·8· ·really were depending on -- they thought we were
·9· ·talk about Ocean State, not New Harbor. ·9· ·their best option to try to turn the business
10· · · · · · THE WITNESS:· I can't speak to New 10· ·around.
11· ·Harbor, but, you know, given that we -- that the 11· · · ·Q.· ·And when you say we, are you referring
12· ·cash position and the disruption of the business 12· ·to --
13· ·via -- as a result of COVID, it would have 13· · · ·A.· ·Ocean State management, Ocean State
14· ·likely ceased to operate. 14· ·board.
15· ·BY MR. RENNER: 15· · · ·Q.· ·All right.· I'm going to show you
16· · · ·Q.· ·Even though it was planned to be sold? 16· ·Exhibit 17.· This is April 16, 2020, e-mail.· Do
17· · · ·A.· ·The -- 17· ·you recall this e-mail?
18· · · · · · MR. MOORMAN:· Hold on.· Objection, 18· · · ·A.· ·No.
19· ·form.· That is not his testimony. 19· · · ·Q.· ·Okay.· So you say in here -- this is
20· · · · · · MR. RENNER:· That's a question I'm 20· ·sent from you to --
21· ·asking. 21· · · ·A.· ·Mauricio.
22· · · · · · THE WITNESS:· Can you ask it again? 22· · · ·Q.· ·-- Mauricio and Patrick Kane at
23· ·BY MR. RENNER: 23· ·Deerpath, and you say the password on the profit
24· · · ·Q.· ·Right.· So we talked about the 24· ·improvement plan is COVID19; do you see that?
25· ·potential sale of Ocean State, right? 25· · · ·A.· ·Yeah.
125 127
·1· · · ·A.· ·Mm-hmm. ·1· · · ·Q.· ·What does that mean?
·2· · · ·Q.· ·And that was in the works no later than ·2· · · ·A.· ·It means that's the password for a
·3· ·April 1 of 2020, right? ·3· ·document.
·4· · · ·A.· ·Mm-hmm. ·4· · · ·Q.· ·For what document?
·5· · · ·Q.· ·I mean, Ocean State would have just ·5· · · ·A.· ·I honestly don't remember, but we had
·6· ·been allowed to fail rather than be sold? ·6· ·probably put together a turnaround plan, and so
·7· · · ·A.· ·No, the -- ·7· ·that's the password for the turnaround plan.
·8· · · · · · MR. MOORMAN:· Objection, form.· You've ·8· · · ·Q.· ·Is that a password you selected?
·9· ·got to slow down.· Objection, form and ·9· · · ·A.· ·Probably, yes.
10· ·foundation. 10· · · · · · MR. MOORMAN:· Just for the record, this
11· · · · · · THE WITNESS:· No, the likely -- the 11· ·is only part of the document, right, there's
12· ·likely scenario, it's called we'd hand over the 12· ·more to this?
13· ·keys.· We'd say to Deerpath, it's your business, 13· · · · · · MR. RENNER:· I mean, it looks to be an
14· ·because they're now the, you know -- they have 14· ·e-mail, part of an e-mail chain.
15· ·all the debt, they have all the senior debt, and 15· · · · · · I don't recall how it's produced off
16· ·we just -- we're, like, we're done, and here's 16· ·the top of my head.
17· ·the business and -- 17· · · · · · MR. MOORMAN:· Okay.
18· ·BY MR. RENNER: 18· ·BY MR. RENNER:
19· · · ·Q.· ·Did you discuss that scenario with 19· · · ·Q.· ·All right.· So now I want to talk about
20· ·Deerpath? 20· ·the time period after Ocean State received the
21· · · ·A.· ·Yes. 21· ·PPP funds, okay?
22· · · ·Q.· ·Okay.· Can you describe those 22· · · · · · So after receiving the funds, did Ocean
23· ·communications? 23· ·State make all of its outstanding rent payments?
