EXHIBIT 68¶
GOVERNMENT OF THE VIRGIN ISLANDS OF THE UNITED STATES ECONOMIC DEVELOPMENT COMMISSION¶
PUBLIC HEARING¶
THURSDAY, November 15, 2012 12:43 p.m. to 2:32 p.m.¶
Port Authority Conference Room St. , Virgin Islands¶
MEMBERS PRESENT¶
ALBERT BRYAN, Chairman NATHAN SIMMONDS, Vice Chairman MILLIN MADURO, ESQ., Member RANDOLPH , Member JOSE PENN, Member¶
STAFF PRESENT¶
NUGENT- , ACEO HENRY SMOCK, ESQ., Legal Counsel FRED HANDLEMAN, ESQ., Director of Legislative & Legal Affairs MARGARITA , Director of Applications STEPHANIE BERRY, Director of Compliance BETH HOFFMAN, ESQ., Investigator SEMELE , Public Relations DORENE IIIII! Board Liaison¶
PORTER’S COURT REPORTING, INC. P.O. Box 11303 St. , Virgin Islands 00801¶
INDEX¶
| 2 | ITEM | DESCRIPTION | PAGE |
|---|---|---|---|
| 3 | No. 1 | Meeting Called to Order | 3 |
| 4 | No. 2 | Roll Call | 3 |
| 5 | No. 3 | Review and Approval of Agenda | 4 |
| 6 | No. 4 | Cases for Public Hearing | |
| 7 | a. Southern Trust Company, Inc. | 6 | |
| b. DIAM Management | 41 | ||
| 8 | c. Asset Recovery Management, Inc. | 65 |
(Hearing Adjourned.)¶
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to call to Hearing. THE CHAIR: Good morning. I’d like order the Economic Development Commission Public¶
PROCEEDINGS¶
5 Can I have a roll call, please?¶
6 MR. PENN: Commissioner Bryan.¶
7 THE CHAIR: Present.¶
8 MR. PENN: Commissioner Simmonds.¶
9 MR. SIMMONDS: Here.¶
10 THE CHAIR: Commissioner¶
11 MR. Here.¶
12 MR. PENN: Commissioner Penn,¶
13 present.¶
14 Commissioner¶
15 THE CHAIR: Excused.¶
16 MR. PENN: Commissioner Millin¶
17 Madura.¶
18 THE CHAIR: Late.¶
19 MR. PENN: Mr. Chair, you have four 20 members present.¶
21 THE CHAIR: Having established a 22 quorum are there any changes to the agenda?¶
23 -: . Mr. Chairman, good 24 afternoon. I’d like to thank all of the board members for 25 being here. I’d like to acknowledge the presence of the¶
1 2 3 4 staff that’s here relating to the EDC Public Hearing and to introduce starting with introducing our new Director of Compliance, Miss Stephanie Berry. And we’d like to welcome her to the team. And she is bringing to the table a great 5 deal of skills and we look forward to her adding to the EDC 6 program with a very varied background that she brings. She 7 is a Ph.D. candidate in industrial psychology and management 8 and is quite familiar with the government processes. So we 9 want to welcome our new Director of Compliance and to also 10 acknowledge — I know that my counsels have all been 11 introduced to her by e-mail. Welcome, Stephanie Berry.¶
12 Attorney Smock is here, Counsel to the Board, 13 Attorney Beth Hoffman, our investigator, and our Public 14 Relations representative, Semele , and of course our 15 Executive Assistant to the Board is with us today. We are 16 happy that she’s here. She’s feeling better. Glad that you 17 are here.¶
18 And, Mr. Chairman, in response to your question 19 with regards to changes on the agenda, the agenda as is 20 presented to you is as it is. The original document you had 21 in your drop box were amended because counsels have all 22 agreed, Counsel Erika Kellerhals and Attorney agreed 23 to shift their clients presentations. So we will start with 24 Asset Management, sir, as you deem appropriate.¶
25 THE CHAIR: Asset that’s what’s on¶
1 the agenda.¶
2 3 MS. KELLERHALS: go first, Southern Trust. I think we are going to¶
4 5 agreed — I thought we had¶
6 7 first? You are going to go¶
8 MS. KELLERHALS: Yes.¶
9 10 apologize. You did say that. That’s right. I¶
11 12 • • to go before Asset Recovery. And we would like DIAM¶
13 14 the agenda. Thank you. That’s the reorder of¶
15 16 17 18 19 MR. PENN: Mr. Chair, I’d like to move that the agenda be amended that Southern Trust Management Company be the first item for public hearing to be followed by DIAM Management, Inc. and then Asset Recovery Management, Inc. So moved, Mr. Chair.¶
20 THE CHAIR: Second?¶
21 MR. _: . Second.¶
22 23 THE CHAIR: Properly moved and seconded. All those in favor?¶
24 (Chorus of Ayes)¶
25 THE CHAIR: Opposed?¶
1 (No Response)¶
2 THE CHAIR: Abstention?¶
3 (No Response)¶
4 THE CHAIR: Motion carries.¶
5 Motion to accept the agenda as amended.¶
6 MR. PENN: So moved, Mr. Chair.¶
7 THE CHAIR: Second?¶
8 MR. SIMMONDS: Second.¶
9 THE CHAIR: Properly moved and¶
10 seconded. All those in favor?¶
11 (Chorus of Ayes)¶
12 THE CHAIR: Opposed?¶
13 (No Response)¶
14 THE CHAIR: Abstentions?¶
15 (No Response)¶
16 THE CHAIR: The agenda stands¶
17 approved.¶
18 Cases for Public Hearing, Southern Trust Company.¶
19 Who speaks to this matter?¶
20 MS. KELLERHALS: I do.¶
21 THE CHAIR: Mr. Smock, could you¶
22 swear in the testifiers?¶
23¶
24 (Thereupon Erika Kellerhals, Esq. and Jeffrey¶
25 Epstein were duly sworn in by Attorney Smock.)¶
MS. KELLERHALS: Good afternoon, Chairman, Commissioners and Staff. I appreciate the opportunity to come before you today and speak with you regarding my client, Southern Trust Company, Inc.¶
5 I’m here today with Mr. Jeffrey Epstein who is 6 the President of Southern Trust. And after a brief 7 introduction covering the business and its compliance with 8 the statutory requirements of the EDC program, I’m going to 9 turn the floor over to Mr. Epstein and he will talk to you a 10 little bit about the new business model.¶
11 Southern Trust, which will be located on the 12 Island of St. is applying for benefits under Category 13 IIa as a designated service business. And once it gets up 14 and running it will provide cutting edge consulting services 15 to companies around the world lying in part upon the use of 16 biomedical and financial informatics. The client base for 17 this company is going to range from individual consumers to 18 scientist, to investment companies looking to create new 19 strategies using what’s called mine information. I want to 20 get a few housekeeping out of the way and on the record 21 before Mr. Epstein explains to you exactly what it is they 22 are going to be doing.¶
