Deposition of Nancy Salzman, 2000


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 1   UNITED STATES BANKRUPTCY COURT 

 2   NORTHERN DISTRICT OF NEW YORK                       

 3   -------------------------------------------

 4   IN RE:    TONI F. NATALIE,              Chapter 7

                          Debtor,            Case No. 99-16195

 5   -------------------------------------------

 6   NANCY SALZMAN,

 7                        Plaintiff,

 8             -against-                     Adv. Proc. No. 00-90169

 9   TONI F. NATALIE and NATIONAL HEALTH OUTLET-A 

10   PLACE OF CREATIONS, INC.,

11                        Defendants.                  

12   ---------------------------------------------------------

13                  STENOGRAPHIC MINUTES OF Deposition

14             conducted of Plaintiff, NANCY SALZMAN, on the

15             15th day of November, 2000, at the offices of

16             Whiteman, Osterman & Hanna, One Commerce Plaza,

17             Albany, New York commencing at 10:59 a.m.;

18             before ELLEN J. FRANKOVITCH, a Shorthand

19             Reporter and Notary Public within and for the

20             State of New York.

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0002

 1   APPEARANCES:

 2   WHITEMAN, OSTERMAN & HANNA

     One Commerce Plaza

 3   Albany, New York 12260

     On behalf of Plaintiff;

 4   BY:  MARGARET CANGILOS-RUIZ, ESQ.

 5   

 6   MICHAEL B. RUDIN, ESQ.

     Suite 142, The Powers Building

 7   16 West Main Street

     Rochester, New York 14614-1601

 8   On behalf of Defendant.

 9   

10   JAMES P. TRAINOR, ESQ.

     636 Plank Road, Suite 108

11   Clifton Park, New York 12065

     On behalf of Keith Raniere.

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15   ALSO PRESENT:  TONI NATALIE

16                  JOAN SCHNEIER

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 1                    S T I P U L A T I O N S

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 3                  It is hereby stipulated and agreed by and

 4             between the attorneys for the respective

 5             parties hereto that the signing and filing of

 6             the Notary's Oath be waived; that the

 7             examination be conducted before Ellen J.

 8             Frankovitch, a Shorthand Reporter and Notary

 9             Public in and for the State of New York; that

10             the filing of the transcript of testimony in

11             the Office of the Clerk of the Court be waived;

12             that the examining party will furnish the

13             examined party one copy of the transcript of

14             testimony as taken without cost or charge; that

15             all objections to questions, except as to the

16             form thereof, are specifically reserved to the

17             time of trial; and that the transcript of

18             testimony may be signed before any Notary

19             Public or other officer authorized to

20             administer oaths.

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0004

 1                        NANCY SALZMAN,

 2                  (having been first duly sworn by the

 3             Notary Public, was examined and testified as

 4             follows:)

 5   BY MR. RUDIN:

 6   Q.   Ms. Salzman, can you tell us where you reside.

 7   A.   7 Grant Hill Road, Clifton Park, New York.

 8   Q.   Do you reside there with anyone other than yourself? 

 9   A.   My daughter.

10   Q.   What is your daughter's name?

11   A.   Lauren.

12   Q.   How old is she?

13   A.   24.

14   Q.   Can you tell us your age?

15   A.   I'm 46.

16   Q.   And can you tell us what your educational background

17        is.

18   A.   I'm a nurse.  I have a college degree in nursing.

19   Q.   What kind of degree?

20   A.   I have a bachelor's degree in nursing. 

21   Q.   Bachelor of science or bachelor of arts?

22   A.   Bachelor's of science in nursing.

23   Q.   Any other degrees beyond that?

24   A.   No.

0005

 1   Q.   Any other professional training beyond that?

 2   A.   Well, I have a lot of professional training beyond

 3        that.

 4   Q.   Can you tell us what your professional training

 5        beyond nursing is?

 6   A.   I have several years of Ericksonian training.

 7   Q.   Can you tell us what that is?

 8   A.   It's a post-graduate type of training that taught me

 9        how to use and apply brief solution-based models of

10        therapy and hypnosis.  And also I took a course at

11        Columbia University in hypnosis, but that was given

12        with Dr. Herbert Siegel. 

13   Q.   Is the training you received in this Ericksonian

14        method, was it through a college or private

15        institution or was it individual?

16   A.   There were several types of trainings I took.  I

17        took a series of courses through the National

18        Institutes of Health.  I took -- that was given in

19        Bethesda, Maryland.  I took a series of courses at

20        Reuters University.  And then I took a series of

21        courses that were given privately by different

22        practitioners of the Ericksonian therapeutic method.

23   Q.   Can you tell us what the Ericksonian method is, or

24        at least generalize?

0006

 1   A.   Milton Erickson is considered to be one of the

 2        foremost experts in clinical hypnoses in the world,

 3        and there's an Ericksonian Foundation that offers

 4        courses all over the world.  And he is considered to

 5        be the founder of brief solution-based models of

 6        therapy.  So I've taken many of those courses since

 7        1979.

 8   Q.   Can you tell us what brief solutions means?

 9   A.   Originally when I started studying this, it was a

10        new approach to therapy back in the '70s.  Now, it's

11        the standard accepted type of therapy.

12   Q.   When you say therapy, what kind of therapy?

13   A.   Psychotherapy.

14   Q.   Is it geared to any specific or special type of

15        ailments?

16   A.   It's a general approach to working with people who

17        have psychological issues, problems.

18   Q.   Does it entail prescribing any medication?

19   A.   No.

20   Q.   Now, you said you took a course at Columbia that was

21        sort of a similar type thing but on hypnosis? 

22   A.   That was more traditional hypnosis.

23   Q.   What other professional training or professional

24        endeavors have you taken part in?

0007

 1   A.   I took several courses in neurolinguistic

 2        programming.

 3   Q.   What is that?

 4   A.   It's a model of behavioral change.  It's a blend of

 5        behavioral and cognitive psychology and formal

 6        linguistics.

 7   Q.   Where did you take those courses?

 8   A.   All over the country.

 9   Q.   Through recognized universities or recognized

10        educational programs?

11   A.   NLP is taught through different institutions all

12        over the country.

13   Q.   What types of institutions?

14   A.   There's an institution in New Town, Pennsylvania

15        called the Eastern NLP Institute.  I took training

16        from Connie Ray and Steve Andrus.  They have the

17        largest institute in the country and I can't

18        remember the name right now.  It's in Colorado.  I

19        took courses from Robert Dilts, one of the founders,

20        and Richard Banbler, who's also one of the founders. 

21        And courses from John Grinder, who was also one of

22        the founders, and Tad James.  And Wyatt Wood Small.

23   Q.   In your professional -- as a professional, how would

24        you use neurolinguistics?  What does it do, what is

0008

 1        its purpose?

 2   A.   It's a model for human behavior change.

 3   Q.   Well, that's very general.  What did you do with it;

 4        beat people up to make them change, put them in dark

 5        rooms?  You must do something to make people change. 

 6        Tell us what you do or what NLP does.

 7   A.   It's a type of -- it's a cognitive approach where

 8        you can talk to the person.  It has a model of

 9        change; it has several different techniques to work

10        with.

11   Q.   You talk to people.  I'm just trying to figure

12        out -- I mean, most psychologists, psychiatrists,

13        they talk to people, but obviously this is something

14        different than traditional psychiatry or

15        psychoanalysis?

16   A.   They use different models as well.  They might use a

17        Freudian model or Gestalt model.  This is an NLP

18        model.  

19   Q.   Is it recognized by practicing psychiatrists in this

20        country?

21   A.   When you say recognized?

22   Q.   Well, if you look in a book that's published either

23        by or for psychologists that are physicians, would

24        they recognize this as a model that would be useful

0009

 1        for them?

 2   A.   There are psychiatrists who use this model.

 3   Q.   I take it, obviously, the rest --

 4   A.   And psychologists and social workers who do use this

 5        model.  There are many different models used in the

 6        field.

 7   Q.   Can you tell me, what does that model mean?  I know

 8        what Freudian does or what it is.  What does NLP do

 9        that's different than Freudian? 

10   A.   The goals are the same.

11   Q.   To cure the person or to change?

12   A.   To help the person make behavioral changes.

13   Q.   The methods are different, I take it?

14   A.   Yes.

15   Q.   What methods does NLP use to try to get people to

16        change?  In general, then I'll go specific.  But in

17        general?

18   A.   I don't understand what you mean by methods.

19   Q.   Do you use hypnosis?  Do you use sound deprivation,

20        light deprivation, sleep deprivation?

21   A.   There are a series of techniques in NLP, and NLP

22        uses things that are called reframing,

23        submodalities, belief change procedures, parts

24        integrations.  These are the names of techniques.

0010

 1   Q.   How do you perform those techniques?

 2   A.   By talking to the person.

 3   Q.   It's just talking?

 4   A.   It's a talking type of a therapy that acts as a

 5        conscious and unconscious process.

