Avenue CLO Fund, Ltd. et al v. Bank of America, N.A., et al

Filing 79

CERTIFIED REMAND ORDER. MDL No. 2106. Signed by MDL (FLSD) on 1/14/14. (Attachments: # 1 Transmittal from FLSD, # 2 1 09-md-02106 Designation of Record, # 3 1 09-md-02106 Dkt. Sheet - flsd, # 4 09-MD-2106 DE 1, 2, 4-30, # 5 0 9-MD-2106 DE 32-36, # 6 09-MD-2106 DE 37 part 1 of 3, # 7 09-MD-2106 DE 37 part 2 of 3, # 8 09-MD-2106 DE 37 part 3 of 3, # 9 09-MD-2106 DE 38, 39, 41-47, 49, 50, # 10 09-MD-2106 DE 51, # 11 09-MD-2106 DE 52-59, 61-65, 68, 70, 72-76, # (1 2) 09-MD-2106 DE 78-84, 86-91, # 13 09-MD-2106 DE 93, 95-103, 106-108, # 14 09-MD-2106 DE 110-115, # 15 09-MD-2106 DE 116-125, 127-129, 132-134, # 16 09-MD-2106 DE 136-140, 142-158, # 17 09-MD-2106 DE 160-162, 164-167, 170-175, 177-190, # ( 18) 09-MD-2106 DE 191-199, 201-215, # 19 09-MD-2106 DE 217-229, 232-247, # 20 09-MD-2106 DE 248, # 21 09-MD-2106 DE 249 part 1 of 2, # 22 09-MD-2106 DE 249 part 2 of 2, # 23 09-MD-2106 DE 251-253, 262-266, 284-287, 300, 301, 310, 319, 326-3 31, # 24 09-MD-2106 DE 335, 336, 338-344, 346-349, # 25 09-MD-2106 DE 350, # 26 09-MD-2106 DE 351-358, # 27 09-MD-2106 DE 360-366, 368-374, # 28 09-MD-2106 DE 375 part 1 of 3, # 29 09-MD-2106 DE 375 part 2 of 3, # 30 09-MD-2106 DE 375 p art 3 of 3, # 31 09-MD-2106 DE 376 part 1, # 32 09-MD-2106 DE 376 part 2, # 33 09-MD-2106 DE 376 part 3, # 34 09-MD-2106 DE 376 part 4, # 35 09-MD-2106 DE 376 part 5, # 36 09-MD-2106 DE 376 part 6, # 37 09-MD-2106 DE 376 part 7, # 38 09-MD-2106 DE 376 part 8, # 39 09-MD-2106 DE 376 part 9, # 40 09-MD-2106 DE 377 part 1, # 41 09-MD-2106 DE 377 part 2, # 42 09-MD-2106 DE 378, # 43 09-MD-2106 DE 379, # 44 09-MD-2106 DE 380, # 45 09-MD-2106 DE 381 part 1, # 46 09-MD-2 106 DE 381 part 2, # 47 09-MD-2106 DE 382 part 1, # 48 09-MD-2106 DE 382 part 2, # 49 09-MD-2106 DE 382 part 3, # 50 09-MD-2106 DE 382 part 4, # 51 09-MD-2106 DE 383 part 1, # 52 09-MD-2106 DE 383 part 2, # 53 09-MD-2106 DE 383 part 3, # 54 09-MD-2106 DE 383 part 4, # 55 09-MD-2106 DE 383 part 5, # 56 09-MD-2106 DE 383 part 6, # 57 09-MD-2106 DE 383 part 7, # 58 09-MD-2106 DE 383 part 8, # 59 09-MD-2106 DE 383 part 9, # 60 09-MD-2106 DE 383 part 10, # 61 09-MD-2106 DE 383 part 11, # 62 09-MD-2106 DE 384 part 1, # 63 09-MD-2106 DE 384 part 2, # 64 09-MD-2106 DE 384 part 3, # 65 09-MD-2106 DE 384 part 4, # 66 09-MD-2106 DE 384 part 5, # 67 09-MD-2106 DE 384 part 6, # 68 09-MD-2106 DE 384 part 7, # ( 69) 09-MD-2106 DE 384 part 8, # 70 09-MD-2106 DE 384 part 9, # 71 09-MD-2106 DE 384 part 10, # 72 09-MD-2106 DE 384 part 11, # 73 09-MD-2106 DE 385 part 1, # 74 09-MD-2106 DE 385 part 2, # 75 09-MD-2106 DE 386 part 1, # 76 09-MD-2106 DE 386 part 2, # 77 09-MD-2106 DE 386 part 3, # 78 09-MD-2106 DE 386 part 4, # 79 09-MD-2106 DE 386 part 5, # 80 09-MD-2106 DE 386 part 6, # 81 09-MD-2106 DE 386 part 7, # 82 09-MD-2106 DE 387 part 1, # 83 09-MD-2106 DE 387 part 2, # 84 09-MD-2106 DE 388, # 85 09-MD-2106 DE 389 part 1, # 86 09-MD-2106 DE 389 part 2, # 87 09-MD-2106 DE 389 part 3, # 88 09-MD-2106 DE 389 part 4, # 89 09-MD-2106 DE 390, 392-394, # 90 1 10-cv-20236 Dkt. Sheet - flsd, # 91 10cv20236 DE #1-27, 29-31, 45, 53, 60-65, 67-70, 73, # 92 1 09-cv-23835 Dkt. Sheet - flsd, # 93 09cv23835 DE 112, 115-126, # 94 09cv23835 DE 130, 134, 135 and 145)(Copies have been distributed pursuant to the NEF - MMM)

Case 1:09-md-02106-ASG Document 375 Entered on FLSD Docket 12/03/2013 Page 1 of 5

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Miami Division
CASE NO.: 09-2106-MD-GOLD/GOODMAN
IN RE:
FONTAINEBLEAU LAS VEGAS
CONTRACT LITIGATION
MDL NO. 2106
This document relates to all actions.
______________________________________/
NOTICE OF FILING ON THE PUBLIC RECORD
DEPOSITION TRANSCRIPT EXCERPTS PREVIOUSLY FILED
UNDER SEAL RELATED TO SUMMARY JUDGMENT FILINGS
Defendant Bank of America N.A. (“BANA”) and Avenue CLO Fund, et al. (“Plaintiffs”)
hereby give notice that they are jointly filing on the public record certain documents, previously
filed under seal, related to BANA’s Motion for Summary Judgment and Plaintiffs’ Motion for
Partial Summary Judgment in the above-titled case.
On October 4, 2013, this Court issued an Order Upon Mandate [D.E. #368] requiring the
parties to specify, by district court docket entry number, which documents previously filed under
seal could be unsealed. 1 However, because the parties could not view the sealed entries on the
electronic CM/ECF docket in this case—and therefore, could not determine which district court
docket entry numbers corresponded to each sealed document—the Court later issued a Sua
Sponte Order Regarding Mandate and Documents Filed Under Seal [D.E. #370] requiring the

1

The parties previously filed with the Eleventh Circuit a letter dated December 14, 2012,
identifying documents and testimony that should remain sealed. Since that time, the parties have
determined that certain evidence included on that list no longer needs to remain sealed and, upon
further review of the record, the parties have identified other evidence that should remain sealed
which was inadvertently omitted from the letter.
1

Case 1:09-md-02106-ASG Document 375 Entered on FLSD Docket 12/03/2013 Page 2 of 5

parties to make a recommendation by November 1, 2013 regarding how they proposed to comply
with this Court’s October 4, 2013 Order Upon Mandate.
On November 1, 2013, the parties filed a Joint Notice Regarding Proposal for Partially
Unsealing Summary Judgment Filings [D.E. #373]. The parties proposed submitting to the
Court redacted copies of all memoranda of law and statements of material facts, in addition to
one copy of each exhibit and a single compilation of each witness’s deposition transcript
excerpts cited in all memoranda of law. On November 5, 2013, this Court entered an Order
Approving Joint Proposal [D.E. #374], approving the parties’ joint proposal and ordering the
parties to file via CM/ECF redacted copies of the summary judgment memoranda of law,
statements of facts, and exhibits, on or before December 6, 2013.
The parties previously filed under seal the deposition transcript excerpts listed below,
which were cited in their respective summary judgment memoranda of law and statements of fact
filed on August 5, 2011, September 9, 2011, and September 27, 2011. In compliance with this
Court’s Order Approving Joint Proposal, the parties now file the following deposition transcript
excerpts on the public record with the exception of those that remain under seal either in full or
in part (as indicated below):2
DEPOSITION TRANSCRIPT EXCERPTS
No. Deponent
1
Ambridge, Robert
2
Badala, Peter
3
Barone, Robert
4
Blauner, Stephen
5
Bolio, Brandon

Filing Status
Publicly filed (attached)
Publicly filed (attached)
Publicly filed (attached)
Filed Under Seal
Publicly filed with redactions (attached)

2

Additional documents previously filed under seal related to BANA’s Motion for Summary
Judgment and Plaintiffs’ Motion for Partial Summary Judgment, including the respective
memoranda of law and statements of facts, will be filed under separate cover.
2

Case 1:09-md-02106-ASG Document 375 Entered on FLSD Docket 12/03/2013 Page 3 of 5

DEPOSITION TRANSCRIPT EXCERPTS
No. Deponent
6
Brown, Jeanne
7
Christensen, Hans
8
Corleto, David
9
Esplin, Jason
10 Freeman, Jim
11 Fu, Vincent
12 Howard, David
13 Kolben, Herbert
14 Kotite, Albert
15 Kumar, Deven
16 Lupiani, David
17 Macklin, Scott
18 Miranowski, Todd
19 Mulé, Philip
20 Naval, Ronaldo
21 Newby, William
22 Pardon, Douglas
23 Pryor, Shepherd
24 Rafeedie, McLendon
25 Rourke, Kevin
26 Schmitz, Roger
27 Scott, Michael
28 Sheffield, Chaney
29 Susman, Jeff
30 Sussman, Mitchell
31 Varnell, Jon
32 Yu, Henry
33 Yunker, Brett

Filing Status
Publicly filed (attached)
Publicly filed (attached)
Publicly filed (attached)
Publicly filed (attached)
Publicly filed with redactions (attached)
Publicly filed (attached)
Publicly filed with redactions (attached)
Filed Under Seal
Publicly filed (attached)
Publicly filed (attached)
Publicly filed (attached)
Filed Under Seal
Filed Under Seal
Publicly filed with redactions (attached)
Publicly filed (attached)
Publicly filed (attached)
Publicly filed (attached)
Publicly filed (attached)
Publicly filed with redactions (attached)
Filed Under Seal
Filed Under Seal
Filed Under Seal
Filed Under Seal
Publicly filed with redactions (attached)
Filed Under Seal
Publicly filed (attached)
Publicly filed with redactions (attached)
Publicly filed (attached)

3

Case 1:09-md-02106-ASG Document 375 Entered on FLSD Docket 12/03/2013 Page 4 of 5

Date: Miami, Florida
December 3, 2013
By:

/s/ Jamie Zysk Isani
Jamie Zysk Isani

By:

Jamie Zysk Isani (Florida Bar No. 728861)
HUNTON & WILLIAMS LLP
1111 Brickell Avenue, Suite 2500
Miami, Florida 33131
Telephone: [phone]
Facsimile: [phone]
E-mail: [e-mail]

/s/ Lorenz Michel Prüss
Lorenz Michel Prüss

Lorenz Prüss (Florida Bar No. 581305)
DIMOND KAPLAN & ROTHSTEIN, P.A.
2665 South Bayshore Drive, PH-2B
Miami, Florida 33133
Telephone: [phone]
Facsimile:
[phone]
E-mail: [e-mail]

-and-

-and-

Bradley J. Butwin (pro hac vice)
Jonathan Rosenberg (pro hac vice)
Daniel L. Cantor (pro hac vice)
William J. Sushon (pro hac vice)
O’MELVENY & MYERS LLP
7 Times Square
New York, New York 10036
Telephone: [phone]
Facsimile: [phone]
E-mail: [e-mail]
[e-mail]
[e-mail]
[e-mail]

J. Michael Hennigan
Kirk D. Dillman
MCKOOL SMITH HENNIGAN
865 S. Figueroa Street, Suite 2900
Los Angeles, California 90017
Telephone: [phone]
Facsimile: [phone]
E-mail:
[e-mail]
[e-mail]
Attorneys for Plaintiffs Avenue CLO Fund,
Ltd., et al

Attorneys for Defendant Bank of America, N.A.

4

Case 1:09-md-02106-ASG Document 375 Entered on FLSD Docket 12/03/2013 Page 5 of 5

CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing was served by transmission
of Notice of Electronic Filing generated by CM/ECF on December 3, 2013 on all counsel or
parties of record on the Service List below:
J. Michael Hennigan, Esq.
Kirk Dillman, Esq.
Robert Mockler, Esq.
MCKOOL SMITH, P.C.
865 South Figueroa Street, Suite 2900
Los Angeles, California 90017
Telephone: [phone]
Facsimile: [phone]
E-mail:
[e-mail]
[e-mail]
[e-mail]

David A. Rothstein, Esq.
Lorenz Michel Pruss, Esq.
DIMOND KAPLAN & ROTHSTEIN, P.A.
2665 South Bayshore Drive
Penthouse 2-B
Miami, Florida 33133
Telephone: [phone]
Facsimile: [phone]
E-mail:
[e-mail]
[e-mail]

Attorneys for Plaintiffs Avenue CLO Fund, Ltd. et al.
By:

5

/s/ Jamie Zysk Isani
Jamie Zysk Isani, Esq.

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Deposition Transcript Excerpts
of Stephen Blauner
Filed Under Seal

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123
Bolio, Brandon 3/30/2011 12:00:00 PM

1

IN THE UNITED STATES DISTRICT COURT

2

FOR THE SOUTHERN DISTRICT OF FLORIDA

3
CASE NO.
4

IN RE: FONTAINEBLEAU LAS

09-MD-02106-CIV-GOLD/

GOODMAN
5

VEGAS CONTRACT LITIGATION
MDL NO. 2106

6

7

8
9
10
11
12
13

ORAL AND VIDEOTAPED DEPOSITION OF BRANDON BOLIO,

14

produced as a witness at the instance of the Plaintiffs,

15

and duly sworn, was taken in the above-styled and -numbered

16

cause on Wednesday, March 30, 2011, from 9:19 a.m. to 5:28

17

p.m., before Angela L. Mancuso, CSR in and for the State

18

of Texas, reported by machine shorthand, at the law offices

19

of Hunton & Williams, 1445 Ross Avenue, Suite 3700, City of

20

Dallas, County of Dallas, and State of Texas, pursuant to

21

the Rules of Civil Procedure and the provisions stated on

22

the record or attached hereto.

23

JOB No. 159381

24
25
Bank of America - Fontainebleau

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A. That's right.

2

Q. All right. And we'll be looking at documents

3

to try and help you out in that regard throughout the

4

day.

5

By whom are you currently employed?

6

A.

Bank of America.

7

Q.

Is it the Bank with a "k", the Bane with a "c"

8

or something else?

9

A.

10

Q. And what is your position there?

11

A.

12

Q. In what group?

13

A.

14

Bank with a "k", Bank of America, N.A.

I'm currently a vice president.

In Corporate Debt Products, covering gaming

companies.

15

Q. When did you begin work for Bank of America?

16

A.

I started with Bank of America in August

17

of 2004.

18

Q.

In what capacity? What was your position?

19

A.

I was an analyst in -- at the time it was

20

called Global Portfolio Management. Now it's called

21

Corporate Debt Products.

22

Q. And what is the Corporate Debt Products group?

23

A. Corporate Debt Products is responsible for the

24

bank's balance sheet, for underwriting and monitoring

25

bank loans, and liaising with the other parts of the

Bank of America - Fontainebleau

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Bolio, Brandon 3/30/2011 12:00:00 PM

1
2
3
4

bank as needed.
Q.

What do you mean by "responsible for the

bank's balance sheet"?
A. When there -- if a client wants to request a

5

bank loan, they come to Bank of America and Corporate

6

Debt Products is responsible for underwriting that bank

7

loan, Bank of America's portion of that bank loan.

8
9

10

Q. And when you use the term "underwriting," what

does that mean?
A. That means conducting financial analysis,

11

market studies, and due diligence in order to make a

12

decision whether or not we lend money and how much we

13

would lend.

14

15

Q.

Is part of that determining the risk that Bank

of America faces in entering into the transaction?

16

A.

17

Q. And are there guidelines that help Corporate

18

Debt Products determine whether a particular risk is --

19

is too great to justify the bank's participation?

20

A. There are a lot of guidelines and bank

It is.

21

policies that determine a lot of things. We're highly

22

regulated, and there are guidelines that the bank

23

follows to help determine risk and make an ultimate

24

decision.

25

Q. You also said that as part of Corporate Debt

Bank of America - Fontainebleau

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Bolio, Brandon 3/30/2011 12:00:00 PM

1

Products that you both underwrite and monitor the loans.

2

In what ways does Corporate Debt Products, in general,

3

monitor the loans the bank entered -- enters into?

4

A. Generally speaking, we will conduct quarterly

5

monitoring of the loans that typically coincides with

6

the reporting requirements of the credit agreement that

7

the borrower is required to do, or monthly if the

8

reporting requirements are monthly.

9

10

Q. And the review that you do on a quarterly or

sometimes more regular basis, does that have a name?

11

A.

It does.

12

Q.

What's the name?

13

A. The quarterly review is called a PACR,

14
15
16
17

Periodic Analysis and Covenant Review.
Q.

Okay. That's the periodic review, whether

it's monthly or quarterly?
A. PACRs are typically required quarterly,

18

although the bank's guidelines are always changing --

19

and those have changed recently-- to account for

20

different profiles of borrowers. But typically PACRs

21

are quarterly.

22
23

Q.

I've seen reference in the documents to CAM,

C-A-M, all caps. Are you familiar with that moniker?

24

A. Yes, I am.

25

Q.

What does it sands for?

Bank of America - Fontainebleau

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A. CAM stands for Credit Approval Memorandum.

2

Q.

3

A. The CAM is the document that allows the bank

How does that relate, if at all, to the PACR?

4

to -- it's essentially the approval document, the

5

underwriting document. And CAMs are conducted at

6

origination in order to seek and document approval, as

7

well as, on an annual basis, CAMs are prepared to assist

8

in the monitoring process.

9
10

Q. Are there documents that are generated with

the more regular PACR?

11

A. There are.

12

Q.

13

A. There is a risk-rating score card, typically,

14

What are those called?

that's generated with the PACR.

15

Q. Anything else?

16

A. Not to my knowledge right now.

17

Q.

18
19
20
21

The risk-rating score card is -- is less

narrative, shall we say, than the -- than the CAM?
A.

It's less narrative, although it contains

portions of narrative.
Q.

Is there any other document other than the

22

risk-rating score card that's generated in the PACR

23

process?

24

A. Not that I can think of at this point.

25

Q. Another area that you indicated Corporate Debt

Bank of America - Fontainebleau

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1

Products got involved in was liaising, over the course

2

of a financing, with other groups in the bank; is that

3

right?

4

A. Yes.

5

Q.

6

A. Large underwritten or-- or best-effort

7

syndicated bank deals typically require a lot of

8

coordination among the bank, Corporate Debt Products,

9

and if the investment bank is involved or if the

10

structuring group is involved on a syndicated financing,

11

and so we liaise with those groups as needed throughout

12

the deal process.

13
14
15
16
17

Q.

Describe that for me.

Toward what end?
MR. CANTOR: Objection. You can answer.

A. Toward --the goal is to ultimately either do
a deal or not do a deal.
Q. (BY MR. DILLMAN) For loans that are in

18

existence for which SofA has already signed up, is there

19

a process of liaising with other groups in --within the

20

bank that's a typical part of the Corporate Debt

21

Products activities?

22

A. If there are things that --yes. If there are

23

things that require the expertise of those groups, it is

24

typical to liaise with them.

25

Q. You mentioned "best-efforts loan." What did

Bank of America - Fontainebleau

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Bolio, Brandon 3/30/2011 12:00:00 PM

1

you mean by that?

2

A. Not underwritten.

3

Q.

Typically, on a loan on which BofA is the

4

agent, the bank agent, does the Corporate Debt Products

5

group get involved in some regular course of monitoring

6

or involvement in such -- in such loans?

7

A. Yes.

8

Q. Does-- first of all, why? What's the

9
10
11

purpose?

A. Purpose of Corporate Debt Products being
involved --

12

Q. Yes, sir.

13

A. -- in the agency function on a -- on a

14

monitoring basis, is that the question?
Yes. Yes, sir.

15

Q.

16

A. If there are any questions or issues that come

17

up with the monitoring documents that are required to be

18

submitted, typically, Corporate Debt Products will help

19

to coordinate that with the borrower and the agent.

20

Q. And the monitoring documents that you're

21

referring to, describe what you meant by that.

22

A. There are whatever the-- the reporting

23

requirements are under the credit agreement, be it

24

financial statements, compliance certificates,

25

etcetera.

Bank of America - Fontainebleau

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1

Justin Lien.

2

Q.

3

A. L-i-e-n.

4

Q.

How do you spell Justin's last name?

Did you report to either Mr. Corum or Mr. Lien

5

with respect to the Fontainebleau project at any time

6

prior to Mr. Susman's departure?

7

A. No.

8

Q.

9

A. I believe he left in February of 2009.

10

Q.

Mr. Susman left the firm in -- do you recall?

11
12

MR. CANTOR:

13
14

A.

15

Q.

16

A.

17
18
19
20

.

21

Q. After Mr. Susman left, to whom did you

22

directly report?

23

A. Brian Corum.

24

Q.

25

Mr. Corum took over some of Mr. Susman's

responsibilities with respect to the Fontainebleau

Bank of America - Fontainebleau

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Bolio, Brandon 3/30/2011 12:00:00 PM

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project; is that correct?

2

A. He did.

3

Q. Anybody else in the Corporate Debt Products

4

group that became involved in the Fontainebleau

5

Las Vegas project after Mr. Susman's departure who

6

wasn't previously involved?

7

A. No.

8

Q.

Okay. Who else other than you, Mr. Susman,

9

and Mr. Corum from the Corporate Debt Products group was

10

involved in the Fontainebleau project at any time?

11
12

A. Khoa Duong was an analyst who was involved to
a certain extent.

13

Q. And is that a man or a woman?

14

A. I'm sorry?

15

Q. Is that a man or a woman?

16

A. It's a man.

17

Q.

18

A. Okay. K-h-o-a D-u-o-n-g.

19

Q. And Khoa Duong was involved primarily in the

20
21

Can you spell that name?

risk-rating activities for the --for the loan, correct?
A. Correct. Khoa was involved in the risk-rating

22

activities as well as helping to write the monitoring

23

and those kind of things.

24
25

Q.

What monitoring and those kinds of things are

you referring to?

Bank of America - Fontainebleau

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Bolio, Brandon 3/30/2011 12:00:00 PM

1

A.

Mostly the risk rating, as well as, as I

2

referred before, on an annual basis you have to conduct

3

an annual CAM.

4

Q.

Okay. All right. The things that we

5

previously talked about that you -- that Corporate Debt

6

Products did on a periodic basis with respect to loans

7

that had been entered into?

8

A. Correct.

9

Q.

Was Mr. Duong involved at all in the liaising

10

functions that you've described with respect to

11

Fontainebleau Las Vegas?

12

A. Not very much.

13

Q.

14

A. Yes.

15

Q.

Were you?

Describe the involvement of Corporate Debt

16

Products with other groups in the bank as it related to

17

the Fontainebleau Las Vegas facility.

18

19

MR. CANTOR: Objection to foundation as
to people other than himself. But go ahead and answer.

20

A. There was quite a bit of liaising. We --

21

Q.

22

with?

(BY MR. DILLMAN) Can we just say working

23

A. Yes. Okay.

24

Q.

25

A. We--

Okay.

Bank of America - Fontainebleau

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Bolio, Brandon 3/30/2011 12:00:00 PM

1
2
3
4
5

Q.

I'm not even sure how you spell "liaising."

That's one of the problems.
A. We worked with -- are you asking who the

specific groups were?
Q.

I want you to describe for me in general --

6

we'll get into more specifics -- how Corporate Debt

7

Products worked with other members or teams in the bank

8

relating to the Fontainebleau Las Vegas financing.

9

A. Corporate Debt Products worked with the Agency

10

group in coordinating posting of documents to

11

lntralinks. We also worked with the Disbursement Agent

12

group in coordinating the monthly draws. We also worked

13

with the Syndications group if there were times that we

14

needed input on market, bank market. And we also worked

15

with the Investment Banking group if there were times

16

that we needed to discuss -- some of the documents that

17

were -- that were put into place, they helped with some

18

of those documents.

19

Q.

Let me take those one at a time. With respect

20

to the Agency department-- department or group? I'm

21

not sure what you said.

22

A. Either one works.

23

Q.

24

A. It does.

25

Q. All right. You said you coordinated with them

Either one works?

Bank of America - Fontainebleau

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1

on posting of documents to lntralinks; is that right?

2

A. Correct.

3

Q.

4

That's a fairly routine technical process of

posting a document, isn't it?

5

A.

It is.

6

Q.

Is that typically something that Corporate

7

Debt Products was involved with was the technical

8·

aspects of getting a document from Point A to Point B?

9

A. It is.

10

Q. And was that done primarily by IT people?

11

A. No. There are people that work in Agency

12

Management that have access to -- have publishing rights

13

on the workspaces.

14
15

Q.

Publishing rights-- in other words, they can

post things to lntralinks that other people can't?

16

A. Correct.

17

Q.

18

Who are those people in the Agency group as it

related to Fontainebleau Las Vegas?

19

A. Ron Naval.

20

Q.

21

A. Correct.

22

Q.

Otherwise known as Renaldo?

So he was a poster? In other words, he

23

could -- he could actually physically or technically, I

24

suppose, post documents on lntralinks; whereas, you

25

could not?

Bank of America - Fontainebleau

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Bolio, Brandon 3/30/2011 12:00:00 PM

1

A. Correct.

2

Q.

3
4

Did Mr. Naval typically -- was he engaged in

the process of drafting the documents that he posted?

A. He was not, although Agency Management does

5

review, on the front end, documents where there are

6

agency -- where there is agency language. They review

7
8
9

· that language to make sure it conforms with their
requirements.
Q;

Did he make the call as to what documents were

10

posted on lntralinks and what weren't, or did he simply

11

do the mechanical task of posting of them?

12

A. He did the mechanical task --task of posting.

13

Q.

Who -- who made the call regarding what

14

documents went to lntralinks through Mr. Naval and what

15

documents didn't?

16

A. The credit agreement and disbursement

17

agreement laid out what documents were to be provided to

18

the various groups of investors, and Corporate Debt

19

Products and Agency helped to facilitate that process.

20

Q.

It sounds to me as if Corporate Debt Products

21

provided to Mr. Naval the documents that were to be

22

placed on lntralinks. Is that a fair summary?

23

MR. CANTOR: Objection.

24

A. No. The documents were typically provided by

25

the borrower to Corporate Debt Products and/or Agency.

Bank of America - Fontainebleau

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Bolio, Brandon 3/30/2011 12:00:00 PM

1

Q.

(BY MR. DILLMAN) All right.· And the

2

documents that were to be --that were then posted on

3

lntralinks, the decision as to whether or not that's a

4

document that needs to be posted or not, who made that

.5

call?

6
7

8
9

A. Typically, Corporate Debt Products in
conjunction with Agency.
Q. And when you say "typically Corporate Debt

Products," who?

10

A. Jeff Susman, myself.

11

Q. Anybody-- and when you say "in conjunction

12

with Agency," who at Agency, other than Mr. Naval, was

13

involved in the process of determining what documents

14

would or wouldn't be put onto lntralinks?

15
16
17

18
19

20
21

A. I believe just Mr. Naval was tasked on
Fontainebleau.
Q.

Did you work with anyone else in the Agency

group other than Mr. Naval?

A. I may have worked with others when Mr. Naval
was out, but primarily it was Mr. Naval.
Q. And other than as you've summarized, are you

22

aware of any activities of Mr. Naval with respect to the

23

Fontainebleau Las Vegas project, other than as you've

24

testified?

25

A. No.

Bank of America - Fontainebleau

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Bolio, Brandon 3/30/2011 12:00:00 PM

1

Q.

In what instances would Mr. --would you work

2

in conjunction with Mr. Naval to determine if this

3

particular document should be placed onto lntralinks?

4

A. Whenever a document came from the borrower, we

5

would typically-- if it was required to be shared with

6

other investors per the documents, those would be posted

7

to lntralinks.

8

Q. And who -- again, I'm trying to figure out

9

who's --who's making this call as to whether it gets

10

posted or not. You said you worked in conjunction with

11

Mr. Naval.

12

Did you sit down and -- either figuratively or

13

literally sit down and say, what do you think, Ron? Do

14

you think this should be posted to lntralinks? Or was

15

it more, Ron, here is a document that needs to be

16

posted; please do so?

17

A. It was more mechanical. There is not that

18

much judgment whether or not something gets posted.

19

It's really laid out in the documents.

20

Q.

Okay. And who made the determination as to

21

whether or not this particular document that you were

22

looking at was a document that, under one or more of

23

the -- of the underlying agreements, should be placed on

24

lntralinks?