23 Southern Trust is going to meet all the statutory 24 requirements including that with respect to capital 25 investment. In fact Southern Trust has indicated in their¶
1 2 application will exceed the statutory investment requirement of $100,000.00.¶
3 4 We’ve also set out a detailed employee benefit plan. And one of the things that’s noted about the plan 5 itself is in addition to providing generous lead packages, 6 life insurance and a donated leave program, the company 7 actually includes one hundred percent employee and dependent 8 coverage for health insurance. So the company will absorb 9 the cost of all health insurance. And they have agreed to a 10 minimum $50,000.00 per year charitable contribution in 11 addition to the mandatory contributions to the Territorial 12 Scholarship Fund and the Department of Labor database. And 13 those of you who know Mr. Epstein he has been a long-term 14 resident of the Virgin Islands know that he has given 15 generously over the course of the last 11 years to various 16 charities in the Virgin Islands.¶
17 We did request as part of the application a 18 waiver of the employee requirement for the first five years 19 down to five employees. There were a couple of different 20 reasons for doing that. One is as Mr. Epstein explains and 21 as we explained in the application, there are some very 22 specialized job positions needed by virtue of the business 23 model and what the business itself would be doing. And it’s 24 anticipated that getting to maximum capacity and finding the 25 right employees will take a significant period of time. And¶
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as a result of asking for that waiver of the employment requirement down to five, we are also asking that the percentage residency requirement also be amended from 80 percent to 50 percent for the first five years.¶
5 I’m now going to turn the floor over to Mr. 6 Epstein and he can talk to you a little bit about his 7 background in this business in particular.¶
8 MR. EPSTEIN: Thank you.¶
9 What’s happening in today’s environment is the 10 fact that most everyone here has a computer in front of 11 them. Most of the time if you look back 25 years if you 12 wanted to know whose genetics determined your current 13 circumstance, if you wanted to get financial advice, if you 14 wanted to get medical advice you would go to one doctor. 15 You would, hopefully, choose the right doctor and he would 16 according to his experience say, fine, maybe you have a 17 stomach ache and we have in response to your problems three 18 or four solutions.¶
19 In fact if you were going to go into the Army 20 years ago they classified your health like only five 21 categories. Were you sort of very healthy, healthy or were 22 you F-4. Everything was very general and very broad 23 categories.¶
24 As you all are aware everything nowadays has 25 become personalized. You have your clothes that you wear¶
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can be custom made. Everyone has many options on how to set up their computers. What’s happening in the world is that many decisions that used to be made by one single individual now it’s impossible to get accurate information without accessing vast numbers of databases. What Southern Trust 6 will do will be basically organizing mathematical algorithms so that if I want to know what my predisposition is for 8 cancer we can now have my genes specifically sequenced.¶
9 Unfortunately, it hit home as of yesterday for me 10 exactly what my company does. One of my closest friends was 11 diagnosed two days ago with a terminal cancer. Now he’s at 12 the best hospital. I’ve known him since I was six years 13 old. His tumor needs to be sequenced. We will spend time 14 going through the DNA of his exact tumor.¶
15 Now that was the first step that’s available 16 today. It hasn’t been available ever before. But that’s 17 only the first step. Now we know specifically what type of 18 cancer he has.¶
19 In the past unless you are lucky enough to have 20 the right doctor when you went to diagnose that problem and 21 he can say, well, Jose or Albert I’ve seen this before and 22 you were out of luck. Now what we’ll do is we’ll use this 23 one sequence, his own DNA and the specific problem he has 24 with his cancer and access worldwide databases of every 25 drug, every single drug across the world that’s been tested¶
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on all different types of cancers that specifically have his DNA sequence involved. So the chances of a successful treatment are now viable where before as he said last night he would be dead in four weeks.¶
5 So as of medical advance you are able for the 6 first time to have custom made medicine but you can’t do 7 that without accessing a vast database of information. Even 8 if you are the best doctor in New York or California or 9 here, you can only read what you can read. You have 24 10 hours a day. The new sequences in biomedicine will allow 11 you to access every publication that affects your area and 12 you don’t have time to read it.¶
13 So my company’s algorithms will in fact digest 14 the information as best as they can currently and then spit 15 out its recommendations. So you’ll have computer generated 16 solutions for medical problems, which is the next century’s 17 work on how to get people healthy.¶
18 My real business has always been money. People 19 want to know which companies to invest in and you might have 20 been lucky enough — I was poor but if your parents had any 21 money and they wanted to simply find the to buy or how 22 to invest their money, again they had to find a stockbroker 23 or a local banker or someone they could go to and ask their 24 advice. And that one person’s advice was only as good as 25 the college they went to or their experience in the¶
1 business.¶