 6   Q.   Does it also use hypnosis? 

 7   A.   It accesses different states.  Not deep trance, if

 8        that's what you're referring to.

 9   Q.   You're not putting somebody in a trance; you're

10        basically speaking to people, trying to communicate?

11   A.   For the most part, that's correct.

12   Q.   The hypnosis part of your training would be separate

13        from NLP?

14   A.   Correct.

15   Q.   What period of time did you take these NLP courses? 

16   A.   I started in 1985 taking neurolinguistic programming

17        courses, and I took them up to probably '92.

18   Q.   Where were you working at that time?

19   A.   I had my own practice here, and for a period of the

20        time I worked for different people that I was also

21        studying with.

22   Q.   Doing the same kind of thing?

23   A.   Teaching, and I learned to train and I taught NLP.

24   Q.   Before your learning training NLP and NLP, what was

0011

 1        your employment before that?

 2   A.   Before learning NLP?

 3   Q.   Yes.

 4   A.   I worked with my husband at that time, who was a

 5        physician, and I saw clients and did some

 6        counselling.

 7   Q.   What kind of physician was he?

 8   A.   He was an internist.

 9   Q.   They're not necessarily related to what he did and

10        what you did?

11   A.   We did it in the same office and shared patients.

12   Q.   He's an internist and you're giving psychological

13        counselling, whatever; correct?

14   A.   I did counselling. 

15   Q.   With his patients? 

16   A.   With his and some other physicians as well. 

17   Q.   And before that?

18   A.   That's it.  I worked in a hospital for a year.

19   Q.   What was your nursing specialty, if any?

20   A.   Well, my -- I didn't have a nursing specialty, per

21        se.

22   Q.   You weren't like a surgical nurse, for instance?

23   A.   No.

24   Q.   Just a general nursing degree?

0012

 1   A.   Yes.  

 2   Q.   You say you had an office with your husband.  Were

 3        you a licensed psychologist at the time?

 4   A.   No.

 5   Q.   Do you need to get a license to be a psychologist?

 6   A.   No -- you need a license to be a psychologist, yes. 

 7        But I wasn't a psychologist.

 8   Q.   You weren't a psychologist back then?

 9   A.   No.

10   Q.   Have you ever applied for a psychology license?

11   A.   No.

12   Q.   What do you classify as what you do?

13   A.   Now?  

14   Q.   Yes.

15   A.   I do coaching and I do a business where I teach

16        people strategies for success, and I do coaching.

17   Q.   And that's got nothing to do with psychology, at

18        least not directly?

19   A.   No.

20   Q.   During this NLP period of time, did you have a

21        license as a psychologist?

22   A.   I did not.

23   Q.   Did you give people psychological counselling?

24   A.   I did psychotherapy.

0013

 1   Q.   And you're saying that's not psychological

 2        counselling?

 3   A.   It's referred to as psychotherapy.

 4   Q.   Was what you were doing recognized by the State of

 5        New York?

 6   A.   I was not licensed as a psychologist or social

 7        worker in the State of New York.

 8   Q.   Did you utilize any of the facilities of the State

 9        of New York; for instance, any medical care,

10        Medicaid or federal stuff, Medicare?

11   A.   I did not personally.

12   Q.   Did you ever bill Medicare for any of your services?

13   A.   No.

14   Q.   Your patients were always private pay patients?

15   A.   My patients were always private pay.

16   Q.   Did you ever at any time ever collect monies from

17        any state agency or health care provider?

18   A.   Personally?  No.

19   Q.   Did any of your businesses?

20   A.   I had licensed therapists who worked for me.

21   Q.   You weren't licensed but they were licensed?

22   A.   Correct.  

23   Q.   Can you tell me who Maggie Willis is? 

24   A.   Maggie Willis is a therapist who worked for me.

0014

 1   Q.   Where did she work for you, what place?

 2   A.   I had two offices.  I had an office at Stuyvesant

 3        Plaza and I had an office at New Karner Road in

 4        Albany.

 5   Q.   For what period of time did she work for you?

 6   A.   She started working for me -- you know...

 7   Q.   If you recall?

 8   A.   I think she worked for me five years.

 9   Q.   During all that period of time, was she a licensed

10        therapist?

11   A.   No.

12   Q.   At some point you're saying she had become a

13        licensed therapist?

14   A.   Yes.

15   Q.   Can you tell me what a licensed therapist is or was?

16   A.   Maggie was a social worker and Maggie had a social

17        work degree.  There are six years of supervised

18        practice that a social worker must have in order to

19        become licensed.

20   Q.   Was she doing her supervision through you or through

21        your company?

22   A.   Through my company, yes.

23   Q.   Who was her supervisor?

24   A.   Frank Macri.

0015

 1   Q.   And he was, in fact, a licensed therapist?

 2   A.   That's correct.

 3   Q.   During this time while you were running this office

 4        and these people were doing therapy, what were you

 5        doing?

 6   A.   A variety of different things.  I was doing

 7        organizational management and development.  I was

 8        teaching trainings for different organizations and

 9        industry in health care.

10   Q.   Through this company?

11   A.   Yes.

12   Q.   So the company was sort of an umbrella company doing

13        different things?

14   A.   Yes.

15   Q.   What was the name of the company?

16   A.   The International Center for Change.

17   Q.   Was it d/b/a or corporation?

18   A.   Corporation.

19   Q.   Who were the principals of the corporation?

20   A.   Originally, it was myself and James Pike.  And he

21        left the company in 1997 and then it was just me.

22   Q.   And you carried on the company?

23   A.   That's correct.

24   Q.   Was it a New York corporation?

0016

 1   A.   Yes.

 2   Q.   And when you say -- this is my words, so if I'm

 3        wrong, correct me -- you did training for

 4        corporations?

 5   A.   That's correct.

 6   Q.   What kind of training?  

 7   A.   In communications, and some organizational

 8        development and management using neurolinguistic

 9        programming as a model.

10   Q.   The word programming strikes me.  What do you mean

11        by neurolinguistic programming?  I understand the

12        model thing, but does programming mean more than

13        that?

14   A.   It's the name of the model NLP, neurolinguistic

15        programming.

16   Q.   Did you give presentations and those kinds of

17        things?

18   A.   Yes.

19   Q.   Are these for various corporations?

20   A.   Yes.

21   Q.   Are you still doing that type of work?

22   A.   Not as much as I was in the past, very little of

23        that type of work.

24   Q.   What type of work are you doing now?

0017

 1   A.   I have another company now.

 2   Q.   What is the name of that company? 

 3   A.   Executive Success Programs, Incorporated.

 4   Q.   A New York corporation?

 5   A.   Delaware.

 6   Q.   Licensed to do business in New York State? 

 7   A.   I imagine.  I'm in New York State.

 8   Q.   You're located in New York State?

 9   A.   That's correct.

10   Q.   Who incorporated that business?

11   A.   I did.

12   Q.   Who physically did the paperwork for that business?

13   A.   Toni Natalie helped me do the paperwork.

14   Q.   You incorporated the paperwork --

15   A.   She helped me incorporate that.

16   Q.   Did you do it through the Internet?

17   A.   Yes.

18   Q.   And you got at some point a corporate certificate

19        from Delaware?

20   A.   Yes.

21   Q.   After you had the corporate, did you do bylaws of

22        the corporation, minutes to the meetings, those

23        kinds of things?

24   A.   Yes.

0018

 1   Q.   And you keep those on a regular basis?

 2   A.   Yes.

 3   Q.   And you think the corporation is licensed in New

 4        York State.

 5   A.   (No response.)

 6   Q.   I'm just asking you.

 7   A.   I filed the papers and I do business in New York

 8        State.

 9   Q.   And you pay taxes in New York State?

10   A.   That's correct.

11   Q.   Who are the principals of that corporation?

12   A.   I am.

13   Q.   And who are the directors?

14   A.   I'm the director.

15   Q.   You're the sole director?

16   A.   Yes. 

17   Q.   Who are the officers of the corporation? 

18   A.   I am.

19   Q.   And that corporation is operating at the present

20        time?

21   A.   It is.

22   Q.   Can I ask you who First Principles, Inc. is, if you

23        know?

24   A.   It's another company that I own.

0019

 1   Q.   You own that?

 2   A.   Yes. 

 3   Q.   Do you know of a guy named Glazer out of New York

 4        City?  I don't know his first name, but his last

 5        name is Glazer.

 6   A.   I don't think so. 

 7   Q.   Is that business licensed to do business in New York

 8        State?

 9   A.   First Principles?  I also incorporated that business

10        in Delaware.

11   Q.   Not New York State?

12   A.   That's correct.

13   Q.   What does that corporation do?

14   A.   That corporation holds the patents for my other

15        company.

16   Q.   What patents are those?

17   A.   I have a couple of patents that are pending for

18        rational inquiry.