25

A. Typically, Corporate Debt Products.

Bank of America- Fontainebleau

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Bolio, Brandon 3/30/2011 12:00:00 PM

1

Q. You or Mr. Susman, in this case?

2

A. Correct.

3

Q. You said you also worked with Disbursement

4

group in connection with coordinating monthly draws. Do

5

you recall that?

6

A. Yes.

7

Q. And the Disbursement group was who?

MR. CANTOR: Objection.

8
9

A. There was --

10
11

MR. CANTOR: Go ahead.
A. The Disbursement group was a group of people.

12

The main person there was Jeanne Brown, who was tasked

13

on Fontainebleau.

14

Q.

(BY MR. DILLMAN) And I meant-- I didn't make

15

my question very clear. But I meant, in connection with

16

Fontainebleau, who was the Disbursement group that you

17

worked with, and it was-- at least included Jeanne

18

Brown?

19

A. Yes.

20

Q. Anyone else that comes to mind?

21

A.

I don't recall the name of the people that

22

worked under Jeanne Brown, but she was the -- the team

23

leader.

24

Q.

During this time, where were you based?

25

A.

In Dallas.

Bank of America - Fontainebleau

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1

Q. The -- you said that you coordinated with the

2

Disbursement group on monthly draws. What did you mean

3

by that? Describe the process of coordination.

4

A. There is a pretty specific, detailed process

5

that was spelled out in the disbursement agreement that

6

related to monthly draws; and we would, again, work with

7

the Disbursement group to make sure that that was being

8

executed.

9

Q. And when there were -- if there were judgment

10

calls as to whether or not particular requirements had

11

been met, who typically would make those judgment calls?

12

Corporate Debt Products or Disbursement?

13

A. Typically, Corporate Debt Products, although

14

Disbursement did have certain things that they would

15

focus on that was their -- under their purview.

16

Q. What were those things that were, as you .

17

understood, under Disbursement's purview as opposed to

18

Corporate Debt Products?

19

A. They would receive a lot of backup to the

20

monthly draws, and they would review a lot of that

21

backup for certain items.

22

Q. What items?

23

A. Lien releases, making sure that, you know,

24

documents that were supposed to be provided were

25

provided.

Bank of America - Fontainebleau

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Bolio, Brandon 3/30/2011 12:00:00 PM
1

Q. Anything else?

2

A. That's the majority.

3

Q.

Did Disbursement -- did the Disbursement group

4

go through the documents that were provided to make sure

5

that they were -- they fell within the parameters of the

6

underlying loan agreements, or was that left to somebody

7

else?

8
9

MR. CANTOR: Objection.
A. I believe Disbursement would do a certain

10

amount of reviewing as it related to the parts that they

11

were reviewing.

12

Q.

(BY MR. DILLMAN) Okay. What parts did

13

Corporate Debt Products review, and what parts did

14

Disbursement review?

15

A. My recollection is that Disbursement reviewed

16

more of the -- you know, making sure that the documents

17

were there, making sure that the -- again, the lien

18

releases were provided, making sure that the general

19

process was intact; and Corporate Debt Products would

20

review more the financial type of documents.

21

a.

22

A. In balance, those kind of documents.

23

a.

24

A. In balance was one of the major ones, you

25

What do you mean?

What else other than in balance?

know, that would -- that would tie to other documents

Bank of America - Fontainebleau

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1

such as remaining cost report, you know.

2

Q.

3

A. I'm sorry?

4

Q.

5

A. Correct.

6

Q.

7

A. That was -- I mean, those were some of the

8
9

Budgets?

Budgets?

What else?

major ones.
Q. And if there was a question about a particular

10

issue in the documents, typically did Corporate Debt

11

Products take the question to the borrower or did

12

Disbursement?

13
14

MR. CANTOR: Objection. Go ahead.
A. Typically, if it was a more of a financial

15

type question, Corporate Debt Products would take the

16

question to the borrower. If it was a procedural type

17

of question that fell within the purview of what the

18

Disbursement group was doing, they had, you know,

19

certainly, authority to go directly to the borrower and

20

ask questions as well.

21

Q.

(BY MR. DILLMAN) And who made the final

22

decision? Who rang the bell when it was appropriate to

23

disburse funds, when BofA determined that it was

24

appropriate to disburse funds under the Fontainebleau

25

Las Vegas facility?

Bank of America - Fontainebleau

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A. Typically, Corporate Debt Products.

2

Q. And was that typically Mr. Susman, you, or

3

someone else?

4

A. Mr. Susman.

5

Q.

You indicated that with respect to the

6

Fontainebleau loan there was also -- you also worked

7

with Syndications, the Syndications group. How so?

8

A. If there were questions about, you know,

9

general market, the market, or investment groups, we

10

would sometimes, you know, call the Syndications group

11

and ask them what they thought, what their view was,

12

because their expertise is the bank market and working

13

with investors.

14

Q.

What did you mean by "questions about the

15

general market, the market, or investment groups"? And

16

I'm just quoting from you.

17

A. Sure. I guess questions about how different

18

institutions or the bank market in general would --you

19

know, appetite questions. You know, generally, if we

20

wanted to get sort of the pulse of the bank market, we

21

would reach out to Syndications.

.,
22

. Q.

By "appetite" you're not talking about lunch?

23

A. No.

24

Q. You're talking about the willingness or the --

25

the -- the --yeah, the willingness of financial markets

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1

to enter into certain transactions at certain times?

2

A. Correct.

3

Q.

4

tenure with the Fontainebleau Las Vegas facility?
MR. CANTOR: Objection. Go ahead.

5
6

How did those questions come up during your

A. Syndications was also very involved in the

7

front end, and so I think that Mr. Susman would reach

8

out to Syndications quite a bit to bounce things off of

9

them, you know, if there were ever questions that came

10

up.

11
12
13

Q.

(BY MR. DILLMAN) Are you talking about

pre-closing?
A. I'm sure pre-closing, but also post-closing,

14

because Syndications, again, was very involved during

15

the pre-closing, and I think they were -- you know,

16

Mr. Susman and Mr. Howard were partners, and they really

17

worked on the deal together at the beginning. So when

18

questions would come up, they would pick each other's

19

brains and coordinate.

20

Q. Was -- at some point in the history of the

21

Las Vegas facility, as you understood it, was there --

22

were there discussions about restructuring the loan

23

internally at BofA?

24

A. Yes.

25

Q. And those started when?

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1

A. Those started when we started seeing things in

2

the market that we thought would impact the ongoing

3

operations of Fontainebleau once it opened.

4

Q. Those things being what?

5

A. Basically, the recession, how it was impacting

6

the gaming market and the perceived impact of the condo

7

market in Las Vegas.

8

Q. And the perception or the belief by -- by the

9

Corporate Debt Products that by June of 201 0

10

Fontainebleau Las Vegas would be in violation of its

11

financial covenants?

12

MR. CANTOR: Objection; foundation.

13

A. Can you repeat the question more specifically?

14

Q.

(BY MR. DILLMAN) One of the issues that led

15

to restructuring discussions within BofA was SofA's

16

belief that, based on the factors that you just

17

discussed, Fontainebleau Las Vegas would be out of

18

covenants in June-- by June of 2010?

19

. A. Could be. Could have a difficulty meeting its

20

covenants when it opened and as those covenants stepped

21

down.

22

Q. And that was the expectation, actually, at

23

BofA in early 2009, that that would be the case, wasn't

24

it?

25

MR. CANTOR: Objection.

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1

A. Was not the expectation. It was something

2

that could happen, and it was our job to factor that in.

3
4

Q.

(BY MR. DILLMAN) And to protect the bank in

the event that that did happen?
MR. CANTOR: Objection.

5
6

A. Could you state the question?

7

Q.

(BY MR. DILLMAN) And one of your purposes in

8

doing that analysis that we'll get into a little bit

9

more in detail down the road here was to help protect

10

the bank with respect to its involvement in this loan?

11

A. Yes.

12

Q.

13

Indeed, that's what Corporate Debt Products is

·all about, isn't it?

14

MR. CANTOR: Objection.

15

A. Correct.

16

Q.

17

(BY MR. DILLMAN) Now, you're aware that in

September of 2009, Lehman filed for bankruptcy?

18

A. Yes.

19

Q. And that had a potential impact on the

20

Las Vegas facility because Lehman was the primary lender

21

under the retail facility, right?

22

A. Yes.

23

Q. That caused discussions to occur within the

24
25

bank?

A. Yes.

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1

Q. You were involved in those discussions?

2

A. I had some involvement, but not very much, in

3

those discussions.

4

Q.

5

that.

Okay. You interfaced with Trimont -- strike

Do you know who Trimont is?

6
7

A. I do.

8

Q. Who is Trimont?

9

A. My understanding is that Trimont is the

10

servicer or was the servicer for the retail facility

11

under the Fontainebleau Las Vegas.

12

Q.

What does it mean to be a servicer?

13

MR. CANTOR: Objection. Go ahead.

14

A. Sometimes, if investors don't have as robust a

15

build-out of back office type facilities, they will hire

16

servicers to help execute, service their loans.

17
18

Q.

(BY MR. DILLMAN) You understood that Trimont

was the servicer for the retail loan?

19

A. Yes.

20

Q.

BofA was the -- held the equivalent position

21

or performed the equivalent functions with respect to

22

the resort loan, correct?

23

MR. CANTOR: Objection.

24

· A. There is a lot of nuances and distinctions,

25

probably, between the two.

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1

Q.

(BY MR. DILLMAN) But the tasks that you

2

understood Trimont did for the retail facility, who did

3

those tasks on the -- on the resort side?
MR. CANTOR: Objection.

4
5

A. I'm not sure how the two tasks directly would

6

correlate, but my understanding was that-- again, that

7

Trimont was the servicer for the retail group lenders.

8
9
10

Q.

(BY MR. DILLMAN) Who was the servicer for--

for the resort side, if there was one?

A. Well, Bank of America was the agent under the

11

senior credit facilities, so that was one type of role

12

that was provided.

13

Q. Was there any party other than BofA involved

14

in the disbursement of funds --the aggregation and

15

disbursement of funds on the resort side?

16
17

A. I believe there was a trustee under the second
mortgage notes.

18

Q. Anybody else?

19

A. Not that I'm aware of.

20

Q. And by September of '09, you -- excuse me --

21

'08, you understood that the second -- second trustee

22

notes were -- had already been exhausted?

23

A. I believe that's the case.
MR. CANTOR: Objection.

24
25

Q.

(BY MR. DILLMAN) Okay. So as of that time,

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BofA was the only party involved in the process of

2

aggregating and disbursing funds on the resort side?

3

A. I believe that's correct.

4

Q.

5

A. I did not really. I may have spoken or been

6

on a phone call once or twice, but I did not deal with

7

them in a primary capacity.

8
9

Q.

Did you deal with the Trimont folks at all?

Did you ever -- do you know who the Trimont

folks were?

10

A. I believe his name was Mac Rafeedie.

11

Q. · Towards the end of September you had an e-mail

12

to Mr. Rafeedie asking him about the -- about the funds

13

from the retail facility, right?

14

MR. CANTOR: And let the record reflect

15

that counsel has shown a document to the witness.

16

(Deposition Exhibit 474 marked.)

17

A. Yes.

18

Q.

(BY MR. DILLMAN) And you're looking now at

19

what I've marked as Exhibit 4 74. That is indeed an

20

e-mail that you sent to Mr. Rafeedie?

21

A. It appears to be so.

22

Q.

Was it typical for you to communicate with him

23

by e-mail or otherwise with respect to confirming

24

receipt of funds under the retail facility?

25

A. It was not typically me communicating with

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1

him.

2

Q. Why -- why, at the end of September, were you

3

communicating with Mr. Rafeedie?

4

A. I don't recall.

5

a.

The end of September was a little different

6

than -- than the preceding months that had -- for which

7

disbursements were made, wasn't it?

8

MR. CANTOR: Objection.

9

A. Around that --

10
11

MR. CANTOR: Go ahead.

.

A. Around that time is when the retail lenders

12

started to fund. So whenever you have a new process, it

13

is a little bit atypical at first.

14
15

Q.

(BY MR. DILLMAN) Retail-- was this the first

month that the retail lenders had funded?

16

A.

I don't recall.

17

Q.

It was also a little different because there

18

was this question about whether Lehman was going to pay?

19

A.

Probably, yes.

20

a.

Well, you know that at the end of September,

21

following Lehman's bankruptcy, one of the questions that

22

was being bandied about within SofA was, is Lehman going

23

to pay under the retail facility, right?

24

A. Yes.

25

a.

And if they didn't pay, that-- that was going

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to be a bad thing?
2

A. Yes.

3

Q.

That would mean that the credit -- the resort

4

payments wouldn't be made, there would be no financing

5

that month for the project?

6

A. Correct.

7

Q.

8

A. Correct.

9

Q.

10

A. Yes.

11

Q. And why were you requesting from Mr. Rafeedie,

Because the one was dependent on the other?

You were attune to the issue?

12

if you recall, the wire reference number and the wire

13

amount?

14

A. I don't recall. I can -- I can tell you what

15

I think of it, sitting here today, but I don't recall

16

why.

17

Q.

18
19
20

Sure. Sure.
MR. CANTOR: Don't guess. If you have an

understanding, he's entitled to that, but don't guess.
Q.

(BY MR. DILLMAN) No, I'm not looking for your

21

guess, but I'm -- but I'm guessing that, while you may

22

not recall exactly, you got a pretty good understanding

23

based upon the fact that you were there at the time.

24

MR. CANTOR: If you do, you do.

25

A. Again, typically, I would not communicate with

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1

that group. I don't know if-- I don't recall if

2

perhaps the Disbursement folks were out or not. So I

3

just don't recall.

4

Q.

(BY MR. DILLMAN) You did know that one of the

5

possibilities was that Fontainebleau would be paying

6

Lehman's share of the September draw?

7

MR. CANTOR: Objection; lacks foundation.

8

A. Can you restate the question?

9

Q.

(BY MR. DILLMAN) You did know that one of the

10

possibilities was that Fontainebleau Resorts would pay

11

Lehman's portion of the retail draw, correct?

12

A. I didn't know that that was a possibility.

13

knew that it was something that was discussed whether it

14

would be a possibility or not.

15

Q. Discussed by whom?

16

A. By Mr. Susman, by, you know, the folks that he

17

got involved in other parts of the bank, and by counsel.

18
19
20

Q. And when you say "whether it would be a

possibility," what did you mean by that?
A. Well, when --when there was a question of

21

whether or not Lehman would be able to fund, there were,

22

you know, things that were discussed to see if there

23

were alternatives to that.

24
25

Q. Were there things that were discussed as to
whether or not Fontainebleau's payment of the Lehman

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1

share would violate any of the conditions to

2

disbursement?

3
4
5

A.

I believe it was discussed as would it be a

possibility for the company to fund.
Q.

In other words, would they have the ability,

6

under the documents, to fund without busting one of the

7

conditions?

8

A. Correct.

9

Q.

10

minute.

11

12

Okay. You also --we'll get into that in a

You also mentioned discussions about other
possibilities. What were you referring to there?

13

A. Well, just in general, if there is a problem,

14

we typically look at the contract and see if there are

15

any solutions that can be workable.

16

Q.

Okay. So let's take those two sides. One was

17

did -- did Fontainebleau have the ability, under the

18

documents, to --to pay for Lehman without busting

19

conditions, the other being other possibilities. Okay?

20

What discussions did you have with folks

21

within BofA concerning the ability of Fontainebleau to

22

pay, under the documents, without busting conditions?

23

MR. CANTOR: And in answering that

24

question, just be careful about not revealing

25

discussions where you asked for legal advice from

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1

counsel.

2

A. Sure. I wasn't primarily involved in those

3

discussions. I was generally sort of told what the

4

progress was, but I was not really involved in those

5

discussions. Really Mr. Susman had those discussions

6

primarily with counsel and other parts of the bank.
(BY MR. DILLMAN) And other parts of the bank?

7

Q.

8

A. Yes.

9

Q.

10

Oh. I didn't know if you said "in" other

parts of the bank.

11

A. "And" other parts of the bank.

12

Q.

13

A. I don't recall exactly, but probably

What other parts of the bank?

14

Syndications, you know, maybe Investment Banking, maybe

15

Risk.

16

Q.

Give me names.
MR. CANTOR: Well, don't guess. I mean,

17

18

if you know that Mr. Susman spoke with these people, by

19

all means, tell him.

20

A.

I don't recall.

21

Q.

(BY MR. DILLMAN) How about-- how.about Bret

22

Yunker-- Bret Yunker?

23

A. Perhaps.

24

Q.

25

Okay. You don't --were you in any

conversations with Mr. Yunker and anyone else on the

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topic of whether or not Fontainebleau had the ability,

2

under the governing documents, to fund for Lehman

3

without busting conditions?

4

A. I don't remember being in any specific

5

discussions with Mr. Yunker about it. I could have

6

been, but I don't remember that.

7

Q.

Was there a conclusion that you were informed

8

as to whether or not Fontainebleau could -- could fund

9

for Lehman?

10

A. Generally speaking, the conclusion, as I

11

understood it, was that receiving funds from the retail

12

lenders was a requirement to proceeding with the draw.

13

Q. And receipt of funds from someone else, for

14

example, Fontainebleau Resorts, wouldn't satisfy that

15

condition?

16

MR. CANTOR: Objection.

17

A. I'm not sure.

18

Q.

(BY MR. DILLMAN) Okay. You don't recall any

19

conversations that went into that level of detail?

20

A. Again, I believe they were had, but I don't

21

recall the conversations that were in that level of

22

detail, no.

23

Q.

You don't recall

w~ether,

following Lehman's

24

bankruptcy, it was an important fact for disbursement of

25

funds whether Fontainebleau Resorts paid on behalf of

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Lehman? Is that --

2

MR. CANTOR: Objection. That's not what

3

he said.

4

Q.

5

(BY MR. DILLMAN) Is that the testimony?

want to make sure I understand.

6

A. No, it's not.

7

Q.

8

Okay. You understood that that was an

important issue?

9

A. Yes.

10

Q. And you understood that there was -- there

11

were questions surrounding the appropriateness of

12

payment by Fontainebleau?

13

A. Yes.

14

Q. And you understood that the conclusion at the

15

bank was that if Fontainebleau paid, that that would be

16

a violation of one of the conditions to disbursement,

17

right?

18

MR. CANTOR: Objection.

19

A. That's not what I recall specifically.

20

Q.

21
22
23
24
25

(BY MR. DILLMAN) What do you recall

specifically?
MR. CANTOR: Objection; asked and
answered.
A. As I-- as I already stated before, that it
was a requirement for the funds from the retail lenders

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1

to be provided in order for the bank to disburse the

2

remainder of the funds.

3

Q.

(BY MR. DILLMAN) Okay. But we're talking

4

names here, right, as opposed to categories. You knew

5

that Fontainebleau was certainly considering paying

6

Lehman's portion.

7

A. I did not know that.

8

Q.

That was one of the options. I'm putting in

9

front of you Exhibit 204. This is a series of e-mails,

10

Mr. Bolio, that you are copied on. Do you recall them?

11·

A. I'm reading. Okay. Your question?

12

Q.

13

A. I don't recall this document, but I see it.

14

Q.

15

The question was, do you recall the document?

You have no reason to believe that you didn't

receive it, right?

16

A. No.

17

Q.

Middle of the second page, and I think I

18

identified this, but for the record this has previously

19

been marked as Exhibit 274 [sic]. Middle of the second

20

page, there is an e-mail from Mr. Susman to Mr. Yunker

21

and Mr. Howard and Mr. Varnell, copied to you. Do you

22

see that?

23

A. Yes.

24

Q.

25

A. Yes.

Mr. Susman was your boss?

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1

Q.

2

A. Mr. Yunker was in the Investment Bank.

3

Q.

4

A. Mr. Howard was in Bank of America Securities,

5
6
7

Mr. Yunker was who?

Mr. Howard?

in the Syndications group.
· Q. And Mr. Varnell?
A. Mr. Varnell was in the Investment Bank as

8

well.

9

Q.

Mr. Susman states that, "In my opinion, there

10

is still one issue that still needs to be resolved.

11

That is, do we as the Bank Agent make the unilateral

12

call to interpret the FB funding as Retail Agent funding

13

(or waive the condition if interpreted differently) or

14

do we seek Required Lender consent." Do you see that?

15

A. Yes.

16

Q. You understood when you -- strike that.

17

You understand that the "FB funding" here

18

refers to funding by Fontainebleau Resorts?

19

MR. CANTOR: Objection.

20
21
22

A. I don't know what Mr. Susman was thinking when
he wrote this.
Q.

(BY MR. DILLMAN) Of course not. But when

23

you --when you received it, you understood that the

24

"FB funding" meant and referred to funding of Lehman's

25

September share of the retail facility by Fontainebleau

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Does that seem right?

1

Q.

2

A. Yes.

3

Q. All right. You go down -- you say, just below

4

that, "CP for'' -- and what was that? "LB"?

5

A. "LB."

6

Q.

7

"To fund prior to bank." What does-- what

does "CP" mean there?

8

A. I believe that means condition precedent.

9

Q.

10

A. Probably Lehman Brothers.

11

Q.

12

Okay. And "LB"?

"Prior to Bank?" What does "Bank," capital B,

refer to there?

13

A. Probably the senior secured credit facilities.

14

Q.

Okay. So you're asking here whether it's a

15

condition precedent for Lehman to fund in order for the

16

resort lenders to fund?

17

A. Yes.

18

Q. And ultimately you answered that question yes,

19
20

21
22

it is a condition precedent?

MR. CANTOR: Objection; asked and
answered. You can answer.

A. I believe what I. answered is that what I

23

was-- my recollection, what I was told, is that it was

24

a condition precedent for the senior secured lenders to

25

fund for the retail facility lenders' money to have

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1

arrived.

2

Q.

(BY MR. DILLMAN) Okay. That was-- so far

3

that's what you've said your understanding was, just in

4

general, that you didn't get any more down into the

5

gears on that?

6

A. Correct.

7

Q.

8

Okay. You then go on, "Could FB put this in

if LB whiffs?" The "FB" there is Fontainebleau?

9

A. Yes.

10

Q. And "LB" is Lehman Brothers?

11

A. Lehman Brothers, I believe so.

12

Q. And by "whiffs," you meant if Lehman doesn't

13

pay--

14

A. Yes.

15

Q.

16

this in?

-- could they put -- could Fontainebleau put

17

A. Yes.

18

Q.

You then say, "Approximately 75 million in

19

balance." What's-- was there any connection between

20

the question asked as to whether Fontainebleau could put

21

it in if Lehman whiffed and this "in balance" comment?

22

A. I don't recall this specific conversation.

23

Q.

This -- do you believe that these notes

24

reflect a conversation that you had with someone or

25

someones versus just idle musings by-- by Brandon

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1
2

3
4

Bolio?
A. I really don't -- I really don't remember a
specific conversation.

a.

Was it typical for you to write down random

5

thoughts as opposed to simply memorializing events and

6

so on?

7

A. Well, I think, as you'd shown me before,

8

sometimes I would go through and take notes myself to

9

help educate myself on how the deal was supposed to

10

work.

11

a.

12

A. So this appears to be questions that were

Right.

13

being asked. I just don't recall the specific

14

conversation or the context.

15

a.

Okay. On the next page, it says, "25 million,

16

2 million Lehman," and then going off at an angle up

17

above, after "Lehman," it says, "Did not fund their

18

share," and then it continues, "so 23 million others."

19

Do you see that?

20

A. Yes.

21

a.

22

A. I don't recall at all.

23

a.

Do you know what that refers to?

Does it help you to recall that Lehman -- that

24

you understood that Lehman had not funded their share of

25

some portion of the retail loan?

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2

A.

No, it does not. That doesn't refresh my

memory.

3

0. Is there anything else that you can think of,

4

any explanation for those words in that conjunction,

5

that would be a reasonable interpretation of that?

6 ·

7

MR. CANTOR: Objection.
A. You know, I recall conversations about -- or

8

being told that Lehman was funding other deals, but I'm

9

not-- I'm not sure if it was referring to something

10

else.

11

Q.

(BY MR. DILLMAN) This says, "Did not fund

12

their share." So my question is, is there anything

13

that -- based on your knowledge and recollections, that

14

the words "2 million Lehman" with the notation above,

15

did not share their fund -- "Did not fund their share,"

16

any other reasonable interpretation of that other than

17

that you were aware that Lehman didn't fund their share

18

of the retail facility?

19

MR. CANTOR: Objection. Go ahead.

20

A. I really don't recall.

21

·Q. (BY MR. DILLMAN) You don't have any other--

22

can't offer me any other interpretation, sitting here

23

today; is that right?

24
25

A.

No. I already tried, but I really can't

recall any other interpretation.

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A. Sitting here today?

2

Q. Yes, sir.

3

A.

Probably.

4

Q.

Probably. 11.2, I'll tell you, is the section

5

that deals with further assurances, in the disbursement

6

agreement. Are you familiar with that section?

7

A.

Somewhat.

8

Q.

It provided the opportunity for Bank of

9

America to seek further assurances from the borrower on

10

certain issues and topics, right?

11

A.

12

could.

13
14

Q.

I don't recall that specifically, but it

But you recall that there was such a provision

in the disbursement agreement?

15

A.

I don't recall.

16

Q.

Do you recall that, at the end. of September,

17

BofA sent a letter to -- excuse me -- an e-mail to

18

Mr. Freeman seeking further assurances under

19

Section 11.2 of the disbursement agreement?

20

A.

I recall that we asked for the company to rep

21

again, and it was likely under 11.2, further assurances.

22

Q. And how did you come to that understanding

23
24
25

that you had requested the company to rep again?
A.

I didn't come to the understanding or the

decision, you know. It was -- I understand that it

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was -- the decision was made based on conversations that

2

were had with -- among Bank of America and counsel.

3

Q.

My question was, how did you come to the

4

understanding, not how did the -- how was the decision

5

reached?

6

A. How did I come to the understanding?

7

Q.

How did you come to the understanding that

8

there was a request for further assurances by BofA to

9

the borrower?

10
11
12

A. I was refreshed on Monday. My memory was
refreshed, talking to my counsel.
Q.

Okay. I don't want to hear what you talked

13

about with your counsel. But did you see documents that

14

helped refresh your recollection that that had occurred,

15

an e-mail?

16
17
18

A. I don't think I saw an e-mail, but it was
generally discussed.
Q.

Okay. And does -- do your notes on the bottom

19

of 436 help you to recall that the issues -- at least

20

among the issues of concern for Bank of America with

21

respect to the further assurances were Sections 3.3.1 of

22

the disbursement agreement and 3.3.23 of the

23

disbursement agreement?

24
25

A. I don't recall that specifically, once again,
but it would seem to make sense.

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Q. And did you --with this context, the --the

2

excursion that we took here to discuss what these

3

various sections were -- 3.3.1, 3.3.23 --further your

4

recollection that there was a further assurances e-mail

5

sent out, does any of that help you to' recall a

6

conversation that you participated in with Mr. Sonny

7

BenMoshe, Mr. Freeman, and Ms. Thier on the topic of

8

further assurances?

9

A. It does not.

10

Q.

Exhibit 241 is an e-mail from Mr. Susman to a

11

host of people, copied to yourself, and it forwards an

12

e-mail from Ms. Brown to yourself, saying, "The wire for

13

the Lehman portion has arrived. Please advise." Do you

14

see that?

15

A. Yes.

16

Q.

17

A. Yes. I don't remember receiving it, but it

18

You received this e-mail?

appears that I did.

19

Q.

20

know?

21

What advice was Ms. Brown looking for, if you

A. I believe she was --looks like she was

22

telling us that the retail funds had arrived and please

23

advise. Again, I don't remember specifically receiving

24

it, but probably means are we okay to, you know,

25

disburse.

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2

Q.

She was looking for your signoff on

disbursement?

3

A. Yes.

4

Q. And did you give her the signoff?

5

A. I don't recall.

6

Q.

7

A. No.

8

Q.

9

A. I believe so.

10

Q.

Do you have any reason to believe you didn't?

Either you or Mr. Susman did, right?

Was this a particularly difficult process in

11

terms of determining whether or not to fund at the end

12

of September?

13

MR. CANTOR: Objection.

14

A. In what way?

15

Q.

16

A. Yes.

17

Q.

(BY MR. DILLMAN) Less routine than most.

Turbulent?
MR. CANTOR: Objection.

18
19

A. What's the question?

20

Q.

(BY MR. DILLMAN) Would you talk-- would

21

you --would you characterize the events at this time

22

with respect to the Fontainebleau funding as turbulent?

23

A. I wouldn't say turbulent.

24

Q. Actually, you did, which is one of the reasons

25

why I asked you. But you knew that, right?

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was more the general financial markets being very

2

turbulent.

3

Q.

(BY MR. DILLMAN) What did that have to do

4

with Fontainebleau Las Vegas funding otherthan the

5

Lehman issue?

6

MR. CANTOR: Objection.

7

A. Well, Lehman filed for bankruptcy.

8.

Q.

(BY MR. DILLMAN) Yeah. Yeah. And so the

9

turbulent times that you're talking about here were

10

the --were the times related -- at least to this

11

facility, the times related to the Lehman bankruptcy

12

and, you know, the --the logistical issues, if nothing

13

else, that that caused for the funding of the

14

disbursement; is that right?

