Free Appendix - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE __________________________________________ EQUAL EMPLOYMENT OPPORTUNITY ) COMMISSION, ) ) Plaintiff, ) ) CIVIL ACTION NO. 04-1304 (KAJ) v. ) ) P.T. MORGAN PAPER CO., affiliated with ) P.T. MORGAN PACKAGING COMPANY, ) ) Defendant. ) )

COMMISSION'S SUPPLEMENTAL APPENDIX

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION JACQUELINE H. MC NAIR , REGIONAL ATTORNEY JUDITH O'BOYLE , SUPERVISORY TRIAL ATTORNEY M. JEAN CLICKNER , SENIOR TRIAL ATTORNEY Equal Employment Opportunity Commission Liberty Center, Suite 300 1001 Liberty Avenue Local Counsel: Pittsburgh, PA 15222 UNITED STATES ATTORNEY (412) 644-6439 DISTRICT OF DELAWARE SETH M. BEAUSANG, ASST. U.S. ATTORNEY The Nemours Building 1007 Orange Street, Suite 700 Wilmington, Delaware 19899 Dated: February 2, 2006 Del. Bar ID No. 4071 (302) 573-6277

Document Ex. A Transcript of James Morgan January 24, 2006 Deposition Exhibit A
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IN THE UN ITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

EQUAL EMPLOYMENT OPPORTUNITY ) COM MISSION , ) ) Plaintiff, ) ) v. ) Civil Action No. ) 04-1304 P.T. MOR GAN PAP ER C OM PAN Y, an ) affiliate of P.T. MO RGA N ) PACK AG ING CO MPA NY , ) ) Defendant. )

Deposition of JAMES M ORGAN taken pursuant to notice at the offices of the United States Attorney for the District of Delaware, The Nemours Building, 1007 Orange Street, Suite 700, Wilmington, Delaware, beginning at 9:30 a.m . on T uesday, January 24, 20 06, b efore Anne L. Adams, R egistered Professio nal Re porter and No tary Public.

APPEARANCES: M. JEAN CLICKNER, ESQ. U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION 1001 Liberty Avenue Pittsburgh, Pennsylvania 15222-4187 for the Plaintiff,

THOMAS S. NEUBERGER, ESQ. THE NEUBERGER FIRM Two East Seventh Street, Suite 302 Wilmington, Delaware 19801-3707 for the De fendant. --------------------------------------------------WILCOX & FETZER 1330 King Street - Wilmington, Delaware 19801 (302) 655-0477 James M organ 2

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JAMES MORGAN,

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the witness herein, having first been duly sworn on oath, was examined and testified as follows: EXAMINATION BY MS. CLICKNER: Q. Good morning, M r. Morgan. M y name is Jean Clickner. I'm the trial attorney for the Eq ual Employment Oppo rtunity Commission. And you are here for your deposition in the case of EEOC versus P.T. Mo rgan Paper C omp any; is that co rrect? A. Co rrect. Q. Would you state your full name for the record? A. James B., as in Bruce, M organ. Q. And are you taking any med ications today that would impair your ability to remember things or to speak the truth? A. Well, I take a fair amount of medications, but I don't know that there is any that would prevent me from telling the truth. Q. D o your med ications impa ir your m emo ry? A. I do n't think so. Let's put it that way. B ut age is im paired a little bit. Q. N othing we can do about that.

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A. Right.

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Q. Do you have any physical condition that would impair your ability to remember or to tell the truth? A. I doubt it. But I have atrial fibrillation and diabetes too. Q. To your knowledge, do they impair your ability to tell the truth? A. No. Q. Would you, please, state your home address and telephone number? A. Home address is 52 5 B road water, all one word, Broad water R oad , Arno ld -- A-R-N-O -L-D -- M aryland , 21012. Q. Your phone numb er? MR . NEU BER GER : Is your phone numb er unlisted? THE W ITN ESS : Yes, it is. BY MS. CL ICK NE R: Q. Your office number is fine. A. The office number is (410) 544-7733. Q. What is your race? A. Caucasian. Q. Are you married? A. Yes.

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Q. And is your wife still living? A. Yes.

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Q. And what is her name? A. Peggy Morgan. No middle name. Q. Do es she ever go by the initials P .T.? A. Jokingly, occasionally people in the office call her P.T. Q. What is behind that joke? A. When we started the company, the first order we got, we were standing on a street corner in Brooklyn in a snow storm. The first purchase order we had, the gu y said, well -- it was pay b ig com pany from C hicago -- what is the nam e of your compa ny? A nd I just pulled it out of the air b ecause I wasn't prepa red. T stands for T indall, which was her maiden name. So Peggy Tindall Morgan. Q. And does your wife live with you? A. Yes. Q. Do you have children? A. Three daughters. Q. W hat are their names? A. Debb ie, Cind y -Q. What is Debbie's last name? A. Sanders, S-A-N-D-E-R-S. Cindy M oss, M, as in Michael, O-S-S. And Maryanne P ersico, spelled P, as in

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Paul, E-R-S-I-C-O. Q. And what is your highe st level of education, formal education?