19   Q.   Copyrights or patents?

20   A.   They're patent pending.

21   Q.   The reason I ask, patents generally have to do with

22        mechanical devices. 

23   A.   These are intellectual property patents.

24   Q.   Who invented these particular items that you're

0020

 1        trying to get a patent on?

 2   A.   Keith Raniere.

 3   Q.   And they're in your corporation name?

 4   A.   Yes.

 5   Q.   And you applied for them?

 6   A.   Yes.

 7   Q.   Does it list him and First Principle as having any

 8        interest in those patents?

 9   A.   I'm -- I don't know how to answer the question. 

10        They're his -- they have his name because he's the

11        originator.  They're owned by my company.

12   Q.   Did you purchase those from him?

13   A.   The patents?

14   Q.   Yes.

15   A.   No.

16   Q.   Have you made an agreement to pay him a remuneration

17        from whatever you received from those patents from

18        any of the money that you earn for use of those

19        patents?

20                  (Ms. Cangilos-Ruiz and the witness

21             confer.)

22                  MR. RUDIN:  The same rules are going to

23             apply.

24                  MS. CANGILOS-RUIZ:  If you don't

0021

 1             understand, don't answer.

 2   A.   I don't understand.

 3   Q.   Somebody's got patents.  Do you think they've got

 4        any value?

 5   A.   Yes.

 6   Q.   Did Keith just give you those patents and say you

 7        can do what you want with them?

 8   A.   Provided that I use them in the way that he wants

 9        them used, he gave me those patents.

10   Q.   And he doesn't expect to receive any money or

11        remuneration of any kind?

12   A.   At some point we have an agreement that he will get

13        a portion of my profits.

14   Q.   So there is an agreement that he will be paid for

15        the use of those patents at some point?

16   A.   That's correct.

17   Q.   Is there an agreement for an amount or percentage?

18   A.   It's a percentage.

19   Q.   Of whatever you gross, I assume?

20   A.   Yes.

21   Q.   Could I ask, why are they being registered in your

22        name and not his name?

23   A.   That was the agreement that he made with me.

24   Q.   I'm asking you why.

0022

 1                  MS. CANGILOS-RUIZ:  I am going to object

 2             only because this question goes well beyond the

 3             litigation that's framed right now in the

 4             bankruptcy court.

 5                  MR. RUDIN:  No, it doesn't because the

 6             thing is that your claim is Keith Raniere owned

 7             my client's business 80 percent, but not on the

 8             record.  I want to know -- which is the same

 9             kind of situation here -- why he owns these

10             things not on the record.

11                  MS. CANGILOS-RUIZ:  I think because of the

12             judge's recent ruling, the 523 action has been

13             dismissed and we are now limited to the 727

14             counts.

15                  MR. RUDIN:  Correct.

16                  MS. CANGILOS-RUIZ:  And I will give you

17             some leeway, but I am going to have to reassert

18             my objection if you pursue this line of

19             question because I do not see it as relevant to

20             the causes of action as currently framed.

21                  MR. TRAINOR:  I join in the objection.

22   BY MR. RUDIN:

23   Q.   What's your relationship with Keith Raniere?

24   A.   He's my mentor.

0023

 1   Q.   Can you tell me what that means?

 2   A.   I met Keith in 1997 and we made an agreement that he

 3        would teach me his model and mentor me.

 4   Q.   What's his model?

 5   A.   It's called rational inquiry.

 6   Q.   Is that a psychotherapy type of model?

 7   A.   It's a philosophical type of model that has

 8        philosophical and educational and scientific

 9        applications.

10   Q.   For what?

11   A.   A variety of different things.

12   Q.   I mean, is it for people, is it for?

13   A.   It's for -- the way that I use it is with people.

14   Q.   Can you tell me what Keith Raniere's address is?

15   A.   I don't know.

16   Q.   How long have you known Tony Natalie?

17   A.   Since 1997, November. 

18   Q.   How did you meet her?

19   A.   I came into her outlet and my ex-husband's wife,

20        Sandy Padilla introduced me to her.

21   Q.   That was not a business relationship at that point,

22        I take it, just personal?  When you got introduced

23        to her it was not for business purposes?

24   A.   It was for business.

0024

 1   Q.   What were the business purposes that you got

 2        introduced to Toni Natalie for?

 3   A.   Sandy brought me to Toni's place of business to meet

 4        her and Toni introduced me to her company that day.

 5   Q.   Where was that place of business?

 6   A.   In Clifton Park on Route 9.

 7   Q.   Do you remember the name of the business?

 8   A.   National Health Outlet.

 9   Q.   Was there a specific purpose for your meeting with

10        her?

11   A.   Well, when I went, I went there because I thought I

12        was going to meet Keith Raniere and that day I also

13        met Toni Natalie.

14   Q.   Did you already know Keith Raniere at that time?

15   A.   No.

16   Q.   So you met Toni; at some point later, obviously, you

17        met Keith Raniere?

18   A.   That day.

19   Q.   Oh, that day?

20   A.   Yes.

21   Q.   And you had a conversation at some point, I assume,

22        concerning business?

23   A.   That day with Toni?  Yes, we sat down and she

24        introduced me to her company and her products. 

0025

 1   Q.   And you had a business at that time also; correct?

 2   A.   The International Center for Change.

 3   Q.   Did your relationship with Toni develop further

 4        after that on both a personal and business level?

 5   A.   It did.

 6   Q.   Can you tell us, did there come a time that you

 7        started counselling Toni individually?

 8   A.   She asked me to help her with some personal

 9        problems.

10   Q.   Do you recall when that was?

11   A.   It was very early in the relationship.

12   Q.   And at some point did you commence counselling her?

13   A.   I would talk to Toni about her problems.

14   Q.   Is that counselling or is that something other than

15        counselling?

16   A.   It was coaching.  It was a lot of coaching, a lot of

17        her -- yeah, it was.  It wasn't a paid counselling

18        position.  When you say counselling, I'm not sure

19        what you mean.

20   Q.   Well, do you consider yourself a professional?

21   A.   I do consider myself a professional.

22   Q.   And you stated that it's not so much that you give

23        people advice, but you help people through this NLP

24        method and other methods that you use, correct, or

0026

 1        you attempt to help people?

 2   A.   I do help people.

 3   Q.   Were you using those methods on Toni?

 4   A.   Are you asking me if Toni was a client of mine?

 5   Q.   Well, you said you were counselling her.  Were you

 6        using any of these NLP methods while you were

 7        counselling her?

 8   A.   Yeah.

 9   Q.   Were you using any other methods of therapy -- or

10        what would you call it?  Strike that.   

11             I think her problems were emotional, not

12        physical; correct?

13   A.   Correct.

14   Q.   And that's why she was talking to you; correct?

15   A.   Correct.

16   Q.   And you were reluctant to say the word counselling,

17        but you were coaching her.  Can you tell us what you

18        mean by coaching?

19   A.   At the time that I was working with Toni, I was not

20        doing counselling any longer professionally.  I was

21        doing a lot of business consultations and coaching

22        with individuals involved in businesses.  Toni asked

23        me to help her work through some of the issues that

24        she was dealing with primarily because of her

0027

 1        business.

 2   Q.   This was in '97, correct, approximately?

 3   A.   Started in '97.

 4   Q.   And you were doing different things; you were doing

 5        an executive business type of client at that point

 6        and not doing the NLP coaching?

 7   A.   I was working primarily in industry at that point.

 8   Q.   How did Toni find out that you were actually a

 9        counselor or therapist of some type?

10   A.   I don't know.  I think she knew people that I knew.

11   Q.   So you didn't tell her that?

12   A.   (Witness shakes head.)

13   Q.   But when she asked you to help her, you agreed to?

14   A.   Yes.

15   Q.   Did you ever speak to Keith Raniere about any of

16        Toni's problems?

17   A.   Yes.

18   Q.   After you talked to Toni?

19   A.   I don't understand the question.

20   Q.   Well, you talked to Toni.  You must have received

21        some information from her as to what her problems

22        were; correct?

23   A.   I did.

24   Q.   Did you ever speak to Keith about those problems?

0028

 1   A.   When you say talk to Keith about those problems, I'm

 2        not sure what you're asking.

 3   Q.   Did you ever talk to Keith about the problems that

 4        Toni was relaying she was having?

 5   A.   Do you mean did I discuss -- did I listen to what he

 6        told me about --

 7   Q.   Did you tell him what Toni told you? 

 8   A.   At times, if I had her permission.

 9   Q.   And you would always ask her permission?

10   A.   Oh, yeah. 

11   Q.   Now, you mentioned that Keith was your mentor.  Was

12        he anything more than your mentor?  I don't mean

13        personally; I mean, was he a business partner?

14   A.   He is the conceptual founder of Executive Success

15        Programs and First Principles.

16   Q.   Does he get paid from any of those corporations for

17        any of those services?

