1. 513
1 to the 938 property?
2 "Answer: I don't believe so.
3 "Question: Or with respect to
4 the 940 property or the 944 property?
5 "Answer: No.
6 "Question: Or the CC&R's?
7 "Answer: I don't believe so, no.
8 "Question: When was the last time
9 you spoke to Stephanie Boren with
10 respect to the beach properties or the
11 CC&R's?
12 "Answer: Over a year ago."
13 Q And, Mr. Praske, you recall this deposition was
14 taken on April 3rd, 2001?
15 A Yes.
16 Q So that was about six months after you claimed to
17 have prepared an assignment and spoke to Ms. Boren,
18 correct?
19 A I prepared it November 1st, 2000.
20 Q I want to switch gears now.
21 Some of the work that you did for Mr. Gaggero
22 prior to anything relating to the 938 property involved
23 some judgments that were pending against Mr. Gaggero,
24 correct?
25 A I recall reviewing some judgments, yes.
26 Q And one of the judgments was a judgment by
27 Mr. Stein, Picard Stein?
2. 28 A I know the name. I really don't know what the
3. 514
1 judgment pertained to.
2 THE COURT: That's not what he asked you.
3 The court reporter -- would the witness please
4 focus on the question and try to focus on what he's asking
5 you and answer what the lawyers are asking you about.
6 Would you read that question again.
7 (The question was read by the reporter as
8 follows:
9 "Q And one of the judgments was a
10 judgment by Mr. Stein, Picard Stein?")
11 THE WITNESS: A judgment by Mr. Stein. I don't know
12 Picard Stein.
13 MR. ROSEN: Mr. Stein. Okay.
14 Q And that judgment by Mr. Stein was entered against
15 Mr. Gaggero in early 199- -- well, strike that.
16 Do you recall that there were two judgments
17 against Mr. Gaggero?
18 A No, no.
19 Q Okay. Do you also recall a judgment by Fleishman,
20 Fisher & Moest?
21 A Yes.
22 Q Okay. And those two judgments were recorded
23 against Mr. Gaggero in early-to-mid 1998, correct?
24 A I don't know when they were recorded.
25 MR. ROSEN: Your Honor, I would like to read from the
26 deposition of Mr. Praske taken in the matter of Gaggero
4. 27 versus Stacey, from page 27, line 17 through 21 -- I'm
28 sorry -- page 28, line 17 through 21.
5. 515
1 THE COURT: Volume 1 or 2?
2 MR. ROSEN: Volume 1.
3 MR. BEZEK: One second, Your Honor.
4 THE COURT: 27, 17 to 28?
5 MR. ROSEN: 27, 17 through 21.
6 THE COURT: I see. Thank you.
7 MR. ROSEN: I'm sorry, Your Honor. Now I'm -- page 28,
8 line 17 through 21.
9 THE COURT: Okay.
10 MR. BEZEK: Your Honor, can I ask counsel a question
11 about the page reference, Your Honor, please.
12 No objection.
13 MR. ROSEN: (Reading):
14 "Question: And were these judgments
15 by John Picard Stein or Fleishman ever
16 entered against Mr. Gaggero, the ones
17 you're talking about in early '98?
18 "Answer: I don't know when they
19 were entered against him. I believe one
20 was early '98, one was mid-'98."
21 Q And these judgments entered against Mr. Gaggero
22 affected certain real estate transactions concerning
23 Mr. Gaggero, correct?
24 A No, I don't know that to be correct.
25 MR. ROSEN: Your Honor, I would like to read from this
26 same volume of the deposition, page 29, lines 6 through 18.
7. 516
1 MR. ROSEN: (Reading):
2 "Question: Well, again, I'm not
3 asking for specifically what your strategy
4 was, whether you looked at a document,
5 what you were trying to do, how you were
6 going to do whatever it is that you were
7 going to do. What is it that -- what
8 were you going to do? I mean, what were
9 you hired to do?
10 "Answer: These judgments affected
11 certain transactions related to certain
12 properties; and therefore, I had to find
13 out all the details about the judgment
14 itself, not the underlying case, the
15 judgment. And I had to do a lot of
16 research. Once I found out that
17 pertinent information about the
18 judgments, I had to research and find
19 out what effect those judgments would
20 have on transfers of title."
21 Q And the work you performed for Mr. Gaggero in this
22 time frame also included periodically reviewing
23 Mr. Gaggero's credit reports to see how these judgments
24 were affecting his credit, correct?
