1 1 UNITED STATES DISTRICT COURT 2 EASTERN DISTRICT OF VIRGINIA 3 - - - - - - - - - - - - - - - - - - -X 4 Federal Energy Regulatory Commission : 5 Plaintiff, : 6 v. Civil Action No. 7 Powhatan Energy Fund, LLC, 3:15-cv-00452(MHL) 8 Houlian "Alan" Chen, HEEP Fund, Inc. : 9 and CU Fund, Inc., : 10 Defendants. : 11 - - - - - - - - - - - - - - - - - - -X 12 Thursday, October 21, 2021 13 Washington, DC 14 15 VIDEOTAPED VIRTUAL DEPOSITION 16 OF RICHARD GATES 17 called for examination, pursuant to agreement of 18 counsel, held via Cisco Webex, at 9:03 a.m., 19 before Kim M. Brantley, C.S.R., a Court Reporter 20 and Notary Public in and for the District of 21 Columbia, when were present on behalf of the 22 respective parties: 23 24 25 2 1 APPEARANCES: 2 On behalf of the FERC: 3 JOSHUA FERRENTINO, ESQUIRE 4 DAMON TAAFFE, ESQUIRE 5 Federal Energy Regulatory Commission 6 Division of Investigations 7 Office of Enforcement 8 888 First Street Northeast 9 Washington, D.C. 20426 10 (202) 502-8228 (Mr. Ferrentino) 11 Email: joshua.ferrentino@ferc.gov 12 damon.taaffe@ferc.gov 13 14 On behalf of Plaintiffs Powhatan Energy Fund, LLC 15 and Richard Gates: 16 CHRISTOPHER L. PERKINS, ESQUIRE 17 Eckert Seamans Cherin & Mellott, LLC 18 919 Main Street - Suite 1300 19 Richmond, Virginia 23219 20 (804) 788-9636 21 Email: cperkins@eckertseamans.com 22 23 24 25 3 1 APPEARANCES CONTINUED: 2 On behalf of Plaintiffs Powhatan Energy Fund, LLC 3 and Richard Gates: 4 CHARLES A. ZDEBSKI, ESQUIRE 5 Eckert Seamans Cherin & Mellott, LLC 6 1717 Pennsylvania Avenue NW - 12th Floor 7 Washington, DC 20006 8 (202) 659-6605 9 Email: czdebski@eckertseamans.com 10 11 On behalf of defendants Houlian "Alan" Chen 12 HEEP Fund, Inc. and CU Fund, Inc.: 13 WILLIAM BARKSDALE, ESQUIRE 14 Skadden Arps Slate Meagher & Flom, LLP 15 1440 New York Avenue NW 16 Washington, DC 20005 17 (202) 371-7171 18 Email: william.barksdale@skadden.com 19 ALSO PRESENT: 20 Paul Mussenden - FERC 21 Luke Gelber - Ankura 22 Daniel Lloyd, Attorney Advisor - FERC 23 Kevin Gates - Powhatan Energy Fund 24 Madison Butko - Remote Video Specialist 25 4 1 I N D E X 2 DEPOSITION OF RICHARD GATES 3 EXAMINATION BY: PAGE: 4 Mr. Ferrentino 10 5 6 INDEX OF DEPOSITION EXHIBITS: 7 R. GATES EXHIBITS: PAGE: 8 R. Gates Exhibit 1. 5/19/21 Twitter tweet 33 9 R. Gates Exhibit 2. 8/12/10 email chain 40 10 from Alan Chen to Kevin Gates, Bates 11 stamped POWDC_0400 to 0043 12 R. Gates Exhibit 3. 10/15/13 email from 44 13 R. Gates to karen@progressiveitgroup 14 Bates stamped POWDC_5044 15 R. Gates Exhibit 4. 6/24/10 email from 100 16 Larry Eiben to Kevin Gates, Bates 17 stamped POWDC_3844 18 R. Gates Exhibit 5. 9/23/15 email from 114 19 Kevin Gates to Keryn Newman, Bates 20 stamped POWDC_7989 21 R. Gates Exhibit 6. 6/22/14 email from 122 22 Richard Gates to Joseph Rago, Bates 23 stamped POWDC_8786 24 25 5 1 INDEX OF DEPOSITION EXHIBITS CONTINUED: 2 R. GATES EXHIBITS: PAGE: 3 R. Gates Exhibit 7. 3/19/10 email from 127 4 Kevin Gates to Richard Gates, Bates 5 stamped POW_8000 6 R. Gates Exhibit 8. 6/26/10 email from 137 7 Kevin Gates to Chao Chen, et al., Bates 8 stamped POWDC_3338 to 3344 9 R. Gates Exhibit 9. 8/2/10 email from 146 10 Kevin Gates to Richard Gates, Bates 11 stamped POWDC_4116 to 4117 12 R. Gates Exhibit 10. (skipped) 13 R. Gates Exhibit 11. 8/6/10 email and 148 14 attachment from Kevin Gates to 15 Richard Gates, Bates stamped POWDC_6174 16 R. Gates Exhibit 12. 8/19/10 email from 150 17 Kevin Gates to Larry Eiben, Bates 18 stamped POWDC_6504 to 6505 19 R. Gates Exhibit 13. 8/2/10 email from 152 20 Richard Gates to Kevin Gates, Bates 21 stamped POWDC_4160 to 4162 22 R. Gates Exhibit 14. 3/1/14 email from 155 23 Richard Gates to Kevin Gates, Bates 24 stamped POWDC_4154 to 4156 25 6 1 INDEX OF DEPOSITION EXHIBITS CONTINUED: 2 R. GATES EXHIBITS: PAGE: 3 R. Gates Exhibit 15. 8/5/21 email from 159 4 Richard Gates to Kevin Gates, Bates 5 stamped POWDC_7076 to 7078 6 R. Gates Exhibit 16. 8/31/10 email and 166 7 attachment from Kevin Gates to Larry 8 Eiben, Bates stamped POWDC_1116 to 1118 9 R. Gates Exhibit 17. (skipped) 10 R. Gates Exhibit 18. 9/28/15 email and 180 11 attachments from Kevin Gates to Larry 12 Eiben, Bates stamped POWDC_7106 to 7108 13 R. Gates Exhibit 19. (skipped) 14 R. Gates Exhibit 20. Powhatan Energy 192 15 Fund, LLC Sealed Supplemental Submission 16 R. Gates Exhibit 21. 5/11/11 email and 201 17 attachment from Kevin Gates to Richard 18 Gates, Bates stamped POWDC_5920 to 5922 19 R. Gates Exhibit 22. 4/9/14 email from 213 20 Kevin Gates to Tom Schoenberg, Bates 21 stamped POWDC_9077 to 9079 22 R. Gates Exhibit 23. 2/16/12 email from 230 23 Richard Gates to Greg Sekelsky, Bates 24 Stamped POWDC_5465 to 5466 25 7 1 INDEX OF DEPOSITION EXHIBITS CONTINUED: 2 R. GATES EXHIBITS: PAGE: 3 R. Gates Exhibit 24. (skipped) 4 R. Gates Exhibit 25. (skipped) 5 R. Gates Exhibit 26. (skipped) 6 R. Gates Exhibit 27. 1/2/18 email from 233 7 Kevin Gates to kevin@pufferfish.org, 8 Bates stamped POWDC_11974 9 R. Gates Exhibit 28. 4/10/14 email from 244 10 powenergy2013@gmail.com to 11 Felix@felixsalmon.com, Bates stamped 12 POWDC_2798 13 R. Gates Exhibit 29. 7/13/14 email from 257 14 Powhatan Energy Fund, LLC to K. Dynamite 15 Bates stamped POWDC_3063 16 R. Gates Exhibit 30. (skipped) 17 R. Gates Exhibit 31. (skipped) 18 R. Gates Exhibit 32. 10/13/14 email from 264 19 Richard Gates to Chao Chen Bates 20 stamped POWDC_8181 21 R. Gates Exhibit 33. (skipped) 22 R. Gates Exhibit 34. 11/17/14 email from 273 23 Matthew Yuros to Richard Gates Bates 24 stamped POWDC_7791 25 R. Gates Exhibit 35. (skipped) 8 1 INDEX OF DEPOSITION EXHIBITS: 2 R. GATES EXHIBITS: PAGE: 3 R. Gates Exhibit 36. (skipped) 4 R. Gates Exhibit 37. (skipped) 5 R. Gates Exhibit 38. (skipped) 6 R. Gates Exhibit 39. 6/23/4 email from 281 7 John DAntona to Richard Gates Bates 8 stamped POWDC_4498 to 4499 9 R. Gates Exhibit 40. (skipped 10 R. Gates Exhibit 41. (skipped) 11 (Exhibits attached to original transcript.) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 9 1 P R O C E E D I N G S 2 THE LEGAL VIDEO SPECIALIST: This is 3 the deposition of Richard Gates in the matter of 4 FERC v. Powhatan. Case number 3:15-cv-00452. 5 This is a matter pending before the United States 6 District Court, Eastern District of Virginia. 7 This deposition is being held remotely via Webex. 8 The time is approximately 9:03 a.m. on October 9 21st, 2021. 10 The court reporter today is Kim M. 11 Brantley with Ace-Federal Reporters and my name is 12 Madison Butko, your video operator representing 13 Ace-Federal Reporters. 14 Counsel, would you please identify 15 yourselves and who you represent. 16 MR. FERRENTINO: Good morning, 17 everyone. This is Joshua Ferrentino. I'm counsel 18 for the Federal Energy Regulatory Commission. 19 Also on the line from FERC are Dan Lloyd, who is 20 also present with me in the conference room, and 21 Paul Mussenden. 22 MR. PERKINS: This is Chris Perkins of 23 the law firm of -- 24 MR. FERRENTINO: Also from -- 25 MR. PERKINS: Sorry, go ahead, Josh. 10 1 MR. FERRENTINO: Yeah, also present on 2 behalf of FERC is Luke Gelber of Ankura. 3 MR. PERKINS: And I'm Chris Perkins, 4 Eckert Seamans. I represent Powhatan Energy Fund, 5 LLC and I'm joined by my partner, Charlie Zdebski. 6 THE LEGAL VIDEO SPECIALIST: Will the 7 court reporter please -- 8 MR. BARKSDALE: And -- sorry. Also on 9 the line is William Barksdale from Skadden Arps 10 representing Alan Chen, HEEP Fund and CU Fund. 11 THE LEGAL VIDEO SPECIALIST: Okay, will 12 the court reporter please swear in the witness. 13 Whereupon, 14 RICHARD GATES, 15 called as a witness by counsel for FERC, and after 16 having been first duly sworn, was examined and 17 testified as follows: 18 EXAMINATION BY COUNSEL FOR FERC: 19 BY MR. FERRENTINO: 20 Q. Good morning, Mr. Gates. What is your 21 full name? 22 A. Richard John Gates. 23 Q. Just so the record is clear -- just so 24 the record is clear, your brother Kevin Gates is 25 also attending this deposition as a representative 11 1 of Powhatan Energy Fund? 2 KEVIN PERKINS: That's correct. 3 MR. FERRENTINO: Thank you. 4 BY MR. FERRENTINO: 5 Q. Mr. Gates, I know you've had your 6 deposition taken before and I know you attended 7 Mr. Eiben's deposition when we did it back this 8 summer but I just want to go over a few ground 9 rules to make sure we make a clean record today. 10 The first is if you don't hear or 11 understand a question that I ask, please just ask 12 me to repeat it. That's no problem. Your answers 13 all have to be verbal because the court reporter 14 can't pick up gestures. Yes or no is always 15 preferable to uh-huh or yeah, mm-hmm, that sort of 16 thing. 17 Please do keep your voice up. I don't 18 think we'll have any trouble hearing you. But it 19 does help because we're all on microphones to make 20 sure that -- that you do that. 21 Please do -- try not to talk over me, 22 not only because it's difficult for the court 23 reporter but because we have with the remote -- 24 the remote situation some difficulty in 25 making sure that we -- we don't talk over one 12 1 another. 2 If an objection is made, which I expect 3 may happen, you'll need to answer the question 4 unless your counsel gives you an instruction not 5 to answer. 6 We'll take breaks today for your 7 benefit and for everyone else. If you need a 8 break, just let me know. The only rule is that we 9 can't break while there's a question pending. 10 I had sent your counsel this morning a 11 number of exhibits that I intend to ask you about 12 today. Were you able to print those out or have 13 then printed for you? 14 A. No. 15 Q. How do you intend to look at exhibits 16 this morning? 17 A. As a PDF. 18 Q. And are you opening those on your 19 computer, that sort of thing? 20 A. I don't understand the question. 21 Q. Do you intend to open the -- the 22 exhibits on your computer while you're looking at 23 the screen? Is that -- is that how you intend to 24 handle things? 25 A. The PDF is already open. So it's a -- 13 1 it has already been opened. I intend on reviewing 2 the PDF that is already open to answer the 3 questions. 4 Q. Very good. And -- and are you able to 5 look at -- look at that on your -- on the same 6 screen that -- that you're looking at right now or 7 are you looking at them on a separate laptop? 8 How are you doing that? 9 A. So I had options. I may do it on the 10 same screen or I may do it on a separate screen. 11 Q. Very good. If you have any trouble 12 opening an exhibit or if there is any other 13 problem you'll let us know so that we're able to 14 perhaps do something alternative. 15 I have the ability perhaps to -- to put 16 an exhibit on screen if that becomes necessary. 17 Mr. Gates, where are you this morning? 18 Are you in West Chester, Pennsylvania? 19 A. Yes, yes. 20 Q. And you're in a conference room it 21 looks like in -- in your own office? 22 A. If the question is am I -- I am in not 23 my own office. This is a business's office. 24 Q. What business is that? 25 A. It's a firm that we manage called -- 14 1 that I own separate and distinct from Powhatan 2 Energy Fund called Elmagin Capital. It has a -- 3 Q. Is anyone -- I'm sorry. I didn't mean 4 to cut you off. 5 A. It has office space that I'm using in 6 the conference room of Elmagin Capital's 7 conference room. 8 Q. Is anyone else in the conference room 9 with you this morning? 10 A. No. 11 Q. All right. Mr. Gates, do you consider 12 Alan Chen to be an innovator? 13 A. You said do I currently or have I ever 14 thought him to be an innovator? What's the point 15 in time? Right now? 16 Q. Yes, right now. Do you consider Alan 17 Chen to be an innovator? 18 A. I consider Alan Chen to be a -- a 19 broken man, somebody who's not working, not doing 20 anything and I don't believe he's doing much 21 innovation right now. 22 Q. Did you ever consider Alan Chen to be 23 an innovator? 24 A. Yes. 25 Q. At what point in time was that? 15 1 A. Various points in time and I can't 2 recall all the specific times when I thought he 3 was an innovator. 4 Q. Was it ten years ago? 5 A. It could have been. 6 Q. In what way was Alan Chen an innovator 7 in the past? 8 A. In what way did I view him to be an 9 innovator in the past? Is that the question? 10 Q. Do you understand my question, sir? 11 A. I don't understand the question. I'm 12 sorry, could you repeat it. 13 Q. In what way is it confusing? 14 A. Are -- are you asking me why I thought 15 he was an innovator in the past, what 16 characteristics he had that made me think he was 17 an innovator? 18 Q. Yes, let's start there. 19 A. I thought that he was a small business 20 owner. I thought he was entrepreneurial. I 21 thought he was able to see opportunities and take 22 risks that to me classify him as an innovator 23 at -- at some points in time. 24 Q. Do you consider his trading on behalf 25 of Powhatan Energy Fund to be innovative? 16 1 A. I believe at some point in time in the 2 past I -- I did, yes. 3 Q. And -- and what were the -- in what 4 respects did you consider his trading for Powhatan 5 Energy Fund to be innovative? 6 A. How is this different than the -- the 7 prior question that I answered? 8 Q. I'm asking if -- if you believed his 9 trading for Powhatan Energy Fund was innovative 10 and in what respects. 11 Can you -- can you elaborate on the 12 reasons you believe that his trading for Powhatan 13 Energy Fund was innovative? 14 A. I guess very similar to my prior answer 15 where he took risks, he saw opportunities in the 16 market and he created his own business or 17 businesses. 18 Q. And what were the risks that he was 19 taking in the market for Powhatan? 20 A. I think a huge political risk, in 21 hindsight. 22 Q. What was the political risk that he was 23 taking? 24 A. That the government would accuse him of 25 market manipulation when I don't believe he did 17 1 anything wrong for political gain. 2 Q. All right, so is that something that 3 you were aware of at the time he was trading for 4 Powhatan? 5 A. I don't recall that. 6 Q. You don't recall. And so -- but you 7 described it as a hindsight risk, so is this 8 something that you've concluded after years of 9 this case I imagine? 10 A. I don't know whether -- when I 11 concluded that there was a political risk. I 12 don't remember if it was years, months, days, but 13 at some point in time after I did come to the 14 realization that he took a huge political risk 15 with his business pursuits. 16 Q. When Dr. Chen placed power trades from 17 point A to point B while simultaneously trading 18 from point B back to A, was that innovative? 19 A. Yes. 20 Q. I couldn't hear -- I couldn't hear your 21 answer. 22 A. Yes, I believe that that was 23 innovation. At some point in time I felt like A 24 to B and B to A was innovative. 25 Q. And why is that? 18 1 A. Similar reasons I described earlier is 2 that he took risks, he saw opportunities in the 3 marketplace. He was trying to compete in a -- 4 what we felt was a competitive marketplace and he 5 helped make the markets more efficient. 6 Q. When you say he was competing in the 7 marketplace, what -- what do you mean by that? 8 A. He was participating in a whole -- in a 9 competitive market where the goal was to -- to 10 make the markets more efficient, where competition 11 was supposed to flourish and he was successful at 12 that time financially. 13 Q. How did Alan Chen's trading make the 14 market more efficient? 15 A. There were a number of ways that it 16 made the market more efficient. One example is 17 that it enabled us to create a website that we put 18 the information out there at ferclitigation.com to 19 make it public so that the world could see how 20 these markets are regulated and perhaps be the -- 21 political powers could try to make them more -- 22 help them, help see the problems in this 23 marketplace. 24 Q. So, Alan Chen's trading in -- in 2010 25 made the market more efficient -- efficient by 19 1 allowing you to launch ferclitigation.com in later 2 years. 3 Is that your answer? 4 A. That's not what I said. 5 Q. Okay. Tell me where I've gone wrong. 6 A. I said it means the market is more 7 efficient in a number of ways. That was one 8 example. 9 Q. Okay. Are there other examples that 10 you can give me of market efficiencies created by 11 Alan Chen's trading? 12 A. Yes, yes. 13 Q. Let's go through them. Start with the 14 first one. 15 A. Well, I already gave you the first one. 16 The second one I would suggest is that 17 the market changed the rules as a result of his 18 trading. The -- the markets -- tariffs were 19 passed, market changes were -- were enacted that 20 the powers that be decided were important or 21 reasonable and restructured the markets as a 22 result -- partially perhaps as a result of his 23 trading. 24 Q. So Alan Chen identified an inefficiency 25 through his trading that was later closed by PJM. 20 1 Is -- is that what you're in essence saying? 2 A. I don't know who specifically changed 3 the tariff, whether it was PJM, FERC or some other 4 entity or a combination thereof, but the market 5 structure was changed perhaps as a -- as a result 6 of Dr. Chen's trading. 7 Q. Okay. Are there -- I think we've 8 covered two now. Are there any other efficiencies 9 that Alan Chen helped introduce to the markets as 10 a result of his trading for Powhatan? 11 A. He provided -- I believe there is some 12 risk -- some result in the market where he would 13 help prices converge when it needed it the most. 14 In other words, if one leg cleared -- 15 if one portion of his trades were executed, at 16 certain times it would have helped with price 17 convergence, that some people perhaps makes -- is 18 a result of making the markets more efficient. 19 Q. And how -- how have you identified that 20 efficiency of price convergence as it relates to 21 Alan Chen's trading? 22 A. I've just read documents and seen 23 analyses and things like that through the years. 24 Q. Are those analyses prepared by expert 25 witnesses that Powhatan has hired? 21 1 A. I don't recall specifically. 2 Q. Could there be any other source other 3 than those experts that you have hired for 4 Powhatan? 5 A. Yes. 6 Q. What other sources might those be? 7 A. Our own internal analysis, research for 8 paper -- anything else publicly available on the 9 internet, other communications from other folks in 10 the industry, presentations at conferences. 11 There's a wide range of -- of central 12 sources out there that may have been reviewed 13 through the years. 14 Q. You -- you referred to internal 15 analyses, what -- what sort of internal analyses 16 would those be? 17 A. I don't recall specific. These are 18 just hypothetical. You asked me what types and I 19 was just naming examples. 20 Q. Okay. 21 A. I don't recall any specific analyses 22 that Elmagin prepared that was not used by an 23 expert but we do sometimes do analysis on our own. 24 Q. Did Elmagin exist when Alan Chen was 25 trading for Powhatan? 22 1 A. When you say -- 2 Q. -- for Powhatan. 3 A. -- do you refer to Elmagin Capital, 4 LLC. 5 Q. Yes, I am. Yes. Did that -- did that 6 fund exist when Alan Chen was trading for 7 Powhatan? 8 A. Elmagin Capital is not a -- a fund. 9 It's a management condition of funds. But the 10 management company -- Elmagin -- to answer the 11 question, Elmagin Capital, LLC did it exist when 12 Alan Chen was trading for -- for Powhatan Energy 13 Fund, LLC? I believe the answer is no. 14 Q. All right. Did -- did Alan Chen's 15 trading for Powhatan involve the use of algorithms 16 or other trading analysis to your knowledge? 17 A. To my knowledge, as I sit here today? 18 Q. Yes. 19 A. Did Alan Chen's trading use algorithms 20 or analysis to assist with trading? I believe the 21 answer is yes. 22 Q. Actually I should ask a better 23 question. I think you picked up on an 24 inefficiency in my questioning. So let me -- let 25 me back up. 23 1 You're familiar with the firm TFS 2 Capital, correct? 3 A. Yes. Yes. 4 Q. And how are you familiar with it? 5 A. I have a lot of familiarities with TFS 6 Capital, LLC. One such example is I think I was 7 involved perhaps in submitting -- doing business 8 as registration for the -- for the firm a number 9 of years ago. 10 Q. Is that your only familiarity with TFS 11 Capital? I mean, you were an owner of TFS 12 Capital. Isn't that right? 13 A. Which question do you want me to 14 answer? 15 Q. You were an owner of TFS Capital. 16 Isn't that correct, sir? 17 A. I don't know how to answer the 18 question. 19 I -- I believe I still may be an owner, 20 so I don't know whether -- what past tense is 21 appropriate. But I believe the entity may still 22 exist in some form. 23 Q. Thank you for that clarification. You 24 are presently an owner of TFS Capital. Is that 25 correct? 24 1 A. Correct. 2 Q. How long -- for how long have you been 3 an owner of TFS Capital? 4 A. We started -- I'll -- I'll talk around 5 the answer. I'm not exactly sure I understand it 6 precisely. But we started -- I started a business 7 called Technical Financial Services. I believe it 8 was an LLC formation. Paperwork was filed in 9 October 1997. Technical Financial Services, LLC 10 was subsequently changed to TFS Capital, LLC. I 11 believe that change may have occurred in the late 12 '90s or early 2000s. 13 So I've been owner of TFS Capital or 14 formally -- or its prior name of Technical 15 Financial Services since I believe October of 16 1997. 17 Q. Have you held any positions with TFS 18 Capital as an employee or manager? 19 A. I don't understand the question. 20 Q. What about my question is confusing 21 you, sir? 22 A. The term "employee" and "manager," the 23 terms, both of them confuse me a little bit. 24 Q. Are -- are you familiar with those 25 terms from your work? What do they mean to you? 25 1 A. They can mean different things at 2 different points in time. 3 Q. Okay. I don't want to -- I don't want 4 to spend all morning on the -- on terms that I am 5 sure that you understand, having worked in 6 financial services for several decades. 7 What is your -- what is your 8 understanding of the term employee as you use it 9 in your -- your day-to-day business, sir? 10 A. It can have various definitions. 11 That's why I was asking the question, for 12 clarification. 13 An employee could be an individual who 14 works for a business and has no ownership. An 15 employee -- it is possible to be an owner and also 16 I believe at some times in our business we refer 17 to a salary employee or to get a health care 18 benefit you have to be an employee. So I -- as an 19 owner I might be able -- I might be classified 20 sometimes as an employee. 21 So -- so that's the reason for the -- 22 why I was looking for a clarification. 23 Q. All right. And -- and how about the 24 term manager. Does that give you any -- any 25 heartburn. If I asked were you a manager of TFS 26 1 at any point in time, would you know what I was 2 talking about? 3 A. None of it gives me heartburn, to be 4 clear. I'm just looking for clarification to help 5 answer your questions. 6 Manager in -- to help you out, manager 7 to me could be managing people, directing their 8 efforts, providing guidance. Manager in our 9 industry could also be a money manager, a 10 portfolio manager, somebody that's responsible for 11 selecting investments. 12 That's why I was looking for 13 clarification. 14 Q. All right. Using both of your 15 definitions of manager, have you ever held either 16 manager role at TFS Capital? 17 A. Yes. 18 Q. Okay. Did you have a title at TFS 19 Capital? 20 A. I believe I was a portfolio manager at 21 some point in time. 22 Q. All right. And what was your -- what 23 is or -- your percentage ownership of TFS -- TFS 24 Capital, excuse me? 25 A. It varied over time. 27 1 Q. Could you tell me how it varied over 2 time? 3 A. Not exactly, but I could provide some 4 thoughts on it. When the business -- Technical 5 Financial Services, I don't know whether that's 6 also -- you're -- when you refer to TFS Capital, I 7 don't know whether -- I'm not a lawyer and I don't 8 know whether TFS Capital or Technical Financial 9 Services was also considered TFS Capital, but I'll 10 provide a very fulsome answer here to help out. 11 Technical Financial Services was formed 12 in October of 1997. I believe at that time I was 13 exactly one-third owner of the entity. At some 14 point this time I speculated earlier that it was 15 the late '90s or early 2000s, Technical Financial 16 Services changed to become TFS Capital, LLC, and 17 at some point in time as well, and I don't know 18 which came first, my ownership interest in the 19 business decreased. 20 Q. Would you describe yourself as one of 21 the leaders of TFS Capital over the course of its 22 existence? 23 A. I led various efforts. I -- would I -- 24 I usually don't describe myself as a leader of TFS 25 Capital. Would I? I can't really -- it's not 28 1 really the way I described it. But there are 2 various things that I did lead at TFS Capital. 3 Q. All right. Let's return to Alan Chen, 4 now that we've digressed into TFS Capital. 5 Did Alan Chen's trading on behalf of 6 Powhatan involve use of an algorithm? 7 A. I'm confused because I thought like -- 8 earlier you asked me -- I thought I asked -- was 9 asked this exact same question, was it use of an 10 algorithm or analysis, and I believe I answered 11 yes to that question. 12 Is -- is this question different than 13 that? Are you trying to define the question of 14 analysis or algorithm, how do I distinguish 15 between the two? 16 Q. This -- this is a different question, 17 sir. Just answer the question asked, which is did 18 Alan Chen's -- Chen's trading from -- on behalf of 19 Powhatan Energy Fund involve use of an algorithm? 20 A. I would say that I believe -- sitting 21 at this point in time, that his trading on behalf 22 of Powhatan Energy Fund, LLC, used an algorithm or 23 analysis. 24 Q. That's nonresponsive, sir. Did it 25 use -- did Alan Chen use an algorithm to trade for 29 1 Powhatan? 2 A. Could you define how you use the word 3 algorithm, what doe it -- what do you mean in this 4 context. 5 Q. Have you heard the -- the term 6 algorithm used in a trading context, sir? 7 A. Many times. 8 Q. What does it mean to you? 9 A. It can mean different things at 10 different points in time depending on who I'm 11 talking to. That's why I was looking for 12 clarification to see -- 13 Q. All right. Okay, well you tell me how 14 you're going to define the term algorithm in 15 answering my question. 16 A. Okay, so in this algorithm we can use 17 as a fully automated trading strategy written in 18 Python where it fully executes and submits trades 19 to -- to a -- to a portal. 20 If that's the definition we're using, 21 then the answer is no, I don't believe at this 22 point in time he used an algorithm. 23 Q. Are there any other forms of algorithm 24 that you believe Alan Chen used to trade for 25 Powhatan? 30 1 A. When you say "forms of algorithm," do 2 you mean definitions of algorithm? 3 Q. As you understand -- understand and use 4 the term "algorithm," sir, are there any other 5 forms of algorithm that you're familiar with that 6 Alan Chen used to trade for Powhatan? 7 A. I'll try my best to answer the 8 question. I'm not really fully sure I understand 9 what you mean by "forms of algorithms". 10 But if you define algorithm as a -- 11 using any sort of analysis, quantitative analysis 12 to create -- to guide an investment decision, 13 then, yes, I believe, using that definition of 14 algorithm, that Alan Chen used -- at this point in 15 time I believe Alan Chen used algorithms to trade 16 on behalf of Powhatan. 17 Q. So you -- you were -- you -- you 18 understand algorithm to be any form of 19 quantitative analysis that can be engaged in by a 20 trader? 21 A. That's not what I said. In fact 22 earlier I said that there were multiple 23 definitions of algorithm, and that's -- 24 Q. Right, and I'm just -- okay. I'd like 25 to move on rather than get bogged down here. 31 1 But did you understand Alan Chen's 2 trading on behalf of Powhatan involved any trade 3 secrets? 4 A. I'm not a lawyer and I don't know what 5 you mean by "trade secrets" but I do believe he 6 had secret sauce and proprietary knowledge that he 7 did not want to -- that he wanted to protect, that 8 aided his business. 9 Q. Do you know what the secret sauce was? 10 A. At this point in time do I know what 11 the secret sauce was? You know, as I sit here 12 today or are you asking me at that point in time? 13 Q. We'll -- we'll do -- we'll do both. 14 Let's take -- let's take at this point today, do 15 you believe Alan Chen had secret sauce that he was 16 deploying for Powhatan? 17 A. So I've always -- to be clear, I've 18 always thought he had secret sauce, using the term 19 very generally of course, which isn't I assume a 20 legal term, but I believe he always had secret 21 sauce. 22 When -- the question I thought was you 23 asked me to define what that secret sauce was and 24 I tried to get clarification, because my 25 understanding of his secret sauce involved over 32 1 time. 2 As I sit here today, I believe his 3 secret sauce may have involved analyses and/or 4 algorithms to use to trade in the market as well 5 as an understanding and ability to read tariffs, 6 contact individuals in the industry, including 7 PJM, to try to understand the -- the rules that 8 guide -- that needed to guide his business, and he 9 had other secret sauce, too, I believe. 10 Q. Was A to B, B to A a secret sauce that 11 Alan Chen had? 12 A. What do you mean, A to B, B to A? 13 Q. If he's trading in the up-to-congestion 14 market simultaneous from A to B or B to A -- 15 A. We're breakup. I lost the audio. 16 Q. Is that a secret sauce? 17 A. You know, I lost that whole audio. 18 Q. Sorry, and I see that. I see that you 19 were talking. I see that. I -- I'm having a 20 little trouble hearing you, as well. 21 Can you hear me now? 22 A. I can. 23 Q. All right. If Alan Chen was trading 24 from point A to B and point B to A simultaneously 25 in the UTC market, do you consider that to be part 33 1 of Alan Chen's secret sauce? 2 A. I believe that portfolio construction 3 was part of his secret sauce and trading the 4 different paths the way he arranged his trades I 5 believe to be -- to be important. 6 Q. If -- if Alan Chen was moving power in 7 a circle, so to speak, to use a colloquialism, 8 would that be part of his secret sauce? 9 A. I don't understand the question. 10 Q. Have you ever heard the phrase "moving 11 power in a circle" before? 12 A. Maybe, but I don't recall specifically. 13 (5/19/21 Twitter tweet was marked R. 14 Gates Exhibit 1, for identification.) 15 BY MR. FERRENTINO: 16 Q. All right. I'd like to move to 17 documents now. Are you able to pull up Exhibit 1? 18 A. Exhibit 1. So -- let me see here. I 19 am on -- so the exhibits, to be clear, it's -- 20 okay, the exhibits are labeled in the bottom 21 right-hand corner, I assume, and I assume they 22 encompass all the prior pages to the next exhibit. 23 In other words, exhibit -- just to be 24 clear, Exhibit 2 is page -- Exhibit 2 is just page 25 two, Exhibit 3 is page three to -- 34 1 Q. Sir, I'll -- I'll identify the exhibits 2 for you, just to make it easy. I don't know what 3 form you're looking at them in but I can tell you 4 that Exhibit 1, just for the record, is a single 5 page. It is a -- what appears to me to be a tweet 6 from Powhatan Energy Fund, LLC, and it's a single 7 page. 8 Do you see it? 9 A. Yes, I see page -- I have the PDF 10 pulled up. It's an 118-page PDF and I am looking 11 at page one. In the bottom right-hand corner it 12 says "R. Gates Exhibit 1". 13 Q. Right, I think we're looking at the 14 same exhibit. 15 Is Powhatan Energy Fund, LLC -- or 16 excuse me, @powhatanfundllc a Twitter account that 17 you use? 18 A. "That you use". I would describe it as 19 a Powhatan -- Powhatan -- that account is an 20 account that Powhatan uses. 21 Q. And who -- who has the ability to tweet 22 with this account? Who has the credentials for 23 the Powhatan Fund, LLC Twitter account? 24 A. I don't know specifically. 25 Q. Did you have the ability to tweet on 35 1 this account? 2 A. Yes. 3 Q. Who else had the ability to tweet on 4 this account? 5 A. At this point in time today? 6 Q. Yes, sir. 7 A. I believe that it's Kevin Gates, my 8 identical twin brother, and I are the only two 9 individuals. 10 Q. To your knowledge has anyone else -- 11 I'm sorry, I didn't mean to cut you off. 12 To your knowledge has anyone else 13 ever -- other than you and your brother Kevin, 14 ever tweeted on this account? 15 A. I don't recall specifically. 16 Q. Are you aware of this account ever 17 being hacked or subject to unauthorized use? 18 A. No. 19 Q. Who authored the tweet in Exhibit 1? 20 A. Powhatan Energy Fund. 21 Q. Was it you or your brother Kevin that 22 authored this message? 23 A. I don't recall who specifically typed 24 that in on behalf of Powhatan Energy Fund, LLC. 25 Q. But it would be either you or Kevin. 36 1 A. I don't recall. That's likely, but I 2 don't recall. 3 Q. I -- I'm just -- I'm just asking for 4 the total universe. There's -- there's no one 5 else other than you and Kevin that could have 6 written in this message? 7 A. You asked me that question earlier and 8 I said I don't recall if anybody else has tweeted 9 on behalf of Powhatan Energy Fund. 10 Q. I'm asking about this specific message, 11 sir. 12 Is there anyone else, other than you or 13 Kevin, that could have authored the document in 14 Exhibit 1? 15 A. I think it's unlikely but it's 16 possible. I don't recall. 17 Q. What are the -- what's the possibility 18 that -- that you're concerned about? 19 A. I'm not concerned about any 20 possibility -- I'm not concerned about anything. 21 I'm just not sure who authored it. I don't recall 22 specifically that -- the account probably has had 23 thousands or tens of thousands of tweets since it 24 was launched in 2014 I believe and I don't 25 recall -- and -- and lots of the tweets have been 37 1 deleted and removed and I -- I don't recall 2 specifically who authored each individual tweet on 3 behalf of Powhatan Energy Fund. 4 Q. Right, and I -- I understand that. 5 That -- that has been clear from your testimony. 6 What I'm trying to get at is is there 7 anyone else other than you or your brother Kevin 8 who might have written this document which 9 Gates -- according to the face of it, from May 19, 10 2021, this year? Anyone else who had control of 11 the account at that point in time? 12 A. I don't recall. I don't recall this 13 tweet. I know the name -- I recognize the name 14 Blythe, I recognize the name Silkman and I 15 recognize the name Alan. I don't recognize 16 lindsey_baxter. I don't recognize this @itis. 17 I -- I just don't recall. 18 Q. All right. The tweet itself reads, "I 19 suggest" -- quote, "I suggest asking them what 20 happens to innovators (e.g. Blythe, Silkman, Alan, 21 etc.) when the government tosses out bogus 22 allegations of fraud". 23 My question is, who is Blythe referred 24 to in this Twitter message? 25 A. I don't know who was referred to at 38 1 that time. I -- I don't recall. I don't know who 2 authored it. I don't know what they meant when 3 they did author it. 4 At this point in time I would speculate 5 that Blythe means Blythe Masters in JP Morgan. 6 Q. And that's a name that you're familiar 7 with? 8 A. I don't understand the question. 9 Q. Who is Blythe Masters at JP Morgan? 10 A. Blythe Masters is a woman, a very 11 successful, intelligent, thoughtful woman who used 12 to work at JP Morgan. 13 Q. Do you consider her an innovator? 14 A. At this point in time do I consider 15 Blythe Masters an innovator? I don't know what 16 she's doing right now. 17 Q. Have you ever considered Blythe Masters 18 an innovator for anything she's done at any point 19 in time? 20 A. Probably. I -- I don't know that I 21 specifically thought of that term, innovator, but 22 I -- I would -- but I would say that at some point 23 in time I would historically have considered 24 Blythe Masters an innovator. 25 Q. Why? 39 1 A. Because I believe she's -- I'll -- I'll 2 speculate at some point in time I thought she may 3 have been innovator for similar reasons that I 4 believe that I described Alan Chen earlier where 5 she would take risks, try to participate in 6 markets, try to make markets more efficient and -- 7 for the better of -- of society. 8 Q. All right. Who is the Silkman referred 9 to in this tweet? 10 A. I don't know. I don't know who 11 authored the tweet. I don't know when -- what 12 they meant when they did author it. 13 At this point in time I recognize the 14 name Silkman as an individual up in the New 15 England area who had a -- had a consulting 16 business. 17 Q. And do -- do you consider Mr. Silkman 18 to be an innovator? 19 A. At this point in time do I consider him 20 to be an innovator? I don't know what he's doing. 