18   A.   He does not.

19   Q.   He does it for free?

20                  MS. CANGILOS-RUIZ:  Object to the form of

21             that question.  Would you rephrase it, please.

22   Q.   Do either of these corporations pay any monies or

23        any other kinds of remunerations to Mr. Raniere for

24        his services?

0029

 1   A.   It is possible.  And I don't remember exactly, but

 2        Executive Success Programs may have paid a

 3        consulting fee at one time.

 4   Q.   Does it now?

 5   A.   It hasn't, no.

 6   Q.   First Principles, does that pay anything?

 7   A.   No.

 8   Q.   Does Keith have any ownership interest in either of

 9        those businesses either on the books or some other

10        kind of theoretical way?

11                  MS. CANGILOS-RUIZ:  I am going to object

12             and reiterate the objection.  I think you have

13             gone well beyond.  I've given you a lot of

14             leeway, and it doesn't relate to the 727

15             action.

16                  MR. RUDIN:  The question is still whether

17             or not she's a creditor.  It's still an issue;

18             correct?  And the question becomes she says

19             that --

20                  MS. CANGILOS-RUIZ:  What are you referring

21             to?

22                  MR. RUDIN:  I'm referring to your

23             interrogatories where the allegations that with

24             regards to Toni's business, Keith --

0030

 1                  MS. CANGILOS-RUIZ:  What page?

 2                  MR. RUDIN:  I'm sorry, page 5 and also in

 3             the letter. 

 4                  MS. CANGILOS-RUIZ:  This response was

 5             directly under Section 523 of the Bankruptcy

 6             Code which, because the prior attorney did not

 7             timely assert that, has now been dismissed.  So

 8             I'm going to object, and it's a standing

 9             objection.

10   BY MR. RUDIN:

11   Q.   Did there come a time that you lent any of Toni's

12        businesses any money?

13   A.   Yes.

14   Q.   When was the first time?

15   A.   In January of 1998 -- sorry, in January of 1999 I

16        lent Toni's business $5,000.

17   Q.   Who was that check made out to?

18   A.   I think it was made out to National Health Outlet. 

19        It may have been made to National Health Network. 

20        There was a $5,000 check.

21   Q.   At whose request was that loan made?

22   A.   Toni's.

23   Q.   Did you speak to Keith Raniere about making that

24        loan to Toni?

0031

 1   A.   Yes, I did.

 2   Q.   Before or after Toni asked you for the loan?

 3   A.   It was at the same time, and I don't remember who I

 4        discussed it with first.

 5   Q.   The three of you were together?

 6   A.   It's possible that the three of us were together.

 7   Q.   Do you recall why either Toni or Keith asked you to

 8        make a loan of that money?

 9   A.   I do.

10   Q.   Can you tell us why?

11   A.   Toni had a loan that was coming due that was for

12        $10,000 that she told me was lost in the mail.  And

13        she asked me to lend her $5,000 to cover her rent

14        until that check came in.

15   Q.   And do you recall if Keith was there when this was

16        said?

17   A.   There was more than one conversation, and Keith and

18        Toni were present separately and together during

19        those conversations.  All three of us were together

20        for at least one of them that I remember.

21   Q.   Did you ever ask Keith about the validity about the

22        statement about the $10,000?

23   A.   Toni was quite upset about the loss of the -- the

24        check was lost in the mail.  Toni was quite upset

0032

 1        about it, so she had told me about it.

 2   Q.   But you said you spoke to Keith about the loan.  Did

 3        you ask Keith what he felt about making the loan?

 4   A.   Yes, I did.

 5   Q.   Can you tell us what he told you?

 6   A.   He -- I think he asked me to help Toni.

 7   Q.   Based upon his request, you helped Toni?

 8                  MS. CANGILOS-RUIZ:  Objection.

 9   Q.   Was it based on what Keith told you that you gave

10        Toni the loan or based upon what Toni told you?

11   A.   I would have to say both.

12   Q.   For how long have you known Kristin Keith? 

13   A.   I met Kristin Keith Christmas 1997.

14   Q.   Where did you meet her?

15   A.   At Toni Natalie's outlet.

16   Q.   Can you tell us the circumstances of that meeting?

17   A.   Toni had a Christmas dinner there that I attended.

18   Q.   And how about Pamela Cafritz? 

19   A.   I met Pamela Cafritz about a week after I met Toni

20        Natalie.  Toni introduced me to her.

21   Q.   How about Barbara Jeske?

22   A.   I met her on Christmas at Toni's.

23   Q.   Did there come a time that Keith asked you to loan

24        money to Kristin Keith?

0033

 1                  MS. CANGILOS-RUIZ:  I object to the

 2             question.  I think it's leading.  I think you

 3             should rephrase.  

 4                  MR. TRAINOR:  I join in that.

 5   BY MR. RUDIN:

 6   Q.   Did you ever lend any money to Kristin Keith?

 7   A.   I did.

 8   Q.   Can you tell us when?

 9   A.   In February of 1997 -- 1998.  Sorry.

10   Q.   How much did you lend her?

11   A.   The first time?

12   Q.   Yes.

13   A.   $1,500.

14   Q.   And I take it there was more than one lending?

15   A.   Um-hmm.

16   Q.   How many more times did you lend her money?

17   A.   Two.

18   Q.   How much did you lend her the next two times?

19   A.   In total I lent her $13,000.

20   Q.   Was she employed at the time you made these loans to

21        her?

22                  MS. CANGILOS-RUIZ:  If you know.

23   Q.   If you know, obviously.

24   A.   I'm not sure what the arrangements were.  She was

0034

 1        developing a company.

 2   Q.   What company was that?

 3   A.   It's called Organizational Marketing.

 4   Q.   By herself?

 5   A.   I'm not sure of how the company was structured

 6        exactly.

 7   Q.   Was Keith Raniere involved with the company?

 8   A.   Yes.

 9   Q.   Did Keith ask you to lend her the $13,000?

10   A.   He did not.

11   Q.   She asked you?

12   A.   Yes.

13   Q.   Did you receive any kind of promissory note or any

14        kind of documentation evidencing those loans?

15   A.   No.

16   Q.   Have those loans since been repaid?

17   A.   Partially.

18   Q.   In the form of cash or in the form of services?

19   A.   Both.

20   Q.   For the record, Kristin Keith was here this morning

21        and you said she was your assistant?

22   A.   Yes.

23   Q.   Is that how she's repaying part of this money she's

24        borrowed from you?

0035

 1   A.   No.

 2   Q.   You're paying her to be your assistant?

 3   A.   Yes.

 4   Q.   Do you know what interest or -- strike that.  

 5             Do you know if Keith Raniere had any interest

 6        in the businesses that you knew Toni was operating,

 7        either National Health Outlet or National Health

 8        Network.

 9   A.   Could you restate that?

10   Q.   You state that you became familiar with Toni's

11        business because you were there and you talked to

12        her and talked to Keith Raniere?

13   A.   That's correct.

14   Q.   Did there come a time that you found out or did not

15        find out that Keith Raniere was somehow involved in

16        those businesses?

17   A.   There was a time that I found out.

18   Q.   What was his involvement?

19   A.   He was the conceptual founder of Toni's business.

20   Q.   What concept did he found?

21   A.   The way that -- to the best of my knowledge the way

22        that he ran -- he set up the company or taught Toni

23        to set up the company -- because he mentored her as

24        well -- was his concept.

0036

 1   Q.   Did he ever tell you why his name was not involved

 2        in the company as an owner, why he wasn't the

 3        stockholder, why he wasn't an officer?  If you know.

 4   A.   Toni told me that he wasn't.

 5   Q.   Did you think he was an officer or owner of the

 6        corporation?

 7   A.   Toni told me of an agreement that she had with

 8        Keith.

 9   Q.   Can you tell us what that agreement was?

10   A.   She told me that it was her company primarily, and

11        as long as she ran it in a way that was consistent

12        with his concept and his management style, that it

13        would be in her name, and that she would -- that

14        they had an agreement, a verbal agreement that 80

15        percent of the company belonged to him and she would

16        sign it over at any time he was not -- he did not

17        feel that she was running the business consistently

18        with their agreement.

19   Q.   Did there come a time that he relayed that

20        information to you that he thought she was not

21        running the company properly?

22   A.   Yes.

23   Q.   When was that?

24   A.   He had concerns about that almost from the beginning

0037

 1        of my relationship with Keith and Toni.

 2   Q.   Was this sometime in '97?

 3   A.   Yes.

 4   Q.   Can you tell us what he told you his concerns were

 5        about Toni's operation of the business? 

 6   A.   Well, both Keith and Toni told me that the company

 7        was designed sort of as a prototype and that it

 8        needed to be systematized so that it could be

 9        reproduced.  And that was not happening in the way

10        that he had hoped or she had hoped.

11                  MS. CANGILOS-RUIZ:  I've given you a lot

12             of leeway, again, continuing in areas that are

13             well beyond what is framed by the pleadings

14             that are before the court.