15
16
17
18
19
20

MR. CANTOR: Objection; asked and
answered.

A. Yes. Among, as well, the new process being
involved, etcetera.
Q.

(BY MR. DILLMAN) I previously showed you the

September 30 letter, Exhibit 76, from Mr. Naval.

21

MR. CANTOR: Do you want him to pull that

22

out?

23

Q.

24
25

(BY MR. DILLMAN) No, no, no. You don't--

you don't need to pull that out. Sorry.
You're aware that Fontainebleau did not hold a

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lender meeting as Mr. Naval requested in his letter?

2

A. I believe that's correct.

3

Q. Instead, they sent a memo that was posted to

4
5

lntralinks?
A. Yes. I believe that's correct.

6

(Deposition Exhibit 477 marked.)

7

Q. And that memo _.;well, and -- and this packet

8

of documents, which I'll mark as Exhibit 477, was one

9

that was in your files, correct?

10

A. It appears to be.

11

Q.

12

there?

Is that your received check stamp up top

13

A. Yes.

14

Q.

So if we go from back to front, the last

15

letter is a September 22nd, 2008, letter from Mr. Naval

16

to Mr. Freeman seeking to schedule a telephone

17

conference, and you've got a sent check up on that,

18

right?

19

A. Yes.

20

Q.

The next letter is the letter that we

21

previously looked at, September 30, from Mr. Naval to

22

Mr. Freeman, again seeking a --among other things,

23

seeking a lender conference call, correct?

24

A. Yes.

25

Q. And down below there is a little star near

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Item Number 2. Is that your star?

2

A. Yes.

3

Q.

You were starring this because this was a

4

particularly important issue within the context of this

5

letter?

6

A. I don't recall why I starred it, but, you

7

know, that would appear that it's highlighted.

8

Q. And the issue is, did Lehman fund its portion

9

of the requested 3.789 million of shared costs funded

10

last Friday or was this made up from other sources? If

11

Lehman did not fund its portion, what were the other

12

sources? Correct?

13

A. Yes.

14

Q.

The October 7 memo is then -- is the top

15

document here, which is Fontainebleau's response to

16

Mr. Naval's letter, as you understood it?

17

A. Yes.

18

Q.

Did Mr. Freeman, in his memo, answer the

19

question that you had starred down below concerning who

20

funded Lehman's portion of the September retail draw?

21
22

A. Yes. It appears to have answered that
question.

23

Q. And where is that?

24

A. Second paragraph.

25

Q. Yes, sir. Where is that?

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A. You want me to read it to you?

2

Q. Yeah, the portion that you're referring to.

3

A. Sure. It says, "In August and September, the

4

retail portion of such shared costs was 5 million and

5

3.8 million, respectively, all of which was funded."

6

Q.

Okay. And Mr. Naval's letter to Mr. Freeman

7

doesn't ask whether it was funded, does it? It asks who

8

funded?

9

A. It does ask who funded.

10

Q. And, indeed, Mr. Naval states, in effect, that

11

the amount was funded last Friday. You see that?

12

A. Yes.

13

Q. And you knew that the entire amount was

14

funded, right?

15

A. Yes.

16

Q. The folks at Bank of America, including

17

Mr. Naval, knew that it was funded?

18

A. Yes.

19

Q.

So in terms of the question Mr. Naval was

20

asking, who funded it, was that question asked by --

21

answered by Mr. Freeman in his --

22
23

MR. CANTOR: Objection; asked and
answered.
-- memo?

24

Q.

25

A. I believe the question was answered, again, in

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2
3
4

the-- in the sentence that I read before.

a.

That sentence tells you what you need to know

about who funded?
A. Probably not as much detail as would have

5

been, you know, nice, but I think that, you know,

6

answers the question.

7

a.

8
9

Yeah, me, too.
The -- did -- did you make any efforts after

this to -- to get more detail on that answer?

10

A. I really don't recall.

11

a.

12

Were you ever advised by anyone at Bank of

America -- strike that.

13

Were you ever advised by Mr. Freeman that

14

there were limits to what he could discuss concerning

15

the Lehman September draw, upon the advice of his·

16

counsel?

17
18
19
20

A. I don't recall him stating that to me
specifically, but he could have.

a.

Do you recall that you learned that

Mr. Freeman had said that?

21

A. I don't recall that specific concept, no.

22

a.

Okay. Do you recall, in general, the concept

23

that Mr. Freeman was limited in what he was going to

24

tell Bank of America based on advice he had received

25

from his counsel?

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A. I don't recall it today, sitting here. There

2

might be an e-mail about it, but I don't recall that.
Okay.

3

Q.

4

A. I recall that, you know, Mr. Susman,

5

Mr. Freeman were in conversations about the retail

6

funding--

7

Q. Yes.

8

A. -- because we didn't have -- the bank didn't

9

have direct communications with retail lenders other

10

than through, generally, Trimont.

11

Q.

But you don't recall hearing from either

12

Mr. Freeman or Mr. Susman or anyone else, for that

13

matter; that Mr. Freeman had informed Bank of America

14

that there were things he couldn't tell them about the

15

Lehman facility based upon the advice of his counsel?

16

A. I don't recall that today, no.

17
18

(Deposition Exhibit 478 marked.)
Q.

478, an e-mail from Ms. Brown to yourself.

19

She passes along an e-mail to you from Kathy Hernandez

20

at Fontainebleau, and she asks, "How do I answer her?

21

Is Jeff OK?"

22

You received this e-mail?

23

A. Yes.

24

Q. You understand from the context that Ms. Brown

25

was asking you whether it was okay to fund the

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disbursements?

2

A. That was probably what she was asking, yes.

3

Q. And -- and, again, this is now the second one

4

we've seen. Was it typical for Ms. Brown to check with

5

either you or Mr. Susman to make sure that it was okay

6

to disburse funds?

7

A. Yes.

8

Q.

Okay. At some point you became aware that

9

Ullico was funding some or all of Lehman's share of the

10

retail facility, did you not?

11

A. Yes.

12
13

14

(Deposition Exhibit 479 marked.)
Q.

I've put in front of you what we'll mark as

Exhibit 479. It's an e-mail that you received?

15

A. Yes.

16

Q. And it says, "Per Trimont this morning, it

17

expects Ullico to fund the Lehman piece."

18
19

Did you make any inquiries concerning the
terms under which UIIi co had -- strike that.
Did you make any inquiries to confirm that

20

21

Ullico had, in fact, funded some or all of Lehman's

22

share of the retail advances?

23
24
25

A. I didn't make any inquiries directly. I'm not
sure if the bank made inquiries that I wasn't aware of.
Q.

Did you come to understand at some point that

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indeed Ullico was funding some or all of Lehman's

2

portion of retail advances for some periods?

3

4

THE REPORTER: I'm sorry.
Q. That Lehman was funding some or all -- excuse

5

me -- that Ullico was funding some or all of the Lehman

6

advances for some periods?

7

A. I understood that Ullico -- I came to

8

understand that Ullico was one of the retail lenders and

9

that they were stepping up to fund some deficits under

10

the retail advances.
Deficits created by Lehman's failure to fund?

11

Q.

12

A. Yes.

13

Q.

Did you ever come to any understanding

14

regarding the-- whether or not Ullico had stepped into

15

Lehman's shoes in terms

16
17

~fits

funding commitments?

A. When you say "step into their shoes," you mean
just fund on their behalf?

18

Q.

Taking over their commitment.

19

A. I don't recall that specifically, but, again,

20

I do recall that Ullico had stepped up and was funding

21

more than their original share.

22

Q.

Did you at any point come to understand that

23

Ullico had taken over Lehman's obligations under the

24

retail facility, had stepped into Lehman's shoes?

25

MR. CANTOR: Objection. Go ahead.

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A. That they had legally stepped in, assumed--

2

Q.

(BY MR. DILLMAN) As opposed to a

3

month-to-month, one-off, might pay, might not pay, they

4

had assumed Lehman's obligations.

5

A. I don't recall that.

6

Q. You don't recall --

7

A. It's possible.

8

Q.

9

A. Again, I don't recall that specifically, but

10
11

-- ever knowing that, do you?

it's possible that they did.
Q.

Yes. Indeed, anything's possible. My

12

question really is, is there anything that you recall,

13

sitting here, that would lead you to conclude that that

14

was the case?

15
16
17

MR. CANTOR: Objection; asked and
answered.
A. Once again, I -- you know, I do recall that

18

Ullico had stepped up funding more than their original

19

share.

20

Q.

(BY MR. DILLMAN) Beyond that, you weren't

21

aware of what the terms might or might not have been

22

between Ullico and Lehman or Ullico and any other party?

23

A. I don't recall.

24
25

(Deposition Exhibit 480 marked.)
Q.

Exhibit 480, an e-mail from Jeanne Brown that

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is copied to you. Did you receive the e-mail?

2

A. Yes. Looks like I was copied.

3

Q. ·And you can look through it, but it appears

4

that Ms. Brown is -- has attached an e-mail to herself,

5

which I assume is sort of just-- is a draft of what she

6

would -- she's intending to send if she gets signoff.

7

Does that --

8

MR. CANTOR: Objection.
-- seem to be correct to you?

9

Q.

10

A. Yeah, I don't recall what Jeanne was thinking

11

when she wrote this, but it appears that she attached an

12

e-mail that she was asking to hold off on sending until

13

we gave the go-ahead.

14

Q. And the e-mail was forwarding to-- excuse

15

me -- to Trimont the advance confirmation notice from

16

Fontainebleau Las Vegas for January, right?

17

A. Yes.

18

Q. And the advance confirmation notice is

19
20
21
22

attached to her e-mail, right?

A. Yes, it appears to be attached. It's attached
in this set of papers. So -Q.

Well, and this was produced as a single

23

document by-- by Bank of America, so I'm assuming that

24

this is indeed the attachment that went with the e-mail,

25

but I only have the production to go on.

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The last page is dated January 13, 2009.

2

It's -- it is the lVI Construction's advance

3

certificate. Do you see that?

4

A. Yes.

5

Q. And while Mr. -- strike that.

6

Ms. Brown is writing her e-mail to you on

7

January 14th, the next day. Do you see that? Her

8

e-mail to you which is the --

9

A. Yes.

10

Q.

11

--the top page --I guess it's not to you.

It is copied to you.

12

With that background, I want you to help me --

13

help me out, work through this. It says, "Brandon has

14

requested that we hold off on sending the request to

15

Trimont/Lehman until either he or Jeff Susman gives us

16

the go ahead."

17

The "Brandon" is you?

18

A. Yes.

19

Q.

Do you recall why you were requesting

20

Ms. Brown to hold off sending the January advance

21

certificate to Trimont?

22
23

A. I don't.

MR. CANTOR: By the way, let me just note

24

an objection to the assumption that you put on the

25

record previously, Kirk.

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MR. DILLMAN: Yes.

2

MR. CANTOR: I don't know whether you're

3

right or you're wrong. I will only note that neither

4

e-mail has the sort of typical attachment reference that

5

one sees in an e-mail when there is something attached

6

to it. So this may or may not have been attached.

7

just don't know.

8

MR. DILLMAN: I am informed and believe,

9

based upon the fact that it was a single document, that

10

it was. It may not be. It may not be.

11

MR. CANTOR: Yeah, and the fact it's a

12

single document could have been a decision made by a

13

paralegal at O'Melveny who had no -- you know, who was

14

having a good day with the stapler.

15

MR. DILLMAN: Right. Right. And --and

16

indeed, as I told you, my information about these being

17

part of the same document is simply the manner in which

18

it was produced by BofA.

19

Q.

(BY MR. DILLMAN) The content, however, would

20

seem to coincide, doesn't it, whether it was actually

21

attached or not? The e-mail is talking about the

22

January advance and notice to Trimont, and Ms. Brown's

23

follow-up e-mail also addresses that same topic?

24

A. Yes.

25

Q. All right. So whether they were part of the

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same document or not, does any of these -- do any of

2

these materials help you to refresh your recollection as

3·

to the issue, in mid-January of '09, that was causing

4

you to request Ms. Brown to hold off on sending the

5

advance certificate for that month to Trimont?

6
7

MR. CANTOR: Objection; lacks foundation.

A. It doesn't.

8
9

THE VIDEOGRAPHER: I need to change the
tape. We're off record, 11:22 a.m.

10

(Recess from 11:22 a.m. to 11:27 a.m.)

11

THE VIDEOGRAPHER: This is the start of

12

Tape 3. Back on the record at 11:27 a.m.

13

(Deposition Exhibit 481 marked.)

14

Q.

(BY MR. DILLMAN) Mr. Bolio, I'm putting in

15

front of you Exhibit 481. 481 is an e-mail from

16

Ms. Brown to yourself. Any reason to believe you didn't

17

receive it?

18

A. No.

19

Q.

It's also to Mr. Susman. She is forwarding an

20

e-mail from Ms. -- excuse me --from Mr. Rafeedie, which

21

reads, "I touched base with Ullico and the wire has been

22

authorized. As soon as it is received, we'll follow up

23

with Sumitomo. Will keep you posted."

24
25

You understood, in January of 2009, based upon
this e-mail, that Ullico was funding -- strike that.

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1
2.
3

Did you understand, in January of 2009, that
Ullico was funding on behalf of Lehman?

A. Again, I don't recall that specifically, but

4

my understanding was, again, that Ullico had stepped up

5

and was funding more of their share. It was --you

6

know, at this point I don't remember if it was clear to

7

me exactly who was funding, but I did know that Ullico

8

was stepping up.

9
10

Q. Let me try and parse that out. You knew that

Ullico was paying more than its share?

11

A. Yes.

12

Q.

Did you have any reason to believe it was

13

paying -- that that was something other than paying some

14

or all of Lehman's share?

15

A. No.

16

Q.

17

A. I just don't -- I just don't remember that

Okay.

18

that was -- they were paying all of it. You asked if

19

they were paying all of it. I don't remember.

20
21

Q.

Okay. If we -- if we change that to some or

all?

22

A. That works.

23

Q.

24
25

Okay. So in December you were aware that

Ullico was paying some or all of Lehman's share?

A. Yes.

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1
2
3
4

Q.

In January you were aware that-- aware that

Ullico was paying some or all of Lehman's share?

A. Wait. I'm sorry. You said, before, in
December?

5

Q.

6

A. Okay. Okay.

7

Q.

8

A. Yes.

9

Q.

December. We already looked at that e-mail.

Right?

Okay. So in January you were aware that

10

Lehman was -- that Ullico was paying some or all of

11

Ullico's share?

12

A. Yes.

13

Q.

Did -- did you have a different understanding

14

at any point up until the time that BofA terminated the

15

revolver facility, that is, different understanding than

16

that Ullico was paying some or all of Lehman's share?

17
18

.A. I don't recall.
Q. At some point in time did you -- do you recall

19

having concluded that Ullico was no longer paying some

20

or all of Lehman's share?

21

A. I don't.

22
23

(Deposition Exhibit 482 marked.)
Q.

Exhibit 482, e-mail from Ms. Brown to

24

yourself. This is toward the end of February,

25

specifically February 25th. Ms. Brown forwards to you a

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series of e-mails, the bottom of which, on the first

2

page, reflects that Ullico funded the Lehman portion

3

with a simultaneous wire as the first one. Do you see

4

that?

5

A. Yes.

6

Q. You understood that-- in February of '09,

7

that Lehman was -- excuse me -- that Ullico was funding

8

the Lehman portion, not just some but all of the Lehman

9

portion, correct?

10
11

MR. CANTOR: Objection.
A. I don't recall reading down this e-mail at the

12

time. I think the punch line was that all the money was

13

in and they were getting the wire out.

14
15

(BY MR. DILLMAN) You had access to the

Q.

information?

16

A.

17

Q. Yeah. Did you-- you didn't have an

18
·19
20

I did.

understanding one way or the other, as far as you can
recall?
A. Again, I recall the important thing being that

21

all the retail money had arrived, and that's what Jeanne

22

was in charge of coordinating with Trimont.

23
24
25

Q. And her question to you, "What next?" What

did that mean to you?
A. Probably meant if-- asking if the draw was

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1
·2
3

going to take place as planned.
Q. Again, that was a decision that you and/or

Mr. Susman made?

4

A. Yes.

5

Q. And at this time do you know whether

6

Mr. Susman is still at the bank, September 25 -- excuse

7

me -- February 25th?

8

A. I don't recall the exact date that he left the

9

bank. It was probably-- I believe it was in February.

10

I'm not sure if it was before or after this time.

11

Q. All right. The fact that he's not copied on

12

any of these e-mails, does that suggest to you that he

13

was no longer at the bank as of-- at least as of this

14

date?

15

A. It doesn't -- it doesn't, necessarily, because

16

sometimes Jeanne would just send me e-mails intending

17

them for both myself and my boss, whether it was Jeff

18

or-- or Brian.

19

Q. After Mr. Susman left, other than your

20

reporting requirements, did your involvement with the

21

Fontainebleau facility change?

22

A. A little bit.

23

Q.

24

A. Mostly in getting up to speed, Brian Corum and

25

some partners that we had involved at the time as well,

Howse?

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Special Assets group.

2

Q.

3

Partners? Do you mean other people in the

bank?

4
5

A. Yes, other people in the bank, in the Special
Assets group.
Okay. Mr. -- Mr; Yu?

6

Q.

7

A. Correct.

8

Q.

9

A. Mr. Yu was the primary. I believe, when we

Others in Special Assets?

10

first got Special Assets involved, we had recommended

11

that it go to Real Estate Special Assets, and I believe

12

there was another gentleman that, you know, looked at a

13

few things. But Mr. Yu, at this time, I believe, was

14

involved.

15
16

Q.

What-- what Special Asset group was he a part

of?

17

A. Mr. Yu?

18

Q.

19

A. Bank of America Special Assets.

20

Q.

Yes.

I'm sorry. I took from your answer that when

21

you originally asked for Special Assets group to get

22

involved, you asked for the Real Estate guy in Special

23

Assets.

24

A. My-- you know, again, I didn't--

25

Q.

Was that what you intended to convey?

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A. Yes. Yes.

2

Q.

3
4

Okay. Mr. Yu was not a Real Estate Special

Assets guy; is that right?

A. I don't know if he was or wasn't, but I

5

believe that the head of the Real Estate Special Assets

6

group was named Joe Fuszard, I believe, and he was the

7

first person that we had reached out to.

8

Q. Okay. So whether Mr. Yu was in that group or

9

not, ultimately he transitioned to be your primary

10

contact at Special Assets?

11

A. Correct. It was a staffing issue as we worked

12

through who was being staffed on it from Special Assets.

13

Q. And this was a recommendation from COP that

14 ·

Special Asset groups get involved?

15

A. Yes.

16

Q. As part of the --was it part of a CAM review

17

process, or did it precede the CAM process for the year

18

2009?

19

A. Typically, actions are -- coincide with CAM

20

processes because that's when we -- it forces us to take

21

second looks and deep dives into things, but-- so I

22

think it was in conjunction with a CAM process. I don't

23

recall specifically if we had started it prior to that,

24

but it probably would have been documented and evidenced

25

by a CAM.

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Q.

Do you recall whether Mr. --whether you had

2

concluded -- and by "you" I mean the COP -- had

3

concluded, prior to Mr. Susman's departure, that Special

4

Assets should get involved?

5

A. I believe that we had recommended Special

6

Assets get involved prior to Mr. Susman's departure,

7

yes.

8

Q. And what-- I take it from documents that I've

9

seen that there are various levels of involvement by

10

Special Assets.

11

A. Correct.

12

Q.

13

A. There's typically three levels: SAG -- stands

14

for Special Assets --Advisory, SAG Hybrid, and SAG

15

Direct.

16

Q.

17

A. SAG Advisory is where CDP and the risk

What are the levels?

Describe for me each of those levels.

18

organization that COP works with has decision-making

19

authority. SAG Hybrid is where SAG has decision-making

20

authority but CDP is still on the account to help with

21

information, background, those kind of things. And SAG

22

Direct is where CDP no longer has involvement and SAG

23

has all of the interactions exclusively.

24
25

Q.

What is the risk organization that you just

referred to?

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A. Yes.

2

Q.

Okay. And that it-- the FDIC subsequently

3

repudiated its obligations, "its" being First National

4

Bank of Nevada's obligations under the credit agreement?

5

A. Yes.

6

Q. And this letter memorializes that?

7

A. Yes.

8

Q.

What steps, if any, did BofA take with respect

9

to future disbursements as a result of the repudiation

10

of First National Bank's commitments?

11
12

A.

I believe what we did was take out First

National Bank's commitments from the in-balance test.

13

Q.

14

A. That's all I'm remembering at this point.

15

Q. Any determination as to whether or not the

Okay. Anything else?

16

repudiation of First National Bank's commitment

17

constituted a default or an event of default under any

18

of the pertinent credit agreements?

19

A. I'm sorry. Could you restate that question?

20

Q.

21

A. Okay.

22
23
24
25

I can have it read back. How's that?

(Requested text was read.)
A. I don't recall if a determination was made
that it constituted an event of default.
Q.

How about a default?

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A. Or a default.

2

Q.

3
4
5

Okay. Were you involved in any conversations

on that topic?
A. I don't recall the specific conversations, but
I remember the issue.

6

Q.

7

A. Just that First National Bank of-- I'm

What do you remember about it?

8

sorry-- First National Bank of Nevada had been taken

9

into FDIC receivership and that they were, you know, as

10

a result, no longer able to fulfill their requirements

11

under the loan documents and were being taken out of the

12

in-balance test.

13

Q.

Okay. I thought you were suggesting that you

14

recall conversations about whether it constituted a

15

default or event of default.

16

A. I don't remember specific conversations about

17

that, no.

18

Q.

Okay. And do you recall whether BofA did

19

anything other than to take the Bank of Nevada funds out

20

of the in-balance test with respect to this repudiation?

21

A. I don't recall anything else.

22

Q.

23
24
25

Was that a decision by the COP group to take

the amounts out of the in-balance test?
A. I think the decision was made collectively
among COP and -- and counsel.

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Q.

Okay. Other than counsel, were there any

2

other groups involved at the bank in that decision

3

process?

4

A. Agency was probably involved in the process,

5

but I don't recall specifically which groups were or

6

weren't involved.

7

Q. Agency, Mr. Naval?

8

A Yes.

9

Q.

10
11

Was involved in the decision to take Bank of

Nevada out of the in-balance test?

A. He was involved, I believe, in the

.12

conversations about it because it impacts, you know,

13

communications with lenders. He's responsible for

14

communicating with lenders, those kind of things.

15
16

Q.

So he would be involved to the extent that

there were communications that flowed from the decision?

17

A. I believe that's true.

18

Q. And he wasn't involved in the decision?

19

A. I don't think he made the decision, no.

20

Q.

21
22
23
24
25

Was not involved in the decision other than

to-- as it might have to be communicated to others?

A. I don't think so, but I don't recall
specifically.
Q.

Okay. Anybody at Disbursement, in Ms. Brown's

group, involved in the decision?

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A.

I just don't remember.

2

Q.

You don't recall any involvement at this

3

point, do you?
MR. CANTOR: Objection.

4
5

A. Was the question, do I recall any involvement

6

myself?

7

Q.

(BY MR. DILLMAN) No. By her-- by her group.

8

A.

I don't recall any involvement by her group.

9

That's correct.

10
11

(Deposition Exhibit 487 marked.)
Q.

I'm putting in front of you Exhibit 487, an

12

e-mail from you to Ryan Falconer. We already discussed

13

Mr. Falconer in an earlier e-mail, did we not?

14

A. Yes.

15

Q. He's with Z Capital? Mr. Falconer is with

16

Z Capital?

17

A. Yes.

18

Q.

19

A. Yes.

20

Q.

21

You had a conversation with him?

Mr. Naval memorialized that in the letter

attached to your e-mail?

22

A. Yes.

23

Q.

Mr. Naval -- does the e-mail accurately

24

reflect your conversation -- prior conversation with

25

Mr. Falconer?

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A.. I don't remember this conversation

.2

specifically, but I assume that the letter does

3
4

characterize what our conversation was.
Q.

You recall that Z Capital was one of a number

5

of term lenders who did not fund their term lender

6

commitments in March of 2009?

7

A. I recall that after having spoken with my

8

counsel on Monday, but I hadn't recalled that prior to

9

that.

10

Q.

Okay. As of Monday, when you talked or saw or

11

did whatever you did, you then recalled that that had

12

happened?

13

A. Yes .

. 14

Q. And that Z Capital was one of several?

15

A. Yes.

16

Q.

17
18

When did Z Capital -- strike that.
Did Z Capital pay their term loan obligation

for-- prior to March 25, 2009?

19

A. I don't recall.

20

Q.

How about ever? Did they ever?

21
22

MR. CANTOR: I'm sorry. Are you
referring specifically to the Marc_h portion or--

23

MR. DILLMAN: Let me make that clear.

24

Thanks.

25

Q.

(BY MR. DILLMAN) In your letter-- in

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Mr. Naval's letter, he is confirming a conversation that

2

you had with Mr. Falconer, during which Mr. Falconer

3

told you that Z Capital was not able to fund their delay

4

draw term loan commitment that month, correct?

5

A. Yes.

6

Q. Do you know whether Z Capital ever paid the

7

delay draw term loan requests referenced in Mr. Naval's

8

letter?

9

A. I don't. I don't recall.

10

Q.

Did you have any conversations with

11

Mr. Falconer regarding whether Z Capital intended to pay

12

at some point in the future or whether they were simply

13

refusing to pay altogether? ·

14
15

A. I don't recall specific conversations after
this conversation, but-- yeah.
Yeah, what?

16

Q.

17

A. I just --

18

MR. CANTOR: Objection.

19

A. You know, I don't remember specific

20
21
22

conversations after this conversation.
Q.

(BY MR. DILLMAN) Okay. All right. And you

don't know, sitting here, whether Z Capital ever paid?

23

A. I don't.

24

Q.

25

Following your conversation with Mr. Falconer,

did you have discussions with others at B -- at SofA on

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1

the issue of how does this impact, if at all, our

2

disbursements in March?

3

A. Yes.

4

Q.

5

A. Again, I don't remember the specific

Who did you have those discussions with?

6

discussions. I would have, you know-- I would have --

7

well, looks like I copied Brian, Ron, Bill Scott, and

8

Henry Yu. So I think the conversations would have been

9

with those parties. I don't remember the specific

10

conversation, though.

11
12

Q.

Brian -- Brian Corum is the person to whom you

reported at the time?

13

A. Correct.

14

Q.

15

A. Correct.

16

Q.

17

A. Yes.

18

Q. Mr. Yu is SAG?

19

A. Yes.

20

Q. And Mr. Scott was -- was outside counsel for

Mr. Naval is the author of the letter?

Memorialized your conversation?

21

the bank?

22

A. Yes.

23

Q.

Okay. Anybody else who you could put in the

24

group of people that you would or may have discussed the

25

impact of Z Capital's failure to fund the disbursement?

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1
2
3
4

MR. CANTOR: Objection.

A. Again, I don't recall, you know, specific
conversations after this.
Q.

(BY MR. DILLMAN) Okay. But is there anyone

5

that you would put, as I said, in the group of people

6

that you might have had such conversations with --

7
8
9
10
11
12

MR. CANTOR: Objection.
Q.

-- other than the people that were listed on

that e-mail?

A. It looks like at the time I thought to include
the people listed on this e-mail.
Q.

Yeah. I got that. My question is, is there

13

anybody else that you would put in the group of people

14

that you may have had follow-up discussions with on the

15

topic of whether Z Capital's failure to fund in March

16

had any impact on the obligation of SofA to disburse

17

proceeds in March?

18
19

MR. CANTOR: Objection.

A. I can't think of anyone else.

20
21

(Deposition Exhibit 488 marked.)
Q.

(BY MR. DILLMAN) I'm placing in front of you

22

Exhibit 488. This is an e-mail from Mr. Falconer that

23

appears to be in response to your -- excuse me -- to

24

Mr. Renaldo -- Mr. Naval's letter to him in the previous

25

e-mail; is that correct?

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MR. CANTOR: Objection.

2

A. Would you repeat the question for me?

3

Q.

4
5

(BY MR. DILLMAN) Yes. Is it the case that

Exhibit 488 is Mr. Falconer's response to you to the
· letter that Mr. Naval sent him that was attached to

6

Exhibit 487?

7

A. Yes.

8

Q.

Mr. Brandon --excuse me. Mr. Falconer says,

9

"To clarify, Z Capital Finance, LLC, is not funding the

10

requested Delay Draw Term Loan borrowing for

11

Fontainebleau Las Vegas due to an inability to fund the

12

request. We are expressing no opinion at this time on

13

whether conditions to funding were met." Do you see

14

that?

15

A. Yes.

16

Q.

Did Mr. --was it important for your purposes

17

to determine the reason why Z Capital was not-- was not

18

funding?

19
20
21

MR. CANTOR: Objection. You can answer.
A. I think it's important to determine the

reason. Yes, I do.
(BY MR. DILLMAN) Why is that?

22

Q.

23

A. Well, for example, if-- with the case of

24

First National Bank of Nevada, if it was in receivership

25

by the FDIC and had been repudiated, then that's, you

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1
2

know, a reason that we would need to know.
Q.

Okay. So same thing with Z Capital? It

3

was -- you wanted to know the reason why they weren't

4

funding?

