Combined 5532 Appex Vol I

QUINN EMANUEL URQUHART OLIVER & HEDGES LLP 51 Madison Avenue, 22nd Floor New York, New York 10010 Susheel Kirpalani James C. Tecce Erica P. Taggart Special Counsel to the Official Committee of Unsecured Creditors of Lehman Brothers Holdings Inc., et al. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------------------------------------------x In re: : Chapter 11 : Case No. 08-13555 (JMP) LEHMAN BROTHERS HOLDINGS INC., et al., : Jointly Administered : Debtors. : ------------------------------------------------------------------------x In re: : SIPA Proceeding : Case No. 08-01420 (JMP) LEHMAN BROTHERS INC., : : Debtor. : -----------------------------------------------------------------------x

APPENDIX VOLUME I TO MOTION OF OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF LEHMAN BROTHERS HOLDINGS INC., ET AL., PURSUANT TO 11 U.S.C. § 105(a), FED. R. CIV. P. 60(b), AND FED. R. BANKR. P. 9024, FOR RELIEF FROM ORDER UNDER 11 U.S.C. §§ 105(a), 363, AND 365 AND FEDERAL RULES OF BANKRUPTCY PROCEDURE 2002, 6004 AND 6006 AUTHORIZING AND APPROVING (A) SALE OF PURCHASED ASSETS FREE AND CLEAR OF LIENS AND OTHER INTERESTS AND (B) ASSUMPTION AND ASSIGNMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES, DATED SEPTEMBER 20, 2008 (AND RELATED SIPA SALE ORDER) AND JOINDER IN DEBTORS' AND SIPA TRUSTEES MOTIONS FOR AN ORDER UNDER RULE 60(b) TO MODIFY SALE ORDER

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EXHIBIT No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

DESCRIPTION Draft Complaint Deposition transcript of Steven Berkenfeld, taken August 6, 2009 Deposition transcript of Bart McDade, taken on September 2, 2009 Deposition transcript of Hugh “Skip” McGee, taken on August 10, 2009 Deposition transcript of Mark Shapiro, taken on August 7, 2009 Deposition transcript of Alex Kirk, taken on August 31, 2009 Deposition transcript of Ian Lowitt, taken on August 20, 2009 Deposition transcript of Eric Felder, taken on July 31, 2009 Deposition transcript of Paolo Tonucci, taken on August 14, 2009 Deposition transcript of Robert Azerad, taken on August 17, 2009 Deposition transcript of Alastair Blackwell, taken on August 7, 2009 Deposition transcript of James Hraska, taken on August 14, 2009 Deposition transcript of Martin Kelly, taken on August 18, 2009 Deposition transcript of Rich Ricci, taken on September 8, 2009 Deposition transcript of Gerard LaRocca, taken on August 19, 2009 Deposition transcript of David Petrie, taken on August 26, 2009 Deposition transcript of Michael Klein, taken on September 12, 2009 Deposition transcript of Archibald Cox, taken on September 11, 2009

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DRAFT QUINN EMANUEL URQUHART OLIVER & HEDGES, LLP Susheel Kirpalani James Tecce 51 Madison Avenue, 22nd Floor, New York, New York 10010-1601 (212) 849-7000 Erica Taggart 865 South Figueroa Street, 10th Floor Los Angeles, California 90017-2543 (213) 443-3000 Special Counsel to the Official Committee of Unsecured Creditors of Lehman Brothers Holdings, Inc., et al. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re LEHMAN BROTHERS HOLDINGS INC., et al.

Chapter 11 Case No. 08-13555 (JMP)

Debtors. _______________________________________ THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF LEHMAN BROTHERS HOLDINGS INC., et al.

Adversary Proceeding No.: 09-_____ (JMP)

Plaintiff, COMPLAINT -againstLEHMAN BROTHERS HOLDINGS INC., and LEHMAN BROTHERS INC., and

03690.61377/3097014.6

FILED UNDER SEAL

DRAFT LB 745 LLC, and BARCLAYS CAPITAL INC., Defendants.

COMPLAINT FOR DECLARATORY RELIEF PURSUANT TO 11 §§ 105(a) TO THE HONORABLE JAMES M. PECK UNITED STATES BANKRUPTCY JUDGE: The Official Committee of Unsecured Creditors of Lehman Brothers Holdings Inc. ("LBHI") and its affiliated debtors and debtors-in-possession (the "Committee"), by and through its undersigned counsel, hereby brings this Complaint for declaratory relief pursuant to section 105(a) of Title 11 of the United States Code (the "Bankruptcy Code") against LBHI, Lehman Brothers, Inc ("LBI"), LB 745 LLC ("LB 745") (collectively "Lehman" or the "Sellers") and Barclays Capital Inc. ("Barclays" or the "Purchaser"), and allege as follows: PRELIMINARY STATEMENT 1.

Through this action, the Committee seeks a declaration that certain post-petition

transfers of billions of dollars in securities and other assets from Lehman to Barclays were not authorized by the Bankruptcy Court in its September 19, 2008 order (the "Sale Order") authorizing and approving the sale of the majority of the assets of the North American broker dealer-business of LBI to Barclays (the "Sale Transaction") or any other order of the Bankruptcy Court. Specifically, the Committee seeks a declaration that a self-styled "clarification letter" dated September 20, 2008, but executed on September 22, 2008 (the “Clarification Letter”), which the parties used as the vehicle to transfer billions of dollars in assets in connection with

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2

DRAFT the Sale Transaction, was never presented to, reviewed by, or approved by the Bankruptcy Court. Although it was stated at the September 19, 2008 hearing seeking entry of the Sale Order (the "Sale Hearing") that the parties were "hoping to finalize and actually present [the Clarification Letter] to Your Honor whenever it comes down here," this never occurred. In fact, the Court was never asked to approve the Clarification Letter, which was filed with the Court on September 22, 2008, after the Court entered the Sale Order, the date that the Sale Transaction closed. 2.

The misleadingly titled Clarification Letter is anything but a "clarification" to the

Sale Transaction approved by this Court. As an initial matter, the Clarification Letter significantly altered the structure of the Sale Transaction from an asset sale to a trade that accomplished the "sale" of estate assets through a termination of a repurchase agreement previously entered into between the parties. Indeed, when the parties terminated the repurchase agreement, Section 559 of the Bankruptcy Code required that the excess collateral value constituted property of the estate. 3.

More importantly, the Clarification Letter did not entail just a change to the

mechanics of the sale. By setting forth certain “buckets” of securities, the Clarification Letter crystallized Barclays’ receipt of a negotiated, but undisclosed, $5 billion block discount in the value of the purchased assets. In addition to locking in this discount, the Clarification Letter provided the means for Lehman to acquiesce to Barclays' demand for additional assets by transferring certain additional assets that were not part of the original asset purchase agreement, nor disclosed to the Court or specifically approved under the Sale Order. 4.

In particular, the Clarification Letter provided for Barclays to receive (i) certain

additional assets valued at no less than $1.9 billion and held in "clearance boxes" belonging to

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3

DRAFT LBI that were listed on Schedule B to the Clarification Letter, (ii) certain 15-c3-3 securities valued at between $750 million and $800 million, and (iii) an undisclosed amount of collateral supporting Lehman's OCC accounts, valued at $2.3 billion. Thus, Barclays’ demand for additional assets provided at least an incremental $5 billion of value for which no additional consideration was provided to Lehman and their estates. Consequently, significant and real harm has been inflicted on the creditors of the Lehman estates for which the Committee seeks appropriate redress. 5.

Accordingly, through this action, the Committee seeks a declaration that the

Clarification Letter and the transaction consummated thereunder were never approved by the Court. PARTIES 6.

The Committee was appointed pursuant to section 1102 the Bankruptcy Code and

is a party in interest in these chapter 11 cases under section 1109(a) of the Bankruptcy Code. 7.

LBHI is a Delaware corporation with its former principal business address at 745

Seventh Avenue, New York, NY 10019 and its current principal business address at 1271 Avenue of the Americas, 45th Floor, New York, NY 10020. 8.

LBI is a Delaware corporation with its former principal business address at 745

Seventh Avenue, New York, NY 10019 and its current principal business address is James W. Giddens as Trustee for SIPA Liquidation of Lehman Brothers Inc., c/o Hughes Hubbard & Reed, LLP, One Battery Park Plaza, New York, NY 10004 (Attn: James B. Kobak, Jr.), attorneys for the SIPA Trustee.

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DRAFT 9.

LB 745 LLC is a Delaware limited liability corporation with its former principal

place of business address at 745 Seventh Avenue, New York, NY 10019 and its current principal business address at 1271 Avenue of the Americas, 45th Floor, New York, NY 10020. 10.

Upon information and belief, Barclays is a corporation organized under the laws

of the United Kingdom with its principal place of business in London, England. It maintains offices in Manhattan at 200 Park Avenue, New York, NY 10166 and 745 Seventh Avenue, New York, NY 10019. JURISDICTION AND VENUE 11.

The Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. §

1334. This is a core proceeding within the meaning of 28 U.S.C. § 157(b). 12.

Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

13.

The statutory predicates for the relief requested herein are sections 105(a) of the

Bankruptcy Code. 14.

The Court has the authority to issue a declaration of rights and grant future

necessary or proper relief pursuant to 28 U.S.C. §§ 2201, 2202. BACKGROUND A.

The Bankruptcy Court Approved the Sale of LBI's Assets to Barclays Based on the Specific Representations Regarding the Nature and Value of the Assets to be Transferred from Lehman to Barclays Contained in APA and Stated During the Sale Hearing 15.

Lehman together with their debtor and non-debtor affiliates (collectively, the

"Debtors") were formerly the fourth largest investment bank in the United States. For more than 150 years, Lehman was a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Lehman's headquarters in New York and regional headquarters in London and Tokyo were complemented

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DRAFT by a network of offices in North America, Europe, the Middle East, Latin America and the Asia Pacific region. 16.

Commencing on September 15, 2008, and continuing from time to time thereafter,

LBHI and certain of its direct and indirect subsidiaries voluntarily commenced cases under chapter 11 of the Bankruptcy Code with this Court. The Debtors' chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Bankruptcy Rule 1015(b). On September 19, 2008, a proceeding under the Security Investors Proceeding Act ("SIPA") was commenced for LBI. James W. Giddens as acting as the trustee in the SIPA proceeding. 17.

On September 16, 2008, the Sellers and the Purchaser executed an asset purchase

agreement (including its court reviewed and approved amendments, the "Asset Purchase Agreement" or "APA") for the sale of the majority of the assets of the North American broker dealer business of LBI to Barclays. The APA set forth the cash and securities that would be transferred to Barclays as part of the Sale Transaction. In addition to certain real estate transferred as part of the Sale Transaction, the APA generally provided for Barclays to pay $250 million cash plus up to $750 million in potential payments under a "true up" provision, receive assets with a book value of $70 billion, and assume $69 billion in liabilities. 18.

Specifically, the original APA defined Purchased Assets to include:

(a) the Retained Cash; (b) all deposits . . . ; (c) the Transferred Real Property Leases . . . ; (d) government securities, commercial paper, corporate debt, corporate equity, exchange traded derivatives and collateralized short-term agreements with a book value as of the date hereof of approximately $70 billion . . . (e) 50% of each position in the residential real estate mortgage securities.1

1

APA § 1.1 (definition of "Purchased Assets") (emphasis added).

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DRAFT 19.

In addition, the APA further provided for assumption of liabilities "with a book

value as of the date hereof of approximately $69 billion."2 20.

On September 17 and 19, 2008, the Court held hearings to consider whether to

approve the Sale Transaction identified in the APA. 21.

At the September 17, 2008 bid procedures hearing, counsel to LBHI and LB 745

outlined the terms of the transaction to the Bankruptcy Court. Counsel explained that, pursuant to the terms of the APA, a copy of which had been submitted to the Court, Lehman had agreed to transfer approximately $70 billion of securities to Barclays in exchange for Barclays's assumption of $69 billion of Lehman's liabilities. Taking into account all the exchanged consideration, counsel to the Debtors explained to the Court that "looking at it from the net of this transaction, there will be approximately 1,700,000,000 dollars yielded out of this transaction" for Barclays. 22.

Just two days later at the September 19, 2008 Sale Hearing, the Debtors informed

the Court that the value of the assets to be exchanged between Lehman and Barclays had changed. According to the Debtors, the value of the assets to be transferred to Barclays had dropped to "$47.4 billion," and that Barclays would be assuming "$45.5 billion" in Lehman's liabilities. 23.

Specifically, the Debtors stated the following with respect to the changes to the

transaction: "Let me try to summarize the changes that were made to the transaction. In terms of the economic changes, they result largely because of the markets, unfortunately. And from the time that the transaction was actually entered into till now, the markets dropped and the value of the securities dropped as well. So, originally, we were selling assets that had a value of seventy – approximately seventy billion dollars. And today . . . we're

2

Ex. 1, APA § 2.3(i).

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DRAFT only selling assets that have a value of 47.4 billion dollars. Barclays is assuming liabilities, however, of 45.5 billion dollars in connection with those assets." 24.

The Debtors also explained that—other than those changes detailed in an

amendment to the APA,3 which had been submitted to the Court—the other consideration to be exchanged between Lehman and Barclays had not changed. Specifically, the Debtors stated that "Barclays is still agreeing to pay the cure amounts on any leases that it assumes or that we assume and assign to it. Barclays is also agreeing to the same employee compensation arrangements. And it is also agreeing to pay the 250 million dollars of goodwill to LBI." 25.

In addition, at the Sale Hearing, the Debtors informed the Court that Lehman and

Barclays intended to execute a Clarification Letter that would supplement the APA and clarify which Lehman subsidiaries would be transferred to Barclays as part of the transaction. Specifically, the document would "clarify that the only subsidiaries that are being purchased by Barclays are Lehman Brothers Canada Inc., Lehman Brothers Sudamerica SA and Lehman Brothers Uruguay SA." 26.

The Debtors provided the Court with no further description of the document, but

promised that once the letter was finalized it would be "present[ed] to Your Honor." 27.