15   BY MR. RUDIN:

16   Q.   At some point you lent the corporation some more

17        money other than the $5,000?

18                  MS. CANGILOS-RUIZ:  Objection to the form

19             of the question.

20   Q.   Did there come a time after you lent the $5,000 to

21        the company that you lent other monies to the

22        company?

23                  MS. CANGILOS-RUIZ:  Objection to the form

24             of the question.

0038

 1   Q.   Did you ever loan any money to this corporation or

 2        any of Toni's corporations?

 3   A.   No, other than what I said.

 4   Q.   Well, you said $5,000?

 5   A.   Right.

 6   Q.   There was money other than what you're claiming that

 7        you lent to the corporation, or there is not any

 8        other money?

 9   A.   To the corporation?

10   Q.   Yes.

11   A.   No.

12   Q.   No other money to the corporation.  Did you loan any

13        money to Toni?

14   A.   I did.

15   Q.   And how much money did you lend to Toni?

16   A.   $46,000.  And actually $50,000.

17   Q.   Can you explain the difference between the 46,000

18        and the 50,000?

19   A.   Toni asked me to lend her $50,000.  I got a home

20        equity line to lend her that money.  Part of the

21        money was to be used for her to pay Barbara Jeske,

22        one of the people who worked with her, commissions. 

23        And Barbara financially was in a bind, so I advanced

24        her $4,000 before I got the home equity line.

0039

 1   Q.   Do you know who Barbara worked for?

 2   A.   National Health Network.

 3   Q.   But you're saying you lent the money to Toni to pay

 4        a bill that belonged to National Health Network?

 5   A.   Toni asked me to lend her the money.

 6   Q.   Do you know if it was her obligation to pay Barbara

 7        Jeske? 

 8   A.   Originally when Toni asked me to lend her the money,

 9        she asked me to lend her $35,000.  Then she came

10        back a second time and told me that she owed

11        commission money, and asked me if I could lend her

12        an additional $15,000 for commissions so that she

13        could pay Barbara.

14   Q.   Did Barbara work for Toni personally or did Barbara

15        work for one of the businesses that Toni was

16        operating?

17   A.   I don't know exactly what their arrangement was.

18   Q.   Tell me what the commissions were about.  Did you

19        have any idea or was it just their word that they

20        told you that commission was owed, if you know?

21   A.   I don't know a lot of how they did it.  I don't know

22        much of anything.  Toni just asked me to lend her

23        the money.

24   Q.   And you lent her the money?

0040

 1   A.   I did.

 2   Q.   In your demand for documents you attached a letter

 3        dated April 25th where you say that you actually

 4        lent Toni $110,000.  Do you recall that letter? 

 5        (Proffered)

 6   A.   Between 1997 and 1999, I would say January of 1999,

 7        before the $5,000 check was given to Toni.

 8   Q.   You lent her other money?

 9   A.   I gave her money -- her business money for

10        consulting services.

11   Q.   Explain that to me.

12   A.   Well, when I first met them and Keith offered to

13        mentor me, the way that that was -- the way that I

14        paid Toni's company for consulting services.

15   Q.   What consulting services did Toni's company perform

16        for you, or her company?

17   A.   Through her company, Keith consulted my company.

18   Q.   So you paid her company.  Was that money supposed to

19        go to Keith?

20   A.   Actually, Keith was the conceptual founder of that

21        company, so I suppose that's what he did with that

22        money.  

23   Q.   You gave it to Keith for consulting services?

24   A.   I gave it to Toni.

0041

 1   Q.   How did you make the checks out, to Toni or to the

 2        business?

 3   A.   International Center for Change made the checks out

 4        to Toni's companies.

 5   Q.   For the corporation?

 6   A.   Yes.

 7   Q.   You gave those checks to Keith or Toni, if you

 8        recall?

 9   A.   You know, my secretary would make out the checks.  I

10        don't know if she mailed them or delivered them. 

11   Q.   But at some point they did come into the hands of

12        Toni's business?

13   A.   Yes.

14   Q.   And they're actually in payment of Keith Raniere's

15        services?

16   A.   Yes, they were prepayment for Keith's services.

17   Q.   And who would tell you to make the checks out to

18        Toni's business?

19   A.   Nobody told me -- oh, what happened was, I didn't

20        really have a financial agreement with Keith Raniere

21        for the consulting services that he was doing, but

22        he was doing -- he did a lot of work with me.  And

23        so I wanted to in some way compensate him, which he

24        didn't ask me for.  And so there were times when I

0042

 1        wanted to somehow compensate him and he told me that

 2        I could help Toni with her business by paying a

 3        consulting fee that she could use for her business.

 4   Q.   So those monies were not loans; correct?

 5   A.   They were prepayment for consulting that he offered

 6        to do.

 7   Q.   Did Keith do the consulting services for you?

 8   A.   It was agreed that he would.

 9   Q.   Did he?

10   A.   Some.

11                  MS. CANGILOS-RUIZ:  At this point, I am

12             going to object.

13                  MR. RUDIN:  It goes back to the question

14             of the loans, and I think I'm entitled to ask

15             that.

16                  MS. CANGILOS-RUIZ:  I just want the record

17             to be clear.  We have asserted the $55,000.

18                  MR. RUDIN:  And I'm leading up to that.

19                  MS. CANGILOS-RUIZ:  A hundred ten is not

20             what we are asserting here and we're not under

21             523. 

22                  MR. RUDIN:  I understand that.

23                  MS. CANGILOS-RUIZ:  We are under 727,

24             which is the denial of the complete discharge. 

0043

 1   BY MR. RUDIN:

 2   Q.   You also say that there was also, that your company

 3        and Toni's companies are sister corporations.  What

 4        does that mean?

 5   A.   Well, Keith had several different concepts and all

 6        of the companies were intended to interact with each

 7        other and support each other.

 8   Q.   Monetarily?

 9   A.   I don't think that that was ever mapped out.

10   Q.   Just a general type of situation?

11   A.   General?

12   Q.   Right.  In other words, it wasn't specifically I'll

13        give you $10?

14   A.   Yes.  It was not specific.

15   Q.   In your letter you refer to the mission.  What was

16        the mission?

17   A.   There is an overall belief that we have.

18   Q.   First, who is "we"?

19   A.   The -- with respect to concepts that are being

20        taught, that the ethics currently in business are

21        not at a high level, so that the mission is about

22        raising the ethics not only of our businesses but

23        through education in the world.

24   Q.   So Toni's companies are sisters, in that they have

0044

 1        the same mission as your companies; is that fair to

 2        say?

 3   A.   That's correct.

 4   Q.   And was it common knowledge to people who were in

 5        this mission involved in sister companies that Keith

 6        would receive a tribute or some kind of payment out

 7        of these companies for his personal living expenses?

 8                  MS. CANGILOS-RUIZ:  I'm going to object.

 9                  MR. RUDIN:  In this thing you're saying

10             the company used funds to pay personal bills.

11                  MS. CANGILOS-RUIZ:  You're being very

12             leading with respect to questions.  I've given

13             you an awful lot of leeway.  Secondly, you

14             continue to skirt the edge, and I thought I

15             gave good leeway without interrupting the

16             deposition.

17                  MR. RUDIN:  You are claiming that my

18             client took money out of the company for

19             personal expenses, and that's one of the frauds

20             you're claiming; correct?  She withdrew money

21             and that's part of the fraud, that she didn't

22             disclose.

23                  MS. CANGILOS-RUIZ:  727, failure to

24             satisfactorily explain loss of assets.

0045

 1                  MR. RUDIN:  Guess what, I'm asking her

 2             where the money went.  Did the money go to

 3             Keith or did it go to my client.  I think it's

 4             a fair question, where did the money go.

 5                  MS. CANGILOS-RUIZ:  Why don't you rephrase

 6             your question.

 7                  MR. RUDIN:  Okay. 

 8   BY MR. RUDIN:

 9   Q.   Keith's name comes up as involved in all these

10        companies, correct, somehow, some way.  Do you know

11        if he was paid any money from any of these companies

12        for any of the services he rendered.

13   A.   Personally?

14   Q.   Personally.

15   A.   He was not.

16   Q.   Who was paid for his services?

17   A.   By who?

18   Q.   By any of these companies.  You stated before that

19        you paid money for consulting services that he was

20        supposed to render to Toni's company.

21   A.   Yes.

22   Q.   But it was services that Keith was supposed to do;

23        correct?

24   A.   (Witness nods head.)

0046

 1                  MS. CANGILOS-RUIZ:  You'll have to give an

 2             oral response.

 3   A.   That's correct.

 4   Q.   Do you know if Toni ever paid any expenses from her

 5        businesses on behalf of Keith?

 6   A.   Yes, I do know that.

 7   Q.   What expenses?

 8   A.   Well, I saw a box of documents yesterday that my

 9        attorney showed me that included payments to the

10        attorney general.