5

A. Yeah. It wasn't-- it wasn't the same

6

thing -- the same situation with Z Capital that First --

7

than First National Bank of Nevada, but it was important

8

to understand if they were not funding because they

9

didn't want to fund or because they had an inability to

10

fund at the time.

11

Q. And why was that important?

12

A. Well, I think it, you know, speaks to if they

13

were making the decision not to fund because they didn't

14

w~nt

15

satisfy conditions or if they just, you know, couldn't

16

fund the request at the time.

to and they disagree with --with a failure to

17

Q.

Why? Why was that important?

18

A.

I think it was important to know what their

19
20

stance was.
Q.

Why? We keep getting back to why was it

21

important? Why was that distinction important in

22

your-- in your activities with respect to the

23

Fontainebleau Las Vegas facility?

24

25

MR. CANTOR: Objection; asked and
answered.

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2

MR. DILLMAN: It's been asked a couple
times.

3
4
5

MR. CANTOR: It's been answered a couple
times.

A. I mean, again, it was important to understand

6

their reasoning. I don't recall exactly why, if there

7

was a legal implication to that.
(BY MR. DILLMAN) Okay.

8

Q.

9

A. But we wanted to understand their reasoning,

10

if they just didn't want to fund because they didn't

11

agree that the conditions had been met or if they

12

weren't funding at this time because of an inability to

13

fund.

14

Q.

15

A. Versus simply choosing not to fund, correct.

16

Q.

Or simply choosing not to fund?

Okay. And if they were -- if they were not

17

funding because of an inability to fund, what

18

consequences did that have, if any, different from their

19

funding because --their failing to fund because they

20

just didn't want to, they didn't feel like it this

21

morning, or because they felt that the conditions hadn't

22

been met?

23
24
25

A. I don't recall today. I'm sure we, you know,
talked about it and looked at the documents.
Q.

Is it your recollection that there was a

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difference, that it had some difference with respect to

2

how, for instance, disbursements were handled?

3

A. No, not that I recall right now.

4

Q. And with whom were you having these

5

conversations? In all likelihood, the same group that

6

you previously identified --

7

A. Yes.

8

Q.

9

A. Yes.

10
11
12

-- or some subset thereof?

(Deposition Exhibit 489 marked.)
Q.

Now, a group of funds under the rubric of

Guggenheim didn't fund, either, for March, did they?

13

A. I believe that's correct.

14

Q.

15

You had conversations with representatives of

Guggenheim on their failure to fund?

16

A. I don't remember if we had conversations or if

17

it was just e-mail, but we could have had conversations.

18
19

Q.

Did you have any conversations with anyone at

Guggenheim?

20

A. I don't recall.

21

Q.

22

A. No.

23

Q.

24
25

Does Holly Lai, L-a-i, ring a bell?

Okay. You did receive this e-mail,

Exhibit 490 [sic]?
A. Yes.

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Q.

You understood --

2

A. Or -- I'm sorry. 489?

3

MR. CANTOR: 489?
(BY MR. DILLMAN) I'm sorry. Yes. Thank you.

4

Q.

5

A. Yes.

6

Q. Did Guggenheim ever pay the amounts that it,

7

as of March 10, 2009, was telling you that it was not

8

funding?
MR. CANTOR: Objection.

9
10

A. I don't -- I don't recall. I believe there

11

was a -- you know, we were trying to figure out. There

12

was a question of these funds, if they were managed by

13

Guggenheim.

14
15

Q.

(BY MR. DILLMAN) Which funds are you

referring to?

16

A. LFC2 is one of them.

17

Q.

This is the e-mail down below, at the bottom

18

of the first page?

19

A. Correct.

20

Q.

21

A. I don't recall if they ended up funding or

22
23

Okay.

not.
Q.

Did you recall that at some point in time SofA

24

concluded that some or all of the term lenders were not

25

going to be making their payments of the March funding

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request at any point?

2

A. Yes. I was reminded on Monday.

3

Q.

When did you come to that conclusion?

4

A.

I didn't come to the conclusion, but I don't

5
6
7
8
9
10

11

remember when the bank came to the conclusion.
Q.

Okay. Who at the bank came to the conclusion,

as far as you know?
A. You know, I think Henry was squarely in the
driver seat at the time.
Q.

Okay. And do you know when the conclusion was

reached?

12

MR. CANTOR: Which conclusion is this?

13

MR. DILLMAN: The conclusion we've been

14

talking about, the conclusion that some or all of the

15

term lenders were not going to be making their March

16

funding, ever.

17
18

19
20

21
22
23

MR. CANTOR: Ever? Objection.
A.

I don't think that that conclusion was ever

reached.
Q. (BY MR. DILLMAN) Okay. Well, that was my
question.
A. Okay. I'm sorry. I misunderstood, if that
was the question.

24

Q.

25

A. I'm not aware that that was ever the

Okay.

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2
3

conclusion that was reached by BofA.
Q.

Okay. Was --what efforts did BofA, as far

as, you know -- strike that.

4

Did you engage in any efforts to try and track

5

down the issue of whether or not Guggenheim was going to

6

pay?

7

A. Again, I remember trying to help figure out

8

who these various funds were. I think there were

9

certain funds such as this LFC2, Loan Funding Corp.,

10

that were managed by Guggenheim. And so, you know,

11

there was some energy on, you know, figuring out who

12

those funds were managed by, who was the decision-maker,

13

but, you know, I don't remember specific conversations

14

with Guggenheim.

15
16

Q.

How about with Z Capital, other than the one

that was reflected in Mr. Naval's letter?

17

A. No, nothing else.

18

Q.

Who, as you understood it, was tasked to

19

follow up with those institutions about whether or not

20

they were going to pay?

21

A. Our-- our Credit Services group is typically

22

tasked with following up with investors that haven't

23

funded yet. I'm not sure if they were, you know, the

24

ones that were tasked with it, but that's typically how

25

it works.

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Do you know whether anyone was tasked, other

Q.

2

than how it typically works?

3

A. I don't remember.

4

Q.

5

group?

6

A.

7

Q. And, typically, it wouldn't be a person in

8

Typically, it wouldn't be a person in your

No.

SAG, if there is a typical situation there?

9
10

MR. CANTOR: Objection.
A. Again, if there is a typical situation, yeah.

11

Typically, it's more back office, but, you know, not to

12

say that it can't be other people.

13
14

(Deposition Exhibit 490 marked.)
I'm putting in front of you Exhibit 490. This

Q.

15

is an e-mail from Mr. Naval to yourself and others.

16

Actually, it's to -- excuse me. It's to Kaitlin Trinh

17

at Guggenheim Partners. It is copied to yourself and

18

others.

19

Attached is a letter from Mr. Naval to

20

Guggenheim, which reflects the fact that-- well, it

21

asks them to confirm that the funds stated in the letter

22

do not intend to fund in response to the company's

23

request, that request being the March 2009 request. You

24

received this?

25

A. Yes.

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Q. Any conversations with Ms. Trinh or anyone .

2

else at Guggenheim leading up to this letter that you

3

recall?

4

A.

5

· Q. Any conversations after?

6
7

MR. CANTOR: Objection.
A. Again, I don't remember.
(Deposition Exhibit 491 marked.)

8
9

I don't remember.

Q.

(BY MR. DILLMAN) Exhibit 491, an e-mail from

10

yourself to-- excuse me-"" Ms. Trinh, copied to the

11

same group, dated March 24, 2009, asking Ms. Trinh, in

12

effect, to respond to Mr. Naval's letter, right?

13

A. Yes.

14

Q.

Did Ms.-- as of this point, March 24, 2009,

15

I'm assuming from your e-mail that Bank of America had

16

not received payment from any of the funds listed in

17

Mr. Naval's letter.

18

A. It appears that's the case.

19

Q.

20

Did BofA at any point receive payment from

those funds?

21

A. I don't recall.

22

Q. And does this Exhibit 491 help you to recall

23

any conversations that you had with Ms. Trinh or anyone

24

else at Guggenheim on this topic?

25

A. Again, you know, it helps me to recall that

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there were these -- you know, I remember thinking there

2

were these sort of strange named funds here, and trying

3

to track down who the fund manager was. So I recall the

4

situation; but I don't recall, you know, the specific

5

conversation.

6

Q.

Did you ever come to the conclusion that

7

Guggenheim was not the fund manager for these various

8

funds?

9

A. Not to my recollection.

10

Q.

11

Did you ever come to the conclusion that they

were?

12

A. I believe that's what we determined.

13

Q. And as far as you recall, sitting here today,

14

you were never given any contrary information by

15

Ms. Trinh or anyone else; is that right?

16

A. That's -- not that I can recall. Yeah.

17

(Deposition Exhibit 492 marked.)

18

Q. Exhibit 492 is an e-mail from yourself to a

19

number of people, both internal and external to Bank of

20

America. The topic --the date is March 16, 2009, and

21

the subject is re: Debrief with lVI - Fontainebleau

22

Las Vegas, and you have attached to your e-mail a

23

document entitled "In-Balance Test with 'Revised and

24

Comments' columns added." Actually, that's your

25

description.

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In mid-March of 2009, you were involved in

2

discussions within Bank of America and with lVI on the

3

in-balance calculations for Fontainebleau Las Vegas; is

4

that right?

5

A.

I believe that's correct.

6

Q.

You did the calculations that are included on

7

the exhibit, the attachment to this e-mail; is that

8

right?

9

A.

10
11

12

I don't remember if I did them or if-- or if

they were provided to me.
Q.

Were there others at the bank who were --

strike that.

13

Were there others, as far as yqu were aware,

14

that were running in-balance test calculations for

15

distribution within this group of people other than

16

yourself?

17

A.

18

Q. You, in fact, were running those, correct?

19

A.

20

Q. And so based on that, you-- based upon the

No.

I believe that's true.

21

fact that you're the author of the e;_mail that attaches

22

this, you believe that these are your calculations,

23

correct?

24
25

A. Well-MR. CANTOR: Objection.

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A. --again, I don't-- I don't recall if I came

2

up with the numbers or if the numbers were -- you know,

3

if they were --

4

Q.

5

A. -- determined in conjunction with, you know--

(BY MR. DILLMAN) Handed to you?

6

you know, with input from the company, from the

7

borrower.

8

Q.

9

A. Or-- yeah.

10

Q.

Fair enough. Fair enough.

But the spreadsheet itself was something that

11

you did, and the contents of it you may have gotten from

12

others?

13

A. That's probably right.

14

Q. All right.

15

A. Or the spreadsheet was provided by the

16

borrower and I, you know, passed it along. I just don't

17

remember.

18

Q.

19

A. Okay.

20

Q.

21

A. Yes.

22

Q. And do you know what you were revising from?

Well, there is a Revised column.

Do you see that?

MR. CANTOR: Objection.

23
24

A. No.

25

Q.

(BY MR. DILLMAN) Was this a revision of an

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Q.

2

A. All the lenders in the senior secured

3
4

What do you think it means?

facilities.
Q.

Were the lenders in the senior secureds in a

5

position to do due diligence with respect to

6

Fontainebleau's remaining costs as set forth in the

7

remaining cost report?

8

A. Sure.

9

Q.

10

that that was SofA's job as the agent?

11
12

In the first instance, would you agree with me

MR. CANTOR: Objection.

A. I would say it was SofA's job as agent to

13

communicate what we were hearing from lVI; and, you

14

know, to the extent that lenders had questions about

15

what was being provided, they had just as -- as much

16

right to talk to lVI or the company about it.

17

Q.

(BY MR. DILLMAN) In the first instance, the

18

due diligence that would be done to determine this was

19

due diligence by lVI and BofA on behalf of the lenders;

20

isn't that right?

21

MR. CANTOR: Objection.

22

A. In which first instance?

23

Q.

(BY MR. DILLMAN) Others might be doing other

24

things. They might have -- be able to call the company.

25

They may be able to do a lot of things. But in terms of

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how this financing was structured, BofA, as the agent

2

for the lenders, and lVI, as the hired construction

3

consultant, were, in the first instance, the people who

4

were --who were doing the due diligence to determine

5

whether or not the remaining cost report was appropriate

6

or not?

7

8

MR. CANTOR: Objection.
A.

Information typically came to the agent and

9

the construction consultant first, but it was up to

10

each, you know, lender to do their own diligence if they

11

had questions about what was being provided on

12

lntralinks.

13

Q.

(BY MR. DILLMAN) Okay. I think we're saying

14

the same thing here. But whatever lenders did with

15

the--

16

MR. CANTOR: I actually disagree with

17

that.

18

Q.

(BY MR. DILLMAN) Whatever lenders were --

19

were doing with the information that was provided to

20

them on lntralinks, the obligation to assemble and

21

provide that information was SofA's obligation as agent

22

in the first instance, correct?

23

MR. CANTOR: Objection.

24

A.

No.

25

Q.

(BY MR. DILLMAN) No. Whose obligation was it

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2

to assemble and provide that information to the lenders?
A. The agent worked in a facilitating type of

3

role to provide information between the borrower and the

4

lenders and, you know-- so information typically came

5

to the agent first.
Right.

6

Q.

7

A. But it was each lender's job to analyze the

8

information that was being provided and, if they had

9

questions or concerns about it, to, you know, reach out

10

to the agent, in which case we would try to answer the

11

question, if we knew the answer, and otherwise we would

12

try to get the answer from the company or reach out

13

directly to the company or to the construction

14

consultant.

15

Q. And if BofA, as agent, had questions or

16

concerns about the information that it was being

17

provided, did you understand that BofA had an obligation

18

to get to the bottom of those·questions and concerns

19

before it simply passed the information on to the other

20

lenders?

21
22
23
24
25

MR. CANTOR: Objection; calls for a legal
conclusion.
A. So is the question if BofA had questions from
an agency perspective?
Q.

(BY MR. DILLMAN) If BofA had questions or

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concerns about the information that it was being

2

provided, did you Uf1derstand that you had an obligation

3

to track that down to get the questions and concerns

4

addressed before you simply forwarded· to the other

5

lending banks and institutions the information that you

6

had questions and concerns about?

7

MR. CANTOR: Obligation to whom?

8

A. Not necessarily an obligation as agent.

9

a.

10

(BY MR. DILLMAN) Obligation as -- in some

other capacity?

11

A. No. I mean, Bank of America had its own, you

12

know, commitment as a lender; but the obligation as

13

agent was to ask questions, and, you know, to the extent

14

the questions were being asked by the -- by the

15

investors was to ask the questions and pass the

16

information along.

17

a.

And if SofA was aware of inconsistent

18

information from that that was provided by the

19

borrower -- let me make it easy.

20

If SofA was aware of contrary information to

21

that which was being passed along by the borrower, was

22

it your assessment, as somebody in the COP unit at SofA,

23

that BofA should just pass that -- the borrower's

24

information along to the lenders without trying to

25

reconcile the contrary information that it had?

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2
3

MR. CANTOR: Objection; calls for a legal
conclusion.
A. Again, I think we-- we tried to do what was

4

required of us as agent under the contract, again, the

5

agency role under the contract. I would think that if

6

there is discrepancies, we would ask; but, you know, if

7

there is a specific instance, you know, we can talk

8

about it.

9

Q.

(BY MR. DILLMAN) If there were discrepancies,

10

you would ask the borrower or whoever was giving you the

11

information?

12

A. I would think so. I would think so.

13

Q. And based upon your involvement with this

14

facility and your position now as a vice president in

15

the CDP department, you would expect that SofA would do

16

that, would be to ask the borrower if the borrower was

17

providing information that was contrary to or

18

inconsistent with information that BofA had?

19

A. Well, typically, the information that SofA

20

would had -- would have would come from the borrower in

21

the first place, and so I don't see why the borrower

22

would be providing inconsistent information themselves.

23

Q.

Based upon your position and experience at

24

SofA, isn't it your understanding that if SofA becomes

25

aware, from any source, of contrary or inconsistent

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information to that that's being provided to it by the

2

borrower, BofA should and does track that down to

3

determine what the true facts are before they pass the

4

information on to the other lenders?

5
6
7
8

MR. CANTOR: Objection. Any source?

A. Again, it would depend on what the

contr~ct

states BofA, as agent, is required to do.
Q.

(BY MR. DILLMAN) And as an agent, in terms of

9

general agency principles, bank agent, is it your

10

understanding that BofA would track that information

11

down and determine what the -- what the correct

12

information is before it simply passed on to the lenders

13

information that it believed was inconsistent with or

14

contrary to the true facts?

15

MR. CANTOR: Objection.

16

A. Again, I think that, you know, we would do

17

what was required under the credit agreement and

18

disbursement agreement and ask the questions of the --

19

of the borrower, relay those answers to lenders. You

20

know, that's the process.

21

Q.

(BY MR. DILLMAN) Okay. And with the

22

Fontainebleau facility, if Fontainebleau had told you

23

the borrower had provided to you information that you

24

knew was false, would you have simply passed that on to

25

the borrowers -- to the lenders?

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A. You know, I can't say what I would have done.

2

I don't --I don't think I would have, if I knew the

3

information was false, but --

4
5

Q. Really? You think there is even-- is there a
doubt in your mind about that?
MR. CANTOR: Objection; argumentative.

6
7

Q.

(BY MR. DILLMAN) Are you telling me that as a

8

vice president of Corporate Debt Products at BofA,

9

you're telling me that in an agented facility, agented

10

by BofA, that if you had information that exposed the

11

borrower's information as a lie, that you would pass

12

that information on to the other lenders -MR. CANTOR: Objection.

13
14
15

Q.

-- without making any effort to determine the

true facts?

16

MR. CANTOR: Objection; argumentative,

17

it's hypothetical, calls for speculation. It's

18

fattening. It's un-American.

19

A. Could you restate that question --

20

Q.

21

A. --directly and specifically?

22

Q.

Sure.

Sure. If you knew that a borrower was lying,

23

as the agent on the facility, would you simply pass that

24

misinformation along to the other lenders or would you

25

make some effort to make sure that what the lenders got

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2
3

was the correct information?
A. Again, we would do what was required by us, as
agent, under the credit facility.

4

Q.

5

A. Again, we would do what was required of us, as

6
7

agent, under the credit facility.
Q.

8
9
10
11
12

No more, no less?

I heard that. No more, no less, right?
MR. CANTOR: It's an answer. He's

answered your question.
A. That's what we would do. We would read what's
required of us, and that's what we would do.
Q.

(BY MR. DILLMAN) Thank you. Did you make any

13 ·

other-- I don't want to say-- but did you -- did you

14

do any other in-balance report analyses in the March

15

of '09 period other than as you may have worked on on

16

Exhibit 492?

17

A.

I don't recall specifically, but maybe.

18

Q.

Was that kind of an ongoing thing over the

19

course of March, that you were looking at and tinkering

20

with in-balance reports, or-- or was that sort of a

21

one-shot deal?

22

A. I don't recall. It was a long time ago.

THE VIDEOGRAPHER: Five minutes.

23
24
25

Q.

(BY MR. DILLMAN) You were aware of concerns

expressed by some of the lenders prior to March of '09

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with respect to whether or not there were cost overruns

2

at the project, were you not?

3

A. I believe so.

4

Q. And who expressed those concerns to you?

5

A. I believe that some lenders, after reading a

6

report that was generated by lVI, asked some questions

7

and expressed some concerns.

8

Q.

9

A. lVI prepared monthly reports. I believe in

Which report?

10

January or February the report contained some language

11

about some concerns that they had.

12

Q.

13

A. And I think we got-- we received questions

14

15

Uh-huh.

from some lenders about that.

· Q. And even before that, Deutsche Bank was

16

suggesting that there were some cost overruns at the

17

project, right?

18

A. .I think that's right.

19
20

21

(Deposition Exhibit 493 marked.)
Q.

493 is -- is one of those suggestions by

Deutsche Bank, right?

22

A. Yes.

23

Q.

24

A. I don't know her, but I recall this e-mail.

25

Q.

Did you --you know Mary-- Mary Kay Coyle?

Do you recall communicating with her?

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A. Yes.

2

Q. And she, on the last page of this e-mail,

3

says, "I have heard that there are cost overruns over

4

and above what has been reported since June

5

(approximately 200 million in overruns) and that Moelis

6

has been retained to raise additional equity-- equity

7

to fund these overruns." And then what follows from

8

there -- oh, no, and she goes on to say, "What

9

specifically are the overruns and as a related issue,

10

how is the project in balance if there are."

11

And what follows after that is your response

12

to her e-mail?

13

A. Yes.

14

Q.

Okay. The 200 million she's referring to,

15

those are -- those are overruns that were reported in

16

June?

17

A. I believe so.

18

Q.

There were -- and you were aware that the

19

company was -- "the company" being Fontainebleau --was

20

seeking equity raised through Moelis?

21

A. I was not.

22

Q.

23

that?

Were you, before you got this e-mail, aware of

24

A. I was not.

25

Q.

You -- she made you aware of that, or at least

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she referenced it, right?

2

A. She did reference it, yes.

3

Q. Did you do anything to determinewhether or

4

not the company was indeed seeking to raise equity?

5

A. You know, I believe I asked Jeff, you know, if

6

he had any opinions or suggestions, and, you know, this

7

came as a surprise to us, and, you know, if-- if

8

Deutsche Bank had any knowledge that we didn't have, we

9

were happy to, you know, hear it and discuss it.

10
11
12

Q. Did you solicit Deutsche Bank's input in that

regard?

A. I believe we did, and I believe-- you know, I

13

don't see it written here, but I believe, you know, I

14

said, you know, if you have any details about it, you

15

know, feel free -- you know, please tell us because we

16

haven't heard this. I remember that being my general,

17

you know, thought and sentiment was I haven't heard

18

this. If you have information about it or if you know

19

anything about it, you know, let us know.

20

Q.

Now-- and what-- if she had handed you a

21

document that said, you know, here is-- here is a

22

document from Moelis that says they're seeking equity

23

raise for 150 million of cost overruns, what would that

24

have caused you to do, if anything?

25

MR. CANTOR: Objection.

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A. Well, it's not-- again, it wasn't-- it was

2

surprising to me that she mentioned that Fontainebleau

3

was -- it wasn't surprising, but it was news to me that

4

she mentioned that Moelis was talking to the company.

5

guess it wouldn't have been necessarily surprising that,

6

you know, a borrower would be talking to a financial

7

advisor--

8

Q.

9

A. -- about raising equity. I think it's, you

(BY MR. DILLMAN) Sure.

10

know, probably a prudent thing for them to be doing,

11

especially heading into, you know, an opening in what

12

was believed to be a challenged gaming environment.

13
14

Q.

to pay for overruns.

15
16

Sure. But she's talking about raising equity

MR. CANTOR: Objection.
Q.

(BY MR. DILLMAN) Right? "Moelis has been

17

retained to raise additional equity to fund these

18

overruns." Right?

19

A. That's what it says.

20

Q. All right. So if -- if she had handed you a

21

document that showed that Moelis was seeking to raise

22

additional equity for Fontainebleau Resort specifically

23

to fund -- let's just grab a number-- 150 million of

24

cost overruns in December 2008, what, if anything, would

25

you have done with that information?

..

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A. I would have sent to the -- if it was me

2

making the decisions, I would have sent it to the

3

borrower and said, what is this? This is what we're

4

hearing from the banks. We have no information about

5

it. What's going on? Are there cost overruns? And,

6

you know, what's the situation?

7

Q. And if they simply didn't respond to it, would

8

you have brought that to the attention of the other

9

lenders?

10

A. We would --well, if they just didn't respond

11

to it, you know, at all, we would probably ask the

12

question again.

13

Q. And if they didn't respond to it?

14

A. You know, I don't know. It's a hypothetical.

15
16

I don't know.
Q.

Okay. Was that the kind of information that

17

you would have felt compelled at some point, if the

18

company simply denied it or shied you on, to-- to let

19

the other lenders know about?

20

MR. CANTOR: Objection.

21

A. Again, I don't know. It's hypothetical.

22

Q. (BY MR. DILLMAN) Okay. What did you

23

understand your duties were under the governing

24

agreements in terms of alerting the other-- of tracking

25

down information that was provided to the borrower,

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where you had inconsistent or contrary information at

2

your-- at your disposal?

3

MR. CANTOR: Objection.

4

A. Again, I think if there is anything that was

5

·glaringly wrong, we would have typically asked the

6

question. But, you know, under-- you know, our role as

7

agent was to ask questions, if questions were being

8

asked of us that we didn't know the answer to, and relay

9

those questions back to the, you know, lender that was

10

asking the question. And if that wasn't sufficient for

11

them, then they could follow up with --with another

12

question.

13
14

Q.

(BY MR. DILLMAN) The lenders, the other

lenders?

15

A. Yes. Yes.

16

Q.

17
18
19
20

Okay. So you were simply a conduit between

the borrower and the lender; is that your-understanding?

A. The agency role is -- is a lot like a conduit,
yes.
Q. And if you had no -- if you had information

21

contrary to the information provided by the borrower, it

22

was your understanding, in this facility, under the

23

documents governing the Fontainebleau Las Vegas project,

24

that you had no obligation to track down the information

25

and no obligation to provide the lenders the contrary

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1
2

information; is that right?
A. Is the question if we had definitive evidence

3

of something that was inconsistent that the borrower was

4

telling us or if we had heard, you know, a rumor about

5

something?

6

Q.

If you had credible evidence that was contrary

7

to or inconsistent with information that was provided to

8

the borrower, did you understand that under the

9

governing documents for this facility that you had an

10

obligation to track the information down to get to the

11

truth.and/or provide the credible information that was

12

inconsistent to the other lenders?

13

A. I don't know if we had an obligation, but, you

14

know, I would think that if we had credible evidence to

15

the contrary than what we were being told, then we would

16

ask -- have asked the question because we would have

17

been just as curious to know the answer as the other

18

lenders.

19
20
21

Q. And would --

THE VIDEOGRAPHER: I need to change the
tape. I'm sorry. We're off record, 2:15p.m.

22

(Recess from 2:15p.m. to 2:24p.m.)

23

THE VIDEOGRAPHER: Start of Tape 5.

24
25

We're now on record at 2:24 p.m.
(Deposition Exhibit 494 marked.)

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Q.

(BY MR. DILLMAN) I've marked and placed in

2

front of you Exhibit 494, which is an e':"mail from

3

yourself to Mr. Keyston and Mr. Fuszard. It attaches a

4

letter from J.P. Morgan, which, in turn, attaches the

5

January 30 Project Status Report from lVI. So far so

6

good?

7

A. Yes.

8

Q. You sent this e-mail to Mr. Fuszard and

9

Mr. Keyston?

10

A. Yes.

11

Q. Why were you communicating with them at this

12
13

point?
A. At this point I believe we had recommended

14

that our workout group get involved and so-- Joe

15

Fuszard is with our workout group. I copied Brian

16

Corum. He was --you know, presumably at this point--

17

I'm not sure, but presumably he had taken over from Jeff

18

Susman, and I was sharing-- as well as I copied-- you

19

know, I sent it to Doug Keyston as our risk officer, and

20

I was sharing the letter that we received from

21

J.P. Morgan to discuss-- discuss the letter and-- and

22

the issue.

23

Q. The -- the issue being what?

24

A. Well, the issue being the comments from lVI

25

that they had seen certain things or, you know, had

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MR. CANTOR: You said lenders. He meant

1
2

loan.

3

MR. DILLMAN: I -- I got it.

4

A. I believe I meant loan, DDTL --

5

Q.

6

A. --delay draw term loan.

7

Q.

8

(BY MR. DILLMAN) DDTL means loan.

"Difficulty with the loan and non friends and

family banks"-- riow I'm even more confused.

9

A. So am I.

10

Q. All right. And in the context when you're

11

talking about friends and family banks, on the one hand

12

those are institutions, right?

13
14

15

MR. CANTOR: I'm sorry. Could I hear
that again? I missed it, before you answer.
Q.

(BY MR. DILLMAN) I'll ask it again. The

16

friends and family banks that you're talking about,

17

those are --you're talking about institutions?

18

A. Banks, yes.

19

Q. You're not talking about agreements?

20

A. No.

21

Q. And I had -- I had read this to mean DDTL,

22.

delay draw term lenders, being other institutions and

23

that the difficulties were with these two groups of

24

institutions.

25

You're telling me that, in the context of this

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sentence, you believe that it means -- DDTL means delay

2

draw term loan and the difficulties here were with the

3

friend and family bank on the one -- banks on the one

4

hand and the loan on the other?
MR. CANTOR: Well, again, you're--

5
6

I'm telling --

A.

7

MR. CANTOR: I'm sorry. Again, Kirk,

8

you're misreading it because you're leaving out the word

9

"non."

10

MR. DILLMAN: Okay.

11

MR. CANTOR: Okay.

12

A.

I'm telling you that I don't remember what

13

that meant, what -- but typically I think, if I wrote

14

"DDTL," it seems to be that I was thinking delay draw

15

term loan.

16

Q.

(BY MR. DILLMAN) Okay. All right. And your

17

counsel is correct. I did read [sic] out, not

18

intentionally, the non friends and family banks.

19

With that, having now gone around and -- and

20

clarified my-- my prior misunderstanding, do you have

21

any idea what that means?

22
23
24
25

MR. CANTOR: Don't guess.
A.

I just don't remember what that means, sitting

here today.
(Deposition Exhibit 499 marked.)

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Q.

(BY MR. DILLMAN) 499 has been marked. It's

2

an e-mail from you to a number of internal people at

3

BofA. It attaches IVI's Project Status Report dated

4

February 23, 2009 ..

