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Thursday, August 18, 2011

Original Art Stories: Steve Geppi's Million Dollar Art Deal Gone Bad Part III: Geppi's Deposition


An anonymous person decided to accuse me of spreading ‘misinformation’ in regards to my recent posting about Steve Geppi and his milliondollar art deal that went horribly wrong.  To further this I thought it’d only be fair to share everything at my disposal – the other day I posted Jerry Weist’s art inventory, so today I thought I’d post Steve Geppi’s deposition, in its entirety.

Here you can read how Geppi’s wealth has plummeted from an estimated $20,000,000 to somewhere around $1,000,000.  You can read, in his own words, why Geppi stopped paying the agreed upon amount to the Montana family.  You can read, in Geppi’s own words, about the many judgments against him.  About the only thing you can’t read is why Geppi firmly believed that the Montana family colluded with Jerry Weist to inflate the value of Bob Montana’s art in order to get a better price, but you can read, in Geppi’s own words, how he has no idea who bought the art that Diamond sold, or what prices they realised, this is despite Diamond and/or Geppi himself being able to get those details through Heritage and eBay if they so desired.  In short you can see just how lackadaisical Steve Geppi approaches his business.  It’s all here, all I’ve done is reformatted it, and I’ve removed Geppi’s personal street address.  Other than that one change not a word has been removed, so you can read Geppi’s mangled grammar in all its glory.

And just for an added bonus, immediately after the deposition are copies of correspondence between Geppi and the Montana family, copies of the contracts that Geppi signed and some relevant tid-bits from Geppi’s answer to the Montana family’s original filing.  Click on them to enlarge them for a better view and then tell me how any of this is 'misinformation'.

Oh, and as an aside, I sign my name to this stuff.  If you want to leave a comment then have the guts to sign your name as well.  As Cliff Meth says, “No guts, no glory.”


UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION
_________________________
PAIGE M. KUETHER, et al.,
vs.
DIAMOND INTERNATIONAL GALLERIES, LLC, et al.,
Defendants
__________________________
Deposition of Stephen Geppi
Timonium, Maryland
October 5, 2010
10:05 a.m.

APPEARANCES:

For the Plaintiffs:
ERIC C. RUSNAK, Esq.
K&L GATES, LLP
1601 K Street, N.W.
Washington, D.C. 20006
202-778-9212

For the Defendants:
JOHN LLEWELLYN HONE, Esq.
LIPSHULTZ AND HONE, CHARTERED
Montgomery Center, Suite 108
8630 Fenton Street
Silver Spring, Maryland 20910
301-587-8500

PROCEEDINGS
STEPHEN GEPPI, was called for examination by counsel and, after having been duly sworn by the Notary, was examined and testified as follows:
EXAMINATION BY COUNSEL FOR PLAINTIFFS
BY MR. RUSNAK:
Q:  Good morning Mr. Geppi.
A:  Good morning. How are you?
Q:  I'm fine.
My name is Eric Rusnak. I'm an attorney at the law firm K&L Gates in Washington, D.C.. I represent Paige Kuether and Lynn Montana, Ray Montana and Don Montana in this action that is pending in the U.S. District Court for the District of Maryland.

And we are here today to take your deposition in this matter.  Have you had your deposition taken before?
A:  Yes, I have.
Q:  So you are familiar with the procedure?
A:  Yes, I am.
Q:  If there is any question that you don't understand of mine, just let me know. If you need to take a break, you know, let me know that, too, and we will try to do that.

Can you please state your name and address for the record.
A:  Stephen A Geppi, G-E-P-P-I. It's [street number removed] Greenspring, that's one word, Greenspring Avenue, Lutherville, Maryland 21093.
Q:  And is that your residence?
A:  That is my residence.
Q:  And what is your current occupation, Mr. Geppi?
A:  Chief executive officer of Diamond Comic Distributors.
Q:  What is your role as chief executive officer of Diamond Comic Distributors?
A:  Chief cook and bottle washer. Does that work? I'm the executive side of this as far as making mental decisions. We have a whole management team that runs the day-to-day, but I am kind of like the retired mascot in a way according to them. Typical CEO responsibilities.
Q:  What does Diamond Comic Distributors do?
A:  Diamond Comic Distributors is the world's largest distributor or English language comic books.
Q:  As part of its business what are its day-to-day activities?
A:  Diamond Comics represents all the major publishers of comic books to the direct sales comic book market, which is the speciality shops, mom and pop type shops, as well as to a number of the traditional book stores/mass market Barnes & Noble, Amazon.com, whatever.
Q:  Where is Diamond Comic Distributors dislocated?
A:  The corporate offices are in this building that we are in today, 1966 Greenspring
Page Drive, not to be confused with my house which is Greenspring Avenue, and that's Timonium, Maryland 21093. Same ZIP.

And the distribution centers are at a variety of places. The major one is in Mississippi, Olive Branch, Mississippi. There is one in New York, Upstate New York. There is one in California, one in London, and there is affiliated other little warehouses that are under another company called Alliance Game Distributors, which really falls under the same financial statement as Diamond. It's a d/b/a Plattsburg was what I was looking for in New York. Plattsburg, New York. I can't believe I couldn't remember that.
Q:  Approximately how many employees does Diamond Comic Distributors has?
A:  I think the last I saw -- they do this thing in the Baltimore Business Journal; largest private companies. I think they – in Diamond's case, not all my companies, but in Diamond's case I think they said, I want to say, somewhere around 700.
Q:  Is that a privately held company?
A:  Yes, it is.
Q:  Who holds the shares?
A:  I own a hundred percent of the shares.
Q:  Does Diamond Comic Distributors have any subsidiaries or affiliates?
A:  I don't know if subsidiaries is the right terminology.
MR. HONE: I want to interject. The concept of affiliates is one which we have spent a great deal of time attempting to determine what that may mean. There is no good meaning for that in terms of the kind of business he conducts. They often refer to companies which they are associated with as his sister company. So maybe that might help him better.
THE WITNESS: I was going to say -- that is the word I was going to use. Sister companies all owned by the same guy.
BY MR. RUSNAK:
Q:  What are those companies?
A:  Well, as I said, Alliance Game Distributors is a separate d/b/a.  What Diamond is to comic books Alliance is to role playing games. They are the largest role playing game distributors. At the end of the year when it's a consolidated financial statement they are more or less a d/b/a. There is also Diamond Book Distributors, which is our way of separating the comic book store market from the bookstore market, the traditional Barnes & Noble and mass markets.

