Excerpts from B.J. Thomas testimony directly related to Colemans and Hays Companies

Here are two long, transcribed excerpts from B.J. Thomas’ deposition on March 19. Thomas was formerly chief financial officer of the Texas-based marine-services firm Deep Marine Technology.

The deposition was part of a civil lawsuit filed by Thomas and former Deep Marine CEO Paul McKim in Texas in October 2008. The suit implicates Minnesota businessman Nasser Kazeminy in a scheme to funnel funds to then-U.S. Sen. Norm Coleman, R-Minn.

According to the allegations, an insurance-consulting contract required Kazeminy-controlled Deep Marine to pay the Hays Companies — the insurance firm  where Coleman’s wife, Laurie, works — $100,000, of which $75,000 was actually sent.

The deposition took place in Houston. The raw transcript text was uploaded to the St. Paul Pioneer Press’ Political Animal blog on Friday. The Minnesota Independent has excerpted two long passages that deal directly with the Hays Companies and the Colemans.

The excerpts appear below, reformatted for easier reading. The first excerpt contains questioning of Thomas by Deep Marine attorney K.B. Battaglini. In the second excerpt the questions are from Casey Wallace, attorney for Thomas’ co-plaintiff, McKim. Thomas’ own lawyer, Charley A. Davidson, also speaks. According to the original transcript, the deposition took place over a full work day at the offices of Davidson’s firm, Locke Lord Bissell & Liddell, LLP.

Q. (BY MR. BATTAGLINI): …Now, before we leave the subject of insurance, did the company ever end up doing business with — did DMT or DMH ever end up doing business with the Hays Company?

A. Directly?

Q. Directly.

A. Yes.

Q. Okay. When was that?

A. That would have been in ‘07.

Q. Okay. And what was the nature of the business that the company was doing with the Hays Company?

A. There was an insurance consulting agreement.

Q. Okay. And is that something that you had looked at and signed off on?

A. And it was something that was sent to us, and the direction from Mr. Kazeminy was that we would enter into that agreement and pay the Hays group.

Q. What was the nature of the arrangement, what was Hays supposed to be doing pursuant to this agreement?

A. Consulting work related to insurance.

Q. All right. Prior to that time was anybody doing consulting work for your insurance program?

A. No.

Q. You had not had a consultant?

A. Not an outside consultant, no.

Q. All right. Did you have a basic understanding of the services that are performed by an insurance consultant?

A. Basic, yes.

Q. Okay. What was your understanding at the time of what an insurance consultant would offer a company?

A. An outside consultant for insurance?

Q. Yes.

A. I — we never employed one. I didn’t investigate it. I apologize. I misunderstood the question. I understood what our broker was doing.

Q. Okay. Separate and apart from what your broker was doing, did you have an understanding of what an insurance broker — I mean, excuse me, an insurance consultant would offer?

A. No. Not really.

Q. Was it ever explained to you the services that would be provided under such an agreement?

A. No.

(Exhibit 17 marked)

Q. (BY MR. BATTAGLINI) I’m going to hand you — and this is slightly out of order — Exhibit 17. I’ll go back to 16 later. It’s several pieces of paper with a paper clip on it attaching them together. I merely attached them for convenience. And I’d like to kind of walk you through what this is. Have you seen many of these documents before?

A. Yes.

Q. All right. Let’s take them in order. The one on the top is called a Disclosure of Service Fee. And it’s on Hays letterhead. And it’s dated March the 30th, 2007. It appears to be signed by Paul McKim. Do you recall having seen that page before?

A. Yes.

Q. All right. How did you come to have seen this page before? And I’m talking about back on or about March the 30th, 2007.

A. I believe it was e-mailed to me.

Q. All right. From the Hays Company?

A. I believe so, yeah.

Q. And did you have an understanding of what it was when you received it?

A. It was an agreement for consulting services.

Q. Okay. Well, the one page, at least, is a disclosure of a service fee, correct?

A. Correct.

Q. A fee was going to be assessed in exchange for services provided?

A. Yes.

Q. Was that your understanding?

A. That’s my understanding.

Q. Okay. Would you prefer to get that back in front of you?

A. Yes, please.

Q. All right.

(Pause in proceedings)

A. Okay.

Q. (BY MR. BATTAGLINI) Okay. And the amount of the service fee reflected on this first page of the exhibit is $100,000, correct?