The Clarification Letter, however, was not finalized until after the Sale Hearing,

and was never presented to the Bankruptcy Court—and certainly not at the time the Court issued the Sale Order on September 19, 2008. Although the Clarification Letter is dated September 20, 2008, upon information and belief, it was not finalized or executed until two days later on September 22, 2008, the date of the closing of the Sale Transaction.

3

The First Amendment changed the APA's definition of "Purchased Assets" to provide that all of LBI's residential real estate securities would be transferred to Barclays as security for clearing services provided by the Depository Trust Clearance Corporation ("DTCC"). Under the APA, Lehman was going to retain 50% of such securities.

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DRAFT 28.

Notwithstanding this, based on the representations made at the Sale Hearing by

the Debtors regarding the contents of the Clarification Letter, on September 19, 2008, the Court approved the sale of LBI's North American operations to Barclays as purportedly described in the APA and the Clarification Letter, the latter of which at that time had neither been finalized nor executed. Thus, the Sale Order defined "Purchase Agreement" to include the Clarification Letter. 29.

Simply put, the Court never saw the Clarification Letter and never reviewed its

terms at any time prior to the entry of the Sale Order. 30.

At the Sale Hearing, the Committee made clear that it did not affirmatively

approve of the sale because it had not had sufficient opportunity to evaluate the terms of the Sale Transaction. Specifically, the Committee stated on the record that: "We're not affirmatively supporting the transaction, Your Honor, because there has been insufficient time for us to really do all the due diligence that we would feel should be done to take that next step of saying yes, this is the best deal and we're supportive actively." 31.

The Court entered the Sale Order in the early morning hours of September 20,

2008. During the weekend following the Sale Hearing, the parties expended considerable efforts to finalize the Sale Transaction with the goal of closing the Sale Transaction before the markets opened on the following Monday (September 22, 2008). B.

The Terms of the Executed Clarification Letter Do Not Comport with the Description of the Letter at the September 19, 2008 Hearing; Lehman Transfers Billions in Assets to Barclays that are Not Disclosed to the Court 32.

The transaction effected through the Clarification Letter executed on September

22, 2008 bears little resemblance to the transaction described to the Court at the Sale Hearing. To be sure, the Clarification Letter identified the Lehman entities to be transferred to Barclays. It also, without the Bankruptcy Court's knowledge or approval, fundamentally rewrote the terms

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DRAFT of the transaction and redefined and expanded the scope and value of the assets to be transferred from Lehman to Barclays as part of the deal. 33.

The Clarification Letter made four significant material but undisclosed changes to

the Sale Transaction: 34.

First, it eliminated the original core of the sale transaction: the transfer of "$47.4

billion" in Lehman-owned assets to Barclays in exchange for the assumption by Barclays of "$45.5 billion" in Lehman's liabilities relating to the assets. 35.

Instead, pursuant to the terms of the Clarification Letter, Barclays would retain

securities and other assets pledged by LBI to Barclays in connection with a repurchase agreement executed on September 18, 2008 (the "Barclays Repurchase Agreement") pursuant to which Barclays provided LBI with $45 billion in short-term financing. In exchange for the retained securities, LBI's obligations under the Barclays Repurchase Agreement would be deemed satisfied. 36.

A repurchase agreement (or "Repo") is a common financing arrangement whereby

one party sells assets to another for a set price with the agreement that the second party will buy back those assets in a short time frame for that price plus a margin. 37.

During the early part of the week of September 15, 2008, the Federal Reserve

Bank of New York (the "Fed") had entered into a Repo contract (the "Fed Repurchase Agreement") with LBI to provide short-term financing of $45 billion to LBI to help keep LBI's brokerage business afloat. 38.

As is generally the case with Repo contracts, LBI was required to post collateral

in excess of the $45 billion financing provided by the Fed. This additional collateral is generally known as a "haircut."

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DRAFT 39.

In light of the pending sale of the majority of LBI's North American assets to

Barclays, the Fed demanded that Barclays "step into the Fed's shoes" and provide the $45 billion Repo financing to LBI pending court consideration of the sale to Barclays. Thus, on September 18, 2008, Barclays and LBI entered into the Barclays Repurchase Agreement and the financing arrangement thereunder replaced the financing previously provided by the Fed. 40.

Pursuant to Barclays's assumption of the Fed's role as the provider of the $45

billion Repo financing to LBI, LBI agreed to transfer the collateral that it had pledged to the Fed under the Fed Repurchase Agreement to Barclays. Consequently, on or about September 18, 2008, a majority of those assets were transferred from the Fed's collateral agent, JPMorgan Chase N.A. ("JPMorgan"), to Barclays's collateral agent, the Bank of New York Mellon ("BONY"). 41.

The full value of the collateral posted by LBI pursuant to the Fed Repurchase

Agreement was ultimately transferred to Barclays. The value of the haircut under the Barclays Repurchase Agreement is believed to be between $5 to $7.2 billion. 42.

As a direct effect of the above-described change to the terms and structure of the

Sale Transaction between Lehman and Barclays, as obliquely outlined in the Clarification Letter, the net profit to Barclays (and net loss to the estate) for the transaction was several billion dollars more than it would have been pursuant to the terms of the APA as described to the Bankruptcy Court at the Sale Hearing and ultimately approved by the Bankruptcy Court in the Sale Order. 43.

Although the Debtors identified the existence of the Repo financing by Barclays

to the Bankruptcy Court at the Sale Hearing, they provided the Court with no indication that any Lehman assets (including the haircut) would be permanently transferred to Barclays in connection with the Repo financing arrangement or that the Barclays Repurchase Agreement

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11

DRAFT would be the vehicle for the parties consummating the Sale Transaction and of Lehman assets to Barclays. 44.

Significantly, because the new transaction set out in the Clarification Letter did

not involve the sale of Lehman's assets, but the execution on collateral pledged by LBI in connection with the Barclays Repurchase Agreement, pursuant to Section 559 of the Bankruptcy Code, all of the excess value of the collateral not used to satisfy the debt owed to Barclays pursuant to the Barclays Repurchase Agreement—totaling between approximately $5 and $7.2 billion—is property of the Lehman estates. 45.

Section 559 provides that "[i]n the event that a repo participant or financial

participant liquidates one or more repurchase agreements with a debtor and under the terms of one or more such agreements has agreed to deliver assets subject to repurchase agreements to the debtor, any excess of the market prices received on liquidation of such assets . . . over the sum of the stated repurchase prices . . . shall be deemed property of the estate . . . ." 46.

Second, in addition to the change in the structure of the Sale Transaction and the

transfer to Barclays of the implied discount or haircut under the Barclays Repurchase Agreement, the Clarification Letter expanded the scope of the assets to be transferred to Barclays to include assets held in "clearance boxes" belonging to LBI that were listed on a Schedule B that was attached to the Clarification Letter. At the time of the execution of the Clarification Letter, these assets were not providing security for any debt owed by Lehman to any creditor. Thus, they could be freely (and secretly) transferred from Lehman to Barclays without protest from any secured creditor. 47.

03690.61377/3097014.6

The value of these assets is estimated to be between $1.9 and $2.3 billion.

12

DRAFT 48.

Third, the Clarification Letter expanded the scope of the assets to be transferred

to Barclays to include certain excess reserves, including certain "15-c3-3 assets," to Barclays. 49.

Under Rule 15-c3-3, promulgated by the SEC pursuant to the Securities Exchange

Act of 1934, brokerages are required to keep on-hand assets sufficient to cover a specified percentage of their customer portfolio, much like a depository requirement for banks. Because of the unwinding of some customer positions in and around September 2008, LBI had excess reserves totaling approximately $1 billion. 50.

Most of these securities—totaling as much as $800 million in value—were

transferred to Barclays. 51.

Fourth, the Clarification Letter expanded the scope of the assets to be transferred

to Barclays to include certain property supporting exchanged-traded derivatives from Lehman to Barclays. This included assets held in certain Lehman accounts at the Options Clearing Corporation (the "OCC Assets"). 52.

Lehman and Barclays agreed to transfer at least $2.3 billion of OCC Assets to

Barclays pursuant to the terms of the Clarification Letter. Ultimately, billion of dollars in OCC Assets were transferred to Barclays. 53.

In total, pursuant to the terms of the Clarification Letter, Lehman transferred

several billion dollars in assets to Barclays without consideration by or approval from the Bankruptcy Court. 54.

Until recently, and only through Court-ordered discovery, the Committee was not

aware of the above-described material modifications to the terms of the APA through the Clarification Letter, or of the extra-judicial transfer of assets from Lehman to Barclays. The

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DRAFT Committee also never knowingly approved these modifications of the terms of the APA or the extra-judicial asset transfers. C.

The Terms of the Executed Clarification Letter and the Transfer of Additional Assets from Lehman to Barclays Were Never Approved by the Bankruptcy Court and are Prohibited by the Bankruptcy Code 55.

As Lehman's former Chief Financial Officer Ian Lowitt put it in a deposition: "the

deal that was consummated and approved by the judge was a completely different deal than the deal that was worked through" after the Sale Order was signed. As he further explained," I don't know what was disclosed to the Court, but I also would say the transaction that was presented to the Court was not the transaction that was the one agreed to on the Tuesday." 56.

These sentiments were echoed by Alex Kirk, the Head of Principal Investing for

Lehman, who testified in a deposition that "[t]his transaction was very different than what had been previewed [to the Court] two days before, and it would have to be explained why it came up." 57.

As the Sale Order makes clear, any amendments to the APA or "related

agreements" that would "have a material adverse effect on the Debtors' estates" could not be made without Court approval. Non-material changes could only be made with the approval of "the Committee, the Debtors and the Purchaser." 58.

All the key terms of the Clarification Letter described above were inserted into

the letter or finalized after Sale Order was signed and issued in the early hours of September 20, 2008. 59.

Because the Bankruptcy Court was not aware of and never approved the material

changes to the APA effectuated by the terms of the Clarification Letter as described above, any post-petition transfer of assets from Lehman to Barclays made pursuant to the Clarification

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DRAFT Letter were not authorized by the Sale Order or any other order of the Bankruptcy Court, and are recoverable by the Lehman estates under §549 of the Bankruptcy Code. 60.

Moreover, because the Committee never approved the terms of the Clarification

Letter described above, to the extent they can be considered to be non-material changes to the Sale Transaction, they are void pursuant to the terms of the Sale Order. 61.

Accordingly, the Committee seeks a declaration that the Court never approved the

Clarification Letter and the transaction consummated thereunder. Based on this, the Committee submits that billions of dollars in securities and other assets transferred post-petition from Lehman to Barclays were not authorized by the Sale Order or any other order of the Bankruptcy Court. Count I (Declaratory Judgment as to Clarification Letter pursuant to 28 U.S.C. §§ 2201, 2202) 62.

The Committee repeats and realleges all the allegations contained in this

Complaint. 63.

On September 19, 2008, based on representations made by the Debtors as to the

terms of the APA and the Clarification Letter at the Sale Hearing, the Bankruptcy Court approved the sale of the majority of the assets of the North American operations of LBI to Barclays as outlined in the APA and the Clarification Letter. 64.

Pursuant to the terms of the Sale Order, any amendments to the APA or "related

agreements" that would "have a material adverse effect on the Debtors' estates" could not be made without Court approval. Non-material changes could only be made with the approval of "the Committee, the Debtors and the Purchaser."

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DRAFT 65.

Because the Clarification Letter had not been finalized or executed at the time the

Sale Order was issued, and was never presented to the Court for its review and consideration, the Court could not have—and did not—approve or authorize the terms of the Clarification Letter through the Sale Order or any other order of the Bankruptcy Court. 66.

Accordingly, all terms of the Clarification Letter—including Section 1(a)(ii),

Section 8, and Section 13, which explicitly or in effect authorized 1) the retention by Barclays of as much as $7.2 billion of excess collateral posted by LBI to Barclays under the Barclays Repurchase Agreement, 2) the transfer from Lehman to Barclays of assets held in "clearance boxes" belonging to Lehman, 3) the transfer from Lehman to Barclays of the 15-c3-3 assets, and 4) the transfer from Lehman to Barclays of the property supporting the OCC Assets—were not approved by the September 19, 2008 Sale Order or any other order of the Bankruptcy Court. 67.

Pursuant to the terms of the Clarification Letter, Lehman transferred billions in

assets to Barclays, which transfers were not disclosed to the Bankruptcy Court. These transfers were not authorized by the Sales Order or any other order of the Bankruptcy Court. 68.

Because the parties disagree as to whether the Clarification Letter was approved

by the Court, there is an actual controversy between the parties. 69.

Accordingly, the Committee seeks a declaration that all terms of the Clarification

Letter that were not disclosed to the Court at the Sale Hearing, including Section 1(a)(ii), Section 8, and Section 13, were not approved by the Bankruptcy Court pursuant to the Sale Order or any other order of the Bankruptcy Court. 70.

The Committee further seeks a declaration that any and all post-petition transfer

of assets from Lehman to Barclays (or retention of Lehman assets by Barclays) pursuant to the

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DRAFT Clarification Letter were not authorized by the Sale Order or any other order of the Bankruptcy Court and thus are prohibited by the Bankruptcy Code. Count II (Attorneys’ Fees, 28 U.S.C. § 2202) 71.

The Committee repeats and realleges all the allegations contained in this

Complaint. 72.

Section 2202 of the Declaratory Judgment Act provides that the Court may grant

"further necessary and proper relief based on a declaratory judgment . . . against any adverse party whose rights have been determined by such judgment." 28 U.S.C. § 2202. 73.

As a result of the positions taken by Barclays, the Committee was forced to obtain

additional services from the undersigned attorneys to protect the rights of all parties in interest to the Debtors’ chapter 11 cases. The Committee therefore seeks a judgment against Barclays for all the Committee’s reasonable and necessary attorneys' fees incurred in recovering the assets secreted from the estate by Barclays. 74.

The Committee’s attorneys’ fees are recoverable from Barclays if the Committee

prevails on its request for a declaratory judgment.

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DRAFT PRAYER FOR RELIEF WHEREFORE, the Committee respectfully seeks an Order from this Court: •

declaring that the Court did not approve the Clarification Letter and the transactions consummated thereunder pursuant to the Sale Order, any other order of the Bankruptcy Court and the Bankruptcy Code;

•

awarding attorneys fees;

•

awarding any and all other relief the Court deems appropriate.