11   Q.   So you do know that some expenses were paid on

12        behalf of Keith -- 

13                  MS. CANGILOS-RUIZ:  The question is the

14             timing she indicated she saw some documents. 

15             Now you're making certain inferences.

16   Q.   Was it within a year prior to the filing of the

17        bankruptcy, if you know?

18   A.   You know, I didn't look very closely.  She showed

19        them to me yesterday.

20   Q.   You've got this thing with ethics -- is this company

21        called Ethos, this ethics in business, is that what

22        its purpose is?

23   A.   My company is Executive Success Programs.

24                  (Defendant Exhibit 1 was marked for

0047

 1             identification.) 

 2   Q.   Is that a brochure from your company?

 3   A.   This is a brochure from my company.

 4   Q.   Is this distributed to the general public or to

 5        specific people?

 6   A.   Yes.

 7   Q.   In here it lists some people that are involved in

 8        the company? 

 9   A.   People who are involved?

10   Q.   Certain people that are involved in the company and

11        what your mission is.  I notice yourself?

12   A.   Yes, it has me.

13   Q.   And it lists Keith Raniere's name?

14   A.   Yes.

15   Q.   And he's involved in this company, also?

16   A.   He -- this is not a company.

17   Q.   It's not a company?

18   A.   No, it's a program that my company teaches.

19   Q.   I see in the back it says First Principles?

20   A.   (Witness nods head.)

21   Q.   So First Principles teaches this particular program?

22   A.   First Principles owns the technologies that that

23        program was developed from.

24   Q.   Is there a licensing agreement between First

0048

 1        Principles and the company that actually is using

 2        this particular item?

 3   A.   Yes.

 4   Q.   And is there money paid back and forth or either

 5        way?

 6   A.   Executive Success Programs leases the technology

 7        from First Principles.

 8   Q.   And First Principles is you?

 9   A.   That's correct.

10   Q.   Does First Principles pay any money to anyone else

11        besides you for the rights to use that particular

12        program?

13                  MS. CANGILOS-RUIZ:  Objection.

14                  MR. RUDIN:  That's okay, I withdraw that.

15   Q.   You say the mission has to do with principles in

16        business, the general mission between all these

17        companies and why Keith is involved?

18                  MS. CANGILOS-RUIZ:  Objection.

19                  MR. RUDIN:  What grounds?

20                  MS. CANGILOS-RUIZ:  I think we've gone far

21             afield.

22                  MR. RUDIN:  If you want to call the judge. 

23             The issue is Keith's involvement.  You're

24             claiming that the money has been siphoned off

0049

 1             of this corporation for my clients' bills;

 2             okay.  I'm entitled to show where.

 3                  MS. CANGILOS-RUIZ:  I think that there was

 4             a count with respect to piercing the corporate

 5             veil that has always been dismissed that is now

 6             totally irrelevant with respect to now what we

 7             have framed before us.  I will reiterate, it's

 8             only four counts 727 with respect to not

 9             properly stating the value of assets and

10             disclosing what they are.  Those are the issues

11             that are framed here.  Nothing with respect to

12             piercing the corporate veil that has to do with

13             the use of corporate assets and personal funds

14             being interchanged.  And therefore, I am

15             objecting to this entire line of questioning.

16                  MR. RUDIN:  The question becomes whether

17             it's a personal loan and whether she's even a

18             creditor, which I have raised in my pleadings.

19                  MS. CANGILOS-RUIZ:  But you are going far

20             afield.  Keith Raniere is not a party to this

21             proceeding.  This is the debt that was owed to

22             Nancy Salzman for a $50,000 line of credit that

23             she particularly took on a personal mortgage on

24             her residence that she gave, that there's no

0050

 1             dispute about.

 2                  MR. RUDIN:  She's claiming the loan is

 3             part of the mission.

 4                  MS. CANGILOS-RUIZ:  That is not part of

 5             what is being alleged here with respect to the

 6             727 causes of action and the hiding of assets.

 7                  MR. RUDIN:  It is with respect to my claim

 8             that she is not a creditor of this person, that

 9             she's a corporate creditor, that the money was

10             never lent to my client.

11                  MS. CANGILOS-RUIZ:  Stay within the

12             parameters of who the loan was to.

13   BY MR. RUDIN:

14   Q.   The loan, you stated before was for $50,000, this

15        one particular loan?

16   A.   Correct.

17   Q.   There were two checks that you drew?

18   A.   Yes.

19   Q.   One was, on your documents, for $46,000?

20   A.   Yes.

21   Q.   And there was another check for $4,000?

22   A.   Yes.

23   Q.   Who was that check drawn to?

24   A.   Which check?

0051

 1   Q.   The check for $4,000.

 2   A.   Barbara Jeske. 

 3   Q.   You drew that check to Barbara Jeske?

 4   A.   I did. 

 5   Q.   And that was in payment of commissions due to

 6        Barbara Jeske, you said.

 7   A.   Are you asking if I paid Barbara Jeske commissions?

 8   Q.   No, if you paid Barbara Jeske for the commissions?

 9   A.   I paid Barbara Jeske $4,000 for what Toni owed her

10        and didn't have.

11   Q.   Toni owed her or the corporation owed her? 

12   A.   Toni told me she owed her the money.  Barbara told

13        me she owed her the money.

14   Q.   Was it your agreement with Toni to draw two checks

15        or was it something you elected to do yourself?

16   A.   I told Toni that I could advance Barbara the $4,000.

17   Q.   Which you did do?

18   A.   Which I did do.

19   Q.   Did you ever make any representations that you were

20        a clinical psychologist?

21   A.   I did not.

22   Q.   Did you ever make any representation that you had 20

23        years of clinical experience?

24   A.   I did.

0052

 1   Q.   Can you tell us what you mean by clinical

 2        experience?

 3   A.   I did work for 20 years with people, most of my

 4        practice involved working with people with chronic

 5        pain and chronic illness.

 6   Q.   You said you're a therapist?

 7   A.   A psychotherapist.

 8   Q.   Who gave you the title psychotherapist?  

 9   A.   Psychotherapy is a term that is used to describe the

10        type of work that I did.  I'm a nurse.

11   Q.   But you gave yourself the name psychotherapist, I

12        take it.  It's not an earned degree?

13   A.   It's not an earned degree, no.

14   Q.   It's not a license?

15   A.   No.  It's a descriptive term.

16   Q.   Did you ever tell Toni that her child's well-being

17        was at risk because of her current state of

18        psychological breakdown?  

19                  MS. CANGILOS-RUIZ:  Objection.  Relevance.

20   A.   I did.

21   Q.   Did you ever tell anybody that you had a master's

22        degree.

23   A.   (Pause)

24   Q.   It's a yes or no.

0053

 1   A.   I did.

 2   Q.   Who did you tell?

 3   A.   I wanted to take a course that I couldn't get into

 4        without a master's degree, and so I told the people

 5        who ran the course that I had a master's degree.

 6   Q.   Did you ever tell any of the companies that you were

 7        soliciting for Executive Placement or these other

 8        corporations that you had a master's degree?

 9                  MS. CANGILOS-RUIZ:  Objection.

10                  MR. RUDIN:  What basis?

11                  MS. CANGILOS-RUIZ:  I think is -- again,

12             are we talking about 725 issues?

13                  MR. RUDIN:  It goes to credibility.  I can

14             ask questions on credibility.  It's discovery.

15                  MS. CANGILOS-RUIZ:  Go ahead.  My

16             objection is noted for the record.

17   A.   I told the company that offered the course that I

18        had a master's degree to take the course.

19   Q.   Who was the company that offered the course?

20   A.   I don't remember.  It was many years ago.

21   Q.   Did you ever tell anyone at Con Edison when you were

22        trying to get a contract out of them for doing some

23        services that you had a master's degree?

24                  MS. CANGILOS-RUIZ:  Objection.  Same

0054

 1             objection.

 2                  THE WITNESS:  Do I have to answer it?

 3                  MS. CANGILOS-RUIZ:  Yes.

 4   A.   Not directly.

 5   Q.   What does that mean?  Did you tell any employee of

 6        Con Edison that you had a master's degree?

 7   A.   I don't think so.  I don't recall ever telling

 8        anybody that I ever had one.

 9   Q.   Did you ever infer to anyone that you had a master's

10        degree?

11                  MS. CANGILOS-RUIZ:  Objection.  Restate

12             the question.  Did she ever infer?

13                  MR. RUDIN:  She said she never told anyone

14             directly.  I asking, did you ever infer it to

15             anybody. 

16                  MS. CANGILOS-RUIZ:  I think the word is

17             imply.  Perhaps you could be more specific by

18             restating the question. 

19   Q.   You say that you didn't tell anyone directly.  Did

20        you ever imply to anybody that you were dealing with

21        at Con Edison that you had a master's?