25 A I -- no.
26 MR. ROSEN: Your Honor, I would like to read from this
9. 517
1 MR. ROSEN: (Reading):
2 "Question: Lastly, on Exhibit B,
3 with respect to the summary, it says,
4 quote, periodic supervision of credit
5 reports and investigative asset
6 searches concerning Mr. Gaggero, end
7 quote. What does that mean, quote,
8 periodic supervision of credit reports,
9 end quote? What are you doing, and why?
10 "Answer: Well, I'd want to see his
11 credit report so that I could see how
12 either of these judgments may have
13 affected his credit report. And I
14 wanted to keep an eye on that from time
15 to time."
16 Q And in your view, Mr. Praske, those judgments had
17 a negative impact on Mr. Gaggero's ability to apply for
18 credit, correct?
19 A No, they didn't have a negative impact.
20 MR. ROSEN: Your Honor, I would like to read from the
21 same transcript, the same page, page 62, lines 14 through
22 23.
23 MR. BEZEK: What page again?
24 MR. ROSEN: Page 62, lines 14 through 23.
25 MR. BEZEK: No objection.
26 MR. ROSEN: (Reading):
10. 27 "Question: And did the judgments,
28 in your opinion, affect his credit
11. 518
1 report?
2 "Answer: I believe so, yes.
3 "Question: And how, in your opinion,
4 was his credit affected?
5 "Answer: Well, I believe that the
6 judgments were listed on the credit
7 reports.
8 "And then that would have a negative
9 impact when applying for further credit
10 or -- I'm sorry.
11 "Question: And then that would
12 have a negative impact when applying
13 for further credit or purchasing?
14 "Answer: Yes."
15 Q Now, you spent some time talking about these
16 trusts that were formed. The first one, the Arenzano --
17 I'm sorry -- the first one I think you said was the Aqua
18 Sante. Is that right?
19 A Aqua Sante Foundation.
20 Q Who was the beneficiary of the Aqua Sante
21 Foundation?
22 A There is a class of beneficiaries.
23 Q What do you mean, a class of beneficiaries?
24 A It's the class comprised of the various members of
25 the Gaggero family.
26 Q Well, I mean, is the beneficiary of the Aqua Sante
12. 27 Foundation a series of individuals, or is it some other
28 sort of entity?
13. 519
1 A It's a series of individuals.
2 Q And who are the beneficiaries of the Aqua Sante
3 Foundation?
4 A Anyone in the Gaggero family.
5 Q Is there a trust instrument?
6 A Yes.
7 Q And does the trust instrument list the
8 beneficiaries?
9 A No.
10 Q What does it say in the trust instrument as to who
11 the beneficiaries are?
12 A Any member of the Gaggero family.
13 Q Does it define the Gaggero family?
14 A It says any member of the family of Mr. Gaggero.
15 Q Stephen Gaggero?
16 A Yes.
17 Q Junior?
18 A Yes.
19 Q And who is the beneficiary of the Arenzano Trust?
20 A The same.
21 Q It's defined the exact same way?
22 A Yes.
23 Q And had you ever had a discussion with Mr. Gaggero
24 about who the beneficiaries of these trusts were?
25 A You mean beyond what I've just described to you?
26 Q No. What you've just described to me --
14. 27 THE COURT: Just answer the question. Take each
28 question separately and individually.
15. 520
1 THE WITNESS: Yes.
2 Q BY MR. ROSEN: You did have discussions with
3 Mr. Gaggero about that, correct?
4 A Yes.
5 Q And, in your mind, Mr. Gaggero knew that he was
6 the beneficiary of these trusts, right?
7 MR. BEZEK: Objection. Irrelevant, also calls for
8 speculation and conjecture, and no foundation.
9 THE COURT: Overruled.
10 THE WITNESS: Repeat the question.
11 Q BY MR. ROSEN: In your mind, Mr. Gaggero knew that
12 he was the beneficiary of these trusts?
13 A No.
14 Q In your mind, did you think he didn't know?
15 A No. He knew that he was not the beneficiary of
16 these trusts.
17 Q He knew he was not the beneficiary of these
18 trusts?
19 A Correct.
20 Q And you had -- well --
21 THE COURT: I think we have a difference between "a
22 beneficiary" and "the beneficiary." I think that's what
23 the issue is.
24 Q BY MR. ROSEN: In your mind, did Mr. Gaggero know
25 he was a beneficiary of the trust?