5
6

We previously looked at their report for the
prior month in conjunction with Exhibit 494, right?

7

A. Yes.

8

Q.

That was for the -- is dated January 30, 2009,

9

and Exhibit 499 is dated February 23, 2009. This is the

10

next monthly Project Status Report by lVI concerning the

11

project?

12

A. That's right.

13

Q. And lVI was still having some of the same

14

concerns that it expressed in its prior report. Do you

15

recall that?

16

A. Let me take a quick look here. Yes.

17

Q.

18

Specifically at-- at page 7 --that's where

you were, right?

19

A. Yes.

20

Q. In the first full paragraph there, the first

21

section entitled "Anticipated Construction Costs Versus

22

Direct Cost Budget," it reads, "While the Anticipated

23

Cost Report indicates the Project is expected to stay

24

within budget, lVI is concerned that all the

25

subcontractor claims have not been fully incorporated

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into the report and potential acceleration impact to

2

meet the schedule has not been included." Virtually

3

word for word from the prior report?

4

A. Yeah. I believe that's right.

5

a.

Any discussions with lVI as to what it was

6

doing to try and bring that issue to ground?

7

MR. CANTOR: Objection.

8

A. Yes.

9

a.

10

A. Well, I mean, you know, lVI was having -- it

(BY MR. DILLMAN) Tell me about those.

11

was our understanding that lVI was in communication with

12

the general contractor and/or the borrower about, you

13

know, what was going on, trying to get additional

14

information; You know, that's what they were working

15

on.

16

I mean, they -- they rely to a certain extent

17

on the information that's provided to them by the

18

general contractor and by the borrower. So it looks

19

like what was happening was they were getting some

20

information that they had questions about.

21

We would expect them to ask those --you know,

22

what was going on, if they had questions, and we were

23

telling them to ask, and figure out what was going on in

24

order to satisfy their -- their questions.

25

a.

And based on this draft report that you sent

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around to your group or the group within BofA that is

2

copied on it, you understood that lVI continued to have

3

these same questions and concerns?

4
5
6
7
8

A. That's probably a fair statement since the
comments were still in the report.
Q.

Page 20 of the report-- do you know what

general conditions are?
A. Vaguely, general conditions, I think, are, you

9

know, things that don't fall into a specific project

10

such as the tower or, you know, podium or garage.

11

Q.

Okay. Do you know why the general condition

12

costs with Change Orders 11 , 12, and 13 were

13

transferred, in fact, to the tower, podium, and garage?

14

A. No.

15

Q. Those were not typically what general

16

conditions were to be used for were costs for specific

17

portions of the project, was it?

18

A. I don't know.

19

Q. Turn to page 22 and -- bottom of 22, top of

20

23. Specifically, the top of 23, it says, "The ACR

21

includes 60,599,000 in pending OCOs; however, these have

22

been taken into account within the Anticipated

23

Contingency Summary." And it goes on with language

24

similar to, if not identical, to the prior language that

25

we looked at from the January report. Right?

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A. Yes.

2

a.

3

So you understood that this was still a

concern that lVI had?

4

A. Yes.

5

a.

That the OCOs, the owner change orders, were

6

eating into the budget-- excuse me -- eating into

7

contingency?

8

A. That the pending owner change orders could eat

·9

into the contingency, yeah, and that lVI was trying to

10

get to the bottom of it.

11
12
13

a.

And, apparently, as of the writing of this

report, hadn't gotten to the bottom of it?
A. I don't know-- yeah, I don't know what

14

information they had received as of the writing of this

15

report and what, you know, phase of understanding they

16

were, but apparently there were still concerns.

17

Q.

18

Okay. And you knew that; SofA knew that?
MR. CANTOR: Objection.

19

A. We knew what we read in the report.

20

a.

(BY MR. DILLMAN) And you were actually-- you

21

sent these around to people for their comments, right?

22

You sent this draft around to folks within SofA for

23

their comments?

24

A. Yes.

25

a.

There is a tenant-- I'm sorry. At page 48,

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there is a section entitled "6.8, Tenant/End-User Status

2

and Approval." Do you see that?

3

A Yes.

4

Q.

There are a number of tenants that are listed

5

on the first portion of this chart, which then follows

6

onto page 49. They include Lobby Bar, Gotham Bar and

7

Grill, FB Steakhouse. Do you see that?

8

A Yes.

9

Q.

Were these tenants that you understand --

10

stood at this time were tenants for the restaurant space

11

that was part of the retail and casino area?

12
13
14

MR. CANTOR: Objection; mischaracterizes
the document.

A I'm not sure where lVI got this list of

15

proposed tenants. I presume it was from the --well, I

16

don't know where they got the list. I presume it was

17

from the general contractor or the borrower.

18
19

Q.

(BY MR. DILLMAN) Somebody on the borrower's

side, right?

20

A

I would think so.

21

Q.

I mean, they're the only ones that are

22

proposing tenants for their project, right?

23

A Right.

24

Q.

25

Okay. And did you at this time -- in this

time frame, late February of '09, understand that the

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proposed tenants on this list were -:-were included

2

within the project as the borrower was then planning it?

3

4

MR. CANTOR: Objection.

A. I wasn't sure, again, not having been involved

5

in the original planning and underwriting, you know,

6

specifically which tenants were believed to be in the

7

original budget, but it looks like this was the list of

8

tenants that they were discussing.

9

Q.

(BY MR. DILLMAN) Did you have an

10

understanding in this period of time that the project

11

that was being built was a five-star project?

12

MR. CANTOR: Objection.

13
14
15

16

A. My understanding was that the project that was
being built was a very nice, upscale project.
Q.

(BY MR. DILLMAN) One of the high-end --to be

one of the high-end projects on the strip in Las Vegas?

17

A. Yes.

18

Q.

19

Complete with all the amenities that would go

with such a project?

20

A. Yes.

21

Q.

22

Just so we've gota complete record, I'm going

to mark as the next exhibit in line, which is 600 --

23

MR. CANTOR: Are we --

24

MR. DILLMAN: I believe we're alternating

25

hundreds.

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A. Sure. That's correct that the acceleration

2

costs and the owner change order -- owner change orders

3

were not mentioned in the letter from Paul Bonvicino.

4

Q. And specifically, in the letter that was

5

posted on lntralinks, there was no mention that the --

6

there was a delay in execution of owner change orders,

7

which seems to have gotten larger recently, was there?

8

A. The letter that was posted on lntralinks --

9

Q.

10

A. -- dated March 4th from Paul Bonvicino?

11

Q. Yes.

12

A. The question is, did it talk about the owner

13
14

Yes.

change orders?
Q.

There was no mention of the fact that there

15

were -- there appeared to be a delay in the execution of

16

owner change orders, which seems to have gotten larger

17

recently.

18
19
20
21

A. I don't-- yeah, as I just stated, I don't see
a mention to that.
Q. And what -- how did you understand -- strike

that.
What did you understand the impact of delays

22
23

in owner change orders to be with respect to the

24

remaining cost report?

25

A.

My understanding of the way the process would

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work is the subcontractor would work with the -- I'm

2

sorry-- the general contractor would work with the

3

subcontractors, you know, in building the project, and

4

as the subcontractors would submit, you know, certain

5

invoices or requests for additional funds, that change

6

orders would be generated by the general contractor and

7

those change orders had to be approved by the borrower

8

in order to make their way into the budget.

9

Q. And once approved by the borrower, they would

10

be added to the budget and thus would be --would

11

increase the remaining costs report number?

12
13
14

A. Unless there was an offsetting change to
contingency.
Q.

Of course. But absent any other factors, an

15

owner change order -- a positive owner change order

16

would increase the remaining costs to complete?

17

A. Yes. Absent any other changes, yes.

18

Q.

Okay. And if there were delays in the

19

execution of owner change orders, that would delay the

20

increase to the remaining cost report, assuming, again,

21

that those change orders were positive?

22
23
24
25

A. Only if those change orders ended up being
approved.
Q.

Well, owner change orders are, by definition,

approved, right?

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2

MR. CANTOR: Objection.
A. You know, I think the definition of "owner

3

change order," it's sort of semantics, but they

4·

weren't -- they weren't approved owner change orders

5

until they were approved. Before they were approved,

6

they were pending. And my understanding is that not

7

necessarily all pending owner change orders were

8

approved.

9
10

Q.

(BY MR. DILLMAN) And there was a category

called pending owner changes, right, POC?

11

A.

12

Q. And then there was OCO, owner change orders?

13

A. OCO, I think it stands for owner change

14
15
16

I believe so.

orders, yes.
Q. And the pending were those that hadn't been
executed, and the OCO were those that had?

17

A.

I believe so.

18

Q.

Okay. So when Mr. Bon -- Mr. Barone here

19

says, "There appears to be a delay in the execution of

20

owner change orders," what he's referring to is the

21

signoff by the owner on the pending change orders,

22

right?

23

MR. CANTOR: Objection.

24

A. Again, I don't know what he was thinking when

25

he wrote it, but that's what it appears to have meant to

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2

me.
Q.

(BY MR. DILLMAN) And, in fact, if the owner

3

is delaying in signing change orders, that's going to

4

delay the impact of those change orders on the budget,

5

right?

6
7

A. Only if those change orders end up being valid
and are approved.

8

Q. And are positive?

9

A. And are positive, yes.

10

Q.

Okay. And so a delay in the execution of

11

valid, proper owner change orders would, in fact, delay

12

the impact to the budget of those change orders?
MR. CANTOR: Objection; asked and

13

14

answered.

15

A. Yes.

16

Q.

(BY MR. DILLMAN) And thereby artificially--

17

and, therefore, the remaining cost to complete that

18

didn't take into account those delayed owner change

19

orders would be artificially low?

20

21

A. That's my understanding, again, barring any
other changes, contingency or otherwise.

22

Q.

23

A. I think all of these things were a big deal,

24

yeah.

25

Q.

That's a pretty big deal, right?

If you turn the page on Exhibit 604 -- keep

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the other letter, Mr. Bonvicino's letter out there, too,

2

so you've got access to that. Mr. Barone says, "It

3

appears that the ACRs 'Anticipated Additional Costs',

4

which were supposed to be a worst case projection of the

5

potential owner change orders, are actually a summary of

6

the projected costs to date with no projection of future·

7

needs."
What did you understand Mr. Barone to be

8
9

saying in this sentence?

10
11

MR. CANTOR: Objection.
A. Again, I don't know what Mr. Barone was

12

thinking when he wrote this, but to me it sounds like

13

the ACR was not capturing the potential future needs; it

14

was only capturing a summary of the actual projected

15

costs.

16
17

Q.

(BY MR. DILLMAN) As opposed to the

anticipated future needs for the project?

18

A. Yes.

19

Q. And he goes on to say, "This is not what the

20

ACR should be representing." Right?

21

A. Right.

22

Q.

In other words, it's not supposed to be

23

representing what you've got in the pipeline right now;

24

it's supposed to be representing all of the anticipated

25

costs to complete?

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MR. CANTOR: Objection.
(BY MR. DILLMAN) Right?

2

Q.

3

A. That was my understanding of-- of what lVI

4
5
6
7

was saying.
Q. And that was your understanding of what the

anticipated cost report were supposed to be disclosing?
A. From-- from what we were hearing from lVI,

8

yes. I didn't have an independent, you know,

9

understanding of what the ACR was because that report

10

was not delivered to us, the bank. But we were -- you

11

know, that was what my understanding was based on what

12

lVI was saying.

13

Q.

14

report?

15
16
17

You sure you never saw an anticipated cost

MR. CANTOR: That's not what he said.
A. I didn't say I never saw one. I said I may
have seen one.
(BY MR. DILLMAN) Okay.

18

Q.

19

A. It was not a common practice that we would

20
21

be-- that they would be sent to us.
Q.

I see. I see. You may have received it, for

22

instance, from lVI, but you typically wouldn't have

23

received one in the first instance from the contractor?

24

A. That's right.

25

Q.

Got it.

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A. And it wasn't one of the reports that was part

2

of our loan .documentation, so it wasn't something that,

3

you know, we would receive typically from the borrower.

4

Q. Thank you. Mr. Barone goes on to say, "This

5

seems to be the case as just about all of the

6

Anticipated Additional Costs, paren, 60,800,000, have

7

been included in TWC's latest requisition as a credit

8

entry labeled 'TW Construction Commitments -Against

9

POCs."' Do you see that?

10

A. Yes.

11

Q.

12

What did you understand that to mean?
MR. CANTOR: Objection.

13

A. Again, this continues to sound like there were

14

certain owner change orders that were outstanding that

15

had not been, you know, executed yet or approved, or

16

there were -- there were certain costs that were being

17

shown as anticipated costs which were more actual costs.

18
19

Q.

committed; is that what you mean by "actual"?

20
21

(BY MR. DILLMAN) In fact, which had been

MR. CANTOR: Objection.

A. Well, he refers to an entry by Turn berry

22

Construction called Commitments Against Potential POCs.

23

I'm not sure what that was intended to mean.

24
25

Q.

(BY MR. DILLMAN) In construction parlance on

projects like this, do you understand that there are

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costs which are committed costs?

2
3
4
5
6

MR. CANTOR: Objection.
A. Generally speaking, yeah, I understand that

there are certain costs that would be committed.
Q.

(BY MR. DILLMAN) As you go along, you commit

to certain costs to get the project built?

7

A. Sure.

8

Q. And that Mr. Barone is saying here that the

9

general contractor's requisition showed as a credit

10

entry TW Construction - Commitments Against POCs, right?

11

See that?

12

A. Yes.

13

Q.

That would be the contractor is making

14

commitments against pending owner changes, in other·

15

words, owner change orders that hadn't yet been

16

approved?

17
18
19
20
21
22

A. .I don't know what that was meant to-- again,

intended to mean by the -- by the GC.
Q.

But it -- it certainly sounds reasonable to

you, doesn't it?
MR. CANTOR: Objection.
A. Sure. I think we've talked about this. It

23

sounds like there were costs that were be -- being

24

reflected as anticipated costs, which, in fact,

25

according to lVI, were actually costs that had to be

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2

incurred, not anticipated.
(BY MR. DILLMAN) Right. Mr. Barone goes on

Q.

3

in the next paragraph to say, "This leads us to believe

4

that FBLV and TWC are not on the same page with respect

5

to the Owner Change Orders, which needs to be resolved,

6

and that the entire picture regarding additional pending

7

costs are not being fully shown."

8

You understood this to be a concern by

9

Mr. Barone that he wasn't getting the full picture from

10

the borrower concerning what costs were actually out

11

there?

12

A. I understand this to mean that lVI didn't

13

think that the contractor and the borrower were on the

14

same page with respect to what the approved owner change

15

orders would be.

16
17
18

Q. And that lVI wasn't getting the entire picture

regarding additional pending costs, right?
A. From the prior paragraph, that's what it seems

19

to imply.

20

Q.

I'm actually reading from the second paragraph

21

on this page, where he says, "This leads us to

22

believe"-- and it goes on-- "that the entire picture

23

regarding additional pending costs are not being fully

24

shown."

25

A. Okay.

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a.

2

A. Yes.

3

a.

You see that?

That's a pretty big deal, isn't it?
MR. CANTOR: Objection.

4
5

A. It is.

6

a.

(BY MR. DILLMAN) If the borrower and/or the

7

general contractor are not providing a full and complete

8

picture of the cost to complete the project, that has

9

repercussions up and down the in-balance report, doesn't

10

it?

11

A. If the ~- if the costs that are going to need

12

to be spent to complete the project are not being

13

reflected as costs to complete the project, yes, that

14

absolutely affects the in-balance report.

15.

a.

16

Affects -- affects disbursement?
MR. CANTOR: Objection.

17

A. Could affect disbursement.

18

a.

(BY MR. DILLMAN) If the in-balance report

19

isn't correct, it's one of the conditions to

20

disbursement, isn't it?

21

A. Yes.

22

a.

23
24
25

If the-- if the project's out of balance,

that's certainly a condition to disbursement, right?
MR. CANTOR: Objection.

A. I believe the project has to be in balance for

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2

there to be disbursement, yes.
Q.

(BY MR. DILLMAN) If the borrower submits

3

inaccurate or untrue materials with the --with the

4

disbursement requests, that's a ground for not

5

disbursing, right?

6
7

MR. CANTOR: Objection.

A. I'm not sure what the --what the remedies are

8

or the implications of receiving information from the

9

borrower that's not accurate or true.

10

Q.

(BY MR. DILLMAN) Okay. When you received

11

this letter from Mr. Barone, you understood that these

12

issues were important, had the potential to stop funding

13

or disbursements in its tracks, and that they had to be

14

gotten to the bottom of, right?

15

A. And that they had to be what?

16

Q. Gotten to the bottom of.

17
18

MR. CANTOR: Objection.
A. I understood that the issues were very

19

important and that lVI was continuing to work with the

20

developer and the borrower to get to the bottom of the

21

issues.

22

Q. (BY MR. DILLMAN) Did you understand that you

23

had to get to the bottom of these issues before you

24

could disburse for that month?

25

MR. CANTOR: You, who?

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MR. DILLMAN: BofA.

2

MR. CANTOR: Objection.

3

A. I'm not sure it was SofA's responsibility to

4

get to the bottom of, you know, all of the issues as

5

agent.

6

Q.

(BY MR. DILLMAN) Let me assume that this--

7

that this letter was received on the morning of

8

March 25th, which I will represent to you was the

9

funding date for that-- for the March '09 disbursement.

10

Okay.

11

With the contents that it includes, did you

12

understand that BofA was required to disburse given the

13

information that --would have been required to disburse

14

given the information that lVI set forth in this letter?

15

MR. CANTOR: Objection; calls for

16

speculation, it's a hypothetical, it calls for a legal

17

conclusion.

18

A. Again, I think that BofA, in conjunction with

19

legal counsel, looked at the contract very hard and

20

within the context of the information that we had and

21

executed what we believed was the, you know, requirement

22

under the contract.

'23

Q. (BY MR. DILLMAN) Got it. My question was, if

24

you had received this letter on March 25th, the morning

25

of disbursement, before disbursements had been made,

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2

equivalent that Special Assets uses.
Q. Okay. And at this point do you understand

3

that Mr. Yu had the ability to make the unilateral

4

decision to downgrade?

5

A. I don't recall specifically, but it seems

6

that, you know, at this point he was certainly, you

7

know, directing the process.

8
9
10

Q. Do you know why the decision was made to
downgrade in Q1 rather than Q2?
A. Just looking at the chain of e-mails, it looks

11

like there is some rationale here.

12

Q. Rationale being what?

13

A. There is some explanation as to why it was

14

decided to be downgraded early.

15

Q. And what is that explanation?

16

A. You want me to read it?

17

Q. I want you to point me to it.

18

A. Okay. It's on page 313.

19

Q. Okay. And the -- specifically where it says,

20

"COP expects FB LV to draw down the full amount of its

21

$800 million revolver in April 2009. Given a greater

22

than 50 percent probability that interest coverage will

23

fall below 1.00x in two quarters, COP is proactively

24

downgrading the company to RR 9 (PSA) with appropriate

25

upgrades and downgrade triggers as follows." Is that

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right?

2

A. Yes.

3

Q. And what does "PSA" mean?

4

A. Risk rated 9 PSA basically means that there is

5

a higher than 50 percent chance that interest coverage

6·

will fall below one turn, one time, you know, coverage

7

of EBITDA over the next six months, two quarters.

8

Q. A downgrade to 9 PSA, does that have any

9

practical implications in terms of the difference

10

between an 8 and a 9 PSA?

11

A. As -- as a loan is downgraded or upgraded,

12

there are implications as to how much capital the bank

13

has to reserve against that loan.

14

Q.

Okay. Any other implications that you're

15

aware of that would be relevant to the Fontainebleau

16

loan?

17

A. No.

18

Q.

19

Do you know why there was a conclusion --

well, strike that.

20

If you go up to the second page, there is an

21

e-mail from Brian Corum to a bunch of folks, copied to

22

you. It says, "We are trying to downgrade FBLV to RR9

23

at today for quarter end."

24
25

Do you know why it was important to do that
before quarter end as opposed to on April 1st?

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A. I don't recall why that was important, no.

2
3

(Deposition Exhibit 617 marked.)
Q.

Okay. Let me put in front of you what's been

4

marked as Exhibit 617. 617 is an e-mail from Mr. Yu to

5

Mr. Washington, copied to, among others, yourself, and

6

attaches a copy of the March 5th, 2009, letter from

7

Mr. Barone to Mr. Kumar. Do you see that?

8

A. Yes.

9

Q. And Mr. Yu asked Mr. Washington to "Please

10

post this to lntralinks private." You see that?

11

A. Yes.

12

Q.

13

Mr. Washington was with the --with

Mr. Naval's group?

14

A. Agency Management.

15

Q. And he was one of the people who sort of had

16

the -- the secret decoder ring to get things onto

17

lntralinks?

18

A. Yes. He could post things on lntralinks.

19

Q. And -- and I had represented earlier that we

20

had not been able to establish that this was placed on

21

lntralinks. I can represent to you that's-- prior

22

to -- prior to Mr. Murata handing me this exhibit, that

23

was correct. But through his good offices, we can see

24

that apparently it was placed on lntralinks.

25

A. Okay.

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Q.

Correct?

2

A. Yes.

3

Q.

I just want to make sure that the record was

4

clear on that before we -- before we ended this

5

deposition. All right?

6

A. Okay. Yes.

7
8

MR. DILLMAN: And at this point I have no
further questions.

9

THE WITNESS: Okay.

10

MR. CANTOR: I have none either. Thank

11

you.

12

THE WITNESS: Okay. Thanks.

13

THE VIDEOGRAPHER: We're off the record

14
15

at 5:28p.m.
(Proceedings adjourned at 5:28 p.m.)

16
17
18

19
20
21
22
23
24
25

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1

UNITED STATES DISTRICT COURT

2

SOUTHERN DISTRICT OF FLORIDA

3
4
5

6
In Re: FONTAINEBLEAU LAS VEGAS ) Case No.: 1:09-md-02106-ASG
7

CONTRACT LITIGATION

8

9
10
11
12
13
14

15

VIDEOTAPED DEPOSITION OF JIM FREEMAN
LAS VEGAS, NEVADA
WEDNESDAY, MARCH 23, 2011

16
17

18
19
20
21

22
23

REPORTED BY: CARRE LEWIS, CCR NO. 497

24

25
Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1
2

-oOoWhereupon -JIM FREEMAN

3
4

having been first duly sworn to testify to the

5

truth, was examined and testified as follows:

6
7

EXAMINATION
BY MR. DILLMAN:

8

Q.

Good morning, Mr. Freeman.

9

A. Good morning.

10

Q. As I just stated, I represent a number of

11

plaintiffs in a lawsuit filed against Bank of

12

America relating to the Fontainebleau Las Vegas

13

project.

14

Are you familiar with that lawsuit?

15

A.

I am familiar with the lawsuit.

16

Q.

Have you ever had your deposition taken

17

before?

18

A.

19

Q. You have had an opportunity to discuss the

20

I have never had a deposition taken.

proceedings here with your counsel, Mr. Kitchens?

21

A.

I have.

22

Q. Any questions before we go forward?

23

A.

No questions.

24

Q.

Who are you currently employed by?

25

A.

I work for MGM Resorts.

Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1

Q.

In what capacity?

2

A.

My title is senior vice president of

3
4
5
6

capital market and strategy.
Q.

In that regard, what are your general job

descriptions and duties?
A. I'm in charge of capital raising for all of

7

MGM Resorts. I report to the chief financial

8

officer of MGM Resorts.

9

Q.

10

A. Approximately one year.

11

Q.

How long have you held that position?

You will have to pardon me because we have

12

this wind tunnel effect behind you so it may be that

13

I don't catch all of your answers. If you could

14

speak up, I suspect the video and the court

15

reporter, as well, would appreciate it.

16

A. Okay.

17

Q.

18

You have been with MGM for approximately

one year?

19

A. Approximately one year.

20

Q.

21

Prior to that where were you employed, if

at all?

22

A. I was employed at Fontainebleau Resorts.

23

Q.

24
25

On what date did you leave Fontainebleau

Resorts?
A. I can't remember the exact date. It would

Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1
2

have been, I believe, around June of 2009.
Q.

If I do my math and go back a year, I'm not

3

at June of 2009.

4

A. Correct.

5

Q.

6

What did you do between the time that you

left Fontainebleau and the time that you joined MGM?

7

A. I was not employed.

8

Q.

9

A. (Laughter.)

10

Q. At the time that you left Fontainebleau,

On the beach, as they say?

11

what was your title with that company, Fontainebleau

12

Resorts?

13
14

A. Senior vice president and chief financial
officer for Fontainebleau Resorts.
Were you a director?

15

Q.

16

A. No.

17

Q.

18

A. No.

19

Q. Did you hold any positions at any other

20
21

Were you a member of the board of managers?

Fontainebleau-related entities?

A. I may have been -- there may have been a

22

title at the -- at a Las Vegas entity where I may

23

have been a treasurer or something like that, but

24

the main functional responsibility was at

25

Fontainebleau Resorts.

Bank of America - Fontainebleau

None

Page 12

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1
2

Q. Which Las Vegas entity do you believe you
may have been the treasurer for?

3

A.

I'm not sure which entity.

4

Q.

Was it a retail entity?

5

A.

No. I think it would have been the main --

6

you know, probably had to do with the entity that

7

raised the capital.

8

Q.

9

A. The borrower and the issuer of the second

10
11

The borrower under the credit agreement?

mortgage notes.
Q.

One of the things that I'm going to ask you

12

to try and concentrate on as we go through this

13

deposition is to let me finish my question before

14

you answer. In a conversational setting it's

15

perfectly appropriate; I understand what you are

16

saying; we can communicate. The court reporter has

17

a much more difficult time with that.
I apologize.

18

A.

19

Q. Thank you.
When did you join Fontainebleau Resorts?

20
21

A.

February of 2006.

22

Q.

In what capacity?

23

A. As the senior vice president and chief

24
25

financial officer of Fontainebleau Resorts.
Q. During the period from February of 2006

Bank of America - Fontainebleau

None

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Freeman, Jim 3/23/2011 5:02:00 PM

1

2
3
4
5
6
7

8
9
10
11

12
13

14
15
16
17
18

Now, the Lehman bankruptcy occurred on
September 15, 2008. Do you recall that?
A.

I don't recall the exact date but that --

my guess would have been September of 2008.

19
20
21

22

23
24
25

Q.

Did you receive in a normal course these

Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1
2

draw requests to the retail lenders?
A. My recollection is that the disbursement

3

agent sent this to TriMont as a server, but I'm

4

guessing a little bit. I don't -- I don't remember

5

seeing this as part of my monthly package that I

6

saw.

7

Q.

You did understand that in September there

8

was a request, a draw request, made to the retail

9

lenders consistent with your advance request that we

10

previously looked at --

11

A. That's correct.

12

Q.

13

A. That's correct.

14

Q. And you understand that -- understood at

15

-- as Exhibit 253, correct?

that time that the retail lenders included Lehman.

16

A. That's correct.

17

Q.

18

lender.

That in fact Lehman was the largest retail

19

A. That's correct.

20

Q. And that therefore, as a result of your

21

advance request, Lehman would be requested to fund

22

the majority share of the draw request to the retail

23

lenders for that month.

24
25

A. I can't remember if they were the majority
share, but they were certainly a significant

Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1

contributor and could have been a majority.

2

Q. The Lehman bankruptcy was generally not

3

perceived at Fontainebleau by you in particular as a

4

positive development for the project, correct?

5

A. That's correct.

6

Q. Why was that?

7

A. At the time of the bankruptcy, I can't

8

remember the exact number, but Lehman was still

9

obligated to fund at least $100 million under the

10

retail facility, I believe.

11

Q. And you perceived that as a problem?

12

A. Yes, with the -- yes.

13

Q.

In fact, if the retail facility didn't

14

fund, the credit facility was not obligated to fund

15

either, correct?

16
17

MR. KITCHENS: Calls for a legal
conclusion.

18

But you can answer, if you know.

19

THE WITNESS: It was my understanding that

20

the retail facility funding, even though it was

21

relatively small relative to the large funding, was

22

a triggering event for funding the larger facility.

23

BY MR. DILLMAN:

24
25

Q. Therefore, if Lehman didn't fund its

obligation and no one stepped up to fund it, that

Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1

could very well shut down all financing for the

2

project.

3

A. Yes, there was that concern.

4

Q. And that's not something that you wanted to

5

have happen.

6

A.

I'm sorry?

7

Q.

Not something that you wanted to have

8

happen.

9

A.

Correct.

10

Q.

Did you have any expectation that you could

11

obtain different funding if that occurred?

12

MR. CANTOR: Objection.

13

MR. KITCHENS: Vague as to time.

14
15

BY MR. DILLMAN:
Q.

At that time, September of 2008.

16

MR. CANTOR: Objection.

17

THE WITNESS: At the time, there were

18

discussions going on between the company and all of

19

the retail lenders about -- sorry -- about funding

20

for the project.

21

BY MR. DILLMAN:

22

Q.

My question was not clear. I apologize.

23

A.

I'm sorry.

24

Q.

Did you have any expectation that you could

25

replace the existing financing, the credit facility

Bank of America - Fontainebleau

None

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Freeman, Jim 3/23/2011 5:02:00 PM

1

happened. I still don't recall it.