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A. I'm a college graduate. Q. Where did you graduate from college? A. West Po int. Q. What year? A. 1958. Q. No w, do you have a relationship with the P.T . M organ Paper C omp any? A. Yes. Q. What is your relationship? A. Executive vice president. Q. Are you also an owner? A. Yes, but my wife is the majority owner. Q. Y our wife owns 51 p ercen t? A. Co rrect. Q. And you own 49 p ercen t? A. Co rrect. Q. So I would take that to mean there are no other owners of the com pany. A. Co rrect. Q. Do you have a relationship with the P.T. Morgan Packaging Co mpa ny?

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A. Yes. Q. And what is your relationship? A. I'm the president and 50 percent owner.

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Q. 50 p ercen t? A. Yes. Q. W ho owns the other 4 0 percent? A. My wife. MR. NEUBERG ER: You mean the other 50 percent. BY MS. CL ICK NE R: Q. Excuse me. Right. I take it there are no other owners? A. Co rrect. Q. N o one else with an ow nership interest. O kay. Now, we're going to be here for several hours and I would like to abbreviate things so we can talk a little more quickly. If I refer to the Paper Company, can we agree that that m eans P .T. M organ Paper C omp any? A. Sure. Yes. Q. If I refer to the Packaging Company, we can agree that me ans P .T. M organ Packaging Co mpa ny? A. Yes. Q. D o you own o r have an ow nership interest in any other com panies?

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A. No. Q. Do es your wife ow n or ha ve an o wnership interest in any other comp anies? A. No.

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Q. Do your daughters own or have an ownership interest in any o ther co mpa ny? A. No. Q. Does the P aper C omp any have a b oard o f directors? A. Yes. Q. W ho is on the bo ard of directors? A. M y wife and myself. Q. And who is on the board of directors of the Packaging Co mpa ny? A. M y wife and myself. Q. Are any o f your daughters on the bo ard o f direc tors of either co mpa ny? A. No. Q. Do your daughters have any formal interest in the running of either com pany? A. Not at this time. Q. So that implies that they have p reviously or they will in the future? A. Well, I hope in the future. If they were, I wouldn't be he re. I would be retired . But in the past,

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they have had p ositions in the co mpa ny. Q. Employee positions or management positions or both? A. I would say emplo yee relations -- ships. Q. We'll get to that in a few minutes. Would you

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tell me when the Packaging Company was incorporated? A. I believe roughly around July 1st, 1982. Q. And at that time, what was the business of the Packaging C omp any? A. It was basically the same as it is now, but the primary focus is the brokering and distribution of corrugated shipping containers. A lot of people refer to them as card boa rd boxes, but technically they are no t. Q. And can you tell me, how did you get into this business? A. I started to work at a box plant during the Korean war in 1951 as an hourly employee. And I worked for seven summers and while I was going to college at the University of Cincinnati. And I started late to get an app ointment to W est Po int. So I went to a year of regular college and I then went to W est Po int, graduated , went into the Army for fo ur years. And I resigned right befo re Vietnam started. So I figured I knew two things, how to make

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boxes and how to fly a plane. So the little independent box plant that I last worked in the summer of 1958 -- in our industry, there is a lot of large integrated suppliers, integrated me aning they own trees, forests, paper mills, paper m achine s and box plants. W hen I left in 1958, they subsequently became the first Mead

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containe rs corrugated plant. And from then until 1962 , they went from 1 plant to 23. And they were looking primarily for graduates that had an MBA degree to go into a training program where they would have a position similar to a controller. But all these plants were acquisitions. And many of them had five -year co ntracts with the owners. At the end of five years, they went across the street, took all the business, took all the salesmen. So there was a desp erate need for people. But b ecause of the way they grew so fast, it was very difficult to find trained peo ple. So I went into the training program. Q. Would that be in 1962 or '63? A. That would have be en the summer of 1962 . Q. And how long did you work for Mead? A. From 1962 to 1969. Q. What happened in 1969? A. Mead Corporation on a box plant level had opted

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to follow staffing procedure of a com petitor in that there were no gene ral managers at the plants. There w as a manufacturing manager and sales manager. And they were of equal rank. But there was no one person making a decision at the local level. So you went up another step and you had region al managers. And there was no general manager there either. Y ou didn't get to the top un til

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you got to the head of the container division. And I wanted to progress for the future. So I wanted to be a general manager or above. And I answered a blind ad in the trade journal and got the job. Q. With Mead? A. No, this is with Interstate Container Corporation. Q. So in 19 69 you changed jobs? A. Let me think. Yes. '69 to '77. Q. And what did you do in 1977? A. I became the general manager of Interstate Container Corporate -- vice presid ent, general manager of Interstate Co ntainer Corporation in Harrison, N ew Jersey, which is basica lly Newark, and was subsequently transferred to the plant in Ed ison, N ew Jersey. Q. In 1 977 , you stayed with Interstate after 1977; is that --

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A. No, I left. So '62 to '69, '69 to '77. MR. NEUBERG ER: I'm sorry. She had asked you, in '77, where did you go? THE W ITN ESS: I took a job with what then was called the Baltimore Box C omp any. BY MS. CL ICK NE R: Q. What was your position? A. Vice president and general manager. Q. How long did you stay there?