DATED:

New York, New York September 15, 2009 QUINN EMANUEL URQUHART OLIVER & HEDGES, LLP

By: Susheel Kirpalani James Tecce 51 Madison Avenue, 22nd Floor, New York, New York 10010-1601 (212) 849-7000 Erica Taggart 865 South Figueroa Street, 10th Floor Los Angeles, California 90017-2543 (213) 443-3000 Special Counsel for the Official Committee of Unsecured Creditors of Lehman Brothers Holdings, Inc., et al.

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Page 1

HIGHLY CONFIDENTIAL - S. BERKENFELD 2

UNITED STATES BANKRUPTCY COURT

3

SOUTHERN DISTRICT OF NEW YORK

4 5

In Re: Chapter 11

6 7

LEHMAN BROTHERS

Case No. 08-13555(JMP)

S

HOLDINGS, INC., et al.,

(Jointly Administered)

9

Debtors. 10

11 12

* * * HIGHLY CONFIDENTIAL* * *

13

DEPOSITION OF STEVEN BERKENFELD

14

New York, New York

15

August 6, 2009

16 17 18 19 20 21 22 23

Reported by:

24

KATHY S. KLEPFER, RMR, RPR, CRR, CLR JOB NO. 24035

25

TSG Reporting - Worldwide (877) 702-9580

Page 2 1 2 3

HIGHLY CONFIDENTIAL - S. BERKENFELD August 6, 2009 9:30 a.m.

4 5

HIGHLY CONFIDENTIAL deposition

6

of STEVEN BERKENFELD, held at Jones

7

Day, LLP, 222 East 41st Street, LLP,

S

New York, New York, before Kathy S.

9

Klepfer, a Registered Professional

10

Reporter, Registered Merit Reporter,

11

Certified Realtime Reporter, Certified

12

Livenote Reporter, and Notary Public

13

of the State of New York.

14 15 16 17 18 19 20 21 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 20

1

HIGHLY CONFIDENTIAL - S. BERKENFELD

2 3 4

1111111111111111111111111111111111.111MOIMMIS

6 4111111111111111111111111111" 7 What's your title at Barclays Capital? Q. 8

9

A.

Managing director.

Q.

And what's your area of

10 11

responsibility?

12 13

Division.

14

do?

A.

I'm in the Investment Banking

Q.

What's your job there? What do you

A.

I chair a few committees to approve

15 16

equity transactions, fairness opinions, and I'm

17

involved in various different capacities in

18

investment banking transaction development.

19 20 21 22 23 24

41111111111.1111111111111110■111111mr irmimmoormas Th

25 TSG Reporting - Worldwide (877) 702-9580

Page 55

1

HIGHLY CONFIDENTIAL - S. BERKENFELD

2 3 4 5 6

/111111111111111111111111.111110.1111111111111011

a 9



10

001111111=1111111111111

11 12 13 14 15 16 17

fami■INIMIN111111•11111M

18

4111■11111110

19 20

81111111=1.8

21 22

%IMP

23 24

aimasimmillinampumwommial.

25

TSG Reporting - Worldwide (877) 702-9580

Page 56 1

HIGHLY CONFIDENTIAL - S. BERKENFELD

2 3 4

IMINIMMMMM OMNIMMINMMIEMMMIS

5 6

-MMIMUMOS

7 8

10 11 12 13 14

•

15 16 17 18 19 20

aMM•

21 22 23 24 25

olum11111011111111111111111111110 TSG Reporting - Worldwide (877) 702-9580

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HIGHLY CONFIDENTIAL - S. BERKENFELD

2 3 4 5 6

iMMMIMMom 1■1=MmIlmisimm

8 9 10 11

ma•■■•=•■•■■• entormwiii■■L .

12 13 14 15 16 17 18 19 20 21 22 23

1111111111111111

24 25

TSG Reporting - Worldwide (877) 702-9580

Page 58 1

HIGHLY CONFIDENTIAL - S. BERKENFELD

2 3

11111111111111.1111111.1111111111111.1.

4

11111.11.

5 6

111111MINOMMINOMMIS

7 8 9 10 ,11

12 13 14 15 16 17 18 19 20

tall11111.111111111M. Q.

Now, you started -- we talked about

the exact date, and I don't care -- you started sometime in September of 2008, correct? A.

The agreement actually says the

employment commences on or before October 31. Q.

Okay. A date -- so we haven't hit

your first anniversary yet? A.

That's correct.

Q.

111111 A.

MUM*

21 22 23

°M.11MMIMMIM 24 dMIEMMIMMMI 25 TSG Reporting - Worldwide (877) 702-9580

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HIGHLY CONFIDENTIAL - S BERKENFELD

2 3 4 5

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25 TSG Reporting - Worldwide (877) 702-9580

•

Page 65 1

HIGHLY CONFIDENTIAL - S. BERKENFELD

2 3 4 5 6

11111.1111111111111111111111111

1111111011111111111111114

41.111111111111=111111111111) 1111111111■11111111111111

7

8

1111111110111111

9 10 11 12 3 4

Q.

Anyone else you think would have

15

knowledge of that fact, whether the business

16

terms included a $5 billion discount to

17

Barclays?

18 19 20 21

A.

I would ask the principal negotiators

of the deal. Q

And that would be Dave Shafir and

McGee?

22

MR.. STERN: Objection to the form.

23

A.

That's probably where I would start.

24

Q.

Who would you ask on the Barclays side

25

of the table? TSG Reporting - Worldwide (877) 702-9580

Page 66 1 2

4 5

HIGHLY CONFIDENTIAL - S. BERKENFELD A.

I would ask Rich Ricci.

Q.

Anyone else?

A.

I would 6:6k Gerard LaRocco, I would

ask Archie Cox, and I would ask Michael Klein, who was not a Barclays employee, but who was

7

acting as an advisor. Q.

9 10 11 12

Now, are Mr. Ricci, LaRocco, Cox and

Klein, would you describe them as the chief negotiators for Barclays? A.

I would describe the chief negotiators

as Ricci, Cox and Klein.

13 14 15 16 17 18 19 20 21 22 23 24 25

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Page 118

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HIGHLY CONFIDENTIAL - S. BERKENFELD

2 3

Q.

So when you add those comp and cure

4

assumed liabilities on top of the elements I

5

just gave you, there's certainly no gain on

6

acquisition for Barclays, if those numbers are

7

real? MR. STERN: Objection to the form.

a

9 10

A.

Well, again, no one was actually --

I'm repeating my answer a little bit. No one was saying this schedule, Exhibit 19, is the

12



deal and see how all these numbers add up. The



deal was the Asset Purchase Agreement. This was

14

meant as some guidance for that as what we meant

15

as 70 billion of assets. For instance, 70

13



16 17 18

billion of assets could have been 69 billion of governments -Q.

Okay.

A.

-- and 1 billion of other stuff, or it

20

could have been 69 billion of corporate equity

21

and 1 billion of governments, right? So we

22

needed to -- because we didn't specify any of

23

that in the text. It was just 70 billion of all

24

this stuff. And this gives you a little bit

25



better sense of what that stuff is. TSG Reporting . Worldwide (877) 702-9580

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HIGHLY CONFIDENTIAL - S. BERKENFELD

2

3

4

1111111111111111111111.1111MEM111. 11111.1.11.111.1.111111111.11.1111111111101111111111

5 6

8 9 10 11 12 13 14 15 16 17

111111.11111111110.111111111.1111.11.11111 Q.

And nobody looking at that agreement,

18

at least from the point of view of the man who

19

signed it, would read that to say there was a

20

discount being given to Barclays for what it was

21

buying? MR. STERN: Objection to the form.

22 23

A.

I didn't believe at the time when I

24

signed this agreement that the intent of the

25

agreement was to deliver assets with a material TSG Reporting - Worldwide (877) 702-9580

Page 123 1 2

HIGHLY CONFIDENTIAL - S. BERKENFELD embedded gain to them, to Barclays.

3 4 5 6 7 8

imilmm=1■11

IINNMIMMIN=MMUP

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

OMINIMMEM=.111.Min TSG Reporting - Worldwide (877) 702-9580

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2 3 4

IIIIIIIIIIIIIIII1111111111

5 6 7 8 9 10



11111111111111 11111111111111 111•1•111.11=11=i

11 12 13 14 15

41■11111111•011

16 17 18 19

20 21

1011111111 11111■1111 Q.

You know, with respect to both the

22

actually, all three of the Asset Purchase

23

Agreement, the First Amendment, which we marked

24

as Exhibit 24, and the clarification letter,

25

which is marked as Exhibit 25, why did you sign TSG Reporting - Worldwide (877) 702-9580

Page 163 1 2

HIGHLY CONFIDENTIAL - S. BERKENFELD

them? Why are you the guy who signs them? A.

I signed the Asset Purchase Agreement

4

because at the time there was nobody else who

5

was an authorized officer of Lehman Brothers

6

Holdings available to sign it there present who

7

could sign it, and to some extent, I think the

8

amendments and the clarification letter were brought to me by the counsel just for

10

consistency after that.

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 164

HIGHLY CONFIDENTIAL - S. BERKENFELD 2 3 4 5 6

A111111111 The negotiators included Mr. McDade.

7 8

Was he not authorized to sign on behalf of LBHI? A.

He was.

10

Q.

Was he not present?

11

A.

He wasn't present at the time the

9

12

17 18

document was ready to be signed.

1111111111111111111111110

.1111111111=111111M

19 20

0111111111■111111MIS

21 22 23

411111111111111■1111111111

1111•111111,

24 25

11111111111111111 TSG Reporting - Worldwide (877) 702-9580

Page 1 1

HIGHLY CONFIDENTIAL - B. McDADE

2

UNITED STATES BANKRUPTCY COURT

3

SOUTHERN DISTRICT OF NEW YORK

4

5

In Re:

6

Chapter 11

7

LEHMAN BROTHERS

Case No. 08-13555(JMP)

8

HOLDINGS, INC., et al.,

(Jointly Administered)

9

Debtors. 10

11 12

* * *HIGHLY CONFIDENTIAL* * *

13

DEPOSITION OF BART McDADE

14

New York, New York

15

September 2, 2009

16 17 18 19 20 21 22 23

Reported by:

24

KATHY S. KLEPPER, RMR, RPR, CRR, CLR JOB NO. 24045

25

TSG Reporting - Worldwide 877-702-9580

Page 2 1

HIGHLY CONFIDENTIAL - B. McDADE

2

September 2, 2009

3

9:57 a.m.

4

HIGHLY CONFIDENTIAL deposition 6

of BART McDADE, held at Jones Day, LLP,

7

222 East 41st Street, New York,

8

New York, before Kathy S. Klepfer, a

9

Registered Professional Reporter,

10

Registered Merit Reporter, Certified

11

Realtime Reporter, Certified Livenote

12

Reporter, and Notary Public of the State

13

of New York.

14 15 16 17 18 19 20 21 22 23 • 24 25

TSG Reporting - Worldwide 877-702-9580

Page 18 1

HIGHLY CONFIDENTIAL - B. McDADE

2 3 4

5 6 7

a

ROmmommommommomml

9 10 11 12 13 14 15 16

41111111111111111

17 18 19 20 21 22

IMMO Q.

Who were the Lehmanites who were again

23

heading up the discussions? I know there were a

24

lot of people involved, but who would you

25

describe as the primary negotiators? TSG Reporting - Worldwide 877-702-9580

Page 19 1 2

HIGHLY CONFIDENTIAL - B. McDADE A.

Bart McDade, Skip McGee, Mark Shafir,

3

clearly Dick Fuld was an informed party but not

4

in the room in terms of those discussions, would

5

be how I would describe the main, the main

6

Lehman principals.

7

8 9

Q.

And who were the principals for

BarCap? A.

Rich Ricci, Jerry del Missier, and

10

their advisor, Michael Klein. And sorry,

11

Archibald Cox, the CEO of the Americas.

12

Q.

Was Diamond involved?

13

A.

In and out.

14 15 16 17 18 19

2° 21 22 23

111111111111111111.11111111111111111111111111111/1111/111111111)

25

TSG Reporting - Worldwide 877-702-9580

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HIGHLY CONFIDENTIAL - B. McDADE

2 3 4

5 6 7 8 9

Q.

With whom were those -- which Lehman,

10

which senior Lehman personnel were the subject

11

of those discussions or involved in them? A.

There was an established group of

13

eight individuals. That would have been the

14

group.

15

Q.

And who were they?

16

A.

McGee, Nagpal, Humphrey, Felder,

17

Donini, Gelband, Lee, and I apologize, I forget.

18

the last.

19

11"1"1"1"1"1"01110"0".1111111.11111. t411111111.111.11.11.161141111"01PPIPINIONNIIIIMWT ViiiMMEMEMOMMOMMOMMOD

20 21 22 23 24 25

IMOMMOMMiliiiiiiiiiMMOIMMONOMOMMOMMONOMIN 411111MMINIMMISTAMOMMINIIRMa

1111•110101011011.1.0 TSG Reporting Worldwide 877-702-9580

Page 197 1 2 3

HIGHLY CONFIDENTIAL - B. McDADE

all11111111.•■11 1111110■111116

5 6 7

8

MM. MEM

9 10 11 12 13

imall111111111110.mommant

14 15 16 17

Nowwwmsomomme=mw

18 19 20 21 22

41MIIMMMIMEMIMINMI=M glana=1

23 24 25

TSG Reporting - Worldwide 877-702-9580

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HIGHLY CONFIDENTIAL - B. McDADE

2

4

1111111111111.111.1111111111111111111111111111

5

6

411111111111

7 8 9

Q.

Do you know if any residential real

10

estate mortgage securities ultimately were

11

transferred to Barclays at the end of the deal?

12

A.

It's my understanding, yes.

13

Q.

What's that understanding based on?

14

A.

My understanding is based -- my

15

understanding is based on our inability to

16

transact much in the way of those assets over

17

that period of week in terms of what market

18

activity. So those balance -- those balances

19

and those assets would have been there and those

20

balances were part of the transaction.