2

BY MR. DILLMAN:

3

If I represented to you that Mr. Yunker

Q.

4

said the conversation did occur, would you have any

5

reason to dispute that?

6
7

MR. CANTOR: Objection. Mischaracterizes
the record.

8

Go ahead.

9

THE WITNESS: I don't have any reason to

1O

dispute it.

11

BY MR. DILLMAN:

12

Did anyone at B of A ever indicate to you

Q.

13

that payment of the Lehman portion of the

14

September retail draw by anyone other than Lehman

15

created potential issues under the governing

16

financing documents?

17

MR. KITCHENS: And again, excluding from

18

your answer any conversations you had with counsel.

19

MR. DILLMAN: I don't think that that would

20

be appropriate since I said "did anyone from

21

BofA."

22
23
24
25

MR. KITCHENS: I'm sorry. I misheard it.
Okay.
THE WITNESS: Not that I recall.
BY MR. DILLMAN:

Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1

Q. Anyone from B of A indicate to you in sum

2

or substance that they would prefer not to know how

3

the Lehman share of the retail advance was being

4

made?

5

A. Not -- not that I -- not that I recall.

6

Q.

Did you ever indicate to them that that

7

might not be a question that they would want to ask?

8

Excuse me. Let me start over.

9
10

Did you ever indicate to them that that was
a question that they might not want to ask?

11

A. Notthatlrecall.

12

Q.

13
14

Do you recall that in that -- well, strike.
You know that FBR made the payment for

Lehman, right?

15

A. In September?

16

Q.

Yes, sir.

17

A.

I didn't remember. I know that FBR did --

18

I didn't remember which month it did, but that month

19

it strikes me that we did. But I --

20

Q.

21

A. I believe that to be -- I believe that we

22

made the payment in September for Lehman.

23
24
25

Q.

Strikes you?

You were part of the decision process that

led to FBR making that payment for Lehman?

A. I believe so.

Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1

Q. As the CFO, would you typically have signed

2

off on the wiring of those funds to TriMont, the

3

servicer on the retail?

4

A. I believe so.

5

Q.

Let me place in front of you what's

6

previously been marked as Exhibit 14. Is this a

7

document you have previously seen?

8
9
10

A. I may have. I don't remember the specific
document.
Q.

Did you have an understanding that

11

Mr. Kotite was going to inform the retail lenders

12

that Fontainebleau Resorts had made Lehman's payment

13

for the September draw?

14

A. I believe I would have, yes.

15

Q.

16

Exhibit 56 is a document from TriMont. You

understand TriMont was the servicer --

17

A. That's correct.

18

Q.

19

A. That's correct.

20

Q.

21

-- for the retail facility?

They were the entity that received the

funds from the various retail lenders?

22

A. That's correct.

23

Q. And this reflects a wire from Fontainebleau

24

Las Vegas -- excuse me -- Fontainebleau Resorts,

25

Inc., of $2,526, 184 on September 26, 2008.

Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1

A.

Correct.

2

Q.

That was Lehman's share of the retail

3

facility for the month of September, correct?
I believe that to be correct, yes.

4

A.

5

Q. And this is a payment you authorized?

6

A. That's correct.

7

Q.

So as of certainly no later than

8

September 26, you were aware that Fontainebleau

9

Resorts paid the retail portion for Lehman.

10

A.

For September, that's correct.

11

Q.

Yes.

12

At that time, September 26, 2008, Bank of

13

America asked you to reaffirm your prior reps and

14

warranties from the advanced certificate, didn't

15

they?

16

A. That -- I believe so.

17

Q.

Why?

18

MR. CANTOR: Objection.

19

MR. KITCHENS: Calls for speculation.

20

MR. CANTOR: Yeah.

21

THE WITNESS: I don't remember

22

specifically. I don't -- I assume it's tied into

23

the retail facility and the funding that month, but

24

I guess I considered my reps to be reaffirmed on the

25

draw date, regardless.

Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1

A.

2

No.
MR. KITCHENS: I was going to say that's a

3

yes-or-no answer, and you selected one of those

4

alternatives so that's fine.

5

BY MR. DILLMAN:

6
7

0. The letter that was sent to you was -that's Exhibit 76.
Your response to that was Exhibit 77?

8
9
10

A.

Let me spend a minute looking at the

letter.
Sure. Sure.

11

Q.

12

A. Yes, I believe my letter was a response to

13
14

that request.
Q.

In the second full paragraph of the letter,

15

there is a reference to 3.3.23 of the disbursement

16

agreement. It's the second indented portion.

17

Do you see that?

18

A. Yes.

19

Q.

Had you had discussions with anyone at

20

B of A prior to the date of this letter concerning

21

this condition in the master disbursement agreement?

22
23
24
25

MR. KITCHENS: In the context of the Lehman
bankruptcy?
MR. DILLMAN: Yes. Yes.
BY MR. DILLMAN:

Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1
2
3
4

Q.

Prior to the date of this letter and in the

context of the Lehman bankruptcy.
A.

I don't recall a conversation on this

specific provision.

5

Q.

6

A. Is this provision getting at who is

7
8

Did you --

funding? Is that -Q.

Let's look at the disbursement agreement

9

and look at 3.2.3 so that you can have it in front

1O

of you, but I believe this quote is in that

11

provision.

12

A.

I don't remember. I mean we obviously

13

talked generally. I don't remember them citing

14

3.3.23, but obviously there was discussion around

15

what was happening with Lehman Brothers.

16

Q.

More particularly, discussion around what

17

was happening with Lehman Brothers and how those

18

events might impact conditions under the master

19

disbursement agreement?

20

A.

I think all the discussions around Lehman

21

Brothers were its impact on the overall monthly

22

funding.

23

Q.

24

.A.. And with counsel, yes.

25

Q.

With -- all of the discussions with B of A?

I'm ju'st talking now about B of A.

Bank of America - Fontainebleau

None

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1

A. Yes.

2

Q. What did you discuss with B of A concerning

3

the Lehman events and how those events might impact

4

conditions under the master disbursement agreement?

5

MR. CANTOR: Objection. Mischaracterizes

6

his testimony.

7

THE WITNESS: Again, I don't remember --1

8

don't remember the specific discussions that took

9

place. There were obviously -- there were questions

1O

about what was going on with Lehman Brothers and

11

what was -- you know, what was their impact going to

12

be on a going-forward basis. And then they

13

formalized those for the bank group, I think, with a

14

request for a call, and we responded with the letter

15

that we sent.

16

BY MR. DILLMAN:

17

Q.

And is it your belief that these two

18

provisions that are set forth in the first two

19

paragraphs of Mr. Naval's letter to you were at

20

least two of the conditions that you had previously

21

discussed with B of A?

22
23
24
25

MR. CANTOR: Objection. Mischaracterizes
his testimony.
THE WITNESS: I believe these are the -- I
believe these are the general context of the

Bank of America - Fontainebleau

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Freeman, Jim 3/23/2011 5:02:00 PM

1

conversation that we were having with B of A, yes.

2

BY MR. DILLMAN:

3

0. Mr. Susman, Mr. Howard, or others?

4

A.

5

6

I don't remember specifically who the

discussion was with.

0. And can you recall anything more

7

specifically about conversations with B of A related

8

to 3.3.23?

9
1O
11
12
13

MR. CANTOR: Objection. Asked and
answered.
THE WITNESS: Not -- not that I recollect.
BY MR. DILLMAN:
0. The letter here, Mr. Naval's letter,

14

itemizes several questions, six questions, to be

15

precise, that they believe the lenders would want

16

answers to. Feel free to read through those. My --

17

I'm going to ask you about Question Number 2 in

18

particular.

19

A. Okay.

20

0. You understood that at least according to

21

B of A it was important to the lenders to know

22

whether Lehman funded its portion of the

23

September draw requests and if not, who did?

24

A. That's ·· that's the Question Number 2.

25

Yes, I agree.

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1

Q. And that was one of the issues that you

2

were addressing in your follow-up letter,

3

Exhibit 77?

4
5

A.

We were addressing -- yes, we were

addressing the issue in it -- several issues.

6

Q. Several issues --

7

A. Yes.

8

Q. -- that being one of them.

9

A.

10

Q. And turning to Exhibit 77, where is it that

11

Uh-huh.

you answered the Question Number 2?

12

A. We responded based on the -- based on the

13

advice of counsel to -- the memo was authored based

14

on the advice of counsel.

15
16
17

Q. I wasn't asking how it was authored or who
authored it or anything.
Where does Exhibit 77 address the question

18

did Lehman fund its portion of the requested

19

September draw request? -- I have shorted that --

20

and if so -- or if not, who did?

21

MR. KITCHENS: Well, there is no foundation

22

for that. There is an assumption that this 77 is

23

response to the six questions in 76, which is not

24

necessarily correct. So to ask him where does it

25

occur I think is without foundation.

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1

THE WITNESS: Do I still answer it?

2

MR. KITCHENS: You may.

3

BY MR. DILLMAN:

4

Q. Yes.

5

A. I don't believe it answers the question.

6

Q. It does address payment, doesn't it, in the

7

middle of the second paragraph? It says, "In August

8

and September the retail portion of such shared

9

costs was 5 million and 3.8 million respectively,

10

all of which was funded."

11

Do you see that?

12

A. Yes.

13

Q. And that -- take whatever time you need.

14

That's the only response here in Exhibit 77

15

that addresses in any way the subject matter of

16

Question 2 in Exhibit 76, correct?

17

A. I believe so.

18

Q. But if we look at Question 2, they weren't

19

asking you whether it was funded. Question 2

20

assumes it was funded, doesn't it?

21

A. Yes.

22

Q. So when you say in question -- in

23

section -- paragraph -- or Exhibit 77 that it was

24

funded, you are not really answering that question,

25

are you.

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1

A. That's correct.

2

Q.

3

A. Correct.

4

Q. And so when Bank of America says to you did

People knew it was funded.

5

Lehman fund and if it didn't, who did? and you said

6

it was funded, you dodged their question, didn't

7

you?

8

MR. KITCHENS: Well, wait a minute. Bank

9

of America didn't ask him anything. Bank of America

10

said --

11

MR. DILLMAN: Is there an objection?

12

MR. KITCHENS: -- what we think others are

13

going to be asking this question. So there's an

14

incorrect premise. It lacks foundation, and it's

15

argumentative in its use of the term "dodged their

16

question."

17

BY MR. DILLMAN:

18

Q. You can answer.

19

A. We authored the memo which was -- which,

20

you know, was broadly a response to questions that

21

arose over Lehman Brothers, based on the advice of

22

counsel.

23

Q. And you answered it in a way that would

24

inform a reader of Exhibit 76 that in fact Lehman

25

hadn't paid, right?

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1

MR. KITCHENS: Objection. Vague. Unclear.

2

THE WITNESS: I'm not sure I understand

3

that.

4

BY MR. DILLMAN:

5

Q.

If someone asks you who did X -- you know,

6

did Lehman do X and you say X was done, wouldn't a

7

reader naturally come to the conclusion that Lehman

8

did X because you are dodging the question?

9

MR. CANTOR: Objection.

10

MR. KITCHENS: Objection. Argumentative.

11

Lacks foundation.

12

MR. CANTOR: Is he being called as an

13

expert on linguistics? mind reading? any of the

14

above?

15

THE WITNESS: I'm not sure what a reader

16

would conclude from that.

17

BY MR. DILLMAN:

18
19

Q.

Wouldn't be an irrational conclusion, would

it?

20

MR. CANTOR: Objection.

21

MR. KITCHENS: Calls for speculation, and

22
23

incomplete hypothetical.
THE WITNESS: I'm not sure what a reader

24

would conclude.

25

BY MR. DILLMAN:

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1

Q. At some point, do you recall Mr. --

2

Do you know Mr. Varnell?

3

A.

I do.

4

Q.

He is a B of A managing director.

5

A.

Correct.

6

Q.

Was at the time that you worked for B of A?

7

A.

Correct.

8

Q.

Was at the time that you left B of A?

9

A.

Correct.

10

Q.

And was at the time of these events in

11

2008?

12

A. Yes.

13

Q.

14
15

Do you recall any conversations with

Mr. Varnell concerning the Lehman issues?
A.

Not -- not specific conversations. I --

16

the ones that I remember were more with David Howard

17

about setting up this -- with, I believe, David

18

Howard about setting up this call, and maybe Jeff

19

Susman. I may or may not have had a conversation

20

with John on the subject. I'm not sure.

21

Q.

Do you recall that you had a meeting in

22

Las Vegas with the retail lenders and, among others,

23

Mr. Varnell?

24
25

A.

I'm not sure. That meeting may have

happened, but I don't specifically remember the

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1
2

meeting.
Q.

Do you remember a meeting with the retail

3

lenders after the Lehman bankruptcy to discuss stuff

4

relating to Lehman?

5
6
7

A. I don't remember a specific meeting. There
may or may not have been.
Q.

Mr. Varnell at some point forwarded to you

8

information about analyst reports, stating that

9

Fontainebleau had paid Lehman's portion of the

10

September 2008 draw request on the retail facility.

11

Do you recall that?

12
13
14

A. I don't recall it specifically, but it may
have happened.
Q.

Okay. Well, let me place Exhibit 233 in

15

front of you, previously been marked. Exhibit 233

16

is a highly confidential transmittal of an e-mail

17

from somebody else to you from Mr. Freeman.

18

You received this e-mail, I take it?

19

A. From Mr. Varnell.

20

Q.

21

Excuse me. From Mr. Varnell. Yes, sir.

The other Mr. Freeman.

22

A. Yes.

23

Q.

24

A. It does -- yes, it does sound familiar,

25

Do you recall having received it?

once I see it.

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1

Q. And what sounds familiar is the information

2

down below that -- in the e-mail that he was

3

forwarding to you that is in paragraph numbered

4

Item 5?

5

A. That's correct.

6

Q. And it reads, "Fontainebleau update." We

7

understand that the FBLEAU equity sponsors have

8

funded the amount required from Lehman on the retail

9

credit facility due this month, $4 million. As a

10

result, there are no delays in construction this

11

far."

12

Do you see that?

13

A. Yes, ldo.

14

Q. And does this is help you to recall

15

conversations with Mr. Varnell on the topic of who

16

funded for Lehman?

17
18
19
20

A.

I don't remember specific conversations

with Mr. Varnell on who funded.
Q.

Do you have any recollection of asking

Mr. Varnell why he was sending you this?

21

A.

Not -- not that I -- not that I recall.

22

Q.

Were you curious?

23

MR. CANTOR: Objection. Doesn't recall.

24

THE WITNESS: I mean, yes, I was -- yes, I

25

would be curious upon receiving this.

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1

BY MR DILLMAN:

2

Q. And you recall having received it?

3

A. I do believe so, yes.

4

Q. And you were curious about why it was being

5
6

sent to you?

A. Uh-huh.

7

MR KITCHENS: You have to say yes.

8

THE WITNESS: Sorry. Yes.

9

BY MR DILLMAN:

10

Q.

11

my lips.

12
13
14

15
16

I will tell you how to answer. Just read

Did you contact Mr. Varnell and ask him
"Why did you send this?"

A. I probably did, but I don't remember a
conversation.
Q.

Does this help you to recall conversation

17

or conversations with Mr. Varnell relating to the

18

who-paid-for-Lehman issue?

19

A. Again, I don't -- I don't remember having a

20

specific conversation with Mr. Varnell on who paid

21

for Lehman.

22

Q. And if Mr. Varnell had asked you who paid

23

for Lehman, you wouldn't have lied to him, would

24

you?

25

A. No.

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1
2

0. You would have told him the Fontainebleau
did?

3
4

MR. KITCHENS: Lacks foundation. I think
he said he couldn't remember the discussions.
MR. DILLMAN: Strike it.

5
6
7

BY MR. DILLMAN:
Q.

Now, Exhibit 233 attaches an e-mail from

8

Kevin Rourke, Andrei Dorenbaum, and Brad Means.

9

They are from Highland Capital Management, LP,

10

according to the signature line of the contact

11

information.

12
13

Did you know Mr. Rourke, Mr. Dorenbaum, or
Mr. Means prior to receiving this e-mail?

14

A. I knew Kevin Rourke.

15

Q. And you knew him as being someone from

16

Highland?

17

A. From Highland Capital, correct.

18

Q.

19

You knew that Highland was a term lender in

the credit facility?

20

A. That's correct.

21

Q.

22

Had you had conversations with Mr. Rourke

prior to October 10, 2008?

23

A. Yes.

24

Q.

25

On what topics? Strike that.
On any topics having to do with Lehman?

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1

A.

I think so.

2

Q.

What do you recall of your conversations

3

with Mr. Rourke? And let me expand that to be or

4

anyone else from Highland.

5

A.

I thought -- I think I remember a meeting

6

where they were in our office and they were asked --

7

it was right around the time of Lehman's bankruptcy

8

filing.

9
10
11

Q. Around the time as in that week or sometime

in the general, you know, month thereafter?
A.

It's a little bit of a blur. I thought it

12

was really close to the time, but I could be wrong.

13

Q. All right. Who attended that meeting that

14
15
16

you recall?
A.

Kevin. And I think there were some others,

but I remember Kevin. I think Kevin specifically.

17

Q.

Others from Highland?

18

A.

lthinkso.

19

Q.

Others from Fontainebleau other than you?

20

A.

I'm not sure.

21

Q. Anyone else?

22

A.

I'm not sure.

23

Q.

B of A?

24

A.

I don't believe so.

25

Q.

Who called the meeting?

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1
2

BY MR. DILLMAN:
Q. And that when you were telling Mr. Howard

3

and Mr. Susman and Mr. Varnell and Bill Scott that

4

you told Highland what you could, you were

5

representing at least in part that you didn't tell

6

them everything. There was things that you couldn't

7

tell them and therefore didn't.

8

A. I think -- I think it was what I could

9

based on -- based on my conversation -- based on the

1O

advice I had received from counsel.

11

Q. And did you make it clear to the folks at

12

B of A that your limitations on what you could and

13

couldn't say to Highland were the result of

14

conversations that you had had with counsel?

15

A. Not sure.

16

Q.

Do you recall having described the reason

17

why you had limitations on what you could and

18

couldn't say other than conversations you had had

19

with counsel?

20

A. I don't believe so.

21

Q.

So whether you told them that it was

22

because you talked to counsel and counsel had given

23

you certain limitations or whether or not, you don't

24

recall having said there was any other reason?

25

A. I believe that to be the case.

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1

Q.

Okay. What was their reaction when you

2

told them that there were certain things you

3

couldn't tell Highland?

4

MR. CANTOR: Objection. Whose reaction?

5

MR. DILLMAN: B of A's.

6

MR. CANTOR: Objection. That

7

mischaracterizes testimony, but he can answer.

8

THE WITNESS: In what time frame? My

9

recollection is that when we sent the memo out to

10

the lenders there was some conversation about that

11

we had limitations on what we were and weren't

12

allowed to say, based on our discussions with

13

counsel. That's my recollection of when that

14

conversation happened.

15

BY MR. DILLMAN:

16
17
18

Q. And the conversation you are talking about

now is a conversation with B of A?
A.

I believe -- I believe it would have been.

19

But this was around -- this was around: Are you

20

going to have a call?

21
22
23

No, we don't think we are going to have a
call. We will write a memo instead.
But again, I don't remember a specific

24

conversation where we went through this, but it

25

seems to me that it would have happened as a natural

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1
2

response to the request.
Q.

So to be -- take it back to some of the

3

documents we looked at, in connection with the

4

request B of A made in Exhibit 76 and your

5

responsive letter in Exhibit 77, you believe there

6

were discussions with B of A in which you apprised

7

representatives of B of A that there were things

8

that you could say and things that you couldn't say

9

about the Lehman bankruptcy issue?

10

MR. CANTOR: Objection.

11

THE WITNESS: I don't remember a specific

12

conversation, but I think we framed -- we framed the

13

fact that we weren't going to have a call in that

14

context.

15

BY MR. DILLMAN:

16

Q.

There were certain things that we would

17

prefer not to --

18

A. Right.

19

Q.

20

A. There are certain things that we are not

-- say on a call?

21

allowed to say, and we don't want the call to

22

deteriorate to kind of a least common denominator

23

approach.

24
25

Q.

Did you inform B of A -- strike that.
With whom did you have that conversation

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1

you just --

2

A. My best guess is it would have been David

3

Howard and Jeff Susman because they were -- they

4

were trying to organize the call at that point in

5

time.

6

Q.

7

Not a guess, right? That's your best

recollection?

8

A. That's my best recollection of who at

9

B of A I would have been speaking to about it.

10

Q.

What was their reaction?

11

A. 1--

12

MR. CANTOR: Objection.

13

THE WITNESS: I don't remember.

14
15
16

BY MR. DILLMAN:
Q. Anybody ask you what is it that you -- what

are the subjects about which you can or can't speak?

17

A. No, not that I remember.

18

Q. Any questions about "How about that

19

question of who paid for Lehman?" Can you talk --

20

can you give answers to that?

21

A. I don't -- I don't remember them. Once I

22

laid out that, I don't remember that they ever asked

23

me specifically.
Once you laid out what?

24

Q.

25

A. Well, we were talking about scheduling the

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1

call, not scheduling the call. And we would have

2

said -- my recollection is that at that point in

3

time we said we don't think -- we don't think a call

4

is the right idea; there are limitations upon what

5

we can and can't say. And I don't think they

6

followed up with that statement with specific

7

questions of "Why can't you say this?"

8
9

Did that answer the question?
Q.

1O

It did. Thank you.
I will place in front of you Exhibit 18.

11

This is a meeting agenda for a meeting that -- the

12

testimony is did occur -- occurred on or about this

13

date of March 23, 2008, in Las Vegas --

14

A. October?

15

Q.

16

Yes, sir. October 23, 2008. Sorry.
-- and included at least Mr. Schaeffer,

17

Mr. Varnell, Mr. Yunker, Mr. Howard -- excuse me --

18

yes, Mr. Howard, and I believe that the testimony

19

has been Mr. Freeman as well.

20

A.

21

0. All right. And the purpose of this meeting

22
23

I believe I attended the meeting.

was what?
A.

I don't remember specifically. There would

24

have been obviously questions amongst the --

25

questions amongst the retail lenders about what

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happens, what happens with Lehman but also I think
2

generally about the project.

3

My recollection is that the retail funders,

4

the retail lenders, went a long time without

5

funding. They didn't start funding until after we

6

were through the equity dollars and the second

7

mortgage notes proceeds, so I think it was -- I

8

think it was a project update is my recollection of

9

the meeting.

1O

Q.

Was there a discussion about the

11

possibility of the non-Lehman lenders on the retail

12

facility stepping up and taking over Lehman's

13

commitment?

14
15

16
17

A. There may have been. I can't remember
specifically.
Q. Was there any appetite for that, if you can

recall that?

18

MR. CANTOR: Objection.

19

THE WITNESS: As part of this meeting?

20

BY MR. DILLMAN:
Yes, sir.

21

Q.

22

A. I can't -- I can't remember as part of this

23

24
25

meeting.
Q.

Did you have an understanding in the

September/October time frame that if Lehman didn't

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1

come through with its commitments that the other

2

retail lenders were waiting there to make good on

3

Lehman's commitments and take over its portion of

4

that facility?

5

MR. CANTOR: Objection.

6

THE WITNESS: There were discussions

7

underway, but there wasn't a commit from the other

8

lenders to step in for Lehman if Lehman didn't

9

perform going forward.

10

BY MR. DILLMAN:

11

Q.

Who paid Lehman's share in November?

12

A.

I don't remember specifically.

13

Q.

Fontainebleau?

14

A.

I don't remember specifically.

15

Q.

What -- for what months other than

16

September or in addition to September did

17

Fontainebleau fund Lehman's share of the retail

18

facility?

19

MR. CANTOR: Objection.

20

THE WITNESS: I don't remember

21

specifically. There was -- there was several months

22

where I believe Fontainebleau Resorts funded -- I

23

can't remember if Lehman funded once or twice after

24

them so I don't remember the sequence of the

25

specific months or how many.

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1

2

BY MR. DILLMAN:
Q.

You remember that at some point

3

Fontainebleau entered into agreements with ULLICO

4

relating to monthly funding of the Lehman's share of

5

the retail facility?

6

A.

I do remember -- I do remember that now,

7

but I don't remember the specifics of that -- of

8

that arrangement.

9

Q.

When you say you remember that now, is that

10

because you have looked at documents that helped

11

refresh your recollection about that?

12

A.

I think in a discussion with -- with

13

counsel.

14

Q.

I'm not asking for --

15

A.

Sorry.

16

Q.

-- discussions with counsel.

17

But is it in preparation for the

18

deposition, looking at documents or otherwise, that

19

you were refreshed about an arrangement between

20

ULLICO and Fontainebleau in connection with payment

21

of Lehman's share?

22

A.

In a discussion with counsel, yes.

23

Q.

Did you review any documents in that

24

regard?

25

A.

No.

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1

Q.

Now that you recall those events, do you

2

recall that you were involved in the internal

3

discussions concerning that agreement between -- or

4

those arrangements between ULLICO and Fontainebleau?

5

A.

I would have been involved in internal

6

discussions, but I wasn't involved in the

7

discussions with ULLICO, that I remember.

8
9

Q.

Do you recall having signed certain

documents in that regard?

1O

A.

I may have.

11

Q.

Let me place in front of you what's

12

previously been marked as Exhibit 24.

13

What's 24?

14

MR. CANTOR: Objection. Form.

15

MR. KITCHENS: Objection. Vague.

16

MR. DILLMAN: Come on. I'm trying to cut

17

through things, guys.

18

BY MR. DILLMAN:

19

Q.

Do you recognize Exhibit 24?

20

A.

I would need to review it.

21

Q.

Sure.

22

A. Okay.

23

Q.

24

before?

25

A.

This is a document that you have seen

I have seen it before, and that's my

Bank of America - Fontainebleau

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1
2

signature on Page 5.
Q. This relates to the retail draw -- Lehman's

3

share of the retail draw for December of 2008,

4

correct?

5

A.

I believe that would be correct.

6

Q.

This provides a guarantee by the named

7

parties, in the first paragraph, of ULLICO's payment

8

of the Lehman's share, correct?
I believe that's correct.

9

A.

10

Q. And it requires that the guarantee --

11

strike that -- that the guarantors repay that money

12

to ULLICO the earlier of May --

13

A.

14

Q. -- March 29, 2009, or the next time that

15
16

Lehman fails to make an advance.
A.

17
18
19

Maybe March?

I believe that to be correct.
MR. CANTOR: Objection.

BY MR. DILLMAN:
Q. You were involved in the decision process

20

by which this document was entered into by

21

Fontainebleau Resorts, Turnberry Residential, Jeff

22

Soffer?

23

A.

I was -- I was informed -- I was informed

24

of it and discussed it internally, but I wasn't -- I

25

wasn't involved in many of the conversations with

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1
2

ULLICO about it.
Q.

3

Right. I heard that.
And why didn't Fontainebleau Resorts simply

4

pay the Lehman share for December as opposed to

5

going through a payment by ULLICO guaranteed by

6

Fontainebleau, Turnberry, and so forth?

7

MR. KITCHENS: Lacks foundation.

8

THE WITNESS: I don't recall.

9
10

BY MR. DILLMAN:
Q.

Did you have any discussions about why

11

these entities were entered into this agreement as

12

opposed to a direct payment from Fontainebleau?

13
14
15

A.

I'm sure we had discussions about it, but I

don't remember the specific discussions.
Q.

Did Fontainebleau have the financial

16

ability to pay $3,391,631.83 in December of 2008?

17

MR. CANTOR: Which Fontainebleau?

18

MR. DILLMAN: Fontainebleau Resorts, LLC.

19

THE WITNESS: To the best of my

20

recollection, they would have.

21

BY MR. DILLMAN:

22

Q. Any reason sitting here today why you --

23

that you can think of why Fontainebleau chose to go

24

through a guaranty agreement With ULLICO as opposed

25

to a direct payment?

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1

A. Not that I can -- not that I can recollect.

2

My recollection is that Sonny was in the middle

3

of -- Sonny Kotite was in the middle of those

4

discussions. And certainly there was -- there was

5

discussions with Lehman about how much -- how much

6

they would continue to fund, and there were

7

discussions with ULLICO about stepping in for, I

8

believe, a significant portion of those fundings.

9

So this may have been kind of an interim

10

step to that -- to that resolution, but that's

11

the -- that's my best recollection of why we would

12

have gone through these steps.

13

Q. As of December 31, 2008, you understood

14

that Lehman was not funding its share of the

15

December advance?

16
17
18

A. I believe that to be -- I believe that to
be correct.
Q.

You actually came to that understanding

19

before that because you signed this guaranty

20

agreement on December 29 -- as of December 29,

21

reflecting the fact that Lehman wasn't going to pay.

22

A. I believe that's what this reflects.

23

Q.

24
25

How did you come to the understanding that

Lehman was not going to pay December?

A. I would have heard it from Sonny Kotite, I

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1

believe.

2

Q. And he was the main contact with Lehman?

3

A.

4

Q. And it was your understanding based on your

Correct.

5

conversations with Mr. Kotite that he had been in

6

communication with Lehman and advised that Lehman

7

was not going to make its December payment?

8
9

10

A. That would have been how I got the

information, correct.
Q.

Did you understand in December that Lehman

11

in all likelihood would not be making subsequent

12

payments after that as well?

