MASSIE et al v. GOVERNMENT OF THE DEMOCRATIC PEOPLE'S REPUBLIC OF KOREA

Filing 120

MASSIE et al v. GOVERNMENT OF THE DEMOCRATIC PEOPLE'S REPUBLIC OF KOREA

Doc. 120 Att. 5

Howard Heintz, Jr. 3.30.07.txt 0001 1 IN THE SUPERIOR COURT FOR THE DISTRICT OF COLUMBIA 2 ------------------------------------: 3 UNITED STATES OF AMERICA, : : 4 Plaintiff, : : 5 vs. : No.: : 03-00096 6 POGO and ROBERT BERMAN, : : 7 Defendants. : ------------------------------------: 8 9 Washington, D.C. 10 Friday, March 30, 2007 11 12 Deposition of: 13 HOWARD HEINTZ, JR. 14 called for oral examination by counsel for 15 ROBERT BERMAN, pursuant to notice, at Department of 16 Justice, 601 D Street, Northwest, 17 Washington, D.C., before Terri L. Hamilton, 18 of Capital Reporting Company, a Notary Public in and 19 for the District of Columbia, beginning at 9:20 20 a.m., when were present on behalf 21 of the respective parties: 22 0002 1 APPEARANCES 2 3 On behalf of PLAINTIFF: 4 JUDITH RABINOWITZ, ESQUIRE 5 Department of Justice 6 601 D Street, Northwest 7 Washington, D.C. 20044 8 [phone] 9 10 On behalf of ROBERT BERMAN: 11 STEVEN TABACKMAN, ESQUIRE 12 Tighe, Patton, Armstrong & Teasdale, P.L.L.C. 13 1747 Pennsylvania Avenue, Northwest 14 3rd Floor 15 Washington, D.C. 20006 16 [phone] 17 On behalf of POGO: 18 ANDREW HERMAN, ESQUIRE 19 Brand Law Group 20 923 Fifteenth Street, Northwest 21 Washington, D.C. 20005 22 [phone] 0003 1 CONTENTS 2 3 EXAMINATION BY: PAGE 4 Counsel for ROBERT BERMAN 4, 155 5 Counsel for POGO 132 6 Counsel for PLAINTIFF 153, 158 7 HEINTZ DEPOSITION EXHIBITS * PAGE 8 1 Memorandum dated 9/9/86 55 9 2 Letter, RB 0375 62 Page 1

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Howard Heintz, Jr. 3.30.07.txt personal reaction to them? A Well, I thought that Berman had a good understanding of these markets, that the analysis seemed to show that atleast under some conditions the changes he was proposing would yield greater revenue for the government consistent with the statutory -- and be consistent with the statutory requirements and therefore that his proposal should be considered. Q Is there a way that you can describe his proposal and how it differed from what was going on at the time in terms of valuation? A Well, as I recall it, it applied only to a certain class of oil transactions, namely those between subsidiaries of the same company that's doing the production and the reason those are complicated is because they're all part of the same whole so it's not actually a market, what we call an arms length market transaction in which the buyers and sellers have independent and opposing interest, so establishing the value there is more challenging, let's say. I think Mr. Berman was proposing, in effect, to use a market source of price rather than the price that the corporations said was the price at which their subsidiaries transacted oil. Q Do you recall what you did after reviewing and making your own assessment of the value of his proposal validity, if you will, do you recall what you did at that time? A I think -- well, there would have been several things. One is when I was comfortable that he had developed the analysis and its presentation, encouraged him to discuss it with MMS staff and I sometimes participated in those discussions to see if they thought it was correct and could be implemented or should be implemented. And then, as I said before, typically we would broaden the discussion to higher levels of MMS staff or if staff in other situations didn't agree to in effect have that proposal on the table when they were making decisions. Q Do you recall what the MMS reaction was in these discussions that you participated in, were they receptive to it? A Not very receptive I think it's fair to say. Q And do you recall the rationale for not being receptive? A I recall hearing it, but I don't recall what it was. Sometimes these things have to do with the practicality more than the outcome. Q What do you recall happening? I guess just generally there were discussions, what's your recollection of what happened to his proposals over the ensuing, I don't know how long the process took, but it was being considered or debated during that period of time? A Well, I think there were a number of discussions at various levels and some refinements Page 16