21

411111111111.111111111•1111MMI

22 23

24 11111.11111111111111111111111.11111111111111111111• 25

TSG Reporting - Worldwide 877-702-9580

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HIGHLY CONFIDENTIAL - B. McDADE

2 3

5 6 7

9 10 " 12

14 15

Q.

Did anyone tell you that you -- that

Lehman had an excess of those assets at OCC?

16

A.

Not specifically, no.

17

Q.

Do you recall whether at any time

18

anyone told you that Lehman had an excess of

19

$1.3 billion of cash deposited at the OCC?

20

A.

No one told me that specifically, no.

21

Q.

Did anyone tell you that Lehman had an

22

excess of $900 million in additional assets

23

beyond the cash deposited at the OCC?

24

A.

No one told me that.

25

Q.

Did you ever have any discussion with TSG Reporting - Worldwide 877-702-9580

Page 276 1

HIGHLY CONFIDENTIAL - B. McDADE

2

Barclays about Barclays acquiring the $2.2

3

billion of excess cash and assets margin at OCC?

4

MR. HOME: Objection. Lacks

5

foundation.

6

A.

I specifically did not.

7

Q.

Are you aware whether Barclays ever

8

asked anyone at Lehman to include any of those

9

assets in the sale?

10

A.

I'm not specifically aware of any

11

specific dialogue with respect to those options,

12

the collateral, BarCap and Lehman.

13

Q.

And to your knowledge, was there ever

14

any intent on the part of Lehman to transfer any

15

of those excess cash, that 1.3 billion or any

16

additional assets, that was clearing in margin

17

at OCC to Barclays as part of the sale?

18

A.

My recollection is the original

19

contemplation of those positions would have

20

been, to your point, the actual positions

21

themselves. Collateral would have been a

22

secondary consideration. We were concerned

23

about our collateral positions.

24 25

However, I think over the course of the week, that became -- that became, to my TSG Reporting - Worldwide 877-702-9580

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1

HIGHLY CONFIDENTIAL - B. McDADE

2

recollection, over the course of time, that

3

became something that ended up, I believe, in

4

the clarifying document. Q.

Did anyone tell you that the, under

6

the clarifying document, there had been some

7

agreement where Barclays to transfer to Barclays

a

an additional $2.2 billion of cash and

9

securities representing margin, excess margin

10

11

and other assets at OCC? A.

No. MR. HOME: Objection. Vague and

12 13

ambiguous. Lacks foundation.

14

Q.

To your knowledge, was there ever any

15

intent on the part of Lehman that the clarifying

16

letter would provide Barclays an additional $2.2

17

billion in margin at OCC?

18

A.

No.

19

Q.

What about margin, additional margin

20

that Lehman had at any other clearing

21

corporations, and I want to specifically include

22

any foreign clearing corporations, counterparts

23

to the OCC, were you aware, was there ever any

24

negotiations or intent on the part of Lehman to

25

transfer any such margin, cash or additional TSG Reporting - Worldwide 877-702-9580

Page 278

HIGHLY CONFIDENTIAL - B. McDADE 2

assets, at foreign clearing corporations to

3

Barclays?

4

6 7

A.

I'm not aware of those.

amom■mli 4==1 a■al

8 9 10 11

WaM=N

12 13 14

410 affiNIM/

15 16 17 18 19 20 21 22 23 24

25

MMM ....111111.11 ISO Reporting - Worldwide V7-702-9580

Page 1 1 2 3

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

4

s

In Re: LEHMAN BROTHERS HOLDINGS, INC., et al.,

Chapter 11 Case No. 08-13555 (JMP) (Jointly Administered)

6 7

9 10

* * * HIGHLY CONFIDENTIAL * * * DEPOSITION OF HUGH McGEE New York, New York Monday, August 10, 2009

12 13 14 15 16 17 18 19 20

21

Reported by:

FRANCIS X. FREDERICK, CSR, RPR, RMR JOB NO. 24038

22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 2 1 2 3 4 5

August 10, 2009

6

10:00 a.m.

7

a 9

HIGHLY CONFIDENTIAL deposition of

10

HUGH McGEE, held at the offices of Jones

11

Day, 222 East 41st Street, New York, New

12

York, pursuant to Notice, before Francis

13

X. Frederick, a Certified Shorthand

14

Reporter, Registered Merit Reporter and

15

Notary Public of the States of New York

16

and New Jersey.

17 18 19 20 21 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 13 H. McGEE - HIGHLY CONFIDENTIAL 2 3 4 5 6

all.1111111111111111111111111111 011111111111111111111111111111111MIS

iNENERONIMINENRIMIMMEM

411111111.1111111111M Q.

Stay up at the top of the chain if

7

we could for a moment because I know there's a

a

lot of people who do something in connection

9

with it. I'm looking at the senior activities

lo

either at the table or near the table. Who's

11

involved in getting the transaction done?

12

A.

13

there as well.

14

Q.

Was Paolo Tonucci involved?

15

A.

Yes.

16

Q.

What was his role?

17

A.

Well, Paolo and Ian Lowitt were

Well, certainly Mike Gelband was

18

both involved around some of the balance sheet

19

type items.

20 21 22 23 24 25

1111111111111111111111111111111111111111111111. d'INIIIII11111111111,

1111111.11■1111i TSG Reporting - Worldwide (877) 702-9580

Highly Confidential

Page 1

1

M. Shapiro UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

2 3 4 5

In Re:

6

7

LEHMAN BROTHERS HOLDINGS, INC., et al.,

Chapter 11 Case No. 08-13555(JMP) (Jointly Administered)

9

Debtors. 10

11 12

* *

13

DEPOSITION OF MARK J. SHAPIRO New York, New York August 7, 2009

14 15

* HIGHLY CONFIDENTIAL* * *

16 17 18 19 20 21 22 23 24 25

Reported by: KATHY S. KLEPFER, RMR, RPR, •CRR, CLR JOB NO. 24036 ...

TSG Reporting - Worldwide 877-702-9580

Highly Confidential

Page 2

1 2 3

M. Shapiro August 7, 2009 9:30 a.m.

4 5

HIGHLY CONFIDENTIAL deposition

6

of MARK J. SHAPIRO, held at Jones

7

Day, LLP, 222 East 41st Street, LLP,

8

New York, New York, before Kathy S.

9

Klepfer, a Registered Professional

10

Reporter, Registered Merit Reporter, Certified Realtime Reporter, Certified

12

Livenote Reporter, and Notary Public

13

of the State of New York.

14 15 16 17 18 19 20 21 22 23 24 25

TSG Reporting - Worldwide 877-702-9580

Highly Confidential

Page 7

M. Shapiro

ffMN■M

2 3 4 5 6 7

8 9

M■■■■=. annMI

10 11 12 13 14

Q.

By whom are you presently employed?

15

A.

Barclays Capital.

16

Q.

And what's your position there?

17

A.

18

am the head of Restructuring and

Finance within the Investment Banking Division.

19 20 21 22 23 24 25

TSG Reporting Worldwide 877-702-9580

Highly Confidential

Page 49 1

M. Shapiro

2 3 4

5 6 7

9 10

immomal

11

INNAMMIN/N/Marfilfjp

12 13 14 15

IIIIII■mmommimmiumma •

16 17 18 19 20 21

111111111111111111111=11111111111111ft Q.

Was Steve Berkenfeld involved in the

negotiations on that Monday and Tuesday?

22

A.

Yes.

23

Q.

Would he have been one of the people

24 25

negotiating what you call in the trenches? A.

He was more involved in some of the TSG Reporting - Worldwide 877-702-9580

Highly Confidential

Page 50 1

M. Shapiro

2

legal negotiations. He was definitely at the

3

table from time to time with the lawyers. He

4

was not, to the best of my recollection, in the

5

meetings that took place between myself, Mark Shafir, Archie and Michael Klein.

7

a 9

13 14 15 16 17 18 19 20 21 22 23 24 25

TSG Reporting - Worldwide 877-702-9580

Highly Confidential

Page 63

1

M. Shapiro

2 3 4 5 6

0=====.1.

7 8 9

WAIINAMP And how did you go about trying to Q.

10

identify what I'll call the quantum? How big is

11

this number?

12

A.

So I think I first asked George Mack,

13

again, as part of this, to figure out like what

14

were the outstandings that were unpaid under

15

these contracts. And I think he went to

16

somebody and the answer came back we can't

17

possibly figure that out in this time

18

specifically to each contract. It was just, you

19

know, there was no ability, functionally, to do

20

that in the time we had. That's just not -- I

21

was not humanly possible.

22

So but Barclays obviously wanted that

23

information from us, so we started thinking

24

about, well, how could we approximate that

25

amount. And so a group of us, we were talking TSG Reporting - Worldwide 877-702-9580

Highly Confidential

Page 64

1

M. Shapiro

2

about it on the Lehman side, and we said, well,

3

one way that we could estimate this was by

4

having somebody look at the payables run, the normal payables run in the ordinary course,

6

exclude comp, right, whatever is normally paid

7

for compensation on a weekly or monthly basis, take a snapshot of a normal payable cycle, all

9

right, so at any given time you have a certainly

lo

amount of payables outstanding, not knowing when

11

under every contract a payment was going to be

12

made, and not knowing they were all monthly,

13

necessarily, but we assumed that a lot of them

14

would be paid normally, you know, on a monthly

15

cycle, and provide us with an overall number

16

that would be a proxy for what the payments

17

under, you know, if you were assuming many of

18

those contracts, what those payments estimated

19

could be.

20

So that this was an intent. And we

21

told Barclays we couldn't provide them with the

22

specifics that they were looking for, but we

23

would try to get them an estimate of, for them

24

and ourselves, obviously, an estimate of what we

25

thought the amount would be that could be paid TSG Reporting - Worldwide 877-702-9580

Highly Confidential

Page 65 1

M. Shapiro

2

if they were going to have to assume all of

3

these contracts.

4

Q.

Who did that work?

5

A.

I don't know. George -- George went

6

off and started talking to people in the finance

7

area. And there were many people that were

8

working around, obviously around the clock on

9

these things trying to pull this information

10

together for us. I don't know who actually did

11

the work.

12 13 14

Q.

Is George the person that you tasked

to get the number? A.

George is the person who I tasked to,

15

you know, to get people to provide us with those

16

numbers.

17 18 19 20

4111111111111111111111.11111

21 22 23 24 25

0111111111/1111111111111 TSG Reporting - Worldwide 877-702-9580

Highly Confidential

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M. Shapiro

1 2 3 4

11111111111111111111110 Q.

You testified previously that on,

maybe it was Thursday evening or at some point 6

later in the week, that you thought that there

7

was some concern about Barclays going through

8

with the deal, okay? I don't know what language you used.

Tell me what the -- was there

10

anything that Barclays said to anyone at Lehman

11

that caused that concern, or was it just a

12

general anxiety about wanting to get something

13

done?

14

A.

No, it was really a comment that was

15

made to me by Jim Seery, who said something like

16

there's a big, I think his words were "shit

17

show" going on between JPMorgan and Barclays

18

around the repo and that, you know, JPMorgan was

19

screwing around doing something that Jim

20

characterized, as I said, as something that was

21

not positive, and that, you know, that was

22

putting the deal potentially at risk. That was,

23 24

would say, the nature of what concerned me. So that was it.

25

TSG Reporting - Worldwide 877-702-9580

Highly Confidential

Page 148 1

M. Shapiro

2 3

5 6 7 8 9 10 11 12

MMMRWNM

Q.

Let me show you again what has been

13

marked as Exhibit 19 and draw your attention to

14

the cure amount about which you testified

15

previously --

16

A.

17

Q.

Yes. reflected on this schedule as

18

being, as I read it, 2.25 billion. Do you see

19

that?

20

A.

Yeah, I do see that.

21

Q.

Do you recall that number ever

22 23

changing in the course of the week? A.

I don't remember -- I don't really

24

remember how that 2.25 got in there. I

25

personally have a better recollection of a $1.5 TSG Reporting - Worldwide 877-702-9580

Highly Confidential

Page 149 1

M. Shapiro

2

billion number that we were using for -- and

3

obviously it was an estimate, right?

4

So these were all, at the end of the

5

day, as I explained to you earlier, we were

6

trying to do our best at the time to provide

7

Barclays, principally, with a perspective on

8

what it might cost them to take over all of the

9

contracts that could be subject to the

lo

assumption of the assignment. And so, as I said

11

earlier, we were trying to come up with an

12

estimate of what that number was.

13

My recollection was we -- I used, in

14

my own head, a billion-five, and the reason I

15

remember that is that when we were negotiating

16

the breakup fee, we were -- I was thinking

17

about -- and I had negotiated the breakup fee in

18

the transaction relating to the stalking horse

19

bid -- I remember thinking, okay, we can do 3,

20

typically 3 percent of the deal. Barclays asked

21

for a lot more going in. They asked -- I think

22

Victor Lewkow told me something like $250

23

million or something like that. It was big

24

number. And I told him we weren't going to do

25

that, that in my mind that, you know, there TSG Reporting Worldwide 877-702-9580

Highly Confidential

Page 150

1 2

M. Shapiro was -- that that could be perceived as, you know, chilling the bidding. I didn't want any

4

perception of anybody feeling that they couldn't

5

make a bid. Obviously, you know, I said that 3

6

percent was a normal -- he was not a bankruptcy lawyer, by the way. So I was -- I wouldn't say 9

I was educating him because he obviously was a

10

smart guy, but I was explaining to him in my

11

experience what an acceptable number would be

12

from the court's perspective, and at the time my

13

recollection is we were looking at $250 million

14

for goodwill, it was around a million to a

15

million-450 for the buildings, which ultimately,

16

you know, that was our estimate, we didn't have

17

our desktop appraisals yet -MR. STERN: Billion.

18 19 20

A.

Billion, yeah, sorry. 1.45 billion. That was a

21

billion-seven. We added this estimate for cure

22

costs of a billion and a half, that got us to

23

3.2 billion, and we told them that the $100

24

million breakup fee would be approximately 3

25

percent and that's what we would be willing to TSG Reporting - Worldwide 877-702-9580

Highly Confidential

Page 151

1

M. Shapiro

2

do, plus some expense reimbursement, I think

3

maybe 25 million.