13

A.

No.

14

Q.

Did you have any understanding one way or

15

the other as to the likelihood of Lehman making, for

16

instance, the January payment?

17
18
19

A.

I did not have any understanding of whether

they would or wouldn't.
Q. You came to understand that they had not?

20

MR. CANTOR: Objection.

21

THE WITNESS: I came to understand that

22

they had not for December.

23

BY MR. DILLMAN:

24
25

Q.

You came to understand that they had not

for January as well? They did not for January?

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1

2
3

A.

I believe that -- I believe that to be the

case, yes.
Q. And you are aware that the guaranty

4

agreement was amended to provide for payment by

5

Fontainebleau Resorts through ULLICO of Lehman's

6

January draw requirements under the retail facility.

7

A. I don't remember what happened in January

8

with regards to ULLICO.

9
10
11

12
13
14

MR. KITCHENS: I think he is done looking
at it.
MR. DILLMAN: I'm sorry. Thanks. Throw

15

something at me next time.

16

BY MR. DILLMAN:

17
18
19

20
21
22

23
24

25
Bank of America - Fontainebleau

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Freeman, Jim 3/23/2011 5:02:00 PM

1

2
3
4
5
6
7
8
9
10
11

12
13

14

15
16

17
18

MR. CANTOR: Objection.
BY MR. DILLMAN:

19

20
21

22
23

MR. CANTOR: Objection.

24

THE WITNESS:

25
Bank of America - Fontainebleau

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Freeman, Jim 3/23/2011 5:02:00 PM

1

BY MR. DILLMAN:

2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Bank of America - Fontainebleau

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1
2

Q.

Let me put a document in front of you. It

may help.

3

4
5

6
7

8
9

10
11

12
13
14
15

16
17
18
19

20
21
22

23
24

25
Bank of America - Fontainebleau

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1
2
3
4
5
6

THE WITNESS:
BY MR. DILLMAN:
Q.

7

MR. CANTOR: Objection.

8

THE WITNESS:

9

10
11
12
13

BY MR. DILLMAN:

14
15

16
17
18
19

20
21
22
23
24

25
Bank of America - Fontainebleau

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65
Freeman, Jim 3/23/2011 5:02:00 PM

1

2

3
4

MR. DILLMAN: Why don't we go off the

5

record for a minute. You review. We will go back

6

on. We will get the answer, and we'll go to lunch.

7

THE WITNESS: That would be helpful.

8

THE VIDEOGRAPHER: Off the record at 12:01.

9

(Off the record.)

10

THE VIDEOGRAPHER: Back on the record at

11

12:11.

12

BY MR. DILLMAN:

13
14
15

16
17
18
19
20
21

22

23
24

25
Bank of America - Fontainebleau

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Freeman, Jim 3/23/2011 5:02:00 PM

1

2

3
4
5
6
7

8
9
10
11

12
13
14

15
16
17
18

MR. DILLMAN: Thank you. Let's take a
break for lunch.

19

THE VIDEOGRAPHER: Off the record at 12:13.

20

(Off the record for lunch recess.)

21

THE VIDEOGRAPHER: Back on the record at

22

1:12.

23

BY MR. DILLMAN:

24
25

Q.

Mr. Freeman, at some point in 2008, did

Fontainebleau Resorts seek to raise equity through

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Freeman, Jim 3/23/2011 5:02:00 PM

1

Q.

Yeah. Those are additive.

2

A. Correct.

3

Q.

So the total cost to complete the project

4

as enhanced would be net of the things that are

5

netted out here, $374 million?

6

A. That's how I would interpret these, yes.

7

Q.

8

A. Was what they said we were committed to at

9

Of which 171 was for the base plan?

that point this time for the base plan.

10

MR. CANTOR: Who is the "they"?

11

THE WITNESS: I'm sorry. "They" being

12

based on the discussion with Jeff and Howard and the

13

team the week immediately prior to this meeting.

14

BY MR. DILLMAN:

15

Q.

So let's stick with the 171 is actually net

16

of soft-cost savings and the committed construction

17

costs are 186. We see that on Page 12, right?

18

A. Correct.

19

Q.

Based on your conversations within

20

Fontainebleau, when was the 186 million of base plan

21

additional spend committed?

22
23
24 ·
25

MR. CANTOR: Objection. Asked and
answered.
THE WITNESS: I believe it was -· I believe
it was committed at the point in time that the

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1

A.

I don't know. Not that I'm aware of.

2

Q.

I'm going to ask you to dig back into your

3

pile. If you could, pull out the document that had

4

been previously marked as Exhibit 75. It's the

5

one-pager.

6

A. Okay.

7

MR. DILLMAN: What's the date?

8

MR. CANTOR: September 26.

9

MR. KITCHENS: Here it is. You can use

10

mine, if you want.

11

THE WITNESS: It's going to be at the

12

bottom.

13

BY MR. CANTOR:

14

Q.

15

A. Okay.

16

Q.

Do you have that in front of you now?

17

A.

I do.

18

Q.

This is the e-mail exchange where Jeff

Of course.

19

Susman from Bank of America asks you to affirm the

20

representations and warranties, and you respond, "I

21

affirm."

22

A. Yes.

23

Q.

24
25

And when you responded "I affirm," was that

a -- was that a true statement?
A. Yes.

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Q.

Did you believe that that -- that by

2

responding "I affirm" that that statement was

3

misleading in any way?

4

A. No, I didn't.

5

Q.

Now, you knew that what you were affirming

6

were the various representations and warranties that

7

are certified to in the advance request, correct?

8

A. Correct.

9

Q. And you knew that one of those

1O

representations and warranties had to do with retail

11

funding, correct?

12

A. Correct.

13

Q. · And in fact, the specific one that we have

14

been talking about is Section 3.3.23 of the

15

disbursement agreement. You knew that you were

16

affirming your representation that that condition

17

had been met, correct?

18

A. Correct.

19

Q. And you also knew as of this date that

20

Fontainebleau Resorts had funded on behalf of

21

Lehman, correct?

22

A. I believe so. I can't remember the exact

23

date that that funding would have taken place. Was

24

it the 26th or 27th?

25

Q.

I will represent to you that it was the

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26th. If Mr. Dillman has a fuss with that, I will
2

find a document to prove it to be so.

3
4
5

MR. DILLMAN: I have no fuss.
BY MR. CANTOR:
Q.

So when you were affirming this, you knew

6

that Fontainebleau Resorts had funded the Lehman

7

portion of the September retail.

8

A. That is correct.

9

Q.

Okay. So can you explain to me, sir, why

1O

it was true that the condition precedent in

11

Section 3.3.23 was satisfied?

12

A. Based on my discussion with counsel, I

13

was -- I was -- it was explained it me that we were

14

in compliance.

15

MR. DILLMAN: Just so the record is clear,

16

I am going to go back -- every time he talks about

17

"based on my conversation with counsel," I'm going

18

to go into exactly what he talked about with

19

counsel. If you want to let him waive that as we

20

go -- this is the second time -- you may do so.

21

MR. KITCHENS: I don't intend to waive

22

anything with respect to that, and I have instructed

23

him not to disclose the content of discussions with

24

counsel.

25

So please be careful about that. I think

Bank of America - Fontainebleau

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Freeman, Jim 3/23/2011 5:02:00 PM

1

respect to the retail funding in September?

2

A. I said what I believed I was allowed to say

3

at the point in time, based on the advice I received

4

from counsel.

5
6
7

Q. I believe you testified earlier that -withdrawn.
If you could, pull out -- and hopefully

8

it's right next to the one you are looking at --

9

Exhibit 76.

10
11

12

MR. KITCHENS: In my file.
BY MR. CANTOR:
Q. In Mr. Kitchens' file. Exhibit 76, the

13

September 30 letter. Do you have that in front of

14

you, sir?

15

A. ldo.

16

Q. And if you look down to Paragraph 2 at the

17

bottom of the Question Number 2 at the bottom of the

18

first page there, do you recall we discussed that --

19

you discussed that with Mr. Dillman earlier today?

20

A. Yes.

21

Q. And I apologize, but I'm not sure I

22

understood your testimony from earlier so let me

23

just try it again.

24
25

Is it your testimony, sir, that the
October 7 memo that is Exhibit 77 does not, in fact,

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Freeman, Jim 3/23/2011 5:02:00 PM

1
2

3
4

answer Question 2 on Exhibit 76?
A. I don't know that it answers -- I don't
know that it answers any -- any of the questions.
It wasn't written as a direct response to

5

these individual questions. It was written as an

6

update to what I believed I could say about the

7

about the Lehman subject at that point in time.

8

-~

Q. Okay. Is there any reason why in preparing

9

Exhibit 77 you did not specifically address the

1O

issue of who funded the Lehman draw in September?

11

A. I wrote the memo saying what I believed I

12

could say based on the subject of funding based on

13

the discussions that I had with counsel, the advice

14

that I received from counsel.

15

0. And so is it fair to say, then, that you

16

did not include direct information on whether Lehman

17

funded the September retail advance request because

18

that was not within what counsel had permitted you

19

to say?

20
21
22
23
24
25

A. That's my belief.

(Exhibit 274 marked.)
BY MR. CANTOR:

Q. Let me show you a document that's been
marked as exhibit -MR. CANTOR: What are we up to? 274?

Bank of America - Fontainebleau

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Freeman, Jim 3/23/2011 5:02:00 PM

1

MR. DILLMAN: I am unreliable but --

2

MR. KITCHENS: 274 would be next one.

3

4

BY MR. CANTOR:
Q.

If you could, just take a look at that

5

document and let me know when you have had a chance

6

to look at it.

7

A. Okay.

8

Q.

It's a -- an e-mail from Howard Karawan to

9

Mr. Kotite and Mr. Soffer, CC'd to you and

10

Mr. Schaeffer, forwarding an e-mail from John

11

Maxwell.

12
13
14

Let me ask you first, do you know who John
Maxwell is?
A.

I do know Mr. Maxwell. He was a -- he was

15

a high-yield research analyst for Merrill Lynch at

16

that point in time, I believe.

17

Q.

18

e-mail?

Okay. Do you recall having seen this

19

A. Yes.

20

Q.

Was -- withdrawn.

21

Did part of your job responsibilities as

22

CFO for Fontainebleau Resorts include talking to

23

research analysts?

24
25

A.

From time to time, yes, on the high-yield

side. Obviously we were private on the equity side.

Bank of America - Fontainebleau

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Freeman, Jim 3/23/2011 5:02:00 PM

1

Q.

Right. Prior to September 2008, had you

2

spoken with Mr. Maxwell about the Fontainebleau

3

project?

4
5
6

A. I -- I may have. I don't remember if I did

or I didn't.
Q. As you mentioned earlier, the bottom e-mail

7

here is from Mr. Maxwell. It's essentially him

8

sending around his September 18 report on

9

Fontainebleau. Did you speak with Mr. Maxwell in

10

connection with this report prior to its

11

dissemination?

12

A. I believe I may have.

13

Q. And so for example, if you look in the

14

first paragraph of Mr. Maxwell's e-mail, the second

15

sentence, I believe it is, says, "We spoke with

16

company management."

17
18
19
20
21

Were you at least one of the people whom
Mr. Maxwell spoke?
A.

Glenn, but potentially it was me.
Q.

Okay. Do you have any -- well, withdrawn.
Do you have any memory of having spoken

22
23

Potentially. He may have also spoken with

with Mr. Maxwell in connection with this?

24

A.

I can't remember.

25

Q.

Other than you and Glenn, is there anyone

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Freeman, Jim 3/23/2011 5:02:00 PM

1

A. Yes.

2

Q.

3

Did. you ever respond to Mr. Rourke's

question?

4

A.

Not -- not that I recollect.

5

Q.

Okay. Why didn't you respond to

6
7

Mr. Rourke's question?
A.

I think I had been given specific guidance

8

from counsel as to what I could comment on and not

9

comment on with regards to funding, and I was -- I

1O

believed I was giving all of the information that I

11

could at that point in time.

12

Q. And so you didn't believe that you could,

13

consistent with the instructions that you had been

14

given with counsel, respond to Mr. Rourke's

15

questions?

16
17
i8
i9

20

A.

time, I don't think.
Q. And were those the same instructions from

counsel that you had been given back in September?
A.

21

22
23

I didn't believe that at that point in

I believe so.
(Exhibit 277 marked.)

BY MR. CANTOR:
Q.

Let me show you what we have marked as

24

Exhibit 277. It's amazing that I can't remember

25

three seconds later.

Bank of America - Fontainebleau

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Freeman, Jim 3/23/2011 5:02:00 PM

1
2

Q.

In fact, you knew that Fontainebleau

Resorts had funded part of the retail draw for that.

3

A.

I knew that at that point i(l time, yes.

4

Q.

Did you think that was something that --

5

that was unimportant to Ms. Holloway?

6 ·

A.

I'm not -- I'm not sure.

7

Q.

Is there any particular reason why you

8

didn't tell Ms. Holloway that Fontainebleau equity

9

had funded part of the September retail advance?

1O

A.

Based on the discussion that I had, the

11

advice of counsel, I was -- I was not talking to

12

people about the source of funding.

13
14

Q.

Your e-mail also says, "Sitting down with

D&T Partners tomorrow."

15

Is that Deloitte & Touche?

16

A.

I would guess so.

17

Q.

Who was Deloitte & Touche in connection

18

with the Fontainebleau project?

19

A. They were our auditors.

20

Q.

Did you -- withdrawn.

21

This also refers to you having a callwith

22

Ms. Holloway. I believe it's to be the day after

23

this e-mail chain. Do you recall whether that call

24

took place?

25

A.

I'm not sure.

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Freeman, Jim 3/23/2011 5:02:00 PM

1

record that I disagree with your position on the

2

privilege, but let's -- might as well keep going.
MR. KITCHENS: I will state for the record

3
4

I disagree with your disagreement. You don't need

5

to do that. I won't ever claim you waived it.

6

MR. CANTOR: And ad infinitum.

7

THE WITNESS: I'm sorry. Can you read

8

back?

9

BY MR. CANTOR:

10

Yeah, what was discussed at the board

Q.

11

meeting concerning the decision to seek a loan under

12

both the delay-draw facility and the revolver?

13

A. The business rationale that I described, I

14

think, a minute ago with regards to uncertainty in

15

the capital markets, uncertainty in the lending

16

institutions. There was -- about the lending

17

institutions. There was concern about -- about

18

Miami, actually. There were some liens in Miami

19

with regards to construction there that were growing

20

and, although not meaningful to the overall

21

Fontainebleau enterprise, could potentially trip

22

across default, I believe, with the Fontainebleau

23

facility.

24
25

So there is a lot of -- there was -- there
was concern about Lehman, whether or not Lehman

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1

would keep funding, stop funding, be in a position

2

to fund anymore, rescind their commitment.

3

And based upon all of those factors, the

4

decision was -- and the advice of counsel, the

5

decision was made to draw to -- to attempt to draw

6

all of the facilities.

7
8
9
10

Q.

Lehman was still in the picture at that

point? They had not rescinded their commitment?
A. To my knowledge, they never rescinded their

commitment.

11

Q.

You were never --

12

A. Not that I'm aware of.

13

Q.

Okay. Were you ever informed by anyone

14

that Fontainebleau could no longer place any

15

reliance on Lehman funding?

16

A. Not -- not to my recollection.

17

Q. And the point that you mentioned about

18

Miami, just to make sure I understand it, the idea

19

would be that you wanted to draw down the funds --

20

as much of the funds in the facility as you could,

21

just in case something would happen in Miami that

22

would trip a default that would preclude funding for

23

Las Vegas?

24
25

A.

Right. Even though -- even though we

wouldn't view it as material to the overall project

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Freeman, Jim 3/23/2011 5:02:00 PM

1

in Las Vegas, the times were such in the capital

2

markets that I think it was people had to be very

3

cautious about how they approached their lending

4

institutions.

5

Q.

6

place?

7

A.

8
9

Do you recall when this board meeting took

I would guess sometime late February, but I

don't recall specifically the date.
Q.

The notice of borrowing that we looked at a

10

couple of minutes ago I believe is dated March 2, if

11

I recall correctly, or March 3, one or the other.

12

Do you recall whether the board meeting was

13

held the same day that the notice of borrowing was

14

sent out or was it in advance?

15

A.

I don't believe so. Because my

16

recollection is that the board meeting was in Miami,

17

and I believe I was back in Las Vegas on March 1

18

because it's my anniversary and I was getting yelled

19

at by my wife for not being around.

20
21

Q.

Gotcha.
You spoke with Mr. Dillman earlier today

22

about a meeting that involved lenders, and he showed

23

you a document that was dated April 17. Do you

24

recall a prior meeting in March of 2009 involving

25

the lender group and Fontainebleau?

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Freeman, Jim 3/23/2011 5:02:00 PM

1
2

A.

wouldn't have guessed it was in March.

3

4
5

I believe there was a prior meeting.

(Exhibit 290 marked.)

BY MR. CANTOR:
Q.

Let me show you what we have marked as

6

Exhibit 290. Take a look at that document. And the

7

first thing I will ask you is whether it refreshes

8

your recollection as to the fact that there was a

9

meeting in Las Vegas on or about March 20 of 2009

10

with Fontainebleau and its lenders.

11
12
13
14

A.

It appears to be in preparation for a March

meeting.
Q.

Do you recall a meeting in Las Vegas in or

around this time with Fontainebleau lenders?

15

A.

16

Q. You said a few minutes ago that you recall

17

that there was another meeting with lenders but you

18

weren't sure when it was.

19
20

I'm not sure.

A. If I had to guess, I thought it was earlier
in the year, but I could be wrong.

21

Q.

22

A. I believe so.

23

Q. And who attended that meeting?

24

A. I think it was all the -- all the lenders

25

and senior management of Fontainebleau.

Was it in 2009, as far as you know?

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Freeman, Jim 3/23/2011 5:02:00 PM

1
2

Q.

So it included both term lenders and

revolver lenders and delay-draw lenders?

3

A. Yes.

4

Q.

5

Generally speaking, what was discussed at

that meeting? Was it -- I'm sorry.

6

Was that a meeting in Las Vegas?

7

A. I believe so.

8

Q.

9

A. I think project update. I think we spent

What was discussed at that meeting?

10

some time on the -- kind of the in-balance

11

calculation, and it was kind of just an

12

informational update on the overall project.

13

Q.

14

Do you recall -- well, withdrawn.
If you take a look at what we have marked

15

as Exhibit 290, the attachment is labeled "LV Bank

16

Talking Points.doc." If you flip over to the second

17

page of the document, one of the talking points

18

there talks about the March advance request.

19

Recognizing that you haven't been able to

20

place this meeting in a time context, do you

21

remember any discussion about the March advance

22

request during that meeting?

23
24
25

A. Not specifically at that meeting. Could
you be more specific? I'm not sure I -Q.

Well, do you recall having any discussions

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1

with -- withdrawn.

2

Do you recall that for the March 2008 draw

3

that there were some term lenders who -- delay-draw

4

term lenders who did not fund their commitments in

5

March?

6

A.

2009?

7

Q.

2009. I'm sorry.

8

A. Yes, I believe that there were a couple.

9

Q. And do you recall that you ended up sending

10
11
12

default notices to those folks?
A.

specifically, but I may have.

13
14
15

I didn't recall that. I don't recall that

(Exhibit 291-B marked.)
BY MR. CANTOR:
Q.

I'm going to show you what's been marked as

16

Exhibit 291. Take a look at this, Mr. Freeman, and

17

just let me know if this refreshes your recollection

18

that default notices were sent out in March of 2009.

19

A. Yes.

20

Q.

The first letter went out to Z Capital. Do

21

you see that?

22

A. Yes.

23

Q. And it is a default notice with respect to

24

Z Capital failing to fund an $11.66 million portion

25

of the March delay-draw term loan request.

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Freeman, Jim 3/23/2011 5:02:00 PM

1

A.

Okay.

2

Q. And if you look at the second notice, do

3

you see that that goes to several funds who in a

4

letter I will refer to as "the Guggenheim lenders"?

5

A. Yes.

6

Q. And do you recall that they failed to fund

7

a $10 million portion of the delay-draw term loan?

8

A. At that point in time, they did, I believe.

9

Q.

10

Do you recall that Guggenheim subsequently

funded its portion of the delay draw?

11

A. That's my recollection.

12

Q.

13

portion?

14

A.

Do you know whether Z Capital funded its

I don't believe so, but I can't remember

15

for sure.

16

Q.

17

What was -- withdrawn.
Did Fontainebleau have a position at this

18

time as to whether the failure of these two lenders

19

to fund their portions of the delay draw for

20

March 2009 should preclude funding of that draw?

21
22
23

A.

I think our view was that they should --

that this should not preclude funding of the draw.
Q.

Did you have any discussions during March

24

of 2009 with anyone from Highland on the issue of

25

whether the fact that certain term lenders hadn't

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1

funded their portion of the delay-draw loan and how

2

that would affect the overall funding?

3

A.

I can't remember if I did or didn't.

4

Q.

Do you have -- did you have any discussions

5

with anyone from Halcyon?

6

A.

I can't remember if I did or not.

7

Q.

Do you remember if you had any discussions

8

with anyone from Symphony on that subject?

9

A.

I can't remember if I did or didn't.

10

Q.

Do you recall having any discussions with

11

any of the term lenders on the issue of whether the

12

failure of these term lenders to fund their portion

13

of the delay-draw loan should affect the

14

availability of the loan for Fontainebleau?

15

A.

I don't remember those discussions.

16

Q.

You were having discussions with term

17

lenders during March of 2009 about the fact that the

18

revolving lenders had rejected the notice of

19

borrowing that we saw earlier, correct?

20

A.

I believe that to be the case.

21

Q. And the general tenor of those discussions

22

with these term lenders was that they thought that

23

the revolving lender should have funded, correct?

24

A. That's my recollection.

25

Q.

But you don't recall whether any of these

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Howard, David 3/11/2011 12:00:00 PM

1

UNITED STATES DISTRICT COURT

2

SOUTHERN DISTRICT OF FLORIDA

3
4

IN RE: FONTAINEBLEAU LAS VEGAS

5

CONTRACT LITIGATION

6
7

8

CASE NO 09-MD-02106-CIV-GOLD/GOODMAN
MDL No. 2106

This document relates to all actions.

9
10
11
12

13
14

CONTAINS CONFIDENTIAL PORTIONS
VIDEO DEPOSITION OF DAVID HOWARD

15

Charlotte, North Carolina

16

Friday, March 11, 2011

17
18

19
20
21

Reported by:
Andrea Nobrega

22

Court Reporter
Notary Public

23

JOB No. 157413

24
25
Bank of America - Fontainebleau

:"lone

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:foward, David 3/11/2011 12:00:00 PM

0.

Specifically, what time frame are you

2

referring to when you talk about following the

3

documents, making sure that everyone was doing

4

what they were supposed to be doing?

5

MR. CANTOR: Objection. You can answer.

6

THE WITNESS: Well, the -- I mean, I do

7

recall, you know, that it started with the Lehman

8

bankruptcy, and then there was -- you know, it was

9

probably every month after that there was always a

1O

discussion around this. So that's the time frame

11

in the beginning.

12

13
1l

BY MR. DILLMAN:

0. That's the time frame it began and it
.vent forward from there?

15

,\. Right.

16

0. And when did your involvement with the

17

Fontainebleau project cease?

18
19

20
21
22

23
24

25
Bank of America· Fontainebleau

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Howard, David 3/11/2011 12:00:00 PM

1

2

3
4

5
6
7

8
9
10
11

12

Q. Your name is on a lot of e-mails up

13

through April, May of 2009. In reviewing or in

14

preparing for your deposition, do you recall

15

seeing e-mails post-February 2009?

16

A. I recall seeing one that was in March.

17

Q.

Did that help you to recall that you

18

were indeed involved in some manner with the

19

Fontainebleau facility in March of 2009?

20

MR. CANTOR: Objection. You can answer.

21

THE WITNESS: All I recalled was that,

22
23
24
25

you know, I was probably copied on the e-mail.
BY MR. DILLMAN:
Q. And fair enough. If you saw your name

on an e-mail, it didn't bring back any

Bank of America - Fontainebleau

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Howard, David 3/11/2011 12:00:00 PM

1

recollections, oh, yeah, now I remember I was

2

in --

3

A. No, I remember, you know, checking out.

4

I mean, it was, you know, there were plenty of

5

cooks in the kitchen. You know, there was plenty

6

of people handling it the right way in my opinion,

7

and my advice was not really -- it was more a

8

matter of I guess because I had been involved with

9

it for so long, you know, I was just on the

10

distribution list.

11
12

Q.

When you say people were handling it the

right way, what were they handling the right way?

13

A. I think there was just enough -- there

14

was a workout team. There was internal legal.

15

guess not handling it right -- there were the

16

right, appropriate people that were staffed to be

17

working on it. They didn't need my help.

18

Q.

Post-February of 2009, fair to say you

19

don't know whether BofA was handling it

20

appropriately or not?

21

MR. CANTOR: Object to the form.

22

THE WITNESS: I guess I would say I know

23

that they were the right people involved. What

24

they were doing, I wasn't involved in, so I don't

25

know. I don't know what the decisions were.

Bank of America - Fontainebleau

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Howard, David 3/11/2011 12:00:00 PM

1
2

BY MR. DILLMAN:
Q.

Do you today understand that BofA and

3

the other revolvers terminated the revolving

4

facility associated with the Fontainebleau project

5

in late April of 2009?

6

A. Yes.

7

Q. Were you involved in that decision

8

process?

9

A. No.

10

Q.

Do you understand that the borrower put

11

forth a borrowing notice in early March of 2009

12

that sought to draw down on both the term loan,

13

un-funded delay draw term loan and the revolver?

14

A. I recall that notice, yes.

15

Q.

Were you involved at all in the process

16

by which BofA responded or recommended that banks

17

respond to that?

18

A. I recall that I was on phone calls, and

19

I heard discussion. I don't recall my

20

involvement.

21

Q. Do you understand or do you know that

22

there was a disbursement of proceeds in late March

23

of 2009?

24
25

A. Can you clarify disbursement of
proceeds?

Bank of America - Fontainebleau

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Howard, David 3/11/2011 12:00:00 PM

1

MR. CANTOR: It wasn't me --

2

THE WITNESS: It's the nature of the

3

beast.

4
5
6

7

BY MR. DILLMAN:
Q.

Did you talk to Mr. Yunker before his

deposition?
A. Yes, I did. I don't know that I talked

8

about -- other than the fact that he was going to

9

be deposed, we were actually working on a

10

transaction at the time.
You know, we were working with BofA and

11

12

Bret on an Indian deal. So I talked to him

13

frequently about a lot of things.

14

Q.

Tell me about your conversation with Mr.

15

Yunker after his deposition other than the part

16

that it was tiring?

17

18

19

20

A. That's about all we talked about. I was

more concerned how long it lasted.
Q.

Did you talk about what he and I spoke

aboutduringthatdeposWon?

21

A.

22

Q. Any of the topics that came up?

23

A.

No.

Not really. I mean, I can't recall that

24

we talked any specifics about the deal. I was

25

mostly interested in how long it was, and you

Bank of America - Fontainebleau

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Howard, David 3/11/2011 12:00:00 PM

1
2

know, when would I be able to get out of here.
Q.

Did he ask you what you recall about

3

various events that he might have testified to at

4

the deposition?

5

A. No.

6

Q.

7

that I asked him or the answers that he gave?

8
9

Did he indicate any of the questions

MR. CANTOR: Objection, asked and
answered.

10

THE WITNESS: I don't recall.

11

BY MR. DILLMAN:

12

Q. When did you talk to him?

13

A. A couple weeks ago. I saw him

14

personally a week ago Monday -- let's see, what's

15

today? I saw him Monday night. I saw him Monday

16

night in New York, but we didn't talk about this.

17
18

Q.

So at some point in the last couple of

weeks you talked to him about his deposition?

19

A. Yeah.

20

Q.

21

It would make sense because his

deposition occurred about a couple weeks ago?

22

A. Yeah.

23

Q. And it's your testimony that you can't

24

recall anything about that conversation that you

25

had with him a couple weeks ago other than the

Bank of America - Fontainebleau

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Howard, David 3/11/2011 12:00:00 PM

1

fact that he said the deposition was tiring, is

2

that right?

3
4

MR. CANTOR: Objection. I think that
mischaracterizes what he said.

5

THE WITNESS: I said I don't recall us

6

talking about any specifics, and I was mostly

7

concerned -- you know, my questions to him

8

revolved around the time and his answers were it

9

was tiring and he told me it was about five or six

10

hours.

11
12
13
14
15
16

BY MR. DILLMAN:
Q. When you left BofA, what was your

position -- strike that.
Let me go back. I forgot something.
You talked to Mr. Newby?
A. Yes.

17

18

19

20
21
22

23
24

25

Bank of America - Fontainebleau

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Howard, David 3/11/2011 12:00:00 PM

We did not talk anybody about

1

2

Fontainebleau.

3

Q.

4

position?

5

A.

Managing director.

6

Q.

What group?

7

A. I was in the real estate group,

When you left BofA, what was your

8

syndications, and I handled gaming and lodging and

9

leisure.

10

Q.

Who signed your paycheck, what entity?

11

A.

Banc of America Securities.

12

Q.

How long had you been managing director

13
14

in the group that you just testified about?