24· · · ·A.· ·I mean, they could have done that from 24· · · ·A.· ·If my memory is correct, yes, we did.
25· ·the beginning, because we weren't paying on our 25· · · ·Q.· ·Did it negotiate lower rent with the
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·1· ·proceeds of the sale, right? ·1· ·standard questionnaire that was sent to
·2· · · ·A.· ·It was as I -- let's see. ·2· ·basically any entity that took more than
·3· · · · · · As I remember it, the sale happened ·3· ·2 million dollars, I think, so it was like after
·4· ·before the forgiveness was given by the ·4· ·the PPP thing, they came up with that -- that
·5· ·government, and so when the sale happened, there ·5· ·questionnaire.
·6· ·was an escrow account set up for the total ·6· · · ·Q.· ·So is it fair to say that -- well, did
·7· ·amount of the loan, right, so that -- they held ·7· ·you or anyone else on Ocean State's behalf ever
·8· ·back proceeds, and then once the loan was ·8· ·speak with anyone from either the SBA or any
·9· ·forgiven, then they distributed the proceeds. ·9· ·other governmental agency about Ocean State's
10· · · ·Q.· ·Right, but my question was then, I 10· ·PPP loan?
11· ·assume, it's fair to say that the proceeds of 11· · · · · · MR. MOORMAN:· Hold on.· So what time
12· ·the sale were not used to pay back any of the 12· ·period?
13· ·PPP loan money, right? 13· · · · · · MR. RENNER:· Well, I guess, up until --
14· · · ·A.· ·No -- well, no -- can I restate that? 14· ·well, I know we had the -- not in connection
15· · · ·Q.· ·Yes. 15· ·with the lawsuit.
16· · · · · · MR. MOORMAN:· Yes, of course. 16· · · · · · MR. MOORMAN:· Okay.
17· · · · · · THE WITNESS:· I mean, yes, they were, 17· · · · · · THE WITNESS:· Not in connection with
18· ·but as I said, the transaction happened, right. 18· ·the lawsuit, not that I'm aware of.
19· ·BY MR. RENNER: 19· · · · · · You have to remember, when these --
20· · · ·Q.· ·Which transaction? 20· ·when this was happening, like, they had phone
21· · · ·A.· ·The sale of Ocean State to what 21· ·numbers you could call to get information.· You
22· ·ultimately is Village MD. 22· ·couldn't get anybody to pick up.· There was no
23· · · · · · Village MD paid some money, right, and 23· ·way to talk to anybody.
24· ·then there was an escrow account set up, you 24· ·BY MR. RENNER:
25· ·know, equivalent to the loan agreement, and 25· · · ·Q.· ·Right.
133 135
·1· ·after the sale, a month or two later -- I can't ·1· · · ·A.· ·Because there was, you know, 100
·2· ·remember the exact time -- the loan was ·2· ·million companies around the U.S. trying to
·3· ·forgiven, and then the escrow was released. ·3· ·figure this out.
·4· · · ·Q.· ·Fair enough. ·4· · · ·Q.· ·All right.· So the answer is no, right?
·5· · · · · · My question was, so the money from the ·5· · · ·A.· ·Yeah, no.
·6· ·sale to Village MD wasn't used to pay back like ·6· · · ·Q.· ·And is that -- that question was
·7· ·-- was it Freedom Bank -- ·7· ·regarding, I guess, the PPP loan application.
·8· · · ·A.· ·No. ·8· · · · · · Is it also true that there were no
·9· · · ·Q.· ·-- or the government that those monies ·9· ·discussions with any SBA or governmental
10· ·that were obtained in the PPP loan; no, right? 10· ·officials regarding forgiveness of the loan?
11· · · ·A.· ·The -- no. 11· · · ·A.· ·That's correct.
12· · · ·Q.· ·Okay.· Did the SBA or any other 12· · · · · · MR. MOORMAN:· Except in connection with
13· ·governmental agency ever do an audit of Ocean 13· ·this lawsuit?