2 3 4 Now, just as I — with my friend or as a simple example years ago if you had asked me what is the name of Washington’s horse? I lived in Coney Island. 5 Washington’s horse, okay, what would I have to do? I’d have 6 to get on the bus and go to the library. I’d have to ask 7 the librarian for a book on Washington. Hopefully, 8 somewhere in the appendix would be a note that said 9 Washington’s horse or otherwise I was in trouble. I’d have 10 to actually read the book.¶
11 I would then go back, make a report, come to my 12 school. And as you all know right now we go to Goggle and 13 in a nanosecond Goggle searches 10 billion documents for the 14 names of Washington’s horse. And you can find out 15 what the horse ate for breakfast on a certain day.¶
16 So my company will then take the concept of 17 building these search algorithms but not searching the 18 information for the name of Washington’s horse but in 19 fact searching the world’s databases for what is the best 20 investments. I can’t spend 24 hours a day going through all 21 the investments around the world but my computer can do it 22 in a nanosecond.¶
23 Unbeknownst to most people today again when I 24 first started on Wall Street I was a school teacher. The 25 exchange traded a couple of million shares per day and¶
1 that was a big — and if you had a 100 million shares a day 2 it was a calamity. Now everyday, every minute those numbers 3 of shares are traded but not by people. Seventy-Five or 4 Eighty percent of all the trading around the world — when I 5 say trading, all the statistics you read about how many 6 shares traded today is done by a computer. In fact some of 7 the computers trade thousands of times per second buying and 8 selling at small increments.¶
9 So the speed at which decisions are made you have 10 speed by computers but you need a search engine, just like 11 Goggle has a search engine for documents, a method to search 12 the financial arena for the best investments in my financial 13 arm of Southern Trust and the best medicine. So again if it 14 was me personally — this again it hits very close to home. 15 I’m leaving for New York after this meeting to go sit with 16 the sequencers to see if I can save my friend. And this is 17 the first time in history that it’s probably a chance 18 because most people don’t know when they say you have lung 19 cancer, cancer is not really a thing. It’s not like — you 20 see we used to — the past 30 years we know we had a 21 disease. You had the flu or you had some type of liver 22 disorder. Cancer is very different. Cancer is not a thing. 23 It’s a process. It’s a process.¶
24 What do I mean by that? It doesn’t mean I have 25 something in my lung that has a little “C” that says cancer.¶
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It means that my lung is doing something. It is a process. It is cancering. My lung is cancering or my prostate is cancering. In my friend’s case his brain, bones and liver are cancering.¶
So in the past — unfortunately anyone diagnosed with a disease for lung cancer you could only treat them with a lung cancer approved drug. Like I have a breast care center in New York. So now it turns out that many females for breast care you can treat it with things that were only used before for prostate. And the only way they got to that is they realized that in certain studies in the Netherlands just by these search engines there had been good results based on the computers being able to search the database, the solutions for specific types of problems.¶
Why the Virgin Islands? Again we have high speed connections in St. Croix. So I have to beg both servers to hold my database information. The high level people that Erika mentioned is I need high level mathematicians to come down and help program the computers. Some people actually have to be here and monitor the computers. And these algorithms — it’s amazing but true — much of the work hopefully to be done later in life.¶
So that five, ten years away is the computers themselves will help redesign some of the computer programs. Just like in the cars we first built some computers to help¶
1 2 us manufacture cars. Now the computers are helping to design. They in fact design their own little parts.¶
3 In the new version you can actually printout just 4 like a fax machine started 20 years ago, you could have the 5 computer design the part and make it. It actually prints 6 parts. So Southern Trust will be basically building up a 7 database searching mechanism to search things on an 8 individual basis both in the medical field and the financial 9 field.¶
10 Again it’s an exciting area that the idea is that 11 the diseases that affect the local population — I do lots 12 of work in Africa. To backup Africa is for me a fertile 13 ground for experimentation because it has been so 14 underdeveloped it is not burdened with the current system. 15 What do I mean?¶
16 When telephone companies now come to places like 17 Senegal where I was a couple of months ago, they don’t put 18 copper in the ground. They don’t have to worry about laying 19 cables and going to everyone’s house. They leapfrog the old 20 systems going directly to cellular.¶
21 So though Senegal and Ivory Coast are poor 22 countries, 70 percent of the people have cell phones because 23 they were able to not deal with the local in-breaded 24 telephone companies who had to charge a ridiculous sense of 25 money because they had already laid all this pipe and copper¶
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in the ground. The same thing here, Africa has almost no medicine. It’s difficult. But with searching as opposed to testing people everyone is not the same, not everyone needs an aspirin and not everyone needs the same aspirin or the 5 same amount of aspirin. The idea would be to build up a 6 personal medical database for lots of people.¶
7 That’s it. And ask as many questions about the 8 subject. I enjoy it.¶
