1 1 UNITED STATES DISTRICT COURT 2 FOR THE EASTERN DISTRICT OF VIRGINIA 3 RICHMOND DIVISION 4 5 - - - - - - - - - - - - - -x 6 FEDERAL ENERGY REGULATORY : Civil Action No. 7 COMMISSION, : 3:15-cv-00452(MHL) 8 Plaintiff, : 9 v. : 10 POWHATAN ENERGY FUND, LLC, : 11 HOULIAN "ALAN" CHEN, HEEP : 12 FUND, INC., and : 13 CU FUND, INC., : 14 Defendants. : 15 - - - - - - - - - - - - - x 16 17 18 REMOTE DEPOSITION OF 19 LAWRENCE S. EIBEN 20 Wednesday, June 30, 2021 21 22 23 Washington, D.C. 24 25 REPORTED BY: SUSAN L. CIMINELLI, CRR, RPR 2 1 Remote WebEx Deposition of LAWRENCE S. EIBEN, called 2 for examination pursuant to agreement of counsel, on 3 Wednesday, June 30, 2021, in Washington, D.C., commencing 4 at 9:02 a.m., before SUSAN L. CIMINELLI, RPR, CRR, and a 5 Notary Public within and for the District of Columbia, when 6 were present on behalf of the respective parties remotely: 7 8 JOSHUA FERRENTINO, ESQ. 9 DANIEL LLOYD, ESQ. 10 PAUL MUSSENDEN, ESQ. 11 LISA OWINGS, ESQ. 12 STEVE TABACKMAN, ESQ. 13 Federal Energy Regulatory Commission 14 Office of Enforcement 15 Division of Investigations 16 888 First Street, Northeast 17 Washington, D.C. 20426 18 202-502-6711 19 On behalf of the Federal Energy Regulatory 20 Commission 21 22 23 24 25 --continued-- 3 1 APPEARANCES (continued): 2 3 GREGORY A. CRAPANZANO, II 4 Williams Mullen 5 Williams Mullen Center 6 200 South 10th Street 7 Suite 1600 8 Richmond, Virginia 23219 9 (804) 420-6309 10 On behalf of Defendant Powhatan Energy Fund 11 12 JULIANA BRINT, ESQ. 13 WILLIAM BARKSDALE, ESQ. 14 Skadden, Arps, Slate, Meagher & Flom, LLP 15 1440 New York Avenue, N.W. 16 Washington, D.C. 20005-2111 17 (202) 371-7584 18 On behalf of Defendants Alan Chen, HEEP Fund, 19 Inc., and CU Fund, Inc. 20 21 22 23 24 25 4 1 2 ALSO PRESENT: 3 Sherkat Nooshin - FERC 4 Vince Falcetano - Videographer 5 Kevin Gates 6 Rich Gates 7 Paul Gelbor 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 1 P R O C E E D I N G S 2 THE VIDEOGRAPHER: Good morning. We are now on 3 the record. Participants should be aware that this 4 proceeding is being recorded. And as such, all 5 conversations will be recorded unless there is a request 6 and agreement to go off the record. Private conversations 7 and/or attorney-client interactions should be held outside 8 the presence of the remote interface. 9 For the purpose of creating a witness only video 10 recording, the witness is being spotlighted or locked on 11 all video screens while in speaker view. We ask that the 12 witness not remove the spotlight setting during the 13 deposition, as it may cause other participants to appear on 14 the final video, rather than just the witness. 15 For anyone who doesn't want the witness's video 16 to take up the large part of your screen, you may click the 17 gallery view button in the upper right corner of the remote 18 deposition interface. 19 This is the remote video-recorded deposition of 20 Lawrence Eiben, taken in the matter of Federal Energy 21 Regulatory Commission versus Powhatan Energy Fund, LLC and 22 others in the United States District Court for the Eastern 23 District of Virginia, Civil Action Number 3:15-CV-00452. 24 Today is Wednesday, June 30th, 2021. And the 25 time on the monitor is 9:02 a.m., Eastern daylight time. 6 1 Will counsel please identify themselves for the record? 2 MR. FERRENTINO: This is Joshua Ferrentino on 3 behalf of the plaintiff, the Federal Energy Regulatory 4 Commission. With me in a conference room in Washington, 5 D.C. are Dan Lloyd, also with the Federal Energy Regulatory 6 Commission, and Luke Gelbor of Ankura. 7 MR. CRAPAZANO: This is Greg -- 8 MS. OWINGS: Sorry. Also for the plaintiff and 9 joining remotely, Lisa Owings on behalf of FERC. 10 MR. MUSSENDEN: Also on behalf of FERC, Paul 11 Mussenden, M-U-S-S-E-N-D-E-N. 12 THE VIDEOGRAPHER: Okay. Will our court 13 reporter, Sue Ciminelli, please swear in the witness? 14 MR. CRAPAZANO: I'm sorry. And Greg Crapanzano 15 from the law firm Williams Mullen representing Powhatan 16 Energy Fund, LLC. 17 THE VIDEOGRAPHER: Thank you, counsel. 18 MS. BRINT: Also, Juliana Brint from the law 19 firm Skadden, Arps, Slate Meagher & Flom, representing 20 Defendants Alan Chen, HEEP Fund, and CU Fund. 21 MR. BARKSDALE: And also William Barksdale from 22 Skadden Arps, representing the same. 23 THE VIDEOGRAPHER: Anyone else? Okay, Sue, will 24 you please swear in the witness? 25 MR. FERRENTINO: I'm sorry, I'd just like the 7 1 record to reflect that Mr. Kevin Gates just dialed into the 2 meeting. I believe he is the representative of Powhatan 3 Energy Fund. Counsel will correct me if that's not right. 4 Whereupon, 5 LAWRENCE EIBEN, 6 was called as a witness, and having been duly sworn, was 7 examined and testified as follows: 8 THE VIDEOGRAPHER: You may proceed, 9 Mr. Ferrentino. 10 EXAMINATION BY COUNSEL FOR PLAINTIFF 11 BY MR. FERRENTINO: 12 Q Thank you. And good morning, Mr. Eiben. 13 A Good morning. 14 Q Would you please state your full name for the 15 record? 16 A Lawrence Scott Eiben. 17 Q Thank you. And I just want to put some 18 information on the record about the remote nature of this 19 deposition. You're physically present in Richmond this 20 morning, is that correct? 21 A Yes. 22 Q And is anyone else in the room with you today in 23 Richmond? 24 A No. 25 Q Okay. Do you have with you a set of exhibits in 8 1 printed form that were provided to your counsel this 2 morning? 3 A I do. 4 Q Are they printed with premarked numbers 1 5 through 32? 6 A Yes. 7 Q Good. Each of the exhibits is also Bates 8 labelled with page numbers, so we can refer to those during 9 the deposition for you, too. I just want to talk a little 10 bit about the ground rules for the deposition. I know 11 you've testified before, so I won't belabor this, but if 12 you don't hear or don't understand a question that I ask, 13 please just ask me to repeat it. That's no problem at all. 14 Your answers must be verbal, not gestures. And yes or no 15 is preferable to things like "uh-huh," because the court 16 reporter needs to take down what you say. 17 I see that you have no problem keeping your 18 voice up, but please try to remember that when you're 19 talking, so the court reporter is able to pick you up and 20 the videographer's microphone is able to pick you up as 21 well. 22 Please try not to talk over me or any other 23 counsel. I'll attempt to do the same for you. That's for 24 the court reporter's benefit, because she needs to take 25 down everything today that's said in the deposition. I 9 1 expect your counsel may object to questions and that's 2 fine. You do need to answer the question unless they give 3 you an instruction not to answer the question. I expect 4 that may occur if they believe that I've strayed into the 5 area of privileged material. 6 We'll take breaks for your benefit and for 7 everyone's else's. If you need a break, just let us know. 8 Otherwise, we'll try to do those fairly regularly. The 9 only thing is we can't take a break while there is a 10 question pending. Do you understand? 11 A Yes. 12 Q Mr. Eiben, how did you prepare for your 13 deposition today? 14 A I met with Greg. 15 Q How many times did you meet with Greg? 16 A One. 17 Q For how long? 18 A About an hour and a half. 19 Q And when did that meeting occur? 20 A Within the last week. I can't remember the 21 exact day. 22 Q Was anyone else other than Greg -- you're 23 referring to Mr. Crapanzano, is that right? 24 A Yes. 25 Q Anyone else present other than you and 10 1 Mr. Crapanzano? 2 A His colleague dropped by briefly. I can't 3 recall his name. 4 Q Anyone else? 5 A No. 6 Q Did you look at any documents while you were 7 preparing for your deposition? 8 A Yes. 9 Q Approximately how many? 10 A 15. 11 Q Did you speak to anyone else, other than your 12 counsel, about your testimony today? 13 A No. 14 Q Now, you've testified in a FERC proceeding 15 before, is that right? 16 A Yes. 17 Q And that was in September of 2010, if I'm 18 correct. Does that sound right? 19 A That sounds right. 20 Q And you were under oath like you are today? 21 A Yes. 22 Q Do you believe you told the truth when you 23 testified in that proceeding? 24 A Yes. 25 Q And did you review your testimony in preparation 11 1 for your deposition today? 2 A No. 3 Q Other than in the FERC proceeding in 2010, have 4 you testified under oath before? 5 A I don't think so. I don't recall. 6 Q I believe you testified in 2010 that you had 7 given deposition testimony in a suit against TFS's 8 accountant, is that true? 9 A Yes, that is correct. 10 Q Okay. And have you testified in any other 11 lawsuit, other than that? 12 A Not that I recall. 13 Q Okay. So nothing since 2010? 14 A No. 15 Q Did you ever give testimony or an affidavit in 16 connection with a suit by PJM against Huntrise in Delaware? 17 A I don't recall. 18 Q Has that matter been resolved, the PJM-Huntrise 19 matter? 20 A I don't know. 21 Q Have you ever been convicted of or pled guilty 22 to a crime? 23 A No. 24 Q Do you hold any professional licenses? 25 A No. 12 1 Q Have you ever held any professional licenses in 2 the past? 3 A Only what would have been required for my work 4 at TFS Capital. And I can't recall the exact licensing. I 5 think we had, at one point, to take a Series 65, maybe be 6 registered as a registered investment advisory rep of the 7 firm. 8 Q So licenses to do your securities business, 9 things of that sort? 10 A Yes. 11 Q Have you ever been subject to any discipline 12 related to those licenses? Had them revoked, that sort of 13 thing? Censured? 14 A No. 15 Q Other than Powhatan Energy Fund, has any entity 16 in which you were an owner or principal investor ever been 17 cited for a violation by a state or federal regulatory 18 body? 19 A No. 20 Q Mr. Eiben, you know Kevin and Richard Gates? 21 A Yes. 22 Q Is that right? When did you first meet them? 23 A Oh, wow. We were in sixth grade together in 24 Philadelphia, was when I first met them. 25 Q Have you been friends since that time? 13 1 A No. 2 Q So would you elaborate? Did you move away? Did 3 you become reacquainted with them later? Tell me what 4 happened in your friendship. 5 A Yes. I moved -- I was only in Philadelphia for 6 one year. I moved away, and then reconnected with Kevin 7 and Rich at the University of Virginia. We noticed each 8 other in a math class and connected after that, and really 9 have been in touch ever since. 10 Q And approximately what year was that that you 11 met at UVA? 12 A 1990. 13 Q Did you work together after college with the 14 Gates brothers? 15 A We did. We all entered the same company, 16 Capital One Financial Corporation. At the time, it was 17 Signet Bank. 18 Q Did you all work in the same area or different 19 parts of the bank? Tell me where you worked at Capital 20 One. 21 A Yes, I believe Kevin and I worked in the 22 marketing and analysis department. And I believe Rich 23 worked in the secured part department, so we were not 24 working together, but in the -- generally, the same 25 building. 14 1 Q Did you live together at that time? 2 A At one point, yes, we did live together. 3 Q In Richmond? 4 A Not the whole time, yes. 5 Q At some point, did you and the Gates brothers 6 found a business together? 7 A We did. 8 Q And what was that? 9 A Technical Financial Services, LLC, which became 10 TFS Capital, LLC. 11 Q What made you all decide to found TFS? 12 A We were interested in starting a small business. 13 I think for all of us -- well, I can speak for myself. I 14 believe it to be true for them as well. That we thought a 15 small business would be a better environment for us than a 16 large corporation. We are all fairly entrepreneurial. 17 Q Did you start the business while you were still 18 working at Capital One, or the predecessor to Capital One? 19 A We did. 20 Q Have you always lived in Richmond since that 21 time, when TFS was started? 22 A Yes. 23 Q And at what point did Rich and Kevin Gates move 24 to Pennsylvania? 25 A I can't recall the exact time frame there. 15 1 Q After they moved to Pennsylvania again, did you 2 see each other regularly for business purposes? 3 A Yes. Generally, I was going to a quarterly 4 board meeting for the mutual fund trust. Generally, those 5 were held in the offices in West Chester, Pennsylvania. 6 Q So you saw them in person quarterly? At least 7 quarterly? 8 A Not -- not every quarter. Some of the meetings 9 were held in Richmond, and so I would say certainly 10 annually. No less than annually, but not necessarily every 11 quarter. 12 Q Did you keep in touch in other ways to run the 13 business? 14 A Yes. 15 Q Speak on the phone? 16 A Yes, phone, email. 17 Q About how frequently would you say you had 18 contact with the Gates brothers over the course of your 19 work at TFS? Daily? Weekly? Monthly? 20 A Emails daily. I mean, sometimes multiple times 21 a day. There tended to be a lot of communication back and 22 forth. 23 Q Let's talk about what became of TFS. Does TFS 24 still exist? 25 A I don't know. I sold my interest to my 16 1 partners, and I'm not sure of the current status of the 2 business. 3 Q All right. What -- when did you sell your 4 ownership interest in TFS? 5 A 2016, I believe. 6 Q Did you reach some sort of a written agreement 7 with the owners of TFS when you sold out? 8 A Yes. 9 Q Do you still hold any interests in TFS of any 10 kind? 11 A No. 12 Q Do you still participate in investments that TFS 13 manages? 14 A No. 15 Q All right. We'll come back to that topic. 16 Generally speaking, what would you say your role at TFS was 17 from 1990 through 2016? 18 A So TFS was formed around 1999, I believe. So 19 I'll answer, I guess, from 1999 through 2016, early on, as 20 is the case with many small businesses, the role was broad. 21 We all were doing whatever was required to keep the 22 business going. 23 As the business matured, my role moved more 24 toward, I guess what would be classified as a chief 25 operating officer type role, with oversight of things like 17 1 legal, accounting, external service providers. That sort 2 of thing. Operational stuff. 3 Q Did your role as chief operating officer also 4 encompass compliance matters for TFS? 5 A Yes. 6 Q How, if at all, was your compliance role 7 documented or laid out by TFS? 8 A I don't recall that it was. I guess we had a 9 compliance manual, so that was really what was used to 10 implement the compliance program. 11 Q Did you have any background in compliance when 12 you took on that role? 13 A No. 14 Q Did you supervise any employees that you would 15 consider to be exclusively focused on compliance matters? 16 A No. 17 Q Did anyone else assist you with compliance 18 matters at TFS? 19 A Greg Sekelsky, I would say, at times was helping 20 to implement certain procedures. I can't recall if anyone 21 else was involved. 22 Q Who is Greg Sekelsky? 23 A Greg was our -- the TFS Capital CFO. 24 Q Was he also an owner of TFS? 25 A Greg was partly paid as an owner. He was never 18 1 on the operating agreement, I guess, if that makes sense. 2 MR. CRAPAZANO: And, Josh, I didn't want to 3 interrupt a pending question, but I was allowing these 4 questions on TFS for his general background, but I will 5 object to the extent that you continue to ask questions 6 that are just focused not really on Mr. Eiben, but instead 7 on TFS Capital, who is not a party to this case. 8 BY MR. FERRENTINO: 9 Q Were you responsible for retaining legal counsel 10 for TFS and its various funds in your role as chief 11 operating officer? 12 A I did a lot of the research related to hiring 13 counsels, but I don't know that I was exclusively 14 responsible for making the decision. To the extent that we 15 were going to spend a good deal of money here on a counsel, 16 that would likely be a decision that other people would 17 have -- weigh in on. 18 Q People such as your partners, the Gates 19 brothers? 20 A Yes. 21 Q Anyone else? 22 A No. 23 Q In your compliance role, did you have -- did you 24 believe you had the authority to prohibit TFS or one of its 25 funds from engaging in activities that you thought would be 19 1 -- expose the company to compliance risks? 2 A Sorry. Did you say prohibit? 3 Q Yes. 4 A Could I prohibit? I don't know that I had that 5 level of control. My ownership would not have allowed me 6 to have that level of control, I don't believe. But 7 certainly if I had voiced an opinion that they were doing 8 something that was a significant compliance risk, then it's 9 unlikely we would have done it, you know, so -- 10 Q Can you give an estimate of what percentage of 11 your time while at TFS was related to compliance matters? 12 Because I know you had other roles, right? 13 A Yes. It changed over time. Compliance became a 14 bigger role. Early on -- early on, it was maybe 10 percent 15 of my role. So in your time frame of the late '90s, early 16 2000s, it would have been a small part of my role. But by 17 the time we got to 2010, we were contemplating seeking an 18 outside person to perform the function, so it had grown 19 into essentially a full time role. 20 Q Did you ever hire that outside person to do it 21 as a full time job? 22 A Yes. 23 Q And who was that? 24 A Mary. I forget her current married name. 25 Q Did you -- did you or Mary, in performing your 20 1 compliance duties, ever advise that TFS should not engage 2 in certain activities? 3 MR. CRAPAZANO: I'm going to object to relevance 4 unless it somehow relates to Powhatan, or something having 5 to do with this case. 6 MR. FERRENTINO: Your objection is noted. The 7 witness can answer the question. 8 THE WITNESS: Not that I recall. 9 BY MR. FERRENTINO: 10 Q Now, my understanding is, and you'll correct me 11 if I'm wrong, that TFS's owners and some of its employees 12 made what I would term proprietary investments. Is that 13 accurate? They would essentially -- let me ask a better 14 question. 15 You're familiar with the term proprietary fund? 16 A Well, could you explain what you mean by that? 17 Q Well, is that a term that TFS used to describe 18 certain investments that the owners of TFS were involved 19 in? 20 A I don't really remember thinking or talking 21 about funds as proprietary funds. 22 Q Okay. Maybe it's just not the right term, but 23 as I understand it, TFS managed money for customers on the 24 one hand. And then the owners themselves had money that 25 they invested of their own that was not -- that was 21 1 invested in funds that were not open to clients. Is that 2 accurate? 3 A Yes. 4 Q Okay. And I'll refer to those funds, where 5 client's money was not invested, as proprietary. Would 6 that give you any heartburn? 7 A Well, if I could clarify, I think -- I'm not 8 sure TFS ever managed proprietary funds. TFS Capital, the 9 investment advisor. I can't recall if TFS Capital ever 10 managed proprietary funds. 11 Q Is it the word "managed" that you're hung up on? 12 Is that -- 13 A No, I think TFS -- sorry. TFS Capital, as an 14 advisor, portfolio manager, I can't recall if that entity 15 was ever the manager of a proprietary fund. 16 Q Did TFS employees ever perform services for 17 proprietary funds? 18 A I can't recall. I don't believe so. 19 Q So would you consider yourself, in your role as 20 compliance officer for TFS, to be serving a compliance 21 function for the proprietary funds of TFS's owners? 22 A I would not consider myself, as chief compliance 23 officer of TFS Capital, as serving other entities beyond 24 TFS Capital. 25 Q All right. In your previous testimony in 2010, 22 1 you testified that TFS's owners were involved in a number 2 of funds. Strike that. I'll come back to that. 3 I believe you testified in 2010 that TFS used a 4 quantitative trading strategy. Is that a fair summary of 5 TFS's strategy? 6 A Yes. 7 Q And generally speaking, how did you develop 8 quantitative models for TFS's trading? 9 A So we would have analysts research potential 10 ideas for strategies, which typically involved gathering 11 data, historical data that was relevant to the strategy. 12 The analysts would then typically run simulations, so take 13 the historical data and run -- build a model of some sort, 14 and run the model through time to see if it outperformed 15 whatever benchmark it was being compared to. 16 Q Is one purpose of using that sort of 17 quantitative analysis to minimize risk? 18 A Yes. 19 Q Would you say that minimizing risk is the 20 primary purpose of using a quantitative model or is there 21 some other purpose? 22 A Yes, there is another purpose. Certainly it 23 would be to generate a return. 24 Q And this may reflect my lack of understanding of 25 what you do. Is it fair to characterize a quantitative 23 1 trading strategy as a conservative one? 2 A It can vary. I guess you can have quantitative 3 strategies that are designed to minimize volatility, so 4 minimize fluctuations in your investment or investment 5 capital, or you could have quantitative strategies that are 6 trying to quadruple the performance of the S&P 500 index, 7 which could lead to substantial volatility and substantial 8 drawdowns in your capital. But both could be quantitative. 