14· ·State's PPP loan? 14· · · · · · THE WITNESS:· Except in connection with
15· · · ·A.· ·At some point we had to fill out a 15· ·the lawsuit?
16· ·questionnaire that went into a whole bunch of 16· · · · · · MR. RENNER:· Right.
17· ·detail about our ownership structure, and we 17· · · · · · THE WITNESS:· Again, the PPP loan
18· ·answered all the questions about private equity 18· ·program was administered by local banks, so our
19· ·and various other things. 19· ·communication was with the bank that
20· · · · · · I don't believe they did an audit. I 20· ·administered it.
21· ·wasn't aware of one -- 21· ·BY MR. RENNER:
22· · · ·Q.· ·So other than -- 22· · · ·Q.· ·Are you aware if your banks -- other
23· · · ·A.· ·-- beyond that. 23· ·than the application itself for -- you know, the
24· · · ·Q.· ·Other than the questionnaire? 24· ·loan application and the forgiveness
25· · · ·A.· ·Yeah, and the questionnaire was a 25· ·application, other than those documents, are you
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·1· ·aware if the bank provided any other information ·1· ·BY MR. RENNER:
·2· ·to the SBA or the government regarding Ocean ·2· · · ·Q.· ·Sure, we'll start with that.
·3· ·State's obligations? ·3· · · ·A.· ·Ocean State board, Deerpath, the bank
·4· · · ·A.· ·I can't answer for the bank.· I have no ·4· ·we worked through, and, you know, Sarah and
·5· ·idea. ·5· ·myself.
·6· · · ·Q.· ·Did you or anyone else at Ocean State ·6· · · ·Q.· ·Anyone else?
·7· ·ever discuss the idea of giving the PPP money ·7· · · ·A.· ·No.
·8· ·back? ·8· · · ·Q.· ·What was Deerpath's involvement --
·9· · · ·A.· ·No. ·9· ·strike that.
10· · · ·Q.· ·After the application in April of 2020, 10· · · · · · Who else had involvement?
11· ·did Ocean State ever do any kind of 11· · · ·A.· ·Involved --
12· ·re-evaluation of whether or not it actually 12· · · · · · MR. MOORMAN:· Hold on.· The last
13· ·needed the loan, the PPP loan? 13· ·question you asked was awareness or involvement.
14· · · ·A.· ·Well, as I said, we were managing cash 14· ·He answered awareness.
15· ·on a daily and weekly basis, so, you know, it 15· · · · · · MR. RENNER:· Right.· So now we're going
16· ·was very clear that we needed the money to 16· ·to move to involvement.
17· ·operate the business. 17· · · · · · MR. MOORMAN:· Okay.
18· · · ·Q.· ·This is Exhibit 18.· Do you recognize 18· · · · · · THE WITNESS:· Involved in actually
19· ·this document, sir? 19· ·filling out the application?
20· · · ·A.· ·Yes. 20· ·BY MR. RENNER:
21· · · ·Q.· ·You've seen it before? 21· · · ·Q.· ·No, no, not just filling it out, but
22· · · ·A.· ·Yes. 22· ·either providing input, information, that kind
23· · · ·Q.· ·And on the last page, it's the 23· ·of thing.
24· ·electronic signature, but you verified this? 24· · · ·A.· ·So some of our board members, most
25· · · ·A.· ·Yes. 25· ·likely Ed Lhee and John Pircon and Deerpath, so
137 139
·1· · · ·Q.· ·I just want to talk about a few of the ·1· ·Mauricio and Patrick Kane.
·2· ·interrogatory answers here. ·2· · · ·Q.· ·All right.· Anyone else?
·3· · · ·A.· ·Okay. ·3· · · ·A.· ·Not that I'm aware of, no.
·4· · · ·Q.· ·I think you may have answered some of ·4· · · ·Q.· ·And what was Deerpath's involvement?