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Howard Heintz, Jr. 3.30.07.txt in the analysis over time and some broader -- I think I recall some broader attempt to understand the implications of the change that he was proposing. In the end I think the decision was made not to implement it. Q So the proposals that he made were never implemented? A Yes, I think that's correct. Q Was Mr. Yeager involved in those discussions if you recall? A Well, he was certainly kept informed as the analysis emerged, and as we began to make recommendations at various levels, I would brief him. Sometimes Mr. Berman and I would brief him together. I think there were a number of memoranda describing the analysis and I think he was aware of them. Q Do you recall if Mr. Yeager was, I hate to use the word supporter of it because it's not a very technical word, but was he a person that was convinced of the analysis and was arguing for its adoption or something other than that, taking a position other than that? A Yeah, I don't think -- I don't remember him becoming an advocate for the position. I remember him being concerned and understanding the issue being raised. Q How about Mr. Bettenberg, do you recall whether he was an advocate for the position, if he was involved in the discussion? A He was and I think rather than an advocate for the position I think he was an advocate that it be considered in a serious way. Q To your recollection did MMS consider it in a serious way? A I would say they did. Q What do you recall about that? A Well, I recall that they would -- they would go and after a period of time after we had discussed the analysis with them and the recommendations they would -- we would have the meeting and they would describe what they saw as the difficulties, the weaknesses in the analysis and the difficulty in implementing it and so forth and essentially saying this is why they didn't think it was a good approach. Q There did come a time I take it in the early to mid 1990s when the valuation model or technique or the standards for valuation were changed in the Department; is that correct? A I won't be able to remember any specific date. I know they changed from time to time. Q Do you recall there being a substantial change that required or that involved public input at some point in the process for royalty evaluation? A Public input, no, I don't recall that. There was, of course, public input in all the rulemaking. Q Was there a rulemaking procedure that was Page 17

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Howard Heintz, Jr. 3.30.07.txt undertaken in the 1990s? A Yes, I think there was. Q What's your recollection of that? A My recollection is that we -- that was one of the more formal processes in which we had an opportunity to discuss these sorts of analysis and proposals. Q And did Bob participate in that rulemaking if you recall, Mr. Berman? A Yes, I think he did. Q Was he a designated representative in that Office of Policy Analysis? A Well, we didn't make a separate designation for rulemaking. He was the person who had general responsibility for royalty evaluation issues, so... Q When you would have the meetings as you described with MMS prior to the formal rulemaking, would you participate in some of those? A In some of them, yes. Q Would there be other representatives from the Office of Policy Analysis who would participate in some of them? A There might be sometimes, yes. Q Would Mr. Berman always be a participant? A Always? Q I'm not holding you to literally every time, Mr. Heintz. Would it be typical or usual that if you were participating Mr. Berman would be there also? A Yes. Q Was there ever a time that you recall that Mr. Berman was excluded from those meetings formally? A Yes, I remember in fact he was asked not to work on this issue anymore. I can't tell you when that time was. Q Do you recall who asked him not to work on the issue? A Mr. Yeager did. Q Do you recall who Mr. Yeager conveyed that position to, did he deliver it directly to Mr. Berman or did he deliver it through you or Mr. Bettenberg, or what do you recall? A I don't remember. I remember hearing it directly, but I don't know what else Mr. Yeager did. Q What did Mr. Yeager say to you? A He said he didn't want Mr. Berman to work on royalty issues anymore. Q Why didn't he want Mr. Berman to work on royalty issues anymore? A I don't remember his explaining to me. Q Do you recall there being at some point in the 1990s Qui Tam lawsuits being filed in connection with the issue of oil royalties? A Would you ask that again? Q Do you recall that at some point in the 1990s there were lawsuits filed known as Qui Tam lawsuits by individuals with respect to the issue of oil royalties and whether the companies were Page 18