Then I have a variety of other companies, one of which is Gemstone Publishing, a small company that publishes the comic book price guide and a variety of other types of price guides. Then there is Hake's Americana, which is an auction company that auctions old comic book and political memorabilia. Then there is a very tiny company called E. Gerber, G-E-R-B-E-R, Products. They actually make the mylar sleeves that you put the comic books in.

Whatever else you want to put in them.  Then there is Diamond Select Toys, which is another small company which is a manufacturer of collectible figures based on comic book characters, all licensed products.

Then there is Geppi's Entertainment Museum, which is a show place of all pop culture collectibles that is located downtown at Camden Yards.

Then there is Baltimore Magazine, which is the oldest city magazine in the country, and it's a typical life-style magazine as you would in Washington. You have the Washingtonian, and Boston, Philadelphia, et cetera.
MR. HONE: That is held by who?
THE WITNESS: Rosebud Entertainment is the d/b/a -- not the d/b/a but the holding company, if you will. Who am I forgetting? Am I forgetting someone, John?
MR. HONE: Diamond International Galleries. We should mention that.
THE WITNESS: Diamond International Galleries, which is a nonphysical entity, a carryover, a d/b/a from when there used to be a gallery on the fourth floor of the building we are in now, 1966 Greenspring Drive.  I'm pretty sure that is it.
BY MR. RUSNAK:
Q:  Do you own a hundred percent of the entities that you just named?
A:  Yes, I do. I think there is one where I own 99 percent because there was
 some --
MR. HONE: There are two in which he owns 95 percent and Diamond Comic Distributors owns 5 percent. I'm not certain which two those are.
THE WITNESS: Might be Diamond U.K. because of some tax thing that we needed to do.
MR. HONE: Did you mention Diamond U.K.? You didn't. Diamond U.K..
THE WITNESS: I kind of did that under the umbrella with Aliance/Diamond U.K. all kind of fall under the financial same financial statement as d/b/a's under Diamond.
BY MR. RUSNAK:
Q:  What is Diamond International Galleries?
A:  Diamond International Galleries is the name of what used to be a physical gallery on the fourth floor of 1966 Greenspring Drive where I showcased collectibles, and when we opened the museum Geppi's Entertainment Museum downtown Baltimore Camden Yards we closed the physical entity down. There was no need for it. It retained -- the entity was still retained for whatever accounting purposes, I don't know, so it exists pretty much in name only is the best way I can describe it. And it is a -- what would you call it, John? I wouldn't call it a holding company. I don't know if that's the right terminology.
MR. HONE: It got complex because Mr. Snyder then created two separate Geppi's Entertainment type companies.
THE WITNESS: He was doing more marketing kind of stuff.
MR. HONE: And Diamond International Galleries became nothing but at that time holding company for Hake's Americana.
Does that help?
MR. RUSNAK: Yes.
MR. HONE: I'm not under oath. I will do my best to help out.
BY MR. RUSNAK:
Q:  Does Diamond International Galleries have any other role or business purpose other than to showcase collectibles?
A:  No. No. That was pretty much it.  It was kind of Steve's collection on display and at the time the guy he referred to, John Snyder, who was the president of Diamond International Galleries kind of had – his paycheck was divided among a variety of different entities that might have existed at the time so he oversaw Gemstone  Publishing, the gallery itself, Morphy's Auction, which used to exist, Hake's Americana. These were all kind of pieces. So his paycheck, kind of the best way to get to this, is he was an employee of Diamond International Galleries, the president, but then they would allocate a certain percentage of his time to the oversight of those other entities that I mentioned.
MR. HONE: And there was one other, which no longer exists, which was Geppi's
 Memorabilia Roadshow.
THE WITNESS: Right.
MR. HONE: So that is gone.
BY MR. RUSNAK:
Q:  What was Geppi's Memorabilia Roadshow?
A:  It was a feeble attempt at an auction company in the sports world which is a memory I prefer to lose.
Q:  And did Diamond International Galleries purchase comics or comic collectibles?
A:  Yes. There were cases -- there were two types of purchases. There were things that were purchased by the gallery and there were things purchased by me personally.

Usually the criteria for determining that was if I would buy something that I felt I was going to hold for more than a year and hence be eligible for capital gains, I would do it under the auspices of Steve Geppi personal. If it was something we were just buying as inventory to turn over or hopefully sell, it was bought under the auspices of Diamond International Galleries.
Q:  And so Diamond International Galleries would then at times sell --
A:  Yes.
Q:  -- the items it purchased; is that correct?
A:  Yes. There was a physical gallery here where -- it was not foot traffic oriented.  We would -- no one would walk off the street to the fourth floor, but it was pretty much we would have events, PR events, and whatever type of event we'd come up with and occasionally we would have a sale that way. We would do some of the business where we could under mail order auspices. What it did is it took officially -- it made a place for Steve to sell stuff where in the past it was just, you know, Steve Geppi personal -- it would get convoluted, so we separated it. This way if somebody called up and said, I want a Batman Number 1, and we had one in inventory, if it was a Steve Geppi personal item, then the gallery would sell it, but I would pay the gallery a commission for doing it. If the gallery owned it, it was the gallery's sale entirely. It's all coming back to me now.
Q:  How would the gallery -- either you or the gallery decide what items it was going to purchase?
A:  Well, that was -- John Snyder was the president and we'd run ads all over the place; The Price Guide everywhere like everybody does, and we would compete to out bid other people. So let's say we were fortunate enough to be the high bidder. It would be based on what we determined the product was worth and what we thought was a fair price to pay for it and hopefully that was.
Q:  How would you make a determination as to what the product was worth and what the price to pay for it would be?
A:  A lot of times you bought things that you knew -- you'd like to think you knew as good as anybody. Comic books, for example.