21 I believe Richard Silkman, this 22 individual up in New England, I believe he may 23 have retired, so, I -- you know, if he -- if he's 24 retired and you know, like -- and maybe not 25 working, he might not be innovating. I don't know 40 1 what he's doing. He may be innovating in 2 retirement. You can definitely innovate in a -- 3 in a whole variety of ways. But, you know, I -- I 4 candidly can't -- I don't know what he's doing. 5 Q. Do you believe he was an innovator at 6 any point in the past when he was consulting? 7 A. I believe so, yes. 8 Q. In what way? 9 A. Similar reasons that I gave earlier for 10 Blythe Masters and Alan Chen in that he 11 participated in -- in markets, took financial 12 risks. 13 (8/12/10 email chain from Alan Chen to 14 Kevin Gates, Bates stamped POWDC_0400 to 0043 was 15 marked R. Gates Exhibit 2, for identification.) 16 BY MR. FERRENTINO: 17 Q. All right, can you pull up Exhibit 2, 18 sir. 19 A. I'm looking at page two of the 118-page 20 PDF. 21 Q. Fine. So, the first page I'll -- I'll 22 identify for the record. It's -- it's marked R. 23 Gates Exhibit 2 at the bottom. It also has what's 24 called a Bates number that begins with the letters 25 POWDC and the last four digits of the Bates number 41 1 are 0400 and it continues through Bates page 0043. 2 Are we looking at the same document? 3 A. Yup. I will say pages three to five of 4 the PDF. 5 Q. All right. I believe we're looking at 6 the same document, sir. Let's -- let's -- I'll 7 give you a chance to read it if you'd like, but I 8 just want to ask questions about some text that's 9 on the first page, if I could direct you. 10 A. I'm sorry, what -- we're looking at 11 0400 to -- I'm sorry, so 0400 to zero to -- 0403. 12 Okay, yeah, yeah, yeah. So 0400, and you want me 13 to look at the first page, which is page two. 14 Okay. I'll -- I'll quickly review it. 15 (Brief pause.) 16 A. Okay. 17 Q. All right, I want to direct your 18 attention to an email at the bottom of the first 19 page of this exhibit. It's an email from your 20 brother Kevin to Alan Chen copying Chao Chen dated 21 August 12, 2010 at 4:18 p.m. 22 Do you see that email? 23 A. I see a copy of the email that you just 24 described, yes. 25 Q. Very good. And do you have an 42 1 understanding of the -- the context in which this 2 conversation between your brother and Alan Chen 3 arose? 4 A. "The" context? I don't understand what 5 you mean by "the" context. I have some context. 6 Q. What is the context -- what is the 7 context that you had for this? 8 A. At this point in time, looking at an 9 email that was sent over 11 years ago, it's my 10 understanding that they were evaluating some 11 changes to the market structure in which Alan was 12 participating. 13 Q. All right. And your brother writes, 14 among other things in the email to Alan Chen, this 15 is the second sentence -- I'm sorry, I'll read the 16 whole paragraph. "If PJM files the amendment next 17 week, when do you think that the change will take 18 place, question mark? And I'm correct in 19 believing that you'll still be able to profitably 20 trade but won't be able to keep the TLC. (You 21 just won't be able to make money by moving 22 electricity around in a circle)." 23 I'll -- I'll omit the -- the last few 24 sentences there, but do you -- do you agree that 25 that's what Alan Chen was doing to make money for 43 1 Powhatan, moving electricity around in a circle? 2 A. As I sit here at this point in time? 3 Q. Yes. 4 A. No. 5 Q. Why not? 6 A. I don't know of any circles that exist 7 in the wholesale power markets anywhere in the 8 grid. 9 Q. And I refer to him by his first name; I 10 don't mean any disrespect. Why would your brother 11 Kevin believe that Alan Chen was moving 12 electricity around in a circle in 2010? 13 A. I don't think he believed that. 14 Q. Why not? 15 A. Because I don't think he knew of any 16 circles that existed on the grid. 17 Q. Can you think of a reason he would have 18 been referring to moving electricity around in a 19 circle in 2010? 20 A. I -- when he wrote this, I wasn't 21 copied on it, I don't remember reviewing it at 22 this -- at that point in time, 11 years ago. I 23 really have a very, very -- really no recollection 24 of it. "Moving money around in a circle" I don't 25 know whether it was a phrase -- I mean, I could 44 1 speculate, which I guess is what you're looking 2 for me to do here, but perhaps it's a -- a term 3 that he and Alan Chen had used in the past to 4 describe a certain type of trading. I don't know. 5 But you cannot -- there's not a --a 6 circle on the grid and to move electricity you 7 need transmission lines. 8 Q. Could this be a -- a shorthand 9 reference to the A to B, B to A trades that we've 10 discussed today? 11 A. Could this be? This could be anything. 12 I -- I don't know what it is. It could be B to A, 13 A to B with lower price caps, you know, a home-run 14 strategy. It could be a -- a whole range of 15 things. I -- I don't know. 16 (10/15/13 email from R. Gates to 17 karen@progressiveitgroup, Bates stamped POWDC_5044 18 was marked R. Gates Exhibit 3, for 19 identification.) 20 BY MR. FERRENTINO: 21 Q. Let's go on to Exhibit 3. For the 22 record, this is marked R. Gates Exhibit 3. It 23 contains a Bates number ending in 5044 and it's a 24 single-page document. 25 A. Page six of the PDF is what I'm looking 45 1 at. It's an email -- copy of an email sent from 2 powenergy2013@gmail to 3 karen@progressiveitgroup.com? 4 Q. Yes, sir, I believe we're looking at 5 the same document. I'll give you a moment to look 6 at it and then let me know when you're ready to 7 answer questions about it. 8 (Witness peruses document.) 9 A. Okay, I've scanned it briefly. 10 Q. Did you write this email, sir, Exhibit 11 3? 12 A. I don't recall writing it. 13 Q. Any reason to dispute that you're the 14 same Rich Gates that's listed in the "from" line? 15 A. Any reason? I mean it -- it's possible 16 Kevin Gates typed up the email and -- from the 17 Powhatan Energy account. I -- 18 Q. And signed it -- 19 A. I don't recall. 20 Q. And signed it, "Thanks, Rich"? Does 21 Kevin usually sign your written emails? 22 A. If I give him verbal authorization, 23 sure. I -- it's possible that he could have done 24 it. I don't -- I just don't recall. 25 Q. So it could have been you or your 46 1 brother who wrote this email is what your 2 testimony is? 3 A. I don't recall. I assume it was me 4 that wrote it, but I -- I just don't recall. 5 You're giving me an email that was sent 6 a number of years ago. I assumed it was me that 7 typed it and wrote it, but I -- I just don't 8 recall. 9 Q. Who is Karen? 10 A. Karen was the first girl I kissed in 11 eighth grade. 12 Q. Is she the same Karen that you're 13 writing to in this email? 14 A. No, no. 15 Q. And who is 16 karen@progressiveitgroup.com? 17 A. I remember working with Karen -- I 18 believe it was Karen that helped design a website 19 for us at ferclitigation.com. I believe her name 20 was Karen. It's been a number of years since I've 21 communicated with that web developer. 22 Q. So she's a web developer that helped 23 you start or run ferclitigation.com? 24 A. I believe we used a firm called 25 Progressive IT Group, a -- a web developing shop, 47 1 that Powhatan engaged to help us create a website, 2 and I believe the owner and maybe sole employee, 3 maybe it was a sole proprietor shop, was a woman 4 named Karen, and Karen did work for us to -- 5 worked -- worked with us to -- to create the 6 website. 7 Q. All right. Under your signature line 8 where it says "Thanks, Rich," there are a number 9 of bullet points written out and I believe they 10 describe generally, the lawsuit that FERC brought 11 against Powhatan. 12 Is that -- is that a fair summary of 13 what's here? 14 A. I -- the lawsuit. So the lawsuit it's 15 my understanding started years later, so, I would 16 describe this as just talking about maybe the kind 17 of -- the process that we went through before the 18 lawsuit was initiated. 19 Q. All right, well it seems -- it seems to 20 say in the first bullet point, "On October 7th, 21 2018 the federal energy regulatory Commission, 22 FERC, filed suit against Powhatan Energy Fund, a 23 small firm based in Richmond, Virginia". 24 So it seems to be describing the 25 lawsuit, doesn't it? 48 1 A. I don't know what it means when it says 2 "filing suit". 3 I know that we ended up in the Eastern 4 District of Virginia in the summer of 2015 I 5 believe it when the lawsuit was initiated. I 6 believe that this email -- 7 Q. I see. I -- I see. I may have my 8 dates -- my dates wrong. Okay, fair enough. 9 So, do you believe that what you wrote 10 about your dispute with FERC is accurate? 11 A. I don't know that I wrote this, so 12 that's not the testimony that I gave. 13 Q. All right, let me -- let me rephrase 14 it. 15 Do you believe the person that signed 16 this, "Thanks, Rich" has accurately characterized 17 Powhatan's dispute with the Federal Energy 18 Regulatory Commission? 19 A. I believe that at that point in time 20 the communications that came from Powhatan that 21 they always believed them to be true and -- and 22 correct at that point in time. 23 Q. Do you believe that everything that 24 Rich, whoever that is, wrote in this email is 25 accurate today? 49 1 A. Well, I don't know about the first 2 bullet point. I don't know what it means by 3 "filing suit," so I don't know whether that's -- I 4 can't opine as to that. 5 Q. Well, I won't make you go through 6 everything. Let me focus you on one particular 7 bullet point and that's the third bullet point 8 where it says, "We don't think the manager did 9 anything wrong. He simply responded to 10 incentives, the kind of thing that happens 11 billions of times every day in markets all around 12 the world". 13 Who is the manager referred to in that 14 sentence? 15 A. I speculate that the manager that was 16 referenced in this email, looking at it at this 17 point in time, was Alan Chen. 18 Q. All right. Do you agree that Alan Chen 19 simply responded to incentives in his trading? 20 A. I believe that's one of the things that 21 he gave, yes. 22 Q. What were the incentives that he was 23 responding to? 24 A. Various incentives, probably one that 25 may have been noteworthy was the transmission loss 50 1 credits. 2 Q. Do you believe it was innovative the 3 way Alan Chen responded to the incentives created 4 by the transmission loss credits? 5 A. At this point in time do I believe it 6 was innovative? Is that the -- the question, at 7 that time? 8 Q. Yes. 9 A. Yes, to the first -- at this point in 10 time, was it innovative? It may have been 11 innovative. 12 Q. In what way might it have been 13 innovative? 14 A. You saw tariffs. He was -- you know, 15 read information. He contacted people in the 16 industry that would understand various tariffs. 17 He was a leader in -- in reading and understanding 18 incentives that were placed on the market and 19 responded accordingly. 20 Q. What do you mean he was a leader that 21 responded to incentives? 22 A. My guess is he was one of the first to 23 understand these markets. He might have been one 24 of the first to call PJM and/or the Market Monitor 25 to understand the -- the tariffs, which I believe 51 1 is what took place, and I believe that he might 2 have been one of the first to do that. 3 I believe there's a lot of investors 4 out there who don't even know these markets exist 5 and are unaware of them, and Alan Chen, not only 6 was he aware of them, trading in them, but he was 7 reading tariffs and understanding the -- the 8 market structure better than -- better than 9 others. 10 Q. All right. Mr. Gates, did you do 11 anything to prepare for the deposition that you're 12 sitting for today? 13 A. Yes, yes. 14 Q. What did you do? 15 A. I -- I did a lot of things. I don't 16 understand the question. Are you looking for 17 things I did where the sole intent was to prepare 18 for this deposition? 19 Q. Well you just said you did a lot of 20 things. What were -- what -- what's the universe 21 of things that you did to prepare, in your mind? 22 A. Well, I'll just give you the things 23 that I did that were exclusively to prepare for 24 this deposition, because I assume that's what 25 you're asking. 52 1 I told my wife and my children not to 2 communicate with me today, not to text, call, 3 so -- because I would be unable to answer. I 4 wanted to focus exclusively on this. I ate a big 5 breakfast this morning. Usually I don't eat 6 breakfast, or small breakfasts. I encouraged 7 other people in my office not to come here today. 8 I mean, we usually have a full office and the vast 9 majority of people are not here. They're working 10 remotely. I very rarely wear a jacket and I put a 11 jacket on today specifically for this deposition. 12 And there are other things I could name, as well. 13 Q. Did you look at any documents in 14 representation for this deposition? 15 A. So that's the part where I -- I need 16 some clarification on because -- are you asking 17 did I look at a document specifically with the 18 sole intent to prepare for this deposition or that 19 may have -- that I may have reviewed in 20 preparation of this deposition? 21 Q. Let's do both. Let's do both. 22 Let's -- let's start with what you -- you prepared 23 with, to use your phrase, the specific intent -- 24 A. The sole intent, the sole intent -- 25 Q. The sole intent. 53 1 A. -- is what I meant to say. Did I look 2 at any documents for the sole intent to prepare 3 for this deposition? 4 I mean, I reviewed some emails that my 5 attorney sent to me to help prepare me for this 6 deposition. I guess that's a document of some 7 sort if you print it out. That was specifically 8 to -- to get ready for this. 9 The links to the Webex, the link 10 yesterday where we did the trial run, those are 11 dockets that I specifically reviewed to prepare 12 for today. 13 Q. Did you meet with your counsel to 14 prepare for the deposition? 15 A. I believe at various points in time I 16 communicated with my counsel to prepare for this 17 deposition or that it was discussed at various 18 points in time or communicated electronically via 19 email. 20 Q. All right. How -- how many minutes, 21 hours would you say you spent in person or on the 22 phone with your counsel preparing for this 23 deposition? 24 MR. PERKINS: Interpose an objection 25 here. When you say "your counsel," are you 54 1 referring to Powhatan's counsel, not Mr. Gates' 2 individual or personal counsel? 3 MR. FERRENTINO: Well, I'll -- well, 4 I'll ask both. 5 BY MR. FERRENTINO: 6 Q. Has your personal counsel helped 7 prepare you for this deposition? 8 A. Who are you referring to with a 9 "personal counsel"? 10 Q. I don't know. You tell me. Do you 11 have personal counsel other than Mr. Perkins? 12 MR. PERKINS: Again, to clarify, I 13 represent Powhatan. 14 MR. FERRENTINO: But you also represent 15 the witness in his capacity as an officer at 16 Powhatan. Is that right? 17 MR. PERKINS: Correct. 18 BY MR. FERRENTINO: 19 Q. All right, so if I use the 20 colloquialism "your counsel," I think everyone 21 knows we're talking about Mr. Perkins and Mr. 22 Zdebski, right? I -- I don't -- I'm -- you've -- 23 you've introduced this issue of personal counsel. 24 I'm not really sure where that's coming from. 25 Did you meet with Mr. Perkins and/or 55 1 Mr. Zdebski to prepare for this deposition, Mr. 2 Gates? 3 A. I've never -- meet in person, I've 4 never met either one of them in person. 5 Q. Did you speak to them on the telephone? 6 A. Yes. 7 Q. Did you discuss any documents on the 8 telephone? 9 MR. PERKINS: I'm going to object to 10 the extent you're getting close to what would be 11 considered attorney/client privilege and work 12 product. 13 MR. FERRENTINO: I'm not asking the -- 14 I'm not asking the -- the substance of the 15 discussion. 16 BY MR. FERRENTINO: 17 Q. Did you discuss any documents with your 18 counsel? 19 A. He may a -- one thing I don't -- I 20 think this is safe, Chris. I don't want to -- I 21 had conversations that are attorney/client 22 privileged. I don't want to divulge them. I can 23 confirm and I feel safe confirming that I believe 24 Chris asked me "Did you get the link I forwarded 25 you on -- for Webex?" And I think I said yes. 56 1 So that's the document that was 2 discussed. 3 Q. And -- and that's the -- is that the 4 sole extent of the documents that you discussed -- 5 excuse me, that you -- you examined in preparation 6 for today, the Webex link? 7 A. Okay, so several -- I'm confused. 8 The question is is the email with the 9 Webex link, is that the only document that I 10 reviewed with counsel for the sole -- with counsel 11 that represents Powhatan Energy Fund, LLC for the 12 sole purpose for today -- 13 Q. No. 14 A. -- for today? 15 Q. No, I'm asking -- I'm asking a 16 different question. 17 Did you review any documents other than 18 the Webex link in preparation for your testimony 19 today? 20 A. For the sole purpose of today? 21 Q. Yes. 22 A. Earlier we had this concept -- we were 23 bent on this idea that we had two different types 24 of documents or reviewing. One is a document that 25 I reviewed specifically to get me ready for today 57 1 and another is a, you know, document that I 2 reviewed that in part helped me prepare for 3 today's deposition. 4 The first one in the former category 5 specific to today, I don't believe I reviewed 6 other documents other than the emails 7 orchestrating more the set up of -- of today. 8 Q. All right. And then did you speak to 9 any -- did you speak to any expert witnesses or 10 consultants other than your counsel about today's 11 testimony? 12 A. Expert witnesses, about -- so, we are 13 saying about today's deposition. 14 I believe I may have told some -- you 15 know, so there's been a point in time where we've 16 been told that we need to prepare, get an expert 17 report to send to the court as part of this whole 18 discovery process, inside, you know, has an expert 19 opinion, you produce reports and then the judge or 20 the fact finder kind of reviews them. And that's, 21 you know, a part of managing this case is kind of 22 orchestrating that project and I think that we may 23 have reached out to certain experts or I 24 specifically may have reached out to individuals 25 that we considered using as an expert for this 58 1 case and maybe we discussed the timing of when 2 such a report would need to be prepared relative 3 to this case. So, I reached out to an expert and 4 said, maybe in November we'll need an expert 5 report or December or October or some point in 6 time. I thought we'd probably be in the summer 7 and we are -- we probably referenced today's 8 deposition directly or indirectly in such 9 communications. 10 Q. So, you've been communicating directly 11 with experts that Powhatan has retained in this 12 case? Is that correct? 13 A. "Communicating with experts that 14 Powhatan has retained in this case." I don't -- I 15 mean, you're saying "Powhatan has retained". So 16 you're saying Powhatan, during the administration 17 process, Powhatan engaged experts to help FERC 18 understand or review the set of facts. Those 19 expert reports were produced to FERC. It's my 20 understanding, once we're in civil litigation, we 21 need a new expert, a new kind of individual to 22 help submit something to the Eastern District of 23 Virginia describing the case and we have -- as of 24 yet I don't believe Powhatan has engaged an expert 25 for this latter process. 59 1 Q. All right. Did you communicate with 2 any of those potential experts to prepare for 3 today's testimony, sir? 4 A. "To prepare for today's" -- for the 5 sole purpose of today, no. 6 Q. Did you read any deposition transcripts 7 to prepare for today's testimony? 8 A. I mean, I've had a deposition 9 transcripts (sic). We have a lot of them posted 10 out on our websites. So during the administrative 11 process I was deposed twice by Mr. Steve 12 Tabackman. He brought me in one day and then had 13 me come back another day. It was an in-person 14 down in Philadelphia. Those documents are 15 published on our website. I believe I had 16 reviewed them multiple times through the years. I 17 also believe Kevin's documents were also -- was 18 deposed twice by Tabackman and Olsen and I believe 19 those documents are posted -- two different years, 20 his deposition. Those documents are posted on the 21 website. I believe I reviewed those. I can say 22 the same for Alan Chen, Greg Sekelsky and Lauren 23 Eiben, the documents that are publicly available. 24 But it was not -- I don't believe it was 25 specifically -- I don't believe I've ever reviewed 60 1 any of those documents specifically to prepare for 2 today's deposition. 3 Q. Did you review the transcript of Mr. 4 Eiben's deposition back in the summer of this 5 year? 6 A. I'll -- I'll try to answer because I'm 7 not sure I understand it, because I'm not an 8 attorney. 9 I sat through part of that deposition 10 of -- of Larry's -- Eiben's deposition earlier 11 this year and I listened to bits and pieces and I 12 think I became mindful a little bit. I don't 13 believe we ever received the document of that 14 deposition. I don't believe that it was -- that 15 we ordered it or purchased it or obtained it. So 16 I didn't have a chance to review it, the written 17 transcript. 18 Q. All right. Did you speak to your 19 brother Kevin to prepare for your testimony today? 20 A. Yes. 21 Q. What did you discuss? 22 A. Mainly logistics, how to -- what I 23 should wear. You know, we talked about emptying 24 out Elmagin Capital's office, talked about the 25 breakfasts, things of that -- along those lines. 61 1 Q. Did you discuss the substance of your 2 testimony? 3 A. Specifically to prepare for this 4 deposition? 5 Q. Did you discuss the substance of your 6 testimony today? 7 A. No, I don't believe so. I mean, we've 8 talked about up to congestion trading. We've 9 talked about, you know, corruption. We've talked 10 about various things that presumably might be 11 incorporated in today's discussion but nothing 12 specific about -- you know, for the sole purpose 13 of the -- you know, what things to say. But we 14 talk about Powhatan rather regularly. 15 Q. How often would you say you -- you 16 communicate with Mr. Kevin Gates about Powhatan? 17 A. Regularly. 18 Q. Once a day, multiple times a day, once 19 a week? Can you give me a sense of the 20 regularity? 21 A. I would just describe it as quite 22 regularly. I mean, I could get into the weeds 23 about like, what a contact is or what -- you know, 24 one communication, one and one again, but rather 25 regularly we've been involved a lot in -- in the 62 1 litigation, you know, trips down to Virginia, 2 we've made a couple of trips down to Richmond in 3 the last several months, orchestrated that. We 4 had documents we had to file with the -- with the 5 court. We had to prepare for -- for those things. 6 We had -- review information on other 7 cases such as Green Hat and saw some filings in 8 that and that may serve as a catalyst on 9 conversation about the happenings at FERC and -- 10 and perhaps with our -- with our case. 11 Q. And how did those communications occur, 12 sir, with your brother Kevin? 13 A. Very nicely. They -- they -- just 14 fine. 15 Q. Over what channels do you have them? 16 Are they on the phone, text message, email? 17 A. Of -- we use all different sources of 18 communication. We do work together in our 19 business pursuits, so I do see him rather 20 regularly. I live just a, you, mile or two away 21 from him, so I see him quite often, social 22 settings, you know, work settings, other things 23 like that. So a lot of them are just kind of in 24 person. 25 Q. Have you spoken to Larry Eiben since he 63 1 was deposed in this case over the summer? 2 A. "Spoken"? "Spoken" you mean talking to 3 me I assume is what you mean. I don't believe so. 4 Q. Have you text messaged him since this 5 deposition in this case? 6 A. I don't believe so. 7 Q. Have you emailed with him? 8 A. I believe so. 9 Q. What about did you email him? 10 A. So, I've had -- as an individual I've 11 had very limited interactions with Mr. Eiben 12 and -- but he is an investor in Elmagin's funds, 13 the current funds that we manage at Elmagin 14 Capital, and I believe an email was produced by 15 Elmagin Capital that -- you know, you say "you," 16 I -- I don't exactly know what it means, but I'm 17 going to assume it means Elmagin Capital, my 18 business email, then would say here's a kind of 19 returns that were generated, gains and or 20 losses -- more losses recently, unfortunately -- 21 but that have been generated in the funds, and 22 those emails would -- when you say to, it was more 23 of a BCC, blind carbon copy, so it wasn't 24 specifically to him, but he did receive a copy of 25 it as a BCC. 64 1 Q. All right, have you communicated with 2 Mr. Eiben about this case or about Powhatan since 3 his deposition? 4 A. "This case or Powhatan"? I don't 5 believe so. 6 Q. You mentioned that you gave testimony 7 in -- in the administrative proceeding in this 8 case in two days in I believe it was May 2012. 9 Is that accurate, sound right to you? 10 A. I don't recall telling you a specific 11 month. I don't remember. 2012 is possible. I 12 don't recall the specifics. 13 Q. I'll represent -- I'll represent to you 14 that you -- you sat for testimony in May 2012 like 15 you said in Philadelphia. 16 A. I remember Philadelphia. 17 Q. You recall being under oath during that 18 testimony? 19 A. I don't have a specific recollection of 20 being under oath. I would generally understand 21 that all depositions are under oath. 22 Q. Do you believe that you told the truth 23 in your testimony in the administrative 24 proceeding? 25 A. Yes, yes. 65 1 Q. And I think you said you -- you 2 reviewed your prior testimony some number of times 3 since 2012. Is that right? 4 A. I believe I reviewed the deposition 5 transcripts that are out on the internet, yes, 6 since they were posted. 7 Q. Have you ever given sworn testimony in 8 any matter apart from the case involving Powhatan? 9 A. Yes. 10 Q. How many times? 11 A. In litigation I assume you're asking. 12 I mean, there is a lot of times you sign documents 13 under perjury of law, I promise this is my Social 14 Security number. I assume that is a sworn 15 testimony of some sorts. 16 Q. No, I -- I think I'm referring to sworn 17 testimony in a -- in a context similar to this, 18 either in a deposition or some other proceeding 19 where you were sworn and gave a lot of testimony. 20 Have you given testimony of that sort 21 in any proceeding other than FERC's case against 22 Powhatan? 23 A. Yes. 24 Q. And what are those proceedings? 25 A. A number of years ago there was an 66 1 embezzlement at a -- a trust company in Chicago. 2 The -- that we had an account in and there was 3 money that the regulators gave, like a kind of a 4 certificate of good standing or something like 5 that each year, but I guess, in hindsight there 6 was money that was missing. It was called 7 Independent Trust Corporation. And there's a -- a 8 lawsuit filed against the state of Illinois and I 9 believe I gave sworn testimony in that litigation. 10 Q. Was it in a deposition or in a 11 courtroom or in some other context? 12 A. Deposition. I don't believe I've ever 13 been in a courtroom before. As I sit here in this 14 point in time, I don't ever recall being in a 15 courtroom for giving sworn testimony. 16 Q. All right, fair enough. 17 So that was a case in the state of 18 Illinois that you testified in? 19 A. I believe the court was in Illinois. I 20 think it was a court of claims. I think it was -- 21 this is a long time ago and I'm not an attorney, 22 but I believe it was a -- a state-specific suit. 23 I don't think it was federal court. 24 Q. Do you remember approximately what year 25 that was? 67 1 A. 2000-ish. 2 Q. Okay. And you were a witness in that 3 case, or a victim, essentially? Is that -- am I 4 getting that -- 5 A. Yes, it was an account, there was money 6 embezzled, the -- the state gave it a certificate 7 of good health and it was some kind of shady 8 weirdness where they had apparently known about 9 some money that was held in escrow and they were 10 relying -- the regulator, government agency, I'm 11 not sure what it was -- was relying on 12 spreadsheets or faxed copies of spreadsheets or 13 emailed copies of spreadsheets to verify the 14 safekeeping of assets. Which wasn't a good idea, 15 to put it in hindsight. 16 Q. All right, any -- were you the 17 plaintiff in that case or were you simply a -- a 18 witness victim? 19 A. I don't remember specifically. 20 We might have been named of some sort 21 but I was a witness/victim/plaintiff. There were 22 a lot of -- a lot of witnesses -- I don't know 23 there was a witness, I don't know the 24 (indistinguishable), but I was a victim of some 25 sort. But there were a lot of victims. 68 1 Q. Did you get your money back? 2 A. No, not all of it -- well, wait. Did I 3 get my money back? 4 I know I lost money. The legal system 5 didn't work. We didn't receive satisfaction 6 through the legal system. I believe some money 7 was recouped and there was some lawsuit trying to 8 figure out where the -- the losses should be 9 allocated. 10 I don't recall. Some of -- I don't 11 recall if I had two accounts. Maybe one account 12 received in allocation, and/or my wife, the other 13 one didn't. I don't recall. 14 I believe all of us were charged some 15 administrative fee to help with the receivership, 16 and I believe my -- I definitely paid a 17 receivership sort of fee. So, in a way I did 18 lose -- it wasn't a good thing for me. 19 Q. Have you testified in any other 20 depositions other than the ones we have discussed? 21 A. Yes, yes. 22 Q. In what case? 23 A. The case I don't recall. We did 24 have -- the SEC brought me in as a kind of a 25 witness or -- for some investigation they were 69 1 doing and they asked me a bunch of questions about 2 my interactions with a broker. 3 I had an interaction -- I did work with 4 the SEC on kind of information I submitted to them 5 on latency arbitrage. So I gave them documents 6 and had several meetings with them describing 7 latency arbitrage in the equity markets, a slow 8 National Best Bid and Offer. I gave them 9 documents. I think I signed certain things and "I 10 promise this is true" and I met with them in 11 person. I don't believe they put me under oath, 12 like the raising of the right hand thing, but I 13 probably made some representation that I was being 14 honest and truthful on the latency arbitrage, and 15 that information presumably assisted in certain 16 cases that they pursued against the big banks and 17 others in the market structure. 18 I -- I don't know specifically, but 19 there were settlements that referenced latency 20 arbitrage, sale, slow and sift, and National Best 21 Bid and Offer. And I presume that my testimony 22 could have been used. 23 Q. Well, I guess -- that's that's what I 24 want to know is -- is did you give sworn testimony 25 to the SEC as part of that whistleblower process, 70 1 sit for a deposition? 2 A. I don't believe it's a deposition. 3 Like I -- as I mentioned I didn't like raise my -- 4 I don't believe I ever raised my right hand. I 5 don't believe there was a court reporter. 6 Q. That's all I want to know. Thank you. 7 And are there any other depositions 8 that you've sat for at any time? 9 A. Yes. 10 Q. And what were those? 11 A. We current -- Elmagin Capital currently 12 has litigation per -- in the Eastern District of 13 Pennsylvania related to intellectual proper and I 14 was given -- giving testimony in that case. 15 Q. And that's a case that Elmagin has 16 brought against Chao Chen and others? Is that 17 accurate? 18 A. That Elmagin Capital has brought 19 against Chao Chen and others, yes. 20 Q. So you sat for a deposition in that 21 case. Is that correct? 22 A. "A deposition". So I was an individual 23 witness and I also did what the -- I think it's 24 called a 30(b)(6), something like that. So I was 25 deposed as -- I think that's the term -- I'm not a 71 1 lawyer -- but there is something representing the 2 entity itself. 3 Q. What's that case about, in your own 4 words? 5 A. "What is that case about?" The case 6 was about enforcing agreements and trying to 7 understand what the agreements mean I suppose is 8 how you would describe. 9 Q. Well what's -- what's Elmagin Capital 10 seeking in the case? 11 A. "Elmagin Capital". I -- I can't -- I 12 don't recall the -- the -- I'm not an attorney. I 13 don't recall the specific claims that the 14 attorneys have made in that case. 15 But for me in my position I'm 16 interested in enforcing agreements and -- and 17 making sure that they all have meaning and -- and 18 understanding what the agreements mean. 19 Q. And you're -- would it be a fair 20 summary that you believe that Chao Chen walked out 21 the door of Elmagin and took intellectual property 22 with him. Is that -- is that fair? 23 A. That's not the way I would describe it. 24 Q. What have I gotten wrong? 25 A. Well, I don't know that you've gotten 72 1 anything wrong but it's just not the terms or the 2 way that I would describe it. It's just 3 definitely -- 4 Q. How would -- how would -- how would you 5 describe the allegation, which I understand is in 6 the lawsuit, that Chao Chen misappropriated trade 7 secrets? 8 Put that in plain English for me. What 9 did he do to misappropriate Elmagin's trade 10 secrets? 11 A. I don't believe that he took anything. 12 It's not -- my understanding -- I -- I don't know 13 for sure. I don't have access to the -- the 14 complete picture, but I don't have any reason to 15 believe, as I sit here today, that he took 16 anything, physically took anything, which is kind 17 of the way it seemed like your description 18 implied, that there was a physical thing that -- 19 that left our office. 20 Q. I -- I'm not making any -- I'm not 21 making any assumptions other than what I've read 22 in the papers. I'm just asking for some 23 clarification from you what -- what it is you 24 believe Chao Chen did to deserve getting sued. 25 In plain English, if you were 73 1 speaking -- you know, someone at a cocktail party 2 said, "I'm suing Chao; here's why," what would you 3 say? 4 A. Well, I generally wouldn't have that 5 conversation at a cocktail party. But if you're 6 going to ask me how would I describe it in plain 7 English, it's what I just mentioned earlier, which 8 is trying to understand agreements and trying to 9 understand what they mean. 10 Q. So you think it's -- -- you're -- 11 you're just asking the court's opinion about what 12 the agreements mean? Is that your -- that's your 13 description of the case? 14 A. That's what the judicial system is 15 supposed to do, is to look at agreements and 16 trying to interpret the law and enforce 17 agreements. That's. 18 My understanding, yes. 19 Q. Okay, do you believe that -- do you 20 believe that Chao Chen did something improper? 21 A. Improper? I -- I believe that he may 22 have violated agreements and that's why -- 23 Q. How? 24 A. I'm sorry, to finish that statement -- 25 Q. Sure. 74 1 A. So I believe that Chao Chen may have 2 violated agreements that he had with Elmagin and 3 that's why we are in court trying to help -- 4 trying to work with the judicial system to help 5 see if we can interpret those agreements. 6 Q. How do you believe Chao Chen violated 7 his agreements? 8 A. I'm not an attorney. Like I have a lot 9 of privileged conversations with attorneys about 10 the agreements that we have in this lawsuit in the 11 Eastern District of Virginia. 12 I don't know that I have any 13 additional, you know, insights above and beyond 14 what you seem to already have access to. 15 Q. Would it be a fair characterization to 16 say that Elmagin believes Chao Chen used secret 17 information that he learned while he was working 18 for you to make money in another context? 19 Is that a fair summary of the case? 20 A. That is a summary of the case. It's 21 not unfair to describe it that way. 22 I would just say that it's -- Chao 23 is -- his new business entegrade is that, you 24 know, the allegations laid out in the lawsuit are, 25 you know, what we're trying to have the court work 75 1 with us to determine whether they're, you know -- 2 what they mean, have the FERC help us interpret 3 their -- their meaning. 4 Q. Have you sat for any other depositions 5 other than the ones we've talked about already? 6 A. I don't believe so. 7 Q. Have you ever been convicted of or pled 8 guilty to a crime? 9 A. I got a speeding ticket once. I -- I 10 don't know what you mean by time. 11 Q. That's something other than a speeding 12 ticket, misdemeanor or felony. 13 A. I don't believe so. 14 Q. Okay. And you've held, as I understand 15 it, Series 7 and Series 65 licensing, at least in 16 the past? 17 A. I don't recall but that doesn't sound 18 unreasonable. 