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A. From 1977 to the fall of '81. Q. W hat was the change that you made in the fall of 1981? A. I had basically lost my job during the recession when there was a lot of downsizing. To me, every 10 years there is a recession. And they downsized. And there were no jobs be cause the large integrated comp anies like International Paper and W eyerha euser, when they say there is a freeze on hiring, they mean there is a freeze on hiring. So I had a lot of good experience over the years. A nd it appeared tha t we wo uld have to m ove with, if I got a job, with one of the larger companies. And we didn't want to move. We m oved enough. And I said -- I guess it was Christmas eve, we sold a trailer load of

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Random House obsolete boxes, a load of what's called old corrugated waste. And that was like right around Christmas eve. So I said, well, maybe we ought to make a stab at it. Q. When you say we sold, who is we? A. My wife and I. Q. So in 1982 you started to develop your own business? A. That is correct.

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Q. And what business did you start to develop? A. It was b asically the purchase and sale of corrugated boxes. Q. So is that what you would call brokering? A. Yes, in that we took p ossession once it was load ed on the trailer. And bills of lading were made out by someb ody like International P aper or W eyerha euser, Georgia Pacific, somebody like that. And the trailer went from that particular plant. We sold and still do sell prim arily in North Jersey, C atskills, M iami -Miami? Ne w York C ity, Manhattan and B rooklyn. Q. Y ou don't mean M iami; is that correct? A. I do not mean M iami. So we drop-shipped. W e, basically, did not touch a product. We took the order placed it. It was delivered. We paid the invoice and

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billed the customer. Q. Did you hire truck drivers at that time? A. No. Because there was no need for us to have drivers because all of the box plants would have their own drivers anyway. If not, we used comm on carries. Q. So at the time, let's say in 1982, when you are starting the business, where w ere you living at that time? A. We were living in Severna Park, M aryland , just like across the main drag and about five miles from where

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we live now. Q. And w as it just you and your wife running this business? A. W hen it started, we started in the basement of our house. Q. And then you subseq uently incorpora ted this business? A. Co rrect. Q. And that became what business? A. That became the P .T. M organ Packaging Co mpa ny. Q. W hen did you move into the Pap er Co mpa ny business? First off, let me back up. What is the Paper Com pany business? A. Paper Comp any is primarily engaged in the sorting

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and recycling of old grades of wastepaper from blank newspaper to what is called old corrugated boxes that you would see at a grocery store or see in the back of a shopping center. Some people had balers. Some people did not. So we were engaged in the purchasing and, generally speaking, the trucking to our facility in Delaware where we separated the various grades of paper because they are wo rth different values. This pap er is much more available than a cardboard. Q. Let the record reflect that Mr. M organ wa s indicating white 8-and-a-half by 11 typing paper.

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A. Yes. That would be sold as white ledger is what it's called. Q. W hat is the en d product of the P aper Compa ny? A. It is baled corrugated -- when we first started, there w eren't the P C's and networks that there are now. A lot of information was sent by IBM tab cards. I'm sure you remem ber tab cards. And also there was a treme ndous amo unt of wh at's called C PO , which is comp uter printout, some of which was worth more than other. Q. My question is -- I'm trying to figure out, you brought in these various types of paper into your facility. Yo u sorted them and yo u bale them. A. Co rrect.

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Q. Do you create a product other than these bales o f sorted pape rs? A. Not in the true sense of the word because there are other functions that are performed at that warehouse besides baling. But that was the p rimary function, particularly when we started. Q. But today, is there an end product other than sorted and ba led pap er prod ucts? A. Yes. W e do so me warehousing of finished bo xes where somebody could call today for tomorrow within reaso n. Q. Do you create those boxes?

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A. We would purchase them and they would be shipped to our plant in Smyrna or we would pick them up and bring them there. MR . NEU BER GER : Wait a minute. Were you talking about Packaging there or Paper? BY MS. CL ICK NE R: Q. I guess I don't really understand. Are there two b usinesse s being run ou t of the Sm yrna, D elaware, facility? A. No, there is only one. That one is a freestanding company of itself. Two companies were incorporated separately.

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Q. But I've heard this referred to that there is a paper and a pac kaging -A. I'll explain that to you. Q. Please do . A. One other p roduct that is -- it's the only product we manufacture -- is we manufacture corrugated pads and liners that are sold to, let's say, apple box people, egg ca rton peo ple and o ther industrial comp anies that would have a requirement for pads say 12 by 12, a layer pad, apple box pads and another pad to increase the stacking strength of a box. Q. Now, is that called the paper part of the Paper

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Compa ny or the pack aging p art of the Pap er Co mpa ny? A. There is per se no packaging part in the Paper Company. We have a general manager that is responsible for the profit center. There are some products that we buy from them and resell just like we have products from Weyerhaeuser or International Paper that we buy and resell. Q. W e meaning P ackaging Comp any or Pap er Co mpa ny? A. Both. The Paper Company might sell a box the size of this desk. And the Pa ckaging Co mpa ny might sell the sam e thing. Q. So I'm just -- I still want to be clear about the

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business of the Paper Com pany. So what I understand is you acq uire and sort, recycle -- you acq uire and you sort and you bale various types of paper. A. Correct. Q. And then I'm assuming, do you sell those bales to someone else? A. Yes. T hose bales w ill be sold to, gene rally speaking, very large companies like a W eyerhaeuser or Georgia Pacific and will be recycled into w hat they call the furnish , the make-up of whatever p aper grade that they are using. And they will dump it in and make recycled paper out of it. Q. The Paper Company also manufactures corrugated