9 Q Did you consider Powhatan Energy Fund used a 10 quantitative trading strategy? 11 A I don't -- I did not know much about the trading 12 of Powhatan and the strategy of Powhatan, so I'm not sure. 13 Q Okay. Since you left TFS in 2016, what have you 14 been doing for work? 15 A I have been doing venture capital work in 16 Richmond, Virginia. 17 Q Do you have your own firm or are you associated 18 with another entity? 19 A Yes, I started my own firm. 20 Q What's that called? 21 A Davis Creek Associates. 22 Q Are you currently affiliated with any other 23 firms, trade names, that sort of thing? 24 A Yes, I am -- I opened or co-founded a new entity 25 called Thirdline Capital. 24 1 Q And what does Thirdline Capital do? 2 A Thirdline Capital is trying to create 3 income-focused funds, investment funds. 4 Q Is that also a venture capital firm or is it 5 different? 6 A It is not. The investments are more 7 income-focused, whereas venture capital is more 8 growth-focused. 9 Q Thank you. All right. I want to ask a little 10 bit now about how Powhatan got started and how you met Alan 11 Chen. As I understand it, at some point, you and other 12 principals at TFS became interested in power trading as an 13 investment area. Is that true? 14 A Yes. 15 Q And approximately when did that interest first 16 develop? 17 A I don't recall specifically. Maybe call it 18 2007-ish. 2008, 2009, somewhere in there. 19 Q What was it about power trading that became of 20 interest to you and the others at TFS? 21 A I can't recall specifically. 22 Q Would you say that -- strike that. 23 Was there a particular person at TFS that first 24 became interested in power trading? 25 A I don't know. I don't remember. 25 1 Q And at some point, you became acquainted with 2 Dr. Alan Chen, who was trading in power markets, right? 3 A Yes. 4 Q And through a number of entities, you 5 invested -- you and others at TFS invested money with him, 6 is that right? 7 A Did you say a number of other entities? I'm not 8 sure I understand. Could you be more specific? 9 Q Yeah, let me ask a different question. You and 10 other members of TFS invested money with Alan Chen through 11 more than one vehicle, is that right? 12 A I don't think so. I don't -- I don't recall 13 more than -- 14 Q Did Huntrise Energy Fund invest money through 15 Alan Chen? 16 A I don't know. I don't remember. 17 Q Powhatan Energy Fund invested with Alan Chen, is 18 that right? 19 A Yes. 20 Q How did you first select Dr. Chen to manage 21 power trading investments on your behalf, you or the other 22 members of TFS? 23 A So at some point, I remember I was reaching out 24 by phone, I believe, to traders that were trading on the 25 PJM exchange, if that's the right term for it. So at some 26 1 point, I believe I connected with Alan, but I didn't -- I 2 would have pretty quickly passed the conversation on to 3 Kevin to continue it. So, anyway, that's all. 4 Q Was there something about -- I'm sorry, I didn't 5 mean to cut you off. 6 A No, I was just saying that's how it began. 7 Q So was there something about the PJM market that 8 was attractive to you? 9 A No. Just that people traded power on it, and it 10 was, I guess, the one closest to us. 11 Q So who had the final responsibility for 12 selecting Dr. Chen? 13 A I don't know that anyone individually had that 14 responsibility. I would say Kevin had most, if not all of 15 the conversations leading up to it. 16 Q All right. Can you remember why you were tasked 17 with the initial outreach to Dr. Chen? 18 A I had time to devote to the project. 19 Q Okay. All right. I'm going to ask you to turn, 20 if you would, to Exhibit 1 in your notebook, or however 21 they're arranged. 22 (Eiben Exhibit No. 1 was marked 23 for identification.) 24 BY MR. FERRENTINO: 25 Q Do you have that document marked L. Eiben 27 1 Exhibit 1. It should be a two-page document, and the Bates 2 label ends on 263 on the first page, just to make sure 3 we're all playing with the same deck here. 4 A Yes. 5 Q Great. I'll give you a moment just to look over 6 that email. Let me know when you've finished reading it. 7 A Okay. 8 Q Did you recognize this document when you read 9 it? 10 A No. 11 Q I'll ask a better question, given that it's old. 12 Your email is Larry@TFSCapital.com, or at least it was at 13 this time in February 2008. And would you agree that this 14 appears to be an email that -- the bottom email appears to 15 be an email that you sent to Alan Chen -- 16 A Yes. 17 Q -- inviting him -- and in that email, you had 18 essentially invited him to propose terms on which he could 19 trade power in PJM for what you described as a hedge fund 20 of funds that is investing in power trading. I'm 21 paraphrasing there. But is that generally what this is 22 about? 23 A Yes. 24 Q And would you say that it's likely this is the 25 first contact that had you with Dr. Chen? 28 1 A Likely, yes. 2 Q Were you reaching out to other traders in power 3 markets at this time in a similar fashion as your outreach 4 to Dr. Chen? 5 A Yes. 6 Q Do you recall if any of the other folks 7 responded to you? 8 A I had conversations with a few, but I don't 9 recall specifics of any -- of any of those conversations. 10 Q Approximately how many other power traders did 11 you speak to in this time frame in early 2008? 12 A Three. 13 Q Did you consider using any of those other folks 14 to trade power instead of Dr. Chen or in addition to 15 Dr. Chen? 16 A When I was involved early, I was trying to 17 connect with traders in this space. To the extent that any 18 of them wanted to continue the conversation, I would have 19 passed them over to Kevin for additional conversations. 20 Q Okay. Why was it that Mr. Kevin Gates took over 21 that conversation? 22 A He had time to devote to the project. 23 Q All right. I'm jumping ahead here, but 24 eventually, you established Powhatan Energy Fund 25 specifically to enable trading by Dr. Chen in PJM's market, 29 1 is that right? 2 A I don't know that I would say specifically for 3 Alan to trade. You know, for example, as I read the email, 4 we're talking about a fund of funds, so it makes me think 5 that we were thinking about broader opportunities than a 6 single trader. 7 Q And again, you'll correct me if this 8 understanding is not right, but my understanding is that 9 Dr. Chen invested on behalf of Huntrise for a period of 10 time. Is that accurate? Is that jogging your memory? 11 A I don't recall. 12 Q And -- okay. Is Powhatan Energy Fund still -- 13 still an active Delaware LLC? 14 A I don't know. 15 Q Are you still a member or have any membership or 16 ownership stake in Powhatan Energy Fund? 17 A No. 18 Q When did you cease to be involved in Powhatan 19 Energy Fund? 20 A I can't recall the exact date. I would say 21 within the last two years. 22 Q So I'm not a corporate lawyer, but did that 23 require the operating agreement for Powhatan Energy Fund to 24 be altered, so that you would no longer be a member? 25 Explain to me -- strike that. 30 1 I'm asking you what the mechanics are of your 2 exit from Powhatan Energy Fund. How did that work? 3 A It was, I guess, in my mind -- I don't know for 4 sure. In my mind, it was a sale of the interests. 5 Q And did you hold your interest in Powhatan 6 Energy Fund through LSE Capital Management, LLC? 7 A There was a direct holding beyond that. 8 Q So I'm not sure I understand. So you're saying 9 you had both a direct holding in Powhatan as Lawrence Eiben 10 and an additional holding through LSE Capital? 11 A I'm not really sure how to answer that, but I 12 guess in terms of the mechanics, the whole entity was 13 transferred, sold. So LSE and any direct interest in 14 Powhatan was sold. 15 Q Sold to who? 16 A Kevin and -- Kevin Gates and Richard Gates -- 17 I'm trying to think. Yeah. 18 Q Did you sell both your share in Powhatan and 19 your ownership of LSE to the Gates brothers? 20 A Yes. 21 Q Are they the only remaining owners of Powhatan, 22 to your knowledge? 23 A I don't know. 24 Q What did you receive, if anything, when you sold 25 your interest in Powhatan? 31 1 A The consideration was the -- the agreed upon 2 repayment back into Powhatan. They agreed to assume that. 3 Q Can you explain what you mean by the agreed upon 4 payment? 5 A When there was -- at some point, when capital 6 was redeemed from Powhatan, there was an agreement to put 7 the capital back in, if needed. And so there was a 8 redemption with that agreement. And so there was -- you 9 know, in my mind, that was like a potential liability of a 10 check that might have to be written back into the fund. 11 And they -- for taking ownership, they assumed that amount 12 of money -- that requirement. 13 Q Was there any other consideration other than 14 assuming that redemption obligation? 15 A I don't believe so. 16 Q What was the amount of the redemption obligation 17 that you had that the Gates brothers assumed? 18 A I can't recall the exact amount. 19 Q Was it millions of dollars? 20 A Maybe a million. Something like that. 21 Q When you sold your interest, did anyone else in 22 Powhatan sell their interest around the same time? 23 A I don't know. 24 Q Does Powhatan have any ongoing obligations to 25 you since your cash out -- your sale? Excuse me. 32 1 A No, I don't believe so. 2 Q Do you have any ongoing obligations to Powhatan 3 following your sale? 4 A I don't believe so, no. 5 Q All right. Was Eric Newman an owner of Powhatan 6 at any point? 7 A Yes, I think Eric was invested -- I don't know 8 if he invested directly, if he himself was -- 9 Q And who is Eric Newman? 10 A Eric Newman was a colleague at TFS Capital. He 11 was the chief investment officer, I guess. 12 Q Was Mike Frederick invested in Powhatan? 13 A Yes, I believe so. 14 Q And what's his role at TFS? 15 A He was in a sales role. 16 Q Who is Sam Harris? Is he invested in Powhatan? 17 A I believe so. 18 Q And what was his role at TFS, if you know? 19 A He was also in an internal sales function. 20 Q And Greg Sekelsky, who we already mentioned, he 21 was invested in Powhatan, is that right? 22 A I believe so. 23 Q Is there anyone else that you know of, other 24 than yourself, the gentlemen we just mentioned, and Kevin 25 and Rich Gates, who have owned any part of Powhatan since 33 1 it was formed? 2 A I don't know for sure. I don't. I don't think 3 so. 4 Q You're not aware of anyone else, I guess, is 5 what I'm asking. Are you aware of anybody else other than 6 the gentlemen we talked about? 7 A My only hesitation is I'm not sure what -- how 8 people were invested, if there was a direct investment. I 9 don't know if these people were directly invested or if 10 there was some other entity or something that was invested. 11 Q In other words, sort of as you did with LSE, 12 they might have held their interest through another 13 vehicle, corporate entity. Is that what you're saying? 14 A Possibly. Or a trust or -- 15 Q All right. But as far as, for lack of a better 16 term, beneficial ownership, these were the gentlemen that 17 were owners, however they might have structured their 18 investment? 19 A I believe so. 20 Q Okay. And do you recall, during your 21 involvement in the fund, the Powhatan Energy Fund, what the 22 approximate ownership interest of these gentlemen was other 23 than yourself? Roughly. 24 A I don't know. 25 Q How was it -- how did it come to pass that these 34 1 were the owners of Powhatan? Because obviously you're not 2 offering Powhatan to the general public, right, as an 3 investment? 4 A Not at the time. No, I don't believe so. 5 Q Has it ever been offered to the general public? 6 A I don't know. 7 Q How did you and the Gates brothers or anybody 8 else determine who should be allowed to invest in Powhatan? 9 A I don't remember the -- I don't remember what 10 was -- or how that was determined. 11 Q Did TFS have a practice, formal or informal, 12 about which employees would be invited to make a 13 proprietary investment like Powhatan? 14 A Generally, it was open. If -- not -- no, there 15 was no formal anything pertaining to -- no. 16 Q Who performed functions like accounting and 17 banking for Powhatan? How were those matters handled? 18 A It generally would have -- well, accounting of 19 what, I guess. 20 Q Did Powhatan have need for accounting services, 21 while you were involved in it? 22 A I guess there would have been a tax return. I'm 23 trying to think if there was other accounting work. I 24 don't recall. 25 Q Did Powhatan make disbursements to its members 35 1 while you were involved? 2 A Yes. 3 Q Who handled those disbursements? 4 A Are you talking about logistically, like, who 5 processed the -- 6 Q Yes, start there. 7 A I can't recall exactly. It likely would have 8 been Greg Sekelsky or myself. 9 Q How about Powhatan's bank accounts? Did 10 Powhatan have a separate bank account? 11 A Separate from? 12 Q Its own bank account, did it have its own bank 13 account? 14 A Yes. 15 Q Where was that bank account? 16 A I believe it was Wells Fargo. 17 Q Did Powhatan ever use accounts of other entities 18 other than Powhatan to fund its activities? 19 A I don't believe so. 20 MR. FERRENTINO: We've been going for about an 21 hour. I think this is a good time to take break for me, if 22 you'd like one. Can we go off the record, please? 23 THE VIDEOGRAPHER: Going off the record at 10 24 o'clock a.m. This ends video file number 1 in the 25 deposition of Lawrence Eiben. 36 1 (Recess.) 2 THE VIDEOGRAPHER: We're back on the record at 3 10:10 a.m. This begins media file number 2 in the 4 deposition of Lawrence Eiben. You may proceed, 5 Mr. Ferrentino. 6 (L. Eiben Exhibit No. 2 was 7 marked for identification.) 8 BY MR. FERRENTINO: 9 Q Thank you, sir. Mr. Eiben, could you take a 10 look at Exhibit Number 2 in the collection of documents in 11 front of you. And for the record, this is marked L. Eiben 12 Exhibit 2. And the first page ends with the Bates number 13 448. Is that the same document that you're looking at, 14 sir? 15 A Yes. 16 Q Fantastic. I'll give you just a moment to read 17 it. Let me know when you have. 18 A Okay. 19 Q All right. Do you recognize this document? 20 A No. 21 Q Well, this appears to be an email chain between 22 you and Kevin Gates, is that correct? 23 A Yes. 24 Q In the first email at the bottom of page 1, 25 Mr. Gates writes, "Larry, can you please set up a new 37 1 entity for me? I don't care what you name it. I will work 2 to get it registered with the FERC and PJM, and it will be 3 the fund that Alan will then trade starting this summer. I 4 hope to ramp up significantly." 5 Do you know what fund, if any, came from this 6 request by Mr. Gates to you? 7 A No. 8 Q Is it possible that this is the first request by 9 Mr. Gates to set up what became Powhatan Energy Fund? 10 A Yes. 11 Q All right. Moving up to the next part of the 12 chain, which is a response from you on Wednesday, March 13 17th, 2010. You write, "when do you need the entity in 14 hand? BTW, what will become of HEF at this point?" 15 What is HEF? 16 A HEF. I don't remember what HEF was. 17 Q Is it possible that HEF is Huntrise Energy Fund? 18 A Yes. 19 Q Do you recall whether or not Dr. Chen was 20 trading on behalf of Huntrise Energy Fund after reviewing 21 this document? 22 A I don't recall. 23 Q All right. Moving up to the next email at the 24 top of the chain, Mr. Gates responds to you on March 17, 25 2010. I'm looking at the last sentence of the -- excuse 38 1 me, second to last sentence of the middle paragraph, "my 2 plans are to really lever up over the summer with Alan. 3 And it's very possible that we'll end up imploding. I want 4 it fully insulated from HFoF." Do you see that? 5 A I see it, yes. 6 Q What is HFoF? 7 A HFoF is Huntrise Fund of Funds. 8 Q And what -- in this time frame, what did 9 Huntrise Fund of Funds do? 10 A I don't remember what it was invested in. 11 Q Did it hold interest in other funds? What was 12 its purpose? 13 A I don't remember. 14 Q Seeing this now, do you have any memory of what 15 Mr. Gates meant by "my plans are to really lever up over 16 the summer with Alan"? 17 A No. 18 Q Do you have any idea what Mr. Gates meant when 19 he said, "it's very possible that it will end up 20 imploding"? 21 A No. 22 Q Did you agree with Mr. Gates in this time frame 23 that implosion was a risk of investing with Alan Chen? 24 A I don't know what implosion means. I think -- I 25 don't know what that means. 39 1 Q Well, you, at this point -- this is an email you 2 received from Mr. Gates in 2010, is that right? 3 A It looks that way, yes. 4 Q And you've known Mr. Gates at this point for 5 more than a decade at least, right? 6 A Yes. 7 Q And you've invested millions of dollars with 8 him, is that right? 9 A Yes. 10 Q Yeah. And so when he sends you -- send you an 11 email and says there is a risk that one of our investments 12 might implode, you just said, oh, well, I guess -- I have 13 no idea what he is talking about, but I'll just let it 14 slide? Is that what you're telling me? 15 A Well, he's asking me to set up a new entity. So 16 I guess imploding in this context, to me, means the 17 business may fail. So many of our investments through the 18 years, there is investments that go -- that fail all the 19 time. So I think this didn't catch my attention as, 20 like -- you know, I know he would manage the risk, but 21 there is risk. 22 Q Why would it be important to insulate Huntrise 23 Fund of Funds from this new entity that you were going to 24 establish? 25 A I don't know. I don't remember what was in 40 1 Huntrise Fund of Funds. 2 Q As a general matter, why would you want to 3 insulate one fund from another in structuring your 4 investment? 5 A Yeah, if there is only one fund versus another 6 -- well, the performance could muddy the performance of the 7 other fund. So if you were trying to build a track record, 8 for example, would be a good reason to set up a separate 9 entity. 10 If you're going to go -- if you had plans to 11 distribute it or sell to outside investors, that could be a 12 reason to start building a track record, isolating the 13 performance. That sort of thing. 14 Clearly -- setting up an LLC for any business 15 purposes is -- or setting up a separate entity is also, you 16 know, just in my view, like, from a legal standpoint, like 17 a risk management 101 tactic. So if you had -- so, anyway. 18 Q And what risk does it protect against? 19 A Well, I'm not a lawyer, but I've generally been 20 advised by lawyers to set up new businesses in separate 21 entities, that that's a good business practice. 22 Q Is one reason that if one business fails, it 23 won't take down the others with it? 24 A Yes, I believe that's the case. 25 Q You can put that exhibit aside. Thank you. 41 1 Could you take a look at the document marked Exhibit 3 in 2 your stack? Have you found it, sir? 3 (L. Eiben Exhibit No. 3 was 4 marked for identification.) 5 THE WITNESS: Yes. 6 BY MR. FERRENTINO: 7 Q And for the record, this is an email. It's a 8 single page. The last three numbers of the Bates number 9 are 978. Are you looking at the same document that I am? 10 A Yes. 11 Q Wonderful. I'll give you a chance to read this 12 document. Let me know when you have. 13 A Okay. 14 Q All right. Now, this is an email from Kevin 15 Gates to Greg Sekelsky, copying you, on April 9th, 2010, is 16 that right? 17 A Yes. 18 Q And it appears that Mr. Gates is completing 19 paperwork for Powhatan Energy Fund, is that a fair reading 20 of this document? 21 A Yes. 22 Q And he is writing to Mr. Sekelsky. Mr. Sekelsky 23 is a -- he's the fellow who is the accountant at TFS, is 24 that right? 25 A Yes. 42 1 Q Okay. He's a CPA, and he is also your chief 2 financial officer, or was your chief financial officer? 3 A Yes. 4 Q Why would Mr. Gates want to have Mr. Sekelsky be 5 the treasury invoice contact -- invoice recipient contact 6 for PJM for Powhatan? 7 A I don't know. 8 Q Would you agree that Mr. Gates appeared to be 9 concerned that Powhatan Energy Fund not be publicly 10 associated with TFS? 11 A That's not how I read it. I mean, I read it 12 maybe like he doesn't want to get his email inbox filled up 13 with junk, but anyway. 14 Q So your reading of this email is that Mr. Gates' 15 concern here is that his email inbox not be filled with 16 junk that relates to Powhatan? Is that your testimony? 17 A I mean, I can't speculate as to what Kevin was 18 thinking. 19 Q Sure. 20 A I just don't know. 21 Q Do you agree that Powhatan Energy Fund was not 22 associated with TFS Capital? 23 A What does -- yes, what does "associated" mean? 24 Q I don't know. I'm asking if have you that 25 understanding. 