101101 Jeff Nicolaysen Testimony

8/8/2019 101101 Jeff Nicolaysen Testimony

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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?

CATHERINE E.F. BODENE, OFFICIAL COURT REPORTER, USDC

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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?


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.


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."


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.


I'm sorry, Sharon. I had that backwards. It's the

second page. Sorry about that.


Okay. So this is what we were just looking at. I

apologize. Now go back to the first one.


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.


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?



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.


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?



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.


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.


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?


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.


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?


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?


///


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.



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.


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.


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.




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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.



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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Documents

101101 Jeff Nicolaysen Testimony