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MR. BAXTER: Fair enough.
I call CCPOA's person most knowledgeable who I
understand is Jeff Nicolaysen.
THE COURT: Come around and be sworn, sir.
THE CLERK: Please, raise your right hand.
JEFF NICOLAYSEN,
was thereupon called as a witness herein by the Plaintiff,
and having been sworn to tell the truth, the whole truth and
nothing but the truth, was thereupon examined and testified
as follows:
THE CLERK: Please, take a seat. State your name,
spell your last name and speak directly into the microphone.
THE WITNESS: My name is Jeff Nicolaysen. That's
N-I-C-O-L-A-Y-S-E-N.
DIRECT EXAMINATION
BY MR. BAXTER:
Q. Good morning, Mr. Nicolaysen. How are you?
A. Good.
Q. What position do you hold with CCPOA?
A. I'm the chief finance officer.
Q. How long have you held that position?
A. I've been with the organization 25 years. The title
I've had for probably about five years.
Q. And you're aware, I assume, that this examination is
going to focus on CCPOA's financial condition?
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A. Yes, sir.
Q. Okay. And you're aware that one of the factors that
the jury is to consider in determining the amount of punitive
damages is the financial condition of the various defendants,
right?
A. Yes, sir.
Q. Okay. And are you aware that and I, and my clients,
recently subpoenaed CCPOA's person most knowledgeable
regarding the financial conditions?
A. Yes, sir.
Q. Are you that person?
A. Yes, sir.
Q. Do you have personal knowledge of CCPOA's current
income and expenses?
A. Yes, sir.
Q. All right. And current knowledge of the CCPOA's
current assets and liabilities?
A. Yes, sir.
Q. Why don't we talk about some of those.
Did you prepare what was called a Statement of
Financial Position in conjunction with your testimony here
today?
A. Yes, I did.
Q. Okay. I'd like to flash for the witness only, if we
might, what I've gone ahead and marked as Exhibit 1182.
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(Exhibit published for witness.)
Can you see that on your screen, sir?
A. No.
Q. My fault.
(Monitor adjusted.)
Have it there?
A. Yeah.
MR. MASTAGNI, SR.: Your Honor, we'll stipulate the
documents can come in should Mr. Baxter desire.
MR. BAXTER: Great. Thank you very much.
I would like to move Exhibit 1182 into evidence.
THE COURT: Received.
(WHEREUPON, Plaintiff's Exhibit Number 1182 wasreceived into evidence.)
BY MR. BAXTER:
Q. Okay. Mr. Nicolaysen, just to acclimate the jury to
this document, this is something that reflects your
assessment of the financial position of CCPOA as of September
30, 2010, right?
(Exhibit published.)
A. Yes.
Q. Okay. And the first half of the document at the top
has the indication of "Assets," right?
A. Right.
Q. Okay. And that data that follows represents your
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listing of CCPOA's current assets?
A. Yes.
Q. Okay. And then the second half is entitled
"Liabilities And Net Assets," and that sets forth your
listing of CCPOA's liabilities or the things on the negative
side of the balance sheet, right?
A. Yeah.
Q. Okay. And please forgive me if my nomenclature isn't
the best. I'm not a financial guy. If I get sloppy, please
correct me. Okay?
A. The only thing I would point out is the negative side
is only the total liability number.
Q. Okay.
A. Okay.
Q. Gotcha. So the -- I assume then you are talking
about the number near the bottom of the document in bold, the
4.7 million?
A. The total liability is the 8,910,000. That's the
negative number that you are talking about.
Q. Right. So the net assets, the bold number would be
the net of the assets at the top minus the liabilities near
the bottom?
A. Right.
Q. Okay. Thanks.
So this exhibit actually consists of two sheets,
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correct?
So if we go to the next page, we see another sheet
that's very similar looking.
Do you see that?
(Exhibit published.)
A. Yes, I do.
Q. And I guess I should lay a little bit of additional
foundation.
You prepared both of these sheets, right?
A. Yes, I did.
Q. And if we look at the title of this second sheet it
says "CCPOA Statement of Financial Position September 30,
2010."
Do you see that?
A. Yes, I do.
Q. When was this sheet prepared?
A. This was prepared the middle of last week.
Q. All right.
And then if we could, go to the first sheet, so the
prior page we were looking at, and look at the top of that
document.
(Exhibit published.)
It has the same heading, but it says in parentheses
"After the date amended."
Do you see that?
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A. Yes, I do.
Q. When was this sheet prepared?
A. This sheet was prepared Wednesday of this week.
Q. So this was after the jury's verdict came in?
A. Right.
Q. Okay. So if we could, go back to the second sheet
for a moment. And if we could, go down to the first few
lines under where it says "Liabilities And Net Assets."
(Exhibit published.)
Okay. So the first entry there it says, "Current
Liabilities Accounts Payable $2,504,607," right?
A. I'm sorry. I thought you were going to go -- This is
the same. This is first sheet. I thought you were going
back to the first sheet.
Q. I'm actually looking at the second, but I'll
certainly represent to you that the figure is identical.
A. Repeat the question, please.
Q. So the first entry here under liabilities, it says
"Accounts Payable $2,504,607"?
A. Right.
Q. Okay. And now a substantial portion of that amount
represents the attorneys' fees that CCPOA owes in connection
with this case, right?
A. Well, it includes a lot of different things. Part of
it is attorneys' fees. We have a lot of accounts payable
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besides that.
Q. How much of this represents attorneys' fees?
A. Pertinent to this case?
Q. Yes.
A. Boy, I don't know the exact number, to be honest with
you.
Q. Well --
A. If I took a guess --
THE COURT: Not a guess. Your best estimate.
THE WITNESS: Okay. My best estimate would probably
be about 1.5.
BY MR. BAXTER:
Q. Million?
A. Uh-huh.
Q. So your best estimate is that 1.5 of the 2.5 million
here is attributable to the attorneys' fees owed by CCPOA in
this case?
A. Uh-huh.
Q. Yes?
A. Yes.
Q. I'm sorry. I don't mean to be rude.
A. No problem.
Q. Okay. And that's to pay for the services of David
Mastagni, Phillip Mastagni, James Carr, Sumaira Arastu, Diane
Schaumburg, Ian Roche, Will Creger of the Mastagni firm, and
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Thomas Umberg, Dean Zipser and Adina Witzling of the Manatt
firm, correct?
A. The only thing I can testify to is the firm. I don't
know who worked on the case, but the firm was Manatt and
Mastagni.
Q. Okay. Are there any other lawyers, other than the
ones that I've listed, that you're aware of who worked on the
case?
A. Not that I'm aware.
Q. And incidentally, CCPOA paid the legal fees for all
of the defendants in this case, right?
A. I don't know that.
Q. Do you know of somebody within your organization that
would know that?
A. I would think that Dave Sanders would know that, but
I'm not positive.
Q. Okay. And now, at the conclusion of this case, CCPOA
will not being incurring those legal charges anymore relative
to this litigation, correct?
A. I don't know the answer to that. I would assume
that's correct, but I don't know.