4 5 MMOMMOMMOM 6 WSNUMWM.MiNDB 8

MMMMN.

9 10 11

P

12 13 14 15 16 17 18 19

IIMMIMMEREIMIMMIIMM

20 21 22 23 24 25 TSG Reporting - Worldwide 877-702-9580

Highly Confidential

Page 153 M. Shapiro

1 2 3 4

6 7 8 9 10 11 12 . 13 14 15 16 17 18 19 20 21 22 23 24 25

Now, in that conversation on late Q Monday night or early Tuesday morning, you say you used a number for cure of 1.5? A.

Yes. My recollection for the purposes

of calculating this $100 million. Q.

I understand. Do you have any TSG Reporting - Worldwide 877-702-9580

Highly Confidential

Page 154 1

M. Shapiro

2

recollection where you got that number and why

3

it's different than number that's in Exhibit 19?

4

A.

The only recollection I have is that,

as I said, I had asked people to go back and get 6

me a proxy for what that month, you know, call

7

it snapshot of a monthly payables number would

8

be off of let's call them trade payables, which

9

would really cover contracts that you're paying

lo

under, excluding employee liabilities and things

11

like that.

12

Somebody probably in my team who was

13

tasked with that -- it could have been George

14

Mack, it could have been somebody else, Dan

15

Flores -- I'm sure came back to me and said, I'm

16

being told that rough cut around a billion-five,

17

but it was a true estimate, we never told

18

Barclays it was anything other than an estimate,

19

and we told them it could be higher, it could be

20

lower. And it was, at the end of the day, it

21

was always going to be based on what contracts

22

they ultimately assumed. So, you know, which we

23

didn't have any clear view on other than the

24

fact that we thought they were going to need a

25

good chunk of the contracts to operate the firm. TSG Reporting - Worldwide 877-702-9580

Page 1 1

HIGHLY CONFIDENTIAL - A. KIRK

2

UNITED STATES BANKRUPTCY COURT

3

SOUTHERN DISTRICT OF NEW YORK

4 5

In Re:

6

Chapter 11

7

LEHMAN BROTHERS

Case No. 08-13555(JMP)

a

HOLDINGS, INC., et al.,

(Jointly Administered)

9

Debtors. 10

11 12 13

* * * HIGHLY CONFIDENTIAL * * * DEPOSITION OF ALEX KIRK

14

New York, New York

15

August 31, 2009

16 17 18 19 20 21 22 23

Reported by:

24

KATHY S. KLEPFER, RMR, RPR, CRR, CLR

25

JOB NO. 24545

Page 2 1

HIGHLY CONFIDENTIAL - A. KIRK

2

August 31, 2009

3

9:30 a.m.

4

HIGHLY CONFIDENTIAL deposition 6

of ALEX KIRK, held at Jones Day, LLP,

7

222 East 41st Street, LLP, New York, New York, before Kathy S. Klepfer, a

9

Registered Professional Reporter,

10

Registered Merit Reporter, Certified

11

Realtime Reporter, Certified Livenote

12

Reporter, and Notary Public of the State

13

of New York.

14 15 16 17 18 19 20 21 22 23 24 25

Page 11 1

HIGHLY CONFIDENTIAL - A. KIRK

2 3

4111111P

4

rn1=1 6 7 8

.

9 10 11.

imMMS

12 13 14 15

gomm

16 17

ONM)

18 19 20 21 22 23 24 25

IMW)

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Page 14 1 2

HIGHLY CONFIDENTIAL - A. KIRK

aseiNMOMM/M

3 4

6 7 8 9 10 11 12 13 14 15 16 17 18

■Minnws.

19 20 21 22 23 24 25

A.

Yes.

Several of my colleagues were

Page 15 1

HIGHLY CONFIDENTIAL - A. KIRK

2

who had signed employment agreements were

3

resigning from the

firmillOMMIIIMIS

4 5 6 7

9 10

1.110111111MIL

11

sorts of issues with Barclays.

He was on point for those

12 13

OINNIMMI=1•11111MMo

14 15

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16 17 18 19

4"WIIMINIMII.M.AMEMEMNIMMOIMMUMM.

20 21

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22 23 24 25

0MOOMMoiniMMININ0 •NOMWMI/MEMINNIMIBOiMNINnmP

Page 18 1

HIGHLY CONFIDENTIAL - A. KIRK

2

3 4 5 6 7 8 9 10

NM■11* Ø~M///MA /Mmm~

11 12 13 14 15

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illommummumm.ma.

17 18

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19 20 21

1M

22 23 24 25

0■NaMw

Page 28 1

HIGHLY CONFIDENTIAL - A. KIRK

2 3

4 5 6 7

AMMS

Q.

During the period from Friday, the

12th, through Sunday, the 14th, were you dealing

8 with any particular people at Barclays who you 9 10 11

could name? A.

Archibald Cox. Bob Diamond. Rich

Ricci. Michael Klein, as their agent.

12

?

13

.

14 15 16 17

111111111110111111.1111.111.1101=1111MINM

18 19 20

01010111116100

21

22 23

24 25

111111111111.011111, 41111111111111111111MMOMEMMIMIEUmmilk,

Page 54 1

HIGHLY CONFIDENTIAL - A. KIRK

2 3 4

11111/

6 7 8

9 10 11 12 13 14 fraffialliataffailaiMMaNariaraleanalib 15 16

Q.

Now, you referred to -- you said they

17 broadly outlined the first transaction. By the 18 Friday morning, is it your understanding there's 19 a second transaction, a subsequent transaction? 20

A.

By the time we had this meeting --

21.

Q.

Uh-huh.

22

A.

-- it was my view, my opinion, that

23 there would have to be a reworking of the 24 transaction because a vast majority of those 25 securities that had been planned for transfer

Page 55 1

HIGHLY CONFIDENTIAL - A. KIRK

2

were held at JPMorgan. There was a -- and

3

JPMorgan had a dispute of some sort about the

4

transfer of the repo with Barclays, which was

5

described to me by Mike Keegan, and in addition

6

to that, they shut down Lehman's -- they closed

7

down Lehman's DTC account, which led me to

8

believe that JPMorgan would not cooperate and

9

transfer the aforementioned securities to

10 11 12

Barclays on that Friday.

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13 14 15

411111mismi 411111111111IMEMINIIMMIIMIIIP

16 17 18 19

iiIIMMINNINNEMimmommimg

41111.11111111111111111111.1111111111.1"

20 21 22 23 24 25

11111111111111111111101.1111111.1111.

411111111k

ialIMMOMMIIMMIMIllairmarammo

Page 66 1

HIGHLY CONFIDENTIAL - A. KIRK

2 3 4

ANIMMEMINK

5

Q.

6 7

Describe that for me. What was your

understanding? A.

So, to be clear, I'm not an expert,

8

was not an expert on repo, so I was learning

9

things for the first time that day that I didn't

10

understand how they actually worked prior to

11

that. So I got what was a cursory as opposed to

12

a detailed explanation of the issue, but as

13

understood it from the way that Mike Keegan

14

explained it to me was that the Fed had been

15

providing a repo for Lehman Brothers earlier in

16

the week of approximately $50 billion, that the

17

Fed had made it known that they wanted to be

18

repaid on that repo, and that Barclays had

19

agreed to assume that repo obligation from the

20

Fed. Without that financing the firm would have

21

collapsed the next morning.

22

So the way it was explained to me was,

23

during the transfer of those -- that loan and

24

the collateral associated with that loan, there

25

were many pieces of collateral that Barclays

Page 67 1

HIGHLY CONFIDENTIAL - A. KIRK

2

could not value, so they did not accept them in

3

transfer from the Fed. And mechanically, it was

4

explained to me the way that worked was, in a tri-party repo, the Fed transferred all of the positions to JPMorgan and then JPMorgan began

7

transferring those positions upon the receipt of

8

money from Barclays transferred money, and then they would transfer the positions that secured

10 11

that repo. And at some point during that process,

12

Barclays became very uncertain as to some

13

percentage of that collateral, I don't recall

14

the exact amount, but it was a large number,

15

maybe as much as, you know, 20 percent of the

16

collateral, and when Barclays didn't accept

17

those positions, they, by definition, just got

18

left at JPMorgan.

19

They -- so JPMorgan was left with

20

collateral that they were not comfortable with

21

but Barclays would not accept, so -- and

22

JPMorgan, I guess they attempted to negotiate

23

but couldn't get that negotiation done.

24 25

staININ11#

Page 72 1

HIGHLY CONFIDENTIAL - A. KIRK

2 3 4

isalhoms1111111111111MMININIEMNIMP 41.10111.1111111111111111111111111111110101MMINNIMMMIO-

6 7

8 9

81/IMM/Nie 111111111111.111p

10 13. 12 13 14 15 16 17 18 19

1111=111111MNPIMMINNIMMIIIIMENIF AINOIMIIIIIOMNINMMIIIIBMIIIIIMIIIIIMNR •

20 21

miSMOOMNP

22

MOOMMOMft.

23

Q. And how did Klein, Ricci and Keegan or

24

any combination of those three men react to that

25

news?

Page 73 1 2

HIGHLY CONFIDENTIAL - A. KIRK

A.

There was some question as to, well,

3

what do we do now? I suggested that the only

4

reasonable course of action would be to proceed

5

with the transaction substituting the repo

6

assets, the assets that Barclays had lent

7

against, for all the other securities that had been contemplated in the transaction and leave

9

the rest of the transaction as was.

10 11 12 13

MNIMMIEMMMM

14 15 16

MOMMOMMONOP WoMMnrMt

17 18 19 20

d'OMMIVMMO MMMMW

21 22 23 24 25

VIENEENNIMININIIIM

Page 112 1

HIGHLY CONFIDENTIAL - A. KIRK

2 3

01111mwmwmommorms,

4 5 6 7 8 9

IMMINEMMINMIMMINMEINt

10 11 12 13

INININNINI11111111111111111

14 15 16

111.111111111p

17 18 19

turn it over, or was it to find some, some

20

identifiable bucket of value until Barclays

21 22

4111111111111111111W 23 MI"MINEMIMOMMMNIMft 24 41111111110...1114111111111111106 25

Page 122 1

HIGHLY CONFIDENTIAL - A. KIRK

2 3 4

AMMI.NMIMMAIMEMM

5 6 7

8 01111111MWM11111n. 9 111111.1111

10

11

40.11111.ft

12 13 14 15

giMMOMMOMMIMOMMIll-

16 17 Martin -- somebody who worked for Martin Kelly 18 had prepared it.

19 20

Q.

And within the balance sheet, sir, the

fifth column that's entitled Transaction

21 Adjustments, do you see that? 22 23 24 25

A.

Yes.

Q.

Do you know what that column

represents, what the entries in that column are

10111111111M111111111P

Page 1 1 2

UNITED STATES BANKRUPTCY COURT

3

SOUTHERN DISTRICT OF NEW YORK

4 5

In Re:

6

Chapter 11

7

LEHMAN BROTHERS

Case No. 08-13555(JMP)

8

HOLDINGS, INC., et al,

(Jointly Administered)

9

Debtors.

10

11 12

* *

* HIGHLY CONFIDENTIAL* * *

13

DEPOSITION OF ERIC JONATHAN FELDER

14

New York, New York

15

July 31, 2009

16

17

Reported by:

18

MARY F. BOWMAN, RPR, CRR

19

JOB NO. 24018

20 21 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 2 1 2 3 4 5

July 31, 2009

6

9:35 a.m.

9

Deposition of ERIC JONATHAN FELDER,

10

held at the offices of Jones Day, LLP, 222 East

11

41st Street, New York, New York, before Mary F.

12

Bowman, a Registered Professional Reporter,

13

Certified Realtime Reporter, and Notary Public

14

of the State of New York.

15 16 17

18 19 20 21 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 39 FELDER - HIGHLY CONFIDENTIAL

/41111.1NOMOMMOMMINIMIN

2 3

101061.001111M111.1.MINOMMUIONSWIMI

4

6 7

tiallimmessollalliftwasimmigna-

11111111111111111sallailitimistaliast



8 9 10



1111111101101111101111011111111.1111imismalimilagasiM -



1111101111011011411111111111110m

11 12

sammommatommarmassim

13

1111111111111111111M111111

14 15

C

16 17 18 19 20

WNW

21 22

111wellionms

23 24 25

411111111110Mbaismilmilmmumisinlegoalmifts TSG Reporting - Worldwide (877)702-9580

TSO Reporting - Worldwide (877) 702-9580

Page 1

HIGHLY CONFIDENTIAL - PAOLO TONUCCI 2

UNITED STATES BANKRUPTCY COURT

3

SOUTHERN DISTRICT OF NEW YORK

4

In Re: Chapter 11 6

LEHMAN BROTHERS Case No. 08-13555(JMP) HOLDINGS, INC. et al., (Jointly Administered) 8 9

Debtors.

10 11 12 13

HIGHLY CONFIDENTIAL DEPOSITION OF PAOLO TONUCCI Friday 14 August 2009

14

At: 7:00 am

15

Taken at:

16

Jones Day 21 Tudor Street

17

London United Kingdom

18 19

Reported by: AILSA WILLIAMS Certified LiveNote Reporter

20 21 22 23 24 25

1

Page 2 2 3 4

HIGHLY CONFIDENTIAL - PAOLO TONUCCI APPEARANCES JONES DAY, LLP Attorneys for Lehman Brothers, Inc. 222 East 41st Street New York, NY 10017-6702 BY: JAYANT W. TAMBE, ESQ BRIDGET CRAWFORD, ESQ

6 7

8 9 10 11 12 13 14 15 16

BOIES, SCHILLER & FLEXNER, LLP Attorneys for Barclays Capital and the Witness 5301 Wisconsin Avenue, NW Washington, DC 20015 BY: HAMISH HUME, ESQ. QUINN, EMANUEL, URQUHART, OLIVER & HEDGES, LLP Attorneys for the Creditors Committee 865 S. Figueroa Street, 10th Floor Los Angeles, California 90017 BY: MATTHEW BUNTING, ESQ. ERICA TAGGART, ESQ. (By Phone) SIMPSON THACHER & BARTLETT LLP Attorneys for the Witness 425 Lexington Avenue New York, NY 10017-3954 BY: CHRISTOPHER J. LUCHT

17 18 19 20 21 22 23 24 25

HUGHES, HUBBARD & REED, LLP Attorneys for the SIPA Trustee One Battery Park Plaza New York, NY 10004-1482 BY: WILLIAM R. MAGUIRE, ESQ. Also Present: PHILIP E. KRUSE, Alvarez & Marsal

2

Page 5 1

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

2

PAOLO TONUCCI

3

Having been sworn,

4

Testified as follows

5

DIRECT EXAMINATION BY MR. TAMBE:

6

MR.