43 1 A Yeah, I don't -- there is no legal connection 2 between those -- those entities, so, yes. 3 Q Are you aware of other instances where employees 4 of TFS did what I think Mr. Gates is suggesting in this 5 paragraph, middle paragraph, of creating a Gmail account 6 and automatically forwarding them to a TFS Capital account? 7 A No. 8 Q Have you ever done that, set up a Gmail account 9 and then had it forwarded to your TFS Capital account? 10 A I don't believe so. 11 Q Are you aware of Mr. Kevin Gates doing that in 12 other instances? 13 A No. 14 Q Was Mr. Sekelsky ever separately compensated by 15 Powhatan Energy Fund for work that he performed, say, for 16 example, being the treasury invoice recipient contact? 17 A I don't know. 18 Q Okay. You're not aware of him submitting a bill 19 to Powhatan for services rendered? 20 A No, I'm not aware of that. 21 Q And it's likely he would have done any work on 22 Powhatan while he was also performing his work for TFS, is 23 that right? 24 A At the same time? Is that what you mean? 25 Q Yes. 44 1 A I know we had an arrangement with Greg, where he 2 could do services for outside businesses. And he has, as 3 long as I've known him, had a Greg Sekelsky CPA business, 4 where he has done work for others. I don't know if he was 5 separately billed by Powhatan or if he submitted any 6 invoices for any work. But he has done work for other 7 entities. 8 Q Powhatan didn't have its own offices, or email 9 system, or that sort of thing, did it? 10 A Offices, no. Email, I can't recall what email 11 system or set up was used, if any, for Powhatan. 12 Q Do you know if TFS was paying for Mr. Sekelsky's 13 cell phone at this time? 14 A I don't remember. 15 Q Okay. Go to the next exhibit, please, Exhibit 16 4. 17 (L. Eiben Exhibit No. 4 was 18 marked for identification.) 19 BY MR. FERRENTINO: 20 Q Let me know when you have it. 21 A Okay. Yes. 22 Q All right. And for the record, this is a 23 multipage document, and it has a cover email dated March 24 19, 2010, from Kevin Gates to others. And the Bates label 25 at the bottom of the page -- it has two Bates labels. The 45 1 Bates label beginning POW00008000. Is that the document 2 you're looking at? 3 A Yes. 4 Q Great. I'll give you a moment just to look this 5 over. Let me know when you've had a chance to browse it. 6 A Okay. 7 Q Mr. Eiben, have you seen this document before 8 today? 9 A I don't remember it. 10 Q Did you review it in preparation for your 11 testimony today? 12 A No. 13 Q You're one of the recipients of this email, is 14 that correct? 15 A Yes. 16 Q Do you recognize the other names on the "to" 17 line? 18 A Yes. 19 Q Who are the -- I know who Rich Gates is. I 20 think we've discussed who Eric Newman is. I know who you 21 are. Who is Mr. Chao Chen? 22 A Chao Chen is another TFS Capital employee. 23 Q Was he ever invested in Powhatan Energy Fund? 24 A I believe so. 25 Q Some of the other names that we talked about, 46 1 including Mr. Sekelsky and I think Mike Frederick, are not 2 listed on this email. Can you think of any reason for that 3 or know why that is? 4 A I don't know. 5 Q Do you recall meeting with others in the time 6 frame of March 19, 2010 to discuss ramping up with Alan, 7 the subject line of this email? 8 A No. 9 Q Did you meet one-on-one with any of the folks at 10 TFS Capital to discuss a new investment with Alan Chen? 11 A I don't remember. 12 Q Do you know why Kevin Gates was planning to ramp 13 up with Alan Chen in this time frame? 14 A I don't know. My assumption would be that the 15 investment prospects looked good. 16 Q Did you understand that there was going to be 17 any change in Dr. Chen's trading after March 2010? 18 A I don't remember specifics about the trading. 19 Q What do you remember about the trading? 20 A Really nothing. I wasn't involved in that side 21 of it. 22 Q Excuse me just a second. Other than receiving 23 what I think is a PowerPoint presentation attached to this 24 email, what would you have done to educate yourself about 25 the investment that you eventually made in Powhatan Energy 47 1 Fund? 2 A Possibly nothing. If Kevin said he would 3 recommend it, then that would likely be enough for me. 4 Q Is it your memory that that's what you did here, 5 that you simply decided to invest because Kevin Gates 6 thought it was a good idea? 7 A I don't have a memory of -- I don't have much of 8 a memory of this at all. 9 Q Did you ever discuss the investment with 10 Dr. Chen directly? 11 A Not that I recall. 12 Q Give me one second, please. Could you take a 13 look at page 2 of the PowerPoint in this Exhibit 4? There 14 are two Bates numbers. The one ending 002 or 335 -- or 15 355, excuse me. 16 A Okay. 17 Q The title of the slide is "executive summary." 18 Do you have that? 19 A I do. 20 Q The second bullet reads, "PJM just changed 21 things, such that UTC traders receive transmission loss 22 credits, TLC. Basically, UTC traders don't have to pay 23 transmission losses anymore. This creates more 24 opportunities for Alan." 25 Did you have any understanding of what the 48 1 additional opportunities were that were created by UTC 2 traders not having to pay for transmission losses? 3 A No. 4 Q So you didn't do any investigation at the time 5 to determine what the nature of those opportunities were? 6 A No. 7 Q If you go to the next page, page 3 of the 8 presentation, it reads at the top, "recently, Alan's 9 exposure has significantly ramped up. Alan maintains that 10 his account, HEEPF, isn't taking much more risk. He is 11 participating more heavily in the TLC trades, which he 12 describes as an almost risk-free way to make money." Do 13 you see that? 14 A I do. 15 Q Do you understand what's meant by the TLC trade 16 in this sentence? 17 A I assume it means transmission loss credit. 18 Q I'll agree with you there. That's likely what 19 that means. Do you know -- I'm asking you what the TLC 20 trade is? 21 A I don't know. 22 Q Mr. Gates has described Mr. Chen saying that 23 this is almost a risk-free way to make money. Do you see 24 that? 25 A I do. 49 1 Q If it was -- if investing with Mr. Chen was 2 risk-free, what would be the risk of implosion that we saw 3 discussed in other emails? 4 A I don't know the answer. I don't know. I was 5 not -- I didn't know -- I don't know much about the trading 6 and the risks. I do remember Kevin frequently advising us 7 to be prepared to lose all your money, that this was a 8 risky investment. So I assumed that it would have some 9 volatility, but I have no idea what is going on with this 10 particular exchange. 11 Q How much did you eventually invest in Powhatan 12 Energy Fund? 13 A I don't remember the specific number. 14 Q Was it millions of dollars? 15 A Maybe a million. 16 Q Would you want to understand the risks or the 17 lack of risk in a million dollar investment? 18 A Well, again, for me, I think knowing that Kevin 19 was involved is significant for me. But also at the time, 20 although that's a substantial amount of money, my total 21 investments were quite a bit larger than that, so that that 22 was likely less than 10 percent of my investment portfolio. 23 So I wasn't -- even though it's a large sum, I wasn't 24 overly worried about it. 25 Q Did you view yourself as having any role from a 50 1 compliance perspective of vetting Dr. Chen's trading 2 strategy as laid out here? 3 A No. 4 Q Did you ever consider consulting with anyone 5 knowledgeable about power trading to determine whether an 6 increased investment with Alan Chen was a good idea? 7 A No. 8 Q Did anyone at Powhatan have a compliance role? 9 Any of the owners? 10 A I mean, I think about that question in two ways. 11 One, was there some legal obligation to perform the 12 compliance function? I don't know. Did anybody focus on 13 compliance? I don't know that anybody was specifically 14 assigned that role. 15 Q Okay. You can put Exhibit 4 aside. 16 A Okay. 17 Q And you can take up Exhibit 5, please. 18 (L. Eiben Exhibit No. 5 was 19 marked for identification.) 20 BY MR. FERRENTINO: 21 Q And this is a multipage document marked advisory 22 agreement, and it begins with a Bates number ending in 067. 23 Are we looking at the same document? 24 A Yes. 25 Q I'll give you a moment just to review the 51 1 document. Let me know when you're ready. 2 A Okay. 3 Q Do you recognize this document? 4 A No. The form looks familiar, but I don't 5 recognize -- I don't remember the -- seeing this one. 6 Q Is this agreement in the form typically used by 7 you to hire outside investment advisors? 8 A I don't know why it looks familiar, but the 9 structure of it looks familiar. 10 Q The first paragraph refers to an entity called 11 HEEP Fund, Incorporated. Do you know what that corporation 12 is? 13 A That is affiliated with Alan, I think, is the 14 extent of my knowledge on it. 15 Q I should ask the basic question. If you flip 16 all the way to the last page, did you sign this document on 17 behalf of Powhatan, or is it someone else? 18 A That's Kevin Gates's signature. 19 Q Okay. Thank you. On that last page, just while 20 I have you here, it indicates that the name of the managing 21 member is LSE Capital Management, LLC. Do you see that? 22 A Yes. 23 Q What is that entity? 24 A That entity is the managing member of Powhatan. 25 Q So there is an LLC that formally manages 52 1 Powhatan, rather than an actual person? 2 A Yes. 3 Q And in 2010, who were the owners or members of 4 LSE Capital Management? 5 A That LLC -- 6 Q I'm sorry. Maybe you didn't hear my question. 7 Who were the members of LSE Capital Management in April-May 8 2010? Do you recall who the members of the managing member 9 were? 10 A I believe that I was the sole member. 11 Q All right. And then at some point later on, 12 when you sold your interest in Powhatan, LSE became 13 controlled by someone else or owned by someone else, is 14 that right? 15 A Yes. 16 Q And what does the LSE in LSE Capital Management 17 stand for? 18 A Those are my initials. 19 Q Okay. Let me direct your attention to the 20 paragraph on the first page of Exhibit 5 titled "the 21 multiplier." Let me know when you have that paragraph. 22 A Yes, I see it. 23 Q Okay. It reads, "the multiplier will be set at 24 20. This means that for every megawatt that HEEP trades 25 for HEEP's account, HEEP will place trades for 20 megawatts 53 1 in PEF's account." 2 A Okay. 3 Q Did this degree of exposure to Dr. Chen's trades 4 give you any pause at the time this agreement was entered 5 into? 6 A That would not have meant much to me then. I 7 don't know what it -- what it means. 8 Q Are you aware that before this agreement, 9 Dr. Chen had been trading for Huntrise Energy Fund at a 10 much lower ratio? I want to say it was 4:1. Were you 11 aware of that? 12 A No, I don't -- I don't remember any of the 13 specifics of the trading ratios. 14 Q Okay. Do you know if this agreement is still in 15 force between Powhatan and HEEP Fund? 16 A I do not. 17 Q Do you know if it was ever formally amended or 18 modified? 19 A I don't know. 20 Q Okay. You can put that one aside. Does it jibe 21 with your memory, Mr. Eiben, that Mr. Chen started trading 22 for Powhatan Energy Fund in May 2010? 23 A That sounds right. 24 Q Did you have any understanding in that time 25 frame of what Dr. Chen's trading strategy was? 54 1 A No. 2 Q Do you know if Dr. Chen was successful in that 3 -- in 2010 of turning a profit for Powhatan? 4 A Yeah, the fund made money. 5 Q Did you consider the investment a success? 6 A Yes. 7 Q Take a look at Exhibit 6. 8 (L. Eiben Exhibit No. 6 was 9 marked for identification.) 10 BY MR. FERRENTINO: 11 Q Do you have it? 12 A I do. 13 Q A two-page email ending in 944? 14 A Yes. 15 Q And you write -- and I believe Mr. Gates, 16 Mr. Kevin Gates, writes to you with an update on Alan's 17 performance. Is that a fair summary of what this email is? 18 A Yes. 19 Q How often were you receiving updates about Alan 20 Chen's trading, either directly or through someone else in 21 this time frame? 22 A I don't remember. 23 Q Did you write at the top, in response to seeing 24 the performance figures, "could you slow him down a notch? 25 I can't spend money this fast. Wow." 55 1 When you wrote this, how did Dr. Chen's 2 performance in Powhatan compare to those of your other 3 proprietary investments? 4 A I don't know. I don't remember. This was 5 definitely quite profitable. 6 Q When you wrote the "slow it down" email in 7 Exhibit 6, did you have any understanding what the reason 8 behind Dr. Chen's profitability was? 9 A No. 10 Q Did you ever have a discussion with your 11 partners about what the reasons were for the success of 12 Dr. Chen? 13 A I remember there was a change in strategy at 14 some point that became more lucrative. I don't remember 15 the specifics at all about what the strategy was or how it 16 profited. 17 Q And approximately when was that change in 18 strategy that you remember? 19 A I don't remember. 20 Q How was the change in strategy conveyed to you? 21 A I don't remember. 22 Q Did you speak about it with Mr. Kevin Gates? 23 A I don't know. 24 Q Did you speak about it with Mr. -- excuse me, 25 Dr. Chen? 56 1 A No. 2 Q You can put Exhibit 6 aside. And take up 3 Exhibit 7, if you would. 4 (L. Eiben Exhibit No. 7 was 5 marked for identification.) 6 THE WITNESS: Sure. 7 BY MR. FERRENTINO: 8 Q And for the record, this is -- Exhibit 7 is a 9 multipage email chain. The first Bates number is -- ends 10 in 338. Are we looking at the same document, Mr. Eiben? 11 A Yes. 12 Q Great. I'll give you a moment just to read it. 13 A Okay. 14 Q And I'll start on the Bates page ending 341, 15 right near the middle of the pack. Let me know when you 16 have that. 17 A Okay, I have it. 18 Q And do you see here that Mr. Gates appears to be 19 corresponding -- Mr. Kevin Gates appears to be 20 corresponding with someone named Bob Steele? 21 A Yes. 22 Q Do you know who Bob Steele is? 23 A No. 24 Q Do you know why Mr. Gates was corresponding with 25 someone named Bob Steele? 57 1 A No. 2 Q Did you ever meet with someone named Bob Steele? 3 A I don't think so. 4 Q Okay. Let's fast forward up to the top two 5 email chains. 6 A Okay. 7 Q Would you agree that it appears from this 8 document at least, Mr. Steele had sent a presentation to 9 Mr. Kevin Gates about a power trading proposal that 10 involved UTC transactions? 11 A It looks like there is a discussion of a 12 presentation, yes. 13 Q And it looked to me, reading this, and you can 14 correct me if you have a different understanding, that Bob 15 Steele was looking for a job at TFS, or at least, you know, 16 an outside investment advisor opportunity. Is that fair? 17 A Yeah, I have no idea. 18 Q Okay. 19 A When I look at this email, it's not one I likely 20 would have gotten, would have even read at the time. It 21 just -- this is a level of detail that when it came to 22 anything related to power trading, I would not have -- 23 would not have delved into. 24 Q Okay. But you are copied on at least the last 25 two emails in the chain, is that right? 58 1 A Yes. 2 Q As are Rich Gates, Chao Chen, Kevin Gates, and 3 Eric Newman, all of TFS, is that right? 4 A Yes. 5 Q All right. I'm looking at the email from Chao 6 Chen dated June 25th, 2010, second -- second one down from 7 the top of the chain. 8 A Okay. 9 Q Do you see this? 10 A I do. 11 Q And Chao said, "I just read the presentation. 12 I'm not that excited about it. I think UTC is just a 13 loophole that anyone who knows about can exploit. There is 14 very little skill. I wouldn't hire any of these guys to 15 work for TFS, including Alan." It continues, "I'm 16 interested in power trading if we get to do it ourselves. 17 That is, we manage it the way we manage TFSMX. I don't 18 like passively investing with these guys." Do you see all 19 that? 20 A I do. 21 Q Do you know what TFSMX refers to? 22 A Yeah, that's the TFS market neutral fund. It's 23 a mutual fund that was managed by TFS Capital. 24 Q And what would you say the management strategy 25 or philosophy of that fund is or was, in 2010? 59 1 A It was a market neutral equity strategy, so 2 long, short equity. 3 Q Could you break that down for me as a 4 non-investment expert? 5 A Sure. So most mutual funds that we're familiar 6 with are simply a portfolio of individual securities, 7 stocks often, or bonds. If you -- and if you're investing 8 in those type of portfolios, you're betting that those 9 securities are going to go up. 10 If you would like to hedge the volatility, the 11 price variability of the portfolio, you can also sell 12 stocks or bonds short, meaning you borrow them, and then 13 sell them, so that you're actually betting that they will 14 go down. 15 And if you combine the portfolio of long and 16 short securities, you can still make a profit often, but 17 with a lot less volatility than you would have in a 18 traditional long only portfolio. 19 Q Did you understand Chao Chen to be drawing a 20 distinction between the way Alan Chen was trading and the 21 way you manage money in TFSMX? 22 A I mean, I don't remember this exchange at all. 23 But as I read it, it seems like he is drawing a distinction 24 between an externally managed strategy versus an internally 25 managed strategy. 60 1 Q And to manage it in a similar fashion as you 2 manage TFSMX, meaning that you hedge long and short 3 positions? Is that accurate? 4 A No, I have no idea. I mean, I don't know what 5 Chao was thinking. I'm just guessing. 6 Q Okay. Did you agree with Chao that UTC is just 7 a loophole that anyone who knows about can exploit? 8 A I didn't even know what he means by loophole. I 9 don't -- UTC up the congestion. I don't even know what 10 that means, as far as actual trading. So this email 11 doesn't make much sense to me now. It would not have made 12 much sense to me then, I don't believe. 13 Q So when Mr. Gates, Mr. Kevin Gates writes in the 14 above email, "I agree that UTC is a loophole that probably 15 a dummy can exploit. But why rule these guys off just 16 because they are doing UTC? They should drive a truck 17 through that loophole, even if they know how that FTR's/ICE 18 or virtuals. That's what I'd do." 19 Did that raise any red flags for you that 20 Mr. Gates appears to be advocating for exploiting a 21 loophole? 22 A You know, I don't remember the exchange, but as 23 I read it, no, I don't look at the word loophole -- when I 24 see loophole, in my mind, I think strategy, opportunity, 25 inefficiency, that there is some kind of, you know, way to 61 1 profit, basically. 2 Q Have you ever exploited a loophole in your own 3 investments or trading? 4 A If loophole -- as an inefficiency, that's what 5 we did -- or what TFS Capital did, was to look for 6 inefficiencies in investments. And that's where value 7 generally can be created by structuring trades to 8 capitalize on inefficiencies. So to me, when I look at 9 this, I think, okay, they found a serious inefficiency in 10 the marketplace. 11 Q Do you have an understanding of what that 12 serious inefficiency was? 13 A No. 14 Q Can you give me an example of a time in your own 15 investment, either on behalf of investors or for your own 16 book, that you've found an inefficiency akin to a loophole 17 and exploited it? 18 A So examples of -- TFS Capital would develop 19 strategies based on evaluating historical performance of 20 securities. And for example, one thing we observed was 21 that closed-end funds trade at a premium and discount to 22 NAV. And so they would get out of whack, to the point 23 where closed-end funds would trade substantially below 24 their intrinsic net asset value. 25 And so by purchasing them, and then letting that 62 1 gap close, while waiting for some insider to take enough 2 shares and then convert them to a mutual fund to bring them 3 to NAV, you essentially could capitalize on that profit. 4 So I mean, those things exist everywhere. I 5 mean, in the securities market, that's how, I think, 6 traders profit or outperform indices, by identifying stuff 7 like that. 8 Q Okay. Fair enough. And to my lay 9 understanding, what you're describing sounds like a 10 situation where the market has undervalued an asset that 11 you believe may appreciate in price in the future? Is that 12 the loophole that you're discussing in that circumstance? 13 A Well, you could -- you could hedge it. So for 14 example, some closed-end funds are simply representative of 15 the S&P 500 index, more or less. So if I see a closed-end 16 fund that's trading at a 20 percent discount to NAV, I 17 could buy the closed-end fund, and I could short the S&P 18 500 index via futures, or via an ETF, so that it's an 19 arbitrage trade. 20 You're basically just waiting for that gap to 21 close, knowing that, at some point, it likely is going to 22 close. 23 Q All right. And that's an example, in your view, 24 of a loophole that you've exploited to make a profit for 25 yourself? 