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liners? A. Pads and liners, yes. Q. The Paper Company also buys and sells finished corrugated boxes? A. True. They are not as big as the Packaging Compa ny, but, yes, they have custo mers that would sell the sam e box or p roduct, too, as the P ackaging Comp any might sell 200 miles aw ay. Th ey do have some corrugated , new c orrug ated b ox custome rs. Q. So when you say the Packaging Company, you mean the Packa ging Com pany, P.T . Mo rgan Packaging Comp any buys

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and sells finished boxes; is that true? A. Prima rily. Q. Does P.T. Morgan Packaging Company warehouse those boxes? A. We don't do much warehousing because of the slim margins. Wh at we have wo uld be gen eric boxe s or pad s that could be ship ped to a num ber o f different p eop le. In other words, it doesn't have Budweiser beer printed on it. Q. But speaking of the Packaging Company, do you purc hase finished boxes and/or pa ds and, at times, warehouse them before they have been sold to your customer?

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A. Run that by again, please. Q. The Packaging Company in Arnold, Maryland, the Packaging Co mpa ny buys a nd sells finished b oxes and pads; is that correct? A. Yes. Q. And in that process of buying and then selling them, are they w areho used by the P ackaging Comp any at any time? A. For the pa ds and liners, not generally. Q. But are they so metimes? A. Yes.

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Q. And are the finished boxes warehoused? A. The vast majority of the finished boxes are of a generic type where they can be sold either by the Paper Company or by the Packaging Company. A good example, I'm sure you've heard of Perdue Poultry. Poultry and fish companies, for the majority of them, the boxes are the same size, same composition, but not printed. So we could sell a kosher poultry place in V ineland a poultry box and we could ship the same box and sell it to a fish dealer at the F olton Fish M arket. Q. But my question is: Between the time you purc hase the finished b oxes and you sell them, are they warehoused at any time b y the Pa ckaging Co mpa ny? A. W areho used by the P ackaging Comp any? Very, very

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minute. Q. T his is a yes or no q uestion. A. Could you ask again. Q. The Packaging Com pany, between the time that you buy finished boxes and you sell them, are they ever warehoused by the Pa ckaging Co mpa ny? A. Without qualifying, yes. Q. Where are they warehoused? A. They co uld be ware housed an d are wareh oused at perhaps one of our vendors or they could be warehoused in

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Smyrna. Q. At the Paper Company in Smyrna? A. Yes. B ut there are very few and , general speaking, anything that comes into that wa rehouse is purcha sed and paid for by the P aper Compa ny. Q. I'm only limiting my questions to the Packaging Company business. So d o you reimb urse the Pap er Co mpa ny for warehousing Packaging boxes? D oes Packaging reimburse Paper? A. What we -- the answer is yes. But we reimburse them for their cost. Q. How is that determined? A. W ell, numb er one, som e of the c orra -- firstly, all of the corrugated p ads are m ade in Sm yrna. And let's say we have a standard costing system.

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Q. Let me just back up one minute. W hen you say Smyrna, you are re ferring to the Pa per C omp any; is that correct? A. Right. Q. Go ahead. Yo u finish. I'm sorry. I didn't mean to interrupt. I wanted to clarify that. A. I forgot what your qu estion was. Q. How does Packaging determine what to reimburse Pape r for warehousing Packaging Co mpany products?

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A. The Paper Company. When something comes into the warehouse, 95 percent of the material is owned and paid for by the P aper Compa ny. Q. I'm not talking about that 95 percent. I'm talking about the other percentage of product that's warehoused at the Paper Company for the Packaging Company. Do you have a system set up, does Packaging and Paper comp anies ha ve a system of reimbursement for tha t warehousing service? A. Generally not, no. If it were pads and partitions, the answer would be yes. Q. W ell, explain what you mean. A. Those are the items that they manufacture are

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corrugated pads and scored liners. Q. T hose are the products that the P aper Compa ny manufacture s. A. Co rrect. Q. But there are occasions, is it true that on occasion the Paper Comp any will warehouse either pads or boxes for the Pa ckaging Co mpa ny? A. That is correct. Q. And the Packaging Company does not reimburse the

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Paper Co mpa ny for that warehousing service; is that correct? A. It would be in the costs of the pads and partitions, yes. But the boxes, since they are generic, they are sold at co st to the P ackaging Comp any or they sell them. Q. Sir, I am not asking you about products that are created by the P aper Compa ny. I'm asking you ab out products that are being warehoused by the P aper Compa ny for the Packaging Company. We p reviously admitted or you said to me, no, Packaging Company does not reimburse Paper Com pany for that warehousing service. Is that your answer? A. Genera lly speaking, yes. Q. You are qualifying your answe r now. So what is the qualification?

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A. Because we -- qualification, we pay them an upcharge. Q. What is an upcharge? A. Basically the cost to load or unload a trailer. Q. So is it your testimony that the Packaging Com pany reimb urses the Pap er Com pany an up charge which is the cost of loading or unloading a trailer? A. Upon occasion.