22                  MS. CANGILOS-RUIZ:  And I find that

23             confusing.  I think you have to be more

24             specific.

0055

 1   A.   I never told anyone at Con Edison that I had a

 2        master's degree.

 3   Q.   Can you tell me who Mark Drexel is?

 4   A.   He was my supervisor at Con Edison.

 5   Q.   Did you ever tell him you had a master's degree?

 6   A.   I told him I didn't have a master's degree.

 7   Q.   How did that conversation come about?

 8   A.   Years ago when I said that I had a master's degree

 9        to take this course, taking some of the courses that

10        I had, implied that I had a master's degree.  He was

11        my supervisor, and I told him that I didn't have a

12        master's degree.  

13   Q.   How did the conversation --

14   A.   The fact that I had the courses implied that I had

15        the master's degree, and I corrected it.

16   Q.   Before he found out or after he found out?

17   A.   He never found out.  I told him because I wanted to

18        clarify it in case it was a misrepresentation.  I

19        didn't want it to be a misrepresentation.  It might

20        have been a misrepresentation and I clarified it.

21   Q.   On the money that you claim that you lent to Toni or

22        to Barbara, did you ever have any promissory note

23        signed on any of the money that you're talking about

24        here?

0056

 1   A.   I did not.

 2   Q.   Did you ever talk to Toni's mother concerning

 3        obligations between Toni and yourself, monetary

 4        obligations?

 5   A.   I think I did.

 6   Q.   Can you give us a time frame? 

 7   A.   Could you be more specific with the question?

 8   Q.   Could you give us a time frame; did it happen in

 9        '97, '98?

10   A.   About the money?

11   Q.   When you spoke to Mrs. Schneier.

12   A.   Can you tell me specifically what you're asking?

13   Q.   I asked you if you ever talked to Joan Schneier

14        about monies that you lent to Toni or the

15        corporation and you said yes?

16   A.   Do you want me to tell you about all the

17        conversations I may have had with her about that

18        money?

19   Q.   Pick one.

20   A.   When Toni originally asked me for the money.

21   Q.   This is the fifty or the prior monies, the five

22        thousand?

23   A.   Well, okay.  So you're talking about any money I

24        lent to her?

0057

 1   Q.   Right.

 2   A.   I think I gave Joan the $5,000 check that I lent to

 3        her in January so she could pay the rent.  I'm

 4        almost certain that I handed her the check.

 5   Q.   Did the check have any notations on it?

 6   A.   Loan.

 7   Q.   And it was made out to the corporation, as you

 8        recall?

 9   A.   Yes.

10   Q.   Did you ever set up a payment plan with Toni or

11        Mrs. Schneier as to how the money was to be repaid?

12   A.   Originally yes.

13   Q.   What was the repayment plan?

14   A.   She originally told me that -- I think Toni told me

15        that when the $10,000 was paid to her, she would

16        just give me -- just turn it around and give it

17        right back to me.

18   Q.   Did you yourself have any personal knowledge of the

19        operation of Toni's businesses?

20   A.   When you say personal knowledge of the operation?

21   Q.   Right.  There have been some allegations about the

22        business, distribution of assets.  Did you have any

23        personal knowledge prior to receiving this

24        documentation that supply --

0058

 1                  MS. CANGILOS-RUIZ:  I'm going to object

 2             again.  The question has to do with a count

 3             that has been dismissed.

 4                  MR. RUDIN:  No, it has to do with the

 5             allegation -- 

 6                  MS. CANGILOS-RUIZ:  We're talking about

 7             Toni Natalie's personal bankruptcy here.

 8                  MR. RUDIN:  All right.

 9   Q.   Did there come a time that you made a demand on Toni

10        to pay the monies back?

11   A.   Yes.

12   Q.   And did Toni or anyone else on her behalf offer to

13        give you the company?

14   A.   The company?

15   Q.   Yes.  The National Health Outlet.  If you recall.

16   A.   I recall a conversation with her brother, who

17        offered to give me certain things with respect to

18        her Clifton Park business.

19   Q.   What things were those, and when was the

20        conversation? 

21   A.   It was after April of 1999.

22   Q.   What were the things that were offered? 

23   A.   He offered to let me take over her lease and he

24        offered to give me the physical things that were in

0059

 1        the store, the equipment and some product.

 2   Q.   What was your answer?

 3   A.   No.

 4   Q.   Why was that? 

 5   A.   Well, the lease for a year was as much as the loan,

 6        and I didn't think that it was an adequate trade.

 7   Q.   You didn't want to be committed to the lease?

 8   A.   No.  I didn't run a business.

 9   Q.   You've heard talk about some Ramon Santiago

10        paintings.  Have you ever been in Toni Natalie's

11        residence in Clifton Park?

12   A.   Yes.

13   Q.   Are you familiar with the paintings we're speaking

14        of?

15   A.   Yes.

16   Q.   Do you know anything about Ramon Santiago?

17   A.   I know what Toni has told me about Ramon Santiago.

18   Q.   What has she told you?

19   A.   She told me that his works were worth a lot of money

20        and that she had a sizable collection.

21   Q.   And did she tell you how much they were worth?

22   A.   She did.

23   Q.   Did she ever tell you that she had an appraisal

24        done?

0060

 1   A.   I don't think she did.

 2   Q.   What did she tell you the paintings were worth?

 3   A.   She told me that her collection was worth $150,000.

 4   Q.   When was that?

 5   A.   Well, she told me many things at times throughout

 6        the time I knew her.

 7   Q.   Are you an art collector of any sort?

 8   A.   No.

 9   Q.   Prints, posters, lithographs, original oils?

10   A.   I don't know much about art.

11   Q.   So you basically were just listening to Toni.  If

12        she said it was worth that much, you assumed it was

13        worth that much?

14   A.   That's correct.

15   Q.   Since this has happened, have you made any

16        independent attempts to have an appraisal done on

17        the artwork that was located at Toni's house the

18        last time you were there or when you were there?

19   A.   Have I tried to --

20   Q.   Yes, have you hired an appraiser, have you done any

21        special investigative work?

22   A.   When you say special investigative work?

23   Q.   Hiring an appraiser, maybe talking to people about

24        what was going on in Ramon's life, was he going to

0061

 1        die tomorrow so his paintings would be worth

 2        millions?

 3   A.   Yes.

 4   Q.   What have you found out?

 5   A.   I reviewed his web site personally.

 6   Q.   What did the web site tell you?

 7   A.   That he continues to make artwork.  He continues to

 8        sell artwork.  He continues to display artwork.  And

 9        he has a monetary value for his art.

10   Q.   That he put on his art? 

11   A.   On the web site, yes.

12   Q.   Did you talk to any independent appraisers about the

13        value of that artwork?

14   A.   No.

15   Q.   When was the last time you were in the Clifton Park

16        residence?

17   A.   I believe it was either the last week in March or --

18        about the last week in March, I think, of 1999.

19   Q.   Were you invited in the residence?

20   A.   On that particular occasion?

21   Q.   On that particular day.

22   A.   I may have stopped by.  My computer was there and

23        I -- Toni said I could come and pick it up.

24   Q.   Did you go into the house?

0062

 1   A.   I did. 

 2   Q.   Was Toni there?

 3   A.   Yes.  She let me in.

 4   Q.   Did you pick up the computer?

 5   A.   Yes.

 6   Q.   Were you with anyone else at that time?

 7   A.   No.

 8   Q.   Where was the computer located?

 9   A.   She had it by the front door.

10   Q.   Did you go inside the house or just inside the front

11        door?

12   A.   I was in the living room.

13   Q.   Prior to that time, when was the last time you were

14        in the house?

15   A.   I don't remember.  I was in the house frequently.

16   Q.   Were you ever in the house -- strike that.  

17             Were you ever in the house without Toni's

18        permission?

19   A.   When you say without Toni's permission.

20   Q.   Did you go to the house when you were not invited?

21   A.   No.

22   Q.   Did you ever go to the house with Keith when Toni

23        was not around?

24   A.   Was I ever in the house with Keith when Toni was not

0063

 1        in the house?  Yes.

 2   Q.   Were you at any time in the house with Keith after

 3        February of 1998?

 4   A.   The date -- whenever their relationship ended.

 5   Q.   Using that as a time limit, were you ever in the

 6        house after that?

 7   A.   No.

 8   Q.   Other than the time we were just talking about?

 9   A.   No.

10                  MR. RUDIN:  That's all for now.

11                  MR. TRAINOR:  No questions.

12                  MS. CANGILOS-RUIZ:  I will ask a few

13             questions.

14   BY MS. CANGILOS-RUIZ:

15   Q.   You were listed as a creditor on the National Health

16        Outlet petition and you're also listed as a creditor

17        in a disputed fashion on Toni Natalie's individual

18        petition.  I am going to ask some questions

19        regarding the nature of the debt. 

20             What were the circumstances under which you

21        lent money to the debtor. 