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Howard Heintz, Jr. 3.30.07.txt That means it's way beyond me. And so I think I reached the point where I was willing to regard it as a technical dispute in which there was some merit to both sides. Q We talked about Mr. Yeager not being an advocate. At the outset of the discussions with Q A MMS were you an advocate of the Berman proposal or not? A I was an advocate that it be seriously considered at the outset. Q And do you recall how long did the discussion with MMS, this consideration of this proposal go on, months, years, I mean was this something that went on for an extended period of time? A Yeah, it was pretty extended period, not many years, but years. I mean the issue lurked about for quite awhile and if you look at the rulemaking, that's, of course, a very compact and scheduled process, so the issue was around longer than that. Q At the time that there was consideration being given to the Berman position was it being evaluated as a possibility with other policy recommendations or was it simply being looked at by itself up or down on this one as opposed to gee, we like this one versus that one? A No, I think it was on the table for awhile with an approach that the MMS was recommending and they had considered several variations on their approach. Q Was their approach a market centered approach also; do you recall? A I'm recalling that in the particular aspect that Berman was focussed on it was not. Q I'm sorry. Go ahead. A This was the aspect that I referred to transactions between subsidiaries. Q And when you left four years ago the Department of the Interior, was a market approach with respect to the intracompany transfers in place, was that the mechanism for valuing oil royalties, if you recall? A No, I don't recall it being a market approach with regard to that aspect, no. Q And has there ever been, during your tenure that you recall, a market centered approach for what I'll call intracompany sales as a mechanism for valuing oil royalties? A I think they're relying on posted prices. That's my recollection. MR. TABACKMAN: Why don't we take a break for a few minutes. (Brief recess.) (Heintz Exhibit Number 1 was marked for identification.) BY MR. TABACKMAN: Q Let me show you what we've marked as Heintz Deposition Exhibit Number 1. The date on that is? Page 20

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Howard Heintz, Jr. 3.30.07.txt A September 9, 1986. Q If you take a look at it, take your time and tell me if you recall seeing that. MS. RABINOWITZ: Do you have copy for counsel? MR. TABACKMAN: That's the problem. That's the folder I did not pick up. These are the only copies right now. MS. RABINOWITZ: It's more important for you to look so go ahead. MR. TABACKMAN: I made five copies of all of those today. I didn't realize I had put them in two separate folders as I was rushing out the door. MS. RABINOWITZ: Are there going to be many like this? Should I go make copies right now? MR. TABACKMAN: I think there's probably going to be about half a dozen or so that I think -MS. RABINOWITZ: Can you isolate them and I'll have my secretary make copies? MR. TABACKMAN: That's what I realized in the middle while you were gone. Let's go off the record. (Discussion off the record.) BY MR. TABACKMAN: Q Have you had a chance to review Heintz Exhibit 1? A Yes. Q Do you recall ever seeing it before? A Yes. Q Can you say what is and when you saw it? A It's a memorandum from Bob Berman to me on an analysis of futures prices versus posted prices of oil and it's dated September 1986. Q Do you recall whether this would have been the first time that Mr. Berman would have put something in writing to you? A No, I don't recall whether this was the first time. Q In looking at the document are you able to make an assessment as to does this look like something that's following onto something else as you read it or his first informing you of the analysis that he's been undertaking, if you can say? A I don't think the memorandum makes clear its position. Q Based on you review and your recollection, what is Mr. Berman saying in this memorandum, what is he reporting to you? A Essentially what he's saying is that sometimes the market prices would be better for royalty valuation -- royalty oil valuation than the posted prices that were being used. Q Posted prices are what? A They're the prices that refiners say they will buy oil at on a given date. Q By posted what does that mean, are they posted somewhere? I guess I'm trying to understand what the term means. Page 21