TAMBE : Morning, Mr. Tonucci. We

7

met this morning. My name is Jay Tambe with Jones

B

Day, representing the Lehman Brothers Holdings

9

Estate. I will have counsel introduce themselves

10

to you and then we will get started.

11 12

MS CRAWFORD: Bridget Crawford from Jones Day.

13 14

MR. MAGUIRE: Bill Maguire, Hughes, Hubbard & Reed for the Trustee.

15

MR. BUNTING: Matthew Bunting, Quinn,

16

Emanuel, Urquhart, Oliver & Hedges for the

17

Creditors Committee and on the phone Erica

18

Taggart, also Quinn, Emanuel, Urquhart, Oliver &

19

Hedges.

20 21 22

MR. KRUSE: Phil Kruse with Alvarez & Marsal on behalf of the LBHI Estate. MR. LUCHT: Christopher Lucht, Simpson

23

Thacher & Bartlett, on behalf of the witness in

24

his individual capacity.

25

MR. HUME: Hamish Hume from Boies,

5

Page 6

HIGHLY CONFIDENTIAL - PAOLO TONUCCI 2

Schiller & Flexner representing Barclays.

3

MR. TAMBE: Erica, can you hear us?

4

MS TAGGART: Yes, thank you.

5

MR. TAMBE: Morning, Mr. Tonucci. By

6

whom are you currently employed?

7

A.

Barclays.

8

Q.

In what capacity?

9

A.

I work in the treasury area.

10

Q.

What is your position?

11

A. Head of group balance sheet.

12

Q. And is that head of group balance sheet

13

for global operations?

14

A.

15

Q. How long have you held that position?

16

A.

17

Q. How long have you been employed by

18

That is right, for global operations.

Since February of this year.

Barclays?

19

A.

20

Q. What was your position at Barclays when

21 22 23 24 25

Since September, 26 September 2008.

you first joined Barclays in September 2008? A.

US treasurer for Barclays Capital.

6

Page 17 1

17

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

2 3 4

5

ammilmlimo Q. You used a phrase, "There were changes

6

in secured funding haircuts", is that right? I

7

want to understand what you mean by "haircuts"? A. The difference between the market value

9

and the cash received is known as the haircut in

10

a secured funding arrangement, the market value of

11

the securities I should say. t

12 13 14 15

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16 17 18

wommommompommidgme -

19 20 21 22

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23 24 25

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Page 29 1

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

2 3

4 0111.110 5 6

1111■11111111111 diFINIMAIMINNIMI■41.111111111=1.11111.

7 8 9

11111/IMMINENIO

10 11

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15 16 17 18

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20

ag01111111111.......imsamenwe 22

Q.

Let me rephrase. You understood the

23

5 billion dollars all in economic loss versus our

24

marks to be a reference to a discount off the

25

marks, correct?

29

Page 30 1

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

2

A.

3

Q. The deal that was ultimately done and

Yes.

4 closed on September 22, that too included

a discount off of Lehman's marks, correct? 6

A.

That is correct.

7

Q.

Okay, and the amount of that discount

8 off of Lehman's marks was about $5 billion, is

9

that right?

lo 11

MR. HUME: Objection, lacks foundation. A.

It is uncertain, because obviously there

12 were a lot of valuation movements and so 13

I couldn't say with certainty, but certainly what

14

I can say is versus the valuations that I recall

15 seeing from our analysis it was about that number. 16

Q.

About $5 billion?

A. About $5 billion.

emoselaMMINIIIIIIIIIMINNMErsu• 23

24 25

4OMMOMMIL 010.1.1111111101.111.11111111101111111.11111.111010

30

Page 32 HIGHLY CONFIDENTIAL - PAOLO TONUCCI 2 3 4

5 6

7

/111.111111.11111.11111111111.1011011111.11111160

Q.

How did Barclays get the

5 billion-dollar discount? A.

Right. I think what was contemplated in

the negotiation, and what was executed in terms of the settlement probably differed slightly, you

9

know, and involved over the week the settlement of

10

the transaction, meaning the actual transfer of

11

securities and cash was through the repo

12

agreements, and essentially the termination of

13

those repo agreements.

14 15 16

Q.

Was the discount given to Barclays by

defaulting on the repo? MR. HUME: Objection. You are asking

17

the witness very general questions about

18

a complicated transaction without walking him

19

through any of the details of that transaction. I

20

think the line of questioning lacks foundation.

21

MR. TAMBE: You have an objection to

22

form, right, Hamish? So noted. Answer the

23

question, please.

24 25

MR. HUME: I think the line of questioning is calling for speculation and lacks

32

Page 33 1 2

HIGHLY CONFIDENTIAL - PAOLO TONUCCI foundation.

3 4

MR. TAMBE: Do you remember my question? Probably not. Do you want it read back?

5

A.

Yes, please.

6

(Read back)

7

A.

Yes, I would say that was the way in

8

which the transaction was settled, so that is

9

fair.

10

-

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11 12

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13

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14

iliramairmairoulmNimmuiPc

15

taamms ammumminarommorrermavear

16 17 18 19

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20 21

allwasamminamamiaiarmint

22 23 24 25 4011111

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33

Page 36 1

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

2 3

5 6 7

IF

8

ArialleaNNINNIMMI

9 10

4110•111111101111111■1111101101me

11 12 13 14 15 16 17 18 19

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20 21

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22 23

Q.

Tell me briefly what the changes were,

24

if any, in the size of the Fed repo from Monday to

25

Tuesday to later in the week?

36

Page 37 HIGHLY CONFIDENTIAL - PAOLO TONUCCI A.

I can't recall the exact details. I

recall that the Barclays repo on the -- again, I am not certain about this but the Barclays repo on the 16th, I believe, was for $5 billion. On the 17th I believe it was for $8 billion and then on the Thursday there was obviously a much bigger, transaction and so that changed the Fed repo, which became zero. Q.

Let's talk about that bigger transaction

on Thursday, okay. Describe for me how the Fed repo went to zero and what happened with the

Barclays repo on Thursday? A.

It is difficult for me to talk about the

mechanics because I am not that close to the operational mechanics of the repo being unwound, but my understanding was that the repo unwound on the Thursday morning, which would be typical in a tri-party repo, that an overnight repo would unwind, you would return the collateral and the cash and the transactions would then settle with that collateral that was released, and at the end of the day a new financing transaction would be settled. In this instance there was complexity because

37

Page 38 HIGHLY CONFIDENTIAL - PAOLO TONUCCI JP Morgan was the tri-party agent for Lehman and had been the tri-party agent in the transaction with the Fed. BONY was the tri-party agent for Barclays and so there was a need to transfer collateral from JP Morgan to Bank of New York tri-party system, and I am not sure about the mechanics involved in that transfer but it was clearly a more complicated transaction than if the financing had just been through the JP Morgan tri-party system. Q.

Is it your understanding that on

Thursday, in this bigger transaction on Thursday, Barclays effectively replaced the Fed and the Fed funding transaction? A.

I was not involved in the discussions

with Barclays or with the Fed on the removal or replacement of the Fed in that transaction, so I can't really talk to the specifics, but my understanding was that the Fed transaction was going to mature on the Thursday and they were not really providing any financing subsequently. Q. Wednesday night into Thursday, do you recall the size of the Fed funding being approximately $45 billion? A.

Yes, that sounds about right.

Q. And the Fed was holding approximately

38

Page 39 1 2

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

$50 billion in collateral against that financing?

3

A. That sounds right.

4

Q. And the big transaction that you

5



described on Thursday effectively had Barclays

6 coming in and putting in $45 billion to pay off 7 8 9 10

11

the Fed repo, correct? A.

I understood that they were going to be

putting in 45, that it was going to be a 45 billion-dollar transaction, yes. Q. And all the collateral that was being

12 held by the Fed was then going to be transfeired 13

14 15 16

to Barclays, correct? MR. HUME: Objection, asked and answered. He has already explained. A. To be honest, I was not close enough to

17

the actual transaction that was being booked to

18

know exactly where all the collateral was going to

19

end up, nor was I close enough to any agreements

20

with Barclays or with the Fed as to where all of

21

the collateral was going to end up.

22 23

Q. So effectively on Thursday the Fed funding goes down to zero, correct?

And they exit the financing picture at

39

Page 40 1 2

HIGHLY CONFIDENTIAL - PAOLO TONUCCI that point?

3

A.

That is correct.

4

Q.

And what you have left is the Barclays

repo, correct? 6

A.

That is correct.

Q. Describe for me what happens with the Barclays repo over the next few business dates? 9 10 11 12

We are now into Thursday on to Friday the 19th. MR. HUME: Again, objection to the form of the question and the lack of foundation. A. That transaction happened on Thursday.

13

That was essentially the last of that transaction

14

in the way that I think about it. It was executed

15

on Thursday night and settled Thursday night into

16

Friday morning and that was the end of that

17

transaction. After that it was just a matter of

18

that transaction terminating and the collateral

19

being rebooked as a purchase by Barclays and as

20

a sale by Lehman.

21

22 23 24 25

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40

Page 54 1

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

2 3

OMMMIMMOMMO

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20 21 22 23 24 25

Q. And do you recall there being an effort on September 19 to find additional collateral for

54

Page 55 1 2

HIGHLY CONFIDENTIAL - PAOLO TONUCCI Barclays?

3

A.

4

Q. What can you tell us about the efforts

I do.

to find additional collateral for Barclays? 6

A. That we were asked on the morning of the

7

19th to find if there was additional collateral to

8

include in the transaction.

9

Q. Asked by whom?

10

A.

11

Q. Did Ian Lowitt tell you why he was

12 13

I believe I was asked by Ian Lowitt.

asking you to find additional collateral? A.

He said that it was necessary for the

14

transaction to close and he reiterated that

15

through the day.

16 17

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55

Page 125 1 2 3 4

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

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11

Q. You have a second item: "Their opening

12

balance sheet should also include 1.9 billion of

13

box assets". Correct?

14

A.

Correct.

15

Q.

What is that a reference to?

16

A. The unencumbered collateral.

17

Q.

18

A. Which became Schedule B.

19

Schedule B?

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20 21 22 23 24 25

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125

Page 132 1 2

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

INIIMINIIMINI■•••=101■1

4

5

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6 7 8

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15

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16 17 18 19

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20

23

Q.

The third item reads: "Not clear on the

24

amount of blocked discount or how we make it

25

happen." Do you see that?

132

Page 133 1

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

2

A.

3

Q. And you understand that to be

Yes.

4

a reference to the 5 billion-dollar discount that

5

we talked about earlier?

6 7

MR. HUME: Objection, lacks foundation. A.

I understand it to be a reference to the

8

discount on purchase, so I would have linked it to

9

that $5 billion.

10

Q.

11 12

Then the next sentence reads: "Defaulting on repo could be the best as

discounts could be taken from the haircut."

13

Do you see that?

14

A.

15

Q. Do you remember discussing with anyone

Yes.

16

at Lehman defaulting on the repo as a way of

17

providing the discount to Barclays?

18

A.

Yes.

19

Q.

With whom did you discuss that?

20

A.

I think it was with Ian and with Gerry,

21

perhaps Martin Kelly as well.

22 23

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24

25 461.1.MONIMMINNIIMMIN.M.IMINEMINII

133

Page 142 HIGHLY CONFIDENTIAL - PAULO TONUCCI

armiall1111•111111111111111111111■

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142

Page 143

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

1 2

away and there would effectively be a sale of the

3

asset?

4

MR. HUME: Objection.

5

A.

6

a sale.

That is correct. It would become

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143

Page 146 HIGHLY CONFIDENTIAL - PAOLO TONUCCI

2 3 4

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5

7

9 10 11

Q.

I have talked about the components at

12

least that you have in your e-mail, where you

13

recap the opening balance sheet, right, you have

14

the repo component and then you have 1.9 billion

15

for what we have talked about, became Schedule B,

16 and then you had another billion dollars of the 17

15c3 receivables?

18

A.

That is correct.

19

Q.

And the 1.9 and the 1 is about

20

$2.9 billion, right?

21

A.

22

Q. And that was additional value over and

23

above the repo, correct?

24 25

That is correct.

MR. HUME; Objection. A.

Additional assets over and above the

146

Page 147 1

HIGHLY CONFIDENTIAL -

PAOLO TONUCCI

2

repo assets that were transferred on the Thursday

3

night.

4

6

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147

Page 1 1

HIGHLY CONFIDENTIAL - R. AZERAD

2

UNITED STATES BANKRUPTCY COURT

3

SOUTHERN DISTRICT OF NEW YORK

4 5

In Re:

6

Chapter 11

7

LEHMAN BROTHERS

Case No. 08-13555(JMP)

8

HOLDINGS, INC., et al.,

(Jointly Administered)

9

Debtors. 10

11

REVISED

12

* * *HIGHLY CONFIDENTIAL* * *

13

DEPOSITION OF ROBERT AZERAD

14

New York, New York

15

August 17, 2009

16 17 18 19

20 21 22

23

Reported by:

24

KATHY S. KLEPFER, RMR, RPR, CRR, CLR

25

JOB NO. 24041 TSG Reporting Worldwide (877) 702-9580

Page 2

1

HIGHLY CONFIDENTIAL - R. AZERAD

2

August 17, 2009

3

9:29 a.m.

4 5

HIGHLY CONFIDENTIAL deposition

6

of ROBERT AZERAD, held at Jones Day LLP, 222 East 41st Street, LLP, New

8

York, New York, before Kathy S.