I would consider myself, humbly speaking, an expert to know. When we got into areas of what I would call memorabilia and art works and things like that, John Snyder was much more of an expert than I was on old radio premiums and political buttons and all these things that were offshoots of comic books; licensed products, that have value, and we even published a price guide for pop culture. It was originally called the Hake's Americana Pop Culture Book. So when we would get into areas of, let's say, not necessarily either of our total expertise, but still under the umbrella of pop culture, we would rely on an appraiser or consultant.
Q:  How long have you been in the comic book industry?
A:  I got started as a mailman. That was in 1972. And it was in 1974, July 1st, that I quit my job at the post office and became a comic book dealer in the basement of a TV repair shop. And I have been it in since then, so you could say 35 years or 38 years if you go to the '72 portion where I was kind of sidelined doing it. A long time.
Q:  And do you have a title with the Diamond International Galleries?
A:  Do I?
MR. HONE: Yeah, you are CEO.
THE WITNESS: I'm CEO. Okay. I remember that was an issue for John. John wanted to be president. He is the only guy I ever made president of any of the companies.  He wanted that title.
MR. HONE: He wanted to be CEO, too. We told him no.
THE WITNESS: He thought they would always go around him if he wasn't. His job was to be a buffer for me. Politics in that one.
(Deposition Exhibit No. 1 was marked for identification.)
BY MR. RUSNAK:
Q:  I will show you what I would like to mark as Exhibit 1. Exhibit 1 is plaintiff's amended notice of deposition to Steve Geppi.
 Do you recognize this document?
A:  I can't say that I do but it doesn't mean that I didn't see it.
Q:  This was --
A:  October 4.
Q:  Sent.
A:  It is only like yesterday.
Q:  It was yesterday.
MR. HONE: It was e-mailed.
BY MR. RUSNAK:
Q:  Do you understand that you are providing your deposition today in the matter of Paige M. Kuether and others versus Diamond International Galleries and Stephen Geppi?
A:  Yes. As me personally.
MR. HONE: That was a tough one.
MR. RUSNAK: I'm going to enter as Exhibit 2, if we could mark this, this is plaintiff's amended notice of Rule 30(b)(6) deposition to Diamond International Galleries, LLC.
(Deposition Exhibit No. 2 was marked for identification.)
BY MR. RUSNAK:
Q:  Have you ever seen this document before.
A:  If it's October 4 I would say no.
MR. RUSNAK: Counsel, I understand that Mr. Geppi is testifying on his personal behalf and he will testify as to issues related to Diamond as he might know them in his personal capacity; is that correct?
MR. HONE: As a matter of fact, let me be more detailed about that. If I recall correctly, it was on Friday that you and I reached an agreement that Mr. Geppi would be deposed on the day that he would be available this week. I contacted his personal assistant and found that this morning would be an available time. I received your notices and I immediately replied to you that I had not agreed to a deposition of a Rule 30(b)(6) for Diamond International Galleries, and I have advised you that Mr. Geppi is not prepared on that point, but that he would be to the best of his ability, for whatever knowledge he might have, should you have a direct question relating to any of the Rule 30(b)(6), and I want to take a moment to explain that to Mr. Geppi, if I could off the record.
MR. RUSNAK: Sure.
MR. HONE: That if he has any information that would be of assistance to you he will be delighted to provide it, but he was not in the day-to-day operations of Diamond International Galleries. That man he has identified as John Snyder who has since retired. I have no idea where he is. I know you do. To the extent that he is capable of responding to these, he is not binding Diamond International Galleries, but he will give you whatever knowledge or information he might have which would relate to any issue you might ask him about relating to this Rule 30(b)(6) notice.
Does that sound fair to you?
MR. RUSNAK: Are you suggesting as CEO of Diamond International Galleries that he is not able to testify with respect to certain issues that --
MR. HONE: I don't recall saying that.
MR. RUSNAK: That may relate to—
MR. HONE: I don't recall saying that. What I said was he will be able to testify to whatever you might have but probably not in the detail that you might want. That would be, again, Mr. Snyder.
Go ahead and ask him. But he is not being provided to you today as a corporate designee for Diamond International Galleries. That was never an agreed thing between you and I. This was a big surprise to me when I saw it. And so if we are going to do it, and you are going to want to have a commitment being made on the record for Diamond International Galleries then we will have to talk about that.
MR. RUSNAK: That's fair. And for the record, I will note that the plaintiffs earlier issued a 30(b)(6) notice to Diamond International Galleries for a deposition that was scheduled for June and we took that off the calendar. So just for the record there was a previously issued notice.
MR. HONE: I'm not disputing that.
Give me a second. Off the record.
(A short recess was taken.)
MR. HONE: Mr. Geppi will make an effort to respond to whatever questions you have relating to Diamond International Galleries, but, once again, he is not the corporate designee.
MR. RUSNAK: Okay.
(Deposition Exhibit No. 3 was marked for identification.)
BY MR. RUSNAK:
Q:  I would like to hand The Witness what has been marked as Exhibit 3, which is titled "Agreement for Sale of Art Collection" and it's dated June 29, 2007.
It starts out, Mr. Geppi: "This agreement dated the 29th of June 2007 by and between Diamond International Galleries, LLC with the registered office of 1966 Greenspring Road, Timonium, Maryland 21093 also herein called the gallery, and the Montana family, referred to here as the Montanas."
Have you seen this document before?
A:  Yes.
Q:  And what is your understanding of this document?
A:  This was the agreement that we reached when we purchased the Montana collection.
Q:  What is the Montana collection?
A:  An accumulation of original artwork that was originally done by the now decreased Bob Montana for Sunday and daily newspaper strips that he drew that were published in the newspaper.
Q:  Were those the original Sunday and daily strips?
A:  Yes, they were the originals, yes.
Q:  Who was Bob Montana?
A:  Bob Montana is a legendary creator -- he didn't create Archie. He was prolific though in the artistic side of it. Actually John Goldwater was the original owner of Archie comics created the character or the concept and then Bob Montana was commissioned, I guess, to start drawing it and he drew every Sunday and I believe every daily to the day of his death. So he was a pretty exclusive artist. There were other representations of Archie in different formats but as far as the newspaper strip was concerned he was the original guy.
Q:  Who was the purchaser of the Montana collection?
A:  I believe we purchased that under the auspices of, and correct me if I am wrong,
 John, Diamond International Galleries.
MR. HONE: Yes.
THE WITNESS: The idea being consistent with what I said to you before. If I thought I was going to hold it for a year and hopefully be eligible for capital gains, I would have bought it personally, but as it turns out, we knew, because of the cost of it, the need to sell it to subsidize it, I guess.  We purchased it as Diamond International Galleries for immediate resale.
BY MR. RUSNAK:
Q:  Do you recall what the cost of the collection was?
A:  The cost of the collection was, I believe, to me at total of $1,100,000 because it was a million dollars in a payout plan to the Montanas, the family, and then $100,000 to a fellow by the name of Jerry Weist who was the Montanas' appraiser or representative.
Q:  If we could turn to -- I think you are looking at it as Exhibit A.  It's called
"The Collection." You are actually turned to it there.