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Howard Heintz, Jr. 3.30.07.txt A I don't know whether they are actually physically posted. My guess is they are electronically published now so that various suppliers to the refiners know what they'll be paid for the oil. Q And we had talked that Mr. Berman's proposal focused on intracompany transactions. Is this memorandum that limited or that specific or is it more general? A Yes, it refers to non arms length sales. Q So the focus of it then was on his concern that when companies were selling to subsidiaries the government wasn't getting the full royalty that it might otherwise be entitled to, is that a fair capsule summary of this? A In certain circumstances, yes. Q And those circumstances would be intracompany transactions, non-arms lengths transactions or is it some subset of those even? A It's a subset of those depending on the relationship of posted prices and market prices. Q Would you have passed or do you recall whether you passed this memorandum in particular on to anyone else? A No, I don't recall. Q Do you recall having a conversation with Mr. Berman about it? A No, I don't recall a specific conversation, but it would have been our normal way of working. Q Do you have a recollection of a lawsuit that was going on in California concerning the valuation of royalties or having to do with oil royalties that Mr. Berman was concerned with or focussing on? A Yes, I do recall. Q What's your recollection? A Well, of course the State of California owns some lands and has oil leases on them and therefore has a similar interest in collecting royalties on those leases that the federal government does and the lawsuit was -- in general terms my understanding is the lawsuit was to try to recover additional funds from the oil industry on a similar basis that Mr. Berman is proposing here. Q Do you recall whether Bob was following that or not, Mr. Berman? A I believe he was. I remember him reporting to me from time to time about what he was learning about on the case. Q Do you have a recollection whether Mr. Yeager's directive to you about Mr. Berman not participating in the oil royalties discussions that were going on at MMS that was before or after the California litigation that he was reporting to you on? A No, I don't recall. Q I don't know that I asked you, but when Mr. Yeager said to you that he didn't want Mr. Berman involved in the oil royalties regulation process, what did you do at that time with respect Page 22

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Howard Heintz, Jr. 3.30.07.txt to Mr. Berman and that directive? A Well, I don't recall specifically, but I would have told him not to do it anymore. Q And by not doing it anymore that would mean what, not to write any more memos, not to go to anymore meetings, all of the above? A Yeah, not to do anymore analysis, all of the above, don't work in this area anymore. Q Do you have a recollection as to whether Mr. Berman stopped working on the issue after he received that instruction from you? A I guess I assumed that he did since I was his supervisor and asked him to stop. Q But you have no recollection as to when that was or can't really estimate when that was? A No. Q Can you atleast state in reference to the California litigation that he was reporting to you on if it was before or after you would have given him that directive from Mr. Yeager? A I don't recall specifically. Q Do you have a general sense, a nonspecific recollection? A No. Q Would Mr. Berman, to your recollection, communicate directly to Mr. Yeager without going through you or Mr. Bettenberg? A Not usually, no. MR. TABACKMAN: Let's mark this document as Heintz Number 2. (Heintz Exhibit Number 2 was marked for identification.) BY MR. TABACKMAN: Q I'm going to show you what's been marked as Heintz Exhibit Number 2. If you can take a look at it. Have you had a chance to look at the document? A Yes. Q And what is it if you can identify it? A It's a memo from Bob Berman to me and Brooks Yeager, the subject is status on underpayment on royalties on California crude royal and related enforcement of common carrier provisions of MLA. Q And what is MLA? A I think it's the Mineral Leasing Act. Q What is it that Mr. Berman is informing you of? A Underpayments in California and settlements with the State of California as a result of their -- I'm trying to see if it's -- it doesn't seem to be a suit. It was just an effort by the state to receive more money from the oil industry and then it discusses the causes and amounts of the undervaluation of oil. Q The document, this particular one is undated. Do you have a recollection as to when you would have seen that or recall when Mr. Berman was raising that with you? A No. Page 23

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Howard Heintz, Jr. 3.30.07.txt were marked for identification.) MR. TABACKMAN: Number 7 it appears I only have one copy for you. MS. RABINOWITZ: That's fine. BY MR. TABACKMAN: Q Have you had a chance to look at that? A I've looked at Number 6. Q What is Number 6? A It's a memorandum through me to Brooks Yeager. The subject is future review of MMS revised analysis of whether to pursue collections of additional California royalties based on gross proceeds from exchange rather than on posted prices. The date is May 6, 1994. Q Now, Exhibit 6 indicates it was going to Mr. Yeager from Berman through you? A Uh-huh. Q You need to say yes or no. A Yes. Q And if we look at I believe it's 4, maybe even Exhibit 3, yeah both 3 and 4. I'm sorry, 2 and 3. In fact, if you have those in front of you, if not I can show them to you. Mr. Berman directs those to Mr. Yeager without going through you? A Yes. Q What, if anything, do you make of the fact that he is now sending his memoranda through you in May of 1994? A Well, it would have been the more standard procedure to send it through me since I was the supervisor and I don't know why in August, and the one without a date, that procedure wasn't followed. Q There was also the one in December and by August you mean August 1993 and in December 1993 both of those go directly from Mr. Berman to Mr. Yeager? A Yes. Q And when Mr. Yeager responds on December 4th of 1993 he sends it back through you; is that correct, that would be in Number 5? A Yes. Q But in Number 6, which is five months later or six months later, Mr. Berman is now sending his memoranda through you? A Yes. Q Does that refresh your recollection in any way as to whether in that period of time, that was the period of time in which Mr. Yeager had indicated he didn't want Mr. Berman to continue his involvement? A Well, he's still involved so presumably -- and not hiding it from Mr. Yeager, so I assume he hasn't been told not to be involved yet. That's an inference I would make, I'm not remembering. Q It doesn't refresh your recollection as to when he was told? A I'm not remembering anything I don't remember before, but I am able to infer. Page 29