9 MR. SIMMONDS: Good afternoon. I get 10 the financial part. I mean you got a billion dollars to 11 invest. You search for the best investments and you invest 12 other people’s money.¶
13 The medical part I’m not sure I get as yet. I 14 mean I’m not going to ask you how much something like that 15 would cost because it sounds like it would be really 16 expensive. But who are you catering too? I mean people are 17 going to come to you and say, you know what, I have an 18 ailment. I need you to search and see if there is a cure.¶
19 MR. EPSTEIN: No, it’s the drug 20 companies. To develop a new drug now cost a billion dollars 21 because you sort of start from scratch and it’s really like 22 trial and error in your backyard, trying to figure out which 23 piece fits in this screw. So the drug companies spend the 24 first five years testing all the different parts to see if 25 it will work on this drug — on this disease. The drug¶
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companies would much rather have my computer do the trials and errors.¶
MR. SIMMONDS: But you are not testing anything. You are basically just searching for already 5 tested products.¶
6 MR. EPSTEIN: The algorithms 7 themselves will be almost like a chemistry lab in the 8 computer. In the old days when you had to test for 9 something you had to actually build it to see if it would 10 work. When the Brothers built their airplane they 11 flew it and it crashed. They flew it and that’s when they 12 changed the wing.¶
13 And now what you do is you design it in the 14 computer. The computer inside all the new space ships are 15 all designed by saying here is the wind, here is the gravity 16 and the product comes out at the end. So there is big drug 17 companies that want to know what’s the most likely pathway 18 to hit this type of disease.¶
19 MR. SIMMONDS: Why would it take five 20 years before local folks could be trained in doing this sort 21 of —¶
22 MR. EPSTEIN: It won’t take five. It 23 will be growing simultaneously because the mathematics it’s 24 like the new programs. For example, the last Windows 25 program that came out last week, Windows 8, took 600 people¶
1 2 six years to do. Now it’s not that many people but you need high level programmers.¶
3 4 So I would like to have young people — I’m a teacher by heart — engaged early on. But the programming 5 initially will take time to get up and running and been 6 testing it until it sort of becomes a model for its 7 performance.¶
8 MR. SIMMONDS: Thank you.¶
9 THE CHAIR: Mr.¶
10 MR. _: Good afternoon, Mr.¶
11 Epstein. I’ve been listening to you quite intense.¶
12 You are asking for five years exemption and you 13 need instead of 80/20, you need 50/50. You know that’s 14 going to take going back to the Legislature to change the 15 statute?¶
16 MS. KELLERHALS: We are aware that they 17 did bring in an amendment to go to the Legislature — that 18 the Legislature actually passed legislation that would 19 reduce the number of employees to five. I understand that 20 it was vetoed by the Governor. But based upon my 21 discussions with the EDC staff it was my understanding that 22 at this time based on the circumstances of each applicant it 23 would be considered.¶
24 MR. • That’s the reason why 25 it’s in this proposal?¶
1 2 3 4 MS. KELLERHALS: It’s in the proposal in part because it fits the business model better. It allows them as Mr. Epstein explained there is that ramp up while they are getting the programs together.¶
5 MR. EPSTEIN: I much rather it be 6 shorter frankly.¶
7 MR. You much rather it be 8 shorter?¶
9 MR. EPSTEIN: Sorry. I would like to 10 get it done as fast as possible.¶
11 MR. • • Yes, I understand that. 12 But some of the computer models that you discussed it’s so 13 way out. Is this your thinking or this is something that is 14 on the market that you are trying to tap into?¶
15 MR. EPSTEIN: I am not a mad man. So 16 it might appear that way.¶
17 MR. • • No, I’m just asking if 18 this is your thought brand new or there is something out 19 there that you are trying to bring it here.¶
20 MR. EPSTEIN: Both. There are 21 products just beginning. They have not yet been fully 22 developed. Database mining is a very — product is probably 23 the wrong word. The database mining which mining means as 24 in the past you got to dig into the ground. Here the 25 concept of database mining is very well established but not¶
1 in these two areas.¶
2 3 4 Normally, for example, as you know when you go in your computer it might target you for a specific type of advertisement because it knows that after you’ve been 5 searching for fries. So they mine all the people in 6 the area who is looking for fries and said, you know, 7 Randolph seems to like that. So we’ll send him a message.¶
8 So the concept itself is very well established, 9 using the medical really the next couple of years.¶
10 MR. • • I have no more 11 questions.¶
12 THE CHAIR: How do you get around 13 all the proprietary medical information, though? I mean how 14 does that —¶
15 MR. EPSTEIN: Because you initially 16 start out — most people they opt in or opt out. Sometimes 17 they, even for the first sequencing, potentially to answer 18 your question, when the human geno project is first begun a 19 question came in if they sequence my geno, my personal geno, 20 is that information tied to Jeffrey Epstein or will it be 21 anonymous? And everyone whose genes get sequenced has the 22 right to say I don’t want my name associated with my gene 23 because maybe if I have something that’s bad I might have a 24 rocker gene from a woman pre-deposing me to breast cancer I 25 won’t get health insurance.¶
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So the decision of having your name associated with the sequence is your decision. However, the sequence then goes into a big pile and says the person who had that sequence was responsive to this drug. So there is no name attached. So there is no privacy issue.¶