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Q. Ho w often? Let's limit this to 200 2 to p resent. A. Dep ending upon the product, the price that they are selling it to the Packaging Company includes those warehousing costs. In other words, there is not an invoice fo r 10 of this and then a $ 15 lo ading charge. It's built into the cost of the product when it's sold to the Pac kaging Compa ny. Q. Again, you are reverting back to p roducts that are created by the Paper Company and then sold to the Packaging Co mpa ny; is that correct? A. No. They do warehouse some boxes that are generic. And if they are purchased from the Paper Compa ny, the price that they charge would incorporate all of their costs, which wou ld be -Q. Sir, are you referring -- when the Packaging Compa ny -- back up. Does the Pac kaging Co mpany purchase b oxes

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from the Pa per C omp any? A. Yes. Q. Are those boxes that the Paper Company has made? A. No. Q. Tho se are boxes that the Pap er Com pany has purc hased from a third party? A. Co rrect.

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Q. Does the Packaging Company purchase from the Paper C omp any boxe s that the Packaging Com pany owns? A. If the Packaging Co mpa ny own s, then you wou ldn't charge the Pa per C omp any. Q. Yo u wou ldn't pay the Pap er Co mpa ny. A. Wouldn't pay for it. W e have some pro duct there, not very m uch. La st month it was $1 3,00 0 wo rth of material tha t was carried o n the P ackaging Comp any inventory at the end of the month. Q. But it was located at the Paper warehouse facility? A. Co rrect. Q. And did the Packaging Comp any pay the Paper Company anything for that warehousing service? A. Not for those $13,000. Q. Okay. T hank you. T he Pac kaging Co mpany is basically a bro ker of paper pro ducts; is that correct? A. Yes.

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Q. What percentage of packaging business is related to products, related to the brokering of P aper Compa ny produ cts? A. What percentage of the Packaging Company? Q. Y es. A. I do n't really know because we've never kept

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track of it. But I wou ld say so mewhere in the rang e of 20 to 3 0 percent. Q. Now, in con verse, the Pap er Com pany creates several p roducts, right, bales, sorted b ales, some wrap, right, pads and liners? A. Uh-huh. Q. Wha t percentage o f the paper co mpany's business is brokered through the Pa ckaging Co mpa ny? A. I thought that was the same question I just answered earlier. Q. No. Let's back up. Relating to the Packaging Com pany, what percentage of the Packaging Com pany's business, total business, is related to brokering pro ducts created by the Pap er Co mpa ny? A. Products created by the Paper Company? Q. Y es. A. I would think roughly 10 percent. Q. And when I said products created by the Paper Company, does that mean to you all of Paper's business or

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are you excluding bales when I say that? W hat are you including in that term? A. Okay. Could you re-ask the question? Q. T he Paper Compa ny creates sorted bales; is that true?

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A. Baled and sorted and so metimes they are already baled, but, yes. Q. The P aper C omp any creates pads? A. Correct. Q. Does Paper Company create anything else? A. No. Q. And Paper Company buys and sells pre-made corrugated boxes or containers? A. Paper Company? Q. Y es. A. Yes. Q. Now, taking that as the total of the Paper Compa ny business, as I understand it from your testimony, all of those pro ducts have to be so ld; is that co rrect? A. Co rrect. W ell, I will say som e of the m aterial that is purchased en ds up getting baled b ecause it's not suitable to sell it to a customer. Q. W ell, you don't make a profit until you turn it over to som eone else; is that correct? A. And get paid, yes.

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Q. H ow m uch of the Paper C omp any's total business, the sale of all these things that the Pap er Co mpa ny handles, how much of that is handled, the sale of those items handled thro ugh the Packaging Compa ny?

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A. Probab ly close to 25, 3 0 percent. Q. Ho w is then the remaining 75 , 70 to 75 p ercen t sold, of P aper Compa ny's total pro ducts, how is tha t sold? A. It is sold by the Pa per C omp any itself. Q. Does the Paper Company have a sales force? A. No. Q. So how are prod ucts, how do potential purchasers interact with the Paper Co mpany to buy their prod ucts? A. Over the years, I have brought some in. We have some outsid e sales re ps in the Packaging Compa ny, but they are not employees. They are -- we call them com mission salesmen, but they are not on the compa ny payroll. They don't get paid unless they sell. A fair amount is by word of mouth in the marketplace. We handle several products that very, very few people have. And then there is the sale of the p roduct by the general manager. Q. Anything else? A. Not that I ca n think of. Q. So whe n a Pap er customer makes an o rder, what is

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the process taking the order and invoicing the order? W ho does tha t? A. W ell, the ord er may be taken by the gene ral

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manager. It could be taken by myself. It could be taken by one of the -- I've got the right word for the commission sales -- manufacturer's reps. It could be taken by them. Q. Does paperwork have to be created when an orde r is made? A. Yes. Q. What paperwork has to be created? A. W e are talking about the Paper or Packaging or both? Q. Fo r the Paper Compa ny. A. If the order is taken directly by the Paper Compa ny and they have the product let's say in stoc k, they will, when it's shipped, make out a bill of lading which is sent to the Packaging Com pany's office in M aryland . And then once we had the signed delivery receipt, it would be invoiced to the customer in the name of the P aper Compa ny. Q. So I want to go back over this. So if an order is made for a product from the Paper Company, someone creates a bill of lading; is that correct? A. You said when an order is made?