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Howard Heintz, Jr. 3.30.07.txt Q And you don't need to infer. All I'm asking you is if looking at this refreshes your recollection as to when Mr. Yeager told you to stop having Mr. Berman involved and it does not. What is Mr. Berman advocating in the May 6, 1994 memorandum, Exhibit Number 6? A That the analysis that MMS has done of the materials I think that resulted from the State of California case in settlement be reviewed by the Department and by the Office of Policy Analysis and the Solicitor's Office. Q Do you recall seeing this memorandum before? A You mean at the time? Q At the time. A No. Q Do you have any recollection independent of reading in this memorandum, Exhibit Number 6, that the MMS had requested not to have its report on the California royalty situation reviewed by the Office of Policy Analysis? A No, I don't recall that. Q Do you have a recollection that differs with the representation that Mr. Berman makes that "MMS has also requested that such report when complete not be reviewed within PPA"? A No, I don't remember that. Q But you have no reason to dispute that statement in there I take it? A No, I don't remember anything contrary to it. Q Do you remember any discussion about a limited interagency review of the MMS work product? A No, I don't. Q The paragraph that's numbered one it says "MMS should be required to submit its analysis to PPA." Do you have any recollection with respect to this part of the royalties issue whether PPA, that's the Office of Policy Analysis, correct, an abbreviation? A Yes. Q Whether the office undertook a review of the MMS reports? A No, I don't remember. Q The position of MMS that is described by Mr. Berman is consistent with your recollection however that MMS wanted to proceed on something other than a market based analysis for royalty determination, correct? A That's a very general statement. This raises -- this is a different question about markets than the question of posted prices versus the futures market, but it's a similar principle. Q What is Exhibit Number 6 focussing on? A It's focussing on the exchange transactions in California and I think those are associated with the -- or there's an associated issue about, let's see if that's in here because it's certainly in the background, the treatment of pipelines as common carriers. I guess that's not a part of it. Page 30

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Howard Heintz, Jr. 3.30.07.txt Q Well, the first paragraph says "At the request of the State of California, MMS was has agreed to review additional, factual material, including documents currently under protective order of the court in determining whether posted prices which were below the gross proceeds from certain exchanges properly represent value for royalty purposes." Isn't that the issue that Mr. Berman was initially raising in the earlier memoranda that we saw to you from going back to 1986, the issue that the Department was not collecting the entire value of royalties because of the use of posted prices? A That part of it is correct, but the market reference suggested as the alternative in this case is different from that case. Q What is the market reference that he's suggesting here? A The proceeds from exchanges, in particular what's called a three cut exchange. Q And do you know what that refers to? A No. Q Do you have a recollection of the Department adopting recommendations that Mr. Berman sets forth here? A No. Q Do you know if the Department ever decided to involve itself in the California litigation as Mr. Berman was suggesting? A No, I don't recall. Q Is it fair to say that Mr. Berman and under the second heading PPA and SOL review is pressing for a review by the Office of Policy Analysis strongly? A Yes. Q And is it also fair to say that it appears atleast that as of May 6, 1994 the determination is that the Office of Policy Analysis will not be undertaking the review because of MMS' request? A Yes. Q And if the Office of Policy Analysis were to have undertaken a review, would it have been Mr. Berman to be the person to do that? A Presumably yes, unless he was instructed not to, correct. Q And you have no recollection of whether or not he prevailed in his advice to have the Office of Policy Analysis review the MMS proposals? A That's correct. I don't remember. Q You would not differ if Mr. Berman were to say that that analysis did not take place? A I have no recollection that would cause me to differ. Q Take a look at Number 7. A Okay. Q What is Exhibit Number 7? A It's a memorandum from Bob Berman through me to Brooks Yeager. The subject is MMS royalty global settlements problems and secretarial Page 31