Q. All right. And so that 1.5 million that's currently
due and owing, and whatever else has been previously paid,
that's not going to be an expenditure that's repeated on an
ongoing annual basis, right?
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A. No.
Q. So my statement is correct, right?
Yes?
A. I'd have to -- I'd have to ask you to repeat the
first part.
Q. So the 1.5 million that's currently owed relative
this litigation --
A. Uh-huh.
Q. -- and whatever previous amount, I don't know what
that amount is, that CCPOA has paid to its attorneys in this
litigation, that is not going to be a recurring sum over and
over, year after year, correct?
A. No, it isn't. What I don't know is whether all the
bills are in for that.
Q. Okay. So there may be additional bills still
outstanding?
A. May be.
Q. Okay. All right.
And then at the bottom of what we're looking at here
on the screen -- so this is the second page, this is first
document that you prepared -- it says "Total Net Assets
$6,992,199," right?
A. Right.
Q. And then I'd like to go back to the first page. This
is the amended statement that you prepared this week. And if
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we could, look again at this same section of the sheet.
(Exhibit published.)
I'm sorry, Sharon. I had that backwards. It's the
second page. Sorry about that.
(Exhibit published.)
Okay. So this is what we were just looking at. I
apologize. Now go back to the first one.
(Exhibit published.)
Okay. So here, where it says "Total Net Assets," it
says "$4,704,794," right?
A. Yes.
Q. Okay. And if we look at the middle of the page, so
actually the top of what we're looking at now, it says
"Current liabilities," and that first accounts payable amount
is the same amount that was on the other sheet, right?
A. Yes.
Q. Now, there's a new item in here, and that's the
second one. It says "Accounts Payable - court decision: Dawe
v. CUSA," and it lists "$2,287,405."
Do you see that?
A. Yes, I do.
Q. Okay. And that represents the amount of the jury's
verdict that was just delivered on Monday as against CCPOA,
correct?
A. Correct.
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Q. Okay. And so to be clear, the difference here in the
net assets item at the bottom of the sheet where it now says
4.7 million, previously it said 6.99 million, that's exactly
the amount -- the discrepancy there represents the amount of
the jury's verdict in this case?
A. Right. It does.
Q. All right.
Now, again, on a going forward basis, CCPOA, at least
to your knowledge, is not going to be incurring additional
multimillion-dollar jury verdict judgments year after year,
correct?
A. I am not qualified to answer that. I do know we have
another very large court case out there.
Q. Okay. Well, let me just ask you, in your capacity as
chief financial officer, do you have an expectation that on
an ongoing, regular basis CCPOA is going to be paying out
significant court judgments?
A. I don't have an expectation, but I do have an
expectation of the one large one.
Q. Okay. Is your expectation that CCPOA is going to
lose that case and have to pay millions of dollars?
A. One, I don't know if it will go to court or not.
There's an agreement with -- It's almost more of an accounts
payable issue and a billing issue. And the reason it is not
on the statements is because that amount is unknown.
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Q. Okay. And the attorneys' fees --
MR. MASTAGNI, SR.: Your Honor, may we have a brief
sidebar?
THE COURT: Come to sidebar.
(Whereupon, the following discussion was held at
sidebar.)
THE COURT: Record will reflect we're at sidebar.
Yes, Mr. Mastagni.
MR. MASTAGNI, SR.: The problem I'm having is he's
discussed the attorney fees. There are ongoing cases --
there are ongoing other cases. I would ask at this point
there be no further mention of the attorneys' fees.
Obviously he doesn't know what's due to other firms, how it
is apportioned or anything else.
THE COURT: If that's so you can ask him the question
and that takes care of it. I'm not going to restrict the
plaintiff's examination.
MR. MASTAGNI, SR.: Thank you.
(Sidebar discussion concluded.)
BY MR. BAXTER:
Q. Mr. Nicolaysen, the amount that we were just looking
at, without taking into account the jury's verdict in this
case, was that 6.99 million dollar figure, and that would go
up still more if one were not to take into account the
approximately 1.5 million dollars of attorneys' fees that are
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currently due and owing to my colleagues over here, correct?
A. I mean, that's not something that you can do on the
financials.
Q. Well, I understand.
A. Okay.
Q. I understand what you are saying. Let me ask you
this: The accounts payable, you've already testified that it
is your best estimate. I'm not holding you to surgical
precision.
A. Right.
Q. But your best estimate is 1.5 of the 2.5 million in
accounts payable currently is attributable to attorneys' fees
so I guess I'm asking if one were to -- if the jury were to
ignore that sum --
A. Uh-huh.
Q. -- that would raise the net asset value of CCPOA,
right?
THE COURT: Do you want to object that it is argument
and he ought to take that up if he gets to argument?
MR. MASTAGNI, SR.: Thank you, Your Honor.
THE COURT: That objection is sustained.
MR. BAXTER: Thank you, Your Honor.
THE COURT: I mean, it is obvious, if you subtract a
number, the number is bigger.
MR. BAXTER: You are right. Some of this is a little
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more fundamental than I usually would because I'm not too
good with numbers. I apologize.
BY MR. BAXTER:
Q. I want to talk Mr. Nicolaysen about one other entry
in this exhibit. If we could, go to the top of this page.
(Exhibit published.)
And so there is an entry that says "Current assets."
This is the first entry. It says "Cash and cash
equivalents," 1.873 million dollars.
Do you see that?
A. Yes, I do.
Q. Isn't it the case that as of August 31, 2010, so one
month before what this reflects, CCPOA's cash balance was
$3,337,034?
A. Yes.
Q. Okay.
A. Well, approximately. I don't have those numbers, but
that's approximately correct.
Q. All right. Fair enough.
And isn't it the case that for fiscal year 2006,
CCPOA had over 11 million dollars in cash?
MR. MASTAGNI, SR.: Objection, Your Honor.
Relevancy.
THE COURT: Objection is overruled. You may answer,
sir.
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THE WITNESS: Yes. Approximately. That's correct.
BY MR. BAXTER:
Q. Okay. And there is an entry midway down. What we
are looking at says "Property and equipment, net."
Do you see that?
A. Yes, I do.
Q. Okay. And it gives a sum of over -- just over 5.7
million dollars?
A. Right.
Q. And that line item includes things like the three
houses that CCPOA owns, right?
A. Two.
Q. Two. Okay. And the several motorcycles and the
motorcycle trailer?
A. We own no motorcycles.
Q. Do you own a motorcycle trailer?
A. We own a trailer. I don't know if is a motorcycle
trailer. We own two or three trailers that we do a lot of
events with.
Q. Okay. Has CCPOA ever, within the last couple of
years, owned some motorcycles, including a Harley-Davidson
anniversary edition?
A. No.
Q. Does CCPOA own -- Actually, let me ask you this: Did
CCPOA last year, or within the last year-and-a-half, purchase
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eight vehicles -- eight cars?
A. Approximately.
Q. Okay. That would be included in this property and
equipment sum as well?