19 Q. Okay. Do you -- do hold or have you 20 ever held any other professional licenses of any 21 kind? 22 A. I believe at one point early in my 23 career the Commonwealth of Virginia deemed me to 24 be an investment advisor. I did certain things 25 and I think I got a -- was an investment advisor. 76 1 Q. Have you ever been subject to any kind 2 of professional discipline by FINRA or the 3 Virginia authorities? 4 A. "Subject to discipline". I mean, we've 5 had audits. They come in and they audit us and 6 they look for things, but it's a quite -- 7 Q. I'm not talking about audits. I'm just 8 asking if you've ever had your license in jeopardy 9 for some reason. 10 A. If an auditor comes in I feel like it's 11 in jeopardy. 12 Q. Sure. 13 A. But I don't believe -- 14 Q. But you've never been suspended or 15 expelled from a professional body or that sort of 16 thing is what I'm getting at? 17 A. "Expelled from a professional body"? 18 I -- I don't believe so, not with negative 19 connotations. I mean, I was on a couple of boards 20 of directors that I've left voluntarily -- 21 Q. Yeah, no, I -- I'm specifically talking 22 about professional licensing. Has FINRA ever 23 disciplined you, sir? 24 A. I don't believe so. 25 Q. Other than Powhatan, has any entity in 77 1 which you were an owner or principal investor ever 2 been cited for a violation by a state or federal 3 regulatory body? 4 A. "Cited for a violation". So, I -- I 5 guess I viewed that Powhatan, we're trying to find 6 out whether we did a violation, right? 7 Q. I -- I understand. We have a 8 proceeding going to determine that. So, I'm 9 talking about other than Powhatan. 10 Any other entity that you're in control 11 of, has -- has it been cited by a regulatory body 12 for a violation? 13 A. "Cited". So I think the answer to your 14 question, what you're looking for is no, but I -- 15 but to me what happened -- you know, this -- this 16 proceeding with Powhatan, presumably it's -- you 17 know, we're still trying to find out was there a 18 violation. 19 I don't believe that we've, you know, 20 pled guilty. I don't believe that we -- you know, 21 that a court or if anyone's determined anything. 22 I know there are allegations. 23 But, you know, when the SEC comes in 24 and asks me a question, "Show me your emails," or, 25 you know, that we were audited by the SEC many 78 1 times with -- and were audited by the State of 2 Virginia and had other sorts of audits, they ask 3 questions and, you know, try to find out 4 whether -- you know, get to the point where a 5 judgment is made. So to me a judgment hasn't 6 really been made in the Powhatan case. 7 But in terms of like the NESD, SEC, my 8 guess is it's all publicly available, but I don't 9 believe any judgment or fine or any other penalty 10 or admittance of wrongdoing -- admittance of 11 wrongdoing? 12 I mean, we said -- told the SEC, okay, 13 we will create a trade error log. So I gather -- 14 I don't know whether that's admitting a 15 wrongdoing, because they -- but there's never a 16 financial penalty that we've paid or never any 17 kind of -- stripped of any -- you know, when I say 18 stripped I mean something taken from me that I 19 don't want to give up of -- from any regulatory 20 body. 21 Q. Okay. Thank you for that answer. 22 MR. FERRENTINO: I think it's a good 23 time to take a break. We've been going for about 24 an hour and 45 minutes. I want to give everybody 25 a break. Could we be back in ten minutes if we go 79 1 off the record now? 2 MR. PERKINS: Works for me. 3 THE LEGAL VIDEO SPECIALIST: This is 4 the end of media number one. We are off the 5 record at 10:44 a.m. 6 (Recess taken.) 7 THE LEGAL VIDEO SPECIALIST: This is 8 the start of media number two. We are back on the 9 record at 10:56 a.m. 10 MR. FERRENTINO: Thank you. 11 BY MR. FERRENTINO: 12 Q. Mr. Gates, what is the status of TFS 13 Capital now? Does it still exist? 14 A. I believe the legal entity still 15 exists. 16 Q. But it no longer services clients of 17 any kind? Is that -- is that fair? 18 A. Correct. It returned investor capital 19 a number of years ago. 20 Q. Why did it essentially exit the 21 business of managing money? 22 A. There were a number of reasons one of 23 which was the FERC's allegations caused a lot of 24 bad headlines, a lot of stresses within the 25 partnership and was responsible for the 80 1 termination of that business pursuit. 2 Q. When you say bad headlines, what are 3 you referring to? 4 A. The publicity that FERC's allegations 5 generated at the time. 6 Q. And who made the decision to publicize 7 FERC's allegations in the first instance? 8 A. I believe FERC did. 9 Q. All right. We can come back to that. 10 A. I don't recall, though. Josh, I'm 11 sorry. I don't really recall. 12 Q. Is it possible that you and your 13 brother made the decision to publicize FERC's 14 allegations before FERC did? 15 A. It is possible that Powhatan decided to 16 publish the allegations before FERC did. That is 17 a possibility. 18 Q. All right, so, who made the decision 19 to -- essentially, I'll -- I'll refer to TFS going 20 out of business. I know that it still exists but 21 who made the decision to have TFS go out of 22 business? 23 A. TFS did, the -- the owners of TFS. 24 Q. And -- and who are the owners? 25 A. Who are the owners of TFS Capital? 81 1 Q. Yes. Who were the owners that made 2 that -- made that decision? Was it all of them? 3 Was it a subset of them? 4 A. I don't recall the -- the specifics. 5 Q. Since TFS folded, have you worked? 6 A. I don't understand the -- what -- what 7 you mean by "worked" but I'll try my best to 8 answer it. You can provide guidance if you don't 9 like my answer. 10 Since TFS returned investor capital in 11 2017, there's been a lot of work to -- to unwind a 12 business, to -- to shut a business down that had 13 serviced tens of thousands of beneficial investors 14 or/and investors, had a --a lot of employees, a 15 couple offices, a lot of securities, thousands of 16 securities that it had positions in. So there's 17 been a lot of -- a lot of registrations to various 18 states registrations, federal registrations. 19 There's been a lot of work for that 20 business to -- so that that business is still -- 21 created and still creates -- in fact yesterday I 22 worked on a bit on some of the legacy, what I call 23 legacy TFS Capital issues. 24 Q. All right, are you involved in any 25 other activities other than legacy TFS Capital? 82 1 A. Well, we're here for Powhatan, so I 2 consider today I am working for Powhatan. So I 3 was a vice president of an emerging member of 4 Powhatan Energy Fund and I'm spending a whole day. 5 To me this is work but I'm not getting paid for 6 it. So I don't know what you mean by "work". 7 You know, like "work" a lot of times 8 can have a connotation of you get paid or not, but 9 it's work. 10 Q. Are there any other businesses that 11 you're involved in or have been involved in since 12 TFS returns its investor capital? 13 A. Are there any other businesses I'm 14 involved in or have been involved in since TFS -- 15 I'm just repeating it to make sure I understand 16 the question. 17 A lot of businesses. I invest, you 18 know -- invest in businesses, own -- you know, 19 we've talked about Elmagin Capital, you know about 20 that business. And I was on a board of directors 21 on a publicly-traded company. I've invested in 22 the S&P, you know, index funds. I've owned 23 thousands of businesses, so that's an involvement 24 in, you know -- not hundreds; thousands of -- 25 yeah, different exposure to businesses that way as 83 1 an investor in an index funds and other types of 2 investing. 3 There's a -- the business called TFS 4 Capital CERK that owns worthless securities, sort 5 of worthless securities and the SEC has a kind of 6 broken -- what I would describe as a broken market 7 structure where the regulations just don't make 8 sense and they send all of this. The SEC points 9 to FINRA, FINRA points to the DTC, DTC points to 10 someone else and it's just -- it just doesn't make 11 sense. And it's bad for business, bad for the 12 market. And that business is called TFS Capital 13 CERK, C-E-R-K, and that's a -- a business that I'm 14 involved in to some extent. 15 And there's probably others. I just 16 don't recall them. 17 Q. I understand -- I understand you're 18 featured in the book Flash Boys by Michael Lewis. 19 Is that correct? 20 A. The way I describe it, I -- I think I 21 got a mention -- a couple mentions in that book. 22 Q. What were the mentions -- I'm sorry, I 23 don't mean to cut you off. 24 A. The way I -- one way to describe it -- 25 I've described it in various ways throughout the 84 1 years, but at this point in time I would say that 2 Brad and the faucet, IEX, are the ones that are 3 featured. I'm just a federal mention. 4 Q. All right, you're mentioned in the 5 book. 6 What -- what are the activities that 7 you did that led you to be mentioned? 8 A. What are the activities that I did. 9 I mean, I was asked if I wanted to meet 10 Michael Lewis. I said yes. I spent a -- a day or 11 so with Mr. Lewis going over all kinds of material 12 here in West Chester and described certain things 13 and materials to -- that part -- that caught his 14 interest. 15 Q. Was there any trading that you had done 16 that led Mr. Lewis to want to feature you in the 17 book, mention you in the book? 18 A. Trading that I had done. 19 So I don't remember -- we didn't use -- 20 so trading talking points, and I believe I may 21 have been the one that would like click on a 22 button or submit the trade, I don't think it was 23 for my own ownership. I don't believe I was 24 the -- you know, it wasn't my account, per se. 25 It was proprietary money. We didn't 85 1 use investor money for that. It was proprietary 2 money that was used to do these -- execute these 3 trades, and it might have been money that was 4 owned by various folks at -- beneficial owners of 5 various folks that TFS were party to. 6 Q. What were the trades that you performed 7 that Michael Lewis was interested in? What did -- 8 can you explain what those were? 9 A. I can't explain it specifically. My 10 recollection, it was a trade in Chipotle stock 11 that he referenced and I believe it was a -- a 12 trade in a dark pool with a -- a trade in a -- you 13 know, one of the exchanges. 14 Q. Sure, and I've -- I've read the book 15 and I'm familiar with the Chipotle example. I 16 think the example that Mr. Lewis gave was you made 17 an offer to buy Chipotle stock at $100.05, 18 simultaneously offering to sell at $100.01, and I 19 think that was the example he gave. 20 Does that sound right? 21 A. Does that sound right? I have no 22 recollection of the specific prices that he 23 highlighted. 24 Q. Sure. Sure. But is that the type of 25 trade that you were -- you were doing in the dark 86 1 pools as some sort of test? 2 A. Well, to be -- well, to be -- to be 3 clear, the trades that we executed occurred on 4 different venues, so it wasn't always in a -- in 5 a -- a dark pool. 6 Q. All right. So, explain to me the 7 different contexts in which you were placing these 8 test trades. 9 A. So, trades entered into various market 10 centers to try to evaluate the latency of the 11 National Best Bid and Offer at various venues. 12 Q. And approximately how many of these 13 types of test trades did you perform? 14 A. I don't understand the question. 15 Q. What -- what about my question is 16 confusing to you, sir? 17 A. The word "perform". 18 Q. And -- and why is that a confusing 19 term? 20 A. I don't understand whether it means 21 executed or not executed. If a -- if trades are 22 placed in the market and nothing is executed, is 23 that a performing trade? If one half is executed, 24 is that a performing trade? You got a partial 25 fill on one side and a full fill on the other? Is 87 1 that performing? 2 I don't know what you mean by 3 "perform". 4 Q. Right, I'll choose a different term so 5 you're not confused. And you'll have to forgive 6 me, as I'm sure you know, I don't have the same 7 depth of investment knowledge that you do. I'm 8 simply trying to get information about what you 9 did. So you'll just have to use the English 10 language and correct me if I get a term wrong. 11 So you're -- you're doing these test 12 trades to show latency arbitrage in the dark 13 pools. 14 Is that a fair statement about what you 15 were doing? 16 A. It's not a completely unreasonable 17 statement to -- to describe what I was doing is 18 the way I would phrase it. 19 Q. All right. I'll settle for a 20 reasonable, in the ballpark. 21 Over what time period were you doing 22 these so-called test trades in the equity markets 23 to show latency arbitrage? 24 A. So, just to make sure that we're 25 precise here, I don't believe it was trades that 88 1 were on my behalf. I might have been the one 2 pressing submit or, you know, entering a portion 3 of the trades, but I -- and I also didn't even -- 4 sometimes other people would do the trade. 5 Sometimes I would do one side and then say for 6 instance Kevin would do the other side. So -- 7 Q. All right. So who is -- 8 A. You're saying you doing the -- 9 Q. Who is involved in this -- who is 10 involved in this test trading? You, Kevin. 11 Anyone else? 12 A. I don't recall specifically. 13 Q. And was this all done under the 14 umbrella of TFS Capital? 15 A. No. To the -- sorry, I mentioned 16 earlier that it was proprietary money. 17 Q. Proprietary money. So not client 18 money. In other words your money or the money 19 that belonged to other owners of TFS? 20 Is that accurate? 21 A. The way I think I phrased it earlier 22 was that all the owners of TFS had -- may have had 23 an economic interest in the entity that 24 performed -- that these trades were entered and/or 25 executed on behalf of. 89 1 Q. Was there a single entity that 2 performed the test trades -- excuse me, "executed 3 on behalf of" is -- is the terminology you used. 4 Let me -- let me strike that and 5 rephrase the question. 6 The entity on whose behalf these trades 7 were done, is that a single entity or were there 8 multiple entities involved? 9 A. I don't recall. 10 Q. All right. And over what time period 11 were the test trades executed on behalf of that 12 entity? 13 A. Or those entities. I -- it might have 14 been multiple entities. 15 Q. Sure. 16 A. I don't recall the specific dates. 17 Q. Do you remember the year? 18 A. I remember test trades were performed 19 in 2010. 20 Q. All right. Was it over the course of 21 several months? Was it over the course of a week? 22 What was the approximate length of time 23 involved in the test trading? 24 A. I would say months to years, somewhere 25 in that range. 90 1 Q. And approximately what was the volume 2 of shares that were traded as part of those tests? 3 A. I don't recall. 4 Q. Are we talking thousands of shares, 5 hundreds of thousands, millions? 6 A. Could you rephrase the question? 7 Q. What about my -- what about my question 8 is confusing? Were there -- 9 A. You -- instead of articulating a new 10 question, you just -- if you could lump the 11 hundreds of thousands with the prior question it 12 would make it easier for me to comprehend. I 13 forgot what the -- the prior question was. 14 Q. I'm sorry that I'm confusing you. Let 15 me -- let me try to do better. 16 The test trading that you conducted 17 that we've been discussing just now, approximately 18 what was the volume in number of shares that was 19 involved? 20 A. It involved you mean if a trade isn't 21 executed, is that involved? 22 Q. Sure. 23 A. I don't -- I still don't recall, but if 24 you're asking me for a general range and you're 25 saying that trades that are not executed -- and 91 1 if -- if we entered a buy and a sell for say 500 2 shares and neither side executes, you want me to 3 count that as a thousand shares? 4 Q. You know -- did you get any money from 5 the SEC for reporting latency arbitrage in the 6 dark pools? 7 A. Is that attorney/client privileged? 8 I mean, I -- I filed -- it said 9 Confidential Whistleblower Program. 10 Q. You -- you submitted -- you made a 11 submission to the SEC under the Confidential 12 Whistleblower Program, right? 13 A. That's in the public domain. 14 Q. Yes. And did you receive any money as 15 a result of that submission? 16 A. If it went through an attorney, 17 wouldn't that -- is that attorney/client 18 privileged? Do I answer -- 19 Q. I don't believe -- I don't believe it 20 would be, but I can't -- I can't give you legal 21 advice. If you -- 22 MR. FERRENTINO: Your client's -- your 23 client's asking a question. You can give him 24 instruction not to answer or you can allow him to 25 answer the question, Chris. 92 1 MR. PERKINS: Well, you're -- you're 2 speak being something that doesn't involve 3 Powhatan, so I'm not sure I'm in a position to 4 weigh in on this. 5 I think, Rich, you're going to have to 6 make that call for yourself. 7 THE WITNESS: Yes, I've worked with 8 attorneys on various matters related to the -- to 9 the whistleblower program. 10 BY MR. FERRENTINO: 11 Q. Okay. Well, my question was has the 12 Securities and Exchange Commission provided you 13 any money in exchange for the information you 14 provided in the whistleblower program? 15 A. No. 16 Q. Has it provided any money to any entity 17 that you're involved in as a result of the 18 submission you gave to the whistleblower program? 19 A. No. 20 Q. Do you have an understanding as to why 21 not? 22 A. One understanding is that the 23 whistleblower program is very, very backlogged. 24 They don't -- 25 Q. How much -- how much money do you 93 1 believe that the SEC owes you as a result of the 2 information that was submitted about latency 3 arbitrage? 4 A. How much do I believe it owes me? I 5 mean, the SEC has to determine that. I -- you 6 know, I can ask for, you know, whatever I think is 7 reasonable. I -- I don't know -- I mean, it's 8 kind of like this judicial -- this -- this case. 9 You guys -- 10 Q. I'm ask -- I'm asking, sir -- I -- I 11 understand it's subject to determination, that 12 you're not the final word, but my question was how 13 much do you believe the SEC owes you. I'm sure 14 that you can tell me how much you believe the SEC 15 owes you. 16 A. I don't recall. 17 Q. Is it millions of dollars, sir? 18 A. The SEC -- I don't recall. 19 Q. Do you recall anything about the 20 latency arbitrage or should I move on to another 21 subject? 22 A. I recall a lot about the latency 23 arbitrage. 24 Q. All right, how many shares were 25 involved in the test trading that you performed in 94 1 the dark pools? 2 A. Going back to -- to that question that 3 you asked earlier, and it's -- it's -- I asked 4 question, I don't think I've ever had the 5 response -- but if it's 500 buy, 500 sell and 6 that's a thousand that's executed, you want me to 7 count that as a thousand, I'm going to guess in 8 aggregate -- this is a very of rough guess -- 9 maybe hundred of thousands of shares, but I don't 10 really recall. 11 Q. Did you make money from any of the test 12 trades? 13 A. I don't recall. I don't. 14 Q. Was your intention in conducting the 15 test trades to make money? 16 A. It's always good to make money, you 17 know, if you're following the law, but the prime 18 American -- so we try to make money. They were -- 19 their main purpose was, as I mentioned earlier, 20 was to try to understand the latency of the 21 various market centers of the National Best Bid 22 and Offer that was used to -- as a pricing 23 mechanism. 24 Q. And -- and why would that information 25 be significant to anyone? 95 1 A. Because we were trying to help our 2 clients, trying to make them money and protect 3 them from the trading. 4 Q. And I guess I'm asking, what were you 5 trying to protect them from? 6 A. From losing money. 7 Q. Because someone else did something 8 wrong or the way the market was structured? 9 What is it that you're trying to 10 protect them from losing money to? 11 A. I can't explain the root cause of why 12 they were losing money. That's, you know, for the 13 courts and the regulators and others to -- to sort 14 out. But it was -- the goal was for us to put up 15 our own money to find out ways to protect our 16 clients. 17 Q. What did you think was happening to 18 your clients when they were trading in these dark 19 pools? 20 A. They were getting executions. 21 Q. I'm -- I'm sorry, can you say that 22 again? 23 A. Trades were taking place in the dark 24 pools and other venues. 25 Q. So I'm not clear on why that's a 96 1 problem, if they're -- if they're able to trade. 2 I gather it's some other problem, and perhaps we 3 have a sound issue, but I'm -- 4 What -- what is the problem that you 5 were protecting your clients from? 6 A. From losing money, from getting 7 extra -- 8 Q. Sure. Losing money how? 9 A. By buying too high, covering too high, 10 selling or sorting too low. 11 Q. Would it be an a fair summary of what 12 was going on in the dark pools that, when your 13 clients' trades were submitted, someone was 14 trading ahead of them and either driving the price 15 up or driving the price down, to their 16 disadvantage? 17 A. That's -- I don't know that I would 18 describe it just that way, but I understand why 19 you're saying it, describing it that way. 20 Q. How would you describe it differently? 21 A. I think the way I've described it 22 earlier, which was the latency of the National 23 Best Bid and Offer that was used at the various 24 trading platforms; that there was a -- a -- there 25 was a latency issue that we were concerned about. 97 1 Q. And that latency issue allowed other -- 2 other market actors to profit by knowing how your 3 clients were trading, is that accurate, and affect 4 the price? 5 A. That's not the way I would define it. 6 Q. All right. How would you -- how would 7 you -- how would -- did you believe there were 8 malignant actors involved in the dark pools that 9 you were trying to protect your clients from? 10 A. Well, there's an article -- I'm not 11 sure I understand the -- the question, what 12 "malignant actor" means. That's a specific part 13 of the question that's confusing to me. 14 But there is an article that you can 15 find from I believe it was 2009, maybe March, I 16 forget exactly, called Measuring Arbitrage in 17 Milliseconds. It was written in the Wall Street 18 Journal by Rob Curran. And I'm quoted in there 19 representing TFS and we talked about the -- this 20 latency issue. I believe it was the first time 21 that latency arbitrage was mentioned in the -- on 22 the internet or in the -- in the media, in the 23 media; maybe on the internet, so I forget. But it 24 was one of the first, so we were kind of an 25 innovator, kind of a leader. And we mentioned the 98 1 idea that, you know, maybe the market structure 2 had an opportunity for improvement in that the -- 3 the traders on the other side were doing what 4 they -- you know, maybe should be doing, in fact 5 we -- we might do the same. 6 But over time, you know, my -- my view 7 on dark pools evolved over time and through the 8 years. It's been probably since 2009, maybe 2008, 9 2009, somewhere around there, when I first became 10 aware of this idea. So it's been 12, 13 years. 11 So my evaluation has evolved over time. 12 Q. All right. Approximately how much time 13 elapsed before -- from the test trading to when 14 you reported it to the SEC? 15 A. 'Till I reported what, the results of 16 my test trading to the SEC, or first contact? 17 Q. Your first contact. Your first contact 18 with the SEC about the dark pool problems that you 19 identified. 20 A. I believe in January of 2010 they 21 issued a concept release on market structure and 22 on behalf of TFS Capital I submitted a -- a public 23 comment letter. I believe I was, I forget, maybe, 24 you know, one of the first 20 or 30 comment 25 letters they received, maybe 19 jumps out at me, 99 1 but I -- I don't recall specifically. But I was 2 pretty early. I read it in a couple of weeks. 3 And I sent in a -- a public letter saying, "Hey, I 4 think you got an issue in latency of the dark 5 pool". And that was in January of 2009. 6 Q. All right. And -- and when had the 7 test trading occurred -- 8 A. Or January 2010. 9 Q. -- in relation to that date? 10 A. Sorry, January 2010 is my recollection. 11 Q. Okay. And by the time you submitted 12 that comment, had you already conducted test 13 trades? 14 A. I don't recall. 15 Q. What made you decide to report this 16 issue to the SEC? 17 A. Because I was -- wanted to look out for 18 my clients' best interests. 19 Q. Did the SEC direct you to do any 20 trading on -- to -- to finds facts or -- let me 21 rephrase. 22 After you reported this issue to the 23 SEC that we've been discussing, did the SEC direct 24 you to conduct any particular trades? 25 A. Instruct? I don't recall. 100 1 Q. Did you -- do you believe you did the 2 right thing by reporting the problems you found as 3 a result of the test trades? 4 A. And what -- what do you mean by 5 "reporting"? Reporting to the SEC -- 6 Q. Yes. 7 A. Reporting to Lewis? 8 Q. All of the above. Do you think it was 9 a good idea to -- to publicize his problem? 10 A. I think it made the markets more 11 efficient and I think in the -- it helped our 12 clients. 13 Q. How did it help your clients? 14 A. They stopped losing money or getting 15 unfavorable executions at various venues. 16 (6/24/10 email from Larry Eiben to 17 Kevin Gates, Bates stamped POWDC_3844, was marked 18 R. Gates Exhibit 4, for identification.) 19 BY MR. FERRENTINO: 20 Q. All right, I'm going to go back to the 21 document file at this point. Could you pull up 22 Exhibit Number 4. It's a single-page document, 23 for the record, marked R. Gates Exhibit 4. It 24 ends in Bates number 3844. 25 A. Yes. 101 1 Q. All right. 2 MR. FERRENTINO: And just, you know, 3 Chris, for your benefit, this is a document that's 4 quoted in Powhatan's interrogatory responses. We 5 showed it to Mr. Eiben at his deposition and I -- 6 I think we established to everyone's satisfaction 7 that, even though it may convey the advice of a 8 lawyer, Powhatan's waived privilege over it. 9 BY MR. FERRENTINO: 10 Q. Mr. -- Mr. Gates, do you recognize this 11 document, Exhibit 4? 12 A. Do I recognize it. Not specifically. 13 Q. All right, do you remember Mr. Eiben 14 having conversations with an attorney about 15 trading to one's self? 16 A. I remember that he worked with 17 attorneys and provided -- he was in charge of 18 compliance at the time. 19 Q. So why did Mr. Eiben contact the "Josh" 20 that's referred to in -- in Exhibit 4? 21 A. I don't know. I don't recall. 22 Q. Did this contact perhaps have something 23 to do with your test trading in the dark pools? 24 A. I don't know. I mean, in the first 25 sentence of the third paragraph says, "Josh 102 1 advises... proves price manipulation is 2 possible". I don't believe anybody was -- you 3 know, that term, phrase to me sounds like market 4 manipulation and I don't believe anybody was ever 5 charged for market manipulation in these -- in the 6 venues. 7 Q. My question was sort of simpler, which 8 is, this communication with a lawyer that's 9 memorialized in Exhibit 4, does this relate to the 10 test trading in the dark pools that we just 11 discussed in this deposition? 12 A. I -- I don't know. 13 Q. You don't know. 14 A. It -- it seems like it's talking about 15 to the good of our clients and the world, which is 16 what we were trying to do in the second 17 paragraph -- second sentence of that paragraph, is 18 it a direct economic benefit, as we talked about 19 SEC, the test trades were SEC regulated; tradings 20 under their purview. 21 Q. I -- I'm going to cut you off. I don't 22 think we need to read the document into the 23 record, unless -- there's just the portion I need 24 to focus you on. 25 Let me ask you another question, which 103 1 is, who is the "Josh" referred to in this email? 2 A. I assume it's an attorney that we 3 worked with, a securities attorney. 4 Q. Is that Josh Deringer at Drinker 5 Biddle? 6 A. That's my understanding. That's my 7 best guess. 8 Q. All right. And he's an attorney that 9 has done work for TFS Capital, as I understand it? 10 A. He's an attorney that worked with TFS 11 Capital, correct. 12 Q. All right. What's his area of 13 practice? 14 A. I believe it was securities law but I 15 had -- I'd met him, but I -- I think Larry 16 primarily managed relationships. 17 Q. How many times have you met him or 18 spoken to him, approximately? 19 A. I don't -- I don't recall. 20 I believe he was also involved in the 21 Powhatan matter early on when we -- I think we 22 worked with Drinker Biddle. So I think he might 23 have been involved in some of that as well, maybe 24 more of a case manager or however the law firm 25 structures it. 104 1 Q. Mr. Gates, I'm sorry. Could you -- 2 A. He's in Philadelphia. Larry was in 3 Richmond. I believe Josh always worked out of the 4 Philadelphia office. But for the most part Larry 5 managed the relationship with -- with the 6 securities attorneys. 7 Q. Would you -- would you -- would you say 8 that you had detailed conversations with Mr. 9 Deringer about your test trading in the dark 10 pools? 11 A. I don't believe -- I believe TFS 12 Capital had conversations with Mr. Deringer. I 13 don't remember specifically talking to him about 14 it on behalf of TFS. 15 Q. All right. So let me read you a -- a 16 sentence that appears in Powhatan's interrogatory 17 responses. This is Interrogatory Number 11 and 18 I'm reading a partial answer from page 12 of the 19 interrogatories. "Kevin and Rich Gates had 20 detailed conversations with external securities 21 attorneys about the definition of wash trades 22 while were working on behalf of a different 23 business entity". 24 Do you agree with that statement? 25 A. I would say that TFS Capital had 105 1 detailed conversations. I remember talking to -- 2 we had other conversations or other sorts of wash 3 trades that TFS Capital performed. We did wash 4 trades as a result -- to optimize rebate rates on 5 short position. 6 So this is not the only communication 7 that we've had. We did -- we did all kinds of -- 8 you know, various types of wash trades at TFS. 9 So the answer is yes, I agree with that 10 position -- that statement. 11 Q. You agree with that statement. 12 Were -- were -- were there external 13 securities attorneys other than Mr. Deringer 14 involved in those conversations? 15 A. I don't recall. 16 Q. And I think you testified that the wash 17 trading referred to may involve trades other than 18 the test trading that we've discussed. 19 Is that true? 20 A. But it did. More, I would be even a 21 little stronger. I would say it did. So we did 22 other trades other than the ones highlighted in 23 Michael Lewis' book. 24 Q. All right. And those -- those -- those 25 were for -- those were to make your clients' money 106 1 using the wash trade? Is that accurate? 2 THE COURT REPORTER: I apologize. It 3 broke up when you asked your question, Mr. 4 Ferrentino. Would you please ask it again. 5 MR. FERRENTINO: Certainly. 6 THE COURT REPORTER: Pardon me, sorry. 7 MR. FERRENTINO: It seems like -- no 8 problem. I think we're getting -- we have a 9 little bit of a connection difficulty on someone's 10 end here, perhaps ours and I apologize. 11 BY MR. FERRENTINO: 12 Q. The wash trades apart from test trades, 13 Mr. Gates, those were designed to make your 14 clients money how? 15 A. Well, there were various types of other 16 wash trades that we did. I don't remember saying 17 that to make them money. That's the part that's 18 hanging up -- I'm getting hung up on a little bit. 19 I believe it was in their economic best 20 interest, which might be -- I think I -- the 21 example I provided was a short sale, the rebates 22 on short positions and I would describe it more as 23 not lose money. 24 You know, kind of like the wash trades 25 in the equity -- in the latency arbitrage, the 107 1 goal was to do trades with our own money, to, you 2 know, lose our own money, you know, at a high 3 level so that our clients didn't. We did other 4 wash trades more to make it so our clients didn't 5 lose money on the short positions in our 6 portfolio. 7 Q. And you consulted with external 8 securities attorneys to understand the permissible 9 parameters of that wash trading. 10 Is that your testimony? 11 A. "You" being me specifically or you TFS 12 Capital, or -- 13 Q. TFS Capital. TFS Capital and you, take 14 each one. 15 A. I know TFS did, that we had extensive 16 conversations with -- with -- with Josh and maybe 17 other securities attorneys about the various types 18 of wash trading and I believe I was involved in 19 some of those conversations as well. And I 20 believe there was even a -- a gentleman who I had 21 mentioned in my last deposition with FERC, there 22 was a gentleman who worked at the SEC around that 23 time you who published papers talking about wash 24 trading for proxy-building purposes, and I believe 25 I may have reached out to that individual. And he 108 1 described the legality of it and how it could be 2 used to influence proxy votes. 3 Q. All right. I have -- I have one email 4 that I am aware that's been produced from Powhatan 5 that is -- (network interference) your lawyer's 6 advice about -- 7 A. Sorry, Josh, I missed that. You kind 8 of broke up, the sound. 9 Q. -- FERC documents. 10 I apologize. I think we're having a 11 network issue here. 12 Other than Exhibit 4, which we've 13 looked at, are there other documents that you 14 relied on memorializing attorney advice about wash 15 trades? 16 A. I don't recall. 17 When you say "you," like -- I -- to me 18 this is Larry memorializing something. I am just 19 a recipient. I don't know whether I read it. I 20 don't know whether I ever responded to it. I 21 don't know whether I, you know, sent emails, made 22 notes or other things. 23 I may have an email from the -- when I 24 reached out to the gentleman at the SEC who was 25 doing research on wash trades for proxy voting 109 1 purposes, I -- I just don't recall. 2 Q. Are you aware of anyone, including 3 yourself, speaking to Mr. Deringer about 4 Powhatan's trading when it was occurring or before 5 it occurred? 6 A. Did we talk to -- so the question is, 7 if I can restate it, make sure I understand it -- 8 the question is am I aware of anybody talking to 9 Josh about Powhatan's trading before or while it 10 was occurring? 11 I don't recall. 12 Q. Did Mr. Deringer ever represent 13 Powhatan as a client? 14 A. I know his law firm did for a bit of 15 time and I believe he was referenced on some of 16 the -- included on some of the communications, but 17 I don't know whether it was more of an 18 administrative matter or he was actually providing 19 guidance. 20 Q. Did Alan Chen ever speak to Mr. 21 Deringer, to your knowledge? 22 A. I don't know. 23 Q. Did anyone ever send Exhibit 4 or the 24 substance of it to Alan Chen, that you're aware 25 of? 110 1 A. I don't recall. 2 Q. Is it likely? 3 A. The substance -- I know that when -- I 4 believe that Alan came up to -- came to our office 5 once in West Chester I believe around the summer 6 of 2010 after a period of time when we had been 7 performing -- we had extensive communications with 8 attorneys about various sets of wash trading and 9 with the SEC directly. 10 Q. Did you discuss -- did you disclosure 11 your attorney's advice about wash trading to Alan 12 Chen during that meeting? 13 A. I did -- I think I spent less than two 14 minutes with him, and I don't really recall 15 specifically, but I believe I met him very briefly 16 at the -- near the coffee station, and I don't 17 believe I've had a subsequent -- I haven't had any 18 conversations with him about his trading. 19 Q. All right. So as far as you know the 20 information was -- was not shared with him during 21 that meeting, because you only spent two minutes 22 with him and you didn't discuss this email? 23 A. I can't point to an example of when it 24 was shared with him. That's true. 25 Q. Was Alan Chen doing test trading for 111 1 Powhatan? 2 A. I don't understand what you mean by 3 test trading. I don't understand that term as 4 you're using it. 5 Q. Okay. Well, would you agree that you 6 did test trades in the dark pools? 7 A. I would suggest that Michael Lewis 8 described test trades in dark pools in other 9 venues, as well. To be clear, it wasn't just the 10 dark pools. All of the exchanges also had a 11 National Best Bid and Offer that they relied on 12 relative to Regan and Mess (phon). And -- so some 13 of the trades didn't even include -- weren't even 14 in dark pools. 15 Q. All right. So you were doing -- you 16 were doing something that Michael Lewis describes 17 as test trades. Do you accept that -- that 18 description of what you were doing, to show 19 latency arbitrage? 20 A. I understand why he used -- I 21 understand that he used that term to describe it 22 and that's fine. I -- he can describe it that 23 way. 24 Q. Okay. All right. Have you ever used 25 that term to describe your own trading in the dark 112 1 pools? 