63 1 A We had that strategy at TFS Capital in the TFS 2 market neutral funds, for example. 3 Q It sounds like you're not concerned about the 4 loophole language, is that accurate? 5 A Yes. 6 Q And you weren't at the time when Mr. Gates sent 7 this email? 8 A I would not have been, no. 9 Q Okay. Was anyone else at Powhatan concerned 10 about that language, the loophole language? 11 A I don't know. 12 Q Did you have any discussions with anyone in this 13 time frame, June 2010, about whether exploiting the 14 loophole was advisable or permissible? 15 A I don't remember. 16 Q I see we're into the 11 o'clock hour. I'd like 17 to take a short break again, if that's all right with you. 18 And then we'll go on to the next document. We can go off 19 the record. 20 THE VIDEOGRAPHER: Going off the record at 11:07 21 a.m. This ends media file number 2 in the deposition of 22 Lawrence Eiben. 23 (Recess.) 24 THE VIDEOGRAPHER: We are back on the record at 25 11:18 a.m. This begins media number -- file number 3 in 64 1 the deposition of Lawrence Eiben. Mr. Ferrentino, you may 2 proceed. 3 BY MR. FERRENTINO: 4 Q Thank you, sir. Mr. Eiben, can I have you refer 5 back to Exhibit 4 for just a second? 6 A Sure. 7 Q This was the ramping up with Alan presentation. 8 I'm going to ask you about page 3 again. 9 A Okay. 10 Q Of the presentation. Do you have it again? 11 A I do. 12 Q Great. I think I asked you before if you had 13 any understanding of what was risk-free about Alan Chen's 14 TLC trading. Do you remember that? 15 A Yes. 16 Q And I think you said -- I'm not quoting, but you 17 said something like, well, Kevin Gates was telling me it 18 was risky. What was he telling you was risky about trading 19 with Alan? 20 A So what I recall is Kevin described power 21 trading as a high risk endeavor, that we should expect 22 volatility in the investment. That we could have 23 substantial losses. 24 Q And was that a generalized description of power 25 trading or specific to Alan, or both? 65 1 A Both. 2 Q Okay. And forgive me if I've already asked 3 this, but did you discuss what the risks inherent in Alan 4 Chen's trades were? 5 A No. No. 6 Q All right. You can put that exhibit aside. 7 Thank you. And I'd ask you to take up now Exhibit Number 8 8. 9 (L. Eiben Exhibit No. 8 was 10 marked for identification.) 11 BY MR. FERRENTINO: 12 Q It's a one-page email dated June 24th, 2010. 13 And it ends in -- the Bates number ends in 844. 14 A Okay. 15 Q I'll give you just a moment to peruse that 16 email. Let me know when you've read it. 17 A Okay. 18 Q Do you recognize this document, Exhibit 8? 19 A I don't remember it, no. 20 Q But you authored it, is that right? 21 A Yeah, it looks that way. I would assume that 22 that's accurate, yes. 23 Q Who is the Josh referred to in this email? 24 A That's Josh Beringer. He is a lawyer at Drinker 25 Biddle. 66 1 Q What is his area of practice? 2 A He is, I guess, from what I -- he did other 3 things, but for us, and I think for TFS Capital, and he was 4 counsel on investment companies. 5 Q So would it be accurate to describe him as a 6 securities lawyer? 7 A I don't know. 8 Q Okay. And I'm sorry, he was retained by TFS? 9 A I'm not sure if he was ever retained. In other 10 words, I don't know that we ever had a retainer for him or 11 anything like that. He certainly did work for TFS Capital. 12 Q Did he send you bills for his work? 13 A He did, yes. 14 Q And where were those bills addressed? To TFS? 15 To you? To some other email? 16 A I think, you know, he would -- he would have 17 tagged them to the client, is my -- so I don't know. I'm 18 guessing the bills themselves would show what the work was 19 for. 20 Q Were you the person at TFS who was responsible 21 for reviewing his bills? 22 A Yes. 23 Q Why did you write this email, Exhibit 8, to 24 Kevin and Rich Gates? 25 A I don't recall specifically what led to this 67 1 inquiry. 2 Q So you don't recall why you contacted 3 Mr. Beringer? 4 A No. 5 Q How frequently did you -- excuse me, strike 6 that. 7 When you were at TFS, how frequently did you 8 have contact with Mr. Beringer? 9 A Monthly. 10 Q And so whenever you would have a question about 11 a matter related to investment companies or the SEC, you 12 might contact him? Is that accurate? 13 A Yes. 14 Q The title of this email -- or the subject line, 15 I should say, is "trading to oneself." What does that 16 mean? 17 A I don't recall the exact nature of the inquiry. 18 I mean, I believe it has to do with, if you enter a 19 marketplace and you would place trades on both sides of the 20 security. So it could be construed as -- that you're 21 essentially trading to yourself. 22 Q And you were aware that -- generally, that that 23 kind of wash trading is illegal, right? 24 A I don't know anything -- I mean, again, I'm not 25 a lawyer. Any time any questions came up that were in this 68 1 -- really having to do with anything, I was usually quick 2 to reach out to Josh, or if there was other -- I can't 3 remember if we used anyone else at the time, but I tended 4 to not make assumptions when it came to securities-related 5 stuff. 6 Q And why was that? 7 A Well, I mean, you read headlines about large 8 fines and settlements. And it just seems like there is a 9 lot of fine print in the securities regulations. And you 10 just don't want to be -- you want to steer clear of any 11 even appearance of impropriety, so -- 12 Q And this email refers to -- the third paragraph 13 down, the sentence beginning, "bad/OK news. Josh advises 14 against doing test trades to prove that price manipulation 15 is possible." What are the test trades? 16 MR. CRAPAZANO: I'm going to object based on 17 privilege. And direct the client not to answer, to the 18 extent that it involves a conversation that he had with 19 counsel about that subject. 20 MR. FERRENTINO: Well, Greg, I understand your 21 instruction not to answer. We'll reserve on this issue, 22 and we'll need to reopen Mr. Eiben's deposition if you're 23 giving that instruction, because you produced a document 24 that conveyed in considerable detail the advice of counsel 25 on an issue that Mr. Eiben appears to have asked him about. 69 1 And he is conveying that advice to the Gates 2 brothers. And you've elected not to claim a privilege over 3 this document which conveys the substance of counsel's 4 advice. In my book, that's a textbook subject matter 5 waiver. Do you disagree? 6 MR. CRAPAZANO: I do disagree, because we have 7 a -- one, I would need to look into this, and see if we 8 should claw it back. But we have an agreement in this case 9 that if anything is produced that is subject to 10 attorney-client privilege, that it is not waived, and it is 11 not a subject matter waiver. And we would be able to claw 12 the document back. 13 MR. FERRENTINO: All right. Sure. Go ahead. 14 MR. CRAPAZANO: Further, I've allowed him to 15 answer certain questions. And I've allowed him to get to 16 this point. And I don't want to get into the details here, 17 but there is certainly not a full subject matter waiver on 18 the issue. I've allowed you to ask generalized questions. 19 But to the extent that you're going to ask about specific 20 questions about the attorney-client privilege that would be 21 contained in this document, I'm going to object. 22 MR. FERRENTINO: Okay. I would just -- I don't 23 want to hang the deposition up on this. Like I said, we'll 24 just have to reopen once this matter is resolved, if that's 25 the way you're going to go with it. 70 1 BY MR. FERRENTINO: 2 Q And, Mr. Eiben, that means that I'm going to 3 have to ask you questions at another date if the court 4 rules that Mr. Crapanzano's objection is not well-taken. 5 MR. FERRENTINO: So again, I just want to close 6 the loop on this about waiver. I don't know if you're 7 aware, Greg, but this document is cited, I believe by Bates 8 number, in Powhatan's interrogatory responses. I don't 9 know if that causes you to modify your instructions at this 10 point, but I'll just note that for the record. 11 MR. CRAPAZANO: And as I said, I'll have to look 12 and see whether we need to actually claw the document back. 13 But I think even now -- I don't understand your basis that 14 you can ask -- just because there is a document that was 15 produced, that there would be a full subject matter waiver. 16 Even without clawing the document back, 17 Powhatan's position would be that it doesn't provide a 18 subject matter waiver. So even if there is nothing 19 necessarily privileged in this document, we'll claw it 20 back, which looking at it, you know, now, I'm not sure that 21 there is anything in here that really would warrant a claw 22 back or is necessarily privileged. 23 But to the extent that you're asking further 24 questions that would go into attorney-client privilege, 25 that is objectionable, and he shouldn't answer. 71 1 MR. FERRENTINO: Well, I think that presumes the 2 question of waiver, so let's brush that aside. So it's 3 your position, Greg, that I'm not allowed to ask Mr. Eiben 4 about why he consulted with counsel about doing test 5 trades? 6 MR. CRAPAZANO: No, I've already said that you 7 -- you've already asked questions about why he would 8 generally consult counsel on certain issues. But you asked 9 him -- I believe the pending question was what counsel told 10 him about conducting test trades. 11 MR. FERRENTINO: Right. And the basis for the 12 question is what Mr. Eiben wrote an email that you produced 13 to us and cited in your interrogatories as supporting your 14 defenses in this case. So I think that notions of fair 15 play and the civil rules allow me to -- 16 MR. CRAPAZANO: Sure. I'll object to 17 foundation. Can you please try to establish this document 18 as even referring to the trading that's at issue in this 19 case? 20 MR. FERRENTINO: Well, I think that's what I 21 want to know, actually. 22 BY MR. FERRENTINO: 23 Q Mr. Eiben, can I ask you? Does this document 24 have anything to do with power trading? 25 A I don't know. 72 1 Q All right. Well, I think -- 2 MR. CRAPAZANO: That is the state of our 3 objection. And I'm fine with where we are. 4 MR. FERRENTINO: Well, I'm glad you're fine. 5 MR. CRAPAZANO: And you can ask -- if you want 6 to ask another question, because I have allowed -- I will 7 continue to allow general questions about why he might 8 consider, you know, in his practice asking an attorney 9 about issues and general issues related to SEC regulations. 10 BY MR. FERRENTINO: 11 Q Did you ever ask Mr. Beringer about power 12 trading matters? 13 A I don't recall. 14 Q Did Rich or Kevin Gates ever consult with 15 Mr. Beringer about power trading matters? 16 A I don't know. 17 Q Did -- do you know if Mr. Beringer ever spoke to 18 Alan Chen? 19 A I don't know. 20 Q Did you ever put Mr. Beringer in touch with Alan 21 Chen? 22 A I don't remember doing that. 23 Q Do you know if Mr. Beringer advertises himself 24 or has any expertise in power trading or FERC regulated 25 markets? 73 1 A I don't know. 2 Q After you sent this email, Exhibit 8, to the 3 Gates brothers, did you have any discussion with them about 4 it? 5 A If we did, I don't recall. 6 Q Do you know what the test trades referred to in 7 this email are? 8 A No. 9 Q Do you know what market they're in? 10 A At one point, there was discussion of some 11 observations in the stock trading related to dark pools, I 12 believe, but I can't recall any specifics. And I don't 13 know if this was related to that or not, but -- 14 Q So this is about Flash Boys, isn't it? You know 15 what I'm referring to? 16 A Do I know what Flash Boys is? 17 Q Yes. 18 A Yes. 19 Q Rich Gates is in Flash Boys, isn't he? 20 A He is. 21 Q And what caused Rich Gates to be featured in 22 Flash Boys? 23 A I can't remember the specifics. 24 Q Was it these test trades that are referred to in 25 your email in Exhibit 8? 74 1 A I don't know. 2 Q Are there any other communications or documents 3 that memorialize your conversation with Mr. Beringer in 4 this time frame, June, July 2010? 5 A I don't know. 6 Q Do you know how you communicated about 7 Mr. Beringer on the subject of this email? What method? 8 A How I communicated with Mr. Beringer regarding 9 this subject matter of the -- 10 Q Yes, sir. I'll ask a better question. Did you 11 talk about this matter with Mr. Beringer on the phone? 12 A I don't know. 13 Q Did you send him an email? 14 A I don't know. 15 Q Did he send an email to you? 16 A I don't know. 17 Q Do you have any notes about discussions you 18 might have had with Mr. Beringer on this subject? 19 A I'm sorry. Did you say, do I have notes? 20 Q Yes, sir. About your conversations with 21 Mr. Beringer as memorialized in Exhibit 8? 22 A Not that I am aware of. 23 Q Did Powhatan Energy Fund ever pay Mr. Beringer 24 for advice -- legal advice? 25 A I don't know. 75 1 Q This email refers to -- Exhibit 8 refers to the 2 SEC one, two, three, four times. Is that accurate? 3 A Yes, I see five, actually, but, yes. 4 Q Thank you. Are there any other government 5 agencies referenced in this email that you wrote? 6 A No. 7 Q You do understand the SEC regulates equity 8 markets? 9 A I think the -- well, I don't know everything 10 that the SEC rules apply to, but, yeah, we were familiar 11 with them through TFS, through their regulation of 12 investment companies. 13 Q And would you agree that the email that you 14 wrote as Exhibit 8 is about trading in equity markets? 15 A I don't know. I don't know what was the impetus 16 for the question. 17 Q Was Alan Chen trading for Powhatan in an SEC 18 regulated market? 19 A That's -- I don't know. I mean, I guess that's 20 a legal question. I don't know. 21 Q What's your understanding? 22 A I have no idea. I mean, I understand -- my 23 knowledge of the SEC's involvement in trading and 24 securities and whatnot is predominantly through working on 25 compliance for investment companies and registered 76 1 investment advisors. So I tend to have some knowledge 2 there, but it tends to be pretty limited outside of that 3 realm. 4 Q And that's the work that -- generally, that Josh 5 Beringer did for you, right? Those subject matter areas? 6 A Yep. Helped on those for sure, yep. 7 Q Any others that you can remember? 8 A Yeah. Josh was, I guess, my first -- often my 9 first line of defense for any legal question. Some things 10 related to setting up businesses, for example, and 11 paperwork involved. That sort of thing. 12 But, yeah, he would have -- I would have asked 13 him -- I saw him potentially as a point person, too. I 14 knew Drinker Biddle had a bench of lawyers that did a lot 15 of other things, so it would not be uncommon for me to ping 16 him, and then have an inquiry about, you know, can I raise 17 or invest in this type of thing that we're contemplating. 18 And he would bring in some HR or Department of Labor 19 expert. And you know, he was kind of my point person, I 20 guess, at Drinker Biddle. 21 Q Do you remember that happening in connection 22 with Exhibit 8, that he brought in other attorneys to 23 consult with you? 24 A I don't recall. 25 Q All right. Did you understand Alan Chen to be 77 1 doing test trades in the power markets on Powhatan's 2 behalf? 3 A I didn't really know much about Alan's trades, 4 generally, so I don't -- I didn't know them to be anything 5 other than trades. 6 Q Well, when he is making you so much money that 7 you couldn't spend it so fast, did you understand that that 8 was just a test or if that was trading for real? 9 A Well, it certainly was trading for real, in the 10 sense that it was profitable and creating, you know, a net 11 income stream. But I guess it felt like it was in a 12 constant state of flux, in the sense that it seemed like 13 Kevin Gates was mentioning that it was constantly trying to 14 be improved or modified. That it was trying -- he was 15 trying to make it better. Alan was trying to keep getting 16 better at it. 17 Q So do you think it's fair to characterize what 18 Alan Chen was doing as a test trade? 19 A I have no idea. I mean, I don't -- again, I 20 don't know. I really didn't have much -- I didn't have any 21 access to the actual trades, so I don't know what was -- 22 Q I'm just asking what your understanding is. Did 23 you understand the trades to be test trades? 24 A I mean, I would say that I understood the trades 25 to be trying to profit, but also that there is an 78 1 inevitable process in investment management where you're 2 trying to get better. So could they have been -- could 3 there have been some trading? Perhaps. I don't know if it 4 was testing a new strategy. I don't know. 5 Q Okay. You write in Exhibit 8, in the paragraph 6 beginning "bad/OK news," there is a reference to, quote -- 7 I'm starting in the middle of the sentence, "the fact that 8 we're doing the trades for the long-term greater good of 9 our clients (and the world), since there isn't a direct 10 immediate economic benefit." Do you see that sentence? 11 A I do. 12 Q What trades were you or the Gates brothers doing 13 in June 2010 with the goal of bettering the world and for 14 the greater good? 15 A I don't know. 16 Q Is it possible that Rich Gates was trading to 17 himself in the dark pools, in order to show that other 18 market participants were front running investors' trades? 19 A Yes. 20 Q And you know that he did that, right? 21 A I don't know what -- I don't know. I mean, I 22 wasn't involved in any trade -- I wasn't involved in 23 trading generally at TFS Capital, so I was very removed 24 from anything that was happening on the trading floor. It 25 was -- or trading floor, a couple of computers. 79 1 But that was in West Chester, Pennsylvania. And 2 I was down in Richmond, Virginia. So trading was not in my 3 wheelhouse, so to speak. It's not part of what I was 4 responsible for. 5 Q But you were responsible for talking with 6 counsel about some of those issues, trading to oneself, for 7 example? 8 A Yeah, and -- yes, if a question surfaced that I 9 or someone else thought it merited a discussion with 10 outside counsel, then often I would be the one to reach out 11 and make contact. 12 Q Thank you for your patience. Do you know if you 13 or anyone else considered Exhibit 8 in evaluating whether 14 Alan Chen's trades in PJM were lawful? 15 A I don't know. I don't know. 16 Q Did you ever have a discussion with the Gates 17 brothers or anyone else, other than counsel, where you 18 said, you know, this is okay, remember that email that I 19 sent about trading to oneself? Something like that? 20 A I don't remember. 21 Q Okay. You can put Exhibit 8 aside. 22 MR. CRAPAZANO: I need 30 seconds to adjust the 23 thermostat in the room. I'll be right back. 24 MR. FERRENTINO: All right. We'll wait for you. 25 MR. CRAPAZANO: Thank you, all. 80 1 BY MR. FERRENTINO: 2 Q Mr. Eiben, could we turn to Exhibit 9 next, 3 please? 4 A Okay. 5 Q And for the record, this is an email dated 6 August 2nd, 2010. And Exhibit 9, the first page Bates 7 number ends in 866. Are we looking at the same email? 8 A Yes. 9 (L. Eiben Exhibit No. 9 was 10 marked for identification.) 11 BY MR. FERRENTINO: 12 Q Very good. I'll give you just a moment to 13 review it, and let me know when you've read it. 14 A Okay. Yes. 15 Q All right. This email chain conveys that "Alan 16 Chen got a call from Dr. Bowring of PJM Monitoring 17 Analytics this morning about the large volume trades we put 18 on. I have promised to him that I will not put on these 19 trades starting tomorrow." And I'm reading from the email 20 in the middle of the first page. Do you see that? 21 A I do. 22 Q Did you -- is this a -- excuse me, let me strike 23 that. 24 This email gets forwarded to you and others at 25 TFS Capital on August 2nd from Kevin Gates. Do you see 81 1 that at the top? 2 A Yes. 3 Q Is this the first way that you heard about 4 Dr. Chen's conversation with Dr. Bowring? 5 A I don't remember. I don't really -- I don't 6 remember this email. I remember becoming aware of the 7 contact. 8 Q Do you remember how you became aware of it? 9 A I don't. 10 Q Can you tell us what your reaction was when you 11 heard about Dr. Bowring's call to Dr. Chen? 12 A No. I mean, I don't remember. 13 Q Did anyone else at Powhatan -- strike that. 14 Did anyone at Powhatan express a concern about 15 what Dr. Bowring had told Dr. Chen or the fact that he had 16 reached out to Dr. Chen? 17 A Not that I recall. 18 Q Did you ever speak to Kevin Gates about 19 Dr. Bowring's call to Dr. Chen? 20 A I don't remember any specific conversations. 21 Q Did you ever speak to Alan Chen about the call? 22 A No. 23 Q Do you have any understanding of what was 24 conveyed in the call beyond what's on the page here in 25 Exhibit 9? 82 1 A No, that's it. 2 Q What are the large volume trades that Dr. Chen 3 refers to here, do you know? 4 A I don't. I just assume it's describing his 5 trading, but -- 6 Q Do you know who Joe Bowring is? 7 A No. 8 Q Did this email chain raise any concerns from you 9 from a compliance perspective? 