A. Yes, it would.
Q. Okay. And we'll talk about those items in a tad bit
more detail a little later.
I want to switch gears just a moment and talk about
revenues, so income and revenues.
First, CCPOA is the largest correctional officer
union in the country, right?
A. I don't know. I know that claims have been made, but
I've not looked at other unions to know that answer.
Q. Fair enough. It has approximately 31,300 members,
right?
A. Within a thousand.
Q. And CCPOA has had roughly that number of members for
the last several years, right?
A. Right.
Q. And CCPOA's primary source of revenue is membership
dues and assessments?
A. Yes.
Q. And in fact, membership dues and assessments
constitute over 95 percent of the revenue that CCPOA receives
each year, right?
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A. Yes.
Q. Okay. And the monthly dues for each member is at
$79.56 per month?
A. Correct.
Q. And I've put a calculator in front of you because I
frankly don't trust my own math so I want somebody who knows
what they are doing to run the numbers. But if we take
31,300 members and multiply that by -- is it okay if I round
up to $80 per month?
A. Not a problem.
Q. Okay. That gets us to a revenue total of
approximately 2.49 million dollars per month or about 29.88
million dollars per year. Does that sound?
A. That's actually fairly close to our revenue.
Q. Okay. If nothing else happens today, I'll consider
it a small victory that I got that so thank you.
And isn't it true that the estimated membership dues
revenue for CCPOA's 2010-2011 fiscal year is that amount,
$29,882,736?
A. Very close to that.
Q. Okay. And isn't it also true that CCPOA's total
annual revenue has been at or above approximately 30 million
over the past few years?
A. Yes.
Q. And CCPOA's total revenue, it is your expectation,
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will probably be in that same range next year and the year
after, right?
A. I don't know. The last few years we've actually had
to lower the membership counts each year because they're not
covering the positions, they're not putting the academies, so
we've been losing about 200 members a month.
Q. So if we can accept the notion that the current rolls
are approximately 31,300 members, and you lose 200 members
per month for, let's say, even the next ten years, you're
still going to be at approximately 29,300 members, right?
A. No.
Q. Per month?
A. Not per year. That's per month.
Q. All right. So you're going to be -- Can you do the
math for me on that?
A. Okay. That's 2400 members, so that's 24 -- The
number wouldn't be that high because it would slow down. I
mean, that's in reality. But based on your assumption,
that's 24,000 members and that would leave us with 6000
members.
Q. And as you say, that is not likely to happen?
A. I don't believe that.
Q. What is your best expectation as to the ultimate loss
of membership?
A. You know what? I couldn't even guess because there's
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so many variables in that equation. Who becomes Governor?
What happens to the state budget? I couldn't guess that.
If you had asked me five years ago, I would have said
the membership would continue to go up so I would not want to
guess that.
Q. So you really don't know one way or another
projecting into the future how the membership is going to go?
A. Not past a year out. But over the next year I would
be amazed if we didn't lose membership.
Q. Okay. Fair enough.
All right. And CCPOA does derive revenue from other
sources as well, right, over and beyond just membership dues?
A. Nothing material at all.
Q. Well, in 2005 isn't it the case that CCPOA took in --
this is beyond membership dues -- additional revenues of 1.41
million dollars?
A. We actually had a dues assessment that started in
2005 and it went through 2006.
Q. Okay. And so does that sound about right, my number
I gave you?
A. Actually, it sounds low --
Q. Okay.
A. -- to be honest with you.
Q. And what about -- So the additional revenue would be
somewhere north of 1.4 million that year?
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A. I would think so, but that's five years ago.
Q. All right. And in 2006, I have it that CCPOA took in
additional revenues of $521,276.
Does that sound right?
A. No.
Q. So would it be more than that?
A. Yeah. We had an assessment -- a 17-month assessment.
It was dues.
Q. Okay. All right.
And how does that get reflected on the financial
statements?
Does it get reflected as a due or an assessment, or
does it come in under the "Other Revenue" item?
A. You know what? I don't remember how I classified it.
It is clearly dues. Whether I split it out for informational
purposes, I don't know the answer.
Q. Okay.
A. I don't remember.
MR. BAXTER: Your Honor, may I approach the witness
to see if I can refresh his recollection with something?
THE COURT: Surely.
MR. MASTAGNI, SR.: May I see it?
MR. BAXTER: Yeah. I'm about to get you a copy.
(Document given to counsel for review.)
MR. MASTAGNI, SR.: Your Honor, may we approach on
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this?
THE COURT: Come to sidebar.
(Whereupon, the following discussion was held at
sidebar.)
THE COURT: Record will reflect we're at sidebar.
Yes, sir.
MR. MASTAGNI, SR.: My problem with this is I think
this is off the Internet, it is a website is what he provided
to us.
The question has been asked, "May I show you
something that refreshes your recollection."
THE COURT: We'll see whether it refreshes
recollection.
MR. MASTAGNI, SR.: Which infers it was something
CCPOA made. There is no foundation.
THE COURT: He can show him a piece of toilet paper.
If it refreshes recollection, it does. If it doesn't, his
answer is going to be, "No, it doesn't."
MR. MASTAGNI, SR.: All right. Thank you.
(Sidebar discussion concluded.)
MR. BAXTER: So I'm going to hand you a document.
(Document hand to witness for review.)
BY MR. BAXTER:
Q. Mr. Nicolaysen, like I said just now, I'll ask you
about a couple of specific items, but if you want to
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familiarize yourself --
THE COURT: The first question is does that --
MR. BAXTER: Right. I want him to see the whole
document.
THE COURT: Okay.
THE WITNESS: Okay. Go ahead and ask. If I need to
look at it further, I'll --
BY MR. BAXTER:
Q. If this does not help, then it doesn't help.
Does the entry that I pointed to, when I was over
there, where it says "other revenue" -- I won't testify.
Does that refresh your recollection that there was an
additional source of revenue over and beyond membership dues
and assessments in 2006 in the amount of 1.4 million dollars?
A. Yeah. I would need to -- This doesn't refresh what
it is. We sold a legislative office sometime during that
time frame that we had downtown, and, you know, things like
that. So I really can't tell you what that reflects.
Q. I'll leave that in front of you just in case I need
to come back to it.
A. Okay.
Q. Now, in 2006 CCPOA'S net worth was approximately -- I
won't say approximately. It was $16,555,789, correct?
A. That sounds right.
Q. Okay. All right.
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And since then, and based on the document that you
have prepared, the net worth has decreased in that time to
$4,704,794?
A. Right.
Q. Has CCPOA lost membership precipitously between 2006
and today?
A. A small part, but that's not a large part of that
difference.
Q. Okay. Well, let's talk about that difference.
Let's talk about expenses.
CCPOA's largest single expense item is the salaries
of its employees, correct?
A. Right.
Q. And in fact, for CCPOA's 2010-2011 fiscal year, CCPOA
budgeted $7,748,315 on salaries, right?
A. I'm not sure. I mean, that sounds within reason. I
thought it was more in the 6 million, but --
MR. BAXTER: Okay. Your Honor, I would like to --
May I have just one moment?