26 A Yes. A potential beneficiary of the trust.
16. 27 Q That's not a fact you ever hid from Mr. Gaggero,
28 is it?
17. 521
1 A No.
2 Q And, in fact, you, in explaining these
3 instruments, affirmatively told Mr. Gaggero that he was a
4 beneficiary of these trusts?
5 A No.
6 MR. BEZEK: Objection. Compound.
7 THE WITNESS: That's not what I said.
8 THE COURT: That is a question, asking you if you told
9 him he was a beneficiary of the trust. Did you not tell
10 him he was a beneficiary?
11 THE WITNESS: He was a potential beneficiary.
12 THE COURT: A potential beneficiary?
13 THE WITNESS: Yeah.
14 Q BY MR. ROSEN: Mr. Praske, what's the difference
15 between being a beneficiary and being a potential
16 beneficiary?
17 A Being a potential beneficiary means that it is up
18 to the trustee to decide each year among the class of
19 beneficiaries who will be -- who will receive distributable
20 income.
21 Q And you are the trustee, right?
22 A Yes.
23 Q So you had the discretion to decide which
24 beneficiaries would receive anything from the trust. Is
25 that accurate?
26 A Yes.
18. 27 Q Did you have to decide that someone would receive
28 something?
19. 522
1 A Yes.
2 Q Could more than one person receive something?
3 A Yes.
4 Q And you had that discretion in your sole and
5 absolute authority, right?
6 A Yes.
7 Q Did you have to answer to anyone with respect to
8 that decision?
9 A Yes.
10 Q Who did you have to answer to?
11 A The person who is designated as the protector of
12 the trust.
13 Q And who is the protector of the trust?
14 A Well, in this case it was me, also.
15 Q So you had to answer to yourself to determine who
16 would get any distribution from the trust?
17 A Yes.
18 Q And every year there was a distribution from the
19 trust, right?
20 A Yes.
21 Q Of some amount, correct?
22 A No. I mean, there is -- there are distributable
23 amounts each year of types of --
24 THE COURT: That's not what he asked you.
25 THE WITNESS: -- of income and loss.
26 THE COURT: The court reporter read the question back.
20. 27 I don't think you're on the same page anymore.
28 (The question was read by the reporter as
21. 523
1 follows:
2 "Q And every year there was a
3 distribution from the trust, right?
4 "A Yes.
5 "Q Of some amount, correct?")
6 THE WITNESS: Yes.
7 Q BY MR. ROSEN: In what form does that distribution
8 take?
9 A Usually it's in the form of distributable taxable
10 income or loss or gain.
11 Q Is it ever just money?
12 A It could be.
13 Q Has it ever been cash?
14 A Yes.
15 Q Has cash ever been distributed to Mr. Gaggero?
16 A I'm not certain.
17 Q Now, as a trust lawyer and as a person that set up
18 these trusts --
19 THE COURT: I don't understand that answer. "Not
20 certain" implies that you don't know. If you're the one
21 that distributes the money, how is it that you don't know
22 if you ever gave him cash? I don't understand that answer.
23 THE WITNESS: Okay. Because the distributions could
24 have been from one of the LLC entities to another.
25 THE COURT: He's asking you what has, in fact, happened
26 in the past. It is a simple question. Have you ever
22. 27 distributed cash to Mr. Gaggero from the trust? Can you
28 answer that simple question? From any of the trusts.
23. 524
1 THE WITNESS: I don't know. I would have to look at
2 records.
3 THE COURT: You don't know, or you don't remember?
4 THE WITNESS: I don't remember.
5 THE COURT: So you don't remember. Okay.
6 THE WITNESS: Yeah.
7 Q BY MR. ROSEN: Now, as the person that devised
8 this estate and the trusts within it and, as a trust
9 lawyer, you understood that you owed fiduciary duties to
10 the beneficiary of the trust, right?
11 A Yes.
12 Q So you owed fiduciary duties to the Gaggero
13 family, correct?
14 A Yes.
15 Q Each individually?
16 A Potentially, yes.
17 Q And collectively, correct?
18 A Yes.
19 Q You couldn't harm one beneficiary at the expense
20 of another, right?
21 A Yes, you could.
22 Q You could?
23 A Yes.
24 Q So you believe that you could make a distribution
25 to one beneficiary that would harm the other beneficiaries?
26 A Yes.
24. 27 Q And that's because you have the sole and absolute
28 discretion to do whatever you wanted to do?