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If it turns out that most people don’t mind having their names I was surprised. But most people say, look, if I’m doing something good for society and it’s 9 helpful you say, yes, I’ve had a problem and if I can help 10 others my name could be attached. That’s a decision I would 11 make.¶
12 THE CHAIR: So it’s a biomedical 13 Goggle that —¶
14 MR. EPSTEIN: Yes.¶
15 THE CHAIR: — that tracks genes, 16 preference gene receptivity to different medications in 17 order to make doctors more efficient.¶
18 MR. EPSTEIN: Yes, and drugs more 19 efficient.¶
20 THE CHAIR: But how do you get paid?¶
21 MR. EPSTEIN: The drug companies 22 instead of having — as I said imagine having your own 23 little chemistry lab in a computer as opposed to having a 24 thousand people. So they pay me for the algorithm.¶
25 THE CHAIR: So they pay you a¶
1 2 membership fee to access your server or they pay you for an algorithm that you actually sell them instead?¶
3 4 MR. EPSTEIN: There will be just like in any other product because there are different algorithms. 5 Some will be outright purchases, probably the simple ones. 6 There will be leases for longer runs and most people will be 7 coming back. Sometime if you want to know — just like a 8 search engine in answer to one question. So you get paid 9 for that one piece of advice, ongoing advice or exclusive 10 rights like drug companies might want to have for a specific 11 answer.¶
12 THE CHAIR: And these mathematicians 13 build these algorithms to build themselves or they build 14 algorithms specifically for whatever question is posed 15 because I know you mentioned I still want to know why you 16 have a server here, though?¶
17 MR. EPSTEIN: I’d like to have 18 everything here for security purposes. As you know 19 everybody is hacking servers. The only way really 20 unfortunately to make sure you are secure is to have 21 location wise. Once you put your server —¶
22 THE CHAIR: So your server will be 23 more or less your vault rather than a server to power 24 anybody else anywhere else?¶
25 MR. EPSTEIN: Yes, yes. The systems¶
1 2 3 everything is interconnected. But again the only real way to have certain types of things is servers that are not connected to the Internet directly.¶
4 THE CHAIR: How do you anticipate 5 that this business will grow so that it would actually 6 affect employment?¶
7 MR. EPSTEIN: Because if things go as 8 I planned it will need a significant number of people, 9 hopefully, again, probably between five to ten years or 10 maybe more operate a virtual laboratory. So you need lots 11 of people. You need to watch and help the mathematicians. 12 It’s accessing the computers and training people to operate 13 the systems.¶
14 As you know if you thought about it years ago, 20 15 years ago if we said we are going to have to program a 16 computer, it’s impossible. I can’t do it. I’m a pretty 17 good mathematicians. But now students coming up can program 18 things that were unthinkable years ago.¶
19 THE CHAIR: And the office space or 20 will there be an office space?¶
21 MR. EPSTEIN: Yes, sir.¶
22 THE CHAIR: It will be in St.¶
23 ?¶
24 MR. EPSTEIN: Yes, sir.¶
25 THE CHAIR: But the server will be¶
1 on the level three establishment on St. Croix?¶
2 MR. EPSTEIN: Don’t know yet.¶
4 THE CHAIR: Because I know I heard you mention St. Croix and the access to the band. But you are figuring you can tap in a fiber anywhere and get there?¶
6 MR. EPSTEIN: Yes. You want the access. So that’s really for the trading aspects.¶
8 It turns out — and again it’s an interesting 9 fact, that computers that trade, the algorithms that’s a 10 different part of the business, the computers that trade it 11 makes a tremendous difference if you have fiber and high 12 speed fiber but not high speed fiber.¶
13 So just as a silly example there was a company in 14 New York that moved its offices three streets closer to the 15 exchange and paid millions of dollars to upgrade their 16 space so they can be three streets closer because then they 17 get an edge.¶
18 MR. SIMMONDS: Mr. Chair, if I might 19 follow-up on something that you asked?¶
20 THE CHAIR: Sure.¶
21 MR. SIMMONDS: So what then do you see 22 as the economic benefit to the territory?¶
23 MR. EPSTEIN: Well, obviously, 24 hopefully —¶
25 MR. SIMMONDS: I mean you are¶
1 suggesting that it will be at least five years, maybe even 2 longer before you start ramping up employment.¶
3 MR. EPSTEIN: I think there will be 4 revenues of a considerable number of millions of dollars at 5 the end of the fifth year. But the ramp up these are high 6 dollar revenue items to the company. So obviously in terms 7 of the taxes and in terms of employment.¶
8 MR. SIMMONDS: I’m sorry, taxes for the 9 five or so individuals that —¶
10 MR. EPSTEIN: No, no, the business 11 taxes.¶
12 MR. SIMMONDS: The business taxes?¶
13 MR. EPSTEIN: Yes, sir.¶
14 MR. SIMMONDS: But you are getting an 15 exemption.¶
16 MS. KELLERHALS: Right, but the 17 exemptions are only 90 percent on eligible income.¶
18 MR. SIMMONDS: So you are saying that 19 the 10 percent would be substantial for the territory?¶
20 MR. EPSTEIN: Yes. The answer is 21 “yes”. And combined with employment it’s a little down 22 side.¶
23 THE CHAIR: How was this —¶
24 MR. SIMMONDS: You are already a 25 resident of the Virgin Islands, right?¶
1 MR. EPSTEIN: Yes, sir. I also have 2 homes in New York and Florida. Most people prefer — I 3 prefer to be down here. This is my favorite place to be. 4 It’s a more difficult business environment but I prefer to 5 be here. I prefer to have my employees here. I’ve had a 6 very successful time here.¶
7 THE CHAIR: How is this different, 8 the financial side than what you were doing before?¶