(Brief pause.)
I would like to hand Mr. Nicolaysen an exhibit that I
just obtained or a potential exhibit I just obtained
yesterday that was prepared within the last few weeks. I
understand it to be a CCPOA document.
I can certainly provide a copy to opposing counsel
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and go from there.
(Document handed to counsel for review.)
MR. BAXTER: Your would, I'd like to hand this, if I
might, to Mr. Nicolaysen?
THE COURT: Sure.
(Document handed to witness for review.)
BY MR. BAXTER:
Q. Mr. Nicolaysen, let me ask you first, do you
recognize this document?
A. Yes, I do.
Q. What is it?
A. This is the August 31st, 2010 budget.
Q. Okay. And who prepared this?
A. I prepared that.
Q. Okay.
MR. BAXTER: Your Honor, this is a new exhibit that
has not previously been listed, but I would like to move it
into evidence. It would be Exhibit 1183.
MR. MASTAGNI, SR.: Your Honor, may we come to
sidebar?
THE COURT: Come to sidebar.
(Whereupon, the following discussion was held at
sidebar.)
THE COURT: Record will reflect we're at sidebar.
Yes, sir.
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MR. MASTAGNI, SR: It's not on the exhibit list. I
suppose he can testify to it.
MR. BAXTER: Your Honor, it was prepared August
31st.
THE COURT: He couldn't have had it on the exhibit
list. And the question is whether or not --
(Brief pause. Court reviews the document.)
You're both right. The objection is overruled.
MR. BAXTER: Thank you.
(Sidebar discussion concluded.)
THE COURT: Moving 1183?
MR. BAXTER: I am.
THE COURT: Received.
(WHEREUPON, Plaintiff's Exhibit Number 1183 wasreceived into evidence.)
BY MR. BAXTER:
Q. Okay. Mr. Nicolaysen, if we could -- First of all,
if we could, flash this up for the jury.
(Exhibit published.)
Okay. So everybody can now see this.
So this is entitled: CCPOA 2011 Fiscal Year, August
31st, 2010, right?
A. Right.
Q. Okay. So when did you prepare this?
A. I prepared this probably around September 15th.
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Somewhere in that time frame.
Q. Okay. And CCPOA's fiscal year runs from April 1st
through March 30th?
A. Yes, it does.
Q. March 31st?
A. March 31st.
Q. And in terms of how this document is set up, these
expenditures are broken down into various numbered items,
right?
A. Right.
Q. Okay. And then the first column represents the
amount that's budgeted by CCPOA for that particular
expenditure for the fiscal year?
A. Right.
Q. And then the months that follow those columns
represent the actual sums expended under those items?
A. Right.
Q. So if we look to the third page, and if we look at
line 56 under "Salaries," it says about $7,747,000?
A. Yep. My memory was off.
Q. That's okay. I don't expect you to be able to have
these in immediate recall.
So this is accurate, right?
A. Yes, it is.
Q. Okay. Now, how many employees does CCPOA have?
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A. We run between 86 and probably 92.
Q. Okay. So based on that, the average salary for a
CCPOA employee is over $80,000, right?
A. I haven't done the numbers.
Q. Well, if we divide 7,700,000 by, I think you said,
82?
A. But you would want to divide it by the actual
expenditure, not the budgeted amount.
Q. Well, does the budgeted amount reflect what you
expect to pay to employees for the course of the year?
A. It's what we estimate, but it is not the true number.
Q. Well, has the true number from year-to-year deviated
significantly from what's budgeted?
A. It can. Because if we don't fill behind positions,
it can make a rather large difference.
Q. Let me ask you this: What is the average annual
salary of a CCPOA employee?
A. I have never figured that out.
Q. Okay. Does it vary significantly depending upon the
employee?
A. Yes, it does.
Q. All right. And CCPOA's second largest expense item
is for -- at least for this year, 2010-2011, is for legal
fees; is that right?
A. Let me take a look.
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Q. And that is on page 2 of the document, line 28. It's
a little over 4.5 million, correct?
A. Yeah. The budgeted amount is 4.5 million. And I'm
just verifying.
Q. That's fine. Take your time.
A. Yes.
Q. Okay. And that amount includes what was budgeted for
this action, correct? In other words, this litigation?
A. Yeah. You know what? We don't -- Our legal bills go
up and down so much each year we actually don't look at the
separate cases, we just estimate it based on the prior year.
So no, this case wasn't specifically taken into
consideration.
Q. Okay. Fair enough.
What about the jury's verdict?
This estimate also wouldn't include the amount of the
jury's verdict?
A. No, it wouldn't.
Q. Okay. Now, CCPOA's third largest expense is for the
Political Action Committee, which is still on that same page,
line 40, correct? That's 3.6 million?
A. Let me double-check here.
Yes.
Q. Okay. And that's the amount that CCPOA spends
basically on lobbying, right?
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A. That's the amount we contribute to PAC.
Q. Okay. Fair enough. Then the next largest expense
item is under the heading of Employee Benefits, which is on
the first page, item 18. That's 3.37 million?
A. Right.
Q. And so if you can trust my math, those four items
represent approximately 19.2 million dollars in budgeted
expenditures for this fiscal year, right?
A. Well, I would have to add them up.
Q. Okay. Please, feel free to do so.
A. Do you want the budgeted or the actual?
Q. The budgeted.
A. Okay.
(Witness calculates expense.)
I got 19,222,000.
Q. Okay. Great.
And if you look at the last page -- the second to
last page of what's been marked as Exhibit 1183, the total
amount of budgeted expenditures is $29,948,619, right?
A. Right.
Q. So those four items that we just went through
represent approximately two-thirds of the entire budget,
right?
A. Sixty-four percent.
Q. Okay. All right.
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And then I just want to hit quickly a couple of -- a
few of the other budgeted items.
So if you go to the first page and look at line 2,
there's an entry there for Advertising and Public Relations
in the amount of 1.8 million dollars, correct?
(Exhibit published.)
A. Correct.
Q. And if you go to page 2, line 31, there's a budgeted
expenditure of $409,000 and change, right?
This is -- Sharon, this is page 2.
(Exhibit published.)
There you go. Thanks.
Do you see that?
A. Yes, I do.
Q. And that's the budgeted expenditure for that item?
A. Uh-huh.
Q. Okay.
THE COURT: You have to say "yes" or "no," sir.
THE WITNESS: I'm sorry. Yes.
THE COURT: That's all right.
MR. BAXTER: I missed that one too. I apologize.
BY MR. BAXTER:
Q. Then there's page 2, line 45, called Political
Coordination. That's $258,000.
Do you see that?
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A. Yes.
Q. What's that for?
A. That's for -- That's a hard one to explain because
I'm not the one that defines what comes out of there. It's
normally for events that are not considered under PAC issues
but may have a political benefit for us.
Q. All right.
Is it fair to call that a lobbying fund too, or would
that be inaccurate?
A. I don't know. You would need -- That is a real
legal, legal, legal issue, and I really don't dwell in the
legal part of the political action at all.