·5· ·them. ·5· · · ·A.· ·They were really just helpful in --
·6· · · · · · All right.· So if you go to Page 12, ·6· ·first, they provided us a certification that
·7· ·and the supplemental response to Interrogatory ·7· ·they were an SBA certified lender, which we
·8· ·No. 8. ·8· ·included in the application, but they were --
·9· · · ·A.· ·Mm-hmm. ·9· ·they were helpful, because they had -- they were
10· · · ·Q.· ·So the third sentence down, it says 10· ·SBIC lenders, so basically every one of their
11· ·defendant further states that additional 11· ·companies was applying for a PPP loan, so they
12· ·individuals may have had awareness of the PPP 12· ·were super knowledgeable and helpful in this
13· ·loan applications or loan forgiveness 13· ·period where it was hard to get any information,
14· ·applications for Ocean State, including the 14· ·so they were sharing a lot of, you know, advice
15· ·other individuals listed in response to No. 1? 15· ·and counsel on the process.
16· · · ·A.· ·Mm-hmm. 16· · · ·Q.· ·And what about the board members you
17· · · ·Q.· ·So who specifically either had 17· ·referenced?
18· ·awareness, involvement in the PPP loan 18· · · · · · MR. MOORMAN:· Who?
19· ·application? 19· · · · · · MR. RENNER:· Pircon and Ed Lhee.
20· · · · · · MR. MOORMAN:· Wait.· It's awareness or 20· · · · · · MR. MOORMAN:· Objection, form.
21· ·involvement? 21· · · · · · THE WITNESS:· Can you be more specific
22· · · · · · MR. RENNER:· Well, both, either one. 22· ·with your question?
23· · · · · · THE WITNESS:· So awareness, who had 23· ·BY MR. RENNER:
24· ·awareness of it? 24· · · ·Q.· ·Sure.· What involvement did Mr. Lhee
25 25· ·and Mr. Pircon have?
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·1· ·position of Ocean State? ·1· ·qualified.
·2· · · · · · MR. MOORMAN:· It's both.· He's here to ·2· · · ·Q.· ·Mr. Renner asked you about the timing
·3· ·testify on behalf of Ocean State at the same ·3· ·of when Ocean State received funding from
·4· ·deposition. ·4· ·Deerpath as an SBIC lender; do you recall that?
·5· ·BY MR. MOORMAN: ·5· · · ·A.· ·Yes.
·6· · · ·Q.· ·Mr. Renner showed you some documents ·6· · · ·Q.· ·At the time you applied for a PPP loan,
·7· ·like the LLC agreements, you know, other ·7· ·did you understand whether the SBIC exception
·8· ·management agreements. ·8· ·imposed any time limitation on when a company
·9· · · · · · Do those -- is it your understanding or ·9· ·received lending support from the SBIC company?
10· ·based on -- what is your understanding -- strike 10· · · ·A.· ·As far as we knew, there was no time
11· ·that. 11· ·limit on SBIC lending.
12· · · · · · What is your your understanding of 12· · · ·Q.· ·I want to ask you some questions about
13· ·whether the agreements between Ocean State and 13· ·payroll.
14· ·New Harbor, or any New Harbor affiliated entity, 14· · · · · · So Mr. Renner asked you some questions
15· ·whether those agreements give Ocean State the 15· ·about which entity was responsible for paying
16· ·ability to access New Harbor's assets? 16· ·the people that worked for Ocean State, and
17· · · ·A.· ·They -- as far as I -- as far as my 17· ·also, I think, the 23 companies that provided
18· ·understanding, it gives them no ability to 18· ·health care services; do you remember that?
19· ·access New Harbor assets. 19· · · ·A.· ·Yes, yes.
20· · · · · · MR. RENNER:· Objection to form, 20· · · ·Q.· ·Who was responsible for paying all of
21· ·foundation. 21· ·those employees?