22   A.   Toni asked me to help her come up with a way that

23        she could find some money that she needed, and I

24        told her that I could take a second mortgage on my

0064

 1        home.

 2   Q.   What type of relationship did you and Toni have at

 3        the time that she asked you for this money?

 4   A.   We were friends.

 5   Q.   Did you consider that she was coming to you in a

 6        corporate capacity and asking you for a loan when

 7        she asked for this money?

 8   A.   No.

 9   Q.   Did you know the reason why she wanted the money?

10   A.   Yes.

11   Q.   Notwithstanding the fact that she wanted to put it

12        into her business, did you understand that this loan

13        was to be paid back by the business versus Toni?

14   A.   Toni told me that she would pay me back and that she

15        would personally guarantee it. 

16                  MR. RUDIN:  I'm going to object.  It goes

17             right to the 523 that you objected to.

18                  MS. CANGILOS-RUIZ:  Except that you've

19             raised the issue of creditor, and so it has

20             everything to do with 727.

21                  MR. RUDIN:  Then I have a lot more

22             questions to ask her if you're going to do

23             that.  You just told me that you objected to

24             that.

0065

 1                  MS. CANGILOS-RUIZ:  No, I let you have the

 2             full line of questions with respect to the

 3             amount of loan and the capacity under which it

 4             was given.  You've asked all those questions. 

 5             The line of questioning I've objected to is

 6             Keith Raniere's businesses and how they even

 7             relate to the issues that are framed before

 8             Judge Littlefield in the bankruptcy court.

 9                  MR. RUDIN:  Okay.

10   BY MS. CANGILOS-RUIZ:

11   Q.   What did Toni represent to you at the time that she

12        asked you for the money?

13   A.   She told me that she needed the money or she would

14        lose her business, and she told me that she would

15        personally back the loan with her artwork and her

16        jewelry, but particularly her artwork which she had

17        said was worth $150,000.

18   Q.   When was this conversation that you had with Toni?

19   A.   There were several of them.  From, I think it was

20        the end of January until the end of March when I

21        gave her the money.

22   Q.   1999? 

23   A.   Correct.

24   Q.   At the time that she made statements regarding her

0066

 1        artwork and jewelry, did you have those discussions

 2        in her house?

 3   A.   We had several discussions in several places, and

 4        she made those claims not just to me but to other

 5        people as well, who --

 6   Q.   Well, did she make a representation with respect to

 7        the artwork while you were in her house?

 8   A.   Yes.

 9   Q.   At the time was the artwork on the wall?

10   A.   Yes.

11   Q.   What paintings specifically were on the wall?

12   A.   The painting of a woman with blond hair was in her

13        bedroom.  And then there was another painting --

14        there was another picture in her bedroom.  There was

15        a large picture of her son on the wall on the steps

16        going upstairs, and then there were various pictures

17        all over the house. 

18   Q.   Is the picture that you reference with the blond

19        hair, is that the one that's been termed Blondie?

20   A.   I believe it is. 

21   Q.   And did Toni at the time point to any specific item

22        and make any representations with respect to value?

23   A.   There was a vase that was done by Ramon Santiago and

24        she told me that only three had been produced and

0067

 1        that the vase was worth $20,000.

 2   Q.   What were her exact words?

 3   A.   That she would pay me back, and if she had to she

 4        would sell her art.

 5   Q.   And in that context she mentioned the value of the

 6        vase to you?

 7   A.   Well, she was saying to me, just this vase is worth

 8        $20,000.  She also had told me, through the duration

 9        of our friendship, that her art collection was very

10        important to her and very valuable, and she

11        referenced it quite a bit.  And the value of it she

12        referenced quite a bit as well.

13   Q.   And approximately when did you extend the money to

14        her?

15   A.   March of 1999.

16   Q.   After your discussions with her, did you go about

17        refinancing of your residence?

18   A.   I did.

19   Q.   And who did you apply to?

20   A.   Fleet Bank.

21   Q.   How long did that process take?

22   A.   It took somewhere between three and four weeks.

23   Q.   And did Toni know how you were obtaining the money?

24   A.   She did.  I started the application with Marine

0068

 1        Midland, and Toni introduced me to her banker and

 2        asked her banker if he would expedite the process

 3        for her.

 4   Q.   So when was the money actually received by Toni?

 5   A.   I believe it was March 1st.

 6   Q.   Did you have conversations with Toni after that

 7        time?

 8   A.   I did.

 9   Q.   And what period of time were they after she received

10        the money?

11   A.   I think there was a period of about four weeks where

12        she continued -- and it may have been a little bit

13        more or a little bit less than four weeks -- where

14        she continued to reference the personal nature of

15        the loan, the personal guarantee.  Right up until

16        the last time I spoke to Toni, she told me she would

17        personally be sure I was paid back.

18   Q.   When was the last time you spoke with her?

19   A.   It was sometime around the beginning of April of

20        that year.

21   Q.   And why is it that you spoke with her brother

22        regarding a potential payback on the loan?

23   A.   One day, with no apparent reason to me, her brother

24        called me on the phone and told me that she did not

0069

 1        want to speak with me anymore and I would have to

 2        speak with him.  And that she intended to only speak

 3        through him to me and that I should not contact her

 4        anymore personally.

 5   Q.   And did he -- how many conversations did you have

 6        with the brother?

 7   A.   Maybe three or four.

 8   Q.   And did there come a time when he addressed Toni's

 9        intention with respect to payback of that loan?

10   A.   Yes.

11   Q.   What did he say to you?

12   A.   He spoke about it in each of the conversations. 

13        There also was one other conversation with Toni that

14        I just remembered. 

15   Q.   Was that in that four-week period?

16   A.   Yes.  It was the last conversation that I had with

17        Toni.  In fact, in that conversation she told me

18        that she had lied to me about what she intended to

19        do with the money, and that if she had told me the

20        truth she didn't think I would have lent her money. 

21        And in the conversation with her brother, we

22        discussed that.

23   Q.   And approximately when was that conversation?

24   A.   Her brother called me the day that Toni didn't want

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 1        to speak to me anymore, which was in the same week

 2        that I had that conversation with Toni.  And each

 3        time that we spoke, I referenced back to that

 4        conversation because I asked for my money back at

 5        that point when she had confirmed that it was not

 6        her intent to do what she said she would do.

 7                  MS. CANGILOS-RUIZ:  I have no further

 8             questions.

 9                  MR. RUDIN:  Just a couple.  

10   BY MR. RUDIN:

11   Q.   You stated you were in the house and you perused the

12        various paintings, and one of the paintings was the

13        one described as -- I don't know if it's a nickname

14        of the painting -- Blondie.  Where was that painting

15        located?

16   A.   In Toni's bedroom.

17   Q.   You were in Toni's bedroom?

18   A.   I was.

19   Q.   More than one occasion?

20   A.   Yes.

21   Q.   You said that Toni told you she lied to you about

22        what she was going to do with the money.  What was

23        the nature of the lie that you allege she said? 

24   A.   Toni told me that she was going to run the business

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 1        in the way that Keith said and that she was going to

 2        sign their agreement, which was the 80/20 agreement

 3        that she told me about.  

 4   Q.   Keith was to get 80 percent of the business? 

 5   A.   If she did not run the business the way --

 6   Q.   Right.  And she would get 20 percent and she would

 7        guarantee your loans personally?

 8   A.   Correct.

 9   Q.   And Keith would not be responsible for your loans or

10        any other business loan?

11   A.   Yes.

12                  MR. RUDIN:  Thank you.  Nothing further.

13                  (Whereupon, the examination of NANCY

14             SALZMAN in the above-entitled matter was

15             concluded at 1:29 p.m.)

16                           * * * * *

17                       INDEX TO EXHIBITS

18   DEFENDANT 1:  Brochure, Executive..............PAGE 46

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0072

 1   STATE OF NEW YORK       )

                                            ss.

 2   COUNTY OF               )

 3   

 4                  I,  NANCY SALZMAN, have read the foregoing

 5             record of my testimony taken at the time and

 6             place noted in the heading hereof, and I do

 7             hereby acknowledge it to be a true and accurate

 8             transcript of same. 

 9                               

10   

11              __________________________________

12                         NANCY SALZMAN

13   

14   DATED:     __________________

15   

16   Sworn to before me this ________

17   day of   ________________, 20_____

18   

19   ______________________________

     Notary Public

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0073

 1                   C E R T I F I C A T I O N

 2                  I, ELLEN J. FRANKOVITCH, Shorthand

 3             Reporter and Notary Public in and for the State

 4             of New York, do hereby CERTIFY that the

 5             foregoing record taken by me at the date and

 6             place noted in the heading hereof is a true and

 7             accurate transcript of same, to the best of my

 8             ability and belief.

 9   

10                    ________________________________

11                       ELLEN J. FRANKOVITCH

12   

13   Dated:  NOVEMBER 25, 2000

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