Q. Okay. All right.
And on the top of this page, item 22, there's
something that's Executive Board Expenses, and that's in the
amount of $350,000, right?
A. Right.
Q. Okay. And in addition to that, on page 3, line 64,
there's an expense item for Travel, Food and Lodging in the
amount of $380,000, right?
A. Right.
Q. Okay. And besides the legal fees that we talked
about before, there's also on page 2, line 27, a $525,000
item called Legal Defense.
Do you see that?
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A. Yes.
Q. What's that for?
A. That's actually -- We pay our benefit trust fund.
And it is an insurance policy, legal policy for our
membership to help represent them.
Q. Okay. And I'm not going to belabor this more than I
already have, but if you add up all of the budgeted
expenditures -- and if you want to go to the second to last
page -- again, that gets us to $29,948,000, right?
(Exhibit published.)
A. Yes.
Q. And did this sum -- Did these figures play a role in
your analysis of net worth?
A. No.
Q. Okay. What role, if any, did they play?
What did you take into account in calculating net
worth?
A. Well, the difference is this is a modified cash
basis. Okay. Because it is very difficult to get accrual
basis statements. So I had to work really hard to get that
done for the financial here.
It doesn't include all of the payables, all the
accruals, so it doesn't include a lot of stuff for an accrual
accounting system. This is for decision -- internal
decision-making for the Board of Directors.
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Q. Okay. All right. Let's talk about assets --
A. Uh-huh.
Q. -- of CCPOA.
CCPOA owns its headquarters in West Sacramento,
correct?
A. Yes.
Q. How much is that building worth?
A. I don't know.
Q. Do you know how much CCPOA paid for it?
A. That I know. Four million dollars.
Q. Okay.
A. That includes the land and the building.
Q. When was that?
A. 1992.
Q. Is it fully paid off?
A. Yes, it is.
Q. And CCPOA owns two satellite regional office
buildings?
A. No, we rent.
Q. Does it own any other buildings other than the
headquarters?
A. Yes. To be honest, we also own a piece of land in
Southern California.
Q. Is that in Rancho Cucamonga?
A. Yes.
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We also own two houses.
Q. Let's start with the land. How much did you pay for
that?
A. It was a trade. I think the escrow documents would
show 700,000.
Q. Is that paid off?
A. Yes, it is.
Q. What's that for?
A. We were hoping to build an office in Southern
California.
Q. Is that still the plan?
A. It's been put off for many years.
Q. When did you buy that pieces of property?
A. Three to four years ago. I'm just estimating -- my
best estimate.
Q. And then the houses. You mentioned two houses.
Where are those located?
A. Those are in the Natomas area of Sacramento.
Q. Are those paid off?
A. Yes, they are.
Q. How much were those?
A. We paid approximately 300,000 for them.
Q. For each or both?
A. For each.
Q. So 600,000 total?
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A. Yeah.
Q. What are those used for?
A. We put -- We put a couple of members up when members
come up. It saves us quite a bit of money.
Q. Does Chuck Helton or Perry Speth live in either of
those?
A. Yes, they do.
Q. Do they maintain essentially full time residency
there?
A. They both have a residence elsewhere.
Q. Do they spend most of their time, to your knowledge,
in those residences, the ones in Natomas?
A. During the weekdays. You would have to ask them
though.
Q. Well, do you have an understanding?
A. That it is for the work days, for Monday through
Friday.
Q. And Mr. Helton and Mr. Speth are members of the CCPOA
Executive Council?
A. Yes.
Q. Does CCPOA also own or have an interest in a
townhouse?
A. No.
Q. Are you familiar with somebody named Juan Vasquez?
A. Yes.
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Q. Who is that?
A. He's an employee.
Q. Is he Mike Jimenez' chauffeur?
A. You would have to ask Mike exactly what he does. I
know he has chauffeured him, but I think his job duties are
much more intricate than that.
I know he's -- he's done work setting up offices. He
facilitates a lot of Mike's work.
Q. Does he get paid $68,000 per year?
A. I don't know what he gets paid.
Q. Do you have an estimate?
A. No, I don't. That seems high, but I just -- I just
don't know the answer to that without looking.
Q. Okay. I'm sorry.
Does CCPOA pay for any of Mr. Vasquez' living
expenses or the location where he lives?
A. We have an apartment that we pay for because he has a
Southern California residence.
Q. All right.
And so I probably just had this wrong when I said
"townhouse." So there is an apartment that CCPOA rents?
A. Right. We don't own it.
Q. Where is that?
A. That is in the Natomas area, south of 80 though.
Q. So other than use by Mr. Vasquez, what else is that
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used for?
A. I think that's the only individual that stays there.
I don't know if other members occasionally stay there or not.
Q. How often does Mr. Vasquez stay there?
A. I would have no idea.
Q. Okay. Does CCPOA also pay some or all of the housing
costs for Mr. Jimenez?
A. No.
Q. What about -- What types of expenses does CCPOA pay
Mr. Jimenez?
A. Business expenses. We reimburse for business
expenses.
Q. Okay. Anything else?
A. Not that I'm aware of.
Q. And I had asked you a little bit ago about the
purchase of vehicles last year.
Did you know -- And I asked you if CCPOA purchased
eight vehicles within the last year or so. What was your
answer?
A. That would be approximate to what we buy each year,
to be honest.
Q. Okay. So each year CCPOA purchases about eight
vehicles?
A. Yeah. Mostly for our field reps.
Q. Okay. How much did that cost last year?
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A. Well, we're getting the vehicles for about $20,000 a
car, 22,000. Again, I'm estimating. So what? That's 160 --
176,000.
Q. That's a yearly expense essentially?
A. Sometimes we get six, sometimes we get five,
sometimes we get eight. We take a look each year. We
analyze how many miles the field reps' cars have on them, and
when they're not safe to drive, we change them out.
Q. Okay. All right.
Now, what about political contributions?
I won't get into, you know, who the organization
supports or doesn't support or anything like that, but in
2008 didn't CCPOA contribute one million dollars relative to
a proposition on the California ballot?
A. I have absolutely nothing to do with the political
contributions. All the political checks get run through an
attorney that specializes in political issues.
Q. Who's that?
A. Wayne Ordos.
Q. Let me ask you this: As the chief financial
officer -- I mean, do you have any knowledge of the
contribution that I just referenced?
A. No, I don't.
Just so you know, the money gets transferred over to
that office, and I don't deal at all in the Political Action
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Committees or anything.
Q. Okay. Within the last year didn't CCPOA donate $1
million to something called the National Law Enforcement
Memorial?
MR. MASTAGNI, SR: Your Honor, I object on the
grounds of the First Amendment. We're getting into areas of
what they did.
THE COURT: Overruled. That you may answer.
THE WITNESS: CCPOA did not give a million dollars to
any outside group like that.
BY MR. BAXTER:
Q. Okay. Did CCPOA donate any money to that
organization?