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Howard Heintz, Jr. 3.30.07.txt exposure. The date is September 19, 1994. Q Little more than four months after Exhibit Number 6, correct? A Yes. Q And what would you describe is the subject matter of Exhibit Number 7? A Specific issues that were not -- that Mr. Berman concluded were not appropriately addressed in the global settlements that were being made with oil companies over royalty issues. Q These were royalty settlements that MMS was conducting with oil companies to recover historical royalties owed; is that right? A Yes. Q Here Mr. Berman says, it starts off by saying that there are problems with those settlements, correct? A Correct. Q And he says that the MMS has been conducting them and that as far as he's concerned they've reached a level that the secretary may be exposed to significant criticism for relinquishing claims to substantial royalty revenue; is that right? A That's right. Q And I take it that suggests that Mr. Berman is concerned about the way MMS is proceeding? A That's what it says. Q Do you have a recollection of Mr. Berman becoming increasingly concerned and expressing that concern to you independent of now reading this and seeing it? A Yes. Q You have that recollection? A Yes, I have a general recollection of his becoming increasingly concerned about the global settlements. Q And increasingly, for lack of a better word, noisy about it? A I don't know that I knew what the noise was. I knew what he was saying to me and I certainly would have known what he was writing, but what he was saying to others I was not aware. Q Would it be fair to say that the level of intensity in the memoranda that you've been reviewing is increasing, Mr. Berman's level of intensity and his expression and criticism of others in the Department? A Yes, I think that's fair to say. Q Is it also fair to say that Mr. Berman is expressing the fact that he and the Office of Policy Analysis were not involved in these settlements; isn't that correct? A I don't see that statement. Q If you look at the first paragraph, number four, he says "Lack of appropriate review and oversight prior to committing the Department." Who would that review and the oversight been provided by if it were within the Department of the Page 32

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Howard Heintz, Jr. 3.30.07.txt Interior? A It could have been the office of policy analysis, but it doesn't say that here. Q But that is one possibility? A Could have been the Solicitor's Office, doesn't state that here. Q Those are the two departments or divisions that Mr. Berman was advocating take a close look at this, these settlements in his prior memoranda, right? A Correct. Q Specifically I believe it is the May 6 memorandum, Number 6? A Correct. Q Do you know whether Mr. Berman's recommendation that the secretary declare a moratorium on the settlements and convene a panel to review past procedures was adopted? A I think it was not adopted. I don't recall it and that would have been a pretty traumatic event. Q If it were adopted? A If it were adopted. Q Does this refresh your recollection, the subject matter here in Mr. Berman's expression of concern about lack of involvement in these settlements, refresh your recollection in any way as to when you were told that he should no longer involve himself in oil royalty issues as opposed to complaining about his lack of involvement in oil royalty issues? A Well, again, I can infer. I'm not remembering, but I can infer that he was still involved and had not been told not to be because he's sending memos to Brooks Yeager which presumably wouldn't have done afterwards. Q Well, this memorandum complains that MMS is doing all of these settlements on their own without the involvement of anybody else, doesn't it? A Yes, but he is still sending memos to Mr. Yeager. Q He's sending memos to you complaining about his non-involvement? A Through me. Q Through you complaining about his non-involvement in the issues? A Right. Q And you would draw a distinction between having a substantive role in the resolution of the royalty issues. This document here is fairly characterized as a complaint that he's not being involved; isn't that right? A I would say that it's a complaint that he's not being involved by MMS. It's not a complaint that he's been told not to be involved by Mr. Yeager. Q Do you recall Mr. Yeager taking any steps to ask Mr. Berman to involve himself in this process? Page 33