2 A. It's possible. 3 Q. Would you agree that the -- the test 4 trades weren't designed on their own merits to 5 make money for you? You were -- you were testing 6 how the market was behaving rather than trying to 7 turn a profit on a particular trade, right? 8 A. The way I would describe it is we went 9 into the test trades with the expectation that we 10 would end up losing money. We did that with our 11 own personal money to try to benefit our clients 12 so they did not lose money. 13 Q. Because the information that you 14 gleaned from the test trading would be valuable to 15 exposing a market flaw or bad behavior, right? 16 A. Correct, market design flaw or bad 17 behavior. Correct. 18 Q. But Alan Chen wasn't doing test trades 19 for Powhatan of the same type, right? 20 A. I don't know what Alan was doing. I 21 don't know whether he -- I can't answer that. 22 There wasn't -- 23 Q. All right. 24 A. There's not -- I mean to be clear, 25 these -- these markets are very, very different. 113 1 There is not a National Best Bid and Offer in the 2 wholesale power markets, so they are auction 3 cleared. So you don't have this latency issue. 4 But test trades is a very generic term 5 that could be used for -- to describe many types 6 of trading I presume. 7 Q. But you weren't -- but you weren't 8 going to Alan Chen with -- how much money did you 9 put in Powhatan, by the way, when it first 10 started? 11 A. I don't recall. 12 Q. Was it millions of dollars? 13 A. I don't recall. 14 Q. Hundreds of thousands of dollars? 15 A. I don't recall. I'm sure it's all been 16 disclosed to the FERC. 17 Q. Sure. 18 A. -- and is available to all of us. I 19 don't recall. 20 Q. But you were giving Alan Chen an awful 21 lot of your own money, your personal money, right? 22 A. Well, to put it all -- the way I would 23 describe it is I put a lot of money in my 24 family -- I had an economic interest, a big 25 economic interest in Powhatan Energy Fund and Alan 114 1 Chen had discretionary control over that fund. 2 Q. Yeah, and you weren't giving Alan Chen 3 your personal money and your family's personal 4 money so he could go out and test the markets, 5 right? You were giving him the money so he could 6 make you money, right? 7 A. My goal was to make money. I can 8 confirm that. It was an investment to make money. 9 (9/23/15 email from Kevin Gates to 10 Keryn Newman, Bates stamped POWDC_7989, was marked 11 R. Gates Exhibit 5, for identification.) 12 BY MR. FERRENTINO: 13 Q. All right. Can you turn to Exhibit 5? 14 A. Yes. 15 Q. It's a single-page document, let me 16 know when you have it up. And for the record this 17 is the single page ending in Bates number 7989. 18 Are we looking at the same thing? 19 A. I believe so. 20 Q. All right. And this is an email from 21 Kevin Gates to Keryn Newman and Rich Gates is 22 copied. 23 Do you see that? 24 A. Yep, I see a copy of the email. 25 Q. Do you know who Keryn Newman is? 115 1 A. I know some things about Keryn Newman. 2 Q. What do you know about Keryn Newman? 3 A. I believe she's located in West 4 Virginia. She's a very funny, creative writer and 5 I believe she has a blog. 6 Q. And why -- I'm sorry, I didn't mean to 7 cut you off. 8 A. And I believe she's involved in some 9 litigation related to FERC and/or the wholesale 10 power markets. 11 Q. And why were you and Kevin Gates 12 communicating with Ms. Newman? 13 A. I don't recall. 14 Q. Let's go through it and see if you 15 remember anything. 16 Number one, bullet point number one, 17 "Curious, did you ever connect with Pentland?" 18 What does that refer to? 19 A. I don't remember. I was only copied on 20 this email it appears, my -- my Gmail account. 21 I -- Kevin sent the email. I would speculate that 22 he may have been referencing a gentleman named 23 Bill Pentland who was interested in these markets. 24 Q. All right. All right, I want to skip 25 down and there's a sentence beginning, "Rich did 116 1 WASH TRADES," all caps, "in equity market (after 2 consulting with outside counsel) to expose the 3 structural inefficiencies in the markets." 4 Do you agree about that statement? 5 A. I don't disagree with it. And I think 6 I might have worded it a little bit more... 7 Q. What would you change about it? 8 A. A little differently. 9 Well, there's a couple of things that, 10 you know, we mentioned that one was, I don't 11 believe it was from my personal account that the 12 trades were done. I believe it was done for an 13 account that had maybe I had an economic interest 14 in. 15 I don't know that I did both sides of 16 the -- the trades. Maybe I did. Sometimes I did. 17 Sometimes I didn't, I assume. I don't know. But 18 I would say that "Rich and others performed wash 19 trades in the equity market on behalf of an entity 20 they had economic interest in to expose structural 21 inefficiencies in the market". 22 The other thing that you had mentioned 23 earlier was and/or kind of nefarious behavior. I 24 forget. You used a different word, not nefarious, 25 but kind of like a bad actor. 117 1 So there was exposing something. I 2 can't say exactly what we're exposing except the 3 latency of the NBBO that was used several 4 months... 5 Q. All right. I -- I think you answered 6 my question there. 7 There's -- there's another sentence 8 just afterwards, I think you started reading it. 9 It says, "This was several months before we 10 learned of Alan's A to B, B to A trading which 11 FERC erroneously classifies as wash trades but 12 were really spread trades". 13 Do you agree that you learned that wash 14 trades were ok before learning that Chen was 15 trading A to B, B to A? 16 A. Absolutely. 17 Q. All right. 18 A. Wash trades -- I mean, to be clear, 19 sometimes wash trades are okay; sometimes they're 20 not okay. It depends on a variety of factors. 21 So it's not a blanket statement that 22 wash trades are good or bad. You have to -- 23 there's different nuances in there. 24 Q. All right. There's a statement in here 25 that FERC erroneously classifies Alan's trades as 118 1 wash trades and -- and Kevin says they were really 2 spread trades. 3 What -- could you explain what that 4 means -- well, first of all, let me -- let me back 5 up before you explain it to me. 6 Do you agree with that statement, that 7 Alan Chen's trades were not wash trades, they were 8 spread trades? 9 A. Yes. 10 Q. Okay. Why? 11 A. Because there was risk to the trades. 12 Q. Is that the only reason? 13 A. Is that the only reason that they were 14 spread trades and not wash trades? 15 I -- I don't know that you could trade 16 to yourself in these markets. I -- there's 17 probably other reasons as well. I don't know that 18 it's possible to have a wash -- I don't know 19 whether an auction cleared. It's possible. 20 There's probably other reasons as well, 21 but I think that's the one that really jumps out 22 at me is the risk. 23 Q. What's a spread trade to you? 24 A. It's a -- it's different sort of 25 meetings, but for the -- I would generally 119 1 classify it as a type of trading strategy in which 2 you take two different positions that have some 3 hedges to each other that somehow cancel -- yeah, 4 hedge each other is the way to describe it and 5 have a risk. 6 Q. Mr. -- Mr. Gates, I'm having trouble 7 hearing you. I'm not sure if the court reporter 8 was able to capture what you said, but, for my 9 benefit could you repeat your answer? 10 A. Sure. So spread trades I believe are 11 two -- is a pair of trades that are put on in 12 unison and that offset each other, certain amounts 13 of risk or exposure, and you -- it's a 14 risk-mitigation tool. 15 One other thing I'll -- I'll mention 16 about Alan's trading, A to B, B to A, is that he 17 had different price caps. At some point in the -- 18 along the way I learned that the A to B, B to A 19 had different flavors and sometimes he lowered 20 the -- the -- the congestion cap on one leg and 21 didn't on the other. Sometimes he executed 22 different sizes and they didn't completely offset 23 each other. 24 So there's a -- a number of reasons why 25 a generic A to B, B to A, you know, from Alan's 120 1 trading, was clearly easily not wash trades. But 2 the risk is, you know -- all those other things 3 that I mentioned really do boil down to risk. 4 The changing the price caps, not 5 getting executed on one side, that just shows 6 itself by producing risk, which is what he did. 7 Q. When Mr. -- excuse me, Dr. Chen was 8 trading A to B, B to A, do you have any 9 understanding of what the spread was that he was 10 trying to capture? 11 A. At that time? 12 Q. Yes, for Powhatan. 13 A. Yeah, for Powhatan, in 2010 when he was 14 performing the trades, I had no idea what he was 15 doing. I wasn't even paying attention. I was 16 barely paying attention to this account. 17 Q. And you relied on him to explain to you 18 and the other investors in Powhatan what his 19 trading strategy was, right? 20 A. That's not the way I would describe it. 21 I'd say that he shared some information 22 with some of my colleagues to help us feel 23 comfortable making the investment. 24 Q. But you didn't have other sources of 25 information about the trading other than Mr. Chen. 121 1 Is that right? 2 A. That's not right. 3 We had access to statements at PJM. We 4 had talked to other folks in the industry. We 5 were looking at other things, as well. 6 Q. But as far as Alan Chen's trading 7 strategy, you relied on him and you deferred to 8 him as -- as far as what the trading strategy was. 9 Because as you said you weren't really paying 10 attention, right? 11 A. So, me -- me personally, which makes 12 this whole thing rather fascinating, I had almost 13 no involvement in Powhatan when it was taking 14 place. It was probably around 2012 when I was 15 brought in for a couple depositions that I was 16 getting involved and then when we created a 17 website, that's really where I was, you know, 18 fully involved, years after this trading took 19 place. 20 Alan provided some information to some 21 of my colleagues about the trading activity that 22 he was doing. I'll reiterate that we had access 23 to statements that presumably provided some 24 additional transparency into what he was doing. 25 He had full discretionary control over this 122 1 account and had I believe an advisor agreement or 2 multiple advisor agreements defining the 3 relationship. 4 Q. And those statements you referred to, 5 those are documents that you received from Alan 6 Chen, right? 7 A. I don't know. I believe that we may 8 have had access to -- you know, it's like a 9 brokerage account statement. If you have an 10 advisor buying and selling equities for you at 11 Fidelity, you get information from that advisor 12 but Fidelity also sends you a statement. I 13 believe that we may have received statements 14 directly from PJM that provided transparency into 15 how much money was made or loss and maybe even 16 what specific trades or power requirements were 17 and things of that nature. 18 (6/22/14 email from Richard Gates to 19 Joseph Rago, Bates stamped POWDC_8786, was marked 20 R. Gates Exhibit 6, for identification.) 21 BY MR. FERRENTINO: 22 Q. Okay. All right, I want to go to the 23 next exhibit, if you would. It's Exhibit 6. The 24 last four digits of the Bates number are 8786. 25 It's a single-page email. 123 1 Let me know when you have it and when 2 you've reviewed it and are ready to answer 3 questions about it. 4 (Witness peruses document.) 5 A. I see. 6 Q. Are you ready? 7 A. Yes. 8 Q. All right. Is this an email you sent? 9 A. I don't recall it. 10 Q. Any reason to believe -- any reason to 11 believe it's not you that sent it? 12 A. I assume it was me. That's the best 13 way I can describe it. 14 Q. All right. It -- while -- while we're 15 answering questions about it, if you at any time 16 believe that, you know, Kevin sent this, signing 17 your name or your email was hacked, you'll let us 18 know, okay? 19 A. And it's hard for me -- the problem 20 with -- in these investigations is this is an 21 email that was sent, you know, a long time ago and 22 I just don't -- I remember Joe Rago, I remember 23 meeting him, I remember communicating with him, 24 but I had really -- I remember talking about Flash 25 Boys. I remember talking to him about various 124 1 things but I have no recollection of this specific 2 email. It looks like it's my email. 3 Q. I'll settle for that. Who is Joe Rago? 4 A. He's an individual who used to write 5 for the Wall Street Journal. 6 Q. And why were you communicating with Mr. 7 Rago? 8 A. We were trying to get publicity on this 9 FERC matter, Powhatan, because -- trying to get 10 some publicity about it. 11 Q. Why did you think it was important to 12 get publicity about it? 13 A. To try to help -- for various reasons. 14 One, to kind of protect our reputation, try to 15 protect the financial interests that the 16 partnership had at TFS Capital, trying to help 17 other victims. By 2014 we had met many other 18 victims at FERC's office and we were quite 19 sympathetic to them. 20 We had wanted kind of the market to 21 behave a little bit better. It seemed like -- it 22 seemed like it was a nice -- that publicity 23 would -- would benefit these markets. 24 They are very important for the power 25 markets and it seemed like some more transparency 125 1 would be beneficial. 2 Q. All right. The first paragraph refers 3 to your test trades as described in Flash Boys and 4 that they were wash trades. 5 You see that. That -- is that a fair 6 characterization of the first sentence? 7 A. Yes. 8 Q. And I'm skipping down to the second 9 paragraph. It starts, 'My test trades also 10 exposed that FERC OE abuses the law and its 11 congressional authority". 12 And my question is, if your test trades 13 were conducted in the equity markets, months 14 before Alan Chen traded in the energy markets for 15 Powhatan, how did they expose anything related to 16 the energy markets? 17 A. There was a period of time when FERC 18 was accusing Alan's Chen in some way of doing wash 19 trades, which didn't make a lot of sense to us. 20 At some point FERC accused them of being "wash 21 light trades" and then I think it reverted back to 22 wash trades. I'm not sure where we are today with 23 FERC, but it's -- it wouldn't surprise me if 24 they're still arguing that they're wash trades. 25 And it's interesting that, you know, 126 1 you have a highly publicized example of wash 2 trading that took place in the equity market, not 3 only was described on P1 of the Wall Street 4 Journal in June of 2010, there was also mentioned 5 (sic) in one of Michael Lewis' best sellers, 6 highlighted, and then the -- the -- the individual 7 whose referenced in those publicity -- in those 8 media stories, his identical twin brother, is kind 9 of managing or overseeing an investment where a 10 trader is accused of doing wash trades when they 11 really weren't, but even if they were it's kind 12 of -- doesn't make a lot of sense just because, I 13 mean, FERC, was supposed to follow an SEC 14 precedent. 15 MR. FERRENTINO: All right. I -- I 16 think we should go off the record for lunch. 17 Let's do that and we can talk about it when we 18 come back. 19 THE LEGAL VIDEO SPECIALIST: Okay, this 20 is the end of media number two. We are off the 21 record. The time is 12:06 p.m. 22 (Whereupon at 12:06 p.m. a luncheon 23 recess was taken.) 24 25 127 1 A F T E R N O O N S E S S I O N 2 (Whereupon at 1:00 p.m. the deposition 3 of Richard Gates resumed.) 4 THE LEGAL VIDEO SPECIALIST: Okay, this 5 is the start of media number three. We are back 6 on the record at 1:00 p.m. 7 MR. FERRENTINO: Thank you. 8 (3/19/10 email from Kevin Gates to 9 Richard Gates, Bates stamped POW_8000, was marked 10 R. Gates Exhibit 7, for identification.) 11 BY MR. FERRENTINO: 12 Q. Mr. Gates, I ask you to turn to Exhibit 13 7. That is a multipage document. It is marked 14 with two different Bates numbers. One is AR004347 15 and the other is POW00008000, and it continues to 16 Bates number ending AR004360. 17 Do you have that one? 18 MR. PERKINS: Hey, Josh, for my 19 benefit, while he's looking, what does the AR 20 stand for? 21 MR. FERRENTINO: Administrative record. 22 MR. PERKINS: Oh. 23 (Witness peruses document.) 24 BY MR. FERRENTINO: 25 Q. Mr. Gates, would you just let me know 128 1 when you've found the exhibit and I can ask you 2 some questions about it. 3 Mr. Gates, I -- you may be muted or we 4 may have a technical issue? 5 A. I'm sorry about that. I was muted. 6 I'm on pages 10 to 17 on the PDF. I 7 assume that's the -- the pages that you're 8 interested in having me look at. The first page 9 looks like a copy of an email sent March and the 10 last page looks like the end of a PDF copy of a -- 11 a presentation that was sent out. 12 Ok, the pages that you're interested 13 in, I have not had a chance to review it. 14 Q. All right. This is an -- an email with 15 the subject line "Ramping Up With Alan". 16 Do you see that on the document? 17 A. I do. 18 Q. Okay. We're looking at the same thing. 19 That's good. 20 So, you're one of the recipients of 21 this email, just according to the face of the 22 document. Any reason to believe that you didn't 23 receive it? 24 A. Received the email. I mean, it could 25 have gone into a spam filter. 129 1 Q. I'm asking -- I'm not asking you to 2 speculate about whether it got in your spam 3 filter. 4 I'm asking you if you have any reason 5 to believe that you didn't receive this document, 6 this email. 7 A. I don't recall. This is over a decade 8 ago, so I don't recall. 9 What I'm suggesting is that one 10 possibility is that I did not receive it. It went 11 into my spam filter. 12 Q. Okay, any other possibilities that 13 would lead to you not receiving it that you can 14 think of? 15 A. I don't know what (indistinguishable) 16 was used on this. 17 Q. Okay. 18 A. Zoom? It just says Rich Gates. 19 Q. I think what you're suggesting, it 20 could have gone to a different Rich Gates; that 21 maybe your brother mistyped an email and sent it 22 to another Rich Gates that he knows. 23 Is that what you're suggesting? 24 A. That's one possibility. Another 25 possibility is he sent it to an email account that 130 1 I didn't check. 2 Q. How many email accounts do you have? 3 A. Currently? 4 Q. Circa -- circa 2010, when this email 5 was sent, how many -- how much accounts did you 6 have? 7 A. I don't recall. 8 Q. Did you have an email account at TFS 9 Capital? 10 A. I had an email account for TFS 11 Capital -- TFS Capital, absolutely. 12 Q. So you don't remember anything about 13 this email I take it? 14 A. I remember -- I -- I don't recall this 15 specific email. It was sent over a decade ago. 16 And I receive lots of emails. I do recall a 17 document that was of interest during the 18 administrative process that I believe might have 19 been the one that was -- that was attached or 20 discussed. So I -- I do have some recollection of 21 some document that maybe had the word "ramping" in 22 it that Kevin produced. 23 So, I don't recall this specific email. 24 I don't recall it. But I do have some -- I think 25 it's very possible this email was sent to my TFS 131 1 account. It could have been my Gmail account. I 2 don't know if I had a Powhatan account then. I 3 don't think I did. But it's possible that it 4 includes an attachment that was of interest during 5 the administrative process. 6 Q. All right. Do you remember ever 7 sending this document, the email and/or the 8 presentation attached to any attorney to review 9 around the time it was created in March 2010? 10 A. I don't even recall -- as I mentioned, 11 I don't recall receiving this email, so I can't 12 even -- so if I can't recall receiving the email, 13 it would be very hard for me to say that but I did 14 forward it to an attorney. 15 So I -- I can't recall that either. 16 Q. Okay. So the -- the first page of the 17 presentation, which is the second page of the 18 document, with Bates number ending 4354, it 19 indicates that Kevin Gates is the author of this 20 document. 21 Do you see that? 22 A. So I see underneath the word -- the -- 23 the phrase "Ramping Up With Alan Chen," I see 24 Kevin Gates' name listed underneath it, if that's 25 the question. 132 1 Q. Right. And I think on the -- on the 2 further email Kevin says, "As an FYI I put 3 together the presentation describing the situation 4 with Alan". 5 Any -- any reason to believe that Kevin 6 Gates did not author this document? 7 A. And you're making a representation that 8 this thing on the following page is the attachment 9 that was included? 10 Q. No, I'm not making any representation 11 about it whatsoever, sir. 12 I'm asking you if you believe, have any 13 reason to believe that this document was not 14 authored by your brother and not sent by him from 15 a TFS Capital email. That's my question. 16 A. Okay. My -- so the reason I asked my 17 question is I -- I don't know what attachment -- 18 document was attached to his email. 19 Q. Do you have any reason to dispute this 20 document's authenticity as you sit there in your 21 chair today? 22 A. Authenticity? It's -- my concern is I 23 don't know. Sometimes there's different versions 24 of presentations. Version one, version two, could 25 be, you know, one date and then you augment a 133 1 couple things, you attach something else. 2 Q. The question -- the question was very 3 simple, sir. Your answer is nonresponsive. 4 Do you or do you not have any reason to 5 dispute that this document is something other than 6 it purports to be? Do you believe it's not 7 authentic? 8 A. I have no opinion about it. I -- I my 9 question is -- 10 Q. I'll -- I'll take that as a no, sir. 11 I'll take that as a no and we'll move on to the 12 next document. 13 A. Well, that's not my -- my full answer. 14 I guess my -- my issue is I -- I don't 15 know what document was attached to this March 19th 16 email at 5:07 p.m. 17 If -- if you are telling me that this 18 was indeed the document that was attached, then I 19 would assume, yes, Kevin wrote it, that those two 20 things go together. 21 I don't know -- they have different 22 Bates numbers. I don't know whether they're -- 23 and -- and even different AR numbers. So I don't 24 know whether -- 25 Q. Sir, I'm going to move on to the next 134 1 document. Do you have anything else that you want 2 to say about Exhibit 6 -- or excuse me Exhibit 7 3 before we move on? 4 A. No, except for I'm willing to answer 5 any questions you have about it. 6 Q. Are you familiar with the term 7 "home-run strategy"? 8 A. I have heard that term used. 9 Q. In what context? 10 A. In investing it could be taking small 11 bets and hoping that sooner or later you may 12 have -- receive a large payout. 13 Q. Have you ever heard that term in 14 connection with Alan Chen's trading? 15 A. Yes. 16 Q. When did you first hear that term in 17 connection with Alan Chen's trading? 18 A. I don't recall. 19 Q. Looking back at Exhibit 7, do you 20 believe there's anything in Exhibit 7 that 21 discloses or discusses a home-run trading strategy 22 that Alan Chen had for Powhatan? 23 A. I've not -- don't believe I prepared 24 this document. I didn't -- I don't remember 25 receiving it. 135 1 At this point in time if I look at it I 2 could say the second sentence -- rather the first 3 bullet point in the executive summary could be 4 referencing a home-run strategy. The term 5 "atypical trade" to me could be used to describe a 6 home-run strategy. 7 Q. Could you give me a page number of what 8 you're referring to. I'm sorry. 9 A. Yeah, sure. It's 8002 -- 10 Q. Thank you. 11 A. -- in the executive summary of the 12 presentation. There's -- there's four bullet 13 points. The first bullet point has two sentences. 14 The second sentence describes it as "an atypical 15 trade that's more cost effective". 16 To me that could be terminology used to 17 describe the home-run strategy. 18 Q. And -- so your -- your testimony is 19 that trading the up-to-congestion trade, or UTC, 20 and describing that as an atypical trade that is 21 more cost effective than the traditional trades, 22 that could describe a home-run strategy? 23 A. That could be what the author was 24 intending at that time, point in time. The fact 25 is that it is over a decade old and I can't 136 1 pretend to be in that person's shoes a decade ago. 2 I don't even barely -- 3 Q. I'm sorry. I'm sorry. 4 Any other part of this document that 5 jumps out at you and says, yeah, there's a 6 home-run strategy that Alan Chen has for trading 7 in the UTC? 8 A. The second -- the second paragraph, 9 "This creates more opportunities for Alan". Maybe 10 there's more opportunities for a home-run strategy 11 or for that type of trading. 12 Q. So the -- the full paragraph reads, 13 "PJM just changed things such that UTC traders 14 receive transmission loss credits or TLC. 15 Basically UTC traders don't have to pay 16 transmission losses any more. This creates more 17 opportunities for Alan". 18 So your testimony is that that 19 describes a home-run strategy around the 20 transmission loss credit? 21 A. That's not what I said. I said it 22 could describe. It could have been what the 23 author was thinking at that point in time. 24 I didn't write this document. It was 25 over a decade ago. I didn't remember receiving 137 1 this document over a decade ago. All I'm doing is 2 speculating that the author of this document might 3 have been thinking about that when -- when that -- 4 those sentences were included in there. 5 Q. All right. Anything else on this page 6 that -- that reflects a home-run strategy? 7 A. Or could reflect a home-run -- I don't 8 know -- again I don't know what does reflect a 9 home-run strategy and what doesn't? I don't know 10 when I became aware of the home-run strategy. But 11 I'm just speculating what the author's -- could 12 have been relaying and it could have been that the 13 author was relaying information that came through 14 Alan Chen. So Alan Chen might have been thinking 15 about more opportunities or other -- or atypical 16 trades, thinking of home runs, that he described 17 as an atypical trade, which is how the way it's 18 relayed to other individuals down the line. 19 (6/26/10 email from Kevin Gates to Chao 20 Chen, et al., Bates stamped POWDC_3338 to 3344 was 21 marked R. Gates Exhibit 8, for identification.) 22 BY MR. FERRENTINO: 23 Q. Okay, you can put this document aside. 24 We'll move on to the next exhibit. That would be 25 Exhibit 8. 138 1 A. To be clear, Alan Chen didn't fully 2 disclose all of his trading strategies with us. 3 Q. Let me know when you have Exhibit 8. 4 A. Okay, I'm on page 18 and I assume it 5 goes down to -- 6 Q. It's a multipage document. I'll read 7 you the Bates numbers, just for the record. It's 8 marked Exhibit 8 on the first page and it ends in 9 Bates number 3338, continues through Bates page 10 3344. 11 A. Okay. 12 Q. You're welcome to browse but I'm only 13 going to ask you questions about the first two 14 emails on the top of the chain on the first page. 15 A. Okay. Okay, 18 and 19 is what you want 16 to ask about. 17 (Witness peruses document.) 18 A. Okay. 19 Q. All right. You're copied on this email 20 chain, at least portions of. Do you recall 21 anything about receiving this email, or should we 22 assume that you don't? 23 A. I would make assumptions but I don't 24 recall this thread. 25 Q. Okay. So the -- the second email from 139 1 the top is from Chao Chen to you and -- and 2 others, your brother Kevin. Chao said, in the 3 third sentence, "I think UTC is just a loophole 4 that anyone who knows about can exploit. There is 5 very little skill. I wouldn't hire any of these 6 guys to work for TFS, including Alan". 7 Do you understand what Chao Chen was 8 referring to when he called UTC a loophole? 9 A. I don't remember receiving this email. 10 I could speculate at this point in time over a 11 decade later what he meant. 12 Q. Well, any reason to believe that Alan 13 referred to here is -- is someone other than Alan 14 Chen? 15 A. I assume -- I mean, my guess is it's 16 probably Alan Chen, but I've got a lot of ideas -- 17 a lot of ideas of who else it could be. 18 Q. Was any -- was anyone else trading UTC 19 for you in 2010 whose name was Alan? 20 A. I don't believe so. 21 Q. Do you agree with Chao's 22 characterization of the UTC as just a loophole? 23 A. Well, sometime later, years into -- 24 after the investigation began, I believe we did 25 some analysis or I viewed some material that 140 1 suggested absolutely every single trader in the 2 UTC market made money in the summer of 2010. It 3 didn't matter who participated, everybody made 4 money. 5 I don't remember who prepared that 6 analysis, what it was based on, what assumptions 7 went into it, but indeed if that recollection is 8 accurate, that everybody made money, then I 9 understand -- then I would say that, yeah, Chao 10 looks -- I could understand why -- my guess is why 11 Chao said that is -- you know, maybe he was 12 speculating that everyone's going to make money in 13 this market, you just need to be there. 14 Q. If it was a -- well, strike that. 15 Your -- your brother responds in the 16 next email, "I agree that UTC is a loophole that 17 probably a dummy can exploit. But why rule these 18 guys off? Just because they are doing UTC? They 19 should drive a truck through that loophole, even 20 if they know how that FTRs/ICE or virtuals. 21 That's what I'd do". 22 What -- did you have any understanding 23 of what your brother was suggesting by drive a 24 truck through the loophole? 25 A. I -- I don't remember receiving this 141 1 email. 2 If I were to speculate back in time I 3 think he means -- if -- if there's a market where, 4 you know, I think that we -- we even suggested, 5 you know, a monkey could make money in that 6 market, you know, just kind of randomly throwing 7 things at a -- at a map, and -- and you know, of 8 the PJM footprint, you know, a monkey, which is 9 probably even lower than a dummy in terms of like 10 IQ ability you would think. 11 But, so, my guess is he's suggesting, 12 just because monkeys, dummies, everybody makes 13 money, doesn't mean that we should walk away from 14 it. 15 Q. Did -- did Alan Chen have a legal and 16 moral obligation to drive a truck through the UTC 17 loophole for you? 18 MR. PERKINS: I'm going to object to 19 the form of that question. 20 Rich, you can answer that if you think 21 you can. 22 THE WITNESS: I'm not an attorney. I 23 do know that if he leaves money on the table -- if 24 you're, you know, a doctor, for instance, and 25 somebody comes to you and they're sick and you 142 1 don't give them, you know, the best care, that you 2 probably run into some issues with the ethical 3 board or other people in the industry, and in 4 other words, your job is to take care of your 5 client, whether you're a doctor, whether you're a 6 teacher, whether you're a trader. Your job is to 7 look out for the best interests of your client. 8 So I assume there is some, you know, 9 obligations that Alan had to look out for our best 10 interests. 11 BY MR. FERRENTINO: 12 Q. Do you believe that Alan was looking 13 out for your best interests when he traded to 14 capture the transmission loss credit for Powhatan? 15 A. I believe he absolutely should have 16 taken it into consideration, yes. 17 Q. Have you ever exploited a loophole in 18 your dealings with another business? 19 A. Could you repeat the question. It kind 20 of broke up there. 21 Q. I'm sorry. I see that we are having 22 some connection issues. 23 Have you ever exploited a loophole in 24 your dealings with another business? 25 A. Exploited an -- only with business, not 143 1 personal; you're looking for business exploiting 2 loopholes. 3 We -- when we started TFS -- I think 4 the answer is yes. 5 Q. All right. Tell me about it. 6 A. When we started TFS Capital, we were 7 advised by attorneys and others that you could 8 manage money offshore in a non-U.S. jurisdiction 9 and you didn't have to pay taxes on that money 10 until -- you could defer it for years later, the 11 advisory fee. So we set up a fund in Bermuda 12 called Huntrise Global Partners where the monies 13 that were earned stayed in Bermuda for years, 14 maybe even over a decade -- I don't -- maybe over 15 a decade and kind of growing tax deferred before 16 they had to be repatriated. 17 Q. And so in that -- in that scenario, you 18 were exploiting a loophole in U.S. tax law as you 19 see it? 20 A. I think somebody could describe it as 21 a -- as a loophole. 22 Q. All right. Other than in the tax 23 context, say in your dealings with a business, 24 another business, you know, business to business, 25 have you ever exploited a loophole? 144 1 A. I'm sorry, so business to business. 2 Can you be more specific what you're talking 3 about. 4 Q. I -- I don't have any specific scenario 5 on mind. I'm asking you if you believe that in 6 your dealings with another business you've 7 exploited a loophole? 8 A. "Dealings with another business". 9 In other words like if -- if TFS 10 Capital would you have to actively engage another 11 firm, like Accenture or Deloitte or something like 12 that, when you're saying business to business, is 13 that what you're looking -- 14 Q. In any business -- in any business 15 context, have you engaged in any conduct that you 16 believe was exploiting a loophole, other than the 17 tax one that we've already discussed? 18 A. I think that lots of things could be 19 described as exploiting loopholes. 20 So to me "loophole" means something 21 that's legal by definition and it's not apparently 22 obvious so other people perhaps. I -- I state 23 that, you know, there is a lot of opportunity 24 to -- you know a lot of the -- the business 25 activities that I and others and really everyone 145 1 has engaged in through the years could be 2 described that way. 3 Q. So can you give me just one example 4 that you're talking about. You said there are a 5 lot of them but can you give one -- a single 6 example? 7 A. Well, I already given you one about the 8 tax and now you've asked me -- 9 Q. Sure. 10 A. -- you've asked me not to do tax issues 11 and you started to ask about business to business. 12 That's where I got sidetracked. 13 But if you're now opening up the list 14 to any other transaction where we're exploiting a 15 loophole, I mean, I once -- it's not a business 16 loophole. I once got a free bathroom radio, a 17 shower radio from Right Aid. I didn't pay 18 anything. I -- I went into Right Aid and had a 19 whole bunch of coupons and things like that, and I 20 got a -- I think they left me lunch 21 (indistinguishable) and a shower radio. 22 But from a business standpoint, you 23 know, I, you know, signed up for a free trial. 24 Here's a -- I guess a loophole perhaps, somebody 25 could define it as a loophole, where you can sign 146 1 up for a free trial to -- to review certain 2 literature or services and they start to charge 3 you after X number of days. After 30 days that 4 monthly fee kicks in. So what I do sometimes is I 5 sign up for the service and then I put a little 6 tickler I call them, you know, a little note on my 7 calendar saying cancel the service if you're not 8 happy. And I know that, you know, 29 days out, so 9 I cancel it in time so I'm not charged for the 10 service. And I don't know that other people do 11 that and I've done that for, you know, for -- for 12 some of my business ventures. 13 Q. Is there anything that springs to mind 14 that you could provide an example, or is that -- 15 is that it? 16 A. I'm sure I can -- we could keep going, 17 but there's two examples where you know, the free 18 services, the tax. 19 (8/2/10 email from Kevin Gates to 20 Richard Gates, Bates stamped POWDC_4116 to 4117, 21 was marked R. Gates Exhibit 9, for 22 identification.) 23 BY MR. FERRENTINO: 24 Q. All right. Let's move on to the next 25 exhibit. You can go take a look at Exhibit Number 147 1 9. It's marked R. Gates Exhibit 9. The last four 2 Bates numbers on the first page are 4166 and it's 3 a two-page document ending in 4167. 4 Let me know when you have it. 5 A. Got it. 6 Q. All right. I'll give you just a chance 7 to -- to review it quickly but I'm going to -- I'm 8 going to ask you questions about just the first 9 two emails at the top. 10 A. Okay, I'm ready. 11 Q. Do you -- do you recall receiving this 12 email? 13 A. No. 14 Q. The -- do you recall generally hearing 15 about a conversation that Alan Chen had with 16 Joseph Bowring of PJM Monitoring Analytics in 17 December of 2010? 18 A. Yes. 19 Q. And how did you first hear about it? 20 A. I don't recall. 21 Q. So, did you ever talk to Alan Chen 22 about his call with Dr. Bowring? 23 A. I don't recall. 