You see there the second page it says: "Bob Montana, the Estate Family Collection Appraisal by Jerry Weist of Summer of 2006"?
A:  Right.
Q:  Do you see that?
A:  Yes.
Q:  Is this the collection that Diamond International Galleries purchased?
A:  Yes, it is.
Q:  And what are the numbers, the dollar amounts down the side here?
A:  These are individual estimates by Jerry Weist of what he felt these individual original art pages should be worth in a collectible market.
Q:  And is the appraised value or what Mr. Weist considers what the original pieces were worth is that what you actually paid for them?
A:  That is correct. That is not what I paid for them. This was the basis, I believe, for the anticipated appraised retail value of the collection. My purchase price from the Montanas was to be approximately half, I believe it was. It was $2 million -- allegedly $2 million worth of artwork that I would be purchasing for a million one with the commission.
Q:  And so what do you mean when you say that it would be the retail price?
A:  What a collector would hopefully pay for it at either a private sale or an auction.
MR. HONE: Or better yet, what you as the seller would hopefully get from a collector.
THE WITNESS: Yes.
BY MR. RUSNAK:
Q:  And did you review Mr. Weist's valuation before Diamond International Galleries' purchase?
MR. HONE: I will note an objection.

I will explain that. That is a complex question. What you are really asking him is did he review each one of these pieces of art in connection with each one of these retail prices. I think that is what he needs to answer because the answer is going to be no.
THE WITNESS: I was getting ready to say that. I was getting ready to say that did I look at every line by line, no, but collectively we went through it, we looked at year by year, and I think Jerry, if I recall, tried to estimate these on the basis of the assumption that the earlier years were worth more than the later years, albeit in artwork that is not necessarily true. You could have something that has more action, more characters in it. If you have an Archie daily from 1948 that has none of the main characters, it is just a meaningless scene in the middle of the week, but you have one from 1952 that has Archie and Jughead and Reggie and all the major characters interacting in some way, so you will notice when you look at this list there are even in the same year variations of appraisals.

Some will be this price; some will be more, even though they are later. So I think -- notice here like in 1949 Sunday pages he says he -- Archie kisses Betty. I know this sounds funny to someone who is not in to collectibles, but for a collector, you know, the historic thing about Archie and Betty and Veronica, you'd want a page that has Archie kissing Betty. You'd pay more for that than the one where he is not. So you will see he bumped them up. And a lot of this is pretty arbitrary. Beauty is in the eye of the beholder in artwork. Some woman would say, the last thing I want is a picture of Archie kissing.

I had to evaluate this on the overall hope that I was paying a fair price and at the end of the day I would not only recoup the amount of money I was expending that I would make a profit for that type of investment.
Q:  Did you believe at the time that Diamond International Galleries purchased the collection that you were paying a fair price?
A:  Not being an expert on original Sunday -- there hadn't been a lot of Archie artwork for sale -- you have to understand the market -- because Bob kept all of it. There was very few pieces that came out. The family always had them. I think what happened is when the few pieces that did come out for various reasons over the years, they might have brought significant prices because no one anticipated the mother load to come out. At the time I was relying I guess on Jerry Weist's expertise. He published the original art comic book price guide. I figured I got the right guy.

Even in his price guide I would imagine he has noted estimations -- in artwork each one is individually unique. You can't just say 1948 -- a price guide would have to do that and maybe note some exceptions. A price guide can't get into every day, 365 days a year, for every title that was ever published in the newspaper. So it might say Archie
 Sunday pages from 1948 are this, and Archie daily pages from 1948 are that. And then it might note an exception where the known page is a particularly dynamic page, but the answer more directly to your question, this was all of a sudden a great find coming out of the estate.

One of the best things you can have is the estate, the original provenance coming from the original guy or his family, and there was a lot of excitement about the idea that since only a few had come out they were selling for pretty substantial prices. I bought in like everybody else did that this is significant. I guess maybe at that time I had to believe or I wouldn't have done the deal that they were worth that.