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Q. Fo r a pro duct from the Pap er Co mpa ny. A. To me that's saying the Paper Co mpany got an

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order for som ething. Q. Yes. A. But they are no t making that product but they got an order for so mething that's warehoused there. MR. N EUB ERG ER: Jim, I think she asked you when Paper takes an order for one of its products. You talked ab out bales, pa ds, things like that. TH E W ITNE SS: T he Paper Compa ny takes -MR. N EUB ERG ER: Ta kes an order. THE W ITNE SS: For something that it has, yeah. T he order will be taken by the Pap er Co mpa ny. And -BY MS. CL ICK NE R: Q. And a b ill of lading would be created ; is that correct? A. Co rrect. Q. Who wo uld create the bill of lading? A. The bill of lading would be created by, generally speaking, the general manager. Q. Who else would create a bill of lading? A. Say a team leader because m aybe the general manager is not there or, perhaps, another senior employee who is familiar with loading trucks and making out bills

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of lading.

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Q. And then you said the bill of lading would be sent to the P ackaging Comp any? A. Right. Q. W ho in the Packaging Compa ny wou ld receive that? A. It would be Robbi Sm ith. And if she were out for whatever reason, there are one or two other people who can create an invoice from the bill of lading. Q. Who are those other people? A. One would be Rose Grabowski, the supervisor, and to a very limited degree, Linda Reppenhagen, or in some cases my da ughter, Maryanne. Q. So a b ill of lading is created. The p roduct is shipp ed. And then there is a delive ry receipt; is that correct? A. To us a d elivery receipt and the signed bill of lading ; although they may be two different papers. It would be one of the two. Because sometimes the customer will make out a receiving rep ort, sign for it and give it to the d river. Q. W ho is the delivery receipt or the signed bill of lading sent back to? A. Most generally, Robb i Smith. Q. And then she creates a n invoice for the pro duct; is that correct?

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A. Correct. Q. And does she send that invoice to the customer? A. Yes. Q. And assuming the customer pays, who does the customer send the money to? A. Most generally it is sent to the Paper Com pany's post office box. Q. W hich is in -A. Severna Park, Maryland. Q. And who retrieves the mail from that post office box? A. Genera lly speaking, Joan M eyers. Q. W ho is Joan M eyers? A. She has several func tions. She's my, let's say, secretary. She handles accounts receivable, unless there is a major, major problem. She sends out quotations to potential vendo rs. She will call the potential vendors and ask what are your prices on this box. We have to follow up with a lot of ou r vend ors because they don't reply prom ptly. Q. Is Joan Meyers a Packaging Company employee? A. Yes. Q. So if Joan Meyers retrieves the paym ents that have been sent to the Paper Company's P.O. Box in Severna

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Park, she's brings those payments back to the Packaging Company office; is that correct? A. Correct. Q. Who handles then the banking and the keeping track of those payments? A. Basically, she will bring the mail back for both comp anies. W e have two sep arate p ost office box numb ers. And she will open the mail and make a decision who the mail goes to or w ho these payments go to. A nd she will sort it out and, let's say, give the mail out to the proper person. And I don't know -- she makes out a dep osit slip. So she's sorting the checks out from the Paper Company and the Packaging Company. And I believe she's the one that makes out the deposit slip for the two com panies. She gives the information to Robbi S mith. I'm not sure whe n it is given to Robbi. B ut she gets it. And she will match it up with the bill of lading or receiving slip and we would have already created an invoice. So she will go into accounts receivable and delete those particular invoices that have been paid. Q. Can you tell me wh at, for the P aper Compa ny, what its total business was in 2002? A. Not witho ut look ing at the financial statement.

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But I would say in excess of a million dollars. Q. And that's the Paper C omp any? A. Uh-huh. Q. And that's 2002. And we will just use round numbers in excess of a million dollars. What about 2003? MR. N EUB ERG ER: Yo ur question is sales you are asking, right? BY MS. CL ICK NE R: Q. Yes, that's fine. A. I would say approximately the same. Q. What about 2004? A. Slightly less than a million. Q. Do you know what your sales were for 2005? A. Not witho ut look ing at the financial statement. But it would have been between 900 and 1,000 -- 900,000 and a million. Q. Now, assuming that a customer does not pay for a product that has been shipped to it, does the Paper Compa ny take any steps to get its money? A. Generally, the collections are handled by Joan Meyers. If there is somebody that is not paying for whatever the reason might be, it's turned over to the general manager of the Paper Company to go after the money.

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Q. Let's go back to Joan Meyers. What does she do if bills are not being paid? A. Well, first of all, I get an accounts receivable run for both companies every Friday. And I look at them and I tell her which ones to contact. When she gets to the point where peo ple still aren't paying, if it's Packaging C omp any, then I will call them or visit them . If it's the Paper Company, the general manager will take up the matter with the customer. Q. So you are saying that you do not call Paper customers? A. Virtually not. Q. Do you ever? A. I would say very, very seldom. Q. M y question is: Do you ever call Paper C omp any delinquents? A. Yes. Q. And Jo an M eyers also calls P aper Compa ny delinq uents; is that correct? A. Yes. Q. And is it your testimony that the general manager also calls Paper Com pany delinquents? A. Yes. Q. Anyone else?