A. Okay. Can you repeat the name of it?
Q. I'm sorry. The National Law Enforcement Memorial.
A. Is that -- I don't know. There's a museum back east
that we -- I think we gave $50,000 to, but, again, I wasn't
aware you would be asking that so I don't know for sure. I
could be off on that number. But the only thing I can
guarantee you is we gave nothing, nothing close, anywhere
close to a million dollars on that.
Q. Okay. Are you familiar with something called the
Governor's Cup Gold Tournament?
A. Yes, I am.
MR. MASTAGNI, SR: Objection, Your Honor. We're
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right back to the same First Amendment issue on the right
to --
THE COURT: The Governor's Cup Golf?
MR. BAXTER: Tournament.
THE COURT: Tournament.
MR. MASTAGNI, SR: Can we come to sidebar, Your
Honor?
THE COURT: Come to sidebar.
///
(Whereupon, the following discussion was held at
sidebar.)
THE COURT: Record will reflect we're at sidebar.
Mr. Mastagni?
MR. MASTAGNI, SR.: I thought the ruling was he can
ask about amounts of contributions, but not to who. The
Governor's Cup is a political contribution.
MR. BAXTER: I didn't know that either.
THE COURT: If that's so, I don't know. It sounds
like, I don't know what, but not a political thing.
If you represent that it is, I'll accept your
representation.
MR. MASTAGNI, SR.: Thank you.
(Sidebar discussion concluded.)
BY MR. BAXTER:
Q. Let me ask you this, Mr. Nicolaysen --
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THE COURT: Before you do that, you know, you have
heard this so often, but the questions of lawyers are not
evidence and I just made a ruling.
You may proceed, Mr. Baxter.
MR. BAXTER: Thank you, Your Honor.
BY MR. BAXTER:
Q. Did CCPOA make a $100,000 contribution to a golf
tournament within the last year or two?
MR. MASTAGNI, SR.: May we approach again, Your
Honor?
THE COURT: You may.
(Whereupon, the following discussion was held at
sidebar.)
THE COURT: Record will reflect we're at sidebar.
Before you say anything, you know this reminds me of
what I said to David, which is when I rule on something, I
rule on it. It is not an opportunity to go around the ruling
and find some other way to ask the question.
Is that what you are going to object to?
MR. MASTAGNI, SR.: Yes. Because obviously -- I
mean, there is a First Amendment right. I'm incensed with
this.
THE COURT: I'm ruling it out. I'm ruling it out.
You will find some people are republicans, some people are
democrats.
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MR. BAXTER: I wasn't trying to get cute.
THE COURT: Yes, you were.
MR. MASTAGNI, SR.: Can we please admonition --
THE COURT: Stop.
(Sidebar discussion concluded.)
BY MR. BAXTER:
Q. Okay. Mr. Nicolaysen, CCPOA has box seats at the
Sacramento Kings games, right?
A. Right.
Q. How many seats does it maintain?
A. I don't know. It's actually half a box.
Q. Okay.
A. But I don't know how many seats.
Q. How much does it pay for those per year, or per
season, I guess we should say?
A. It is actually one of the accounts payable. That's
the only reason I know the answer. It is 230,000.
Q. So that $230,000 item is on the accounts payable that
is reflected on the sheet that you've prepared?
A. Right.
Q. Okay. That's a discretionary expense, right?
In other words, that's not something that you need in
order to keep the organization going, right?
A. Yeah. It does have its benefits to the organization.
Q. I'm sure it does.
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A. So it's, you know...
Q. Not mission critical to the continued life blood of
the organization?
MR. MASTAGNI, SR.: Objection. Argumentative.
THE COURT: No. You may answer that, if you know.
THE WITNESS: Well, my belief is it is important to
the members because there's a benefit to the members now when
you look. So I don't know how to answer that any
differently.
BY MR. BAXTER:
Q. Okay. What about the Sacramento River Cats? Is
there a box that's maintained by CCPOA for that?
A. Yeah.
Q. Okay. How many seats does that encompass?
A. I don't know. I have never been there.
Q. How much is that per season?
A. We just paid 23,000 for it.
Q. That's also included in the accounts payable on your
sheet, right?
A. I don't know because we've paid it. So I don't know
if we paid it before September 30th or after so I don't know
the answer to that.
Q. All right. And those -- Both of those sums are
expenditures that CCPOA incurs every year, right?
A. Right.
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Q. And intends to keep incurring in the foreseeable
future, right?
A. Actually, no.
Q. Is that right?
A. We're trying to check the contract. So the answer to
that is maybe, maybe not.
Q. So that would be money that at least potentially
might be freed up; is that right?
A. Maybe.
Q. Okay. Does CCPOA also pay for things like Final Four
tickets? Has it done that?
A. I don't know.
Q. What about golf outings?
A. We may have done a couple.
Q. All right. What about trips to --
A. Excuse me.
Q. Yes.
A. When you mean "golf outings," what I mean is
fundraisers.
Q. Okay.
A. Not -- We don't send people out to play golf. We
don't have business meetings where people play golf and we
pay for golf.
What we do do is, for example, Crime Victims United
has a golf tournament which we sponsor. So sometimes we
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don't even have anyone show up because it is for the benefit
of the organization.
Q. And how much, for example, at that Crime Victims
United function, how much of the sponsorship -- how much
sponsorship does CCPOA put up?
A. I don't know.
Q. Have you ever heard of something called the CCPOA
Insurance Division Trust?
A. The Insurance Trust Division, yes.
Q. I'm sorry. Right.
A. Actually, it is the CCPOA Benefit Trust Fund.
Q. Okay.
MR. MASTAGNI, SR.: Your Honor, objection. I believe
this is a different entity. There is no foundation this is
CCPOA.
MR. BAXTER: I'm going to ask him.
THE COURT: Why don't you wait and find out whether
you've got an objection.
Go ahead.
BY MR. BAXTER:
Q. What is that?
A. That's an insurance trust which is a separate entity
by ERISA. In fact, ERISA has really, really technical
regulations about it, that the money that the trust has is
for the benefit participants of the plan.
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For example, we were going to have them buy part of
our building, but because of the legal ramifications and the
costs and the conflict of interest issues, we didn't have
them buy part of the building because the ERISA laws are so
tough they don't allow for any intermingling of funds
whatsoever.
Q. Okay. What is -- This may have been encompassed a
little bit in your answer, but just to be clear, what is
CCPOA's relationship to that entity?
A. We sign contracts for them to administrate, for
example, our medical plan, our legal defense plan that you
saw in there that we pay them. They administer the legal
defense plan. They run the dental plan, and they also
provide other benefits for the members.
Q. All right. Does CCPOA receive any financial benefit
from that organization?
A. None.
Q. And are you aware -- I asked you about your being
subpoenaed here today. Were you aware of the subpoena that
was issued to CCPOA also including a request for various
categories of documents?
MR. MASTAGNI, SR: Objection, Your Honor. I would
like to approach sidebar.
THE COURT: Come to sidebar.
(Whereupon, the following discussion was held at
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sidebar.)
THE COURT: Record will reflect we're at sidebar.
Yes, sir.