24 Q. Have you formed any understanding of 25 what occurred on the call between Bowring and Chen 148 1 other than what Dr. Chen has written here? 2 A. Yes. 3 Q. What is your understanding that -- that 4 exceeds this -- this document, if you will? 5 A. It's my understanding that Bowring 6 called other market participants as well. It's my 7 understanding that Bowring said if Alan wasn't 8 breaking any tariffs, he wouldn't be reported. 9 Q. And how did -- how did you hear of 10 those things? 11 A. I don't recall. 12 Q. Did this -- did this email cause any 13 degree of concern among you and the other folks at 14 TFS who received it in -- in 2010? 15 A. I don't remember receiving it and I 16 don't remember other people discussing this 17 specifically, no. 18 (8/6/10 email and attachment from Kevin 19 Gates to Richard Gates, Bates stamped POWDC_6174, 20 was marked R. Gates Exhibit 11, for 21 identification.) 22 BY MR. FERRENTINO: 23 Q. Okay. We can move on. I'll ask that 24 you skip Exhibit 10 and you can go to Exhibit 11. 25 A. Okay. 149 1 Q. That for the record is marked Exhibit 2 R. Gates Exhibit 11. The last four Bates numbers 3 on the first page are 6174. It continues with a 4 spreadsheet attached for some number of pages 5 beyond that, but I'm only going to ask you 6 questions about the cover email. 7 A. Okay. 8 Q. This is an email from Kevin Gates to 9 you and others at TFS. Do you see that? 10 A. Yes. 11 Q. I'm skipping down, but this is a 12 summary of money that Alan Chen made in the month 13 preceding this email. 14 Is that a fair characterization? 15 A. It's not an unfair characterization. 16 Q. Sorry, so bullet point number two says, 17 "There's reason to believe that our days are 18 limited with this fund as there is pending 19 regulatory changes that may eliminate Alan's 20 trade. This would be a huge disappointment". 21 Do you have any understanding of what 22 the pending regulatory changes that may eliminate 23 Alan's trade were? 24 A. At this point in time over a decade 25 later I could speculate that it's related to the 150 1 transmission loss credits, that the tariff was 2 changed to make it so that UTC traders were not 3 eligible to receive them. 4 Q. Did you agree -- sorry. I didn't mean 5 to cut you off. 6 A. Nope, I'm done. 7 Q. Did you agree with your brother that 8 using the ability to put on this trade would be a 9 huge disappointment? 10 A. I don't remember having that feeling or 11 even receiving this email. 12 (8/19/10 email from Kevin Gates to 13 Larry Eiben, Bates stamped POWDC_6504 to 6505, was 14 marked R. Gates Exhibit 12, for identification.) 15 BY MR. FERRENTINO: 16 Q. All right. Let's put it aside. 17 All right, you can go to Exhibit 12. 18 This is a two-page document. The first page is 19 6504. 20 Do you have it? 21 A. Yes. 22 Q. All right. Excuse me, this is an email 23 from Kevin Gates to you and others at TFS dated 24 August 19, 2010, and Kevin writes, "FYI, here's a 25 filing that PJM recently did with the FERC 151 1 regarding changing the rules to close the loophole 2 that Alan was exploiting. I'll read it tonight. 3 You can too if you're bored". 4 Did you and the other folks on this 5 email share an understanding in -- of Alan's 6 trading at this time that he was exploiting a 7 loophole on Powhatan's behalf? 8 A. I'm sorry, so the question is did we at 9 that time consider it a loophole? 10 Q. Yes. 11 A. I don't recall specifically. I knew 12 that it was a -- my recollection is that there was 13 a flawed market design. I don't know that I would 14 have characterized it as a loophole because I 15 think it was very obvious from the first part of 16 the statements that traders would do what he was 17 doing. 18 So I think that generally loopholes 19 are -- it's hard to define, but generally they're 20 things that most people don't see and I -- my 21 guess is that almost everybody saw that this was a 22 flawed market design, except for FERC. 23 Q. So did you express that disagreement in 24 August of 2010 and say, no, no, it's not a loop 25 hole; it's obvious? 152 1 A. I don't recall. 2 Q. Did anyone else at Powhatan disagree 3 that it was a loophole in August 2010? 4 A. I don't recall. It's probably not a 5 very meaningful conversation, because whether it's 6 a loophole or not a loophole, it doesn't matter. 7 The -- the belief is that is it legal or not 8 legal, and everybody agrees it's legal. It 9 doesn't matter whether other people say -- 10 characterize it as a loophole or do lots of people 11 know about it or only a small people knew about 12 it. It wouldn't have been that interesting of a 13 conversation to us. 14 Q. Did anyone ever express the view that 15 it was not legal? 16 A. No. 17 Q. In August 2010? 18 A. Ever. 19 (8/2/10 email from Richard Gates to 20 Kevin Gates, Bates stamped POWDC_4160 to 4162, was 21 marked R. Gates Exhibit 13, for identification.) 22 BY MR. FERRENTINO: 23 Q. I think we can move on from Exhibit 12 24 and go to Exhibit 13. This is another short 25 email, Bates pages 4160 through 4162. 153 1 Let me know if you have it. 2 A. Six zero -- so I'm on pages 45 to I see 3 47 of the PDF. Forty-seven isn't that 4 interesting. So 45 and 46 looks like the meat. 5 Q. I don't have your PDF open in front of 6 me. I -- I'm working from the -- the paper copy. 7 So it would be helpful if you could just 8 acknowledge that the Bates numbers that I read are 9 correct, and again that's 4160 through 4162. 10 A. Yes. 11 Q. Great. I'll give you a moment to just 12 take a look at this but I'm only going to ask you 13 about items on the first page. 14 (Witness peruses document.) 15 A. Okay. 16 Q. All right. And I -- I don't want to go 17 through every email but my reading of this email 18 chain is that Alan Chen is communicating with your 19 brother Kevin about his conversation with Dr. 20 Joseph Bowring. 21 Is that -- is that fair? 22 A. Yes, that's part of the exchange. 23 Q. Okay, and -- and -- and basically 24 there's a discussion about whether the issue with 25 the trades was the volume or something else. 154 1 Is that -- is that accurate? 2 A. That's one way to describe it. 3 Q. Did -- did you have any sense of what 4 the -- the volume of Dr. Chen's trading was at 5 this time in August? 6 A. I don't recall. 7 Q. You ask a question at the top, "I do 8 not really" -- quote, "I do not really understand 9 why your trading is an issue. Don't shops like 10 PECO trade a shitload more than Alan?" 11 Did you ever get an answer to your 12 question about whether volume was the issue? 13 A. I don't believe so. 14 Q. And your - your next -- (network 15 interference). 16 A. We're breaking up, Josh. I can't hear 17 you. 18 Q. Okay, "I would just continue" -- I'm 19 sorry. I'm sorry, sir. 20 "Either way, I would just continue to 21 defer to Alan on what is right and appropriate. 22 He is the expert and is getting paid handsomely 23 for his expertise". 24 Does that statement accurately 25 summarize your general approach toward trading 155 1 with Alan -- Alan through Powhatan? 2 A. At the time I don't recall that I had a 3 general approach, except for I wasn't involved. 4 Q. And -- but you wouldn't -- you wouldn't 5 dispute that you were simply deferring to Alan in 6 this circumstance, even when the market monitor 7 came calling, right? 8 A. I would suggest that I was telling 9 Kevin just to continue to defer to Alan, that I 10 wasn't communicating with Alan. But this is 11 just -- if -- it were up to me I would just let -- 12 I would just let Alan decide what he wanted to do. 13 That's my reading at this point in time 14 on an email that was sent over a decade ago. 15 (3/1/14 email from Richard Gates to 16 Kevin Gates, Bates stamped POWDC_4154 to 4156, was 17 marked R. Gates Exhibit 14, for identification.) 18 BY MR. FERRENTINO: 19 Q. Fair enough. Let's move on to Exhibit 20 14. And this is an email -- I'm sorry, did 21 someone say something? It must be feedback. 22 Exhibit 14 is an email ending in -- the 23 first page ends in Bates number 4154 through -- 24 and it goes through Bates page 4156. 25 Let me know when you have it. 156 1 A. I have it. 2 Q. Great. There's an -- an email at 3 the -- the top, there are two emails at the top 4 rather I'm going to ask you about. March 4 -- 5 March 1, 2014, Kevin Gates writes to you, "Here's 6 what Alan wrote when Bowring called him in August 7 2016. 'He told me that he has no authority to ask 8 us to stop but he might refer us to FERC if we 9 don't. And he would let us go if we stop here. I 10 think it is better to stop right here for those 11 large volume trades". 12 And you respond, "This by itself should 13 kill the case. Amazing. Same as voice 14 recording". 15 Mr. Gates, why would this statement 16 kill the case? 17 A. I don't recall what I was thinking at 18 that time in an email that was sent many, many 19 years ago, but as I sit on -- look at this now in 20 this context, it seems fascinating to me that a 21 market monitor could tell a market participant 22 that they will be let go and then change their 23 mind and refer them to the -- for -- for a 24 violation for market manipulation. 25 Q. When you're referring to "same as voice 157 1 recording" in the top email, do you know what that 2 refers to? 3 A. I don't. This is an email that was 4 sent a long time ago. I could speculate if you'd 5 like me to. 6 Q. What might it refer to? 7 A. There was a recording that another 8 market participant obtained by exploiting a 9 loophole. I think they were based in Pennsylvania 10 where we are and it's a two-party consent state. 11 But it's my understanding that they -- their 12 servers were in Delaware or something like that, 13 so that they were allowed -- they somehow found a 14 loophole that I didn't know about. But it 15 allows -- they were allowed to -- they reported a 16 voice -- the message that Bowring made with them 17 basically saying almost identical statements -- 18 the identical statements to them that he made to 19 Alan. 20 We asked for exculpatory information 21 during the administrative process. FERC didn't 22 give us anything. And then through our own means 23 said, oh, we -- we know about this voice 24 recording, can you it to us, and FERC claimed it 25 to be inculpatory and not exculpatory. 158 1 Q. So, are you aware of any recordings of 2 Dr. Bowring's conversation with Alan Chen? 3 A. Just the notes that my -- just the 4 notes that Alan memorialized at the time, some 5 form of recording, but I -- 6 Q. Not a -- not a -- not a voice 7 recording, though? 8 A. I don't believe so. 9 Q. Who does Dr. Bowring work for? 10 A. I believe it's a -- a firm that he owns 11 called market analytics, Market Monitor Analytics, 12 something like that. 13 Q. Now you understand he's not a -- he's 14 not a FERC employee, right? 15 A. Yes, yes. 16 Q. And he's not a party to this case nor 17 is Monitoring Analytics, right? 18 A. Well, I'm not an -- an attorney, so 19 when you say not party to the case, I'm not 20 exactly sure what you mean. But he is -- his 21 statements, his information is very interesting to 22 it. 23 If somebody is called as a witness, I 24 don't know whether that's a party or not. 25 Q. Well, he's not the one -- let me -- let 159 1 me put it in colloquial terms. He's not the one 2 suing you, right? 3 A. Correct. He's not the plaintiff, yes. 4 (8/5/21 email from Richard Gates to 5 Kevin Gates, Bates stamped POWDC_7076 to 7078, was 6 marked R. Gates Exhibit 15, for identification.) 7 BY MR. FERRENTINO: 8 Q. All right, you can put Exhibit 14 aside 9 and you can move on to Exhibit 15 if you would. 10 And that's a two-page email -- excuse me, 11 three-page, Bates 7076 through 7078. 12 Let me know when you have it. 13 A. I have it. 14 Q. Okay. I'm just going to ask you 15 questions about the first page and the first email 16 at the bottom of the page is an email from Alan 17 Chen to Kevin Gates and it says, "Hi, Kevin. From 18 what I'm hearing now we are going to see drastic 19 changes to UTC trades very shortly. Also TLC and 20 UTC issues uneconomic large volume UTC trades, 21 taking advantage of TLC and resolutions are going 22 to be on the 8/12 MC meeting". 23 And it looks to me -- and I can't tell 24 from the email -- it looks to me that perhaps 25 Kevin forwarded Alan Chen's email to you and 160 1 others at TFS Capital and says, "Ugh. It seems 2 that the UTC at PJM will be drastically changed 3 soon. See email tread below". 4 Do you see that? 5 A. I do. 6 Q. All right, there's a response from you 7 at -- at the top of the page on August 5th, 2010 8 from rich@tfscapital.com. 9 Do you see that? 10 A. I do. 11 Q. Your response is, "I wonder if that 12 means Alan will increase our exposure during the 13 next week or so". 14 So your response when you found out 15 that uneconomic UTC trades taking advantage of the 16 transition loss credit were going to be 17 eliminated, and your response was, we should 18 increase our exposure to those trades. 19 Do I have that right? 20 A. I don't believe so. 21 Q. Tell me where I've gone wrong. 22 A. Well, I don't remember what I was 23 thinking when I wrote this email. It was over a 24 decade ago. But I read it to say I wonder, I 25 don't know. I don't read it to say that he will, 161 1 he should, he may. It's just a statement of 2 wonderment, being unsure. 3 Q. Okay. But that was a reasonable 4 possibility in your mind that Alan Chen would 5 increase exposure to a trade that was about to be 6 eliminated by the regulator -- excuse me, by 7 the -- by the -- the market. 8 A. Reasonable. It's apparent -- it's 9 possible that I thought it was a possibility. I 10 don't know reasonable. I didn't use that word. I 11 wouldn't use that word now to describe this. But 12 I don't remember what I was thinking at that time, 13 but I don't see the word -- I don't agree with 14 your statement that it's a reasonable sentence. 15 Q. If Alan Chen had increased your 16 exposure to the UTC trade with the purpose of 17 increasing payment for the transmission loss 18 credit in this week of August 2010, would you have 19 been okay with that? 20 A. I would have no opinion -- to me, I'm 21 an investor. I just ride the volatility, ups and 22 downs. I'm trying to perhaps get mentally 23 prepared for a big loss, for a big gain, for some 24 sort of volatility. 25 I received emails around this time that 162 1 maybe suggest that I didn't know that everybody 2 was making money and you just had to be a dummy or 3 a monkey. Chao I think at that time figured it 4 out. I don't remember knowing that dummies, 5 monkeys and anyone else could make money in this 6 market. 7 I assumed there was the possibility of 8 losing it all and maybe I'm speculating we should 9 hold on tight here because there might be a lot of 10 volatility in the next week or so. 11 Q. So your testimony is this might not 12 have to do with anything other than volatility? 13 That's your testimony? 14 A. My testimony is I don't remember what I 15 was thinking over a decade ago when I sent this 16 email. My -- I'm just speculating different 17 possibilities, just that the market is going to 18 change and then Alan may behave differently at the 19 end of a -- of a market structure. I was not 20 aware. I don't know that -- I -- I don't know 21 all -- have any context to put this email in. 22 There was emails where I said -- you 23 know, the one that we looked at prior I believe, I 24 said just defer to Alan and he said "I'm going to 25 stop". 163 1 So I -- I just don't remember all the 2 communications we had at this time to put this in 3 context. All it is to me at this point in time is 4 a statement of wonderment, of not knowing, and I'm 5 speculating why I may have been wondering at that 6 time. 7 Q. Let me ask a question about the email 8 at the bottom of the first page here of Exhibit 9 15. Alan Chen describes in this email, "TLC and 10 UTC issues (uneconomic large volume UTC trades 11 taking advantage of TLC)." 12 Do you believe that uneconomic large 13 volume UTC trades taking advantage of TLC were the 14 trades that Alan Chen was putting on for Powhatan 15 at this time? 16 A. I don't remember. 17 Q. Any reason to dispute that's what Alan 18 Chen was doing for Powhatan at this point? 19 A. Yes. 20 Q. And what -- what reason do you have to 21 believe that Alan Chen was not doing this? 22 A. Sometimes he changed the price tag. 23 Sometimes he -- he could have done analysis I 24 think by time of day and there was different risk 25 profiles. He was taking extra risks. You know, 164 1 some subsequent analysis that I've seen of his 2 trades, he was taking risks above and beyond just 3 will the transmission loss credits -- the -- the 4 payment exceed and the fees. There were other 5 risks he was taking in the portfolio. He didn't 6 even match up -- he had many trades didn't even 7 match up size, and if you are going to take 8 advantage of the TLC, you would always match up 9 the size. You would place it on nodes where you 10 felt like everything would be -- would clear and I 11 don't believe he was doing those things. 12 Q. So you don't believe he was doing 13 uneconomic large volume UTC trades at all? 14 A. That's not what I said. 15 Q. Okay. You're just saying he's -- he 16 was doing other things at the same time? 17 A. I was -- I'm saying that in the benefit 18 of hindsight he was doing other things -- that he 19 was taking other risks that were not in the 20 portfolio besides transmission loss credits. 21 At this time I have very little 22 recollection of knowing anything about what he was 23 doing. I didn't understand these markets very 24 well at all. 25 Q. All right. So you didn't have that 165 1 understanding about Alan Chen's other trading 2 activities at the time you saw this email in 3 August of 2010, right? That's something you 4 learned later? 5 A. I had a very -- when these emails are 6 sent out, I had a very high-level understanding 7 that there was some sort of payment that he was 8 receiving as a result of the trades. I think we 9 found out about it the prior year in the fall of 10 2009. Twelve years ago we received some payments 11 that we weren't expecting and I think in the fall 12 of 2009 we were aware of -- I was aware of some 13 other income stream signal that traders needed to 14 consider when placing trades. 15 So I was aware of some sort of payment 16 stream, rebate, I guess TLC or -- they had some 17 other names to them; MLSA I think. I forget the 18 details, but I just in general at a high level 19 knew there was some sort of revenue stream he was 20 considering. 21 Q. All right. I have no more questions 22 about this exhibit. 23 MR. FERRENTINO: This is a convenient 24 time for me to take a break and I'm thinking that 25 maybe we can keep it short and be back at 2:05, if 166 1 that works for everyone. 2 THE LEGAL VIDEO SPECIALIST: Okay. 3 This is the end of media number three. We are off 4 the record at 1:57 p.m. 5 (Recess taken.) 6 THE LEGAL VIDEO SPECIALIST: Okay, this 7 is the start of media number four. We are back on 8 the record at 2:05 p.m. 9 MR. FERRENTINO: Thank you. 10 (8/31/10 email and attachment from 11 Kevin Gates to Larry Eiben, Bates stamped 12 POWDC_1116 to 1118, was marked R. Gates Exhibit 13 16, for identification.) 14 BY MR. FERRENTINO: 15 Q. Mr. Gates, I'd like to have you look at 16 Exhibit 16 in your pile, please. That is a 17 three-page document. It's marked with the Bates 18 label 1116 on the first page continuing to 1118. 19 It's an email with a single-page attachment. 20 Let me know when you have it. 21 A. I already have it. 22 Q. Great. This is not an email -- I'll -- 23 I'll represent to you that I see you copied on or 24 receiving, but I'll ask if you recognize the email 25 and attachment as something you've seen before? 167 1 A. I don't recognize it. 2 Q. All right, how -- can I ask you to turn 3 to the last page of the exhibit. This is the 4 letter dated August 31, 2010. 5 Do you see that? 6 A. I do. 7 Q. This appears to relate to redemptions 8 that Powhatan made to its owners in 2010 shortly 9 after the FERC investigation became known to you. 10 Is that an accurate summary of what 11 this email and attachment are about? 12 A. I don't know when I received this email 13 or this document or saw it. It appears to be 14 something related to redemptions from the fund 15 that occurred after I was aware. 16 I believe it was in the first week or 17 two of August that I was aware, maybe a second or 18 third week I was aware that FERC had engaged us, 19 asked us about the trades. 20 Q. All right. Do you remember receiving 21 redemptions from Powhatan in 2010? 22 A. I don't recall. I believe I did but I 23 don't recall the -- the details. 24 Q. All right. I'd just like to run 25 through the language in the -- in the form on the 168 1 last page of exhibit -- Exhibit 16. 2 It says, "Dear Powhatan Energy Fund, 3 LLC investor, you are receiving this letter 4 because you have requested a withdrawal from 5 Powhatan Energy Fund, LLC, or PEF. 6 "Your request is consistent with the 7 terms of the operating agreement and with the 8 expectations of Capital Management, LLC, or LSE, 9 given your past withdrawal activity. 10 What is LSE Capital Management, LLC? 11 A. I believe that is the managing member 12 of Powhatan Energy Fund, LLC. 13 Q. Is -- is LSE Capital Management still 14 the managing member of Powhatan? 15 A. I believe it is. 16 Q. Does LSE Capital Management hold any 17 ownership interest in Powhatan? 18 A. I don't believe so but I'm not sure. 19 Q. All right. Who owns LSE Capital 20 Management now? 21 A. I'm not exactly sure whom but I believe 22 my brother and I are the only ones with -- from 23 the former partnership with economic interest in 24 it. 25 Q. When you say economic interest, it 169 1 means that you have -- you may control LSE through 2 another vehicle like a trust or another company? 3 Is that fair? 4 A. Those are the examples of economic 5 interest. 6 Q. Okay. The -- the letter continues, 7 "Moreover, PEF is sufficiently capitalized at the 8 present time to meet all of its obligations 9 including collateral requirements at PJM. However 10 it is notable that the Federal Energy Regulatory 11 Commission, FERC, has begun investigation into 12 trading activities performed on behalf of PEF by 13 HEEP Fund, Incorporated. 14 "Some or all of the proceeds that you 15 are withdrawing may be deemed necessary to LSE 16 Capital Management, LLC" excuse me, "by LSE 17 Capital Management, LLC in its sole discretion 18 under the terms of the operating agreement to 19 settle matters related to this investigation. 20 "These funds are being released to you 21 but only under the following conditions: you will 22 not spend the money. If you choose to invest the 23 money, you will utilize investments that are 24 generally liquid and of a reasonable risk profile 25 in the diversified equity funds, hedge equity 170 1 funds, diversified bond funds, Money Market 2 accounts, etc.; you will return the money if 3 deemed necessary by LSE Capital Management, LLC." 4 It concludes, "Please confirm your 5 agreement with these terms by signing below and 6 returning this document to PEF." 7 Did you sign a document like this in 8 2010 to receive a distribution from Powhatan? 9 A. I don't recall. 10 Q. The money -- do you remember being 11 subject to conditions like those specified in 12 Exhibit 16 when you took a distribution from 13 Powhatan? 14 A. I don't recall the specifics of -- of 15 that. I remember there was some document that was 16 produced after disbursements were discussed, but I 17 don't -- I don't recall the specifics. 18 I don't even remember if I owned it. 19 My wife may have owned the investment in Powhatan. 20 I forget. It's been over a decade. 21 Q. All right. Well, did you -- did you 22 get -- did you or your wife or some vehicle that 23 you or your wife controls get money from Powhatan 24 in a distribution in 2010? 25 A. I don't recall specifically but I 171 1 believe we did. 2 Q. Okay. Did you spend the money that you 3 received? 4 A. I don't know what I did specifically or 5 where that money is specifically right now. 6 Q. Well, I didn't ask where it was right 7 now. I'm asking if you spent it at any point from 8 2010 through now. 9 A. I don't recall. 10 Q. Did you invest the money in any sort of 11 an investment account? 12 A. I believe at some point we reinvested 13 in Powhatan, but I -- I don't recall the 14 specifics. 15 Q. Did you invest, reinvest all of the 16 money in Powhatan or was there still some amount 17 outstanding? 18 A. I don't recall the specifics. 19 Q. Has Powhatan ever asked for money back 20 from the partners to whom the money was disbursed? 21 A. I don't believe so but I don't recall. 22 Q. You can you put this document aside. 23 Thank you. 24 How did you and Kevin come to be the 25 last partners of LSE Capital Management and 172 1 Powhatan? Members I think is the proper term. 2 A. I believe it was some legal document 3 that was prepared that made that -- made us the 4 remaining owners. 5 Q. And who prepared that document? 6 A. I don't recall. 7 Q. Did you sign it? 8 A. I don't recall. 9 Q. When was the document prepared? 10 A. I don't recall. Probably the last 11 couple of years, 2018, '19, '17. 12 I speculate somewhere between 2016 and 13 2019. 14 Q. And Mr. Eiben testified that the change 15 in membership was accomplished essentially -- and 16 I may be omitting some detail -- essentially you 17 and Kevin Gates assumed the recall obligation of 18 the other members of Powhatan. 19 Do you have an understanding of what 20 happened to change ownership of Powhatan? 21 A. You broke up there at the end. I heard 22 you say that Larry -- that you paraphrased his 23 deposition and then I think I heard -- 24 Q. And you broke up, as well. So let me 25 repeat the question. 173 1 I believe Mr. Eiben testified that in 2 order to change control of Powhatan, to change 3 ownership of Powhatan, you and Kevin Gates assumed 4 the recall obligations of the other Powhatan 5 members; in other words, assuming their obligation 6 to return money to Powhatan if it was recalled by 7 the managing member. 8 Is that a fair understanding of what 9 occurred to change ownership of Powhatan? 10 A. I don't recall the specifics of the 11 agreement but I believe that might have been one 12 of the -- some language that the attorneys worked 13 on, may have discussed that concept. 14 Q. But when you say attorneys, who 15 prepared the -- the document that accomplished the 16 transfer? Which attorneys? 17 A. I think that question was asked a 18 little bit ago and I didn't recall it then and I 19 still don't recall. 20 Q. Okay. Okay. I'm sorry, I'm -- I 21 forgot that. 22 The -- do you remember what the amount 23 of the recall obligation was that you and Kevin 24 assumed? 25 A. I don't have an understanding. 174 1 Q. Is it millions of dollars. 2 I'm sorry, I -- I didn't hear your 3 answer. Maybe -- maybe you broke up if you 4 haven't answered yet. 5 A. I haven't answered yet. I'm thinking. 6 "The recall obligations". I'm not an 7 attorney. I remember evaluating that -- that 8 language and not feeling like it was much 9 liability. 10 Q. All right. Well, that's a feeling 11 about liability. I asked what the amount was. 12 Were you agreeing to assume recall 13 obligations from the other partners to the tune of 14 millions of dollars? 15 A. I don't recall the -- I don't recall 16 the details. My guess is there's a -- 17 Q. How would -- how would you suggest we 18 go about refreshing your recollection? Is there a 19 document that you could look at that would remind 20 you of what the recall obligation now is? 21 A. How would we go -- I would probably 22 talk to my attorneys and ask them where is the -- 23 is there a document or what was done. 24 I'm not an attorney. I don't remember. 25 I remember -- I'm just a business person and I 175 1 remember evaluating the -- the business -- the -- 2 the agreement from a business standpoint thinking 3 there's not a lot of risk here. 4 Q. Sure. 5 A. So you're kind of operating in two 6 different worlds. You're -- go ahead. 7 Q. I'll stipulate there were two different 8 worlds, Mr. Gates. 9 So in -- in my world businessmen -- 10 businessmen usually know with they assume a recall 11 obligation of millions of dollars what that is, 12 and they -- especially if it happened in the last 13 five years, as you seem to have testified to, and 14 especially when it's regarding an entity in which 15 you and your brother have told the court that 16 you -- you spent thousands of hours defending. 17 Is it really your testimony you can't 18 remember how much is on recall to Powhatan right 19 now? 20 A. I've told you that my -- from my 21 standpoint from a business world, my understanding 22 was that the obligation was very small. 23 In terms of how a lawyer looked at it 24 or what a lawyer -- what was described in the 25 documents, I don't -- I cannot quantify that. 176 1 It's possible that it was millions of 2 dollars. I can say that after talking to 3 attorneys and others and evaluating it that it 4 didn't seem like it was a big risk to me. 5 Q. Well, what is -- what is -- what I'm 6 driving at is, what is the amount -- whatever the 7 risk is that it might be taken from you some day, 8 what is the amount that you agreed to put back 9 into Powhatan as a result of the ownership change? 10 MR. PERKINS: I'm going to object to 11 the form. It's not an agreement to put money back 12 in. That mischaracterizes what the obligations 13 were under the redemption document? 14 MR. FERRENTINO: Well, Chris, let me -- 15 let me put on the record now, I'd request that you 16 produce to FERC immediately, like tomorrow, the 17 redemption documents that we've been discussing 18 today, because they haven't been produced. I 19 think they're -- I'm sure they're responsive. 20 They're certainly responsive to the court's order 21 that you produced to the court financial 22 information about Powhatan sufficient for her to 23 evaluate the firm's financial condition. 24 So I'd ask that they be produced, then 25 maybe we can reopen the deposition and have a more 177 1 productive conversation that will allow Mr. Gates 2 to recall exactly how much he owes to Powhatan. 3 MR. PERKINS: Well, again I think 4 you're mischaracterizing him when you say he owes 5 money but I'm happy to discuss with you what 6 discovery requests are still open and need to be 7 responded to. 8 MR. FERRENTINO: We'll -- we'll have 9 that conversation off the record. 10 MR. PERKINS: Okay. 11 BY MR. FERRENTINO: 12 Q. So, let me just close the loop, Mr. 13 Gates. 14 You can't recall whether or not or how 15 much money you have subject to recall to Powhatan 16 as you sit here today under oath? 17 A. What I'm suggesting is that after 18 talking to attorneys and others that, when I 19 evaluate it from a business standpoint of what 20 the -- if -- if there's a one in a million chance 21 that there's going to be an earthquake that kills 22 us in West Chester every year, I don't think about 23 it that much just because it's unlikely. But if 24 that event happens, it's -- you know, it's -- 25 could be catastrophic. 178 1 But when I think about earthquakes, I 2 think of it as a small risk. When I think of this 3 obligation or these documents or material that's 4 being discussed, I'm trying to make it very clear 5 to you that -- and I feel like I am being very 6 clear -- that I don't believe there's a lot of 7 risk, which is how I evaluate this situation. 8 So it's not that I'm trying to be 9 elusive. I'm trying to be as clear with you as 10 possible and we've been as clear with the court as 11 possible about the financial situation and -- 12 and -- of the fund. I just think it's a -- from a 13 business standpoint I don't think it's a high risk 14 that LSE Capital Management will do things to 15 force me or entities that I control to make 16 contributions back into the business. 17 Q. Let's -- let's talk about that. 18 So you -- you just said you don't 19 believe it's a risk that LSE Capital Management 20 will force you to put any money back into 21 Powhatan. 22 Is that accurate? 23 A. I don't believe it's a high risk. I -- 24 I don't think that -- 25 Q. Okay. So -- so I accurately 179 1 characterize your testimony; not a high risk that 2 one entity you control will order another entity 3 that you control to take money from you. 4 Is that fair? 5 A. One entity I control -- anything is 6 possible, but, yes, I don't -- it doesn't seem 7 particularly likely. At one point -- 8 Q. Because -- because you control -- you 9 and Kevin Gates control LSE Capital Management, 10 right? 11 A. Yes, yes. 12 Q. And you and Kevin Gates control 13 Powhatan, correct? 14 A. I think LSE controls Powhatan. 15 Q. Well, effectively you control -- you 16 control both, right? 17 A. I'm -- I'm not a lawyer, but I would 18 say the way I would describe it is I control LSE 19 and LSE controls Powhatan. 20 Q. Okay. So you're -- you and Kevin, 21 you're the only ones in the driver's here. 22 Is there someone else that's 23 participating in the control of those entities, 24 natural persons. 25 A. I mean, we talk to attorneys, but -- 180 1 Q. But they're not owners -- they're not 2 owners, right? 3 A. I'm just trying to answer your 4 question. 5 We already -- I already told you 6 earlier that Kevin and I were the only owners of 7 LSE, so drafting another question -- so I'm trying 8 to assume why you may be asking this question so 9 I'm trying to give you more information which is 10 what I thought you wanted. 11 (9/28/15 email and attachments from 12 Kevin Gates to Larry Eiben, Bates stamped 13 POWDC_7106 to 7108, was marked R. Gates Exhibit 14 18, for identification.) 15 BY MR. FERRENTINO: 16 Q. All right. Let's see. We'll go to 17 Exhibit 18, please. And this is another email 18 chain with two attachments. This is ending in 19 Bates number 7106, continues through Bates number 20 ending -- no Bates number, but a spreadsheet that 21 has some numbers on it. It was one, two, three, 22 four pages. 23 A. Yes. And just so we're complete, 24 because we don't have all the Bates numbers, I'm 25 looking at pages 59 through 62 of the PDF that you 181 1 sent. 2 Q. And you see the last page is a 3 spreadsheet that has columns titled August, 4 October, and Total? 5 A. I -- yeah, I see a document, looks like 6 it was produced in a spreadsheet or printed from a 7 spreadsheet. 8 Q. Okay, great. We're looking at the same 9 item. 10 I just direct your attention to the 11 email at the top of the first page and it says, 12 "Attached" -- and this is from Kevin to Larry 13 Eiben, you and others. It says, "Attached is the 14 letter that everyone signed and attached is an XLS 15 sheet detailing what everyone was distributed from 16 Powhatan that's subject to the letter. In total 17 it's a little over 4M". 18 Do you see that? 19 A. I do. 20 Q. Does that refresh your recollection at 21 all about how much money Powhatan distributed to 22 its owners in 2010? 23 A. It sure helps. 24 Q. Any reason to dispute that it was a 25 little over 4M that was distributed that year? 182 1 A. Sure. I mean, I think we made periodic 2 redemptions and subscriptions into the fund. My 3 guess is I think we're just looking at one 4 transaction, you know, one redemption period. 5 My -- my vague recollection is that it 6 had what we describe in the industry as monthly 7 liquidity, meaning you can borrow, add and -- and 8 redeem from the fund monthly. And it looks like 9 my -- so there's like 12 opportunities each year 10 to add money or redeem money and this just looks 11 like it's one of those transactions that took 12 place in one of those 12 months. 13 Q. And just -- just to be clear, my belief 14 is, looking at page four of the exhibit with the 15 spreadsheet, there are two sets of redemptions: 16 one in August 2010 and one in October 2010. 17 Do you have any reason to dispute 18 that's the -- the subset of redemptions that we're 19 talking about here? 20 A. Oh, okay. I was just looking at the -- 21 the email. Okay. Okay, so, yes, you're right. 22 I -- I made a mistake for the prior evaluation. 23 At this point in time, now that, you 24 know, you guys just provided me, I would suggest 25 that maybe it's two months of -- of activity as 183 1 opposed to just one, which is what I speculated 2 earlier. 3 Q. And -- and would you agree that this -- 4 this set of redemptions in August and October 5 2010, they're special or broken out separately 6 because they're the ones that are subject to 7 recall by LSE. 8 Isn't that right? 9 A. I -- I -- I have no reason to believe 10 that. 11 Q. No reason to believe that I'm correct? 12 A. I've no reason to believe that prior 13 statement that they were broken out separately for 14 this reason because of any letter was why this 15 document was sent out. I -- I don't -- I didn't 16 send it out. I'm only copied on it. I don't 17 remember receiving it and I don't know why it was 18 sent out. 19 My vague recollection is that we would 20 periodically -- and as I'm looking at, it was even 21 2015. So, hold on. Yeah, I'm missing something. 