A. Correct.

Q. What was your understanding at the time of what the $100,000 was to pay for?

A. That was to pay for Hays doing some consulting services.

Q. All right. And who was Hays going to consult with?

A. That is not particularly clear.

Q. It’s not clear from this page that we’re looking at or –

A. Correct.

Q. Okay. Did you have an understanding at the time of who Hays was going to consult with?

A. My best guess at the time was that they were going to be consulting with Mr. Kazeminy.

Q. Is that because under an oversight agreement that insurance discussions like that were going to be had with Mr. Kazeminy rather than with the people at DMT in Houston?

A. Mr. Kazeminy was quite capable of setting the degree of, his degree of involvement on any of those things.

Q. Okay. Prior to your receipt of this disclosure of service fee, who had the insurance company or the insurance broker, Aon, been dealing with on a regular basis in terms of the placement of insurance?

A. Merely myself as well as Paul McKim.

Q. Okay. Once this service fee document was signed by Mr. McKim, did you have any communications with Hays regarding insurance coverage?

A. I’m not sure as to the last time I would have had dinner with Mike Prinz, if it was subsequent to this or not.

Q. Okay. Do you know if Hays Company was having communications with someone in Minnesota working for Mr. Kazeminy, for example, regarding the placement of insurance coverage and consulting services in conjunction with that?

A. Do not know.

Q. Okay. If it did happen, it wasn’t reported to you?

A. Correct.

Q. Did you communicate with anyone in Minnesota working with Mr. Kazeminy’s companies for the purpose of discussing insurance?

A. Yes. The previous year we had gone through a quite a bit of analysis regarding where we were placing our, where we were placing our Jones Act coverage. And there was a, a new underwriter on the market that was offering some extremely low rates.

Q. Uh-huh. And who did you discuss that with?

A. Paul, myself, John Ellingboe, and Nasser were involved in that conversation.

Q. All right. On a routine basis, did you consult with people from time to time in Minnesota?

A. Regularly.

Q. Okay. And who did you normally consult with on administrative matters including insurance?

A. John Ellingboe and Dan Erickson.

Q. All right. Do you know whether or not Ellingboe or Erickson talked with the Hays Company about the insurance that was contemplated by this disclosure of service fee?

A. I have no — no. I don’t know.

Q. It’s possible; you just don’t know?

A. Absolutely.

Q. Okay. Now, it says here, for coverages, all property, executive risk, casualty and marine coverages associated with the operation known as Deep Marine Technology. Is that a fair summary of the types of coverages that you would expect to see on your business?

A. Yes.

Q. Okay. It didn’t exclude anything in particular?

A. Not that I’m aware of.

Q. Now, if you’ll go to the fourth, starting at the fourth page and carrying on to the fifth page, there is an insurance summary for DMT. Is that something that you prepared or had prepared for you?

A. This is something the Aon would have prepared for us.

Q. All right. That’s reflective of Aon’s coverage for 2006 to 2007?

A. Yes.

Q. And was this something that Hays wanted to see so that they could consult with the company about coverage?

A. I — you know, I believe they probably requested it. This was something that we received from Aon as just a normal course of their providing coverage.

Q. Okay. Now, following that, following the pages that we just looked at, there are some invoices, correct?

A. Yes.

Q. And let’s look at the first invoice. This is the Invoice No. 119056 dated April the 24th, 2007 from Hays Company to DMT. In fact, to your attention.

A. Yes.

Q. And it’s a quarterly installment in the amount of $25,000 designated as a service fee on the invoice. I see Paul McKim’s signature on there. Do you see that
in the middle of the page?

A. Yes.

Q. Why would his signature appear on an invoice like this?

A. To approve it.

Q. Would he normally approve something like this?

A. Yes or no. It depends.

Q. Would it first have to go by you in order to be approved by Mr. McKim?

A. No. It could have gone straight. You know, it wasn’t required to go to me before it went to Paul McKim.

Q. Okay. Do you recall having discussed this particular invoice, I’m talking about 119056, with Paul McKim?

A. I remember discussing it.

Q. Okay. What was the nature of the discussion, do you know?

A. The discussion was related to the invoice coming in and the related service agreement.

Q. Okay. Was there a discussion about whether or not it should be paid or anything of that nature?

A. Yes.

Q. What was that discussion about?

A. The discussion was about the contract with Hays and the question of what we were getting for it and did we, that this was something that Nasser wanted and so we needed to proceed along.