Q:  Why did you buy the collection?
A:  Well, because I am -- Diamond International Galleries/Steve Geppi is in the
 business, aside from my normal distribution business, in fact that was the business I was in before I got into distribution buying and selling collectibles. Original, vintage, comic books, artwork, memorabilia buying at a price that you feel you can in turn sell to a collector at a higher price.
Q:  If I could have you turn to page -- there are actually two Page 5s of the original agreement. If you back up to the agreement.
A:  The agreement part?
Q:  Yes. There are duplicate signature pages. They are both marked 5 of 6.
A:  I see that.
Q:  Do you see on the second one under where it says The Gallery authorized representative?
A:  Yes.
Q:  Is that your signature?
A:  That is my signature.
Q:  And you are signing as CEO; is that correct?
A:  That is correct.
Q:  And then do you see down below that it says: "Stephen A Geppi, acknowledgment in connection with the required personal payment guarantee."  Do you see that?
A:  Yes, I do.
Q:  Is that your signature?
A:  Yes, it is.
Q:  What was the personal payment guarantee?
A:  What was it? How much or –
Q:  Do you recall what -- whether --what the nature of the personal payment guarantee was?
MR. HONE: Do you have it with you?
MR. RUSNAK: I do. I will show it to him. Let me back up. Let me ask a different question.
MR. HONE: This is not a test, is it?
MR. RUSNAK: No, it's not.
BY MR. RUSNAK:
Q:  Why don't we turn to Page 2.
A:  Of the agreement?
Q:  Of the agreement.   At the bottom there is Paragraph 3. It says: "Payment guarantee and retention of security interest. In order to guaranty the payment of the purchase price and all amounts due hereunder, The Gallery shall cause Stephen A Geppi to enter into a binding and fully enforceable payment guarantee to guaranty full and prompt payment to the Montanas of the purchase price and the fulfillment of the obligations to Mr. Weist in accordance with the terms of this agreement."
Do you see that sentence?
A:  I do see that.
Q:  Did you understand this agreement required you to enter into a guarantee to -- a personal guarantee to guaranty the payment to the Montanas?
A:  Yes, I did understand.
Q:  If you could turn back to the first page of the agreement, at the bottom is Paragraph 2, it says: "Purchase Price and Other Payments."
Do you see that?
A:  Yes.
Q:  It says: "The Gallery shall pay to the Montanas $1 million," which is also called the purchase price: Did you understand that to be the purchase price?
A:  That is correct.
Q:  And then in the subsequent paragraphs there is little I through little 4.
The first one says: "On or before July 1, 2007, $57,500 shall be paid via wire transfer to each of the four Montana siblings for a total of $230,000."
That is the first payment. Do you see that?
A:  Yes, I do.
Q:  And do you understand that that required Diamond to make a payment of $230,000 to the Montanas?
A:  Yes.
Q:  And do you recall whether that payment was made?
A:  It was.
Q:  And then in 2 little I it says: "On or before June 1, 2008, $62,500 shall be paid via wire transfer to each of the four Montana siblings for a total of $250,000. Each Montana sibling shall be wired his or her respective funds to such bank account as shall be provided to The Gallery by the Montanas."
Do you see that?
A:  Yes, I do.
Q:  Do you recall whether that payment was made?
A:  It was.
Q:  And then in 3 little I it says: "On or before June 1, 2009, $62,500 shall be paid via wire transfer to each of the four Montana siblings for a total of 250,000."
Do you recall whether that payment was made?
A:  That was not made.
Q:  And in little 4, it says --
MR. HONE: We will agree that wasn't made either to save you the trip.
MR. RUSNAK: Let me ask The Witness.
BY MR. RUSNAK:
Q:  Do you recall -- do you understand that that payment was not made, the fourth payment?
A:  Little 3 and little 4 were not paid.
Q:  So do you understand that that was a total of $500,000 due to the Montanas that was not paid?
A:  I do.
Q:  And do you know why it was not paid?
A:  There was no funds sufficient to pay it. There were no funds available.
Q:  That Diamond did not have funds available?
A:  Diamond International Galleries did not have funds available.
Q:  And do you know any other reason why it wasn't paid?
A:  Usually a great reason when you don't have any money. Credit officers have
 been asking that questions for years.
Q:  With respect to -- I will ask you a couple other questions about the collection.   Have you disposed of any of these pieces?
A:  There were pieces sold, yes, traded, whatever.
Q:  Do you recall when they were sold?
A:  That I don't know. I don't know the details.
Q:  Do you recall to whom they were sold?
A:  Not individually, no.
MR. RUSNAK: This morning I was handed by your counsel this document. I only have one copy so we will have to share. I would like to mark this as Exhibit 4.
 (Deposition Exhibit No. 4 was marked for identification.)
BY MR. RUSNAK:
Q:  Mr. Geppi, do you recognize this document?
A:  Yes.
Q:  What is it?
A:  This is an inventory listing of the collection that I purchased from the Montana family.
Q:  And these are items that you have purchased?
A:  Yes. This was part of the consideration. This is a list, I'm assuming, that completely represents the entirety of the collection that I was purchasing from the Montanas with an estimated retail value.