MR. MASTAGNI, SR.: This is a Pretrial Order issue.
The document designation -- We prepared the single document.
We spoke with the Court. We spoke to Mr. Baxter. And
whether he's aware of it or not, it is irrelevant because the
financials were never subpoenaed previously and it was
distinctly ruled that discovery was closed.
MR. BAXTER: I think I'm entitled to inquire whether
or not he received it, whether they took steps to
affirmatively gather documents.
THE COURT: The objection is sustained.
MR. MASTAGNI, SR.: Thank you.
(Sidebar discussion concluded.)
BY MR. BAXTER:
Q. Mr. Nicolaysen, on the subject of the donation to the
memorial fund, the memorial we were discussing before and you
mentioned you thought the amount was less than one million
dollars?
A. Uh-huh.
Q. Have you ever seen the memorial's website in relation
to thanking CCPOA for its donation?
A. No.
Q. Are you aware of the -- Whether you have seen the
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website or not, has anybody told you the amount that was
described on that website as coming from CCPOA?
A. No.
MR. BAXTER: That's all, Your Honor.
Thank you.
THE COURT: Ladies and Gentlemen, we'll take our
morning recess a little early. Fifteen minutes.
Please, remember the admonition the Court has
heretofore given to you.
(Off the record at 10:25 a.m.)
(On the record at 10:42 a.m.)
THE CLERK: Please, remain seated.
Court is now in session.
THE COURT: Record will reflect we're in open court,
counsel are present, the jury is not.
Mr. Umberg.
MR. UMBERG: Yes, Your Honor.
Your Honor, I understand your ruling with respect to
the political contributions and contributions to the
Political Action Committee. However, we're in a very unique
time, and a unique time for several reasons, the first of
which is right now it is October 22nd, and as the Court
knows, we're in the middle of a very hotly contested
gubernatorial campaign, as well as a number of other hotly
contested campaigns right here in Sacramento right here in
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the Eastern District.
For example --
THE COURT: I agree with you. It's certainly going
on.
MR. UMBERG: And the jury, whether they want to or
not, is being exposed to information with respect to CCPOA
and its political activity on TV.
For example, this morning there was TV ads that say
"Sponsored by," "Paid for by the California Correctional
Peace Officers Association." The front page of the newspaper
yesterday makes reference to CCPOA's political contributions.
Now, I don't know what the political affiliations are
of the jury, but what I do know is that that's an improper
basis for assessing punitive damages.
THE COURT: I couldn't agree with you more. That's
why I have been sustaining Mr. Mastagni's objections on that
basis.
There's a real world out there. And, you know, all I
can tell the jury is that they must not consider who or
whether -- not whether, but who CCPOA is contributing to.
I agree with you. And it is unfortunate it comes at
this particular time, but here we are.
What is it that you want me to do other than to tell
them that's not a proper thing for them to consider?
MR. UMBERG: Well, Your Honor, we'll work on a
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curative instruction --
MR. BAXTER: Your Honor --
MR. UMBERG: May I finish, Your Honor?
THE COURT: Yes. That's why I was waiving Mr. Baxter
down.
MR. UMBERG: We'll work on a curative instruction
with respect to extraneous factors they may not consider.
THE COURT: All right.
MR. UMBERG: But the other factor they may not
consider is there's no provision for attorneys' fees in this
case.
None of the causes of action provide for attorneys'
fees. And arguing that attorneys' fees basically either
directly or indirectly are appropriate is also not a proper
matter for them to consider.
THE COURT: I don't think that's what's being done.
I mean, it is perfectly appropriate for the jury in trying to
figure out what is the appropriate number, if any, and in
relating that to the expenses of the particular defendant,
how it is being spent. And I don't see how it could possibly
be read the other way.
Mr. Baxter, however, you wanted to object apparently?
MR. BAXTER: I'm sorry for starting. That's
unprofessional. I do apologize, Mr. Umberg.
A curative instruction at this point -- and I guess
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they can submit whatever they want to submit -- would be
much ado about nothing. I'm interested in the fact that the
contributions were made, not to whom.
THE COURT: I understand, sir. But Mr. Umberg's
concern is that whatever your interest is, some juror may be
upset or unhappy about who CCPOA is backing in this election,
meaning the Governor's race or members of the legislature,
et cetera.
I'm not sure I'm going to give a curative instruction
because I think I can handle it right now by just simply
warning the jury that it would be inappropriate and they are
not to consider that.
MR. BAXTER: That's fine.
THE COURT: But, you know, I'll look at whatever you
give me.
MR. UMBERG: Your Honor, I think Mr. Baxter early on
said he trusted you with respect to an instruction, and we'll
trust you to give the appropriate instruction. Now would be
best actually.
THE COURT: All right. That's what I'm doing to do.
I'm told by Ana that Mr. Baumann is going to the
hospital. He's apparently -- There is some fear he's had a
heart attack.
MR. MASTAGNI, SR.: May I check him?
MR. UMBERG: I don't know that he's had a heart
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attack. I do know he's having some medical issue right now,
and I think the courthouse nurse is with him.
THE COURT: I thought she had already decided that he
had better be taken to the hospital. That's not correct?
MR. UMBERG: We're going to find out right now, Your
Honor.
MR. UMBERG: Can we recess in place for just one
moment so we can find that out?
THE COURT: Okay. We can do that.
MR. BAXTER: Can I raise one additional issue?
THE COURT: Yes. While we're here. This is Dawe
versus CUSA. Of course we're going to have 14 issues.
MR. BAXTER: It wouldn't be a normal court date.
I went back and looked at the verdict forms that have
been given relative to Phase I, Your Honor.
If you look at CMECF document page 509, pages 11 and
12, the claims for intentional interference with prospective
economic advantage are specifically stated to be brought on
behalf of FIMA and Dawe.
THE COURT: I don't know how we made the mistake
then. We'll amend it accordingly.
Yes, sir.
MR. MASTAGNI, JR.: If we can throw it actually on
the overhead, I'll take a look at it. It is a little more
problematic.
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(Document published.)
MR. MASTAGNI, JR.: It says at the top "FIMA and
Dawe," but then it says "FIMA," "FIMA," "FIMA," and the
dollar is to FIMA. And so it is bizarre.
MR. BAXTER: I didn't notice that.
MR. MASTAGNI, JR.: It is bizarre.
THE COURT: It is really all screwed up.
MR. BAXTER: Thank you. I didn't notice that.
Your Honor, I'll defer to whatever you want to do.
THE COURT: That's awful kind of you.
MR. BAXTER: Let's put it this way, I'm not going to
lodge any objections.
THE COURT: All right. I'm going to leave it the way
it is.
All right. I'm going to leave it the way it is.
MR. MASTAGNI, JR.: Thank you.
MR. MASTAGNI, SR.: Mr. Baumann is going to the
hospital.
THE COURT: Yes. That's what I understood.
What are we doing?
Well, we can proceed here, and if you desire -- I
mean, it is up to you. If we get to the point where
Mr. Baumann is not available, I'm just going to tell the jury
that for reasons beyond anybody's control, he's not available
to be examined.