22 So this -- these emails occurred years 23 later. Okay. So I -- I'm sorry, Josh, these 24 emails occurred five years after the transactions 25 took place. They're about roughly five years. I 184 1 assumed it was a -- a document that was sent 2 during that time. Attaches a letter, okay. 3 Okay. So with this additional context 4 that, you know, I -- I don't remember receiving 5 this letter. It looks like I wasn't even -- sent 6 to me. I copied on the one at the top. I don't 7 know whether I was -- the one that was sent 8 September 28th at 10:18 a.m., I don't even know 9 that I received a copy. 10 But looking at it now, it is possible 11 that there was some connection between those two 12 months or those distributions and -- and a -- a 13 redemption letter? 14 Q. And then that's exactly what your 15 brother said in the cover email, right? He said 16 "Attached is an XLS sheet detailing what everyone 17 was distributed from Powhatan that's subject to a 18 letter. In total it's a little over 4M". 19 Do you disagree that the amount on 20 recall is about 4M, at least as of this date, 21 August -- excuse me, September 28th, 2015, when 22 Kevin's writing to you and everyone else? 23 A. Yes. He's not writing to me, to be 24 clear. I'm just a copy on it. 25 Q. Sure. 185 1 A. I -- I don't know. I don't know the 2 context of this email. I don't know why it was 3 sent. I don't know who interpreted it. 4 I believe that at one point in time 5 it's possible that Kevin thought that this was 6 the -- this was information that was relevant to 7 somebody's request about the recall. 8 Q. Okay. So, your -- with all that 9 disclaimer in mind, do you have any reason to 10 believe that your brother's wrong when he says 11 little over $4M is subject to recall from 12 Powhatan? 13 A. I don't -- I never assume my brother is 14 wrong, so I -- I don't assume -- make that 15 assumption at this point in time. I'm -- 16 Q. All right. 17 A. -- saying that I -- I don't know the 18 purpose of this email. I don't have any context 19 to this thread. I don't know who inquired about 20 it. It looks like it was communications that took 21 place between Kevin, Larry and Greg. 22 I don't know whether I considered other 23 purchases that were put back into the fund. I 24 don't understand the analysis of the assumptions 25 that he made into the analysis. But to be clear, 186 1 I never assume he's wrong but he has to make 2 assumptions and he does -- and he sends emails 3 based on his current set of beliefs and for the 4 purpose of that email. 5 Q. Thank you for that explanation. So the 6 $4M amount, do you believe that amount is wrong 7 for any reason, based on the knowledge you have, 8 understanding that your knowledge is not perfect, 9 you -- do you believe the $4M amount is incorrect 10 or has changed in any way? 11 A. I have just attorney/client privileged 12 communications that would prefer not to divulge. 13 Q. Do you have a basis other than 14 attorney/client communications for answering my 15 questions? 16 A. No, it's just guidance that we received 17 from lawyers about the different agreements. 18 Q. So I'm not asking what your lawyers 19 told you. 20 I'm asking if you think the amount is 21 different than $4M. Is it less; is it more? Yes 22 or no? 23 A. Is it yes -- less or more -- yes or no? 24 Q. Excuse me. That's a terrible -- that's 25 a terrible question. I withdraw it. You got me. 187 1 So, do you believe the recall amount is 2 less or more than $4,300,000? 3 A. I believe it's less, but I -- I 4 don't -- it's based on attorney/client 5 communications, but I believe it's less. 6 Q. Is it -- are there amounts that you 7 have returned to Powhatan that have reduced that 8 number? 9 A. I believe so. 10 Q. And what are those -- what are those -- 11 what are those amounts or payments? 12 A. I don't recall. 13 Q. Is it millions of dollars, hundreds of 14 thousands of dollars or less than that? 15 A. I don't recall. And the reason is I'm 16 not trying to be evasive, I just don't think that 17 this is a big risk to the -- economic risk to me 18 personally. 19 Q. I -- I'm not asking about economic 20 risk, sir. I'm asking about dollars and sense. 21 A. I understand you are and I'm just 22 trying to give you some color why I'm unable to 23 give you a more -- answer your questions more 24 carefully. 25 It's like somebody asking me the 188 1 analogy I used earlier about a -- a earthquake. I 2 don't think about earthquakes a lot because I 3 don't expect them to happen. If you, you know, 4 said, hey, your whole house can be wiped out, you 5 could lose all your kids and things like that, I 6 understand there's big risk, I just don't think 7 about it a lot. 8 The reason why I don't think about this 9 a lot is just based on communications I've had, it 10 doesn't seem like it's a big risk to me. 11 You're trying to -- 12 Q. Right, and I understand. But you're -- 13 you're speaking, sir, about magnitude, magnitude 14 versus probability, right? 15 So we could have a one-percent chance 16 that we'd be leveled by a, you know, 7.0 17 earthquake in Washington, D.C. versus a 25% 18 chance. 19 I'm asking what the magnitude of your 20 obligations to Powhatan is and if it's been 21 reduced at all from this $4M figure. 22 A. So I've already answered the question. 23 I believe it's been reduced. 24 Q. By how much? 25 A. You already asked that one and I said I 189 1 don't recall, and then I went on my discussion of 2 not being able to recall to give you some context, 3 because if the probability number is very, very 4 low, then the total outcome is small, and so 5 that's why I don't think about it much. 6 Q. I'm asking you to leave the probability 7 portion out of the equation. 8 A. I understand. 9 Q. What is the approximate magnitude of 10 your responsibility to Powhatan if -- if lightning 11 struck you? 12 A. I -- I don't recall is -- and the 13 reason again is because I don't -- I don't think 14 about it. 15 You've asked me this many times. I 16 think at one point I said maybe millions, but I -- 17 I don't recall the specifics and I'm just trying 18 to give you some background of why I'm answering 19 this way. 20 I know that you're asking about 21 magnitude, I'm talking probabilities, but it's 22 like we're talking past each other and I'm trying 23 to help us bridge that gap, understand why we're 24 talking past each other. 25 Q. Are there records that could help 190 1 refresh your recall? 2 A. Yes. 3 Q. And who has those records? 4 A. Well, I think we've given some of them 5 to you, you know, through -- I think the court may 6 have some, I think, you, FERC, had some, during 7 the administrative process, I think FERC has it 8 via the recent discovery. I think there's a 9 number of places that that information resides, 10 probably with notes and emails that I've received 11 that are attorney/client privileged and things 12 along those lines. 13 Q. Does Powhatan have a ledger or a simple 14 spreadsheet that shows how the $4M recall 15 obligation's been reduced? 16 A. A ledger. Does it have a -- does it 17 currently have a ledger? Does it ever have a 18 ledger? 19 I don't believe it -- I -- I don't 20 believe it's something that we actively monitor. 21 Q. If you wanted to create one showing 22 what the magnitude of your obligation to Powhatan 23 was, as of today, how would you go about doing 24 that? 25 A. I would talk to attorneys I guess, you 191 1 know, just off attorney/client privileged 2 communications, ask them to evaluate notes and 3 material that had been sent to them and spend some 4 time talking to them about the different -- spend 5 more time with the -- with the attorneys. 6 Q. So, is there a source of information 7 other than your attorneys that you could go to for 8 this information? 9 A. Yeah. I mentioned earlier that I think 10 that, you know, some of the information we 11 provided to FERC in the administrative process, 12 some of the information we provided to FERC in the 13 district court, would be available from -- from 14 the documents we provided to the -- the court 15 itself. We just provided financial statements, I 16 think it's some -- you know, might provide some 17 insight. 18 Q. Is it your testimony that the financial 19 statement that was provided to the court in this 20 matter as part of the recent hearing, that that 21 discloses the recall obligation? 22 A. Does it disclose the recall obligation. 23 I assume it was considered when it was prepared. 24 25 192 1 (Powhatan Energy Fund, LLC Sealed 2 Supplemental Submission was marked R. Gates 3 Exhibit 20, for identification.) 4 BY MR. FERRENTINO: 5 Q. All right, let's talk about it then. 6 I'd ask you to look at Exhibit 20. 7 This one's not Bates labeled because it was not 8 produced as part of discovery in this case. This 9 is something that your attorneys filed with the 10 court under seal. And I'll tell you it's one two, 11 three, four, five -- six pages in total and the 12 first page has a caption that says United States 13 District Court for the Eastern District of 14 Virginia. Again it's Exhibit 20. 15 Do you have that? 16 A. I believe so. 17 Q. All right. I'd ask that you flip to 18 the third page of Exhibit 20, which is entitled 19 "Powhatan Energy Fund, LLC Statement of Assets and 20 Liabilities, August 31, 2021, Unaudited". 21 Do you see that? 22 A. I believe so. 23 Q. All right. And the -- and the first 24 heading here under -- the title is "Assets" and it 25 has two subheadings, "Cash and Cash Equivalents" 193 1 and "Prepaid Equivalents" totaling $386,000 and 2 change. 3 Do you see this? 4 A. I do. 5 Q. Does the -- do any of the assets listed 6 under that heading account for the recall 7 obligation of Powhatan's members? 8 A. I don't know how an accountant would 9 classify a recall obligation. I do believe this 10 document was produced with recall obligations in 11 mind. 12 Q. And why do you have that belief? 13 A. Because it's something that was 14 discussed as -- in general that these documents 15 were produced a decade or so ago that were part of 16 the -- that were filed and given to the FERC. 17 Q. Well, I'm asking about one that you 18 filed with the court in September, the one that's 19 in front of you. How do the assets in Exhibit 20 20 account for the recall obligation of Powhatan's 21 members? 22 A. It's an event -- I -- I don't know 23 exactly the classification or requirements that 24 accountants do -- put on statements, but at some 25 point we thought that -- you know, we still think 194 1 there's a chance that we would be able to sue the 2 FERC in the court of claims for what it's done to 3 us and our business and I feel like at some point 4 I thought of that as a -- as a potential asset, a 5 lawsuit for prosecutorial misconduct, Bevins 6 actions, things along those nature, but that's not 7 specifically described here either, even though 8 that's something else that, you know, we've 9 discussed. 10 So my guess is, certain types of things 11 that could come into fruition could occur at some 12 point down the road don't show up on a financial 13 statement may be based on that probability number 14 that we were discussing earlier. 15 Q. Okay, so I guess -- let's -- let's just 16 establish whether or not it's here. 17 All right, so the recall obligation is 18 or isn't on the financial statement that you 19 submitted to the court? Yes or no? 20 A. The document speaks for itself. 21 Q. So it's not there is what you're 22 telling me? 23 A. I'm saying the document -- that's not 24 what I said. I said the document speaks for 25 itself. It says "Assets," "Cash and Cash 195 1 Equivalents," "386," "Small Prepaid Expenses," 2 "Total Assets". 3 We're looking at the same spreadsheet. 4 You and I can both -- or the same document. You 5 and I can both read it. You and I can both -- 6 we're seeing -- I'm very confident we're looking 7 at the exact same thing. It's pretty simple and 8 straight forward. There's no mice dice. It's not 9 a -- a complicated case. We're looking at the 10 same thing. 11 I'm just suggesting that I don't know 12 what goes into "Cash and Cash Equivalents". I 13 don't know whether it's -- I don't see it 14 specifically enumerated here as a -- as an asset. 15 I don't see a Bevins action or a prosecutorial 16 misconduct also described here as an asset, or 17 court of claims. We've had many attorneys reach 18 out to us about suing the FERC and that's not on 19 this either. But is it considered? Maybe our 20 attorneys and our accountants say it's an unlikely 21 event, so therefore we're going to place the value 22 at zero. 23 I am trying to be very clear. You and 24 I can both read the document. It's on the record. 25 You and I both see it. It's with the court. We 196 1 all see it. 2 Q. My question was is the recall 3 obligation of Powhatan's members accounted for 4 under the heading "Assets" in any way, shape or 5 form? 6 A. I think it was considered when this 7 document was produced. 8 Q. And what value was ascribed to that 9 recall obligation when it was considered? 10 A. I don't know specifically but my guess 11 is zero. 12 Q. Who would know the answer to that 13 question that I just asked, about who would value 14 it? 15 A. Our -- probably my lawyers, a lawyer 16 that we worked with that helped us with the 17 documents. 18 Q. And which lawyer is that, sir? 19 A. We have different attorneys that we've 20 worked with and my brother has worked with them 21 closer. So I -- I don't really know. We have 22 some outside counsel that we worked with -- all 23 outside counsel. LSE doesn't have any internal 24 counsel. But he's worked with different -- 25 different attorneys on this -- on this matter. 197 1 Q. Okay, but I'm asking about the -- the 2 valuation of the recall obligation here. 3 What -- what attorneys have given you 4 an opinion about the value of that -- that asset, 5 so to speak? 6 A. We worked with different law firms to 7 discuss it. There's Steve Soles is an attorney 8 that works, a small firm up here in West Chester. 9 There's a -- a larger firm, Richards Finger Layton 10 is the name of it, in Delaware that we've worked 11 with, and I believe there's even another firm in 12 Delaware that we've worked with that's a little 13 bit smaller that also provided some perspective 14 on -- on -- on different matters with -- with 15 Powhatan. 16 Q. And Mr. Soles is actually the in-house 17 attorney for TFS. Is that accurate? 18 A. I don't know. He -- I can say he was 19 internal for TFS. I don't know his affiliation -- 20 Q. He was general counsel at TFS -- I'm 21 sorry. 22 A. Yes. He was, past tense. I don't 23 believe he is any more. 24 Q. All right. So Mr. Soles has had input 25 into the -- the risk here. Is that right? And 198 1 you mentioned Richards Layton and Finger. Is that 2 the firm that you retained in Delaware? 3 A. I don't know who retained them, but 4 they -- I believe that we've communicated with 5 that firm. I don't know whether I have the names 6 right. I think there is -- might be Finger 7 Layton, Finger Layton. I'm not really sure. But 8 it's a larger firm based in Delaware that does 9 work with -- with business entities in Delaware. 10 Q. Did -- did they participate in the 11 preparation of Exhibit 20 -- these -- these 12 attorneys you mentioned? 13 A. I don't recall specifically. I believe 14 that their guidance -- that we received guidance 15 from different firms through the years that helped 16 us prepare these financials. 17 Q. I'm -- I'm not asking about through the 18 years, sir. I'm asking about Exhibit 20. 19 Do you know whether or not any of the 20 lawyers that you mentioned in your testimony today 21 participated in the preparation of Exhibit 20? 22 A. I believe that -- so I'm trying to be 23 very clear with you. I believe that we talked to 24 different lawyers and some of them very recently, 25 last several months, about bankruptcy and other 199 1 things, and we've talked to them about -- about 2 the fund and the financials. 3 When you say did they help prepare, I 4 don't know exactly what you mean, but were they, 5 you know, typing numbers into a spreadsheet or are 6 they just providing guidance? I think it was more 7 the latter where they were providing legal 8 guidance that -- and -- and ideas. But it's an 9 unaudited statement clearly defined here. So 10 it's -- you know, they didn't -- the firms aren't 11 auditing these statements but I think their input 12 was considered when preparing these documents. 13 Q. And who prepared the documents in - in 14 Exhibit 20? 15 A. Who prepared it? Well, Patrick our 16 prior attorney submitted it I assume, but, you 17 know, some pieces on it, maybe the confidential 18 filed under seal, things like that, the numbers, 19 the actual -- the meat of the document was 20 probably run internally by an accountant here that 21 kind of manages some of the -- the information 22 that we submit to the RTOs on our other business 23 or Elmagin Capital. 24 Q. So, your accountant at Elmagin Capital, 25 that's Tabitha Holden? 200 1 A. Correct. 2 Q. Is Tabitha Holden aware of the recall 3 issue we've discussed today? 4 A. I believe so. 5 Q. Has anyone ever provided her the 6 documentation of the recall obligation or the 7 spreadsheet that we examined in one of the 8 previous exhibits showing a $4,300,000 recall 9 obligation? 10 Has she -- has she seen those? 11 A. I don't recall what she's seen, what 12 she hasn't seen. That spreadsheet was a point in 13 time very early on when we assumed that this -- 14 this case would not proceed as far as it has. 15 But I -- I don't know what -- I can't 16 speculate what she has or has not seen. 17 Q. Did you ever provide her with any -- 18 any records to substantiate the existence or the 19 amount of the recall obligation? 20 A. I believe it may have been discussed. 21 I don't recall specifically. 22 Q. When you say you believe -- you believe 23 it may have been discussed, when would those 24 discussions have occurred? 25 A. Sometime in the last two years. 201 1 (5/11/11 email and attachment from 2 Kevin Gates to Richard Gates, Bates stamped 3 POWDC_5920 to 5922, was marked R. Gates Exhibit 4 21, for identification.) 5 BY MR. FERRENTINO: 6 Q. All right, Mr. Gates, you can put 7 Exhibit 20 aside for the moment. 8 I just ask you to pick up Exhibit 21, 9 which is -- begins on Bates page 5920 and it 10 continues through the next -- it has four pages in 11 total, one of which is a spreadsheet that I'm not 12 going to ask any questions about, and it doesn't 13 have a Bates page. 14 Do you have it? 15 A. Yes, I believe so. Seventy-four -- 71 16 to 74 of the PDF. 17 Q. All right. So, I'm looking at an email 18 from Kevin to you and others at TFS Capital. The 19 subject is "Powhatan" and the date is May 11, 20 2011. 21 I won't read the whole thing to you, 22 but in exhibit -- excuse me, in bullet point four, 23 Kevin writes, "Still remember that the money that 24 Powhatan returned to you last year is at risk and 25 there's a chance that FERC could ask for it all 202 1 back. I think that this risk is very small but it 2 should be remembered. We are still waiting to 3 hear" -- or excuse me, "We are waiting to hear 4 back from the FERC". 5 Did you hear that? Did I read that 6 correctly? 7 A. I believe so. I wasn't following it 8 word for word but it seems correct. 9 Q. All right. Mr. Gates, my question is 10 this, the risk that Kevin is talking about in this 11 sentence, in this paragraph rather, that's 12 actually materialized, right? FERC has indeed 13 asked for all the money back from Powhatan that 14 was distributed in 2010, right? 15 A. I don't know. I mean. It still 16 materialized. 17 So FERC can't ask for the money back. 18 It has to be LSE asking for the money back. LSE 19 doesn't have to do -- it can do what it wants. 20 And I don't know that the -- the -- FERC did ask 21 for it all back. It's almost a decade later after 22 the -- - 23 Q. How much -- do you remember 84 how much 24 money FERC has asked Powhatan to pay in civil 25 penalties and disgorgement? 203 1 A. I'm sorry, can you repeat the question, 2 please. 3 Q. Do you remember how much money FERC has 4 asked Powhatan to pay in civil penalties and 5 disgorgement? 6 A. I believe the total number across all 7 defendants is like 35M. 8 Q. All right. 9 A. And I don't know what percentage of it 10 is from Powhatan or the other entities. But rough 11 rough 35M, 34, 35, something like that. 12 Q. And that relates to trading that Alan 13 Chen did for Powhatan in 2010, right? 14 A. Somehow it -- I believe it does relate 15 to that trading that Alan did on behalf of -- Alan 16 or his funds did on behalf of Powhatan. 17 Q. And you could easily direct LSE Capital 18 Management to recall the money from you, from 19 yourself, right? You're on both sides of that 20 transaction. Couldn't you do that? 21 A. I don't know what the terms of the 22 operating agreement are. I don't know if I own 23 50% and Kevin owns 50%. I say yes, he says no. 24 I -- I don't really know what -- 25 Q. All right. So let's say that you and 204 1 Kevin are of the same mind and you -- you control 2 LSE, you have LSE issue an instruction to Powhatan 3 or to the partners of Powhatan, which are 4 yourselves, to put money back into Powhatan. 5 You have that power right now, right? 6 A. I don't know. I mean it's 7 attorney/client privileged communication. I don't 8 know whether I have that power. 9 Q. You don't know whether one business you 10 control with your brother can direct another 11 business you control to receive money from the two 12 of you? That's -- that's something you need to 13 consult with your attorneys on? 14 A. I don't know that -- to be clear, I 15 don't know that LSE has that power. 16 In other words, if I -- for instance in 17 the example -- in the discussion we started going 18 down before, if I wanted to do it and Kevin 19 didn't, and we said what does the -- what do the 20 lawyers say, my sense is Kevin would win in 21 that he -- they would say you don't have to -- you 22 don't have that power. 23 Q. Right, but -- but the power -- the 24 power sits with you and Kevin and not anybody 25 else, correct? 205 1 A. No. The power sits in the agreements. 2 He power sits in other things other than us. The 3 power sits in the law. 4 Q. Okay. Who are the parties to the 5 agreement at this point? 6 A. The -- the power sits in the 7 interpretation of the agreements. I'm not sure 8 who it is, but it's -- my friend says it's Kevin 9 and I with the economic interest entities that we 10 control, wives, things of that nature. But what 11 I'm suggesting is I don't know that these 12 agreements are enforceable. I don't know that 13 the -- the courts -- that they -- they're 14 meaningful. 15 So in other words, you could have a -- 16 an agreement -- you and I could write an agreement 17 saying, "Josh, I'd like you to pay me $5M whenever 18 I ask for it," if you and I both sign it, does 19 it -- if -- and then in a month later I call you 20 up and say, "Josh, where's -- I'd like my $5M 21 now," and you say no, I don't know that that 22 agreement can be enforced. I don't know that 23 there's anything that could be done. 24 Q. But -- but if -- but if you're on both 25 sides of the transaction, enforceability isn't 206 1 really the issue, is it? Because you're -- you 2 can always direct a business that you own to make 3 a recall obligation to yourself? 4 A. I can always invest in -- 5 Q. If you and your -- if you and your 6 brother agree, there's no one else in the world 7 that needs to weigh in on that. Is that -- isn't 8 that right? 9 A. Yes, but it wouldn't happen that way. 10 It wouldn't be one business saying I want you to 11 invest, this other -- you know, the left hand 12 asking the right hand for something, the right 13 would just give it to the left hand. 14 Yes, my left hand and my right hand can 15 work together. My businesses can work together. 16 I can reallocate capital as I see fit. But why 17 not -- 18 Q. I agree, you can reallocate capital as 19 you see fit. That's -- that's my point. 20 There's no third actor here that needs 21 to weigh in on this decision. Isn't that right? 22 A. I can invest, make my investments of my 23 own accounts and things that I control as I see 24 fit and as described in the operating -- in the 25 documents. 207 1 Q. And if you -- if you chose to have LSE 2 Capital Management, you and Kevin chose to have 3 LSE Capital Management exercise the recall 4 obligation that we've been discussing, there's no 5 other person other than you and Kevin that would 6 have to weigh in on that decision. 7 Isn't that right? 8 A. I think I would talk to my attorney to 9 say, am I allowed to execute -- act on something 10 that is not legally enforceable. They may say, 11 no, that's not the way to do it, Rich. The -- the 12 attorney may say, why don't you just have some 13 other investment -- some other account make an 14 investment into LSE. 15 Q. But -- but you would be free to ignore 16 that advice, because there are no lawyers that are 17 owners or members of either Powhatan or LSE 18 Capital, right? 19 A. I could but I generally don't like to 20 ignore lawyers' advice. If they say something I 21 am inclined to follow it. 22 If they're saying that -- you and I -- 23 in the hypothetical that I provided earlier, you 24 and I signed an agreement saying you give me $5M 25 whenever I ask for it, and I call you up and say, 208 1 hey, I'd like my 5M, you might be in trouble by -- 2 you know, I might get -- it might not be good -- 3 it might not make sense some point down the road 4 that transaction might be unallowed. 5 The IRS, somebody might come to us and 6 say, hey this wasn't a -- a legitimate agreement; 7 Rich, you didn't have the right to ask Josh for 8 his 5M and because of that it would be much more 9 headaches would ensue, and it's not worth 10 enforcing agreements that are meaningless. 11 Q. So it's your position that the recall 12 obligation agreement that every partner at 13 Powhatan signed is legally meaningless? 14 A. I've had various conversations with -- 15 with attorneys. It's a legal document. I'm just 16 a business person. I don't understand the law, 17 but I -- that well, but I rely on attorneys and I 18 follow their guidance. 19 Q. That was a nonresponsive answer. 20 So, yes or no, you believe that the -- 21 the recall obligation that applies to Powhatan's 22 members who receive distributions is legally 23 meaningless? Yes or no? 24 A. I don't believe I ever said that. 25 MR. PERKINS: Object. Hold on. Hold 209 1 on, Rich. 2 I'm going to object to the extent it 3 calls for a legal conclusion but you go ahead and 4 answer it if you think you can. 5 THE WITNESS: Yeah, I'm not a lawyer. 6 I don't under -- understand what you're -- what 7 "legally meaningless" means, but I will say that 8 I -- I don't believe I ever described it as a 9 meaningless. 10 I'm just -- my hypothetical example 11 that I have gave you of you and I signing an 12 agreement for $5M, that's a meaningless agreement. 13 That's where the -- I think the word meaningless 14 showed up in this conversation. 15 But, no, I don't think it's 16 meaningless. We've talked to real attorneys about 17 it. We've talked to people. We've spent time 18 evaluating it. It -- there's something. There 19 are documents. They've been given to -- you know, 20 we see them here. So it's not meaningless, but 21 it's -- it's something -- I have to follow my 22 attorney's guidance. So I generally like to 23 file -- follow their guidance. 24 BY MR. FERRENTINO: 25 Q. As a business person -- 210 1 A. But if that isn't the case -- 2 Q. As a business person, what value do you 3 ascribe to the recall obligation as you sit here 4 today? 5 A. The value to -- to LSE and provide 6 value to Powhatan? The value to who? 7 Q. The value to Powhatan. What's the 8 value to Powhatan of the recall obligation as you 9 sit here today? 10 A. Small. 11 Q. How small? 12 A. I don't know. I don't know how small, 13 but I -- but I don't think it's -- Powhatan 14 doesn't -- yeah, doesn't think about that too 15 much. It's -- it's closer to going bankrupt I 16 think. 17 Q. So, you believe Powhatan is close to 18 going bankrupt but it has a recall obligation to 19 you and Kevin of somewhere up to $4M. 20 That's your testimony? 21 A. No, I don't believe I said that. 22 Q. Just trying to summarize. 23 A. I don't think that's an accurate 24 summary. 25 Q. What do you disagree with? 211 1 A. I've said it multiple times and 2 you're -- you're mischaracterizing my testimony. 3 It's LSE has -- is the one that was 4 party to this agreement. It's not Powhatan. And 5 it's my understanding that the $4M was as of a 6 point in time in one email that you showed me from 7 a number of years ago, five or six years ago, from 8 one spreadsheet. We talked about additional 9 contributions that I told you that we put back 10 into the fund that could have been -- to be 11 considered. 12 I've made a number of statements to you 13 that you knew that that -- your summary wasn't 14 characterizing my testimony or should have known. 15 Q. So an entity that you control, Powhatan 16 Energy Fund, will go bankrupt because you refuse 17 to exercise recall obligations that you yourself 18 have. 19 Is that -- is that fair? 20 MR. PERKINS: I object to the form of 21 that question? 22 THE WITNESS: I don't -- I don't -- 23 that's not a -- a summary. When you're saying 24 "you," it's -- again it's -- it appears that it's 25 LSE that is party to this agreement. 212 1 I don't believe -- in the example that 2 I provided to you, if you and I sign a document 3 saying you give me five million, if it's not a 4 valid contract, it's not a valid contract. 5 If we find out there's prosecutorial 6 misconduct, that exculpatory information was hid 7 from us, you know, the monies could come back into 8 the fund to pursue some sort of litigation but I 9 don't believe it would be for a recall obligation. 10 I think we would just reinvest in the fund. 11 BY MR. FERRENTINO: 12 Q. So you would -- you would put money 13 back in the fund only if there was a finding of 14 prosecutorial misconduct in this case? 15 A. I didn't say that. 16 Q. Okay, I'm just trying to clarify what 17 you said. 18 A. That's not what I said, so. 19 Q. So under what circumstances would you 20 return money taken out as part of redemption to 21 Powhatan? 22 A. It wouldn't be returning money, it 23 would be fresh capital that would come in. So I 24 don't know that we would invest in the fund. It 25 wasn't to me and didn't mean a return. It was 213 1 just, you know, investments could be made into the 2 fund. That was just one hypothetical. 3 MR. FERRENTINO: All right, this is a 4 good time to take a break. Why don't we take 5 until 3:15 if we could. 6 THE LEGAL VIDEO SPECIALIST: Okay, this 7 is the end of media number four. We are off the 8 record at 3:09 p.m. 9 (Recess taken.) 10 THE LEGAL VIDEO SPECIALIST: Okay, this 11 is the start of media number five. We are back on 12 the record at 3:16 p.m. 13 MR. FERRENTINO: Thank you. 14 (4/9/14 email from Kevin Gates to Tom 15 Schoenberg, Bates stamped POWDC_9077 to 9079, was 16 marked R. Bates Exhibit 22, for identification.) 17 BY MR. FERRENTINO: 18 Q. Mr. Gates, could you turn to Exhibit 22 19 in your pile of documents, please. And for the 20 record this is a three-page email conversation 21 that begins with the Bates number 9077, ends with 22 the Bates number 9079. 23 A. Okay. 24 Q. I'll give you just a moment to review 25 the document. I think all the substance is on the 214 1 first page and a little bit on the second page. 2 (Witness peruses document.) 3 A. Okay. 4 Q. Mr. Gates, who is Tom Schoenberg? 5 A. I believe he's a member of the media or 6 is or was -- probably was, past tense. Maybe 7 still is. 8 Q. I'm sorry. I think you -- you broke up 9 there and I didn't hear the end of your answer, 10 sir. Could you repeat what you said. 11 A. I believe Tom is or was a member of the 12 media. 13 Q. Did you speak to a lot of members of 14 the media after 2010? 15 A. Yes. 16 Q. All right. This an email between Mr. 17 Schoenberg and your brother Kevin and you're 18 copied, and in the top email it appears that Mr. 19 Kevin Gates is correcting the facts in Mr. 20 Schoenberg's news article or something to that 21 effect, but Kevin Gates says, "Also, to be clear, 22 Powhatan is unaffiliated with TFS Capital. Can 23 you please make that clear. We've never invested 24 our clients' money in the power markets, just Rich 25 and I, our spouses, some of our friends, et 215 1 cetera, have made personal investments in the 2 power markets". 3 Do you agree with your brother that 4 Powhatan Energy Fund is unaffiliated with TFS 5 Capital? 6 A. Unaffiliated. So, I don't remember -- 7 I don't remember these emails. I don't remember 8 receiving a copy of it. You ask me to 9 speculate -- or speculate what Kevin was thinking 10 at a point in time that was more than seven -- 11 Q. No, no, sir. Let me -- let me stop you 12 right there. To be clear I am not asking you to 13 speculate. 14 I'm asking whether you agree with 15 Kevin's statement on the face of this document 16 that Powhatan is unaffiliated with TFS Capital. 17 Is that a true statement or an untrue 18 statement, sir? 19 A. I don't know what Kevin meant by 20 "unaffiliated". 21 Q. What does it mean to you? 22 A. It can mean different things at 23 different points in time. 24 Q. What does it mean in the context of 25 Powhatan and TFS? 216 1 A. It depends on who I'm talking to and 2 when I'm talking to them. 3 Q. All right. Why would it be important 4 for a reporter to make -- a distinction between 5 TFS -- excuse me, make -- make the unaffiliation 6 (sic) of Powhatan and TFS clear? 7 A. "Why would it be important". 8 I don't know the -- the context of this 9 email or what communications took place. I don't 10 know anything surrounding this communication. 11 Maybe Tom left him a voicemail and said 12 Powhatan is owned by TFS Capital. It's one of the 13 funds he managed. And Kevin is writing back and 14 saying, no, it is not managed by TFS Capital; it's 15 not one of our mutual funds. 16 I don't know what the context is of 17 this email. 18 Q. Were you concerned that the media -- in 19 2014 were you concerned that the media not suggest 20 that Powhatan was affiliated with TFS Capital? 21 A. When you say "not affiliated," what do 22 you mean. 23 Q. Any sense. Were you concerned that 24 that affiliation be disclaimed? 25 A. In any -- any reasonable definition of 217 1 the word affiliated? Yes. I thought that the 2 allegations that FERC made would caused adverse 3 harm to TFS Capital which did come to fruition and 4 came to fruition rather nicely. FERC had seceded 5 and it seemed like harming us with these 6 allegations, even though we -- we created a 7 website and made a nice video to help educate the 8 world on what the allegation's been. 9 Q. And you've talked to dozens of members 10 of the press about your case, even before the 11 allegations were public, right? 12 A. I don't recall. 13 Q. Kevin says, "We've never invested our 14 client' money in the power markets. Just Rich and 15 I, our spouses, some of our friends, et cetera, 16 have made personal investments in the power 17 markets". 18 As of April 2014 when this email was 19 written to Mr. Schoenberg, is that a true 20 statement? 21 A. That is a true statement that that's 22 what he wrote. Yes, I think you read it 23 precisely. 24 Q. Yes, and so who were the friends 25 referred to by Mr. Gates, Mr. Kevin Gates, excuse 218 1 me? 2 A. I don't recall, I -- I don't know. I 3 can't speculate what he meant at that time. 4 Q. Are you aware of any friends of yours 5 who were investing with you in the power markets 6 that were not TFS owners or employees in 2014? 7 A. Alan Chen invested alongside of us in 8 the -- the power markets, we managed -- he managed 9 money traded alongside it. You know, and we're 10 not -- I don't even what investing means. It 11 means that we're investing alongside somebody? 12 Alan Chen was the trader. We've 13 invested alongside other people in -- in the 14 markets. I believe Bill McSwain, our former 15 attorney, invested in a fund that somebody 16 managed. But I've invested alongside other people 17 frequently. 18 Q. All right. So in Powhatan, Alan Chen 19 was the manager, right? 20 A. Alan -- we had -- so Powhatan is 21 managed by LSE Capital Management which helps 22 execute an advisory agreement with Alan Chen 23 and/or one of his funds -- I'm not sure if it was 24 Alan or Heep Fund or who executed the trades, who 25 was party to the contract -- but ultimately Alan 219 1 was responsible for -- either he was individually 2 or through one of these entities -- responsible 3 for placing, aligning, organizing his trades. 4 Q. Okay, so he's the investment -- to use 5 the colloquialism, he's the investment manager of 6 Powhatan Energy Fund, right? He directs the 7 investments -- 8 A. I would use that definition. That's 9 not an unreasonable way to use that term. 10 Q. Okay. So who were the other friends of 11 yours involved in Powhatan Energy Fund? Kevin. 