10 A I don't remember receiving it. As I read it 11 now, I would say no. It seemed -- it seemed like he was 12 asked to discontinue trading. He was going to discontinue 13 trading. It seems okay. 14 Q And you weren't curious why he had been told to 15 cease the trading? 16 A I would have -- if I had -- at the time, I'm 17 guessing I would have just assumed that I would have found 18 out, eventually. 19 Q Did you find out eventually? 20 A Well, only that PJM was planning to change their 21 rules based on some trading, to, I guess, prevent some of 22 what he was doing. Something like that. 23 Q All right. You can put Exhibit 9 aside. If you 24 can take up Exhibit 10, please. This is a three-page 25 document premarked. It has a Bates number on the first 83 1 page ending in 163. 2 (L. Eiben Exhibit No. 10 was 3 marked for identification.) 4 BY MR. FERRENTINO: 5 Q Do you have it? 6 A I do. 7 Q Okay. I'll give you a moment to review it. 8 A Okay. 9 Q I'm paraphrasing, but in this email, it looks to 10 me like Alan Chen is telling Kevin Gates, among other 11 things, that it's best to stop right here for those large 12 volume trades. Do you know what those large volume trades 13 refer to in the second email from the top? 14 A No. 15 Q The conversation in the middle of the page is 16 between Dr. Chen and Mr. Kevin Gates. And at some point, 17 Kevin Gates forwards it to you and others at TFS. Do you 18 see that at the top? 19 A Yes. 20 Q Saying, "here is more background from Alan on 21 the call he received from PJM." Did you and Mr. Chen, Chao 22 Chen, and Eric Newman, and Rich Gates, and Kevin Gates have 23 any discussions about this email after you received it? 24 A I don't remember. 25 Q Did you discuss with these gentlemen and the 84 1 other investors at Powhatan what Dr. Bowring believed the 2 problem was with the large volume trades in August 2010? 3 A Not that I recall. 4 Q Did anyone at Powhatan express disagreement that 5 Dr. Chen should cease large volume trading for Powhatan? 6 A I don't remember. 7 Q You can put Exhibit 10 aside. Thank you. Could 8 you pick up Exhibit 11, please, Mr. Eiben? 9 (L. Eiben Exhibit No. 11 was 10 marked for identification.) 11 THE WITNESS: Okay. 12 BY MR. FERRENTINO: 13 Q It's a multipage document. I'm really only 14 going to ask you questions about the cover email, but I've 15 included the whole thing for completeness. This is, again, 16 Exhibit 11, an email dated August 6, 2010. The last three 17 numbers of the Bates page on the top are 174. 18 A Okay. 19 Q You're welcome to read the whole document. I 20 don't want to preclude you from doing that, but again, I'm 21 only going to ask you questions about the email on the top. 22 A Okay. I'm ready. 23 Q All right. Kevin Gates writes to you and others 24 on August 6, 2010, under bullet point 2, "there's reason to 25 believe that our days are limited with this fund as there 85 1 is pending regulatory changes that may eliminate Alan's 2 trade. This would be a huge disappointment." 3 So first of all, what is the fund whose days are 4 limited? Do you have any understanding of what that is? 5 A You know, I would assume that would be Powhatan 6 Energy Fund. 7 Q What's the pending regulatory change that was 8 threatening to eliminate Alan's trade? 9 A I don't know. My understanding was that PJM was 10 going to be changing their rule book, so to speak. 11 Q Did you agree with Mr. Kevin Gates that losing 12 the ability to do Alan's trade would be a huge 13 disappointment? 14 A Yeah, I don't know for sure how I was feeling at 15 the time, but certainly you have what appears to be very 16 profitable trading strategy. Yeah, you'd hope you would be 17 able to continue it. 18 Q Looking at bullet point 3 in Exhibit 11. Do you 19 have any understanding of what the other electricity fund 20 referred to in bullet point 3 is? 21 A No. 22 Q Okay. You can put that document aside. Would 23 you kindly refer to Exhibit 11, Mr. Eiben? This is a 24 two-page email, first Bates page is ending in 495. It's 25 dated August 19, 2010. 86 1 (L. Eiben Exhibit No. 12 was 2 marked for identification.) 3 THE WITNESS: Yep, that's actually 12. Yes. 4 BY MR. FERRENTINO: 5 Q I'm sorry, did I say 11? 6 A Yes. 7 Q I'm sorry. Yes, Exhibit 12. Thank you for the 8 correction. I'll give you a chance to read it, and you let 9 me know when you have. 10 A Okay. I see. 11 Q The last sentence of Kevin Gates's email on page 12 1 refers to holding off -- I'm paraphrasing -- holding off 13 on UTC trades until we get more clarity on the issues 14 raised by FERC. What were the issues raised by FERC, if 15 you know? 16 A I don't know. 17 Q Would you agree that in the first email here, 18 Mr. Gates has written to Alan Chen, to you, and to Chao 19 Chen to -- strike that. 20 A Yes. 21 Q I'm sorry, strike that question. 22 You received -- you're on this email chain, is 23 that right? 24 A Yes. 25 Q And Kevin Gates refers to getting on the same 87 1 page for a call. Do you know what call he is referring to? 2 A No. 3 Q Why would it be important for -- to have 4 Mr. Chen on the same page before a call? 5 A I don't know. 6 Q All right. Would you agree that Mr. Gates and 7 -- Mr. Kevin Gates, excuse me, and Mr. -- Dr. Chen agreed 8 that it's a good idea to stop trading in the UTC market 9 after this date? 10 A Well, I see in the email, it looks like Alan 11 wrote to Kevin. And he said, I think that's a good idea to 12 stop trading for now and wait and see. Oh, okay. Yes, I'm 13 sorry. Kevin at the bottom also says, "I think it makes 14 sense to hold off." Okay, yes. 15 Q Do you remember anyone at Powhatan saying why 16 should we stop trading, let's just keep going, in this time 17 frame? 18 A I don't remember much about this period. 19 Q So the answer is, no, you don't remember that? 20 A I don't. 21 Q Okay. So as far as you know, everyone thought 22 it was a good idea to stop the trading until you had more 23 clarity about what's going on? 24 A I don't remember. I don't. 25 Q Did you feel any need to become involved in 88 1 determining what the path forward was about Alan Chen's 2 trading, based on your compliance role, your compliance 3 experience? 4 A No, I -- I don't recall feeling a need to get 5 involved, other than, as always, I would be happy to 6 assist, if needed. 7 Q Did you assist anyone in resolving this issue 8 from a compliance perspective? 9 A I don't remember how it proceeded from here. I 10 can't remember what the -- what followed. 11 Q Mr. Eiben, if you can't tell, I'm getting a 12 little tired myself, and I imagine you are, too. It's 13 lunch time. Would it be okay to break for lunch now, 14 everyone? 15 MR. CRAPAZANO: Sure. Good with me. 16 THE VIDEOGRAPHER: Going off the record at 12:07 17 p.m. This ends media file number 3 in the deposition of 18 Lawrence Eiben. 19 (Whereupon, at 12:07 p.m., the deposition in the 20 above-entitled matter was recessed, to reconvene at 1:02 21 p.m.) 22 23 24 25 89 1 AFTERNOON SESSION 2 (1:02 p.m.) 3 Whereupon, 4 LAWRENCE EIBEN, 5 the witness on the stand at the time of recess, having been 6 previously duly sworn, was further examined and testified 7 as follows: 8 THE VIDEOGRAPHER: We are back on the record at 9 1:02 p.m. This begins media file number 4 in the 10 deposition of Lawrence Eiben. You may proceed, 11 Mr. Ferrentino. 12 EXAMINATION BY COUNSEL FOR PLAINTIFF (RESUMED) 13 BY MR. FERRENTINO: 14 Q Thank you, sir. Mr. Eiben, could I have you 15 pull up now Exhibit 13 from the packet of exhibits before 16 you? 17 A Okay. 18 (L. Eiben Exhibit No. 13 was 19 marked for identification.) 20 MR. FERRENTINO: And for the record, this is an 21 email dated August 19th, 2010, and the last three digits of 22 the first page are Bates numbered 504. 23 BY MR. FERRENTINO: 24 Q Do we have the same document? 25 A Yes. 90 1 Q Great. I'll give you just a second to read it. 2 A Okay. 3 Q In this email, as I see it, Mr. Kevin Gates has 4 forwarded an email from PJM to you, to Chao Chen, and to 5 Rich Gates. And he writes, "FYI, here's a filing that PJM 6 recently did with the FERC regarding changing the rules to 7 close the loophole that Alan was exploiting. I'll read it 8 tonight. You can, too, if you're bored." 9 And somewhere below in the email, there is a 10 link to a PJM document of some kind. Do you recall reading 11 the filing that's linked in the email below? 12 A No. 13 Q In Exhibit 13? 14 A No. 15 Q Do you believe it was likely that you would have 16 done so? 17 A No, it is not likely. In part, I would say 18 because of the comment from Kevin, "if you're bored." In 19 other words, it's not mission critical that it be read. 20 For me to read it at least. 21 Q He indicated that he would be reading it in his 22 email, as he said. Did you ever discuss with him his 23 reading of the rule after this? After this email was 24 written? 25 A No, I don't remember any conversations. I don't 91 1 remember this email. I don't remember any conversations 2 about the email. 3 Q Did you disagree with Mr. Gates's 4 characterization that Alan was exploiting a loophole? 5 A Again, I don't remember anything about this 6 email. And I don't remember any conversations about it 7 either. 8 Q So you don't remember agreeing or disagreeing? 9 Just no memory at all. 10 A Yes, that's correct. 11 Q Do you have any reason to believe that anyone 12 else who received this email, Mr. Chao Chen, or Rich Gates 13 wrote back to Kevin Gates and said, it's not a loophole? 14 A I don't know what anybody would have done in 15 response to the email. I think as I was mentioning 16 earlier, I'm not sure the word loophole would have been 17 cause for concern among this crowd, because when I look at 18 that word, I think of that being synonymous with strategy 19 or, you know, inefficiency, et cetera. 20 Q Do you have a present belief that Alan Chen was 21 exploiting a loophole through his UTC trades on behalf of 22 Powhatan? 23 A I don't even know what that expression means. 24 Do I think he had found a strategy that made money? Yes. 25 Q That's all you know. You just know he was 92 1 making money for you. 2 A Well, I know that the strategy was profitable. 3 I know that he was trading in the power markets. I don't 4 know -- I don't know really anything about the details of 5 the trading. 6 Q So you don't know enough to agree or disagree 7 with Mr. Gates's characterization of this loophole? 8 A I don't even know -- it's a poor choice of 9 words. I don't even know what that means. 10 Q You can put Exhibit 13 to the side. And pick up 11 Exhibit 14, if you would. This is an email dated August 12 31, 2010, a two-page -- a three-page document. And the 13 Bates number on the first page ends in 116. Are we looking 14 at the same item? 15 A Yes. 16 (L. Eiben Exhibit No. 14 was 17 marked for identification.) 18 BY MR. FERRENTINO: 19 Q Okay. I'll give you a moment to review it as 20 usual. 21 A Okay. Yep. 22 Q All right. Can you explain what this email and 23 the attached document, which appears to be a Word document, 24 what this is? What this is about? 25 A Sure. There was going to be some money redeemed 93 1 by the members of Powhatan, but there was a thought that 2 the money may need to -- may still be needed. And so we're 3 trying to get Powhatan -- we wanted buy-in from the members 4 before the redemptions were processed. 5 Q So who made the decision to redeem? Let me 6 strike that. 7 Is this what's called a forced redemption? 8 A I don't know what that means exactly. It seems 9 like that's a fairly broad -- but this doesn't even -- I 10 mean, I don't see -- there doesn't even seem to be any 11 mention of forced redemptions in the exchange here, or the 12 word "forced." 13 Q Okay. But forced redemption is a term you're 14 familiar with? 15 A Yes, I mean -- yes. 16 Q Who made the decision to redeem money from 17 Powhatan in this time frame, in August 2010? 18 A I don't remember. 19 Q Well, you drafted the withdrawal form, is that 20 true? 21 A I don't know. I don't remember. 22 Q Was the redemption that was contemplated by this 23 document ever accomplished? 24 A I'm sorry, I didn't hear the first part of 25 the -- 94 1 Q Sure. Was the redemption that's contemplated by 2 this email in this blank redemption form, was that 3 redemption ever accomplished? 4 A There was a redemption where Powhatan investors 5 signed something like this. I'm not sure if this was the 6 actual form. 7 Q Would all the investors have had to have signed 8 the form or something like this, in order to receive their 9 money at this time? 10 A Most likely. 11 Q Did they all sign? 12 A I can't remember. 13 Q Do you recall how much money was disbursed from 14 Powhatan in 2010? 15 A No, I don't recall. 16 Q Were there other withdrawals after 2010? 17 A I don't remember. 18 Q I'll just have you look at the last page of this 19 exhibit. Looking at the sentence beginning "however" in 20 the middle of the first paragraph. Do you see that? 21 A I do. 22 Q "However, it is notable that the Federal Energy 23 Regulatory Commission has begun an investigation into 24 trading activities performed on behalf of PEF by HEEP Fund, 25 Incorporated. Some or all of the proceeds that you are 95 1 withdrawing may be deemed necessary by LSE Capital 2 Management, LLC, in its sole discretion under the terms of 3 the operating agreement, to settle matters related to this 4 investigation. These funds are being released to you, but 5 only under the following conditions. You will not spend 6 the money. If you choose to invest the money, you will 7 utilize investments that are generally liquid and of a 8 reasonable risk profile." Some of those funds are listed 9 there. And lastly, "you will return the money if deemed 10 necessary by LSE Capital Management, LLC." 11 Do you -- I'm assuming here -- assuming that the 12 funds were disbursed under an agreement like this, to your 13 knowledge, have all the partners of Powhatan who received 14 these distributions kept the liquidity as required by this 15 agreement? 16 A I don't know. 17 Q And I think you testified before that you're no 18 longer operating under a redemption obligation at Powhatan, 19 is that right? 20 A Yes, that's correct. 21 Q Because the Gates brothers have essentially 22 purchased your obligation from you, is that accurate? 23 A Yes, that's accurate. 24 Q Who is in charge of tracking the redemptions 25 that were made to the investors in Powhatan after 2010? 96 1 A I don't know for sure. I suspect Greg Sekelsky 2 would have been involved. 3 Q Would he be the person that possesses the signed 4 agreements, if any, related to redemptions from Powhatan? 5 A I don't know. I don't think so. I'm not sure 6 where those documents are. 7 Q Do you know if any of the other partners of 8 Powhatan have been bought out of these redemption 9 agreements by anyone else? 10 A I believe so, but I don't know for sure. 11 Q Okay. What's the basis for your belief that 12 others have been bought out? 13 A I recall some conversations about it, some 14 discussion in the past about it. 15 Q When your obligation was assumed by the Gates 16 brothers, had you kept your disbursed money liquid, 17 consistent with the agreement in Exhibit 14? 18 A Yes. 19 Q Would you agree that this -- strike that. 20 That this agreement, understanding it's not the 21 actual agreement, because I don't believe we have those, 22 would you agree that this disbursement request authorizes 23 LSE Capital Management to recall the money redeemed in its 24 sole discretion? 25 A That was the intent. I mean, from a legal 97 1 standpoint, again, I'm not a lawyer, so how that would be 2 determined, I'm not sure, but that was the intent. 3 Q That's fair. And I'm not asking for your legal 4 opinion. But everyone wanted LSE Capital Management to be 5 able to call back the money to satisfy an obligation to 6 FERC, is that fair? 7 A Well, certainly LSE did. 8 MR. CRAPAZANO: Objection. Sorry, apologies. 9 Object that that mischaracterizes the document. 10 BY MR. FERRENTINO: 11 Q Okay. I appreciate that. I'm just trying to 12 understand what the document actually says. I'm not 13 intending to mischaracterizes your testimony. I'm just 14 asking you if my view of it is correct. 15 A Well, I guess I'm thinking that, you know, LSE 16 Capital Management is the managing member of Powhatan. So 17 when I think about -- structurally, how something like this 18 would be set up, that -- I would assume that LSE would be 19 engaging with -- on behalf of Powhatan with the members of 20 Powhatan. 21 Q And as of August 31st, or August 19th, 2010, who 22 was in charge of running LSE Capital Management? 23 A I believe I was the sole member of LSE at the 24 time. It had other officers. 25 Q Who were the other officers of LSE at this time, 98 1 in August 2010? 2 A I believe Kevin Gates, Rich Gates, and I believe 3 Greg Sekelsky. 4 Q Did they also have ownership stakes at that time 5 or simply officer positions? 6 A I don't remember, structurally, the exact setup. 7 Q You can put this document aside. We'll move to 8 the next one. Before we move on to the next document, you 9 said that the intent of the draft document in Exhibit 14 10 was to make a disbursement subject to recall. What was 11 animating the desire to keep that money on hand? 12 A The desire to keep the money -- 13 Q To keep the money available to Powhatan? 14 A My understanding was possibly two items. Like, 15 one, sometimes in the trading, it seemed like months later, 16 there is some settlement process, where some money needs to 17 kind of come back into the account. So that comes to mind. 18 And then as was seemed to be referenced there in 19 the document, it references the FERC matter. And my 20 understanding is, it's, you know, possible legal bills 21 related to that perhaps. That sort of thing. 22 Q Or a settlement? 23 A Did you say for a settlement? 24 Q Or a settlement. I believe the word settlement 25 is used in the document, is that accurate? 99 1 A I don't remember any discussion about 2 settlement. 3 Q It doesn't use the word settlement, but the last 4 sentence of the first paragraph says, "some or all the 5 proceeds that you are withdrawing may be deemed necessary 6 by LSE Capital Management, LLC, in its sole discretion 7 under the operating agreement, to settle matters related to 8 this investigation." 9 A Sure. Yep, I -- I guess I read that also to 10 mean resolve. So resolve matters. 11 Q Did Powhatan ever recall money from you or the 12 other partners in Powhatan to pay legal bills or other 13 expenses of Powhatan? 14 A I don't recall. 15 Q What would be the best way to find that out? If 16 you wanted to know, who would you ask? 17 A Probably the Wells -- the Powhatan Wells Fargo 18 account, looking at the disbursements. 19 Q That would have all the money that went in and 20 out of Powhatan, frankly speaking? 21 A I think so. I believe so. 22 Q All right. You can move on to Exhibit 15, if 23 you would. 24 A Okay. 25 (L. Eiben Exhibit No. 15 was 100 1 marked for identification.) 2 BY MR. FERRENTINO: 3 Q And for the record, this is an email chain dated 4 August 23rd, 2011. The Bates number on the first page ends 5 in 358. Again, it's Exhibit 15. Are we looking at the 6 same item? 7 A Yes. 8 Q I'll give you a chance to look at it. 9 A Okay. 10 Q In the first email in this chain, which appears 11 to be between Mr. Kevin Gates and Mr. Sekelsky, Kevin 12 writes, "Greg, there is too much cash in PEF and HFoF and 13 each has an extra $1,150,000 sitting in cash. And I'd like 14 to do a forced redemption from each fund to each investor." 15 What's the reason that one might do a forced redemption in 16 these circumstances? 17 A You have more -- 18 MR. CRAPAZANO: I was muted when I tried to 19 object. This email is from 2011, and post dates the 20 trading that's at issue in this case. Josh, I'd be happy 21 to hear FERC's position on why this is relevant to the 22 case. 23 MR. FERRENTINO: Well, the time for that -- the 24 time for that, sir, is at trial, when the rules of evidence 25 are in play. This is a discovery deposition. And I will 101 1 ask about the documents that I choose to ask about. That's 2 FERC's position. 3 MR. CRAPAZANO: Understanding that this doesn't 4 have anything to do with the trading. 5 MR. FERRENTINO: Your objection is noted. The 6 witness will please answer the question. 7 BY MR. FERRENTINO: 8 Q Why would one choose to do a forced redemption 9 in this kind of circumstance, from a fund like Powhatan? 10 A It could be that there is more cash in the 11 account than is needed for trading. 12 Q Was Powhatan still trading in this time frame, 13 in 2011? 14 A I don't remember. 15 Q Was it Kevin Gates's sole responsibility to 16 determine when a forced redemption would occur, from 17 Powhatan? 