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then it would proba bly be Ro se Grab owski, her bo ss. Q. Under what circumstances would you call Paper Company emp loyee d elinquents? Not Pap er Co mpa ny delinquents, custome rs. A. The only time probab ly would be if, the account in question, I know the person. In other words, there are occasions when two different companies, the Paper Company and the Packaging Company, will sell the same account. I don't know personally, for the most part, the person who makes the decisio ns to pay the P aper Compa ny. I know some of their customers. But most of them I don't. So it would only be someb ody that, along the way, both com panies sold or I had occasion to meet them . But, generally, I don't get into Paper accounts. G enerally, the invoices and the a ccounts receivable are far less at the P aper Compa ny than the y are at the Packaging Co mpa ny. Q. Are Paper Company delinquent accounts ever turned over to a co llection agency? A. Not that I recall, no. Q. Is there any third party that is used to collect Paper Company accounts due? A. I do n't believe we've ever used a third p arty

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primarily because there aren't that many accounts. And for the mo st part, the monies are not significant, except

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when you are selling to on e of the m ills that's doing, using recyc lable m aterial. B ut, generally, they are very large accounts like a Georgia Pacific. So if a Georgia Pacific is not paying, it's because they skipped an invoice or somebody has said we are going to make a deduction on this invoice for whatever reason. But those accounts are much smaller and easier to handle than the Packaging accounts. Q. If a Paper Company customer decides to make a reduction for whatever reason on an invoice, who at Paper Compa ny app roves or disapp roves that or d eals with that? A. It will come in the mail. It will be opened. And Joan will notice that there has b een a deduction. And she will send the checks upstairs to Ro bbi who will enter them into acco unts receivab le system and note that there is a variance. And the general manager of the Paper Company will be sent a variance and a copy of the invoice. Sometimes people write on there what they are deducting. It's just fact or fiction. Other times you've got to ca ll. Q. And the Packaging Company offices are in a building on the pro perty where yo ur home is; is that

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correct? A. Yes. Q. And is that residential area?

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A. Yes. Q. Was there a time when the P ackaging C omp any was located in Severna Park? A. Yes. Q. But there are no lo nger o ffices in Severna Park; is that correct? A. Co rrect. Q. When did that move change? A. About January of '88. Q. And did they move to Arn old, M aryland , in January of '88? A. Yes. We had to move in two phases. I think we moved the office, perhaps, a month or two before -- my wife and myself and our daughter that was still at home moved into the house in January. I believe we moved to the office probably in November of '87. Q. Let's back up a little bit. You said that in 1982 yo u and your wife started the Pa ckaging Co mpa ny. A. Co rrect. Q. D id you and sh e also start the P aper Compa ny? A. Yes.

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Q. Did you purchase an existing co mpa ny at that time? A. No. We started from scratch. But we had become involved with a small recycler in D elaware who was

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desperate for money. And that area of Delaware, there aren't a whole lot of what we c all wastep aper com panies. But he had so me ve ry large accounts, International, Playtex, Scott Paper, General Foods and probably I've forgotten some of the o thers. So the guy ne eded mo ney desperately. And at that time we were -- this is when the Packaging Company first started up. It also handled baled waste paper. We had no facilities but we were buying it baled. So -- and we had the contacts with the mills to ship it to them . And the guy -- the name of the com pany was Delaware Recyclers -- but who was going bankrupt. So those were so me p retty goo d sized acco unts that he had. Because you also get overruns, boxes printed in Spanish or French or something but have never been packed. So they are usable boxes sold at a discount. W e didn't get into that with the Paper Company's products. But there is overruns, m isprints, jo b lots, seconds, used bo xes. So since we had the contacts and we could make some money off of the guy, we made a decision to

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advance him 10 o r $20,00 0 at the beginning of the mo nth. Then we got everything that the guy generated. And when we started at the end of the mo nth, what he sold to us pretty much equated to what we had lent him. But it gave us a great entree on some o f the boxes that he had . If

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you get six truck loads of B udweiser beer trays, there is a marke t for that kind of stuff out the re. So he wanted us to buy the co mpa ny. And , at that time, he had a financial guy by the name of Gene Fo x who used to work for us. And he had an accounting background. S o while we were talking with the guy about buying his company, Gene Fo x said this guy is going bankrupt but he doesn't know it because all he booked in a month were sales. He booked no purchases. So he could show a profit of five or 10,000. Again, this was a recession year. MR. NEU BE RG ER: Y ou are talking '82? Is that what you are talking about? THE W ITNE SS: Correct. So we got up close to the end of the year like T hanksgiving and Christmas holidays. And these mills will shut down for a week or so. And they won't take anything. So we strung the guy along. W e didn't advance him money, very m uch money at the beginning of December because he was in arrears from

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the previous month. And, of course, the people that he was getting these goods from, who he wasn't paying, were breathing down his ne ck. But there weren't any other recyclers. You either shipped it to him and hoped you got paid or you paid for it to go to the dump. So long story short, he

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went bankrupt. And about six months later we started up our plant in May of '83. And Gene Fox w ent to work for us. So all of the existing accounts, so to speak, were still out there. So that's really how we got started. BY MS. CL ICK NE R: Q. So and then the paper business, the Paper Company's business grew and developed? A. Over a p eriod of time, yes. W hen we started up, we bought a used baler to be able to bale the material. MS. CL ICKN ER: Do you need to take a break? (Thereupon, a short recess was had.) BY MS. CL ICK NE R: Q. Are you considered an employee of the Packaging Compa ny? A. Yes. Q. Are you an em ployee of the P aper Compa ny? A. I would say yes. No one has ever asked me that but I guess, yeah.