22· ·BY MR. MOORMAN: 22· · · · · · MR. RENNER:· Objection, form.
23· · · ·Q.· ·So I want talk about the affiliation 23· · · · · · THE WITNESS:· Ocean State, LLC.
24· ·requirement, right? 24· ·BY MR. MOORMAN:
25· · · · · · Just remind me and the jury -- although 25· · · ·Q.· ·Okay.· And that includes the Ocean
161 163
·1· ·we're not videotaped right now -- how was Ocean ·1· ·State, LLC employees?
·2· ·State able to apply for a PPP loan given the ·2· · · ·A.· ·Yes.
·3· ·existence of the affiliation requirement? ·3· · · ·Q.· ·Does that also include the people that
·4· · · · · · MR. RENNER:· Objection. ·4· ·work for those 23 entities that are providing
·5· · · · · · THE WITNESS:· There was a waiver ·5· ·healthcare services?
·6· ·provided in the -- in the PPP loan regulations ·6· · · ·A.· ·Yes.
·7· ·for any company that had already applied for and ·7· · · · · · MR. RENNER:· Objection, form.
·8· ·received a loan from an SBIC accredited lender, ·8· ·BY MR. MOORMAN:
·9· ·and we had that through Deerpath, and provided ·9· · · ·Q.· ·And from whose bank account did the
10· ·that in our application, a certification of that 10· ·money to pay the employees that worked for those
11· ·in our application. 11· ·23 entities come from?
12· ·BY MR. MOORMAN: 12· · · ·A.· ·Ocean State, LLC.
13· · · ·Q.· ·And just -- I think you just said this, 13· · · ·Q.· ·How did Ocean State, LLC get the money
14· ·but I wasn't paying attention. 14· ·to make those payments?
15· · · · · · How did you know Deerpath qualified as 15· · · ·A.· ·There was -- so the cash flow from
16· ·an SBIC lender? 16· ·patient visits came from third-party payors into
17· · · ·A.· ·They provided certification that they 17· ·the professional services companies, and there
18· ·were -- they were SBIC certified. 18· ·was a sweep on a daily basis of that money up to
19· · · ·Q.· ·So just big picture.· How confident 19· ·the Ocean State accounts.
20· ·were you, was Ocean State, that based on all of 20· · · ·Q.· ·And did the 23 companies have a right
21· ·the eligibility rules you reviewed, all of the 21· ·to that money or did that money go to Ocean
22· ·diligence you did, that Ocean State was eligible 22· ·State, LLC?
23· ·for a PPP loan notwithstanding the affiliation 23· · · ·A.· ·It directly went to Ocean State based
24· ·rules? 24· ·on the services agreements.
25· · · ·A.· ·We were very confident that we 25· · · ·Q.· ·And did Ocean State have any ability
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·1· ·not to make payroll, to keep the money for ·1· ·attached to the resolution, but is the memo that
·2· ·itself? ·2· ·is Exhibit B, this May 7th, 2020 memorandum that
·3· · · ·A.· ·No. ·3· ·you prepared?
·4· · · ·Q.· ·And were these obligations limited to ·4· · · ·A.· ·Yes.
·5· ·payroll or was Ocean State, LLC also responsible ·5· · · ·Q.· ·Do you have any reason to doubt that
·6· ·for other payments for the 23 medical ·6· ·the people that signed this Exhibit 12 had not
·7· ·organizations? ·7· ·read your memorandum before they signed it?
·8· · · ·A.· ·They made all payments -- all of AP was ·8· · · ·A.· ·No, it was included, and I have no
·9· ·paid by Ocean State, LLC. ·9· ·reason to believe that they didn't read it.
10· · · ·Q.· ·And if Ocean State, LLC did not make 10· · · ·Q.· ·Did Ocean State's business start to
11· ·those payments, not make those payroll payments, 11· ·improve in the months after it applied for its
12· ·what happens? 12· ·PPP loan?