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MR. UMBERG: Here's the challenge, Your Honor --
THE COURT: I understand.
MR. UMBERG: -- I'm sure you do understand. He is
subject to punitive damages.
THE COURT: I understand. We're going to have to
decide what to do about that. Apparently -- Well, I mean,
we'll have to cross that bridge when we come to it. I don't
know what else to do.
MR. UMBERG: Let me suggest, Your Honor, as I
understand talking to Mr. Baxter, that we're going to get to
that bridge relatively quickly. I would just ask the
Court -- As soon as you're done, you're going to call
Mr. Baiardi next?
MR. BAXTER: Assuming nothing crazy happens on the
cross.
MR. UMBERG: Then you were going to call Mr. Baumann,
then that is it, right?
So after Mr. Baiardi testifies, if I could ask the
Court to dismiss the jury for a moment so we can assess?
MR. BAXTER: Maybe one possible fix is perhaps we
could get some documents from him.
MR. UMBERG: From Mr. Baumann?
MR. BAXTER: Yeah. We could submit on documents
rather than on his testimony.
MR. UMBERG: This is -- If, for example, the
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defense -- we'll have to think about that -- plaintiffs --
excuse me -- if at this point they would not seek punitive
damages from Mr. Baumann, maybe we could proceed. But we
can't allow in good faith the court -- or the jury to decide
punitive damages without Mr. Baumann's consent.
THE COURT: I understand entirely. I understand
entirely.
We'll have to work it -- I mean we'll have to think
about what we do about that in due course.
God forbid we may have to continue this matter until
we find out what his physical condition is and go from there.
That's awful. But that may just be the way we have
to do it. And if it turns out that he's really having a
heart attack and not going to be available for awhile,
Mr. Baxter, I may do what I have to do.
MR. BAXTER: I understand. I understand.
THE COURT: All right.
MR. MASTAGNI, JR.: Thank you, Your Honor.
THE COURT: Madam Clerk, bring the jury in.
(Jury brought in and seated at 10:50 a.m.)
THE COURT: I know you folks will be surprised, but
there's a reason that it's taken a little longer to get back
to you.
Like everything else in this case, there's been a
whole bunch of little hiccups we've had to deal with. I do
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want to caution you about a matter, however, that is of great
importance.
It is significant to you -- Strike that. It may be,
it is your judgment to make, that part of the expenses that
we've been discussing are CCPOA's political contributions.
That may be significant. You have to decide that.
What is not significant, and what you must not
determine makes any difference in this case is who they are
contributing to.
I am told, and it just shows you how I'm not aware of
what's going on, that there have been ads in the newspaper or
television, et cetera, which apparently say "Paid for by
CCPOA" or something like that.
You may not -- I want to make that very clear. You
may not consider who those contributions are made to in
deciding, if you decide that there are punitive damages, what
the appropriate punitive damages are.
Everybody understand what I'm saying?
Very good. Mr. Mastagni.
MR. MASTAGNI, SR.: Thank you, Your Honor.
CROSS-EXAMINATION
BY MR. MASTAGNI, SR.:
Q. Mr. Nicolaysen, can you please tell us your
professional qualifications?
A. I'm a CPA. I graduated from San Diego State
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University. I have a BA degree with an emphasis in
accounting. I worked for a CPA firm and got my CPA status
roughly in 1982.
I then came up here and worked for a CPA firm for a
short while. Then in 1986 I went to work for CCPOA as their
CPA, and so I've been in the business for almost 32 years.
Q. Thank you.
Now, the main reason that the net worth or the net --
total net assets of CCPOA went down in the amended financial
position is that the --
THE COURT: Why did it go down, sir?
BY MR. MASTAGNI, SR.:
Q. Why did it go down?
A. Well, what we had is an unknown. The unknown became
known Monday when we heard the decision by the court. At
that point in time it is required that we put that in the
financial statements because that was an expense related to a
prior time. So the generally accepted accounting principles
require you to put that in if something material happens
after the date of the original financial statements.
Q. Would the same hold true for the four million dollar
claim on the UPL, the Unpaid Leave Time lawsuit?
A. If that amount ever becomes known, then we would also
have to amend any financial statements that were reflected --
that reflect that number and the time period that it was
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incurred.
Q. Now, in reviewing your testimony just given here this
morning there seems to be, if you go back to 2006, it
declines in CCPOA's revenues as well as net assets, correct?
A. Correct.
Q. Can you explain why that's happening?
A. Yeah. In 2006 -- In November 2006 we had 17 months
of an assessment of $33 per member in addition to the dues.
So then at the end of 2006 our net worth was probably higher
than it had ever been.
But the reason we had that assessment is because our
costs were going up dramatically because we didn't have a
contract. And so our representation costs went up a lot
because of not having a contract.
And then more recently we have things like the
furlough case in which our members were working on Fridays
and not getting paid for it. And we've had a lot of lawsuits
like that that we've had to defend our members. And also,
without a contract, you have a lot more individual
representations.
We've also -- More recently the IRS changed the
funding requirement for the pension plan. And just this year
we actually spent half a million dollars more than we had
budgeted because of the change in requirements for funding
the pension plan. And that's for CCPOA staff.
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So from 2006 on we've actually -- there's actually
been a steady draw on that net worth each year because our
expenses have grown so much.
Q. Does CCPOA have fair share payers?
A. No. Yes. We lost fair share when we lost the
contract, and that was about $35,000 a month. So that's
another $360,000 a year that we lost in revenue. And our
membership has slowly gone down over the last two or three
years which affected revenue.
Q. Do you know why you lose the fair share people when
you don't have a contract?
A. Yeah. The state refuses to collect their dues.
Q. Are there any other reasons why your net worth has
gone down?
A. Those are the biggest reasons they've gone down
really is the pension plan, the increased costs because of
not having a contract.
Q. Now, in terms of your legal fees, do you know whether
or not CCPOA is involved in any other litigation, be it
appellate, trial, administrative or otherwise?
A. You know, I know we're involved in a lot of
membership representation cases, some individually and some
as a group, but I really can't tell you specifically what
they are. But that is -- most of our legal fees are for
membership representation.
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Q. Do you know whether or not CCPOA is involved in the
prison overcrowding litigation?
A. Yes, we are. I didn't remember. Sorry.
Q. Do you know whether or not CCPOA is involved in the
early inmate release litigation?
A. You know what? I'm not aware of that one. I'm
sorry. That doesn't mean we're not.
MR. MASTAGNI, SR.: I think I'm done, Your Honor.
MR. BAXTER: No questions, Your Honor.
THE COURT: You may step down, sir.
May the witness be released?
MR. BAXTER: Actually, Your Honor, may I have just
one moment? I apologize.
THE COURT: Sure.
(Brief pause.)
I thought we were getting you out of here.
MR. BAXTER: No questions, sir. Thank you.
THE COURT: May the witness be released?
MR. MASTAGNI, SR.: Your Honor, we ask that
Mr. Nicolaysen remain available in the hall.
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