25. 525
1 A Yes. But to take into account the overall
2 benefit.
3 Q Now, you said when these trusts were first
4 established that what was done was property was first
5 transferred into an LLC or an LP and then transferred into
6 a trust; is that correct?
7 A Yes.
8 Q And so when a piece of property would be
9 transferred into --
10 A Can I correct that? Excuse me.
11 Q Yes.
12 A Yes, except for the principal residence trust.
13 That was different. But the others were like that.
14 Q You're right. Let's exclude the principal
15 residence trust.
16 Just focusing on the two other trusts, the process
17 was first a piece of property was transferred to an LLC or
18 an LP and then it was transferred into a trust, right?
19 A Yes.
20 Q And using an LLC as an example, Mr. Gaggero would
21 own 100 percent of the LLC that the property is transferred
22 into, correct?
23 A At the moment of the transfer?
24 Q At the moment of the transfer.
25 A At the moment of the transfer.
26 Q And then --
26. 27 THE COURT: Is that a "yes" or a "no"?
28 THE WITNESS: Yes.
27. 526
1 Q BY MR. ROSEN: And then Mr. Gaggero would transfer
2 his interest in that LLC to the trust?
3 A That was part of a total package.
4 Q Right. I'm --
5 THE COURT: So that's a "yes," correct?
6 THE WITNESS: Yes.
7 Q BY MR. ROSEN: So just so I'm clear on this, it's
8 a two-step process: First it's transferred into an LLC,
9 using that as an example, owned by Mr. Gaggero, and then
10 Mr. Gaggero, as a second step, transfers his interest in
11 that LLC to one of the trusts?
12 A Yes.
13 Q Now, if one of the trusts wants to buy a piece of
14 property or one of the entities wants to buy a piece of
15 property, you're the one that's got to ultimately make the
16 decision on whether the funds are going to be released,
17 right?
18 A Yeah, but it's managed by Mr. Gaggero, the various
19 properties, so he will make the recommendation to me.
20 Q He makes a recommendation to you, and you have the
21 sole and exclusive authority to relinquish that money?
22 A Yes.
23 Q You're the only one that can actually relinquish
24 that money, right?
25 A Yes.
26 Q Now, Mr. Gaggero comes to you and says: Hey, I
28. 27 want to buy this great piece of property. What showing
28 must Mr. Gaggero make to you in order to satisfy you, as
29. 527
1 the trustee with fiduciary duties, that I'm going to
2 release funds for that piece of property?
3 A Successful history of making positive, successful
4 transactions.
5 Q That's it?
6 A That's the most important thing.
7 Q So Mr. Gaggero says "I want money," and you say
8 "how much"?
9 A Well --
10 MR. BEZEK: Objection, Your Honor. Argumentative on
11 that one.
12 THE COURT: Overruled.
13 THE WITNESS: No.
14 Q BY MR. ROSEN: So what's the process?
15 A If it's with regard to making investments for the
16 benefit of the trust and he makes a recommendation on a
17 property investment, I will follow that recommendation.
18 Q So I'm just confused why -- I'm trying, in my own
19 mind, to distinguish how that's different from Mr. Gaggero
20 saying "I want money" and you saying "how much"?
21 A Because --
22 Q Why are you drawing a distinction between those
23 two?
24 A Because if he came to me and said "I want
25 $2 million to spend in Las Vegas," I might say "no."
26 Q In other words, it has to be for the benefit of
31. 528
1 Q Yes?
2 A Yes.
3 Q Now, Mr. Gaggero approached you about getting
4 money for the 938 property, right?
5 A Yes.
6 Q When did he approach you about that?
7 A It was in the summer of '98.
8 Q And he talked to you about the property, didn't
9 he?
10 A When?
11 Q In the summer of '98.
12 A Yes.
13 Q And even though at the moment in the summer of '98
14 you didn't know he was talking about the 938 property, at
15 some point within the next couple of months, you knew it
16 was the 938 property because you were doing your
17 bookkeeping, or whatever you do, and you say, hey, here's a
18 purchase agreement for the 938 property and that's what he
19 was talking about, right?
20 A Yes.
21 Q Now, you testified that Mr. Gaggero is the manager
22 over all this real estate; is that correct?
23 A Yes.
24 Q He's the only one that makes decisions about the
25 real estate held within all these vehicles owned by the
26 trust, right?
32. 27 A There might be other people involved, but that
28 would be up to him. I look to him for making those
33. 529
1 decisions.