9 MR. EPSTEIN: What I was doing before 10 was really financial advice which is almost I don’t want to 11 say antiquated but somewhat. You would come to me and say 12 what should I buy? And I’ll use my judgment based on 30 13 years in the business of what you should buy. I didn’t 14 really use computer search engines to find it. It’s a very 15 different business. This is not financial advice. This is 16 the mathematics and the product of financial algorithms for 17 sale.¶
18 THE CHAIR: So you have clients that 19 have invested in this and these algorithms produce not 20 information but — they do produce information but it 21 actually trades based on that information.¶
22 MR. EPSTEIN: That’s correct.¶
23 THE CHAIR: The computer.¶
24 MR. EPSTEIN: Yes, the computer can 25 trade. And the client they can either buy its position in¶
1 2 3 the algorithm or can have advice but I prefer only the algorithm. I don’t want to do financial advice. This is much more sophisticated.¶
4 THE CHAIR: When you say they buy a 5 position in the algorithm, you can invest in an algorithm?¶
6 MR. EPSTEIN: Yes. So if you go on, 7 for example, many trading sites you, yourself, can sign up 8 as a subscription and say I get the Albert Bryan newsletter. 9 When you think about that what was that? That was someone 10 who is willing to pay you a monthly fee for your personal 11 advice. Here we do the same thing except it’s not a person. 12 It’s a computer.¶
13 THE CHAIR: Why isn’t this a Tech 14 Park business, though?¶
15 MS. KELLERHALS: We couldn’t come to an 16 agreement with the Tech Park. So there is an understanding 17 that we could go to the EDC.¶
18 THE CHAIR: Because I was trying to 19 figure out if there was a distinctive difference because it 20 is a little different. It is an Internet provided service 21 but your core business is not really Internet.¶
22 MR. EPSTEIN: No, it’s database.¶
23 THE CHAIR: It’s data.¶
24 MR. EPSTEIN: Yes, data and it’s 25 management.¶
1 THE CHAIR: Right, I go it.¶
2 3 MR. PENN: In the projections you have two revenue lines, fee income and investment income. 4 It seems that — is the fee income both the medical and the financial?¶
6 MR. EPSTEIN: It’s a mixture. Again according to what the client wants to do, whether they want 8 to have a single — you can invest, for example, in the 9 follow-up in only the bond algorithm. So you would then be 10 paying for your piece of a bond algorithm. If you wanted to 11 have more you would be fee for the entire business.¶
12 MR. PENN: I was just trying to get 13 a feel for how much of the business you estimated because 14 your estimate would have been medical versus financial.¶
15 MR. EPSTEIN: I think it will move. I 16 think it will start off being more financial because the 17 medical is much more sophisticated. But in terms of overall 18 sort of doing good thing, hopefully, I think the medical 19 area would be more exciting.¶
20 MR. PENN: And how many people 21 would you say would you need to do what you project for year 22 five? I’m not going to put numbers on the record but I see 23 nearly a doubling of your estimates between year one and 24 year five and I’m just trying to figure out —¶
25 MR. EPSTEIN: I wanted to be¶
1 2 3 4 Case 1:22-cv-10904-JSR Document 186-40 Filed 06/14/23 Page 30 of 43 29 conservative. If things go well we’ll meet a lot of people. MR. PENN: But I mean I guess with the question you had before about the mix 50/50 — MR. EPSTEIN: Yes. 5 MR. PENN: — in year five what do 6 you project that to be to generate what you project even 7 though it’s conservative? How many bodies are you 8 considering? 9 MR. EPSTEIN: Again I would like as 10 many as possible frankly. But the idea is how well will a 11 product this mechanism take. Especially because it’s 12 medical you don’t want to sell something before it’s ready. 13 And once it’s ready then there would be people in the 14 marketing department. There will be a bunch of other 15 things. So it’s difficult to put a number on it. 16 MR. PENN: How do you market that? 17 MR. EPSTEIN: Well, for the medical 18 things through the drug companies as well as certain medical 19 NIH, the hospital divisions, the medical countries. Iceland 20 is one of the few countries — and that’s another discussion 21 at some point because Iceland is an isolated community and 22 they have 50 years of genetic information. So everyone in 23 Iceland has a genetic sequence and you can then see what’s 24 happening, the children, what was really inherited. Is 25 breast cancer inherited, not inherited. Is schizophrenia by¶
1 simply looking at all the data that was accumulated?¶
2 3 4 Places, frankly, like St. are the perfect place to sequence people because it’s so isolated. You are able to get much better data than ever before. And it also 5 ends up — and that’s one of the advantages of being here as 6 opposed to New York.¶
7 THE CHAIR: But when I think of 8 genetic sequencing — and I know we are getting way out on a 9 limb.¶
10 MR. EPSTEIN: No, ask.¶
11 THE CHAIR: I mean I would think 12 that you would have to have some DNA sampling of these 13 people going back for 50 years and 50 years ago we didn’t 14 have that type of technology. So how do you — I mean 15 people have died. How do you trace that? How do you do 16 sequencing of somebody who is no longer here?¶
17 MR. EPSTEIN: In Iceland they’ve kept 18 the sequencing. They started taking blood. So they have 19 kept blood samples from everyone. That was very forward 20 thinking. So they were simply able to get the sequence out 21 of the blood.¶
22 THE CHAIR: Got you. That was 23 confusing.¶
24 MR. EPSTEIN: Yes, it’s 50 years of 25 data. It’s the only country. It doesn’t make them any¶
1 2 healthier at the moment but they have tremendous amounts of data but almost no information.¶
3 THE CHAIR: Wow!¶
4 5 6 MR. EPSTEIN: Because now they have 300,000 people and all their ancestors. Now what do we do with it?¶
7 8 9 10 11 12 It was the same problem when we had the human geno. It was a book of three billion letters and it took ten years to do and three billion dollars to do it, three billion dollars to do it only ten years ago. That same sequence you can now walk into your doctor and have it done for $65.00. You can sequence your entire geno for $65.00.¶