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Howard Heintz, Jr. 3.30.07.txt A No, I don't recall any. Q Do you recall seeing any memoranda from Mr. Berman where he is expressing any input into the valuations that are being arrived at in the settlement process in 1994? A No, I don't recall any. Q Do you recall Mr. Berman talking to you about his substantive involvement in that process, that he was going to a meeting, that he was talking to people about the valuations that MMS was reaching, do you have any recollection of that whatsoever? A I remember not specific events but in general that he expressed to me from time to time his concern about how the settlement negotiations were going and that certain things were not being considered and were being left out of the settlement agreements. I don't know specifically what conversations he had with the people who were participating in them from which he gained that information nor what analysis or concerns he raised with them in those conversations. Q If you look at the last paragraph, the last sentence of the last paragraph on page one of Exhibit Number 7, "It is not known what basis MMS assigned a value to the drainage issue or even if any value was considered at all." Does that suggest to you that Mr. Berman wasn't a participant in the process by which value was determined? A Well, of course, it's an incorrect statement in the first place. Q What is an incorrect statement? A I take it to mean- well, somebody knows what the basis was, so it's an incorrect statement. It's an indirect way -- I take it to be an indirect way for him to say he doesn't know. Q Which would suggest he wasn't a participant? A Right, or nobody would tell him. Q If you would turn to the second page at the top there's a sentence "MMS apparently had not notified BLM of the settlement negotiations, and BLM had not discovered them until late March or early April after the agreement had been signed." Does that further suggest that Mr. Berman was not involved in the process of reaching the settlements? A That's sort of an indirect inference. Q Let me take you down to the next one. If you look down and do see the paragraph beginning whether? A Yes. Q Could you read that to yourself? A Okay. Q It says, "Whether or not 20 years of relinquished claim was considered in the settlement, or how it was valued if considered, can only be learned from a review of the MMS issue valuation working papers associated with the settlement." Does that suggest to you that Mr. Berman was not a participant in the settlement Page 34

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Howard Heintz, Jr. 3.30.07.txt process? A It suggests to me that he hasn't seen those papers and hasn't been told what's in them. Q And wouldn't that suggest to you, sir, that he was not a participant in the process? If he hasn't seen the papers, he can't say if value was considered? A What you're asking me is to infer things for you based on assumptions about those working papers being available to everybody who participated in the process. Why don't you make those inferences yourself? Q Well, I'm asking you, sir, if you -A I don't have a factual basis for answering. Q And I'm asking you then, sir, does it refresh your recollection as to when Mr. Yeager told you Mr. Berman was no longer to participate in the process? A No. Q It does not. But you have no independent recollection either of any office of policy analysis review, is that right, of the MMS settlements? A Correct. Q And no reason to dispute a representation if Mr. Berman were to make one that he wasn't involved? A Correct. (Heintz Exhibit Number 8 was marked for identification.) BY MR. TABACKMAN: Q Have you read Exhibit 8? A Yes. Q What is it? A It's a memorandum from Bob Berman through me to Brooks Yeager, the subject is global royalty settlement oversights, the date is December 5, 1994? Q Is it a fair depiction of this memorandum that once again Mr. Berman is complaining about the MMS settlements? A Well, complaining is your characterization. It's informing Mr. Yeager of failures in the settlements that he thinks should be addressed. Q Let's go back to Number 7. How would you characterize Number 7 if it's not a complaint, what word would you use? A I would say that this is a staff person who is continuing to try to make people at upper levels aware of what he considers to be a weakness in the process. Q Would it be fair to say it expresses his concern? A Yes. Q Would it be fair to say that he expresses strong concern about the way that MMS is proceeding? A Yes, he raises a number of weaknesses Page 35

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Howard Heintz, Jr. 3.30.07.txt Yes. In my office. Was that close in time to the date on which you executed this affidavit? A It was. Q Why were you interviewed by him? Q A Q A I was interviewed by him because he had been asked to investigate the circumstances under which Mr. Berman received funds from POGO. Q I take it he had certain specific questions for you? A Yes. Q Did you take note of whether he was writing down the answers as you were giving them? A He was. Q And I take it at some point thereafter he came back to you with an affidavit in this form? A Yes. Q And you read it over carefully? A I did. Q Did it conform in every respect to the answers you had given to the questions, you were satisfied that there were no inaccuracies? A I didn't look at the notes he took so I don't know whether it conformed with his notes. I determined that it was accurate and signed it as what it says here that I regarded it was true, accurate, and complete. Q It says in the fifth paragraph of the first page, "One of Mr. Berman's areas of responsibility has been the policies and procedures used for the collection of royalties on oil and gas leases issued by the Department." A Yes. Q When you spoke with Mr. Crook do you know whether you had indicated a time frame when he had that responsibility? A I don't recall. Q Would it be fair to say that that was not a responsibility of his in 1999? A Certainly wasn't after this had occurred and he had been asked not to work in that area prior to '99 by -- we had been told he should not work in this area, so that is correct. Q Going back to Exhibit Number 9, the list of his responsibilities that you had drafted, would the statement that he had been responsible for the policies and procedures used for the collection of royalties on oil and gas leases issued by the Department would that be true for 1998? A No. Q Would it be true for 1997? A No. Q Would it be true for 1996? A Not as to oil -- well, except for the California issue. In '96 there was oil undervaluation issues outside of California. Q He monitored them? A Yes, monitored them and reviewed gas royalty valuations. Page 43