18 A I think, in general, he was the most on top of 19 the needs of the fund. So I'm not really going to say his 20 sole responsibility. It would be his recommendation. 21 Q Okay. Mr. Sekelsky writes a response in this 22 email at the top. It says, "Kevin, are we trying to get 23 this to TFS ownership percent or close to it?" 24 Does that question mean anything to you? 25 A No. 102 1 Q Can you think of any reason why redemptions 2 would mirror TFS ownership percentages? 3 A I don't remember. I don't remember this 4 discussion or email. 5 Q Did TFS's proprietary investments generally 6 mirror the percentage ownership of TFS itself? 7 A I don't remember. 8 MR. FERRENTINO: You can put that exhibit aside. 9 Just a housekeeping matter before we move on to the next 10 exhibit. I would just note for the record that the dial-in 11 indicates that Rich Gates has joined the deposition, as 12 well as Steven Tabackman, who is an attorney at FERC. 13 Mr. Crapanzano, is it your position that Rich 14 Gates is also attending as a corporate representative of 15 Powhatan? 16 MR. CRAPAZANO: I apologize that I forgot to 17 bring that up before we started. Yes, that is our 18 position. And I apologize when I was going into that. 19 Does FERC have a problem with there being two 20 representatives on this? It's not really clogging up any 21 deposition room or anything like that. 22 MR. FERRENTINO: Well, you know, I think the 23 concern that we would have is that both Richard and Kevin 24 Gates are obviously percipient witnesses in the case. And 25 ordinarily in these circumstances, witnesses are 103 1 sequestered unless there is some other reason for them to 2 be here. 3 Does Powhatan feel the need to have two 4 representatives on the call? I guess that's the -- that's 5 the question for you. And I would ask you to put on the 6 record what the purpose of their attendance is, given that 7 they will also be questioned as deponents in this case, and 8 likely at trial in the matter as well. 9 MR. CRAPAZANO: I'm not sure I understand your 10 question. Given that they are -- they are corporate 11 representatives of Powhatan. And clearly, they have an 12 interest in this case. They are simply interested. And 13 Kevin Gates has indicated to me that he is perfectly fine 14 dropping from this, if needed, if you'd have an objection 15 to there being two corporate representatives. 16 MR. FERRENTINO: I don't have a problem with 17 them staying. Thank you. I'm just glad we made the record 18 clear. 19 BY MR. FERRENTINO: 20 Q All right. Mr. Eiben, would you take a look at 21 Exhibit 16? 22 (L. Eiben Exhibit No. 16 was 23 marked for identification.) 24 BY MR. FERRENTINO: 25 Q And for the record, this is an email from Kevin 104 1 Gates dated September 28th, 2015, to you and some other 2 folks. The Bates number on the first page ends in 106. 3 Are we looking at the same Exhibit 16? 4 A Yes. 5 Q I'll give you a chance to review this document. 6 A Okay. 7 Q I'm looking at the email at the bottom of the 8 page, which I think is the first email in the chain. It's 9 dated September 28th, 2015. Kevin Gates writes "Larry, 10 Greg, as you guys know, in 2010 and maybe in 2011, Powhatan 11 processed redemptions from investors and had investors sign 12 letters agreeing to certain terms of the redemption related 13 to the FERC OE investigation. I'd like to see those 14 letters. Can you please let me know where they are." 15 Do you know why Mr. Gates was asking you in 2015 16 for copies of the redemption letters? 17 A No. 18 Q Going to the next email in the chain, which is 19 apparently from you, Larry@TFSCapital.com. You write, 20 "Greg, can you include me in the response? Let me know if 21 you cannot locate. I'm also getting questions about the 22 exact amounts to be put back in. If those are not included 23 in the letters, can you include those in the response. 24 Larry." 25 Who was asking you the questions about the exact 105 1 amounts to be put back into Powhatan at this time frame? 2 A I don't remember. 3 MR. CRAPAZANO: I don't want to interrupt the 4 pending question, but again, I just generally object to the 5 line of questioning to any documents that are after the 6 alleged misconduct period, for the record. 7 BY MR. FERRENTINO: 8 Q Moving to the top email, just from Mr. Kevin 9 Gates. "Attached is the letter that everyone signed, and 10 attached is an XLS sheet detailing what everyone was 11 distributed from Powhatan that's subject to the letter. In 12 total, it's a little over $4 million." 13 If you look at the last page of Exhibit 16, 14 there is a spreadsheet with some sums that total to about 15 the $4 million that Mr. Gates says. Does this help refresh 16 your recollection about the amounts that were redeemed from 17 Powhatan after the FERC investigation? 18 A These look to be about right, yes. 19 Q Has the $4 million -- roughly $4 million amount 20 been changed by any recall of the money from the gentlemen 21 listed on this sheet, in Exhibit 16? 22 A I don't know. 23 Q Have there been any further redemptions from 24 Powhatan to its partners after the date of this exhibit, 25 which is September 28, 2015? 106 1 A I don't know. 2 Q Are you aware of any other agreements, other 3 than the blank form that's attached to Exhibit 16, that 4 governs the terms of the recall that LSE Capital Management 5 can enforce? 6 A Well, from my perspective, the -- the interest 7 or the requirement was transferred, so sold to Kevin and 8 Rich. So I don't view that I would still be subject to it. 9 Q I see what you mean, because your interest has 10 been assumed by someone else? 11 A Yes. Yes. 12 Q Okay. That's fair. And again, you're not -- 13 you're aware that perhaps some of the other partners may 14 have similar assumption agreements? 15 A Yes. Yes. 16 Q With other former partners. 17 A Yes. 18 Q Okay. Other than the assumptions, though, 19 you're not aware of the $4 million overall number changing 20 in any respect, either because further redemptions were 21 made, or because money was recalled. Is that true? 22 A I don't recall any discussions or terms that 23 would change. 24 Q Okay. You can skip Exhibit 17, and go to 25 Exhibit 18, if you would. 107 1 A Okay. 2 (L. Eiben Exhibit No. 18 was 3 marked for identification.) 4 BY MR. FERRENTINO: 5 Q And I'm looking at an email -- a single email 6 dated January 3rd, 2011, from Kevin Gates to you and 7 others. And it has a Bates number ending in 864. Are we 8 looking at the same Exhibit 18? 9 A Yes. 10 Q I'll give you a chance to read it. 11 A Okay. 12 Q All right. This email is dated early 2011. Do 13 you recall any discussions with your partners in Powhatan 14 in early 2011 about whether or not trading with Alan's firm 15 should resume? 16 A I don't remember any discussions, no. 17 Q Other than what's written in this email, do you 18 know why Kevin Gates was planning on asking Alan to resume 19 his trading with Powhatan? 20 A No. 21 Q Did you ever discuss with Alan Chen resuming 22 trading in 2011? Were you part of any of those 23 discussions? 24 A No. 25 Q Kevin Gates writes in the second sentence of the 108 1 first paragraph, "his trading will be a good bit less 2 profitable than it was before and will be more volatile. 3 In summary, the risk/return will be more like it was before 4 the introduction of TLC in the fall of 2009." Do you know 5 what that refers to? 6 A The trading or -- 7 Q Let me ask a better question. I apologize. 8 The sentence that I read, two sentences that I 9 read, "his trading will be a good bit less profitable than 10 it was before and will be more volatile. In summary, the 11 risk/return will be more like it was before the 12 introduction of TLC in the fall of 2009." Can you explain 13 why the trading would be less profitable and more volatile 14 if resumed in 2011? 15 A I don't know for sure. I don't know the 16 specific adjustments in the trading that were made. I was 17 removed from that whole process. 18 Q In the next paragraph, and I'm paraphrasing, 19 Mr. Gates states that he is going to reduce exposure to 20 Alan Chen's trading, going from 20 times to four times. Do 21 you know why Mr. Gates would have been reducing exposure to 22 Alan Chen's trading at this time? 23 A No. 24 Q All right. Could you go on to Exhibit 19, 25 please? 109 1 (L. Eiben Exhibit No. 19 was 2 marked for identification.) 3 BY MR. FERRENTINO: 4 Q And for the record, this is an email from you to 5 Kevin Gates dated May 4th, 2011, and the first page has the 6 Bates number ending in 031. Are we looking at the same 7 Exhibit 19? 8 A Yes. 9 Q Great. I'll give you a chance to read it. 10 A Okay. 11 Q All right. It looks to me as if this email 12 forwards -- Kevin Gates forwards an email from Alan Chen to 13 at least you, although perhaps others. And he says, "I'm 14 assuming that you guys are interested in getting back into 15 power trading. I'd like to. Won't be as good as the 16 summer of 2010, but it still should be a nice investment. 17 If I don't hear otherwise, I'll actively pursue this for 18 Powhatan." And you reply in the top email, "yep. Good 19 with me." 20 Did you have any understanding, when you wrote 21 this email, why Powhatan's investment in power trading 22 wouldn't be as good in 2011 as it had been in the summer of 23 2010? 24 A No. 25 Q Mr. Gates says that the power trading -- and I'm 110 1 paraphrasing -- should still be -- still should be a nice 2 investment. Did you agree with that? 3 A I don't -- I don't even remember this email, so 4 I certainly don't know what I was thinking when I read it. 5 Q Were you just following Mr. Gates's lead here? 6 A I don't know. It does -- my response makes me 7 point in that direction. 8 Q All right. You can put Exhibit 19 to the side, 9 and move on to Exhibit 20, please. 10 (L. Eiben Exhibit No. 20 was 11 marked for identification.) 12 BY MR. FERRENTINO: 13 Q For the record, this is an email from Kevin 14 Gates to you and others dated May 11, 2011. And the last 15 three digits of the Bates number on the first page are 920. 16 Are we looking at the same Exhibit 20? 17 A Yes. 18 Q I'll give you a chance to read it and the 19 exhibits attached. 20 A Okay. 21 Q All right. I want to focus your attention on -- 22 well, would you agree that in this -- this email, Kevin 23 Gates is inviting you and other members of TFS to invest 24 money in Powhatan, in the total amount of about $1 million? 25 A Yes. 111 1 Q Do you know if all of these gentlemen named in 2 Mr. Gates's email, Chao, Eric, Freddy, Greg, Sam, Rich, 3 Larry, Kevin, if they all invested again in Powhatan at 4 this time? 5 A I don't recall. 6 Q Do you recall if you did? 7 A I should know that, but I don't remember. 8 Q Okay. 9 A I think I would, but I don't -- 10 Q Bullet point number 2, under some notes, reads, 11 "we won't be collecting the transmission loss credit like 12 we did last year with Powhatan, and this changes the types 13 of trades that Alan will do." Do you see that? 14 A Yes. 15 Q Do you have any reason to believe that's not a 16 true statement? 17 A No. 18 Q Do you have an understanding of how the absence 19 of the transmission loss credit changed Alan Chen's 20 trading? 21 A My high level understanding is it would be less 22 attractive. That's what I remember so far. 23 Q I'm sorry. I didn't mean to cut you off. 24 A Yeah. No, I'm just saying that's fine. 25 Q What would be less attractive about the trades 112 1 that Alan would be doing? 2 A So the performance would likely be less 3 attractive. But I don't know the specifics as to why the 4 trades would be less attractive, but -- 5 Q I'm sorry. 6 A Yeah. No, that's -- that's how the expectations 7 were set. 8 Q Would you agree that bullet point number 2 9 doesn't say anything about the performance being different? 10 It says the trading behavior will change. Is that a fair 11 characterization of that sentence? 12 A I mean, it looks like it says -- well, it says 13 the changes -- this changes the types of trades. So I 14 don't really know what that means or what that translates 15 to, but it's clearly going to be different. 16 Q But you don't understand how they were 17 different? 18 A No. 19 Q All right. You can move on to Exhibit 21. And 20 I should say, this is -- we're a little early in a break, 21 but this is a good time to take a break in my outline. So 22 I'm happy to do that now, or we can get through a couple 23 more documents. Are you doing all right? 24 A Yeah, I'm okay. 25 (L. Eiben Exhibit No. 21 was 113 1 marked for identification.) 2 BY MR. FERRENTINO: 3 Q All right. Let's move on to Exhibit 21. Do you 4 have that in front of you? 5 A Yes. 6 Q And it's an email from you to Mr. Kevin Gates, 7 Mr. Rich Gates, Mr. Newman, and Mr. Chao Chen, on February 8 1st, 2012. The first page has a Bates label ending in 376. 9 Are we looking at the same Exhibit 21? 10 A Yes. 11 Q All right. I'll give you a moment just to 12 review it. 13 A Okay. 14 Q Do you recognize this document? 15 A No. I mean, I don't remember it, but -- 16 Q You wrote it, right? You sent it with some 17 attachments? 18 A Yes, it looks like I did write it. Yes. 19 Q All right. There is a -- the subject line is 20 "follow-ups to planning meeting on 2-1-2012." And in your 21 cover email, you say, "fellows, it was good hanging out 22 with you today. We need to do more of that, preferably 23 with drinks at the close of the meeting." I think this 24 suggests that you met with at least some of the people on 25 this email on that day. Is that a fair guess at what's 114 1 going on? 2 A Yes. 3 Q And do you recall where you held the meeting? 4 A No. 5 Q Was there -- do you recall what the purpose of 6 the meeting was? 7 A No. 8 Q How often did you meet with the TFS partners in 9 early 2012? 10 A In person, do you mean? 11 Q Yes, in person. 12 A I don't know. We were in separate geographical 13 locations, so it wouldn't have been very practical to get 14 together often. 15 Q All right. I want to focus you on the third 16 page of this exhibit, Exhibit 21. It has a title called 17 "functional responsibilities." Do you see that page? 18 A Yes. 19 Q And this appears to be an attachment to the 20 email that you authored. And I'm looking at the second 21 bullet point under your name. It reads, "general legal - 22 misc., ad hoc legal, contracts, employment agreements, HR 23 policy implementation, and HR compliance, risk manager, 24 insurance liability perspective, proprietary fund admin." 25 A Uh-huh. 115 1 Q What does proprietary fund admin mean? 2 A I don't know for sure what I meant at the time 3 of writing it. 4 Q Was proprietary fund administration something 5 that was your responsibility at TFS? 6 A I'm not even sure what it means, so that's tough 7 to answer. 8 Q Well, you wrote it. So you don't -- sitting 9 here today, you have no idea what proprietary fund admin 10 refers to under your responsibilities at TFS? 11 A I would be -- I would be guessing about what I 12 meant by that phrase, yes. 13 Q The next bullet reads, "securities compliance - 14 SEC/CFTC/FINRA/FERC rules compliance, implementation of TFS 15 compliance manual, oversee updating of existing offering 16 documents to require legal filings for new funds, 17 compliance for prop funds." What does "prop funds" refer 18 to? 19 A Based on the preceding bullet, I would suspect 20 that means proprietary funds. 21 Q Was Powhatan considered a proprietary fund of 22 TFS? 23 A Proprietary. I don't know, at the time, what we 24 were considering under the umbrella of proprietary funds or 25 fund. 116 1 Q Can you provide an example -- I'm sorry, I don't 2 mean to cut your answer off. 3 A Yeah. No, I -- it's not a defined term, so I 4 just don't know exactly. 5 Q Sure, I understand. Yeah, I understand it's not 6 a defined term. But these are your words, and I'm trying 7 to understand what -- what they refer to. 8 So can you give me an example of a proprietary 9 fund that was -- that would have been referred to by the 10 term proprietary fund as used in this document in early 11 2012? 12 A Well, I mean, this document wasn't even a 13 working document, I don't believe. I think this was some 14 sort of proposal. So it just seems like I'm not sure that 15 proprietary fund was a thing that was ever really defined 16 from TFS's standpoint. I just don't know. 17 Q So you can't provide an example of a proprietary 18 fund that you're familiar with from early 2012 at TFS? 19 A I can't say for certain that I know what that 20 term means. 21 Q Okay. Well, we're sort of stuck, because you've 22 used it in a document. You're the author, as best I can 23 tell. And you've used the term at least twice here. And I 24 just want to know what you mean. If you don't have a 25 memory of what you were referring to, where would we look 117 1 -- where would we look to define that term, in your view? 2 Who should we ask? 3 A I don't know. I mean, I think it's just the 4 time that's passed. I mean, I'm looking at the email. 5 That's early 2012, almost a decade ago. I mean, that's -- 6 that's a long time. 7 Q Would a fair definition of proprietary funds at 8 TFS be funds that the partners or employees of TFS would 9 stake their own money in, as opposed to a fund that would 10 be offered to investors at large? 11 A All I can say is maybe. I just don't know for 12 sure how we were defining that term, or how I was -- what I 13 meant when I wrote that term here. I just don't know. 14 Q Well, using my definition -- again, I'm 15 proposing my definition, which is a fund operated for the 16 benefit of employees or partners of TFS. Defining that as 17 a proprietary fund, would you consider Powhatan to be a 18 proprietary fund? 19 A No. Powhatan, I would not say, was created for 20 the benefit of TFS employees. 21 Q What about Mr. Sekelsky? Is he a TFS employee, 22 or was he at this time? 23 A Yes. 24 Q And Mr. Frederick? 25 A Yes. 118 1 Q And Mr. Chao Chen? 2 A Yes. 3 Q So Powhatan had several investors who were 4 employees at TFS, is that right? 5 A Yes. 6 Q And several investors who were owners of TFS? 7 A Yes. 8 Q Did you have other funds at TFS where the 9 investors were either -- were solely either owners of TFS 10 or solely employees of TFS? 11 A I believe so, but I'm not 100 percent certain. 12 Q Do you remember any of their names? 13 A Huntrise Energy Fund comes to mind. 14 Q Other than Huntrise Energy Fund and Powhatan 15 Energy Fund, did you have other funds that you were 16 involved in that required FERC rules compliance as referred 17 to in Exhibit 21 on the page ending 378? 18 A I don't know. I don't. 19 Q Okay. You can put Exhibit 21 to the side. And 20 we can move on to Exhibit 22. Do you have that in front of 21 you? 22 A I do. 23 Q For the record, this is an email from you to 24 Rich and Kevin Gates on April 16, 2013. The first page has 25 a Bates label ending in 023. Are we looking at the same 119 1 Exhibit 22? 2 A Yes. 3 (L. Eiben Exhibit No. 22 was 4 marked for identification.) 5 BY MR. FERRENTINO: 6 Q I'll give you a moment to review it. 7 A Okay. 8 Q All right. I believe you testified this morning 9 that you were essentially bought out of TFS. Is that 10 accurate? 11 A Yes. 12 Q And I think you said it happened in 2016. Is 13 that fair? 14 A Yes. 15 Q Did you discuss at any point earlier than 2016 16 what the terms of your exit would be? 17 MR. CRAPAZANO: Objection. Did you mean 2013? 18 MR. FERRENTINO: No, I meant 2016. I guess I'm 19 asking a ham-handed question about, when did the 20 discussions begin about your exit from TFS. Let's try that 21 question instead. 22 BY MR. FERRENTINO: 23 Q When did discussion begin with the other owners 24 of TFS about your possible exit from the firm? 25 A I don't remember. Certainly a good bit before I 120 1 left. 2 Q Does the email or attachment in Exhibit 22 3 reflect some of those discussions? 4 A Yes. 5 Q I want to focus you on the attachment, which 6 begins on Bates page 026. It's called "Larry Eiben 7 proposed exit terms." Do you see that page? 8 A Yes. 9 Q All right. And at the bottom, there is a bullet 10 point -- the very bottom bullet point says, "TFS agrees to 11 indemnify Larry for any potential costs arising from the 12 FERC matter in excess of Larry's profits during the period 13 in dispute. TFS also agrees to indemnify Larry for any 14 potential costs arising from any residual legal matters 15 relating to any of Larry's duties while employed with TFS 16 while overseeing any proprietary funds, or as an ongoing 17 passive equity owner." Did I read that properly? 18 A Yes. 19 Q And correct me if I'm wrong, but you were 20 editing or authoring this attachment beginning on Bates 21 page 026, is that right? 22 A Did I -- did you say, did I author this? 23 Q Did you author or edit this document, yes. 24 A Yes, I believe so. 25 Q Why would TFS need to indemnify you for 121 1 potential costs arising from the FERC matter? 