13 14 15 MS. MADURO: I have one question for Legal Counsel. So through the Chair may I ask my question to Legal Counsel?¶
16 17 18 19 20 With respect to the fact that the Governor has vetoed the proposed legislation, how will that impact us inasmuch as we are in a public hearing and this board is going to have to later decide moving this application forward without the approved legislation?¶
21 22 MR. SMOCK: You’ll have to remind me which legislation are you talking about?¶
23 24 25 MS. MADURO: On the amount of employees that the companies may have. Traditionally we would approve an application with a minimum of 10 and move¶
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forward in the event that the applicant cannot ramp up to 10 we would do a modification or a waiver of employees. But in this instant we are going to start out knowing that we are not going to have 10 employees.¶
MR. SMOCK: So we’ll be dealing with the old legislation.¶
THE CHAIR: But the law allows for us to waive the employment in any case.¶
MR. SMOCK: If we wish.¶
THE CHAIR: For due cause only because those employees are not needed.¶
MR. SMOCK: If we wish to.¶
MS. MADURO: True. But we traditionally do it by coming back to public hearing. So in the interest of time and because we now know that the applicant is not intending to ramp up to that I think it should be notated on the record so that we don’t have to come back in the event that the applicant is approved to a waiver process or a modification process on it.¶
MR. SMOCK: I believe it’s already a part of the application.¶
THE CHAIR: How many more people are doing this?¶
MR. EPSTEIN: There is a couple doing it in California. Steve Jobs had a group that was trying to¶
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help him and it was a little too short. They didn’t get it done in time but they were getting there. In fact the last day of his life they thought they were able to sequence his gene in a way and maybe find a useful drug and he had 5 enough. They said we think we can try a new one that’s 6 specifically tailored for your specific problem and he said 7 I can’t do this anymore. And then they had a big meeting. 8 They tried to convince him to try it and he said I’m done.¶
9 THE CHAIR: Where are you getting 10 your mathematicians from?¶
11 MR. EPSTEIN: Usually from the United 12 States.¶
13 THE CHAIR: That’s a big place. 14 • I’m sorry, where?¶
15 MR. EPSTEIN: United States. I had 16 hoped to get some from Europe just like engineers but it 17 turns out that they don’t exist anymore and anybody in this 18 level of mathematics anywhere, they don’t exist in China 19 because you need a bit of a creative person as opposed to 20 simply a copy cat. They don’t exist in Europe. And if you 21 are really good you are already here. So the universities 22 usually.¶
23 THE CHAIR: So you already have one?¶
24 MR. EPSTEIN: I’ve had one.¶
25 THE CHAIR: And what was his profile¶
1 like?¶
2 3 4 MR. EPSTEIN: Harvard. It’s usually Harvard, MIT. But this is Harvard and he used to be at the institute of advanced studies at Princeton.¶
5 THE CHAIR: So in your five-year 6 plan you are going to send some Virgin Islanders to Harvard? 7 MR. BRYAN: No, I want to train them 8 here.¶
9 THE CHAIR: How do you do that, 10 though?¶
11 MR. EPSTEIN: Because it’s much — you 12 have to start off thinking that, for example, Algebra is not 13 as important as it used to be. Programming is important. 14 And you don’t have to — in the old days you have to 15 actually poke holes in the card to program. And now the 16 younger people can have their little abortage (phon) do 17 things simply by typing in and raise the abortage 18 right-hand. You type it in and it already programs.¶
19 So advance programming is very different. It’s 20 nothing — I’m sure if you have children how they text, for 21 example, they speak in B2B, see you soon. You could ask me 22 five minutes ago how am I going to teach — one of the 23 problems is how do you teach kids to talk because in fact 24 they are starting to talk as they text. So adults don’t 25 understand it.¶
1 THE CHAIR: Is that what it is?¶
2 MR. EPSTEIN: Yes.¶
3 4 THE CHAIR: So are you planning - and I know you have contributed generously before. So are 5 you planning to do — I know we have one applicant that 6 started our Junior Achievement Program and we have some 7 others that did a financial piece that seems to be 8 successful at Charlotte Amalie High. Junior Achievement has 9 gone viral. It’s all over the Virgin Islands now.¶
10 Are you going to do any programs to start to 11 build that type of interest and expose young people to that 12 kind of —¶
13 MR. EPSTEIN: I’m willing to do any of 14 those things. Again I come from a background where I had no 15 money and it was only by understanding math and science that 16 I was able to live the life I currently lead. So I would 17 love to do it.¶
18 THE CHAIR: Any other questions?¶
19 MR. EPSTEIN: I’ll be more than happy 20 in some other forum to sit down and say fine. In fact in 21 some of the scholarship money that I have given before here 22 in St. was to try to find children to go to visit 23 Harvard, encourage them.¶
24 One of the things I did five years ago is I 25 brought a whole bunch of Noble Prize winners here to St.¶
1 2 3 for lectures at the university again so kids can see they don’t have to be in the music business. Science is as fun and exciting.¶
4 MR. SIMMONDS: One of our board members 5 is the Provost at UVI. So we certainly will have him get in 6 touch with you and see what kind of programs could be 7 developed in conjunction with UVI to train mathematicians.¶