Is that what this is or is this the sold items?
MR. HONE: Sold items.
THE WITNESS: I'm sorry. Correction. This appears to be a listing of the collection that I purchased and those items that were sold -- how do I word this? This appears to be a list of items sold from the Montana collection to be more concise. I didn't see sales price in there.
BY MR. RUSNAK:
Q:  So I will ask you a couple of questions about the columns.
A:  Sure.
Q:  There is a column marked "retail."
Do you see that?
A:  Yes.
Q:  What does that -- what do the dollar figures in that column represent?
A:  The original -- I believe they should correspond to the original estimate made by Jerry Weist, the consultant for the Montana family.
Q:  And then in the next column it says "sale price"?
A:  This was unfortunately the prices realized. I say unfortunately because they seem to be less in just about every case.
Q:  And in the column marked "retail" those dollar figures represent the Jerry Weist valuation; is that correct?
A:  I believe so, yes.
Q:  It is not the amount you paid for it?
MR. HONE: That is debatable. That is -- he paid the amount that he paid based upon the Weist valuation. Whether he paid that dollar amount that Weist said, he has already testified he did not. But that acted as the basis for his determination of what to pay.
BY MR. RUSNAK:
Q:  Do you see that there are some -- on your copy, Mr. Geppi, there are some dollar amounts that are highlighted in yellow?
A:  Yes, I do.
Q:  Do you see that those relate to -- correspond to original comic book pages?
A:  Yes.
Q:  And do you know to whom those were sold?
A:  I don't know individually. I know they went in various directions. I have to
 look at these.
Q:  My apologies for it being sort of small.
A:  It just says Montana Sunday page. Then you have to find the date.
MR. HONE: Let me go off the record a second, Bonnie.
(A short recess was taken.)
BY MR. RUSNAK:
Q:  Do you understand those comic book pages, original comic book pages that are highlighted in yellow to have been sold?
A:  Yes. I know we no longer have them.
MR. HONE: And/or traded.
THE WITNESS: That is a common occurrence. You do flat out sales. You do trades. You do cash trades.
(Deposition Exhibit No. 5 was marked for identification.)
MR. RUSNAK: Okay. I will mark as Exhibit 5 -- I am handing The Witness what has been marked as Exhibit 5, which is titled "Personal Guarantee of Payments, June 29,
 2007."
Do you recognize this document, sir?
A:  Yes.
Q:  And what do you understand this document to be?
A:  This was the personal guarantee payment document that I signed back in June of '07.
Q:  And do you have an understanding of what it requires of you?
A:  Yes. I have to pay.
MR. HONE: That is a pretty good understanding.
BY MR. RUSNAK:
Q:  Do you have an understanding that it requires you to pay the Montanas the amounts due under the agreement in the event that Diamond does not pay it?
A:  Yes, I do.
MR. HONE: Just so I want to make it clear that the document speaks for itself. Not
 your interpretation or Mr. Geppi's interpretation. Absent that, that is fine.
BY MR. RUSNAK:
Q:  On Page 4 do you see -- is that your signature there?
A:  Yes, it is.
MR. HONE: Oh, and it's mine, too.
BY MR. RUSNAK:
Q:  And that's your counsel's signature?
A:  Mine is prettier than yours.
MR. HONE: That is probably true.
THE WITNESS: Not really.
BY MR. RUSNAK:
Q:  And have you paid the Montanas pursuant to the amounts due pursuant to this guarantee, you personally?
A:  The balance that was unpaid by Diamond International Galleries?
Q:  Correct.
A:  I have not.
Q:  Why have you not?
A:  Because I did not have the funds.
Q:  You did not have the funds?
A:  I did not personally have the funds.
Q:  Any other reason why you haven't paid the Montanas?
A:  No.
(Deposition Exhibit No. 6 was marked for identification.)
BY MR. RUSNAK:
Q:  Handing The Witness what has been marked as Exhibit 6. It's a confidential document titled "Attestation of Personal Net Worth."
A:  That is 6-27-07.
Q:  Dated June 27, 2007.
Sir, do you recognize this document?
A:  I do.
Q:  What do you understand it to be?
A:  This is a document where I was attesting to the fact that I had a personal net
 worth in excess of $20 million as of June 27, '07.
Q:  And do you know why -- is this your signature on this document?
A:  Yes, it is my signature.
Q:  And do you have an understanding why you executed this document?
A:  It was to represent to the Montanas that I had the capacity I guess or wherewithal to fulfill the personal guarantee.
Q:  And this document is dated June 27,1 2007. Do you see that?
A:  I do see that.
MR. HONE: Matter of fact, he mentioned it.
MR. RUSNAK: He did.
BY MR. RUSNAK:
Q:  As of June 27, 2007, did you in fact have a personal net worth well in excess of $20 million?
A:  Yes, I did.
Q:  And what is your personal net worth as of today?
A:  I do not know that off the top of my head. I'm sure there is an updated version of my financial statement that would represent what it is. But I don't know that number.
MR. HONE: Let me go off the record.
(A short recess was taken.)
BY MR. RUSNAK:
Q:  Mr. Geppi, as of today is your personal net worth less than $20 million?
A:  Yes.
Q:  Is it less than $10 million?
A:  I don't know the number but I'm sure, yes.
Q:  Do you believe it's less than $1 million?
A:  I don't know.
MR. HONE: Right around there.
THE WITNESS: I don't know.
(Deposition Exhibit No. 7 was marked for identification.)
BY MR. RUSNAK:
Q:  Handing The Witness what has been marked as Exhibit 7. This was previously marked -- I will represent for the record that it was marked as Exhibit 3 to the complaint in this matter. It's the letter dated June 15, 2009. It's from me, Eric Rusnak to Stephen A.18 Geppi and Diamond International Galleries in care of your counsel, John Hone.
Have you ever seen this document before, Mr. Geppi?
A:  I'm sure I have.
Q:  Do you have an understanding of what this letter is?
A:  It's a demand for payment based on my personal guarantee.
Q:  And did you understand that on or around June 15, 2009 that the Montanas made a demand that Diamond pay the outstanding balances due pursuant to the agreement?
A:  Yes, I am aware of that.
(Deposition Exhibit No. 8 was marked for identification.)
BY MR. RUSNAK:
Q:  I will mark as Exhibit 8 a letter dated July 22, 2009. I will represent for the record it was previously marked as Exhibit 4 to the complaint in this matter. The letter is from me, Eric Rusnak to John Hone, your counsel.
Mr. Geppi, have you seen this document before?
A:  Yes.
Q:  What do you understand this document to be?
A:  It's reiterating I hadn't yet still paid the payment that was due, and it was also reiterating that based on the previous letter that was in Exhibit 7 that I would not sell or dispose in any way of the Montana collection that was remaining, and that we were looking at a way -- we were representing that we were looking at a way to try to satisfy that with some arrangement.
Q:  And so do you understand that on or about July 22, 2009 the Montanas made a demand on you personally to guarantee the payment?
A:  Yes, I do.
Q:  And do you understand that the Montanas made a demand that if you did not cure the payment that the remaining payments would be accelerated?