13· · · ·A.· ·All the businesses are unable to pay 13· · · ·A.· ·There were -- it was very difficult for
14· ·their debts. 14· ·the first few months, and we started to see
15· · · · · · So all the medical companies could not 15· ·improvement, but it was nowhere near what it was
16· ·pay payroll, could not pay, you know, for all 16· ·the prior year.
17· ·the medical equipment and supplies that they 17· · · ·Q.· ·Could Ocean State have gotten to the
18· ·needed. 18· ·point where its business started to improve had
19· · · ·Q.· ·So I want to turn your attention to 19· ·it not received a PPP loan in March of 2020?
20· ·Exhibit 20.· I think it's right there, John. 20· · · ·A.· ·No.
21· · · ·A.· ·Which one, this one? 21· · · ·Q.· ·All right.· Mr. Roselli, just one more
22· · · ·Q.· ·This one. 22· ·question, I think.
23· · · · · · So, Mr. Roselli, Exhibit 20 is the 23· · · · · · Would you have ever applied for a PPP
24· ·May 7th, 2020 memo that you prepared with the 24· ·loan, allowed Ms. Charette to sign the PPP loan
25· ·subject Paycheck Protection Program. 25· ·application, recommended the PPP loan to the
165 167
·1· · · · · · Do you remember getting asked questions ·1· ·board of Ocean State if you did not think Ocean
·2· ·about this? ·2· ·State was eligible for the loan?
·3· · · ·A.· ·Yes. ·3· · · ·A.· ·Absolutely not.
·4· · · ·Q.· ·Does this memo contain the analysis ·4· · · ·Q.· ·Okay.· I have no further questions.
·5· ·that you conducted to determine whether you were ·5· · · · · · · ·FURTHER EXAMINATION
·6· ·eligible for a PPP loan? ·6· ·BY MR. RENNER:
·7· · · ·A.· ·Yes. ·7· · · ·Q.· ·Just one question.
·8· · · ·Q.· ·Did you conduct the analysis ·8· · · · · · Do you recall sending an e-mail -- it's
·9· ·memorialized in this memorandum before you ·9· ·not an exhibit, I didn't bring it, but I believe
10· ·applied for the PPP loan? 10· ·from my memory, it's July of 2020 -- do you
11· · · ·A.· ·Yes. 11· ·remember sending an e-mail stating that year
12· · · ·Q.· ·You also were asked some questions -- 12· ·over year Ocean State was doing better in 2020
13· ·oh, before I get to that -- this May 7th, 2020 13· ·than 2019?
14· ·memorandum that contains the analysis you did 14· · · ·A.· ·I don't -- I don't remember that.
15· ·about your eligibility for the loan, did you 15· · · ·Q.· ·All right.· Do you recall, is that the
16· ·provide that to the board of Ocean State? 16· ·case, that year-over-year basis, was 2020 better
17· · · ·A.· ·Yes, we did. 17· ·than 2019?
18· · · ·Q.· ·Okay.· So Exhibit 12, this is the 18· · · ·A.· ·No.
19· ·unanimous consent of the board of managers, 19· · · ·Q.· ·Okay.· But, I mean, obviously, the
20· ·right? 20· ·financial documents will --
21· · · ·A.· ·Yeah, mm-hmm. 21· · · ·A.· ·Yeah, the financial --
22· · · ·Q.· ·And if you turn to the end, there's 22· · · · · · MR. MOORMAN:· Hold on.· Don't take his
23· ·Exhibit B. 23· ·word for the document.
24· · · ·A.· ·Yeah. 24· ·BY MR. RENNER:
25· · · ·Q.· ·It says, memo.· I know it's not 25· · · ·Q.· ·I assume, you know, if we were to
166 168
McCorkle Litigation Services, Inc. 165..168
Chicago, Illinois· (312) 263-0052 YVer1f
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