2 A Yeah, it wouldn't. It wouldn't. 3 Q Did you reach an agreement with TFS that carried 4 indemnity for the FERC matter for you? 5 A No. 6 Q The term proprietary funds as used at the bottom 7 of the passage I just read, what does that -- what does 8 that term mean in context here in this paragraph? 9 A Yeah. I mean, I don't know what is meant really 10 by the term "overseeing." I'm not 100 percent -- I really 11 don't know exactly what is meant by proprietary funds. I 12 just don't remember the exact purpose of this bullet or 13 what I was -- what those terms meant. 14 MR. FERRENTINO: Let's move on. Actually, I 15 think this is a good time to take a short break. Could we 16 be back in 10 minutes? Off the record. 17 THE VIDEOGRAPHER: Going off the record at 2:08 18 p.m. This ends media file number 4 in the deposition of 19 Lawrence Eiben. 20 (Recess.) 21 THE VIDEOGRAPHER: We are back on the record. 22 2:20 p.m. This begins media file number 5 in the 23 deposition of Lawrence Eiben. You may proceed, 24 Mr. Ferrentino. 25 BY MR. FERRENTINO: 122 1 Q Thank you, again. Mr. Eiben, I would ask you to 2 return to Exhibit 8 in your stack of exhibits. 3 A Okay. 4 Q Let me know when you have it in front of you. 5 A I have it. 6 Q I think we may have covered this already, but 7 let me ask the question directly. When you conferred with 8 Mr. Beringer in the time frame of Exhibit 8, in June 2010, 9 did you ask him any questions about energy trading? 10 A I don't know. I don't recall. 11 Q And again, I apologize if I'm covering the same 12 ground. Did he ever advise you or others, such as the 13 Gates brothers, about conduct in FERC jurisdictional 14 markets for Powhatan Energy Fund? 15 A I don't know. I don't remember. 16 (L. Eiben Exhibit No. 23 was 17 marked for identification.) 18 BY MR. FERRENTINO: 19 Q All right. Thank you. You can put that exhibit 20 aside. If you could pick up Exhibit 23, please. Let me 21 know when you have it in front of you. And for the record, 22 I'm looking at Exhibit 23 that is dated August 17, 2012, 23 and it has a Bates number ending in 543. 24 MR. CRAPAZANO: And while he's checking that, I 25 just wanted to formally withdraw my objections on those 123 1 issues pending from earlier on Exhibit 8. 2 MR. FERRENTINO: I'm sorry. I think I heard 3 Mr. Eiben say he has Exhibit 23 in front of him. 4 THE WITNESS: Yes. 5 BY MR. FERRENTINO: 6 Q Great. I'll give you a chance to review it. 7 Let me know when you have. 8 A Okay. 9 Q All right. This appears to be an email from 10 Greg Sekelsky to all the partners of Powhatan Energy Fund. 11 Is that accurate? 12 A Yes. 13 Q And you're one of the recipients of this email, 14 right? 15 A Yes. 16 Q And he writes, "Tuckahoe was up .0363 percent in 17 June." What is Tuckahoe? 18 A I believe Tuckahoe was another fund. Tuckahoe 19 Energy Fund, perhaps. I can't remember the exact name of 20 it. 21 Q So Tuckahoe is another fund trading energy, is 22 your memory? 23 A I believe so. 24 Q All right. The next sentence says, "Powhatan 25 was up 80.541 percent in June. Kevin made me aware that 124 1 the legal fees that Powhatan pays should reduce the income 2 earned by Alan, which in turn reduces the amount that 3 Powhatan owes him. This is a one-time big correction, but 4 legal fees going forward will not reduce your value in PEF 5 at 100 percent rate with the coinciding reduction in 6 payable to Alan. Values to follow." 7 Do you have an understanding of what that 8 paragraph refers to, that I just read? Can you explain 9 what's going on, I guess, is a better question. 10 A If I recall -- well, I don't know the specifics, 11 but I believe Alan is insisting to pay some legal fees 12 through a reduction in his compensation or payment for 13 services. 14 Q So how was that agreement reached? 15 A I don't know. 16 Q Do you know who negotiated it? 17 A I believe Kevin was managing the relationship 18 with Alan, so that would be my assumption. 19 Q And just to summarize, your understanding of the 20 agreement is that the legal fees incurred by Powhatan would 21 reduce payments to Alan Chen for his profitable trading in 22 2012, or thereabouts? 23 A I don't really remember any specifics of the -- 24 any arrangement like that with Alan, but that's kind of 25 what I'm reading here. That's what it looks like. 125 1 Q And you believe that Kevin Gates would have 2 negotiated that agreement, if any? 3 A Yes. 4 Q Do you believe it was memorialized in a written 5 agreement? 6 A I don't know. 7 Q Did you ever -- what's the basis for your 8 understanding that Kevin negotiated this change in fees 9 with Alan Chen to account for legal expenses? 10 A Yeah, I mean, I'm connecting the dots a bit 11 here. I'm looking at this email, which says, Kevin made me 12 aware. And then also just knowing that Kevin was the 13 primary relationship manager with Alan, that that's the 14 most likely scenario. 15 Q Okay. You can go on to Exhibit 24, please. 16 (L. Eiben Exhibit No. 24 was 17 marked for identification.) 18 BY MR. FERRENTINO: 19 Q And for the record, this is an email chain dated 20 September 10th, 2011 from Kevin Gates to 21 Larry@TFSCapital.com. The first page has a Bates number 22 ending 761. Are we looking at the same Exhibit 24? 23 A Yes. 24 Q Great. I'll give you a moment to review. 25 A Okay. 126 1 Q Do you -- the subject line of this email is 2 "Steve's review version 2." Do you know who Steve is that 3 this Exhibit 24 refers to? 4 A TFS had a general counsel, Steve Soles, but I 5 just -- this email is just hard to make sense of. So I'm 6 not really sure what this is talking about. 7 Q So Steve Soles was the general counsel of TFS? 8 A He was. 9 Q And was he an employee of TFS? 10 A Yes. 11 Q Mr. Gates writes in the second sentence of the 12 top email, "by the way, Steve has been great," all caps, 13 "with everything regarding FERC. Don't modify the feedback 14 to include it, but I'll just verbally mention it to him 15 when we speak with him." 16 Why would the general counsel of TFS be doing 17 work related to FERC? 18 A Well, I don't know that it says that he did. I 19 just read that it says he has been great with everything 20 regarding FERC. It's hard to know what that even means. 21 Q So you think it refers to something other than 22 his work as a lawyer, for TFS? 23 A You know, I don't know what conversations were 24 taking place up there. And Steve was located up in West 25 Chester, Pennsylvania, with Kevin and Rich. I think -- you 127 1 know, they might have direct interactions with him in the 2 office I'm not really privy to. So I don't -- I mean, this 3 is pretty vague. 4 Q Yeah. So the second sentence there in the 5 second paragraph is, "don't modify the feedback to include 6 it, but I'll just verbally mention it to him when we 7 speak." Why wouldn't -- can you think of any reason 8 Mr. Gates wouldn't have wanted to modify Steve Soles' 9 review to include feedback about the FERC matter? 10 MR. CRAPAZANO: Objection, calls for 11 speculation. He said he doesn't remember this at all. He 12 has no memory or recollection. He wouldn't even be in a 13 position to. 14 BY MR. FERRENTINO: 15 Q Mr. Eiben, are you going to adopt your counsel's 16 answer on your behalf? 17 A I don't know is the short -- is the answer. 18 Q Was Mr. Gates -- Mr. Kevin Gates sensitive about 19 people seeing connections between TFS and the FERC matter? 20 A Was he what? What was the verb? 21 Q Was he sensitive about people seeing connections 22 between TFS and the FERC investigation? 23 A I would say at times, yes. 24 Q Do you understand what motivated those concerns? 25 A My understanding is that it could be construed 128 1 that, you know, TFS was directing the trading or something 2 along those lines, where there -- 3 Q Did you share those concerns? 4 A Did I? 5 Q Yes, sir. 6 A No. I mean, I didn't -- it felt to me that they 7 were completely separate entities with separate -- separate 8 portfolio managers running separate entities. So it felt 9 like there was appropriate, you know, separations. 10 Q All right. We'll move on to Exhibit 25. 11 (L. Eiben Exhibit No. 25 was 12 marked for identification.) 13 BY MR. FERRENTINO: 14 Q For the record, this is an email from Rich Gates 15 dated February 16, 2012 to Greg Sekelsky. You and others 16 are copied on the email. And the last three digits of the 17 first page Bates number is 465. Are we looking at the same 18 Exhibit 25? 19 A Yes. 20 Q I'll give you a moment to read it. 21 A Okay. 22 Q We'll go to the top email first, just because we 23 can get straight to the issue. Mr. Rich Gates asks, "is it 24 weird that TFS is paying for FERC's investigation instead 25 of Powhatan?" And I believe that refers to something that 129 1 Mr. Sekelsky has written below. Is that how you read this 2 document? 3 A Yes. 4 Q Was TFS, in fact, paying for the FERC 5 investigation instead of Powhatan? 6 A I don't remember the specifics. I believe TFS 7 contributed. I just don't recall the specifics. 8 Q Do you know the amount that TFS contributed? 9 A I don't. 10 Q Do you know if any other entities or persons 11 contributed to the legal fees incurred by Powhatan? 12 A No. 13 Q Do you recall any discussion about whether it 14 would be "weird that TFS is paying for FERC's investigation 15 instead of Powhatan"? 16 A No, I don't remember any discussions. 17 Q Do you know if the Gates brothers had any 18 discussions about that with anyone? 19 A I don't know. 20 Q Okay. You can move on to your Exhibit 26, 21 please. 22 (L. Eiben Exhibit No. 26 was 23 marked for identification.) 24 BY MR. FERRENTINO: 25 Q And for the record, this is an email dated May 130 1 4, 2018 from Kevin Gates to Rich Gates, Larry Eiben, and 2 Eric Newman. And the Bates number on the first page ends 3 in 538. Are we looking at the same Exhibit 26? 4 A Yes. 5 Q I'll give you a moment to review it. 6 A Okay. 7 Q The first email of this chain is an email from 8 Greg Sekelsky to a number of other people. After reading 9 the email, do you have a -- can you explain what he was 10 referring to here? What this discussion is about? 11 A Part of it. I mean, the PEF was down due to 12 legal bills. So Powhatan Energy Fund is still up and 13 going, but paying the legal bills. The other part, I'm not 14 sure what that is all about. 15 Q Well, there is a reference to a true-up. What's 16 a true-up? 17 A In this context, I don't know what exactly is 18 meant by that here. 19 Q Okay. The second sentence in the middle 20 paragraph reads, "the true-up was to base the expenses and 21 some income/Alan expense writeoff from PEF to the actual 22 earnings on the FERC income." What is the FERC income? 23 A I don't -- I don't know. This is a -- this is a 24 confusing paragraph. 25 Q For me as well. In addition -- it continues, 131 1 "in addition, since TFS was paying 75 percent of the 2 expenses, the expenses were disproportionately allocated 3 via TFS's ratio at the time of payment and not allocated by 4 the actual earnings on the FERC income. I should have this 5 by the end of the month." Do you know what the reference 6 of paying 75 percent of the expenses is? 7 A No, I mean, I would assume that is a reference 8 to paying some legal bills, but I'm not 100 percent 9 certain. I think part of -- I mean, this might have made 10 more sense to the other participants or other recipients. 11 I was removed from -- long gone from TFS Capital, I guess, 12 on this date. So if there was context about what all of 13 this meant or conversations about what all of this meant, I 14 would have been long removed from any conversations like 15 that. 16 Q All right. Well, let's look at the next email 17 up the chain. Mr. Kevin Gates writes, "Rich, Eric, Larry 18 and I spoke with Greg and told him we're not doing this. 19 Please contact me to discuss. Kevin." Would you agree 20 that suggests that you had some conversation 21 contemporaneous with this email about whatever Mr. Sekelsky 22 is writing you about? 23 A Yeah, it looks like I spoke with Kevin. 24 Q Spoke with Kevin and Greg, is what Mr. Gates 25 says. 132 1 A Yes, that's correct. 2 Q What was it that you weren't doing? 3 A I can't make sense of this -- this email. 4 Q Returning to the first email in the chain, the 5 sentence that says, "in addition, since TFS was paying 75 6 percent of the expenses." Does that refresh your 7 recollection at all about TFS bearing costs of the Powhatan 8 litigation? 9 A I mean, this is -- what's hard -- what I'm 10 having trouble with, among other things, is in my mind, in 11 2018, like, TFS doesn't even exist. So I'm just having 12 trouble putting the pieces together here. 13 Q Was TFS dissolved by this time, by May 2018? 14 A I don't know. I don't really know the status of 15 TFS. I was gone by 2016. And then my understanding is 16 that they largely shut down the operations at TFS. So it's 17 -- I'm not really sure how that all played out. 18 Q Well, would you agree this shows that their -- 19 TFS email addresses are still active at the very least? 20 A Yes. 21 Q And Greg Sekelsky still has a TFS Capital 22 signature line in his email? 23 A He does, yes. 24 Q If you were long gone from TFS by this point, 25 why would you be involved in discussions about whatever 133 1 Mr. Sekelsky is writing about here? 2 A Well, you know, I guess I was still a member of 3 Powhatan, so it was related to that. 4 Q And if you're long gone from TFS, why are you 5 the one who is getting on the phone with Greg and Kevin to 6 discuss this matter? 7 A Yeah, I don't remember. I don't remember the 8 conversation or what was even -- what was discussed. 9 Q Is there anything else you remember about this 10 email before we move on? 11 A No. 12 Q Let's jump ahead to Exhibit 32, if you would. 13 (L. Eiben Exhibit No. 32 was 14 marked for identification.) 15 BY MR. FERRENTINO: 16 Q And for the record, this is a letter from Steven 17 -- is it Solis or Soles? 18 A Soles. 19 Q Soles. Steven Soles to Mr. Kevin Gates dated 20 September 9, 2015. The first page of the letter has a 21 Bates number ending 083. Are we looking at the same 22 Exhibit 32? 23 A Yes. 24 Q I'll give you a moment to review it. 25 A Okay. Gotcha. 134 1 Q Have you seen this letter before today? 2 A I think so. It looks familiar. 3 Q What's your understanding of what this letter -- 4 what this letter does? 5 A My understanding is that TFS is going to cover 6 some of the legal bills related to Powhatan. 7 Q And also, it's going to cover public relation 8 costs that are incurred by Powhatan, 75 percent of them. 9 Is that accurate? 10 A Yes. 11 Q And -- I'm sorry. 12 A Yes, I see that statement. 13 Q And 75 percent of travel and lodging expenses? 14 A Yes, I see that. 15 Q And Powhatan agrees that all costs shall be 16 reviewed and approved by TFS's legal department and 17 accounting department prior to payment? 18 A Yes, I see that. 19 Q Were you involved in negotiating this agreement, 20 this letter agreement? 21 A I don't remember the -- I don't remember any 22 negotiation. I remember discussion around it. 23 Q Do you know how the letter came about? 24 A No, I don't remember what led to it. 25 Q It says in order to -- well, let me back up. 135 1 In September of 2015, you were an owner of TFS 2 Capital, is that correct? 3 A Yes. 4 Q Did you and the other owners of TFS Capital need 5 to agree that this cost sharing arrangement was a good 6 idea? 7 A Yes. 8 Q What are the reasons that TFS agreed to bear 75 9 percent of Powhatan's litigation costs? 10 A Yeah, I don't know, specifically. Certainly TFS 11 had more capital. It had a business that -- well, at this 12 time, I guess -- I'm not really sure that that's true, but 13 arguably more valuable. That it wasn't in TFS's interest 14 to see if things go badly with Powhatan. 15 Q If you're unconcerned that there is any 16 relationship between Powhatan and TFS, why would it be in 17 TFS's interest to pay for Powhatan to fight a legal battle? 18 A Well, I guess it's a distinction between my 19 belief, and what's the kind of correct business decision. 20 And so I have felt from the beginning that we didn't 21 have -- that there was nothing here that was improper. But 22 from a practical business decision standpoint, this is a 23 more conservative path to take. 24 Q The path being the funding of Powhatan's legal 25 expenses? 136 1 A Well, yes. And I guess any -- anything else 2 that's mentioned in here. So even deciding how much to 3 spend certainly is a consideration, because it's not 4 necessarily set in stone. 5 Q So looking at the second paragraph on the first 6 page, there is a sentence that begins, "Powhatan is a 7 special purpose private investment partnership that is not 8 affiliated with TFS. Although Powhatan is not affiliated 9 with TFS in any manner, certain TFS owners and employees 10 have personal and family investments in Powhatan, and some 11 of those individuals participate in Powhatan's management." 12 A couple of questions about these sentences. 13 First, what does it mean to be affiliated or not affiliated 14 with TFS, in your mind? 15 A I mean, I guess -- well, I don't know. It is -- 16 I mean, that term does have some -- certainly some legal 17 definitions in the securities world, based on common 18 ownership and things like that. But I think the point here 19 is that they are separately -- that LSE Capital Management 20 and TFS are separate advisors that manage funds. 21 Q Is "affiliated" a term of art in the investment 22 world? 23 A I don't know. I mean, I've seen it in documents 24 that -- where it is defined. But I don't know if there is 25 a general definition that applies to everything in the 137 1 securities realm. 2 Q The last part of the sentence refers -- this 3 paragraph that we were just looking at refers to "some 4 individuals participating in Powhatan's management." Which 5 individuals from TFS participated in Powhatan's management? 6 A That would be me, Kevin Gates. Possibly to a 7 lesser extent, Rich Gates. I don't know for sure how much 8 -- or what Rich's involvement may have been. Greg 9 Sekelsky, as we've discussed, helped in some respects. 10 Q The next paragraph begins "over the course of 11 the Powhatan investigation, it was determined that FERC's 12 aggressive enforcement tactics posed potential regulatory 13 and business risk to TFS resulting from the personal 14 investments of TFS employees and owners in Powhatan." Do 15 you agree with that statement? 16 A Regulatory business -- yes. 17 Q What are the aggressive enforcement tactics that 18 this paragraph refers to? 19 A I believe it's just referring to the overall 20 process, not any specific action, but just the overall 21 process. 22 Q Did you consider FERC's process and tactics to 23 be aggressive? 24 A Yes. 25 Q Why? 138 1 A Well, it feels like to me that the rule that 2 we're accused of violating was -- or that Powhatan is 3 accused of violating was not in place at the time of our 4 trading. And that we -- FERC's actions were to issue a 5 rather large fine, and find Powhatan in violation without 6 us ever having the opportunity to defend ourselves in 7 court. 8 And to me, that is bad policy. I think it's not 9 the way the process should work, because it's extremely 10 expensive and an extreme strain on the participants 11 involved. But that's just my opinion. 12 Q Is there anything else that you felt -- any 13 other way in which you felt FERC's enforcement tactics were 14 aggressive? 15 A No, I -- I will defer further response on that 16 question to my colleagues who have been more heavily 17 involved in the process. 18 Q In the same sentence that we were just looking 19 at, "over the course of the Powhatan investigation, it was 20 determined that FERC's aggressive enforcement tactics posed 21 potential regulatory and business risk to TFS," et cetera, 22 et cetera, et cetera. Who made the determination of risk 23 that's referred to in this sentence? 24 A I don't remember. I suspect there was some 25 discussion around it. 139 1 Q Who would have been involved in that discussion? 2 A Some of the owners of TFS Capital. 3 Q Would you have been involved in those 4 discussions? 5 A Probably some, yes. 6 Q Did you agree with the determination? I may 7 have already asked that. 8 A Yes, I believe that this was a good business 9 decision. 10 Q Okay. We can turn back to Exhibit 27, if you 11 would. 12 (L. Eiben Exhibit No. 27 was 13 marked for identification.) 14 BY MR. FERRENTINO: 15 Q For the record, I have an email marked Exhibit 16 27 that's dated November 4th, 2015, from Kevin Gates to 17 Larry Eiben. And the last three digits of the Bates label 18 on the first page is 540. Are we looking at the same 19 Exhibit 27? 20 A Yes, we are. 21 Q Okay. I'll give you a moment to review it. 22 A Okay. 23 Q Can you explain what Mr. Sekelsky provided you 24 in this email? The bottom email, excuse me. The first 25 email in the chain, which is -- it has a subject 140 1 "percentages" from Greg Sekelsky to Larry Eiben. What are 2 these percentages? 3 A These look like ownership percentages of the 4 entities. 