A:  Yes, I do understand that.
(Deposition Exhibit No. 9 was marked for identification.)
BY MR. RUSNAK:
Q:  Handing The Witness what has been marked as Exhibit 9. I will state for the record this was previously identified as Exhibit 5 to the complaint. The letter is dated August 18, 2009 from me, Eric Rusnak to John Hone, your counsel.
Mr. Geppi, have you -- do you recognize this document?
A:  I do.
Q:  What do you understand this document to be?
A:  It's a subsequent demand for the accelerated payment of $500,000 into an escrow account and a, for lack of a better word, offer of exploring the possibility of an alternative payment arrangement to somehow resolve the issue. And it also mentions that if we can't resolve them soon, that the Montanas through its counsel is prepared to go to litigation.
(Deposition Exhibit No. 10 was marked for identification.)
BY MR. RUSNAK:
Q:  I will mark this as Exhibit 10.
This is a letter dated July 8, 2009 from your counsel, John Hone to me, Eric Rusnak. I believe, Mr. Geppi, if you look on the second page you will see --
MR. HONE: Wait a minute.
BY MR. RUSNAK:
Q:  I was going to say that he has been CC'd. Do you recognize this document?
A:  Yes.
Q:  What do you recognize this document to be?
A:  It's a letter from my counsel, John Hone, to you stating that neither Diamond Galleries nor me personally are in a position -- not in a financial payment to make payment under the terms of the agreement, but that we were in the process of putting the inventory together and providing a copy, which I think has been done, and letting you know that we have complied with the request not to sell, auction or dispose of the collection. And we have also let Heritage Auction Galleries, who is holding some of that artwork, not to do so either. We have expressed that we did have an interest in resolving or restructuring the deal?
Q:  And as of July 8, 2009 is it true that neither Diamond International Galleries nor Stephen Geppi as guarantor were in a financial position to make payment that was due?
A:  Correct.
Q:  Do you know of any other reason at that time that the payment wasn't made?
A:  No funds.
Q:  And is it true still today that you have not made any payments to the Montanas?
A:  That's is true.
MR. HONE: That's not accurate.
MR. RUSNAK: Let me restate the question.
BY MR. RUSNAK:
Q:  Is it true as of today that neither Diamond International Galleries nor you have made the remaining outstanding payment of $500,000 owed to the Montanas?
A:  That is true.
Q:  And is there any other basis for not making the payment other than that neither you nor Diamond International Galleries has the financial availability to make the payment?
A:  No other reason.
(Deposition Exhibit No. 11 was marked for identification.)
BY MR. RUSNAK:
Q:  I will mark this as Exhibit 11. This is a letter, Exhibit 11, dated February 22, 2010 from your counsel, John Hone to me, and it attaches two schedules, one is called
 "Sundays" and one is called "Dailies"
Do you recognize this document, sir?
A:  I do.
Q:  What is it?
A:  This is my counsel John Hone's letter to you, Eric, indicating that -- he is actually answering your complaint that you filed in the court and attaching -- which is attached here on Exhibit 11 a listing of the items remaining in inventory either in our possession here or at Heritage Auction Galleries, that we would like to use as the basis of our settlement discussion since the valuations were done by the Montanas agent. Jerry Weist. We reiterate we are in no position to make a cash payment. $500,000 is still outstanding. He summarizes the Sunday strips with citing the Jerry Weist value for them as well as the daily strips of the original art summarizing their value and indicating that notwithstanding the remaining artwork still has a value of $1,251,750 for the combined 1179 strips that represent over half of the collection that still remains unsold. And then a proposal is proffered here to the Montanas through you to return the artwork and hopefully satisfy the outstanding debt or promissory note of $500,000 to eliminate the claim, and I guess expressing here that we feel that it's a fair offer because it's still more than half the collection and still has more than half the value which wouldn't place the Montana family in a position of not having been hurt financially in our opinion.
Q:  Do you know who put together the attachments that are marked Sunday and Dailies?
A:  I will defer to counsel on that because I believe you orchestrated that. Who did that? Was that Mark Squreg?
MR. HONE: It was a combination of a number of different people. You want this on
 the record?
MR. RUSNAK: No. You don't have to put it on the record. If The Witness doesn’t know, that's fine.
MR. HONE: I am happy to tell you. There are no secrets here. This is a combination of work by a number of different people here at Diamond Comics to locate and find and receive information from Heritage as to what they had and what we had. So it's a combination of efforts of a number of different people, all of whom I don't know. But it's been represented to me this is the most accurate listing that can be obtained.
BY MR. RUSNAK:
Q:  Mr. Geppi, do you have any reason to believe that this listing is inaccurate with respect to the items at Diamond International Galleries or one of the auction houses?
A:  I have no reason to believe that. I trust my people's ability to do inventory and account for what they have assigned the task to do. Short of doing it myself, I think it's probably accurate.
Q:  And do you believe that the -- on both of these documents, on Dailies and on Sunday, do you see the column marked Weist evaluation?
A:  Yes, I do.
Q:  What do you understand those numbers to represent?
A:  They should represent the corresponding original evaluation or valuations that Jerry Weist did on behalf of the Montanas that were used as the basis for the value of the collection that I was purchasing.
MR. HONE: Stated another way, those represent the values set forth by Weist in Schedule A to the agreement for sale of art collection.
BY MR. RUSNAK:
Q:  Do you understand the Weist evaluation to represent the value of each of these pieces of artwork today?
A:  I think Jerry would still maintain that these were the numbers he put down at the time of the valuation. I believe that if you are asking me the current value of them, are they still consistent with this that is hard to answer because I don't necessarily know that. That would be more determined by an auction.
Q:  Do you know -- do you believe whether these pieces could be sold on the market today for these stated amounts under the Weist evaluation?
MR. HONE: I object. You can answer.