Q. Did you participate in any telephone call or meeting with Nasser Kazeminy or anyone else working from Minnesota having to do with this particular invoice where the nature of the call was why do we need to pay this invoice?

A. No.

Q. Did you take it upon yourself as CFO to look into this to see whether or not it should be paid?

A. No. We were already directed to enter into the agreement.

Q. Directed by whom?

A. Mr. Kazeminy.

Q. And what specifically do you remember by way of a direction to enter into this agreement? Did you participate in a phone call?

A. Mr. Kazeminy called me. We discussed. He indicated that this was a, he was going to work something like this out and, you know, that was to be expected.

Q. Did he explain to you on the telephone during this call why it was necessary to engage Hays for this service fee?

A. Mr. Kazeminy said he wanted to use Hays.

Q. Did he say for what purpose?

A. You know, there was a discussion about, about Hays and who was at Hays and that was somebody he wanted to use. And this — so this was, this was where things were going.

Q. Did you have an understanding following the phone call with Mr. Kazeminy of why DMT was paying $25,000 a quarter of a service fee to Hays?

A. Because Mr. Kazeminy wanted to. And he had an oversight agreement, and he was an over-50-percent shareholder. And this was something he wanted to do.

Q. Okay. But other than the fact that this was something that he wanted to do — and you’ve been clear about that — did you have an understanding of what the purpose was, the actual purpose?

A. I was not necessarily very clear on it. I was aware and convinced that Mr. Kazeminy wanted to do it and honestly believed that he had the authority to request it.

Q. Okay. Was there anytime when you said to Mr. Kazeminy or anyone else that the company should not pay $25,000 a quarter for this service fee?

A. Mr. McKim and I discussed the payment, the arrangement and payment to Hays and questioned what we, we were getting from it. And that was as far as we went.

Q. Okay. So you had no communication, direct communication with Mr. Kazeminy or anyone else in Minnesota where you said to the person on the other end of the phone, we’re not going to pay this amount?

A. I did not, no.

Q. Do you know if anyone else had such a conversation? Did you observe, did you hear anybody else have such a conversation?

A. No.

Q. Now, there were — if we keep flipping through the pages, there are a total of three invoices, correct?

A. Yes.

Q. Okay. And it’s your understanding that all three of those were paid?

A. Yes.

Q. And were you part of the approval process on any of these three?

A. Yes. I signed off on the last one, and then Paul signed off on it.

Q. Okay. So in conjunction with the approval and payment of these three invoices that are attached to this exhibit, was there any follow-up communication or disagreement or dispute that you recall regarding the payment of these invoices?

A. I was not involved in that. No.

MR. DAVIDSON: Take a brief break?

MR. BATTAGLINI: Sure.

(Break from 2:04 to 2:15)

Q. (BY MR. BATTAGLINI) Mr. Thomas, let me ask you one more question about Exhibit 17 before we turn to Exhibit 16. Exhibit 17 is the grouping of the documents that we were just talking about about the insurance payments to Hays.

A. Yes.

Q. Is there any document on there that, that was signed off by you or Mr. McKim that was falsified?

A. No. Not that I’m aware of.

Q. In other words, it appears to be consistent with your internal procedures for approving invoices and the payment of invoices?

A. Yes.

Q. Okay. Thank you.

Q. (BY MR. WALLACE): … Do you recall your testimony with Mr. Battaglini with respect to the consulting services provided by Hays that are referenced in Thomas Exhibit No. 17?

A. Parts of it.

Q. Okay. You were asked that, about the fact that that represents Hays was to provide consulting services to DMT from April 1st, 2007 to April 1st, 2008, right?

A. Yes, sir.

Q. And it was for consulting services, right?

A. Yes, sir.

Q. To your knowledge did DMT ever receive any consulting services from Hays?

A. Not that I’m aware of.

Q. But how much money was paid to Hays for those alleged consulting services?

A. Seventy –

Q. To your knowledge.

A. — five thousand while I was there.

Q. Okay. Okay. During your testimony with Mr. Battaglini, you said — and I’m going to quote you, quote: You know there was a discussion about, about Hays and who was at Hays and that somebody he wanted to use. And this — so this was, this was where things were going. Who was it and during — let me start over. You were having an exchange with Mr. Battaglini about conversations you had with Mr. Kazeminy and Hays, right?