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Q. What about Mrs. Morgan, is she an employee of the Packaging C omp any? A. I hesitate only because she's very sick now. And she's not, let's say, active in either one of the companies. Q. When did she become very sick? I mean, before she was sick.

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A. She was an emp loyee of bo th comp anies. Q. Have you ever heard the term the P.T. Morgan Com panies? A. I've never used it. I don't know if any of our employees have. But I believe the EEOC is referring to them that way. And I think Mark Maddox referred to them in that way. Q. W ell, have you see n any documents where that term, P.T . Mo rgan Co mpanies, has been used in this litigation? A. I honestly can't recall. Q. And if one of the Packaging Co mpany employee s used that term; would that be incorrect? A. Co rrect, that would not be corre ct. Because they are two separately run and incorporated and everything else companies. I could see because there is two com panies with close to the same name , some one might

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refer to it that wa y. Q. Have you ever corrected an employee for using that term, P.T. M organ C omp anies? A. I don't believe so. Q. Does the Paper Company have any locations where it does work other than in Smyrna, Delaware? A. I can't recall any, no. Q. Do es Ro se Grabo wski -- who is a Packaging Co mpa ny

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emplo yee; is that co rrect? A. Co rrect. Q. Does she go to the Paper Com pany's site to work? A. Occasio nally she does. Q. When did she start going there? A. I believe we started that in January of last year. Q. '05? A. Yes. Q. Who m ade the decision to send her there to work? A. I did. Q. And wh y did yo u do that? A. Well, in our entire existence, we've had two general managers with different backgrounds. R ose is knowledgeable enough to tear a computer down and rebuild it. And Gene Fox was very computer oriented because he

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wrote his own programs. And until about five years ago when we got computerized , i.e., PC's and network, he was able, with his program, to send information to the Packaging C omp any. Gene Fox left and we hired G ary Eberhard, whose background is just the opposite of Gene Fox. Gene Fox was not operations oriented. He did a good job. But Gary Eberhard had very little computer experience. He had far more operational experience. He

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was at 37 years with C hrysler in the auto assemb ly plant around here. So we had a very difficult time for Gary to transition on Gene Fox's software for which there were no manuals. I mean, he was smart enough to write his own programs. So we run a financial statement on each com pany every m onth, which requires a certain amo unt of data and inventories. And Gary was having a real problem with the computer -- I don't know whether it was the com puter or the p rogra m that he inherited . So Rose said let's get him a new computer and let's get some off-the-shelf software. And I will teach him how to use this new computer and how to use the software. W ell, the compu ter age has pa ssed m e by mainly because -MR. NE UB ER GE R: Lucky you.

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A. -- there were no PC's in those days. There were IBM tab cards and huge com puters that were centralized . So she got the computer. She got the programs and she started to teach him. But I think probably the older you get the more difficult it is to learn a new skill. And we decided, between Rose and myself and Gary, that she would be over there to handle, to make sure that the inventory were p roperly handled and extended. There were problems in the counts. There were problems in the valuations. So that's how she

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started over there. Originally, it was like one day a month. When you hit holiday months like Thanksgiving and De cember, it wo uld be close r to ma ybe two days a week. Then we developed the situation that you and I are here for and Tom. I'm sure you are awa re, there is a vast amount of information that you had to dig up and we ha d to d ig up. And we still have to run that operation. So she has been over there more to, let's say, collect data either there or at the Packaging Compa ny. And then, at the same time roughly, we developed a problem where the owner of our building who had just signed a 20-year lease extension dec ided to sell the prope rty to a develo per who is building a hosp ital

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where we are lo cated . And we have be en invo lved in that project for a year-and-a-half. He is a person who either is stupid or does not know how to figure costs. And she's spent a tremendous amount o f time keeping the no tes of every meeting of what the guy said. T he town is involved . We have been threatened with eminent doma in. A new building is being put up for us. Yet we continued to have p roblems o f misund erstand ing with the deve loper. So she has spent time over in Smyrna or around Smyrna that wo uld no rmally no t be done.

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Q. So let me back up. Does Miss Grabowski go to Smyrna to input data, financial data into the computer system? A. No. She may have done that initially to get the computer up and running. But, no. She might answer a question or something. B ut the financial statem ents are, let's say, worked up by Ro bbi. T hen to make sure that they are accurate and also because we ha ve bank lo ans that we have to give them certain data at certain times, the work-up is sent to a CPA firm that runs it through their computer, prints out the balance sheet and financial statement. But that, basically, comes through Robbi. Q. There is financial information about the Paper

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Company business that needs to be input into a computer system; is that co rrect? A. W ell, yeah. Probably -- I don't know. I wouldn't say all the time. But the payroll information every week is off whenever we bill or collect and the input of the ending inventories. Q. Well, the financial information then is accessible to the Packaging Company because they handle that end o f the business; is that co rrect? A. That is correct. But I don't know that -- a good portion of the information may be in that computer in