12 Chao Chen? 13 A. In the -- in the Powhatan Energy Fund? 14 I would assume it was Chao. I think Mike 15 Frederick. Sam Harris -- I don't believe Sam and 16 Mike were owners of -- had equity in TFS at the 17 time. It could have been their spouses. I 18 think -- 19 Q. What about Mr. Sekelsky? 20 A. I believe he had like -- at some point 21 he had a phantom equity agreement with TFS. My 22 guess is it was probably 2014 he had a phantom 23 equity agreement, which is not really equity, not 24 an owner, but he has the right to convert to 25 ownership. 220 1 Q. Let -- let's just start with who owned 2 Powhatan first. All right. Let's knock that list 3 out, and then we can go to the ownership of TFS. 4 Hold on a second. 5 So in Powhatan you had Kevin, Rich, 6 Chao Chen, Mike Frederick, Greg Sekelsky, Larry 7 Eiben and Eric Newman? 8 Is that -- does that sound like the 9 right list of people that are invested in 10 Powhatan? 11 A. Economic interest. I don't know 12 whether it was them directly, spouses, something 13 like that. 14 Q. Sure. 15 A. But yeah, that sounds like -- each one 16 of those individuals I think had economic interest 17 in -- in Powhatan. 18 Q. And I think you mentioned Sam Harris as 19 well. 20 A. Correct. 21 Q. Okay. Any of the people that we just 22 mentioned as being owners of Powhatan, are any of 23 those people in 2014 employees or members of TFS 24 Capital? 25 A. Are any of them employees or members -- 221 1 I believe they were all employees and/or -- and 2 members -- yeah, and/or members. 3 Q. Okay. Are there any other friends, to 4 use Kevin's term, who were invested in Powhatan? 5 A. I don't know that -- so when I read 6 this email and the term "friends," it could be 7 Bill McSwain. When it says, "we've never," I 8 don't know who Kevin is talking about with "we". 9 Is "we" Powhatan? 10 Q. Did Bill McSwain invest in Powhatan? 11 A. No. 12 Q. Did any of your attorneys invest in 13 Powhatan? 14 A. No. Rather the list that we already 15 went through I believe is a comprehensive list. I 16 believe you and I both know exactly who -- or 17 could have access to exactly who was in Powhatan. 18 But when I got interrupted I was 19 starting to provide a little bit more clarity to 20 try to help out and that is when I read this email 21 at this point in time, that was sent over seven 22 years ago, he uses the term "we," "we've never 23 invested our clients' money". That to me is very 24 general. I don't know whether he's talking about 25 the Gates brothers. I don't know whether he's 222 1 taking about TFS. I don't know whether he's just 2 talking about Powhatan. He could be talking about 3 Huntrise Energy Fund. He could be talking about 4 other investments that we've made through the 5 years in this -- in this business. 6 I think his point is, you know, if I 7 were to speculate of what Kevin meant at this 8 point in time in this email, it's just that we 9 never received a -- like an advisory fee from -- 10 from the asset -- at that point in time, a fee or 11 a compensation for managing other money in the -- 12 in -- in the power markets, and I think that was 13 the point he was trying to get across in this 14 email. I don't understand the context of it, but 15 it's -- it's -- that's the way I would speculate 16 now just based on looking at this -- this one -- 17 one exchange. 18 Q. Did you or Kevin ever tell Mr. 19 Schoenberg that TFS was by this date, the date of 20 this email, excuse me, 2014, that TFS Capital was 21 paying %75 percent of Powhatan's legal expenses? 22 A. I don't remember. 23 Q. Is it likely that anyone ever disclosed 24 that fact to Mr. Schoenberg? 25 A. I -- I can't speculate, or shouldn't 223 1 speculate. I don't want to speculate. 2 Q. Did anyone ever disclose to Mr. 3 Schoenberg that all of the people who were 4 invested in Powhatan as of 2014 were either TFS 5 owners or employees? 6 A. I -- I think it might have been public 7 at that point. 8 Sure, I mean, a lot of the -- the 9 problem with the FERC's allegations, and I think 10 part of the reason maybe some of this goes to the 11 direct violation, you name people in the -- you 12 know, so we've talked to some of the other 13 victims, their concern with the -- with process -- 14 they've got a lot of concerns, but one of them is 15 that the allegations themselves, even if they're 16 unfounded, can cause severe harm. 17 So I read this email and I feel like 18 Kevin is being very up front with Tom. He's 19 making it clearly that he's -- you know, my guess 20 is Tom knew exactly -- you know, he probably could 21 have found the names of the investors. There was 22 some article in the local paper that mentioned, 23 you know, our spouse's names and, you know, it 24 seemed like that's what FERC was trying to do. 25 So I don't think anybody was running 224 1 away from it. I think we were kind of trying to 2 embrace the idea that FERC was trying to, you 3 know, destroy reputations or business interests by 4 unfounded allegations and we were trying to 5 embrace it and say, look, this is a -- you know, 6 there is -- you know, my guess is it's -- it's 7 common ownership and it was known at that time and 8 I -- my guess is we would have -- probably 9 wouldn't have minded telling me that, yes, we're 10 worried about these -- the damage that FERC's 11 unfounded allegations would have on TFS and our 12 other businesses. 13 Q. All right, so I understand your -- I 14 your speculation about the intention of this -- 15 this email. But to your knowledge no one ever 16 told Mr. Schoenberg that all of the actual owners 17 of Powhatan were TFS employees or owners, right? 18 A. Oh, gosh. I -- I don't ever remember 19 saying that. I don't know whether that's a 20 statement that I've made. 21 Q. All right. And, you know, to your 22 knowledge Mr. Kevin Gates never said anything 23 about it either, right? 24 A. I don't know. I mean, I don't -- I 25 don't know -- you know, I don't believe I've 225 1 opined. In fact I probably said the opposite, 2 that it's very possible that they talk about it 3 and that these allegations were in the public 4 domain. I mean, the ownership of TFS is -- the 5 names of the -- TFS, all these people were on the 6 TFS Capital website I believe and I think they're 7 specifically named in certain FERC filings. 8 So I don't think there's anything that 9 we're doing to -- that's -- that's trying to hide 10 that. We were emailing him about FERC from TFS 11 accounts. I mean, I don't think there's -- I 12 think we're embracing the fact that FERC can and 13 in fact did do severe damage to TFS because of 14 this investigation. 15 Q. What was the damage that -- what -- you 16 keep talking about damage that FERC did to TFS. 17 What was the damage that FERC did? 18 A. It was like, this whole investigation 19 was like dropping a bomb, a nuclear bomb in the 20 middle of our partnership. Allegations like this 21 destroyed careers, destroyed lives, destroyed 22 partnerships, destroyed lifelong friendships. 23 Q. Who -- what lifelong friendships were 24 destroyed by FERC's allegations? 25 A. I think some of the former partners at 226 1 TFS. Once these allegations came out, everybody 2 had different responses to it. People stopped 3 communicating. 4 You know, there was, you know -- I 5 think that, you know, Gree Hat, somebody just 6 jumped off a bridge, right? A whole bunch of 7 friendships, lifelong friendships ended when that 8 man died, before he got a trial, right? So 9 there's -- there's some ones right there. 10 There's other people who -- you know, 11 it was quoted in the media that Alan Chen doesn't 12 go out a lot, he doesn't talk to people, he's 13 humiliated. I mentioned early in this deposition 14 he's a broken man. 15 When a -- a regulatory agency breaks 16 somebody, it destroys their relationships. I know 17 of divorces that have happened as a result of your 18 FERC Office of Enforcement, and -- and that's a 19 lifelong friendship. 20 Unfounded allegations, the power that's 21 yielded in your office is -- is immense. 22 Q. So what was it about the response to 23 FERC's allegations that caused your lifelong 24 friendships ships to end or lifelong friendships 25 within TFS to end? 227 1 A. When we sent documents, position paper 2 to FERC, and we said look, here's a couple of 3 position papers from experts, you know, binder 4 full of attachments, and we got a call back the 5 following business day from Tom Olsen and Steve 6 Tabackman saying we've taken everything out of 7 context and we're wrong, it terrified some of our 8 partners. 9 If you don't have the financial ability 10 to stand up to allegations like this, it's -- it 11 can be terrifying. There are people -- there are 12 lives that have been upended from these 13 allegations and people who have settled with -- 14 with FERC. 15 So people -- you know, that very 16 specific example with Tom Olson and Steve 17 Tabackman called our attorneys back in 2010, '11, 18 I forget when and said, you know, they had taken 19 our position papers and dismissed everything, we 20 knew that this had nothing to do with the law, 21 that this had everything to do with, you know, 22 that -- it was an agency that had run amuck. 23 Q. Were your -- some of your partners at 24 TFS upset about the amount of money that TFS was 25 defending to spend Powhatan -- to defend Powhatan? 228 1 A. I don't recall specifically but there's 2 all kinds of -- of conflicts. People don't like 3 seeing their name in the paper. People run for 4 cover. There's -- we saw settlements with other 5 agencies, Constellation, where they had this 6 merger language, and we realized, okay, the FERC 7 doesn't care. They -- they want a headline for 8 market manipulation and even if it's something 9 that has to do what I believe with regulatory 10 extortion to allow Constellation to merge with -- 11 with Exelon, they'll do it, even though traders 12 were specifically named. 13 Q. Is that why TFS was paying such a large 14 share of Powhatan's legal fees, starting in 2012? 15 A. I don't know that the terms of the 16 agreement. I don't know that I was intimately 17 involved in it, in structuring payment, but I know 18 the firm overall felt like it made sense to pay 19 legal fees as a result of these allegations 20 because we were managing money for retail people, 21 and allegations, whether they're false or not, can 22 cause severe reputational risks. 23 So, for -- there was an agreement, I 24 believe, that was in place between the two 25 entities, or multiple agreements, and one of the 229 1 things that were considered from the business 2 standpoint is the damage that would be done to -- 3 to TFS was a result of these -- FERC's 4 investigation. 5 Q. Approximately how much money did TFS 6 spend to benefit Powhatan? 7 MR. PERKINS: I'm sorry, can you 8 clarify? I'm going to object to the form but you 9 said -- you said to benefit Powhatan? 10 MR. FERRENTINO: Yes. 11 MR. PERKINS: Rich, if you understand 12 what that means... 13 THE WITNESS: Yeah, I -- thank you, 14 Chris. I don't understand. 15 I assume that what Josh is looking for 16 is how much money did -- as a part of this -- you 17 know, these different relationships that the two 18 businesses had, how much money did TFS spend in 19 this -- in these relationships between the two 20 entities. And the answer is I don't know. My 21 guess is north of $1M. 22 Q. Is it less than $2M? 23 A. I don't recall. 24 25 230 1 (2/16/12 email from Richard Gates to 2 Greg Sekelsky, Bates stamped POWDC_5465 to 5466, 3 was marked R. Gates Exhibit 23, for 4 identification.) 5 BY MR. FERRENTINO: 6 Q. I'd like you to go to Exhibit 23, sir. 7 That is a two-page email. It ends in Bates page 8 five four -- excuse me, the first Bates page ends 9 in 5465, continues to 5466. All the substance is 10 on the first page. 11 (Witness peruses document.) 12 A. Okay. 13 Q. All right, in the first email, it's an 14 email from Greg Sekelsky to you and Eric Newman, 15 and he says, in the middle of the first email, 16 "The reason for the estimate issue was unforeseen 17 legal fees, TFS's portion for the FERC 18 investigation. It wasn't really known until we 19 got into November, December. Probably had in the 20 range of 1M in expense". 21 And you respond, "I'm not really 22 worried about something else, 'but is it weird 23 that TFS is paying for FERC's investigation 24 instead of Powhatan,' and it's bold in the 25 original?" 231 1 Did you think in 2012 that it was weird 2 that TFS was paying for FERC's investigation of 3 Powhatan? 4 A. I don't recall thinking that. 5 Q. You wrote -- you wrote in the email, 6 you were at least asking the question if it would 7 be weird. I'm wondering if you could shed light 8 on why it might have been weird to you in 2012. 9 A. I don't remember this email. I'll note 10 that I even spelled Powhatan incorrectly in the 11 email. I wasn't following this -- part of the 12 business very closely. 13 It might have been related to an 14 agreement. Maybe I understood that TFS would be 15 paying at some point and FERC was -- and Powhatan 16 was paying in another point. I don't 17 understand -- I don't have enough context or 18 recollection of what happened over nine years ago 19 with this email, but it is -- does seem to me at 20 this point in time that I was asking something 21 about the relationship between the two entities. 22 My sense is I just wasn't involved in 23 those discussions. I was working on other matters 24 for -- for TFS. 25 Q. Did you ever become comfortable with 232 1 the cost-sharing agreement to believe it was okay? 2 A. I don't know that I ever thought it was 3 not okay. So, I mean, I don't understand that 4 your -- your -- your question seems to imply that 5 I thought it was not okay, which I just think is 6 an inappropriate assumption. 7 Q. Okay. But you're the one who said 8 here, "Is it weird that TFS is paying?" So 9 presumably you thought there was some weirdness, 10 enough to inquire of TFS' accountant, right? 11 And I -- I guess my question is, did 12 you ever get an answer to your question about the 13 weirdness, enough to satisfy you that this is 14 okay? 15 A. I have no recollection. I have no 16 recollection about this question and the question 17 could have been as simple, as I thought it was 18 going to start in June or I thought that at the 19 end of the year we would have a true-up and we 20 would pay for it at the end of 2000 annually. I 21 have no context with which to interpret this 22 question. It's not even a statement. It's just a 23 question that you're asking me to make assumptions 24 about. 25 But there's a whole -- whole range of 233 1 things that could explain this question that also 2 support my idea that I never thought there was 3 anything weird about the two partnerships working 4 together. 5 (1/2/18 email from Kevin Gates to 6 kevin@pufferfish.org, Bates stamped POWDC_11974, 7 was marked R. Gates Exhibit 27, for 8 identification.) 9 BY MR. FERRENTINO: 10 Q. Okay. Would you turn, please, to 11 Exhibit 27. That's a single-page email from Kevin 12 Gates to kevin@pufferfish.org. The Bates page 13 numbering ends in 1974. 14 (Witness peruses document.) 15 A. Okay. 16 Q. All right, and this looks to me like 17 one of many email updates that Kevin occasionally 18 sends out to people that are interested in your 19 case. 20 Is that right? 21 A. I don't know what it looks like to you. 22 I can't opine. 23 Q. Okay. Does Kevin regularly send 24 updates about the FERC case to interested persons? 25 A. "Regularly". I would use the term 234 1 periodically. 2 Q. Okay. How periodically does he do it? 3 A. It varied over time. I think he sent 4 one out earlier this year and I think the one 5 prior to that was a couple years ago. 6 Q. About how many people get the update 7 that he sends? 8 A. Like several hundred. 9 Q. All right. And this is an email from 10 2018 that Kevin wrote and I'm looking at the 11 second paragraph, "Remember what you were doing in 12 the summer of 2010. While you were doing that 13 Alan Chen and Powhatan were trading power at PJM. 14 The trading strategy was simple: Alan submitted 15 trades that collected rebates that PJM offered. 16 "The FERC now wants to -- now calls 17 them fraudulent wash trades while any entry-level 18 trader could identify them as common spread 19 trades, and the FERC wants us to pay a fine of 20 34M". 21 I want to focus your attention on the 22 sentence in the middle, "The trading strategy was 23 simple: Alan submitted trades that collected 24 rebates that PJM offered". 25 Do you agree that that's an accurate 235 1 summary of Alan Chen's trading strategy for 2 Powhatan? 3 A. That -- I think there's many accurate 4 summaries. I think that is one of many accurate 5 summaries. 6 Q. How many accurate summaries are you 7 aware of that -- 8 A. Oh, gosh. Yeah, I could probably 9 rattle off a -- a handful. 10 Q. Okay, well, but -- but what your 11 brother wrote here is accurate to your eye, right? 12 A. Yeah. It says it's a -- it's an 13 accurate summary but it's one of many accurate 14 summaries describing what took place. There's 15 lots of different ways to describe an event. We 16 were writing a short newsletter. This is one 17 accurate description. 18 Q. Kevin writes that an entry-level trader 19 could identify Alan Chen's trade as, quote, 20 "common spread trades". 21 I think we already talked about spread 22 trades, but in the context of a trading strategy 23 designed to collect rebates, what's the spread 24 that one would profit from? 25 A. So there's different things that you 236 1 can profit from in this. One, if you have one 2 leg -- there's all different types of trading that 3 took place, all kinds of risks that were hedged 4 out. I can't classify all of Alan's Chen's 5 trading into one example but the -- the common 6 denominator is they all took risks and they're 7 all -- not all, but my guess is most of them 8 frequently had some portion of -- some portion of 9 their risk that was hedged out by another 10 position. 11 Q. Is the rebate considered part of the 12 spread, in your view? 13 A. The rebate is considered part of the 14 trades. I don't know -- when you're saying 15 "spread," I don't know what that means. To me 16 spread trade is a -- is a term that's used 17 together. I don't know what spread is by itself, 18 but a spread trade is a trade that would consider 19 rebates, absolutely. 20 Q. Okay. So let's -- let's look at the -- 21 the "to" line at the top of the email. It looks 22 like Kevin sent this to an email, 23 kevin@pufferfish.org. 24 Is pufferfish.org the domain name for 25 the Pufferfish Foundation? 237 1 A. I don't know. I think at one point it 2 was but I don't know if it still is. 3 Q. What's the Pufferfish Foundation? 4 A. I think it's a defunct nonprofit. 5 Q. I'm sorry. You broke up a little bit 6 there and I couldn't hear your answer. 7 A. I believe the Pufferfish Foundation is 8 a defunct nonprofit organization. 9 Q. When did it -- when did it become 10 defunct? 11 A. I believe in the last month or so. 12 Q. Why did it become defunct? 13 A. Paperwork was submitted to shut it 14 down. 15 Q. Who submitted the paperwork? 16 A. I believe I signed it. I don't know 17 who actually mailed it in or submitted it. I -- I 18 don't know. 19 Q. And who -- who ran the Pufferfish 20 Foundation while it was operating? 21 A. We had different directors, 22 different -- different parties. 23 Q. Who were the directors? 24 A. I believe early on it was Kevin and I. 25 Q. Did that directorship change over time 238 1 to add additional directors? 2 A. I believe so. I believe spouses were 3 involved and I believe my son may have been 4 involved in it, but I don't have a -- a clear 5 recollection. 6 Q. Which son was involved? 7 A. My only son. 8 Q. What's your son's -- what's your son's 9 name? 10 A. Tyler. 11 Q. And your spouse's? Is that only your 12 spouse or Kevin' spouse as well? 13 A. I don't recall. 14 Q. Did the directors of Pufferfish receive 15 any compensation for their services? 16 A. No. 17 Q. What were the activities of the 18 Pufferfish Foundation? 19 A. I think we ended up donating the money 20 to some anti-bullying campaign. I think that it 21 received -- I don't think it did a lot of work. 22 It didn't -- had a hard time with the -- with the 23 asset raising. 24 Q. How -- how much in assets was it able 25 to raise over its lifetime? 239 1 A. I don't recall specifically, but I 2 think it was a -- a small amount. 3 Q. How small? Thousands of dollars, 4 hundreds of thousands of dollars? 5 A. I would speculate thousands of dollars, 6 less than 10,000. 7 Q. Did it have any employees? I'm 8 guessing not with $10,000 in assets, but... 9 A. I mean, I don't know the legal terms, 10 but I don't believe anybody ever got compensated. 11 I think the only things that it paid for were -- 12 not the only, like web hosting. I think we paid 13 somebody to design a logo, had a nice logo. I 14 think maybe some legal expenses. 15 I -- I don't recall, but then basically 16 the money was just handed over to another -- it's 17 my understanding that the money was -- may have 18 been handed over to another similar nonprofit or 19 we talked to it, if it was another nonprofit with 20 a similar objective, that we could unwind it by 21 giving it there. I forget, but it was a very 22 unproductive, not -- in hindsight it wasn't a 23 great venture. 24 Q. Do you recall the name of the nonprofit 25 that you turned -- 240 1 A. I don't know that we gave. I'm just 2 speculating. I forget what happened. 3 I remember we found out that one of the 4 pop singers had some -- who's the woman that had 5 that meat costume? There was one of the -- very 6 popular singer who had some anti-bullying campaign 7 or something, or nonprofit that we thought would 8 align. I think we worked at the Innocence Project 9 and I don't know that it aligned. I don't know 10 that our lawyers said that would be a reasonable. 11 But I don't recall -- if it did -- even if it did 12 for that matter, and if it did I don't recall 13 where the money went. But it was a very 14 uneventful -- it was a very kind of not that 15 interesting event of a venture. 16 Q. Did you make any deductible -- excuse 17 me, did you make any donations to Pufferfish 18 personally? 19 A. I don't recall. 20 Q. Who were Pufferfish's donors? 21 A. We didn't have a lot of them. I 22 remember Chris Irwin mad a donation early on, it's 23 like a 100 bucks or 50 bucks or something. I 24 think there was some gentlemen that we had met 25 that emailed us and said I think that most of it 241 1 came from some anonymous person that we didn't 2 really know, maybe a thousand or so, I forget. 3 There was a gentleman in the wholesale 4 power markets that said that he would make a 5 donation -- I think said and eventually did make a 6 donation. But I -- I don't recall the -- the 7 total list of donors, but it wasn't large. 8 Q. Did Pufferfish Foundation make any 9 expenditures related to Powhatan's Energy -- 10 Powhatan's case with the FERC? 11 A. Did Pufferfish -- could you ask -- 12 rephrase that question for me. I'm sorry, Josh. 13 Q. Sure, no problem. 14 So has -- did Pufferfish Foundation 15 incur any expenses related to Powhatan Energy 16 Fund's case against FERC? 17 A. Well, it's not a case against -- FERC's 18 case against Powhatan. I don't believe so. I 19 believe that there was some publicity talking 20 about anti-bullying and you know regulators and 21 something like that, maybe would go with FERC, but 22 I don't believe that Pufferfish ever got involved 23 in the wholesale power markets, financially 24 involved in the wholesale power markets, or really 25 any regulated industry for that matter since its 242 1 inception. 2 Q. Did it spend any money to help 3 Powhatan? 4 A. Oh, "spend money to help Powhatan". 5 I mean, it had a website to talk about 6 anti-bullying. To the extent that that helps 7 Powhatan, I -- I don't know. 8 Q. Has Pufferfish Foundation paid any 9 legal fees? 10 A. Yes, I told you that earlier it paid 11 legal -- we had legal expenses. 12 Q. Pufferfish has -- had legal expenses? 13 A. I believe that we paid lawyers, you 14 know, set it up or orchestrate it, whatever. 15 Q. Okay, beyond -- beyond corporate work, 16 did it fund any litigation? 17 A. No, not for us or anybody else. No. 18 Q. But it paid -- 19 A. We had some lawyers. We -- you know, 20 nonprofits are a new world to us. We didn't 21 understand. I think we engaged various people and 22 I assume that -- when I mentioned early on the 23 expenses that it had, I know it had like a -- a 24 website and I think it may have incurred some 25 legal expenses, perhaps some banking fees and -- 243 1 and maybe an accounting fee or a tax return. I 2 don't really know. But so, we probably spent some 3 money on lawyers but not for the benefit -- not 4 attorneys that represented Powhatan or any others 5 in the wholesale power markets. 6 Q. Did it support any of the costs of 7 running ferclitigation.com? 8 A. Support the costs, like in the web 9 hosting or expert reports? 10 Q. Any of it. 11 A. I -- I had mentioned earlier that I -- 12 it didn't -- wasn't involved in Powhatan. It 13 didn't do anything in the wholesale power market. 14 So I'm -- I'm just missing something here. 15 Q. All right. I'm just asking the 16 question here. I'm -- I'm sorry. I don't mean to 17 cover old ground. What I heard you say in respect 18 to the wholesale power markets was that Pufferfish 19 was never invested in the wholesale power markets, 20 but * maybe I misheard you. 21 I'm just -- if you could just answer 22 the question. Did Pufferfish pay for any expenses 23 related to ferclitigation.com? 24 A. No. So earlier I said that it was -- 25 it's not that it's -- I'm -- I'm just wondering 244 1 whether we're being redundant here. Because we 2 had asked about whether its expenses and I said it 3 was never involved in the wholesale power market 4 and or any really regulated business pursuit and I 5 would have described FERC litigation and Powhatan 6 as a -- you know, both, a regulated entity and 7 a -- a -- a wholesale power market -- a firm that 8 has connections to the wholesale -- to the power 9 markets. 10 So, no, FERC didn't. Powhatan didn't. 11 And so my confusion is just it seemed like a 12 redundant question. 13 Q. Well, it happens sometimes. I 14 apologize. I'll -- I'll move on. 15 A. But I asked for clarification, just to 16 make sure that we're good. 17 Josh, I think you're freezing on my 18 screen. I don't know whether you can hear me. 19 (4/10/14 email from 20 powenergy2013@gmail.com to felix@felixsalmon.com, 21 Bates stamped POWDC_2798, was marked R. Gates 22 Exhibit 28, for identification.) 23 BY MR. FERRENTINO: 24 Q. It's -- it's because I'm reading 25 something. I apologize. I should have just said 245 1 something. 2 So I would like you to turn briefly to 3 Exhibit 28, if you could. 4 A. Again we're frozen at the same time. 5 You guys timed it perfectly. 6 So I'm sorry, exhibit what? 7 Q. Twenty-eight, please. 8 A. Okay. 9 Q. And this is an -- for the record this 10 is a document ending in Bates number 2798. It's a 11 single-page email that I believe you sent, but, 12 you know, tell me if that's true or not. 13 A. I don't recognize this email, but I -- 14 yeah, I scanned it briefly and I... 15 Q. All right, did you send this email? 16 A. I don't recall. 17 Q. It's -- it comes from an email address 18 powenergy2013@gmail.com. Is that an email address 19 that you used? 20 A. Yes, yes. 21 Q. And is that an email address you would 22 have been using in April 2014 when this email was 23 sent? 24 A. I could have been using for sure, yep. 25 Q. And the subject line is "I am Flash 246 1 Boys Latency Arb Guy". That sounds like you, 2 doesn't it? 3 A. Sounds like me? That is -- could be 4 me, yep. 5 Q. Could be you. All right. 6 And someone who signed their name Rich 7 writes -- it's someone named Felix Salmon. Do you 8 know who Felix Salmon is? 9 A. I recognize the name. 10 Q. Who is Felix? 11 A. Felix is or was a member of the media. 12 Q. All right. And you are -- I think a 13 fair summary of this email is you are writing to 14 him to let him know that you were the Flash Boys 15 Latency Arbitrage Guy and you were launching 16 ferclitigation.com and you wanted him to be aware 17 of that, right? 18 A. Okay. So, and the way I would describe 19 it is -- is the launch had already happened and 20 that we've got some information out there and 21 basically I'm just trying to say hey, there's 22 another story so let's move on from latency 23 arbitrage and Flash Boys and let's -- let's talk 24 about something else. 25 It's more -- you know, what I thought 247 1 was of interest. I was trying to engage him to 2 get media attention about this case. 3 Q. All right. And in the -- in the third 4 paragraph you write, "The investigation is still 5 technically private". 6 And so, it was Powhatan that publicized 7 FERC's investigation in the first instance. 8 Isn't that right? 9 A. I don't know. 10 Q. Second to last sentence, "Lots" -- 11 "Lots of parallels to the 'test trades' idea to 12 expose latency arb". 13 And then it continues, "Any interest in 14 learning more? I have lots to say". 15 What are the parallels between 16 Powhatan's case and the test trades that you did 17 to expose latency arb? 18 A. So I think you misread the last 19 statement. I think you said, "I have lots to say" 20 but the meaning is still the same. 21 Q. Oh, I'm sorry. Yes, you're -- you're 22 absolutely right. I apologize. 23 A. No need to apologize. The meaning 24 is -- is the same. 25 So I -- I can't speculate on an email 248 1 that I sent over seven years ago of what the 2 parallels I had in my head at that time to share 3 with Felix. I don't know if there was subsequent 4 emails in this exchange that might provide some 5 more perspective on what parallels I had. 6 If you want me to speculate now at this 7 point in time of what the parallels were, yeah, I 8 would describe it as like a market 9 structure/regulatory problem that kind of might be 10 the root cause of both and maybe big financial 11 interests, corruption. I'm not really sure of, 12 you know, how all of this happens, but... 13 And it just seemed like something that 14 would --- another parallel was that the 15 interest -- the media should have some interest in 16 it. The media was interested in the test trades 17 and the latency arbitrage and eventually Senator 18 McCain -- you know, we looked at a document 19 earlier. We saw Senator McCain referenced latency 20 arbitrage. I don't know whether he referenced it 21 by this point in time, April 10th, but at some 22 point he had referenced latency arbitrage in 23 the -- I believe in the Congressional hearing. 24 And we also had senators discuss our site in 25 our -- our case. 249 1 So that's another parallel and that's, 2 you know, interest to I guess U.S. senators. 3 Q. So the parallels have to do with the 4 way a market problem was uncovered and handled? 5 Is that -- is that what you're telling 6 me? 7 A. I don't believe that that's what I 8 said. 9 Q. Okay. Just trying to understand. 10 You mentioned corruption. Do you 11 believe there was corruption involved in the test 12 trading that you did in the latency arbitrage 13 context? 14 A. I don't know but there's big financial 15 interests in the latency -- in the -- in the -- in 16 the market structure, big financial interests that 17 were at play that may at some point have been a 18 recard (phon) for why some of these market centers 19 had closed sets. 20 I'm not -- I -- I can't -- I don't know 21 how this ended up so far in certain venues and -- 22 and how it happened. 23 Q. All right. And how about corruption in 24 FERC's case against Powhatan? Do you believe that 25 you've uncovered corruption, or there is 250 1 corruption here? 2 A. There's something -- we saw those 3 emails. I never -- I don't know that -- Steve 4 Tabackman left our case a couple weeks ago, two 5 and a half weeks ago, so -- and I'm not sure what 6 happened there. I don't know why. I do know that 7 it happened the same day that some emails were 8 made public in another case, the Gree Hat matter, 9 describing personal emails that took place. 10 So something seems fishy. Something 11 has always seemed fishy about this investigation. 12 It never really felt like an investigation. 13 Something seems off. 14 So, I don't know that the -- the final 15 chapter has been written about Powhatan. 16 Q. Okay. But I'm just sort of asking 17 about what you know. I mean, I -- I understand 18 your -- your feeling that it's fishy and I hear 19 you that you feel you've been treated unfairly, 20 but you -- when you say "corruption," what 21 corruption do you believe has occurred in this 22 case? 23 A. Potential corruption. I don't know. I 24 can't explain the behavior of this -- of certain 25 actors that are participating in this 251 1 investigation. You know. There's a lot of bad 2 things happening in this world and a lot of bad 3 things happen in private practice and government 4 and both of these -- you know, we see it with the 5 Epstein investigation. We've got, you know, CEO 6 of Barkman's bank who's under investigation. 7 We've got a couple former presidents whose names 8 have been mentioned and all kinds of weird things 9 that happened, and I -- I don't understand what, 10 you know, the full picture, but all I can say is 11 from those examples it seems like this is how 12 corruption, you know, may present itself; the kind 13 of broken markets and overzealous regulators and 14 people committing suicide and things like that. 15 Q. Is there anything else that you believe 16 evinces corruption in this case, other than what 17 you've already mentioned? 18 A. Yes, yes. 19 Q. What else? 20 A. I think it's -- there's a lot of the 21 victims who are -- are tied up with NDAs. So I -- 22 I don't understand, if there's a -- a settlement 23 for market manipulation or something like that, 24 you know, I don't understand why parties -- why 25 there's not transparency for -- for our case, why, 252 1 you know, you have these kind of short little 2 blurbs that used to happen that "XYZ company 3 settled for market manipulation," you get a 4 paragraph that really doesn't say that much, 5 provide a lot of transparency and the parties to 6 the investigation, you know, seem to have to keep 7 their lips sealed and they're not allowed to talk. 8 That to me is indicative of something horribly 9 amiss. 10 I look at the political influences into 11 the FERC and I believe that politics, sometimes 12 bad things can happen in, you know, political 13 circles, and I know that FERC is a very 14 politicized agency and you could see it from, you 15 know -- in some of the headlines that I would read 16 back in the day about the interests from various 17 parties in -- in -- in this -- in this agency. 18 So those are two more kind of examples 19 of things that I could point to that says like 20 it's -- it's more than it just smells like. We 21 don't have transparency and there's some very, 22 very strong political forces at play here. 23 Q. Do you believe that political forces at 24 play at FERC influenced the specifics of 25 Powhatan's case? 253 1 A. "The specifics". What do you mean "the 2 specifics of Powhatan's case"? 3 Q. Do you believe that decisions in 4 Powhatan's case were made on a political basis 5 rather than on the facts and the law? 6 A. Absolutely. 7 Q. And what were those decisions? 8 A. I can't -- I don't know. I haven't 9 been party to all of the decisions. I can say 10 that, you know, these emails that took place 11 between Olson and Tabackman seem to suggest that, 12 you know, their -- their submissions there that -- 13 that -- that don't -- don't make sense to me. 14 It's not what I normally see in my day-to-day life 15 and in West Chester, communications taking place 16 like that. I -- 17 Q. Those communications had nothing to do 18 with Powhatan's case, though. Isn't that right? 19 A. Well, there are two attorneys who were 20 heavily involved in our investigation. They were 21 the exact same two attorneys that I referenced 22 earlier that I said we submitted paperwork to FERC 23 in the position paper with expert opinions and 24 then in less than one business day later we're 25 told that they dismissed everything and legally 254 1 said that we'd taken things out of context. 2 It didn't seem like from the get-go 3 that this investigation was based on the facts and 4 if it was based on the facts -- you know, I -- as 5 I mentioned in that other email, I think you'll 6 recall that Alan made in the statement I think it 7 would have ended a long time ago. I don't think 8 this case has ever been about the facts. 9 Q. All right. I want to just go back to 10 the parallels between the latency arbitrage test 11 trades and this case that you wrote about to Mr. 12 Salmon. 13 You -- you identified I think -- I 14 think it's a fair characterization what you said. 15 You identified market problems in two different 16 markets as a result of -- of both situations. 