A. Yes, sir.

Q. Do you recall saying in your testimony with Mr. Battaglini, quote: You know, there was a discussion about, about Hays and who was at Hays and that somebody he wanted to use. And this — so this was, this was where things were going. Do you recall that testimony?

A. Yes.

Q. All right. And when you say he wanted to use, who was he?

A. He being Nasser Kazeminy.

Q. And who was it that Nasser Kazeminy wanted to use at Hays?

A. Laurie Coleman.

Q. And who is Laurie Coleman? If you know.

A. She’s the wife of Senator Coleman.

Q. Okay. In March of 2007, did you have a telephone conversation with Mr. Kazeminy about you, about Senator Norm Coleman?

A. That — there was just that one conversation.

Q. Okay. Now, that services agreement that you have before you which is Exhibit No. 17; is that right?

A. Yes, sir.

Q. It’s for services beginning in April of 2007?

A. Yes, sir.

Q. And in March of 2007 you had a telephone conversation with Mr. Kazeminy about Senator Norm Coleman, right?

A. Well, it could have been in March.

Q. Okay. You’re not sure?

A. I’m not sure. It was sometime — if I’m going to put a timeline to it, I’m going to estimate sometime that first quarter of ‘07.

Q. Okay. Fair enough. Sometime before the existence of the document that you have before you which is Exhibit No. 17?

A. Yes, sir.

Q. Okay. In that conversation that you had with Mr. Kazeminy, did he tell you, quote, United States senators don’t make shit, close quote? Or words to that effect?

A. Yes, sir.

Q. Do you have any idea what he meant when telling you that by the context of the conversation you were having?

A. Other than the fact that senators don’t make a lot of money, not really. I’m not very good at reading more into it other than that.

Q. Fair enough. And I don’t want you to read anything into it that you can’t. Okay? Please don’t let me try to put words in your mouth. Can we have that agreement?

A. Sure.

Q. Okay. In this telephone conversation, it was specifically about Hays insurance, though, right? And about the use of Hays?

A. Yes, sir.

Q. And he introduces in that conversation the subject about United States senators don’t make shit, correct?

A. That’s how the conversation started.

Q. And who works at Hays? That you know of personally.

A. Mike Prinz. Laurie Coleman. Well, I — you know, look. I can’t say that I know personally. I have heard that.

Q. Fair enough.

A. Mike Prinz I know works at Hays.

Q. That’s a fair testimony. You don’t have any personal knowledge that Laurie Coleman works there, correct?

A. Correct.

Q. Okay. Did you later approach Mr. McKim asking him whether it was appropriate to follow Mr. Kazeminy’s orders to use Hays?

A. We talked about this after the conversation.

Q. And what was Mr. McKim’s reaction?

A. Our first reaction for both of us was somewhat of a sense of relief in that the previous year we had gone through the discussions with the e-mail that I ultimately sent to Mr. Kazeminy relating to the use of Hays and an associated firm here in Houston to transfer our offshore insurance, or our insurance brokerage to. Neither one of us were very excited by that kind of move. We were very well taken care of by Aon. We were comfortable with the level of service and knew that the company was benefitting from the arrangement. We had ongoing use for Aon on a variety of issues and really did not want to change to an unknown entity that was significantly smaller in size.

Q. Okay. I’m a little bit confused by your response. Did you say at first you were relieved?

A. Yeah. We were relieved because this meant that we weren’t going to be getting our chops busted about changing to Hays. For doing — for, actually, the brokerage of our insurance and the ongoing, and the ongoing brokerage arrangement and who was going to be taking care of and servicing us.

Q. I see. Because all Hays was going to do was provide consulting services as opposed to providing insurance.

A. Yes, sir.

Q. Okay. But from the date of the conversation when he told you U.S. senators don’t make shit until the expiration of a year later, to your knowledge, DMT never got any consulting services from Hays?

A. No, sir. Not that I’m aware.

Q. But they were paid $75,000 of corporate money for that?

A. Yes, sir.

Q. Okay. Was there — did Mr. McKim later ever make an objection to any of the payments to Hays, to your knowledge?

A. Paul was very unhappy about making the payments and grumbled whenever, whenever one of the invoices came through.

Q. Did he grumble to Mr. Kazeminy about it?

A. I don’t know if he did or not.

Q. Did Mr. Kazeminy ever let it be known to you in some form of communication that this was his company and that you and Mr. McKim better just follow his orders in paying Hays?

A. He did not — I did not have that portion of a conversation with Nasser ever.