9

Klepfer, a Registered Professional

10

Reporter, Registered Merit Reporter,

11

Certified Realtime Reporter, Certified

12

Livenote Reporter, and Notary Public

13

of the State of New York.

14 15 16 17 18 19 20 21 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 6

HIGHLY CONFIDENTIAL - R. AZERAD 2

11011111111110111.1.11111111111111111111111.1111111111MM

3 4

41011011111.1111111111111111111111110. 1111111111111.111MW

5

Q.

6

currently?

9

Mr. Azerad, by whom are you employed

A.

Barclays Capital.

Q.

And how long have you been employed by

Barclays Capital?

10

A.

Since September of 2008.

11

Q.

In what position are you employed by

12

Barclays?

13

A.

14

I am a director in the Treasury

Department of Barclays Capital.

15 16 17 18 19

111111111111111110

20 21 22 23 24 25

WIMa TSG Reporting - Worldwide (877) 702-9580

Page 110 HIGHLY CONFIDENTIAL - R. AZERAD 2 3 4 5

TL

6

7

OnEDMIM

8 9 10

4MMIMMIIMEMMMUMI

11 12 13

PMMUMMIMIMMObeftAMMMMEM%

amimonos

14 15 16 17 18 19

tw

20 21 22 23 24 25

■===mmisiMir 410.11M.NnMUMEIMMMMM flTT let me -- I just want to kind of define it. The l'SG Reporting - Worldwide (877) 702-9580

Page 111

1

HIGHLY CONFIDENTIAL - R. AZERAD

2 non-actionable box is a box of assets which is 3

financed on an unsecured basis. The reason it's

4

called non-actionable is because it's -- as part of our analysis of the box, we try to separate

6

assets which we thought were left in the box,

7

left unencumbered, but could be financed from

8

assets left in the box, but couldn't be financed

9

on a "business as usual" basis. That could be

10

the same 1.9 billion.

11 12 13 14 15 16 17 18 19 20 21 22 ?3 24

VOW

25

TSG Reporting. Worldwide (877) 702-9580

Page 1

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

2 3 4

6

7

8

In re:

) ) Chapter 11

LEHMAN BROTHERS

) Case No. 08-13555(JMP)

HOLDINGS, INC., et al., Debtors.

) ) ) ) )

9 10 11 12 13 14 15 16 17

HIGHLY CONFIDENTIAL DEPOSITION OF ALASTAIR BLACKWELL New York, New York Friday, August 7, 2009

18 19 20 21 22 23 24 25

Reported by: KRISTIN KOCH, RPR, RMR, CRR, CLR JOB NO. 24037 TSG Reporting - Worldwide (877) 702-9580

Page 2 1 2 3 4

August 7, 2009 9:21 a.m.

6 7 8

Deposition of ALASTAIR BLACKWELL, held at the offices of JONES DAY, LLP, 222

10

East 41st Street, New York, New York,

11

before Kristin Koch, a Registered

12

Professional Reporter, Registered Merit

13

Reporter, Certified Realtime Reporter,

14

Certified Livenote Reporter and Notary

15

Public of the State of New York.

16 17 18 19 20 21 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 8

1

Blackwell - Highly Confidential

2 3

10011.01MMINIIIIMUNftiaangMeilaft.S

4 5 6 7

10 11 12 13 14 15 16

11111111111111111111"1111111111.11111MMINI You are currently employed by Barclays Capital; correct?

17

A.

I am, yes.

18

Q.

And what is your present position?

19

A.

I am responsible for the Americas

20

operations department for capital markets.

21

Q.

Okay. And do you have a title?

22

A.

I am a managing director.

23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 1 1

HIGHLY CONFIDENTIAL - Cr. HRASKA

2

UNITED STATES BANKRUPTCY COURT

3

SOUTHERN DISTRICT OF NEW YORK

4 5

In Re: Chapter 11

6 7

LEHMAN BROTHERS

Case No. 08-13555(JMP)

8

HOLDINGS, INC., et al.,

(Jointly Administered)

9

Debtors. 10

11 12

* * *HIGHLY CONFIDENTIAL* * *

13

DEPOSITION OF JAMES HRASKA

14

New York, New York August 14, 2009

15 16 17 18 19 20 21 22 23

Reported by:

24

KATHY S. KLEPFER, RMR, RPR, CRR, CLR

25

JOB NO. 24039

Page 2 1

HIGHLY CONFIDENTIAL - J. HRASKA

2

August 14, 2009

3

9:25 a.m.

4 5

HIGHLY CONFIDENTIAL deposition

6

of JAMES HRASKA, held at Jones Day

7

LLP, 222 East 41st Street, LLP, New

8

York, New York, before Kathy S.

9

Klepfer, a Registered Professional

10

Reporter, Registered Merit Reporter,

11

Certified Realtime Reporter, Certified

12

Livenote Reporter, and Notary Public

13

of the State of New York.

14 15 16 17 18 19 20 21 22 23 24 25

Page 15

1 2

HIGHLY CONFIDENTIAL - J. HRASKA Q.

Okay. Before I forget, what is your

current position at Barclays? 4

A.

I am in a very similar role.

5

Corporate title-wise I'm a director, which is

6

equivalent to SVP. I manage, again, Secured

7

Financing Operations for both equities globally

8

and fixed income in North America.

9

Q.

Is it fair to say your role is -- your

10

duties and responsibilities are relatively the

11

same as you had when you were at Lehman?

12



A.

Responsibilities are reasonably the

13

same, not quite as extensive as they were at

14

Lehman from a global perspective.

15 16 17 18 19 20 21 22 23 24 25

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Page 58 1 2

HIGHLY CONFIDENTIAL - J. HRASKA

111111111111111.16

3 4 5 6

tiosamainimariimailmigaiiiimaismosisegis

7 8 9 10 11 12

.11111.1.1111.1111111111111111.111111111111111111111111mma --111-11-1111-1

13 14 15 16

Q.

And so what was the haircut associated

with the September 18 repo? A.

There wasn't a -- there wasn't a

17

specific stated haircut. There was a total loan

18

amount, which was this $45 billion, and the

19

total collateral value that we were trying to

20

transfer over to Barclays or what we were

21

directed to transfer over to Barclays was

22

approximately $50 billion.

23

Q.

And that $50 billion was comprised of

24

the approximately $42 billion in securities that

25

you mentioned earlier plus the cash?

Page 59

1 2 3

HIGHLY CONFIDENTIAL - J. HRASKA A.

It turned out that that was the case.

It was initially intended to be all collateral, but the market value of what we were to transfer initially was $50 billion.

6

Q.

Okay. And Barclays was, after the --

'

after they received the proceeds of the loan and

a

the collateral, was Barclays satisfied that it

9

had received the entire amount of collateral

10

that it was expecting with respect to that repo? MR. SHAW: Objection. Foundation.

11 12

A.

Yeah, I don't know whether they were

13

satisfied or not. I mean, we completed the

14

securities transfers until the point that we

15

couldn't make any transfers because the system

16

had been shut down, and we were requested at

17

that point to deliver an additional 7 billion in

18

cash, which we did.

19 20

41111MMOMMINIIMM4

21

emmulansgairemmis

22

11111111111111M

23 24 25

41111111.1111111111111111111111110111

Page 1 1

HIGHLY CONFIDENTIAL - M. KELLY

2

UNITED STATES BANKRUPTCY COURT

3

SOUTHERN DISTRICT OF NEW YORK

4 5

In. Re: Chapter 11

7

LEHMAN BROTHERS

Case No. 08-13555(JMP)

8

HOLDINGS, INC., et al.,

(Jointly Administered)

9

Debtors. 10

11 12

* * *HIGHLY CONFIDENTIAL* * *

13

DEPOSITION OF MARTIN KELLY

14

New York, New York

15

August 18, 2009

16 17 18 19 20 21 22 23

Reported by:

24

KATHY S. KLEPFER, RMR, RPR, CRR, CLR JOB NO. 24042

25

TSG Reporting - Worldwide 877-702-9580

Page 2

1

HIGHLY CONFIDENTIAL - M. KELLY

2

August 19, 2009

3

9:30 a.m.

4 5 6

HIGHLY CONFIDENTIAL deposition of MARTIN KELLY, held at Jones Day, LLP, 222 East 41st Street, New York, New York, before Kathy S.

9

Klepfer, a Registered Professional

10

Reporter, Registered Merit Reporter,

11

Certified Realtime Reporter, Certified

12

Livenote Reporter, and Notary Public

13

of the State of New York.

14 15 16 17 18 19 20 21 22 23 24 25

--•-•----/- ,,,,

•-

••

TSG Reporting - Worldwide 877-702-9580

Page 8

HIGHLY CONFIDENTIAL - M. KELLY 2

By whom are you currently employed?

3

A.

4

Q-How long have you been employed there?

5

A. Q.

6 7

10 11

Since late September of '08. And what's your title at Barclays

Capital? A.

9

By Barclays Capital.

I'm a Managing Director and I'm the

Chief Financial Officer in the Americas. Q.

And is that the position you have held

since you joined Barclays in September of '08?

12

A.

No, it's not. No, my --

13

Q.

Go ahead.

14

A.

My title has remained the same. My

15

position changed in March, and upon going into

16

Barclays from Lehman, I had three different

17

positions. The first was the Financial

18

Controller for Barclays Capital on an interim

19

basis, and that was a London-based position.

20

Second position was the head of Finance for

21

Structured Capital Markets.

22

Q.

Also in London?

23

A.

Also in London. The third position

24 25

was head of Americas Financial Decision Support. Q.

Financial Decision Support? TSG Reporting - Worldwide 877-702-9580

Page 9 HIGHLY CONFIDENTIAL - M. KELLY

1 2

A.

Support, yeah.

3

Q.

Was that in London or in the Americas?

4

A.

That was an Americas-based role.

Q.

Are you based in New York?

A.

I am. I have remained living in New

6 7

York. I commuted to London for that period of

8

time between September and March..

10

Q.

Okay.

A.

I should also say that, in addition to

11

being CFO of the Americas now, I retained the

12

second of those three positions, so I remain

13

head of Finance for Structured Capital Markets

14

today.

15 16 17

sommusgamaamosivall.

18 19 20 21 22 23 24 25

TSG Reporting - Worldwide 877-702-9580

Page 46

HIGHLY CONFIDENTIAL - M. KELLY 2 3 4 5

10 11

0110111Milsa Q.

When you wrote, "Approx. a 5 billion

12

all in economic loss versus our marks," what did

13

you mean by that?

14

A.

I recall that the 5 billion represents

15

the difference between the negotiated price and

16

the values of those assets on Lehman's books.

17 18 19 20 21 22 23

sittillissallsoolansa

24 25

TSG Reporting - Worldwide 877-702-9580

Page 108 3.

HIGHLY CONFIDENTIAL - M.

KELLY

2 3 4

6 7

0.

As far as you know, sir, for these

a

asset classes, exclusive of cash, were they

9

shown on Lehman books at an amount higher than

10

$62 billion at or about the time this schedule

11

was prepared?

12

A.

13

aggregate.

14

Q.

15 16 17

My understanding is yes, they were, in Were they $5 billion higher; is that

your understanding? A.

Approximately $5 billion higher.

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18 19 20 21

111111111111.011~10111Minasmallam

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22 23 24 25

TSG Reporting - Worldwide 877-702-9580

.Page 116 1

HIGHLY CONFIDENTIAL - M. KELLY

2 3 4

6

a

9 10 11

1•111111111.11111111111111mi

12 13 14

1111MENNIFINIMIIIIIMam 1111111111111111MaimINIIIIII

15 16

summusimommimillM111.11.11.0

17 18 19

Q.

Is it your understanding that the

20

entries on the liability side of this schedule

21

for cure payment for comp represent liabilities

22

that Barclays was going to assume in the

23

transaction?

24 25

MR. HUME: Objection. Vague. A.

Can you repeat the question, please? TSG Reporting - Worldwide 877-702-9580

Page 117

1 2

3

HIGHLY CONFIDENTIAL - M. KELLY



(Record read.) A.

My recollection is that these amounts

4

were initial estimates of liabilities that

5

Barclays was to assume.

6

4.

Well, the comp number of 2 billion was

an agreed number, correct? a

9

A.

Yes, that was my understanding.

Q.

And it was your understanding that the

10

2 billion comp number that was agreed was a

11

billion dollars over the accrual that Lehman

12

carried on its books for comp, correct?

13 14

A.

It was approximately a billion dollars

over the cash component of the accrual.

15 16 17

TSG Reporting - Worldwide 877-702-9580

Page 129 1

HIGHLY CONFIDENTIAL - M. KELLY

2

waa/alissiassmaw/i/O/MA

3 4 5 6

MMEI Q.

What do you mean when you say there

7

was an effort to identify other assets? What

8

other assets are you talking about?

9

A. My recollection is that there was an

10

effort to identify whether there was a surplus

11

in funds segregated under the 15c3 requirement.

12

Q.

Apart from the effort to find a

13

surplus in funds, the segregated funds under

14

15c3, were there other types of assets that were

15

being searched for to transfer to Barclays?

16

A.

My recollection is there was a general

17

effort to identify unencumbered and pledgeable

18

assets.

19 20 21 22 23 24

qM■

25

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Page 134

1

HIGHLY CONFIDENTIAL - M. KELLY

2 3 4

5 6 7

Q.

Why was it reduced from 2 and a

quarter to $1 billion? A.

It was reduced after a review of the

8

schedule that Ian, Ian Lowitt, and I undertook

9

at some point during that week whereby we

10

observed that the estimated liability appeared

11 to be high relative to the expense run rate of 12 13

the firm. Q.

And was it you and Mr. Lowitt who made

14

that determination that it was high relative to

15

the expense run rate?

16 17 18

A.

My recollection is that it was Ian and

I that made that observation. Q.

And at what point in the week did you

19

and Mr. Lowitt make that observation? Early in

20

the week? Late in the week?

A.

I can't recall.

22

Q.

Was it before Friday of the week?

23

A.

I believe it was before Friday, but

21

24

I'm not certain.