17 Isn't that right? 18 A. You're asking me to say did I say that 19 that was one of the parallels that I'm opining on 20 now? 21 Q. Yes, exactly. Yes. 22 A. Okay. So one of the things I did say 23 earlier is that there were market structure issues 24 in two different markets that we were helping to 25 provide a little transparency on. 255 1 Q. All right. So in the latency arbitrage 2 situation, you identified a market flaw in the way 3 certain exchanges were run, correct? 4 A. "A flaw". I -- I -- not exactly the 5 way I would word it. I would say that I described 6 a flaw in the operation of certain markets and 7 it -- it was designed in the implication of Regen 8 MS. 9 Q. All right. So you -- you identified 10 the flaw in whatever area that you want to 11 characterize it and you went to a regulator. Is 12 that right? You said here's a flaw, I want to let 13 everyone know about it, right? 14 A. That's one of the many things I did, 15 yep. 16 Q. Okay. Did you try to make money off 17 the existence of that flaw? 18 A. No. 19 MR. FERRENTINO: I think we can take a 20 short break here. I'm going to try to focus on 21 where I want to go next. We could go off the 22 record. 23 THE LEGAL VIDEO SPECIALIST: Okay, this 24 is the end of media number five. We are off the 25 record at 4:15 p.m. 256 1 MR. FERRENTINO: If we could go back on 2 at 4:20, that would be good. 3 (Recess taken.) 4 THE LEGAL VIDEO SPECIALIST: This is 5 the start of media number six. We are back on the 6 record at 4:23 p.m. 7 MR. FERRENTINO: Thank you. 8 BY MR. FERRENTINO: 9 Q. Mr. Gates, are you still alone in the 10 conference room? 11 A. Yes. 12 Q. Have you spoken to anyone during your 13 breaks in this deposition? 14 A. Yes. 15 Q. Who did you speak with? 16 A. I spoke with Chris and I spoke to my 17 brother Kevin. 18 Q. Is Kevin still there in the office 19 with -- nearby? 20 A. Yes. 21 Q. Has he entered the -- I'm sorry, you 22 said yes, but I cut you off. 23 A. I -- I think he is leaving soon, may 24 have already left, I'm not sure, but he has been 25 here for a bit of the day. 257 1 Q. Has he been communicating with you 2 while we're on the record in any fashion? 3 A. No. 4 (7/13/14 email from Powhatan Energy 5 Fund, LLC to K. Dynamite, Bates stamped 6 POWDC_3063, was marked R. Gates Exhibit 29, for 7 identification.) 8 BY MR. FERRENTINO: 9 Q. All right. I'd ask you to turn to 10 Exhibit 29, please. For the record, this is a 11 single-page document that ends in Bates number 12 3063. 13 Do you have that email? 14 A. I do. 15 Q. Did you write this email? 16 A. It looks like there is various emails 17 here. It looks like Powhatan Energy Fund. 18 Powhatanenergy13@Gmail was communicating with this 19 other email account as a back and forth. So I 20 wrote -- I believe I may have written some of the 21 emails but not others. 22 Q. And did you write the top email in the 23 chain that's signed by someone "Rich"? 24 A. I assume so but I -- I don't recall 25 this email. 258 1 Q. Who is K. Dynamite or KD? 2 A. My sense is a member of the media. 3 Q. All right. And I think he or she is 4 asking if you have -- strike that. 5 Let me just read what you wrote in 6 the -- in the first paragraph. "Sorry for my 7 delays on this. We haven't released the 8 transcripts. But may do it on -- in Monday. I 9 think the issue is that the FERC's Office of 10 Enforcement called trades that are ubiquitous in 11 all other markets... manipulative. So instead of 12 settling we just went open kimono". 13 Next paragraph continues, "The 14 deposition transcripts are just a continuation of 15 our desire to provide more transparency". And it 16 continues. 17 Let me ask about your -- your statement 18 that "FERC's Office of Enforcement called trades 19 that are ubiquitous in all other markets... 20 manipulative". 21 In what sense are the trades that Alan 22 Chen performed for Powhatan ubiquitous in all 23 other markets? 24 A. I don't know what I meant when I wrote 25 it at that time. This is over seven years ago, 259 1 and -- but I will say that I believe now, looking 2 back on it, I may have suggested that spread 3 trades are ubiquitous in all other markets and 4 allowed except for -- were similar to -- the ones 5 that Alan Chen executed are spread traits and 6 those are ubiquitous in all other markets. 7 Q. So the spread trade characteristic is 8 ubiquitous elsewhere? 9 A. Yes. I believe -- I mean, I believe 10 spread trades are ubiquitous in markets, in all 11 markets. 12 And Josh, while I have you here, a 13 little pause here... earlier today I mentioned an 14 article that appeared in 2009 described -- 15 entitled Measuring Arbitrage in Milliseconds, 16 written by Rob Curran in the Wall Street Journal. 17 The last paragraph might be of interest to you, 18 because you specifically asked -- you implied 19 that -- about latency arbitrage, the last 20 paragraph of it reads, "The scale of Mr. Gates' 21 fund, direct feeds to the exchanges proved cost 22 prohibitive. But for larger funds, Mr. Gates said 23 it would be foolish not to engage in latency 24 arbitrage. And he said dark pools, whose 25 profitability is linked to their volumes, may be 260 1 tempted to turn a blind eye to the activity as 2 long as other clients don't complain". 3 Q. I'm sorry, are you reading from 4 something right now? 5 A. Not any more. I'm no longer reading. 6 But I just read the last paragraph of the art that 7 I mentioned earlier, Measuring Arbitrage in 8 Milliseconds. 9 Q. Thank you. 10 So I want to direct you back to Exhibit 11 29 and you state to K. Dynamite, "So instead of 12 settling we just went open kimono". 13 What is -- what is the -- what did the 14 term "open kimono" mean in this context as you 15 wrote it? 16 A. I don't remember what I meant at that 17 time. I don't remember this email. I do remember 18 somebody named Kid Dynamite. 19 Q. All right. 20 A. But I don't -- I don't remember this 21 specific email or that term. 22 I'll speculate now, you know, reading 23 it more than seven years later, without any 24 context, without even looking at any other emails 25 or other material, just looking at this kind of in 261 1 isolation, perhaps the idea of open kimono 2 described that we just kind of published 3 everything on the internet. 4 Q. And you published everything that you 5 had received from FERC on ferclitigation.com, all 6 the litigation transcripts, a variety of other 7 documents. 8 Is that right? 9 A. "Everything". I don't know I'd 10 describe it as everything but a lot of things. 11 Q. A lot of things. At least the 12 deposition transcripts, right? 13 A. Yep, they're out there. 14 Q. When you suggested in your email to KD 15 that the transcripts showed bullying, is that 16 your -- is that a fair characterization of what 17 you wrote here, in Exhibit 29. 18 A. I'm sorry, can you read -- you're 19 saying is it the exhibit bullying? 20 The way I read it now is that it 21 provides a sense of whether they were doing 22 research or just acting like bullies. So I didn't 23 know -- 24 Q. Do you believe the lawyers who deposed 25 the witnesses in the FERC investigation behaved 262 1 like bullies? 2 A. Do I believe the lawyers who did 3 depositions in the FERC investigation behaved like 4 bullies? Yes. 5 Q. Which ones? 6 A. I would say Steve Tabackman. He -- he 7 deposed me and my brother. I've heard Tom Olson 8 and the bullying. I've heard, yeah, some other 9 people, but those are the ones that we -- that I 10 know of that deposed individuals here at Powhatan 11 that I would say that, yeah, they kind of are 12 bullies. 13 Q. All right. I'll move on. 14 You attended Mr. Eiben's deposition or 15 at least a part of it. Is that right? 16 A. Yes. 17 Q. Have you received a transcript of Mr. 18 Eiben's deposition? I may have asked that before? 19 A. I think you did ask that before and the 20 answer then I believe was no and I believe the 21 answer is still no. 22 Q. Okay. So you haven't posted the 23 deposition transcript on ferclitigation.com then, 24 because you don't have it. 25 And you -- you attended the last 263 1 hearing before Judge Roth in this case in 2 Richmond? 3 A. I did, yep. 4 Q. And your brother Kevin -- your brother 5 Kevin testified in that hearing. Do you recall 6 that? 7 A. I do. 8 Q. Do you have a transcript of that 9 hearing? 10 A. I believe we did get it, yes. 11 Q. All right. Have you posted it on 12 ferclitigation.com? 13 A. I don't believe so. 14 Q. Why not? 15 A. Just a business decision. 16 Q. What are the factors that went into 17 your business decision not to post the transcript? 18 A. I think the attorneys said don't do it 19 until there was redactions made, or is added to 20 the docket. 21 Q. What -- what redactions might need to 22 be made for the transcript in your view? 23 A. In my view? 24 Q. Yes. 25 A. Whatever the attorneys suggest. We 264 1 just follow their guidance. 2 (10/13/14 email from Richard Gates to 3 Chao Chen, Bates stamped POWDC_8181, was marked R. 4 Gates Exhibit 32, for identification.) 5 BY MR. FERRENTINO: 6 Q. All right, we can move on to Exhibit 7 32, please. I'll give you a chance to flip to it. 8 We're skipping a few here. And this a -- it's a 9 one-page email. The Bates number ends 8181. 10 A. I see it. 11 Q. All right. I'll give you just a chance 12 to review it here. 13 (Witness peruses document.) 14 A. Okay. 15 Q. Is this an email conversation you 16 participated in? 17 A. I don't recall this email exchange. It 18 appears that I did and it appears it was sent from 19 my account and referencing my children. 20 Q. All right. So it looks to me like you 21 and Kevin and Chao Chen are discussing the PJM 22 power market circa October 2014 in this email 23 chain. 24 Is that fair? 25 A. That is one of the fair descriptions 265 1 of -- of what I would describe has taken place 2 here. It's probably not the best. 3 Q. All right. And Chao -- Chao says 4 essentially, I think the first -- the first 5 sentence he said is, "The market," quote, The 6 market is poorly designed". And he goes on to 7 explain why this is. And you -- you respond with 8 a slightly lengthier email explaining that, quote, 9 "The market may not be designed the way we would 10 design it if we were in charge." And I'm skipping 11 some, but you basically continue, "We should not 12 pass judgment on the designs of the tariffs. They 13 are what they are, period". 14 Do you -- do you sill hold the view 15 that we shouldn't pass judgment on the designs of 16 markets that we're trading in? 17 A. Well, first off, it looks like I had a 18 typo in the first sentence that you didn't pick 19 up. It said it may not be designed the way "he" 20 way would design it and I think you put the word 21 "the" in there for "he". 22 Yes. But to answer your question, yes, 23 I believe we just have to follow the rules that 24 exist and the processes that are set up. 25 Q. And that's the way you feel about the 266 1 power markets, that, you know, if the tariff 2 allows it, anything goes, right? 3 A. "If the tariff allows it, anything 4 goes"? 5 I don't think that's what I said here, 6 and I -- you know, I guess my. That's not what 7 I've said. That's another mischaracterization. 8 Q. All right. But at a minimum you agree 9 we shouldn't pass judgment on the designs of the 10 energy markets or the designs of tariffs, right? 11 A. "We shouldn't pass judgment". 12 We can pass -- I mean, I -- I guess 13 from a standpoint of trying to decide -- so, when 14 I read this today I'm looking at it like it looks 15 like we're trying to decide what are we doing with 16 our lives, how are -- what kind of business 17 pursuits should we pursue, if any, and it looks 18 like I'm just suggesting that the -- the system in 19 place to set up the wholesale power markets are 20 what they are. 21 There are shareholder meetings at the 22 RTOs and you can write in a letter and maybe 23 nobody will read it, it'll fall on deaf ears. You 24 can send something to the FERC and they may add 25 rebates anyways to UTC trades even though other 267 1 people say this doesn't make sense. They can 2 allege nonsensical allegations of fraud. 3 It is what it is. The goal has always 4 been to, you know, try to help improve markets to 5 make them better, to make them function better. 6 But if the system doesn't want to get better, 7 there's only so much you can do in -- in -- in the 8 world. 9 Q. And -- and but that's what you did when 10 you found a flaw in the equity markets with the 11 latency arbitrage. You -- you told people that 12 you saw a flaw and that it should be fixed, right? 13 A. "A flaw". 14 I saw something, you know -- it's a 15 competitive market and I assumed that, you know, 16 competitive markets, my clients were being hurt in 17 those markets, that I would try to help them. 18 That is my -- felt like it was my responsibility 19 is to look out for my investors and my clients. 20 And what I did in that was to help out my 21 investors. 22 Q. When you found out -- and when you 23 found out that Alan Chen was exploiting a loophole 24 in the PJM market, to use your brother's words, 25 you didn't go to the regulator, did you? 268 1 A. I think that Kevin suggested that he -- 2 even if he was exploiting a loophole, that he 3 should. I don't know that he suggested that he 4 was or that's what he believed -- 5 Q. I'm just asking -- I'm just asking a 6 different question, sir, which is when you found 7 out about the potential existence of a loophole, 8 however you want to characterize it, in the PJM 9 market that Alan Chen was exploiting, to use 10 Powhatan's term, exploiting a loophole, you did 11 not tell PJM about the problem, right? 12 A. I believe other people told PJM about 13 the problem. 14 Q. But you didn't, right? You didn't do 15 it? 16 A. I didn't know about it. 17 Q. Okay. 18 A. I was very unaware of what -- I -- I 19 didn't understand the nuances, the intricacies. I 20 was focused at that time more on the SEC 21 regulating markets. 22 Q. No one -- no one at Powhatan told PJM 23 or FERC about this problem when they found out 24 about it, right? 25 A. I don't know what -- when you say 269 1 "problem," I think Alan called PJM -- PJM up and 2 asked about this --this payment. 3 Q. And when did -- when did Alan Chen do 4 that? 5 A. I -- I don't know, but it was --- 6 sometime it's in some of the position papers that 7 FERC mentioned where Alan Chen -- some of the 8 paper filings that Alan Chen called PJM and asked 9 about this rebate, so. 10 Q. And -- and after -- and after he had 11 that conversation, how many millions of dollars 12 did he trade on Powhatan's behalf to exploit the 13 loophole? 14 A. "How many millions of dollars". 15 He was trading up to congestion as 16 measuring in different units and dollars. How 17 much collateral was required to -- is your 18 question for me dollars of collateral was required 19 for those -- for -- for him to put those trades 20 on? 21 Q. I'm asking how much money did Alan Chen 22 put at risk for Powhatan to make the trades that 23 exploited the loophole that we've been discussing? 24 A. Okay. 25 Q. After calling PJM. 270 1 A. It sounds like your -- it is a 2 collateral question and I -- I don't know exactly 3 how much money he had in collateral. My sense is 4 several million dollars of collateral is required 5 for these -- to trade -- place these trades. 6 Q. Mr. Gates, do you believe -- do you 7 believe that Elon Musk is behind your battle with 8 FERC? 9 A. I'm not sure. Sometimes I do. 10 Q. Why do you believe that? 11 A. I don't know that I believe it now but 12 I just said sometimes I believe it. 13 So when I do believe it I just try to 14 understand what's the, you know, the root cause 15 behind this because it hasn't really made sense. 16 And earlier this year we just found out which 17 trades we did that were supposedly manipulative, 18 even though the trades took place in 2010. Just a 19 lot of things didn't really make sense about this. 20 And I'm just trying to understand what are the 21 political forces behind it, or why is this kind of 22 playing out the way it has and I -- and I just 23 kind of look around and see other things that 24 don't look right to me and sometimes I end up 25 looking at Mr. Musk. 271 1 Q. And what have you found out about Mr. 2 Musk in relation to Powhatan's case? 3 A. Well, I know he's involved in energy. 4 I know he's very political. He did a horrible -- 5 you know, what I would describe as a horrible 6 tweet yesterday about Bitcoin and other 7 cyptocurrencies and seems to use his platform to 8 really engage people and it doesn't -- doesn't 9 always seem to make a lot of sense to me. 10 Q. Do you have any evidence that you can 11 share with us that Mr. Musk has influenced FERC's 12 litigation to Powhatan? 13 A. Do I have any evidence that he's using 14 it? 15 I -- just that I -- you know, he's 16 involved in the -- in the -- in FERC. He -- I 17 think he's done some filing Tesla, and also a city 18 from a business interest that he's had against 19 filings there at the agency. I know that one of 20 the former chairman's of the agency just kind of 21 left, he left FERC and went off and -- and worked 22 for one of Mr. Musk's entities. And it just -- 23 just seems like there is some weird political 24 issues taking place with his business pursuits 25 and -- and the regulators. 272 1 Q. Have any -- have any of Mr. Musk's or 2 Tesla's filings mentioned Powhatan? 3 A. I don't know. 4 Q. Why would -- why would Mr. Musk want to 5 hurt Powhatan? 6 A. I don't know specifically, but it's -- 7 you know -- it's -- I don't know if it's 8 specific -- someone wants to hurt us, 9 specifically, but somebody wanted to have a kind 10 of an overzealous Office of Enforcement -- it 11 appeared to me that somebody wanted an overzealous 12 Office of Enforcement for some period of time and 13 I don't know whether it was just the headlines, 14 getting market manipulators plays well. It's a 15 good thing. Like if you get a market manipulator, 16 it's kind of like getting a sex offender, you 17 know, or a communist back in the day. It's good 18 politics. It can make you look good. 19 And it felt like these allegations 20 never really made a lot of sense to us and -- from 21 a legal standpoint until it seemed like it was 22 some other purpose behind it. And maybe it was 23 just to get headlines for them to be parlayed into 24 some other financial gains. 25 273 1 (11/17/14 email from Matthew Yuros to 2 Richard Gates, Bates stamped POWDC_7791, was 3 marked R. Gates Exhibit 34, for identification.) 4 BY MR. FERRENTINO: 5 Q. All right. I'll ask you to turn to 6 Exhibit 34 now, please. That's a single-page 7 email. The Bates number at the bottom is 7791. 8 A. I'm sorry, yeah, 7791, Exhibit 34. 9 Here we are, yep. 10 Q. Great. So I'll give you a chance just 11 to read it and then we'll dive in. 12 (Witness peruses document.) 13 A. Okay. 14 Q. Okay. All right. This is an email to 15 you. Is that right? 16 A. It appears to be. 17 Q. And it's from someone named Matthew 18 Yuros, and both of you are communicating with your 19 Gmail accounts. 20 Do you see that? 21 A. "Both of you communicating". 22 I don't know that I am communicating. 23 I know that I received an email that was sent to 24 me. I have no recollection of this email. 25 Q. Okay. Who is Matthew or Matt Yuros? 274 1 A. Matt Yuros is a gentleman who worked 2 for TFS Capital for a number of years and is now 3 involved in Elmagin Capital. 4 Q. Matt writes at the end of his email to 5 you, "I am keeping this off of TFS email as per 6 Mark's instructions since it mentions energy". 7 What does that sentence mean to you? 8 A. Oh, I don't remember. I -- I don't 9 know why he sent it. Matt sent it. I didn't send 10 it. I don't even remember it. It was almost 11 seven years ago. 12 If I were speculating at this point in 13 time, looking at it in isolation without any 14 context or other information, I assume that he was 15 representing a gentleman at TFS Capital named Mark 16 Schlegel who was absolutely terrified of FERC's 17 investigation, and in -- and in hindsight was 18 right, that it would bring the end to TFS. But he 19 basically wanted to make -- keep the businesses 20 separate. He didn't want -- keep as much 21 separation on the communication as possible I 22 assume is what that means. 23 Q. And what was Mark Schlegel's position 24 at TFS at the time this email was written in 25 November 2014? 275 1 A. I don't recall. 2 Q. Was he an in-house lawyer? 3 A. No. 4 Q. Was he a compliance person or a 5 regulatory person? 6 A. He was compliance -- yeah, maybe a 7 little compliance. He's not an attorney. I think 8 he has -- I think would apply to his undergraduate 9 degree. I think he was -- did work, he was like a 10 chief operating officer, a chief financial 11 officer, something along those lines. I -- I sort 12 of forget. 13 There's also a period of time -- I 14 don't even know it they worked at TFS at that 15 time. I -- I did remember what Mark's role was. 16 He also -- we had a business called Moxy Vote that 17 we tried to get retail shareholders to vote proxy 18 statements. That's why, you know, the wash trades 19 and the proxy statements were particularly 20 interesting to me. And Mark worked there for a 21 period of time. And I don't know remember when he 22 left Moxy Vote and when he started working with 23 TFS. But that was his -- I believe his career 24 transition was Moxy Vote to TFS and then he left 25 TFS and is very far away from the power markets. 276 1 Q. Would -- do you know how Mark's 2 instructions that Matt refers to in this email 3 are -- were -- were disseminated? 4 A. Do I know how his instructions were? I 5 don't. 6 Q. At this point in -- in 2014 FERC's 7 investigation of Powhatan had commenced. Is that 8 right? 9 A. I've -- I've -- 10 Q. Well, it started in 2010, right? So -- 11 so obviously it's still ongoing at this point? 12 A. Yes, yes. 13 Q. And -- and -- and you said that Mr. 14 Schlegel was -- was terrified of FERC. Was one 15 reason for communicating about energy off of TFS 16 email to avoid trading discoverable information in 17 TFS email? 18 A. I don't believe that to be the case. I 19 believe it was more he wanted TFS not to be 20 affiliated with FERC; that FERC would -- you know, 21 takes down anything, just blows a huge path and 22 destroy anything, and I think he was worried about 23 TFS and wanted TFS to be investigated. 24 Q. And -- but by this time TFS was already 25 paying 75% of Powhatan's legal bills, right? 277 1 A. I don't know when it began that 2 arrangement. 3 Q. I'll represent to you that it occurred, 4 based on documents we reviewed with Mr. Eiben, at 5 least as early as 2012. 6 So, I guess the question for you is, 7 what -- what would need to be hidden here by 8 keeping it off TFS' email? 9 A. Nothing is hidden. I mentioned that -- 10 you're mischaracterizing the testimony again. 11 What I said was that I think he -- 12 we're not trying to hide anything. It's more to 13 make it so that FERC wouldn't use it as an 14 opportunity to do more -- to -- to blow a bigger 15 hole into people's livelihoods and wellbeing. 16 Q. By finding emails that would ordinarily 17 be written on TFS email -- email servers on Gmail? 18 A. No, again you're mischaracterizing my 19 testimony. It's becoming a bit unseemly. That's 20 not what I said. 21 Q. Well, I -- I'm just -- I'm just 22 confused about why this -- this email would need 23 to occur over a personal account when you and Mr. 24 Yuros both work at TFS, right? 25 A. Yes. 278 1 Q. And you're communicating about the 2 business of TFS here, as best I can tell. 3 A. That's not the way I read it. 4 Q. All right. Well, the last sentence in 5 the first paragraph, it says, "I think it might be 6 good to sit down at year end and discuss the 7 future of not just TFS Capital, but Elmagin and 8 any plans that may involve me in ventures outside 9 of the core asset management business of TFS". 10 You disagree that that mentions TFS' 11 business? 12 A. You just read -- I think you read the 13 statement properly, the sentence properly. What 14 I'm suggesting is that he is talking about other 15 business pursuits, but "Elmagin and any plans that 16 involve me outside of other ventures". Up above 17 he talks about health care. We talked about other 18 business pursuits and I think that what he's doing 19 is saying I would like to talk to you about things 20 other than TFS, including energy, and that's why 21 I'm doing this separately. 22 Q. All right. And he --the subject line 23 of the email is "Year End Review." 24 Do you see that? 25 A. I do. 279 1 Q. And he -- he says in his first 2 sentence, "I recognize that I report to Eric 3 officially and will have my year-end review with 4 him in about a month or so, but I wanted to see if 5 you thought it made sense for you and I to have a 6 year-end marketing meeting as well". 7 Was he an employee of any other entity 8 other than TFS when he wrote this email about his 9 year-end review? 10 A. Year-end marketing meeting. I just see 11 year-end meeting as well. 12 I think that he and I spend a lot of 13 time thinking about things other than TFS, which 14 is what he's referencing, including energy -- 15 Q. All right. So it's not a performance 16 review that he's talking about. It's something 17 else? 18 A. You interrupted me, so I'd like to 19 answer my -- 20 Q. I apologize. I -- I -- you broke up at 21 the end there. 22 A. It's my understanding that he's talking 23 about other business pursuits. He's talking -- it 24 appears to me at this point in time, almost seven 25 years later, that he's talking about health care. 280 1 He's talking about an RAA. He's talking about 2 energy trading, and that we have a very open 3 working relationship talking about various things 4 and sit down and talk about TFS, where is it 5 going, but also more importantly, because it 6 doesn't look like that trajectory is going so 7 well, I would like to look at something -- talk 8 about other business pursuits that you may be 9 pursuing to see whether I could plan my career 10 accordingly. 11 Q. All right. So I guess maybe I'm 12 assuming that this had to do with a year-end 13 performance review that you might have received as 14 a TFS employee, and you're selling me that's not 15 necessarily true, it may be about something else? 16 A. He's talking about a year-end -- at the 17 end of -- it's the end of the year. He's talking 18 about -- I look at it, I read it now and speculate 19 that what he's suggesting is I will have a 20 year-end review of TFS, in parallel I would like 21 to talk about other opportunities outside of TFS 22 so I can sort of horse race my opportunities. I'm 23 doing this separately because I don't want to 24 mention energy in TFS emails because we don't want 25 FERC to blow a hole and obliterate more things 281 1 than what it normally obliterates. 2 (6/23/4 email from John DAntona to 3 Richard Gates, Bates stamped POWDC_4498 to 4499, 4 was marked R. Gates Exhibit 39, for 5 identification.) 6 BY MR. FERRENTINO: 7 Q. Okay, I think I understand. 8 Let's move on to Exhibit 39, please. 9 This is an email that's two pages and it ends the 10 first page as Bates number 4498, continues to 11 4499. 12 (Witness peruses document.) 13 A. Okay. 14 Q. This is an email that -- or an email 15 chain that you exchanged with someone named Joe 16 DAntona. 17 Do you see that? 18 A. No. 19 Q. Well, it's a -- the top email is from 20 johndantona@sourcemedia.com? 21 A. Okay. 22 Q. And it's to Rich Gates. 23 A. I see. 24 Q. All right. And you write -- is this 25 one of the many contacts that you had with the 282 1 media about the Powhatan case? 2 A. I don't recognize his name at all. 3 Looking at his domain name I would speculate he's 4 a member of the media and the -- and the contents 5 of the -- the exchange. But I -- I have no 6 recollection of this -- 7 Q. Sure. 8 A. -- person. In the beginning the email 9 at the bottom is with a Philip Albinus. 10 Q. It looked to me like you tried to get 11 Mr. Albinus' attention about an article and 12 then -- then tried to contact Mr. DAntona, and 13 they refer to a magazine that they run. Do you 14 remember what magazine that might be? 15 A. I have no recollection. 16 Q. All right. You write in the second 17 email from the top, "I need a technical 18 publication to discuss how wash trades are not 19 necessarily manipulative. One example, the test 20 trades I did that are described in Flash Boys I 21 bought and sold the same security with the purpose 22 of learning about market structure". Then you go 23 on to discuss the FERC case. 24 Why did you need a technical 25 publication to discuss how wash trades are not 283 1 necessarily manipulative? 2 A. I don't think I needed it. 3 Q. So are you saying what you wrote to Mr. 4 DAntona was incorrect, you didn't really need it? 5 A. Yeah, if a -- I didn't need it, but if 6 a -- the wash trades were to be described as why 7 they're not manipulative, it would require a 8 technical publication. But I don't know that I 9 personally needed it. 10 Q. Okay, but you wrote in the email, "I 11 need" -- quote, "I need a technical publication to 12 describe how wash trades are not necessarily 13 manipulative". 14 Those are your words. I'm just asking 15 why you said that. 16 A. I don't recall. I told earlier I don't 17 recall these people. I don't recall anything 18 about this. I have no context. 19 I'm just suggesting now that I don't 20 know that I ever needed to happen. But when I 21 read this one sentence out of all this email, it's 22 my own interpretation now, given more than seven 23 years have elapsed since I wrote this, is that the 24 technical publication would be required to explain 25 that wash trades are not per se manipulative. 284 1 We mentioned earlier the Flash Boys 2 wash trades. I mentioned that wash trades were 3 required to be implemented for proxy voting. I 4 mentioned wash trades that we did at our business 5 to (indistinguishable) and short positions and 6 other trades. 7 I think one of our experts, Richard 8 Wallace, submitted paperwork to the FERC that was 9 promptly dismissed, talking about wash trades for 10 want of some other piece that -- that he pursued 11 for -- wash trades were done for I believe it was 12 tax purposes. And it's kind of a wonkie topic 13 that I am not sure that people outside of the 14 industry could really appreciate or understand, so 15 I needed somebody who knew the industry -- to hire 16 somebody with some technical know-how to be able 17 to explain this to -- to -- to the world. 18 Q. And how would that be helpful to you in 19 2014 when you wrote to Mr. DAntona? 20 A. For me personally? I think education 21 is good in helping regulators, helping policy 22 makers, helping the industry have clarity and not 23 rely on misinformation. I think in general 24 accuracy is good. So trying to explain this 25 little nuance I think would have benefited people. 285 1 It was also my understanding that 2 sometimes in the power markets we hear wash 3 trades, everyone is -- you throw that out. It's 4 kind of like the sex offender or the communist 5 that you'd rather not be guilty and I just thought 6 it'd be beneficial for, you know, maybe the 7 industry and policy makers that really understand 8 that wash trades are not per se manipulative. In 9 fact several types of legal wash trades are 10 described on our website at ferclitigation.com. 11 MR. FERRENTINO: Mr. Gates, I think 12 I've covered everything I want to cover with you 13 today. I do want to give your counsel and counsel 14 for Mr. Chen -- excuse me, Dr. Chen, a chance to 15 ask any questions they have of you. 16 We can go off the record while we 17 decide whether or not to do that or we can simply 18 jump right in. But thank you for your time. I 19 may have questions in light of their questions but 20 I hope not. 21 MR. PERKINS: This is Chris Perkins. I 22 don't have any questions for in Gates. 23 MR. BARKSDALE: And this is Will 24 Barksdale. I also do not have any questions for 25 Mr. Gates. 286 1 MR. FERRENTINO: All right. Thank you. 2 I think we're finished, then and thank you again 3 Mr. Gates, and your counsel, and Ms. Butko and Ms. 4 Brantley for your time today. 5 MR. PERKINS: You're welcome. 6 THE COURT REPORTER: Hello, this is Kim 7 the reporter. I just wanted to know if the other 8 attorneys, are they allowed to order copies of the 9 transcript, Mr. -- 10 MR. FERRENTINO: Yes, they are, 11 absolutely. This is a -- this is a federal 12 district court litigation, so we're -- we're not 13 restricted where testimony is disseminated at this 14 point. 15 MR. PERKINS: And Kim, this is Chris. 16 I don't know at this time if I'm going to want it 17 or not, so I'll have to get back to you. 18 THE COURT REPORTER: Okay, so I'll have 19 the office send you and email, just to follow up. 20 MR. PERKINS: That'd be great. 21 MR. FERRENTINO: And I'll just put on 22 the record that FERC will order the transcript 23 on -- what are the -- what are the options for 24 transcript orders, Kim? 25 THE COURT REPORTER: I got an email 287 1 from your office saying that you want it on 2 Monday. My office -- 3 MR. FERRENTINO: I think that -- I 4 think that would be fine. 5 THE COURT REPORTER: Okay, I can do 6 that. 7 MR. FERRENTINO: Thank you very much. 8 THE COURT REPORTER: And I'm sorry, Mr. 9 Barksdale, is he saying he doesn't want a copy? 10 Mr. Barksdale, are you saying you don't want a 11 copy or? 12 MR. BARKSDALE: I haven't said anything 13 yet but right now we don't need a copy. If we -- 14 if we do need one I can reach out and order one. 15 But I think we're good for now. 16 THE COURT REPORTER: Okay, you want me 17 to send an email, a follow-up email? 18 MR. BARKSDALE: That'd be great. Thank 19 you. 20 THE LEGAL VIDEO SPECIALIST: Okay, then 21 this concludes today's deposition of Richard Gates 22 on October 21st, 2021. We are off the record at 23 5:08 p.m. Master media will be retained by 24 Ace-Federal Reporting. 25 (Time Noted: 5:08 p.m.) 288 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 289 1 ERRATA SHEET FOR THE TRANSCRIPT OF: Case Name: FERC vs. Powhatan Energy Fund, LLC 2 Dep. Date: October 21, 2021 Deponent: Richard Gates 3 CORRECTIONS: 4 Pg. Ln. Now Reads Should Read Reason ___ ___ ___________ _____________ ______________ 5 ___ ___ ___________ _____________ ______________ ___ ___ ___________ _____________ ______________ 6 ___ ___ ___________ _____________ ______________ ___ ___ ___________ _____________ ______________ 7 ___ ___ ___________ _____________ ______________ ___ ___ ___________ _____________ ______________ 8 ___ ___ ___________ _____________ ______________ ___ ___ ___________ _____________ ______________ 9 ___ ___ ___________ _____________ ______________ ___ ___ ___________ _____________ ______________ 10 ___ ___ ___________ _____________ ______________ ___ ___ ___________ _____________ ______________ 11 ___ ___ ___________ _____________ ______________ ___ ___ ___________ _____________ ______________ 12 ___ ___ ___________ _____________ ______________ ___ ___ ___________ _____________ ______________ 13 ___ ___ ___________ _____________ ______________ ___ ___ ___________ _____________ ______________ 14 ___ ___ ___________ _____________ ______________ ___ ___ ___________ _____________ ______________ 15 ___ ___ ___________ _____________ ______________ 16 _____________________ Signature of Deponent 17 SUBSCRIBED AND SWORN BEFORE ME 18 THIS____DAY OF_____________, 2021 19 _________________________ (Notary Public) 20 MY COMMISSION EXPIRES: ________________________ 21 22 23 24 25 290 1 ACKNOWLEDGEMENT OF WITNESS 2 I, RICHARD GATES, do hereby acknowledge 3 that I have read and examined the foregoing 4 testimony, and the same is a true, correct and 5 complete transcription of the testimony given by 6 me, and any corrections appear on the attached 7 Errata sheet signed by me. 8 __________________ ______________________________ 9 (DATE) (SIGNATURE) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 291 1 CERTIFICATE OF NOTARY PUBLIC 2 I, Kim M. Brantley, C.S.R., the officer 3 before whom the foregoing deposition was taken, do 4 hereby certify that the witness whose testimony 5 appears in the foregoing deposition was duly sworn 6 by me; that the testimony of said witness was 7 taken by me in stenotype and thereafter reduced to 8 computerized transcription under my direction; 9 that said deposition is a true record of the 10 testimony given by said witness; that I am neither 11 counsel for, related to, nor employed by any of 12 the parties to the action in which this deposition 13 was taken; and, further, that I am not a relative 14 or employee of any attorney or counsel employed by 15 the parties hereto, nor financially or otherwise 16 interested in the outcome of the action. 17 ___________________________ KIM M. BRANTLEY, C.S.R. 18 Notary Public in and for the District of Columbia 19 20 My Commission Expires: 21 December 14, 2024 22 23 24 25