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Howard Heintz, Jr. 3.30.07.txt Q Now, it states in your affidavit that he had "areas of responsibility has been the policies and procedures used for the collection of royalties on oil and gas leases issued by the Department." A Correct. Q Was he responsible for the policies and procedures that were issued by the Department? A Of course not. Q It states, "Over the years there have been a number of policies, regulations, and practices which he has reviewed and analyzed in order to provide economic analysis and advice to those responsible for administering programs involved in the collection of royalties." Did I read that correctly? A Yes. Q So people other than Mr. Berman were the people that were responsible for the policies and procedures? A Correct. Q And in fact the economic analysis and advice that Mr. Berman gave, particularly focussing on the advice, was not advice that was followed with respect to the oil royalties; is that correct? A In general correct, yes. Q Is it incorrect in specific ways? A I'm not remembering any, but I just... Q You're not remembering any way in which his advice was followed? A It was a very, very general statement that you asked me and I'm not going to state that I factually know such a generality. Q Well, the document says that he had an area of responsibility has been the policies and procedures, that's not an accurate statement is it, sir? A In the context of the rest of the affidavit I believe it is. Q In the context of the rest of the affidavit it is correct to say that he had responsibility for the policies and procedures used for the collection of royalties in oil and gas leases issued by the Department? A That's not what it says. Q One of Mr. Berman's areas of responsibility has been the policies and procedures used for the collection of royalties on oil and gas leases issued by the Department? A Yes, sir, now you have said what it says. Q Right. And was he the person who was responsible for the policy and procedures used for the collection of royalties? A No, and that's not what it says. Q What does it say? A It says that's one of his areas of responsibility. Q A Q A Oh. And that differs? Yes, sir. In what way? In the context of this affidavit it's Page 44

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Howard Heintz, Jr. 3.30.07.txt clear that he's an economist on the staff in the Office of Policy Analysis and that he has -- that this is one of the areas for which he is assigned to perform the functions of an economist on the staff of the Office of Policy Analysis. Q So you would modify that sentence in that way? A No, I'm explaining to you that that's what the word area, as in areas of responsibility, means in the context of the affidavit. Q And the last time that he had responsibility within the context of the affidavit for those policies and procedures used for the collection of royalties on oil and gas leases was when, according to Exhibit 9? A Well, he monitored the -- under valuation in '96 that appears to be the last time in Exhibit 9 that activities related to that area are included. Q How is the word monitored, which you used, differ from your use of the word reviewed and the following bullet point on Exhibit 9 and the word supported in the one that comes after that? A I think monitored is collecting, observing and collecting information about the topic. The other steps have to do with what is done with the information after it's been assembled. Q So that monitoring would be different than supporting? A Where is the word supporting? Q Under 1996 the last bullet, "Supported Interior Service Center on cost allocation and cost price analysis." A Yes. Q And is it fair to say that supporting would be a more active involvement than monitoring? A Correct, it suggests the delivery of some information produced. Q By Mr. Berman? A By Mr. Berman. Q Whereas the monitoring does not? A I suggests that he is acquiring information. Q In 1995, again referring to Exhibit 9 which you drafted, is there any reference that he did any active providing of a service in connection with oil royalties? A I'm sorry, would you repeat that? Q Looking at Exhibit 9 and focussing on 1995, is there anything that suggests that he was providing or had active involvement or providing a product, I believe you said, or information to someone regarding oil royalties? A No, it does use the word monitored. Q Again, focussing on 1994, it states again that he monitored the California royalty undervaluation and shipment? A That's correct. Q And the royalty regulations that MMS was considering in the latter part of the 1990s were Page 45