25

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Page 136

1 2 3 4

HIGHLY CONFIDENTIAL - M. KELLY Q.

Tell me what you said, what Mr. Lowitt

said, and what Mr. McDade said in that meeting. A.

My recollection is that I explained

5

the observation that we had, meaning that the

6

liability estimate appeared high relative to the

7

run rate. I don't recall what Ian said in that meeting. And I recall Bart's reaction to that

9 10

as being: We just left a billion dollars on the table.

11 12 13 14 15 16 17

WMMMMMEMainfte MINIMMEN

18

iiriij

19 20 21 22

1.41NOMOM

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Page 229

1 2

HIGHLY CONFIDENTIAL - M. KELLY Q.

Is it fair to say that the -- now I'm

3

back in the u Loss/Gain" column, the 5.25 loss to

4

Lehman. Did that calculate -- is it fair to say that's primarily a function of the difference

6

between the book value of the inventory and the

7

value negotiated -- and the negotiated value in

8

the contract for the securities? MR. HUME: Objection. Vague and

9 10

ambiguous.

11

A.

It may. It may. It likely accounts

12

for the difference based on these estimates at

13

this point in time.

14 15 16



17

awaniummunaumii.001■111111111aNaft 4111.101011111MilliallIEMBOMMINIMMINIMMININ

18 19 20 21 22 23

esainallir

24 25

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Page 66 1

HIGHLY CONFIDENTIAL - M. KELLY

2 3 4 5 6 7

Q.

Uh-huh. Did you have an

8

understanding, sir, that the agreement, the

9

pricing of the agreement was that Barclays would

10

pay Lehman 5 billion less than Lehman had

11

thought the assets were worth?

12

A.

My understanding was that the

13

negotiated sales price across all those asset

14

portfolios resulted in a $5 billion,

15

approximately $5 billion loss to Lehman relative

16

to its marks at that time.

17 18 19 20 21

ME/MENINlifilIMEINIMM#1/illniasfaiisikfti

22 23 24

25 MIIIIMEMIIIMO TSG Reporting - Worldwide 877-702-9580

Page 1

1 2

HIGHLY CONFIDENTIAL - G. LaROCCA



UNITED STATES BANKRUPTCY COURT

3

SOUTHERN DISTRICT OF NEW YORK

4 5

In Re: Chapter 11

6 7

LEHMAN BROTHERS

Case No. 08-13555(JMP)

8

HOLDINGS, INC., et al.,

(Jointly Administered)

9

Debtors. 10

11 12

* *

*HIGHLY CONFIDENTIAL* * *

13

DEPOSITION OF GERARD LaROCCA

14

New York, New York August 19, 2009

15 16 17 18 19 20 21 22 23

Reported by:

24

KATHY S. KLEPFER, RMR, RPR, CRR, CLR

25

JOB NO. 24292 ISO Reporting - Worldwide (877) 702-9580

Page 2

HIGHLY CONFIDENTIAL - G. LaROCCA 2

August 19, 2009

3

9:30 a.m.

4

HIGHLY CONFIDENTIAL deposition 6

of GERARD LaROCCA, held at Jones

7

Day, LLP, 222 East 41st Street, LLP, New York, New York, before Kathy S.

9

Klepfer, a Registered Professional

10

Reporter, Registered Merit Reporter,

11

Certified Rea1time Reporter, Certified

12

Livenote Reporter, and Notary Public

13

of the State of New York.

14 15 16 17 18 19 20 21 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 29 1 2

HIGHLY CONFIDENTIAL - G. LaROCCA

IiIIIIIIMMMIM1111101111111111

"11611111811.111"4111Mallb

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Q.

Okay.

19

A.

And said we needed to get on the phone

20

with the Fed, okay? And Jonathan used words

21

like if the Fed is going to support this, you

22

know, if we want the Fed to work with us and to

23

support this transaction that we want to try to

24

do, that we're going to have to step into

25

that -- we're going to have to take the Fed out TSG Reporting - Worldwide (877) 702-9580



Page 30

HIGHLY CONFIDENTIAL - G. LaROCCA 2

of my -- of their financing obligation with

3

Lehman Brothers. I participated in a phone call with

4

the Fed on that Tuesday, and -- and you're going 6

to ask me who it was with, and I don't recall,

7

and after my phone call, the urgency was evident

8

to me and I dropped what I was doing and headed

9

down to the Fed and I met with -- now, I'm not

10

sure if I -- I don't know if I went down on the

11

Tuesday night. I think so, I'm almost, I'm

12

almost positive it was Tuesday night early

13

evening and met with Lucinda Brickler and other

14

colleagues of hers from the Fed. And Lucinda had explained to me that

15 16

the Fed was financing Lehman Brothers, had

17

provided roughly $45 billion in financing for

18

Lehman Brothers, and that they were using --

19

that Lehman was using three facilities to

20

finance collateral and the Fed had lent them $45

21

billion.

22 23

111111111.

24 25

TSG Reporting - Worldwide (877) 702-9580

Page 36

HIGHLY CONFIDENTIAL - G. LaROCCA

2 2 3 4

6 7 a

9 10 11 12 13 14 15 16 17 18

Q.

The cash is how much? 45 billion?

19

A.

Originally, the -- we moved 5 billion

20

initially, and the securities did not move

21

across quickly, and as a matter of fact, we

22

actually didn't get $5 billion worth of

23

securities for the first $5 billion worth of

24

cash that moved across.

25

At that point in time, I alerted the TSG Reporting - Worldwide (877) 702-9580

Page 37 1

HIGHLY CONFIDENTIAL - G. LaROCCA

2

Fed, and I would have called, I'm not sure if it

3

was Lucinda Brickler or Stephanie Heller, that

4

we had agreed a transaction, we were having a

5

great deal of difficulty because JPMorgan was

6

not cooperating, and they had gone onto the --

7

they had gotten -- I was told that they were

8

going to reach out to JPMorgan. I can't tell

9

you what they said. They came back to me, the Fed, and

10 11

said that JPMorgan wanted to hold the excess

12

collateral in margin for the transactions to

13

satisfy, you know, their potential exposure to

14

Lehman Brothers, and I said that's a

15

non-starter, that's not the transaction that we

16

had agreed on the Wednesday. We had agreed a transaction with the

17 18

Fed to take the Fed out of the transaction, not

19

for Barclays to satisfy or, you know, JPMorgan's

20

exposures to Lehman Brothers. That was a lively

21

discussion with me and the Fed, and at that

22

point in time, I had escalated to Rich Ricci

23

that JPMorgan was -- I don't know the words I

24

would have used. I don't know that --

25

Q.

Something colorful?

.. TSG Reporting - Worldwide (877) 702-9580

Page 38 3. 2 3 4

HIGHLY CONFIDENTIAL - G. LaROCCA

A.

Something colorful, right? They

didn't play nice in the sandbox, okay? And, you know, and several -- now hours have passed, right? And, you know, we

6

haven't done -- we haven't moved much cash and

7

much securities.

9 10 11 12 13 14 15 16 17 18 19 20 23. 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 1

1

HIGHLY CONFIDENTIAL - D. PETRIE

2

UNITED STATES BANKRUPTCY COURT

3

SOUTHERN DISTRICT OF NEW YORK

5

In Re:

6

Chapter 11

7

LEHMAN BROTHERS

Case No. 08-13555(JMP)

8

HOLDINGS, INC., et al.,

(Jointly Administered)

9

Debtors. 10

12

* * * HIGHLY

CONFIDENTIAL* * *

13

DEPOSITION OF DAVID PETRIE

14

New York, New York

15

August 26, 2009

16 17 18 19 20 21 22 23

Reported by:

24

KATHY S. KLEPFER, RMR, RPR, CRR, CLR

25

JOB NO. 24293 TSG Reporting - Worldwide (877) 702-9580

Page 2

1

HIGHLY CONFIDENTIAL - D. PETRIE

2

August 26, 2009

3

9:29 a.m.

4 5

HIGHLY CONFIDENTIAL deposition

6

of DAVID PETRIE, held at Jones Day

7

LLP, 222 East 41st Street, New York

8

New York, before Kathy S. Klepfer

9

a Registered Professional Reporter

10

Registered Merit Reporter, Certified

11

Realtime Reporter, Certified Livenote

12

Reporter, and Notary Public of the

13

State of New York.

14 15 16 17 18 19 20 21 22 23 24 25

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Page 93 1

HIGHLY CONFIDENTIAL - D. PETRIE

2

Q.

And the next line below that?

3

A.

The next line below that reads,

4

"Haircut charged will be implied."

5

Q.

What does that mean?

6

A.

Given that the Fed had extended

7

funding for Lehman assets, the Fed employed its

8

own haircut schedule for those assets. Given

9

that Barclays had been asked by the Fed and we

10

were undertaking taking the Fed out of their

11

lending of money to Lehman Brothers for those

12

specific assets, when we would receive those

13

assets versus the cash that we were lending to

14

Lehman, the collateral that we would receive,

15

which would be at this point identical to what

16

the Fed had been funding on that Thursday, the

17

haircuts would be implied because they had

18

already been applied to the Lehman loans.

19 20 21 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 113

1 2

HIGHLY CONFIDENTIAL - D. PETRIE collateral that we received.

3 4

Q.

Is that consistent with your

recollection of what happened that evening into the Friday? A.

My recollection is in dollar terms.

7

We received 42.7-ish billion dollars worth of

a

collateral and got $7 billion in cash to complete the Fed repo trade. This breakdown

10

from John Haley is something I wouldn't be able

11

to comment on. I don't know if it's correct or

12

not.

13 14 15 16 17 18 19 20 21 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580

Page 1

1

HIGHLY CONFIDENTIAL - M. KLEIN UNITED STATES BANKRUPTCY COURT

2

SOUTHERN DISTRICT OF NEW YORK 4

5

In Re:

X Chapter 11

6 7

LEHMAN BROTHERS

Case No. 08-13555(JMP)

a

HOLDINGS, INC., et al.,

(Jointly Administered)

9

Debtors. 10

11 12 13

* *

* HIGHLY CONFIDENTIAL* * *

DEPOSITION OF MICHAEL KLEIN

14

New York, New York

15

September 12, 2009

16 17 18 19 20 21 22 23

Reported by:

24

KATHY S. KLEPFER, RMR, RPR, CRR, CLR

25

JOB NO. 24546 TSG Reporting - Worldwide 877-702-9580

Page

HIGHLY CONFIDENTIAL - M. KLEIN 2 3

September 12, 2009 10:40 a.m.

4

5

HIGHLY CONFIDENTIAL deposition

6

of MICHAEL KLEIN, held at Jones Day

7

LLP, 222 East 41st Street, New York, New York, before Kathy S.

9

Klepfer, a Registered Professional

10

Reporter, Registered Merit Reporter,

11

Certified Realtime Reporter, Certified

12

Livenote Reporter, and Notary Public

13

of the State of New York.

14 15 16 17 18 19 20 21 22 23 24 25

TSG Reporting - Worldwide 877-702-9580

2

Page 177

1

HIGHLY CONFIDENTIAL - M. KLEIN

2 3 4 5

11.11111111.1110MORMINIMemeinsitamm"sor

6 7

8 9 10 11

WilaMMortimamiMiNWMOIMMEla MIMMM•MMIIMINNISMIIM MInaft00

12 13

111111.111111110111111111111111111111111111111"MOMMIMINO

14 15 16 17 18 19

timmommemomMOIMMMOMMOSIMMINNIIIIIIIIIII/

20 21 22 23

loganammimmagaussmaimmailliMilinammapme MISIIIIMMOMMINallabillalleantiONNOWI • Q.

Do you have an understanding as to

24

whether or not Barclays received any residential

25

real estate securities in connection with the , TSG Reporting - Worldwide 877-702-9580

TSG Reporting - Worldwide 877-702-9580

Page 1

1

HIGHLY CONFIDENTIAL - A. COX

2

UNITED STATES BANKRUPTCY COURT

3

SOUTHERN DISTRICT OF NEW YORK

4

In Re: 6

Chapter 11

7

LEHMAN BROTHERS

Case No. 08-13555(JMP)

8

HOLDINGS, INC., et al.,

(Jointly Administered)

9

Debtors. 10

11 12 13

* * * HIGHLY CONFIDENTIAL* * * DEPOSITION OF ARCHIBALD COX

14

New York, New York

15

September 11, 2009

16 17 18 19 20 21 22 23

Reported by:

24

KATHY S. KLEPFER, RMR, RPR, CRR, CLR JOB NO. 24300

25

TSG Reporting - Worldwide (877) 702-9580

Page 2

1

HIGHLY CONFIDENTIAL - A. COX

2

September 11, 2009

3

10:19 a.m.

4

5

HIGHLY CONFIDENTIAL deposition

6

of ARCHIBALD COX, held at the law

7

offices of Jones Day, LLP, 222 East

a

41st Street, New York, New York, before

9

Kathy S. Klepfer, a Registered Professional

10

Reporter, Registered Merit Reporter,

11

Certified Realtime Reporter, Certified

12

Livenote Reporter, and Notary Public

13

of the State of New York.

14 15 16 17 18 19 20 21 22 23 24 25

TSG Reporting Worldwide (877) 702-9580

Page 99 1

HIGHLY CONFIDENTIAL - A. COX

2 3

fearammommoimaisimaiimmomait

4 5 6 7

Iminsimiusionamina

8 9 10 11 12 13 14 15 16

MOM

17 18 19 20 21 22

11.1111Mallat .10111M4111M111111111MMINIMMIONNOMINIO 110011111611111111111111111111111. Do you have an understanding as to

23

whether or not Barclays received any residential

24

mortgage securities in connection with this sale

25

transaction? TSG Reporting - Worldwide (877) 702-9580

Page 100 1 2

HIGHLY CONFIDENTIAL - A. COX

A.

The residential mortgages were subject

3

to a good deal of negotiation and discussion. I

4

do not recall where we came out on those.

5

Q.

Okay. Do you have an understanding as

6

to whether or not they were pledged to the DTC

7

in connection with the sale transaction?

8



A.

I do not know for certain, no.

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

TSG Reporting - Worldwide (877) 702-9580