8 MR. EPSTEIN: Not only mathematicians, 9 in fact it’s a longer discussion. I’m willing to have as 10 many discussions anybody here would like to have on the 11 record, off the record. But that Apple computer sitting in 12 front of the Chairman has more teaching ability than all the 13 teachers in St. but people don’t understand how to 14 use it yet still, not only here but most places because the 15 teacher unions don’t like that idea.¶
16 There is something that I would always encourage 17 adults to do as I would encourage all children is something 18 that some people know about and some might not. It’s called 19 the Khan Academy, K-h-a-n, Academy. Now if you haven’t seen 20 it you should go on line. It teaches every subject you 21 learn in high school. You can watch it when you want. It’s 22 simple. You don’t feel embarrassed if you don’t understand 23 it the first time because you can play it over and over 24 again. You can blog with other children or people your own 25 age to learn the same subject or maybe having the same¶
1 2 problems you have. I don’t understand how miosis works or mitosis in bio-medicine.¶
3 4 So I can blog now and say who else? Can someone explain to me how the chromosome split and they get answers. 5 So, yes, it’s a tremendous amount of things to be done.¶
6 THE CHAIR: You know we were having 7 that discussion the other day and that’s a serious shift 8 now. Because the most important thing is teaching kids how 9 to learn on the Internet because all of the information is 10 already there. They don’t need to sit. Florida has this 11 future school I think it’s called Florida Virtual School. 12 And they have their whole high school curriculum on line for 13 anybody in the nation to go on and do it. But in the Virgin 14 Islands like Iceland we are in the middle of nowhere.¶
15 MR. EPSTEIN: You see that’s sort of 16 insensibly the same thinking I grew up with. But the middle 17 of nowhere just like Africa you have an Apple computer 18 sitting on the Internet. So in fact you are not in the 19 middle of nowhere. You are in the middle of everything. 20 You are in the middle of everything. You just have to 21 understand how to use this thing. And it’s not taught in 22 the school.¶
23 And not only are the computers now used to say so 24 you can learn Algebra but it turns out — and if again let’s 25 look ten years down the road if I’m successful it turns out¶
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that with 14 people in the room everyone has a different learning skill and they learn differently. Some people are very visual. Once they see a motorcycle part they can put it together. I can’t. Some people need to hear it verbally because they learn verbally. Some people learn visually. 6 Some people have a combination of the two.¶
If you go back 500 years there was not one person 8 that sat in the classroom and said to the people in the 9 field sit in here and let me lecture you and don’t move 10 while I do it. In fact as I described it the thing that 11 everyone learns to do and really learns well is to walk and 12 no one taught them. No one taught you to walk.¶
13 THE CHAIR: So what you are 14 suggesting is in 10 years we may be able to have a — your 15 same product that would be able to take a genetic code of 16 how somebody is, figure out what is the best way for them to 17 learn and put it on the Internet for them?¶
18 MR. EPSTEIN: I don’t want to say — 19 that’s pushing it but yes. It’s the Frankenstein version 20 but it’s true, yes. In fact it will turn out that certain 21 people can learn certain things. Certain people can move 22 through space differently.¶
23 So your skill set if you think about it the 24 questions that people ask are questions they have to find 25 the right person to ask. You want to find the best doctor.¶
1 If you got sick and I got sick we go to the best doctor.¶
2 3 4 The best doctor for a 100 percent likelihood is connected on that machine somehow. So how can you find that person in the right place that’s connected with that 5 information? It’s really exciting.¶
6 THE CHAIR: That is.¶
7 MR. EPSTEIN: Yes, but things like the 8 Khan Academy you don’t need — if you want to learn 9 mathematics you don’t really need to go to high school.¶
10 THE CHAIR: So why can’t we fix the 11 LEAC, man, if we can do all of that?¶
12 Anymore questions?¶
13 MR. SMOCK: Mr. Chairman, for the 14 record to follow-up on Commissioner Millin’s question and 15 comments, this application did request fewer than 10 16 persons. But Section 708 of Title 29 Subsection F does 17 provide for the record that:¶
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19 To be eligible for the granting of 20 benefits you must employ at least 21 10 persons on a full-time basis. 22 And such enterprise and all employees 23 and such enterprise shall be subject 24 to the exceptions contained in Section 25 711 of this subchapter be residents¶
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of the United States Virgin Islands provided however that the applicant may employ fewer than 10 such persons upon demonstrating to the Commission that the employment of this number of persons in his particular enterprise would not be economically feasible or practical. And upon a further finding by the Commission that the desirability of the proposed enterprise outweighs the fact that it is not labor intensive.¶
I believe this application also ask for a residency reduction also. But it is permitted under the code if this commission so finds.¶
-: And if I may, Mr. Chairman, the amendment to the legislation to reduce the five, we have submitted to Senator Malone the appropriate wording. And my understanding is that that amendment is to be dealt with on Monday by the Committee of the Whole to address the EDC requirements. So we should be okay.¶
THE CHAIR: Fantastic. Maybe we don’t have to do anything.¶
Anymore questions?¶
(No Response)¶
THE CHAIR: Thank you. MS. KELLERHALS: Thank you.¶
CERTIFICATE¶
This is hereby certified to be a true and accurate transcript of the foregoing proceedings.¶
Verdell Porter Shorthand Reporter
¶