THE WITNESS: Basically I would say that handled properly and done in a way that you don't put too much out of the market at one given time or whatever, the typical collectible -- if you have something valuable and you have more than one of it, even though these are all totally unique, they are still by definition the same thing. Original Montana artwork, that that is the whole job of an art dealer is to find the collectors who will pay these prices without making them appear to be common. It's awkward because if it was a comic book and you had Archie Number 1, you could have ten different Archie Number 1s, but you could only have one of any one of these as original artwork. If the market sometimes perceives, oh, my God, there is a lot of Archie artwork on the market, so that might affect it so you have to be discreet in your handling of it. Plus just flat out depending on the economy. We saw comic books sell recently for a million and a half dollars in the middle of the worst economy ever and it was because it's generally hard to find. It was handled properly. I think that the Montana artwork is still very desirable and hopefully these prices can be realized and possibly more if handled properly.
Q:  Did you or Diamond International Galleries attempt to sell the artwork that is
 listed on these two schedules at any point in time?
A:  Without specifically looking at a list, some of this may have -- I think -- let me think about this a minute. The items I'm not sure -- items consigned to Heritage Galleries, Auction Galleries, if, in fact, they were sold with a no reserve listing, then I would say none of these were offered because they wouldn't be here. And so I qualify it by saying I think none of these were offered at the Heritage Auction Galleries. When we were told to cease from offering and not put any available for sale we cut it off. These were in the pipeline so to speak to be auctioned but never actually were is my understanding.
Q:  Do you know of any individual piece of artwork from the Montana collection that was sold either at or above the Weist evaluation?
A:  I don't know off the top of my head. I would say I don't know.
MR. HONE: Interesting question.
THE WITNESS: Good question.
MR. HONE: Maybe your best question.
THE WITNESS: Certainly entirely possible. I indicated before beauty is in the eye of the beholder so Jerry may have evaluated a piece that was $2000 just for the sake of illustration because he didn't deem it to be anything more special, but somebody out there might have went nuts over it because they thought it was cool and it had something they were interested in so it's possible that it happened. Typically happens in auctions. Some sell above. Some sell below.
MR. RUSNAK: Want to take a five-minute break and I can run through my notes.
(A short recess was taken.)
(Deposition Exhibit No. 12 was marked for identification.)
BY MR. RUSNAK:
Q:  Handing The Witness what has been marked as Exhibit No. 12. This is a letter dated September 8, 2009 from John Hone, your counsel, to Kim Newby, who I will represent for the record is also counsel to the Montanas.
Mr. Geppi, have you seen this document before?
A:  I have.
Q:  Do you see on the second page in the last full paragraph, the last sentence it says: "It is not his desire to see the Montanas hurt, but neither he nor Diamond International Galleries, LLC are able to fulfill any of the terms of the existing agreement."
Do you see that sentence?
A:  I do see that.
Q:  Was it true as of September 8, 20097 that neither you nor Diamond International Galleries, LLC are able to fulfill any of the terms of the existing agreement between Diamond and the Montanas?
A:  That is true.
Q:  Is that true as of today?
A:  Yes, that is true.
Q:  And do either you or Diamond International Galleries have any intent to pay the Montanas the $500,000 outstanding on the agreement?
MR. HONE: Wait a minute. I am troubled by the word "intent."
THE WITNESS: I was going to say intent is not the right word. Ability.
MR. RUSNAK: Is that an objection?
MR. HONE: I will say this for him.
MR. RUSNAK: You want to make an objection and then he can answer?
MR. HONE: Okay. I object.
MR. RUSNAK: Okay.
MR. HONE: I'm confused by the word "intent."
THE WITNESS: That is like when you are in a teepee. You go inside --
BY MR. RUSNAK:
Q:  I'm sorry, Mr. Geppi. You started to answer.
A:  I started to answer in saying that intent and ability are, I guess, two different things. We have, as of this date, no ability, either Diamond International Galleries or me, personally to fulfill that payment.
MR. HONE: But if he had it he would do so, would you not?
THE WITNESS: Yes, I would.
MR. HONE: There you go.
MR. RUSNAK: Happy now?
MR. HONE: I am.
BY MR. RUSNAK:
Q:  Mr. Geppi, do you have any judgments against you?
A:  Yes.
Q:  Against you personally?
A:  Yes.
Q:  Do you know what those are?
A:  Okay. There is one with PNC Bank for a property in Maine that a partner and I had purchased. There is one also in Maine with M&T Bank, Spring Brook. There is one with Harbor Bank here in Maryland.  And John, you have to help me.
MR. HONE: Camden.
THE WITNESS: Camden National Bank in Maine.
MR. HONE: In Maryland.
THE WITNESS: Oh, they filed it in Maryland. Whatever.
BY MR. RUSNAK:
Q:  Do you know how much the PNC judgment is?
A:  It's approximately $15 million.
Q:  That is against you personally?
A:  Yes.
Q:  And do you know how much the M&T Bank judgment is?
A:  That's because properties have been sold, I know there is an anticipated shortfall of a million and a half dollars. The original loan was 4.7 million but there have been a number of properties sold off and I believe the verbal estimation of the expected shortfall is a million and a half dollars.
Q:  That is against you personally?
A:  Yes, it is.
Q:  Do you know how much the Harbor Bank is?
A:  Harbor Bank is approximately $3 million.
Q:  Against you personally?
A:  Correct.
Q:  What about the Camden judgment?
A:  That is approximately $600,000 against me personally.
MR. HONE: Actually a little less.
BY MR. RUSNAK:
Q:  And Mr. Geppi, do you own a home?
A:  Do I own it or does the bank own it? Technically I'm the owner, the purchaser of the home I'm in.
Q:  Do you have just one home?
A:  Yes, one.
Q:  And is that home at the address that you gave at the beginning of this deposition?
A:  Yes, that is the home.
Q:  And is that home mortgaged?
A:  Over a hundred percent. As a result, the bank, M&T Bank is asking me to sell it and the asking price is dramatically less than the buying price which they provided the bridge loan for.
Q:  Mr. Geppi, are you in any bankruptcy proceedings?
A:  No.
Q:  Is Diamond International Galleries in any bankruptcy proceedings?
A:  No, it's not.
MR. HONE: Given it a great deal of thought though, just in time for your motion for summary judgment perhaps.
MR. RUSNAK: I don't have any other questions.
Counsel, do you have any questions?
MR. HONE: I have no questions.
 (Whereupon, the proceeding was concluded at 11:19 a.m.)



4 comments:

Shahana said...

Too long post. Why don't you divide and make small small post and show the whole thing?

Kid said...

Danny, you've got a great blog, but I think she has a point. A reasonable-sized instalment every couple of days or so would generate more interest as each piece unfolds. At the moment, I can see how someone might lose the will to live having to wade through all that information. Take a leaf out of Jim Shooter's book - he teases the reader with bits at a time and has them falling over themselves to come back for more.

It's a good idea. All the best.

Anonymous said...

Don't worry about the length.

Having to concentrate is a good thing.

Anonymous said...

Wow. I'm glad that Mr. Geppi hasn't had a heart attack over those judgements. I sure hope this does not effect Diamond Distribution.