2 Q In other words, there might be other people
3 working under him, but he's the decisionmaker, correct?
4 A Yes.
5 Q As to all aspects?
6 A All aspects?
7 Q Of the property, real property held by the trust.
8 A Yes.
9 Q Have you heard of an entity called Malibu Broad
10 Beach LP?
11 A Yes.
12 Q What's that entity?
13 A That's a limited partnership.
14 Q Is that one of the limited partnerships owned by
15 one of the trusts?
16 A Yes.
17 Q Which trust is it owned by?
18 A You mean which is it associated with? Aqua Sante
19 Foundation.
20 Q Does Malibu Broad Beach own property?
21 A When?
22 Q Well, does it own property now?
23 A Yes, I believe so.
24 Q Did it own property in 2001?
25 A Yes.
26 Q In 2001, it owned some property in Venice, right?
34. 27 A No, I don't think so.
28 Q Do you know what property it owned in 2001?
35. 530
1 A No, can't recall.
2 Q So you just don't know one way or the other,
3 right?
4 THE COURT: Don't know what one way or the other?
5 MR. ROSEN: I'll withdraw the question.
6 Q Did Malibu Broad Beach own a rental house in 2001?
7 A Yes, I believe so.
8 Q Where was that rental house located?
9 A In Malibu.
10 Q On Broad Beach, right?
11 A Yeah.
12 Q And Mr. Gaggero, as the manager of the estate, was
13 managing that property, as well, right?
14 A Yes.
15 Q Mr. Gaggero was the one that managed Malibu Broad
16 Beach's holdings, right?
17 A Well, he was the portfolio manager for Malibu
18 Broad Beach.
19 THE COURT: Would the court reporter read the question
20 back.
21 Let's see if you can answer what he asked you.
22 (The question was read by the reporter as
23 follows:
24 "Q Mr. Gaggero was the one that
25 managed Malibu Broad Beach's holdings,
26 right?")
36. 27 THE WITNESS: It was managed by the limited
28 partnership.
37. 531
1 Q BY MR. ROSEN: And Mr. Gaggero was the ultimate
2 decisionmaker as to what was going to happen with that
3 property, right?
4 A He would be the one to make a recommendation as to
5 whether it ought to be sold or if at this time he ought to
6 buy something else. And to that extent, yes.
7 Q I apologize for cutting you off.
8 As the trustee of these trusts, if you had a
9 question about the rental property owned by Malibu Broad
10 Beach LP, you would go to Mr. Gaggero and ask him about it,
11 wouldn't you?
12 A It would depend.
13 Q As a trustee, you would expect him to be
14 knowledgeable about that property, wouldn't you?
15 A Maybe not all aspects. It would depend on the
16 situation.
17 Q Some aspects?
18 A Yes.
19 Q The macro aspects?
20 A About -- okay, yes.
21 Q The rental property you would expect Mr. Gaggero
22 to know about, maybe not the nitty-gritty details, but you
23 would expect him to have a general sense about what's going
24 on with this Malibu Broad Beach rental house, right?
25 A Yes.
26 MR. ROSEN: No further questions, Your Honor.
38. 27 THE COURT: All right. Mr. Bezek, you may redirect.
28 MR. BEZEK: Thank you, Your Honor.
39. 532
1 REDIRECT EXAMINATION
2 BY MR. BEZEK:
3 Q Mr. Praske, you were asked some questions about
4 some outstanding judgments. Do you know what happened to
5 those judgments, whether they were paid or not?
6 A I recall that one of them was settled. Another
7 one was paid, but I don't think Mr. Gaggero had to pay it.
8 I think an attorney had to pay it.
9 Q Now, the existence of these two judgments, both of
10 which were ultimately paid, would those in any way affect
11 the commitment that was made on behalf of the total estate,
12 on behalf of the total estate to purchase 938?
13 A Absolutely not.
14 Q Regardless of those judgments, was the money
15 available through one resource or another to purchase that
16 property when and if it was made available for sale?
17 A Yes.
18 Q To prepare for your testimony, have you done
19 anything to review the records and books to get yourself
20 refreshed on the events that occurred?
21 A At this time or for the deposition?
22 Q Well, let's focus just for the trial first.
23 A Yes.
24 Q How many times have you prepared for trial before
25 ultimately starting the trial?
26 A Two or three.
40. 27 Q How much time did you spend the first time going
28 through books and records and preparing yourself to testify