5 Q Is the first set of percentages under the 6 heading of TFS, ownership percentages of TFS Capital? 7 A Yes. 8 Q Are all the folks listed as owners of TFS true 9 owners or members of the LLC, I guess would be the accurate 10 term, or were they in November 2015? 11 A No, I don't believe so. I believe Greg, Sam, 12 and Freddy, which refers to Mike Frederick, were not. 13 Q Are they what's known as shadow owners, or is 14 there another term that you would use for that type of an 15 ownership percentage that's not actually an ownership? 16 A I don't know. That sounds fine. 17 Q Okay. I'm just asking if you had a shorthand 18 that we could use to refer to that. 19 A No, not really. No. 20 Q So the next set of numbers down, which is PEF, 21 profit allocation, FERC, June 1 to August 3, what are those 22 numbers? 23 A I'm not 100 percent sure, but I think that's 24 just the allocation of profits from the profits generated 25 in Powhatan. I guess that's a date range during which 141 1 profits were generated. 2 Q Is that roughly the date range in which FERC has 3 alleged that Alan Chen engaged in manipulative behavior on 4 behalf of Powhatan? 5 A I don't know. I don't know. 6 Q What do you make of the inclusion of FERC in the 7 title of that set of numbers? 8 A I mean, that looks like -- I don't know. It 9 doesn't make much sense. 10 Q Well, this is an email that Mr. Sekelsky sent 11 only to you, as best I can tell. And your testimony now is 12 that you don't have any idea what it's about? 13 A Well, it looks like it's some -- it looks like 14 it's a profit allocation of profits during a period of 15 time. But you asked me about the FERC -- you mentioned the 16 FERC in the header, which I don't know why that would be 17 there. 18 Q All right. If you go to the next page of 19 Exhibit 27, there is three more sets of numbers. PEF 20 percent, August 2010. Effective end of trading. PEF 21 current. And PEF last trading. What are these numbers, if 22 you know? 23 A I believe that because of either additions of 24 capital or redemptions of capital, the percentages would 25 have changed. And so there needed to be some analysis to 142 1 determine the -- the overall profit allocation or the 2 current ownership percentages. 3 Q Was there something going on in November of 2015 4 that would have caused Mr. Sekelsky to be emailing you 5 these percentages? 6 A I don't know. I don't recall. 7 Q If we were to do a percentage chart of ownership 8 of Powhatan now, what would it look like? 9 A I don't know for sure. I would -- I mean, I 10 know based on my own transaction that Kevin and Rich's 11 percentage would be higher. Unless they have somehow 12 disposed of their ownership. 13 Q Yours would be zero? I'm sorry. 14 A Yes. 15 Q Anybody else that you know of here that would be 16 zero? 17 A I can't remember the specifics, but I believe 18 that most, if not all of these -- the individuals not named 19 Kevin and Rich sold interest to Kevin and Rich. 20 Q The middle email on the first page of Exhibit 27 21 says -- it's an email from you. And it says, "FYI, I'll 22 call to discuss at some point. Larry." It looks to me 23 like you sent it to Kevin Gates, although I'm not certain. 24 Do you recall having any discussion with Mr. Gates about 25 these numbers in the November 2015 time frame? 143 1 A No. 2 Q What -- strike that. 3 All right. We can put that aside. Skip ahead 4 to Exhibit 29, if you would. And this is a single page 5 document, an email dated November 12, 2013. The last three 6 numbers of the Bates number are 481. 7 (L. Eiben Exhibit No. 29 was 8 marked for identification.) 9 BY MR. FERRENTINO: 10 Q Are we looking at the same Exhibit 29? 11 A We are. 12 Q I'll give you a moment to review it. 13 A Okay. 14 Q This is an email from Kevin Gates to Rich Gates 15 and you. Do you see that? 16 A I do. 17 Q And the subject is "personal investment 18 meeting." Did you and Kevin and Rich Gates meet 19 periodically to discuss your personal investments? 20 A No, I don't remember a lot of those meetings. 21 Q Do you still hold any personal investments in 22 which the Gates brothers are also invested? 23 A Yes. 24 Q What are those? 25 A The -- two of the power funds that their current 144 1 company manages, I am an investor in those. 2 Q Do you meet from time to time to discuss those 3 investments? 4 A No. 5 Q How do you receive information about those 6 investments? 7 A I get -- I believe it's a quarterly statement 8 regarding the value and appreciation. 9 Q What are the names of those two power funds you 10 mentioned? 11 A Elmagin and Elmiso. 12 Q Who manages those investments? 13 A I can't recall who -- I can't remember the name 14 of the portfolio manager, the entity. 15 Q All right. I want to go back to Exhibit 29. 16 There is a bullet point F in this email. It says, 17 "monetize FERCLitigation.com." Do you see that? 18 A I do. 19 Q What is FERCLitigation.com? 20 A I believe that's the website that was set up to 21 disclose information about the ongoing matter here. 22 Q Did you play any role in setting up 23 FERCLitigation.com? 24 A No. 25 Q Whose idea was it to set up FERCLitigation.com? 145 1 A I can't remember. 2 Q Did you ever contribute content to 3 FERCLitigation.com? 4 A No. 5 Q This email, Exhibit 29, refers to monetize 6 FERCLitigation.com. What -- do you have any understanding 7 what that means? 8 A No. 9 Q Is it possible that Mr. Kevin Gates was 10 proposing to discuss selling ads on the website or somehow 11 making it profitable? 12 A I can't imagine that selling ads was 13 contemplated, but I just don't know. It wasn't something 14 that I spent any time thinking about. 15 Q Can you think of any other way that you could 16 monetize FERCLitigation.com? 17 A Sure. I guess if you believe, you know, no 18 press is bad press, it certainly could attract a lot of 19 attention, which may -- I guess could be good, could be 20 bad. 21 Q Do you recall any discussion about what the 22 money raised from FERCLitigation.com would be used for? 23 A No. 24 Q Was FERCLitigation.com ever successfully 25 monetized? 146 1 A I don't know. 2 Q We can go on to Exhibit 30. And this, for the 3 record, is another single page email dated November 25th, 4 2014. And the last three digits of the Bates number are 5 146. Are we looking at the same Exhibit 30? 6 A Yes, we are. 7 (L. Eiben Exhibit No. 30 was 8 marked for identification.) 9 BY MR. FERRENTINO: 10 Q Let me know when you've had a chance to review 11 it. 12 A Okay. 13 Q This appears to be an email from Greg Sekelsky 14 to the other partners of Powhatan Energy Fund. Would you 15 say that's accurate? 16 A Yes. 17 Q Mr. Sekelsky says, "PEF was up 19.125 percent 18 for October due to interest and an accounting correction. 19 The offset to legal fees paid to Alan was paid on 25 20 percent of total legal fees and not paid fully by PEF, when 21 it should have been 100 percent. Values to follow." 22 What's this email about? 23 A Well, it's about an accounting adjustment, but 24 the cause, I don't know. I don't know what would have led 25 to this adjustment. 147 1 Q Do you know what's referred to by the offset to 2 legal fees paid to Alan? 3 A I don't know for sure. I would guess we're 4 talking about the reduction in fees that was, at some 5 point, agreed to with Alan to -- I guess because of the 6 legal fees that were being incurred. 7 Q Did Powhatan ever pay any of Alan Chen's legal 8 fees? 9 A I don't know. 10 Q Did TFS Capital ever pay any of Alan Chen's 11 legal fees? 12 A I don't know. 13 Q Are you aware of anybody other than Alan Chen 14 paying Alan Chen's legal fees? 15 A I can't remember. I just don't remember any -- 16 what any terms of the arrangements were with Alan. It's 17 just going back a long ways. 18 Q So it's possible that it happened, but you don't 19 know? 20 A Yeah, I just don't know. 21 Q Are you aware of any written agreement that's -- 22 that obligates Powhatan or TFS or any member of Powhatan or 23 TFS to pay Alan Chen's legal bills? 24 A I can't remember if there was any written 25 agreement. 148 1 Q We can continue to Exhibit 31. One more 2 question on that subject, Mr. Eiben. I'm sorry. Before we 3 move on. Has TFS made any payments to Alan Chen or to 4 entities that he controls other than for advisory fees? 5 A I'm not sure. I don't know that TFS has paid 6 Alan Chen advisory fees. I don't know. I don't remember 7 TFS paying advisory fees. I would expect advisory fees 8 were being paid by Powhatan. 9 Q And maybe I can ask a better question. I'm 10 aware that Powhatan and other entities paid Alan Chen 11 advisory fees. Are you aware of payments other than 12 advisory fees made to Alan Chen by TFS, by Powhatan, or by 13 any other entity that you were involved in? 14 A No, I'm not aware of any. 15 Q All right. Thank you. You can move on to 16 Exhibit 31. 17 (L. Eiben Exhibit No. 31 was 18 marked for identification.) 19 BY MR. FERRENTINO: 20 Q And for the record, this is an email dated 21 January 2nd, 2018, from Kevin Gates to 22 kevin@pufferfish.org. The last three numbers of the Bates 23 number are 974. Are we looking at the same Exhibit 31? 24 A Yes, we are. 25 Q I'll give you a chance to review it. 149 1 MR. CRAPAZANO: And while he reviews, Josh, I'm 2 just going to need to take a restroom break. 3 MR. FERRENTINO: Why don't we take a break now. 4 I'm happy to have the witness review the document while 5 we're on break. 6 THE VIDEOGRAPHER: Going off record at 3:21 p.m. 7 This ends media file number 5 in the deposition of Lawrence 8 Eiben. 9 (Recess.) 10 THE VIDEOGRAPHER: We are back on the record at 11 3:27 p.m. This begins media file number 6 in the 12 deposition of Lawrence Eiben. You may proceed, 13 Mr. Ferrentino. 14 BY MR. FERRENTINO: 15 Q Thank you, again. Mr. Eiben, did you have a 16 chance to look at Exhibit 31 on the break? 17 A Yes, I did. 18 Q Great. Do you know what a common spread trade 19 is? 20 A Common spread trade? No. I mean, not exactly. 21 I have a hunch. 22 Q Do you have an inexact understanding of what it 23 is? 24 A Yeah, I think of a spread trade as like an 25 arbitrage type trade, where you have positions that attempt 150 1 to offset risk. And so that would be a spread trade, where 2 there is essentially two sides. 3 Q And typically speaking, how do you profit from a 4 spread trade? 5 A Well, I mean, I guess it could be any number of 6 ways. It could be that the positions are compressing. It 7 could be hedging risk and getting paid some sort of 8 dividend or distribution from the positions. That sort of 9 thing, I guess. 10 Q Can you elaborate on your answer, that you could 11 be profiting from some dividend or distribution? How would 12 that work with a spread trade? 13 A Yeah, so I guess one way might be to -- I think 14 about owning -- and I don't know if this perfectly fits in 15 the definition of spread trade, or what even spread trade 16 means, but you could collar a stock position where you sell 17 an option -- a call option against a position, and buy a 18 put option against the position. And essentially just take 19 the dividend on the position itself. 20 Q You know when the corporation is going to pay a 21 dividend, so you put in a position that essentially cancels 22 out simply to collect the dividend? 23 A Yes. 24 Q I'm looking at the second paragraph of Exhibit 25 31. The second sentence, which is referring to Alan Chen's 151 1 trading strategy. I'll read the whole paragraph. 2 "Remember what you were doing in the summer of 2010? While 3 you were doing that, Alan Chen and Powhatan were trading 4 power at PJM. The trading strategy was simple. Alan 5 submitted trades that collected rebates that PJM offered." 6 Do you agree with that characterization of Alan 7 Chen's trading strategy on behalf of Powhatan? 8 MR. CRAPAZANO: Can you please finish the quote? 9 THE WITNESS: So the rest of the paragraph 10 reads, "the FERC now calls them fraudulent wash trades, 11 while any entry level trader can identify them as common 12 spread trades. And the FERC wants us to pay a fine of 34 13 million." 14 I don't really -- I just wasn't close at all to 15 Alan's trading. I didn't engage in conversations with 16 Alan. I might have spoken to him one time. I didn't look 17 at any of the trades. I didn't review trades. I didn't 18 ask many questions about his trading. So I just don't even 19 -- I'm not very familiar with the structure of the trades, 20 nor am I very knowledgeable about the power markets in 21 general. So it's hard for me to opine about the -- what 22 they were or what they were not. 23 BY MR. FERRENTINO: 24 Q So you don't have an opinion about what Alan's 25 trading strategy was? You don't agree or disagree with 152 1 Mr. Gates here? Let me read that sentence again. Strike 2 the question. 3 I'm reading the sentence again. "The trading 4 strategy was simple. Alan submitted trades that collected 5 rebates that PJM offered." Do you have any reason to 6 disagree that that's an inaccurate statement of Alan Chen's 7 trading strategy for Powhatan? 8 A No, I don't have any reason to disagree with 9 that, nor agree with it. I just don't -- I just don't 10 know. 11 Q You're taking no position on the words of your 12 long-time partner, Mr. Kevin Gates? You don't know, one 13 way or another, whether that's true? 14 A Well, collected rebates. Yes, I mean, that 15 makes sense that -- I understand that some -- I don't know 16 if they are called rebates or that's even the right term, 17 but, yes, I understand that something was paid. And that 18 affected the outcome of the trading and the results, but 19 that's about all I know. 20 Q Have you ever worked as a trader? I think we 21 probably covered this, but do you have a trading 22 background? 23 A No. 24 Q Do either Kevin or Rich Gates have a trading 25 background? 153 1 A Kevin and Rich were part of the portfolio 2 management function at TFS Capital, so they worked pretty 3 closely with the traders of TFS Capital, but I don't know 4 that they ever themselves punched trades in for TFS 5 Capital. 6 Q As I read this paragraph, Mr. Kevin Gates is 7 suggesting that there is a spread to be profited from in 8 Alan Chen's trading. Would you have an understanding of 9 what that spread was? 10 A No, I wouldn't have -- 11 Q Okay. Mr. Gates sent this email to an email 12 address kevin@pufferfish.org, and you appear to be a blind 13 copy on the email. Is that how you read this? 14 A Yes. 15 Q Do you know what pufferrish.org is? 16 A I believe it is an organization that Kevin set 17 up to keep people informed of the case and the process. 18 Q Is it the domain name for The Pufferfish 19 Foundation? Does that ring a bell? 20 A I don't know. 21 Q Have you ever heard of Pufferfish Foundation? 22 A No. 23 Q Have you ever contributed money to Pufferfish 24 Foundation? 25 A No. 154 1 Q Do you know if TFS ever contributed money to 2 Pufferfish Foundation? 3 A I don't know. I don't remember. 4 Q Are you aware that Pufferfish Foundation applied 5 for and received tax exempt status from the IRS? 6 A No, I did not know that. 7 Q Do you know if Pufferfish Foundation has 8 incurred any expenses related to Powhatan Energy Fund's 9 case against FERC? 10 A No, I don't know. 11 Q Do you know what it spends money on? 12 A No. 13 Q Mr. Eiben, recognizing that you're no longer 14 involved in Powhatan, was there ever a point in time when 15 you were involved in Powhatan that Powhatan considered 16 filing for bankruptcy? 17 A No, I can't recall -- I can't recall that. 18 Q Have you met with any experts hired by Powhatan 19 or Dr. Chen in this case? 20 A No. 21 MR. FERRENTINO: Mr. Eiben, I don't have any 22 questions for you left in my outline. Your counsel and 23 counsel for Dr. Chen may have questions for you. And once 24 they have a chance to ask any questions they may have, I 25 may have some additional ones as redirect. But thank you 155 1 for your time today. And perhaps I won't speak to you 2 again, but we'll see. 3 THE WITNESS: Thank you. 4 MR. CRAPAZANO: Take a break until 3:45? 5 MR. FERRENTINO: Sure, that's fine. 6 MR. CRAPANZANO: All right. Thank you. 7 THE VIDEOGRAPHER: Going off the record at 3:39 8 p.m. 9 (Recess.) 10 THE VIDEOGRAPHER: We are back on the record at 11 3:47 p.m. And, Mr. Crapanzano, you may proceed. 12 EXAMINATION BY COUNSEL FOR DEFENDANT POWHATAN 13 BY MR. CRAPANZANO: 14 Q Thank you. Mr. Eiben, can you hear me? 15 A Yes, I can. 16 Q Great. Thank you. During the course of the 17 deposition today, I know that you responded that you didn't 18 know or couldn't recall to a number of questions. These 19 events were mostly or a lot of them were over 10 years ago, 20 right? 21 A Yes. 22 Q And do you think that you would have had a 23 better memory or recollection about the events that were 24 asked of today, had you been asked about them closer to the 25 dates that they occurred? 156 1 A Yes. And I guess I was, so there is another 2 deposition to refer to. 3 Q And that was my last question. That you were 4 deposed in September of 2010 by FERC in a related 5 investigation, correct? 6 A Yes. 7 MR. CRAPAZANO: All right. Thank you. I have 8 no further questions. 9 MR. FERRENTINO: I don't have any follow-up 10 based on Greg's examination. Folks for Dr. Chen, do you 11 have any questions for the witness? 12 MR. BARKSDALE: This is William Barksdale. I do 13 not believe that we have any questions at this time. 14 MR. FERRENTINO: Thank you. Madam Court 15 Reporter, Mr. Videographer, I believe we can go off the 16 record. Thank you so much. 17 THE VIDEOGRAPHER: This is the end of the 18 deposition. The time is 3:49 p.m., and we are off the 19 record. 20 (Whereupon, the deposition concluded at 3:49 21 p.m.) 22 23 24 25 157 1 C O N T E N T S 2 3 WITNESS EXAMINATION 4 LAWRENCE S. EIBEN 5 By Mr. Ferrentino 7 6 By Mr. Crapanzano 155 7 8 E X H I B I T S 9 10 L. EIBEN EXHIBIT NUMBER IDENTIFIED 11 Exhibit 1 POWDC0090263 - Email chain 12 11/18/10 26 13 Exhibit 2 POWDC0086448 - Email chain 14 3/17/10 36 15 Exhibit 3 POWDC0092978 - Email 4/9/10 41 16 Exhibit 4 POWDC00008000 - Email 3/19/10 17 with attachment Alan.pptx 44 18 Exhibit 5 POWDC00000067 - Chen Advisory 19 Agreement 5/18/10 50 20 Exhibit 6 POWDC0035944 - Email chain 21 7/16/10 54 22 23 --continued-- 24 25 158 1 EXHIBITS CONTINUED: 2 Exhibit 7 POWDC0033338 3 Email chain 6/26/10 56 4 Exhibit 8 POWDC0173844 - Email 6/24/10 5 trading to oneself 65 6 Exhibit 9 POWDC0034166 - Email chain 8/2/10 80 7 Exhibit 10 POWDC0034163 - Email chain 8/2/10 83 8 Exhibit 11 POWDC0036174 - Email chain 8/6/10 9 Power_Summary_080610.xls 84 10 Exhibit 12 POWDC0090495 - Email chain 8/19/10 86 11 Exhibit 13 POWDC0036504 - Email chain 8/19/10 89 12 Exhibit 14 POWDC0091116 - Email chain 8/31/10 13 PEF withdrawal terms.doc 92 14 Exhibit 15 POWDC0087358 - Email chain 8/23/11 99 15 Exhibit 16 POWDC0037106 - Email chain 9/28/15 16 PEF Withdrawal terms 103 17 **There is no Exhibit 17** 18 Exhibit 18 POWDC0035864 - Email 1/3/11 107 19 Exhibit 19 POWDC0041031 - Email chain 5/4/11 20 Resume UTC trading 109 21 Exhibit 20 POWDC0035920 - Email 5/11/11 22 Additional Subscription Request 110 23 Exhibit 21 POWDC0036376 - Email 2/1/12 24 TFS Version 2.0 doc 112 25 --continued-- 159 1 EXHIBITS CONTINUED: 2 Exhibit 22 POWDC0037023 - Email 4/16/13 3 Proposed Exit Terms Larry.doc 119 4 Exhibit 23 POWDC0039543 - Email 8/17/12 5 TEF/PEF July 122 6 Exhibit 24 POWDC0090761 - Email chain 7 9/10/11 Steve's Review Version 2 125 8 Exhibit 25 POWDC0035465 - Email chain 2/16/12 128 9 Exhibit 26 POWDC0018538 - Email chain 5/4/18 129 10 Exhibit 27 POWDC0018540 - Email chain 11/4/15 11 Percentages 139 12 **There is no Exhibit 28** 13 Exhibit 29 POWDC0035481 - Email 11/12/13 14 Personal Investment Meeting 143 15 Exhibit 30 POWDC0039146 - Email 11/25/14 16 PEF - October 146 17 Exhibit 31 POWDC0111974 - Email 1/2/18 18 Powhatan Fund Update 1/2/18 148 19 Exhibit 32 POWDC0174083 - 9/9/15 letter to 20 K. Gates Re Powhatan Energy Fund 21 LLC FERC Investigation 133 22 23 24 25 160 1 CERTIFICATE OF NOTARY PUBLIC & REPORTER 2 3 I, SUSAN L. CIMINELLI, the officer before whom the 4 foregoing deposition was taken, do hereby certify that the 5 witness whose testimony appears in the foregoing deposition 6 was duly sworn; that the testimony of said witness was 7 taken in shorthand and thereafter reduced to typewriting by 8 me or under my direction; that said deposition is a true 9 record of the testimony given by said witness; that I am 10 neither counsel for, related to, nor employed by any of the 11 parties to the action in which this deposition was taken; 12 and, further, that I am not a relative or employee of any 13 attorney or counsel employed by the parties hereto, nor 14 financially or otherwise interested in the outcome of this 15 action. 16 17 18 SUSAN L. CIMINELLI 19 Notary Public in and for the 20 District of Columbia 21 My Commission Expires November 30, 2021. 22 23 24 25