A. I don't recall when I was promoted.

15

had been running that group gaming since '02.

16

had done hotels before that.

17

I think I was already an MD by then

18

or -- I originally -- it's a long path. What else

19

do you want to know about my --

20

Q.

What I want to know is whether your job

21

description in 2007 was essentially the same as

22

your job description at the time that you left?

23

A. Yes.

24

Q.

25

One thing for the court reporter, you

are going to have to wait until I finish my

Bank of America - Fontainebleau

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Howard, David 3/11/2011 12:00:00 PM

1

question, and I understand that in conversations

2

you anticipate and typically anticipate correctly

3

what the question is going to be and want to get

4

on with it and answer, but it makes her job really

5

hard.

6

A. Understood.

7

Q. What were your job responsibilities at

8
9
10
11

the time that you left in March of 2009?

A. They were the same as they had been
since 2002.
Q. What were your job responsibilities

12

during the time from 2002 through the time that

13

you left on March 31, 2009? Sorry, it wasn't a

14

clear question apparently.

15

A. My job responsibility, I had during

16

those times, I don't know, I managed a small

17

group, three to four individuals.

18

We were primarily tasked with on the

19

syndication side of I guess originating or winning

20

business from clients, structuring syndicated

21

transactions, working with our sales group to then

22

sell them off, work with credits.

23

So I was very much involved in the

24

marketing process. I was very much involved in

25

structuring, documentation, not always, but often,

Bank of America - Fontainebleau

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Howard, David 3/11/2011 12:00:00 PM

1

a lot of the modeling and then the syndication,

2

but typically after a transaction was closed, I

3

did not have any involvement.

4

If I had involvement, it was usually if

5

there was an amendment where the lenders were

6

going to be involved, and they needed -- often I

7

was the facilitator between, you know, the client

8

and credit, and the lenders to just communicate as

9

to what's going on and, you know, was often

10

involved in amendments or when something was going

11

differently than the documentation or the

12

transaction was expected to go, and there needed

13

to be communication with lenders.

14

Q.

Who were the three or four in your group

15

who you worked with or who worked for you in the

16

2008, 2009 time frame?

17

A. Richard Arendale, Michael Chung, Tom

18

Montgomery, Jordan Harris, Knight Kieffer, but I

19

don't know when Knight left. Knight had gone on.

20

He worked with me on the original Fontainebleau, I

21

believe.

22

Q.

23

A. Knight Kieffer.

24

Q.

25

A. I can't -- that's --

Knight Kieffer?

Cool name.

Bank of America - Fontainebleau

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Howard, David 3/11/2011 12:00:00 PM

1

Q.

Did any of the individuals that you just

2

identified work in any way on Fontainebleau

3

post-closing?

4

A. No.

5

Q.

6

A. Yes.

7

Q.

8
9
10

You did?

What were the circumstances that got you

involved in Fontainebleau post-closing?

A. Because of potential issues that might
need communication with lenders.

11

Q.

Specific issues?

12

A. Well, specifically when Lehman, you

13

know, went bankrupt and we got a lot of inquiries

14

from lenders, that's when I got involved.

15

Q. And we'll go into this in more detail,

16

but you got involved when Lehman issues arose for

17

what purpose?

18

A. Well, my job responsibility would have

19

been to if there needed to be an amendment or

20

communication with the lenders, to be involved as

21

to how that was going to be received and act as

22

liaison with sales staff. So we made sure that

23

the lenders received, you know, the appropriate

24

communication. From a practical standpoint, just

25

I have done a lot of transactions, have a lot of

Bank of America - Fontainebleau

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Howard, David 3/11/2011 12:00:00 PM

1
2

construction loan experience.
I did a lot of real estate -- started my

3

career in real estate construction back in Texas

4

and moved to California, and I have done a lot of

5

real estate construction.

6

So I think from the credit products

7

group and credit, they valued my opinion. So they

8

would -- I was involved just as an advisor a lot

9

of times to have another -- somebody to bounce

10

ideas off and talk about things.

11

Q. I will try to break that down. Were you

12

brought in to the Fontainebleau Las Vegas issues

13

surrounding Lehman to provide -- in part to

14

provide opinions, assistance, etc., with respect

15

to the construction issues that you just testified

16

you had some background with?

17

A. I think it was with everything. I mean,

18

you work with a group. I had a lot of knowledge

19

about Fontainebleau. The documents, I was very

20

involved in drafting the documents.

21

So I think it was just my experience

22

with Fontainebleau, my experience with the

23

borrowers, my experience with the lenders, my

24

experience with construction, my experience with

25

gaming, my experience with working internally.

Bank of America - Fontainebleau

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1

It was a wide variety of experiences

2

that I have collected over my career that I think

3

people valued and wanted me to be involved since I

4

had knowledge.

5

Q. And since the Lehman issues as you have

6

referred to them created potential problems and

7

concerns for which your grouping of talents was

8

perceived to be valuable by BofA?

9

MR. CANTOR: Objection.

10

THE WITNESS: I don't know -- you have

11

to rephrase that for me.

12
13

BY MR. DILLMAN:
Q.

14
15

MR. CANTOR: I'm not even sure it was a
question.

16
17

THE WITNESS: I think it was just saying
what I just said.

18
19

It was an awful question.

BY MR. DILLMAN:
Q.

You have these talents. You have this

20

package of experiences and so on that you bring to

21

the table. You bring that to the table at all

22

times that you are at BofA during this time

23

period, yet for most projects your involvement

24

ends at closing. It didn't with Fontainebleau.

25

You were brought back into this facility with

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1

respect to the Lehman issues. Why? What was

2

there about the Lehman issues that as you

3

understood it, caused the bank to come to you and

4

say we want you to become re-engaged with the

5

Fontainebleau Las Vegas project?

6

MR. CANTOR: Objection.

7

THE WITNESS: Again, I think you

8

mischaracterized quite a bit in that statement.

9

What I would say is if there had been any other

10

deal that had similar issues, any deal that had

11

issues with the transaction that needed

12

conversation from lenders, I was brought in.

13

It had nothing to do with it being

14

Fontainebleau if I had prior knowledge of the deal

15

or -- I got involved post-closing on lots of

16

transactions, and in fact, people called and asked

17

my advice a lot after closing about what's this,

18

what do you think about that.

19

So it was not unique to Fontainebleau

20

that I got involved post-closing.

21

BY MR. DILLMAN:

22

Q.

What were the issues with Fontainebleau?

23

You have said the Lehman issues. What were those

24

issues that caused you to become involved

25

post-closing on that facility?

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1

A. Well, I think the initial was the fact

2

of the Lehman bankruptcy and the retail funding,

3

and how are those funds going to be put into the

4

project as related to an in-balance issue. Was

5

there going to be adequate proceeds to finish the

6

project, and what did that mean to the existing

7

documentation, and what did that mean, you know,

8

to the lender and procedurally how are we going

9

to, you know, review and handle that.

10

Q.

You said that one of your roles was

11

communication with lenders. How was it perceived

12

in September of 2008 that there would need to be

13

communication with lenders on this issue of

14

Lehman?

15

MR. CANTOR: Objection.

16

THE WITNESS: How was it perceived?

17

BY MR. DILLMAN:

18
19

Q.

How did you understand -- strike that.
What communications with lenders did you

20

understand would need to or might occur as a

21

result of the Lehman issues?

22

A. Well, given that it was very high

23

profile, there was a lot going on at the time.

24

There was a lot of panic in the market. There was

25

just -- it was a really difficult time for the

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1

financial services industry across the board.
But the high profile nature of it, the

2
3

fact that everybody knew that Lehman was one of

4

the funders in the retail loan, we actually had

5

inbound calls coming in. We anticipated that

6

people would want to know what was going on with

7

the situation.

8

Best we could, we needed to gather

9

information and communicate to lenders what we

10

know.

11

Q.

12
13

14
15
16
17

How did you get brought back into

Fontainebleau? Who called you?
A.

I don't know. I don't recall who called

me.
Q.

Typically in those circumstances, how do

you get brought back into a project post-closing?
A.

How did get brought -- I mean, you know,

18

I usually stay abreast of everything that I work

19

on. So I mean I talked to -- you are talking

20

about a team that works on a lot of deals that

21

talk three or four or five times a day about a lot

22

of things. So I'm always up to speed about

23

everything.

24
25

Getting brought back in, there is no
official demarcation line of you are on, you are

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1

you have any recollection whatsoever of the

2

circumstances that caused you to be reviewing this

3

issue as you stated in your e-mail prior to the

4

actual date of Lehman's bankruptcy in September

5

15,2008?

6

A.

I have no recollection of that.

7

Q.

Did you prior to Lehman's bankruptcy

8

filing, talk with anyone at the company, the

9

company being Fontainebleau Resorts or any entity

10

associated with it, about Lehman issues?

11

A. I have no recollection.

12

Q.

Who at the company did you typically go

13

to if you needed to discuss issues concerning the

14

Las Vegas financing?

15

MR. CANTOR: Objection. You can answer.

16

THE WITNESS: Jim Freeman.

17

BY MR. DILLMAN:

18
19

Q.

You knew Jim Freeman from his days of

Bank of America?

20

A. Yes.

21

Q.

22

A. No. I mean, define friend, I guess.

23

Q.

24
25

Jim Freeman a friend?

I would define friend as being someone

that you are closer to than a business colleague.
A. No. He was a business colleague.

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1

Q.

Did you at my time in conjunction with

2

the Lehman issues as we discussed them here, speak

3

to Mr. Freeman?

4

A.

Can you repeat that question?

5

Q.

Did you at any time in conjunction with

6

the Lehman issues that we have been -- as we

7

discussed them here, the bankruptcy issues, have

8

any discussions with Mr. Freeman?

9

A.

I just want to make sure I understand.

10

Are you talking prior to the bankruptcy or

11

post-bankruptcy or just any time in there?

12

Q. Any time is any time.

13

A.

I know I had to be on some phone calls

14

with him. I don't recall any specific

15

conversations, but I do recall I had to talk to

16

him about these issues, and primarily I recall the

17

thrust of my wanting to talk to him was for him to

18

speak to the other banks.

19

Q.

20

here?

21
22
23

A.

What time period are you referring to

It would be after the bankruptcy, after

the 15th that you stated.
Q.

But in that general time frame,

24

September of 2008, as opposed to January of 2009?

25

It's that time frame around the Lehman bankruptcy

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Howard, David 3/11/2011 12:00:00 PM

that you are talking about now?
,\. Yeah, fall of 2008.

3

0. By the way, you understand that -- and I

4

didn't go through this at the beginning. You

5

understand that this deposition is being taken

6

under penalty of perjury?

7

A. Yes.

8

0. And you understand that an answer to a

g

question for which you have a recollection, if the

10

answer is I don't recall, that that is untruthful

11

and that would be perjury?

12

A. Yes.

13

0. Did you consider the Lehman bankruptcy

.'

• '1

'.o be a potential material -- to have a

15

potentially material impact, negative impact on

5
17

the Fontainebleau Las Vegas facilities?

,\. Did I consider it?

0. Yes.
~

'J

MR. CANTOR: Objection.

:::o

THE WITNESS: Yes, I did.

21

8Y MR. DILLMAN:

22

0. Why?

23

A. Well, they were the funding mechanism

24

tor the retail portion, and the way the documents

25

"vere constructed, that if retail funds were not

Bank of America - Fontainebleau

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Howard, David 3/1112011 12:00:00 PM

funded, then the lenders were not required -2

the -- I guess the casino resort lenders,

3

everybody else, were not required to fund.

4
5

Without funding, the project doesn't get

Q.

built?

6

A. Yeah.

7

Q.

I have seen reference in e-mails to a

3

risk rating. At BofA, what does that mean, a risk

9

rating?

1O

A. Every -- every is a broad word. I would

11

say typically the loan, especially commercial

12

loans at the bank carry a risk rating, which

13

allows in the bank to -- it's helpful in pricing

1i

f•Jr risk adjusted capital, and I think the scale

;5

1;oes from one to ten.

16

Q.

Ten being best or ten being worst?

7

A.

Ten is the worst. Ten you are writing

1

:3

:t off almost. Nine is typically considered a

~

3

:;ubstandard, which is an OCC term. The fed --

:o

there are certain reserves that has to be taken it

21

it's a nine. If it's an eight, it's called -- I

22

forget what the term was, but there are certain

23

reserves ii it's an eight.

24

Seven is kind of it's on watch list to

25

so to -- once it starts getting into seven or

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1

eight, nine range, it goes to -- typically it gets

2

reviewed to go to the workout group.

3

Most loans in the gaming portfolio were

4

somewhere in the four to six range. Typically

5

when a loan is made, it's in that range. It would

6

be -- it's the bank's own internal system that

7

they use to grade loans.

8

The best analogy would be like a Moody's

9

or S&P type rating, so you can -- a risk rated

10

four loan is less risky than a risk rated six,

11

thereby you could charge less LIBOR spread and

12

that was a way of determining profitability based

13

on the risk that you were taking.

14

Q. And this would be at the outset of the

15

loan in terms of pricing the loan at the

16

beginning?

17

A. It's done at the beginning, and then

18

it's reviewed -- I don't know -- it's reviewed

19

consistently at least annually, or if any material

20

events happen, it's typically looked at when the

21

material events happen. So that's not my

22

department.

23

When involved in risk rating, I needed

24

to know what it was. It helped from a pricing

25

standpoint often you could -- that certainly

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1

BY MR. DILLMAN:

2

Q.

3

A. You know, honestly, I don't recall. I

4

probably read this e-mail, so, you know, I may

5

have seen it in print.

6

Q.

Did you ever hear that from any source?

let's step back for a minute. When you

7

got involved or re-involved in this facility in

8

September 2008, you understood that there was a

9

potential problem as a result of the Lehman

10

bankruptcy, and that potential problem was that if

11

the retail funding didn't come through, it would

12

effectively shut down the financing for the

13

project?

14

A.

Correct.

15

Q.

So one of the issues that BofA was

16

interested in getting to the bottom of, was would

17

the retail funding come through or would it not?

18

A. Yes, definitely.

19

Q. And you talked to the company - at

20

least in part talked to the company, Mr. Freeman,

21

to find out what they knew about those issues?

22

A. Those issues being whether retail was

23

going to be funded or not?

24

Q. Yes, sir.

25

A.

I can't recall -- I very well could have

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1

been on phone conversations. I recall having

2

discussions around this. Specific discussions I

3

do not recall.

4

I do recall having discussions as to --

5

what I recall my main focus, what I thought, what

6

I was interested in, was making sure that, one,

7

all the appropriate people were involved

8

internally; that everybody was aware of the

9

situation; that communication throughout the

10

organization as well as to the extent possible

11

communication to the lenders was being handled in

12

an appropriate manner.

13

I know I was on phone calls with Jim.

14

do not recall whether they were before, after,

15

when. What I do recall is mostly I wanted him to

16

have phone calls with the lenders to talk about

17

this issue. I wanted people to hear it from him

18

directly, not through BofA, not as BofA being a

19

conduit.

20

I know we talked about how was this

21

going to get solved. This was very realtime and

22

there wasn't a lot of months to kind of go through

23

a process and figure this out, because I think the

24

draw requests were due at the end of the month,

25

24th, 25th, something like that.

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1

me to where in your opinion you thought a

2

default -BY MR. DILLMAN:

3
4

Q. There is lots of provisions. My

5

question is, whether your review of section 3.3,

6

which deals with conditions precedent to advances

7

by the trustee and the bank agent, allows you to

8

recall any discussions in the negotiation of this

9

document relating to the impact of defaults under

10

the retail facility on funding conditions under

11

the master disbursement agreement?

12

A.

My recollection would only be to this

13

section that is 3.3.23, retail advances, which as

14

more eloquently stated than I did that the

15

retailers had to refund as a condition for the

16

bank lenders or BofA to fund.

17

Q. Did you have any discussions at any

18

point with anyone at BofA surrounding the Lehman

19

bankruptcy with respect to the applicability or

20

not of this particular condition precedent to any

21

of the events or potential events arising out of

22

the Lehman bankruptcy?

23
24
25

A.

I recall discussing this provision, the

funding of the retail lenders, yes, several times.
Q. With whom?

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1

A.

I don't recall exactly with whom. I

2

know with Jeff Sussman. I'm sure Bret Yunker was

3

on the phone. I'm sure whoever worked with Jeff,

4

Brandon, if Brandon was working on it at that

5

time, Brandon Bolio, potentially credit officer,

6

Doug Keyston.

7

I know I requested that internal counsel

8

be involved, Bill Scott at Sheppard Mullen. So

9

there likely could have been more people but those

10

were the people I would have expected to have

11

those conversations with.

12

Q.

Did you, Mr. Howard, come to any

13

conclusions with respect to whether or not payment

14

of Lehman's portion of the September draw request

15

under the retail facility by Fontainebleau Resorts

16

would be payment by the retail agent and/or the

17

retail lenders as set forth in 3.3.23?

18

MR. CANTOR: Mr. Howard, I would just

19

caution you, he is asking if you personally came

20

to that conclusion one way or another. You

21

shouldn't be repeating what counsel told you, if

22

anything.

23

THE WITNESS: I don't recall coming to a

24

conclusion. In this process, as I would let you

25

know, I did not have a vote. I -- it was not my

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1

decision to decide whether or not that was, in

2

fact, the case.

3

It was not my decision, nor my

4

responsibility guided by the bank to make that

5

decision whether or not to fund.

6

BY MR. DILLMAN:

7

Q.

Whose responsibility was it?

8

A. It would have fallen under Jeff Susman

9

and his group. I was there as advice, and as I

10

have stated, my goal primarily, I was mostly

11

concerned that all the right people were looking

12

at all the facts, considering all sides, whether

13

it be the client side, whether it be the lender

14

side, whether it be Bank of America side, all

15

contingent parties needed to be involved and

16

considered in this decision, and in fact, that

17

counsel needed to be involved to make sure that

18

the documents were being followed.

19

That was really my goal, was to make

20

sure that the people that were making the decision

21

that did have a vote were doing it the right way.

22

What I thought or felt, in fact, I never really

23

advised to my knowledge as to what could or could

24

not be done.

25

My goal per my recollection, was just to

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1

make sure that everybody was discussing it and the

2

facts were to the best of everybody's ability,

3

they were going through the process because I felt

4

a responsibility in my position to make sure that

5

the lenders were -- the existing lenders, you

6

know, were represented I guess.

7

It wasn't just, hey, we have to fund

8

this because the client wants us to, or we don't

9

want -- I felt like everybody needed to look at

10

this. This was a gray area. It was very

11

difficult. It had never been looked at before.

12

There wasn't precedent for this issue.

13

So my goal was really to make sure that

14

everybody considered it and viewed it pursuant to

15

the documents.

16

Q.

Did you provide any input, whether you

17

had a vote or not, on the issue of whether or not

18

payment by Fontainebleau Resorts of Lehman's

19

September draw would satisfy the condition of

20

3.3.23?

21
22

MR. CANTOR: Objection, asked and
answered.

23

THE WITNESS: Yeah, I don't recall.

24

BY MR. DILLMAN:

25

Q.

You don't recall any input at all?

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1
2

was in October of 2008?
A. Well, I remember the meeting. The

3

reason I know it's October is because I was

4

refreshed by the O'Melveny counsel as to when the

5

actual date, but I do remember going to that

6

meeting in the fall.

7

Q.

We'll get there in just a minute.

8

want to direct your attention to the page 33 of

9

the master disbursement agreement. 3.3.2, do you

10

see that representations and warranties?

11

A. Yes.

12

Q. Yes?

13

A. 3.3.2, yes.

14

Q. And specifically paragraph A,

15

subparagraph A, which reads in part each project

16

entity set forth in article four or in any -- or

17

in any material contract shall be true and correct

18

in all material respects as if made on such date,

19

and it goes on from there. Do you see that?

20

A. Yes.

21

Q. And if you look at article four of the

22

master disbursement agreement, specifically 4.9.1,

23

it says there is no default or event of default

24

under any of the financing agreements. Do you see

25

that?

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1

A. lseethat.

2

Q. And so one of the conditions precedent

3

in the document that you negotiated was that at

4

the time of any funding, there would be no default

5

or event of default under any of the financing

6

agreements, correct?

7

MR. CANTOR: Objection.

8

THE WITNESS: I don't know what the

9

definition of financing agreements.

10
11

BY MR. DILLMAN:
Q.

Let's look at it I think you will find

12

if you turn to the definitions at the back -- I'm

13

sorry, page -- it's the bates stamp number that

14

ends in 67 at the very bottom on the right-hand

15

corner here. Do you see that financing

16

agreements?

17

A

18

Q. And it means collectively, and I will go

19

Uh-huh.

to the facility agreements. Do you see that?

20

A

Uh-huh.

21

Q.

Yes?

22

A

I see the facility agreements.

23

Q. And if you turn a couple pages back, you

24

will see that facility agreements is defined to

25

mean collectively and including the retail

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1

facility agreement. Do you see that?

2

A. Yes.

3

Q.

So the document that you negotiated said

4

as one of the conditions precedent, that there be

5

no default or event of default under the retail

6

facility agreement, correct?

7

A. Correct. Well, I mean based on the

8

reading of this document, I would say that's

9

correct. I'm not an attorney. Based on this

10

cursory review, what you just showed me, I would

11

agree with that.

12

MR. CANTOR: Note an objection.

13

BY MR. DILLMAN:

14

Q.

Do you recall any discussions

15

surrounding the drafting of this agreement with

16

respect to these provisions that I just -- that we

17

have just gone over?

18

A. No.

19

Q.

In September of 2008 surrounding

20

Lehman's bankruptcy, did you participate in any

21

discussions concerning whether or not Lehman's

22

failure to pay its obligations under the retail

23

facility constituted a default?

24
25

A. I don't recall having those specific
discussions.

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1

Q.

Did you at any time have any discussions

2

with respect to that issue?

3

A. No, I don't recall.

4

Q.

5

Lehman had an obligation to fund under

the retail facility, did it not?

6

MR. CANTOR: Objection.

7

THE WITNESS: Yes.

8

BY MR. DILLMAN:

9

Q.

I will represent to you that failure to

10

fund is defined as a capital L, capital D lender

11

default under the retail facility.

12

A. Maybe, but I mean I also have been doing

13

this long enough to know defaults can be cured,

14

waived by lenders. Just because something happens

15

it could be a default, doesn't necessarily

16

constitute it puts an agreement into default.

17

Q.

Did BofA, to the best of your knowledge,

18

ever waive any condition for disbursement under

19

the master disbursement agreement with respect to

20

the September disbursements, September '08,

21

specifically those?

22
23
24
25

A. I do not believe that they waived
anything.
Q. At any time that you are aware of?

MR. CANTOR: Objection.

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THE WITNESS: That I'm aware of, I don't

1

2

recall anything being waived.
BY MR. DILLMAN:

3

4

Q.

Based on your experience, you are aware

5

that any such waiver would have to be in writing,

6

correct?

7

A. You know, it depends on the

8

technicality. I have seen a lot of things over my

9

experience where guys have waived things because

10

they just view it as a gray area, and they decide

11

not to do it, but typically if it is very

12

specific, it will be -- especially in a case of a

13

syndicated loan, it will usually be in writing.

14
15

Q.

In part you want to make sure everybody

is aware of what's going on?

16

A. Correct.

17

Q. Are you aware of any written waiver of

18

any condition precedent set forth in the master

19

disbursement agreement by BofA at any time?

20

A. No.

21

Q.

So you are not aware that the particular

22

default by Lehman of its obligation to fund the

23

retail facility, you are not aware of that having

24

been waived at any time by BofA, correct?

25

MR. CANTOR: Objection.

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THE WITNESS: You know, I don't know

2

that there was a default -- who knew there was a

3

default to waive? You are asking a question that

4

has a lot of hindsight to it in my opinion.

5

don't know that anybody knew.

6

Financing documents, while written, can

7

be modified. You are talking about modification

8

of a document which the bank had nothing to do

9

with, the retail facility documents, correct? You

10

are talking about a default under a document that

11

Bank of America was not party to other than

12

vis-a-vis a inter-creditor agreement.

13

So the only -- I would have to go back

14

and look. Typically in inter-creditor agreements,

15

you would have, if you are in default you need to

16

notify us and the reliance is on the other

17

lenders.

18

I don't know that Bank of America had

19

any knowledge at that time -- I never had any

20

knowledge, I will put it that way, nor did I know

21

that Bank of America -- that that agreement was

22

technically in default.

23

Typically a default has to be declared

24

in my experience because I have lived through lots

25

of defaulted documents.

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1
2

BY MR. DILLMAN:
Q.

Did you at any time come to the

3

understanding that Lehman had not made its payment

4

obligations under the retail facility?

5

A. I came to that understanding as it

6

relates -- are you talking to the September '08

7

specifically or anyone?

8
9
10
11
12

Q. At any time. My question was not

limited to time.

A. I did become aware when I found out that
ULLICO was funding their share.
Q.

To go back, in the September time frame,

13

you don't recall any conversations with respect to

14

whether or not payment by Fontainebleau Resorts of

15

Lehman's obligations under the retail facility,

16

would constitute a violation of condition 3.3.2A

17

of the master disbursement agreement, is that

18

correct?

19
20

MR. CANTOR: Objection, asked and
answered.

21

THE WITNESS: I don't recall.

22

BY MR. DILLMAN:

23

Q. You don't recall ever having been asked

24

by anyone for any input into that determination,

25

is that right?

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MR. CANTOR: Objection.

2

THE WITNESS: I don't recall. There was

3

a lot going on then. I just don't remember that

4

specific request coming to me.

5

BY MR. DILLMAN:

6

a.

Do you remember any request that in

7

general related in any way to whether or not .

8

defaults by Lehman under the retail credit

9

facility would be a condition -- would violate a

1O

condition precedent to funding under the master

11

disbursement agreement?

12

A I don't recall defaults, discussing

13

defaults.

14

Q.

15

A. Again, I think my recollection goes to

How about --

16

if the money came in from the servicer, retail

17

servicer.

.18

a.

And that was sort of where it stopped in

19

terms of what you recall about an analysis having

20

been done?

21

A. That's what I recall, yes. Because

22

that's where my -- maybe I was too simplistic at

23

the time thinking that if it came in from the

24

servicer.that was coining in, and we heard Lehman

25

funding other situations, the lenders could fund,

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and was there -- I do recall that people looked at

2

the documents to say what's our obligation, and it

3

was like if it comes in from -- I think the

4

decision would be if it came in from the servicer,

5

that that was -- and we had a rep from the

6

company, that everything as you pointed out in

7

3.2, which I think that rep also included if there

8

was a default under the other documents.
So I think at that time as you are

9
1O

.talking September-ish time frame, that funding,

11

Bank of America, to my knowledge, had no knowledge

12

that there was a default under -- they had not

13

been noticed by the retail lenders, and you would

14

have the documents. I wouldn't.
I would assume that the inter-creditor

15
16

would say that you have to notify -- both parties

17

had to be notified if there was default, that you

18

were required to provide notice.

19

I don't recall any notice of default

20

being delivered to Bank of America or it being

21

included in the rep.

22

Q.

Based on your years of experience in

23

this industry and your involvement in negotiating

24

at least some of these documents related to the

25

Las Vegas facility, if BofA became aware of p.

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just don't recall. You are starting to like --

2

I'm not saying -- if I can say, seeing these

3

e-mails and stuff, that certainly could have

4

happened.

5

What I'm trying to think of is what did

6

I think of exactly that happened when I was on the

7

phone in any of these meetings, do I remember it,

8

I don't. I don't remember that specific point.

9

Now that I'm seeing all this, yes, that

10

certainly could have happened. That could have

11

been an issue that guys were focused on.

12
13

BY MR. DILLMAN:
Q.

You do know that the other lenders were

14

focused on that issue, don't you?

15

A. Oh, yeah, yeah, yeah.

16

Q.

17

portion?

18
19

They wanted to know who paid the Lehman

A. The other lenders were and that was -- I
don't know when that was.

20

Q.

You tell me.

21

A. I don't know. I don't know that it was

22

at the time frame you are talking about right now.

23

That's what I don't know. It may have been after

24

the fact, but from my recollection, I don't recall

25

in September that that was the issue with other

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1

lenders.

2

I recall it being -- the issue being

3

what's going to happen, and is money going to come

4

in and are we going to get the project built.

5

That's what I recall the issue being.

6

Q. You recall other lenders asking

7

certainly after the September funding of the

8

retail facility who paid Lehman's share?

9

A. I saw some documents on that yesterday.

10

So that refreshed my memory that, yeah, the guys

11

were curious about that.

12

Q. The guys being other lenders?

13

A. Other lenders.

14

Q. And so was BofA?

15

A. Yes.

16

Q. And BofA, in fact, sent a letter to the

17

company asking the company to answer several

18

questions, one of which is who paid Lehman's share

19

in September?

20

A. Yes. I saw that letter yesterday.

21

Q.

22

A. Very likely I saw it at the time.

23

Q.

You saw it at the time, correct?

And based on your review of documents

24

yesterday, you are aware that the company never

25

responded to that question, either with a call to

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the lenders or with anything in writing?

2

MR. CANTOR: Objection.

3

THE WITNESS: I saw a letter response

4

from Jim Freeman.

5

BY MR. DILLMAN:

6

Q. And Mr. Freeman in that letter response

7

didn't state who paid the Lehman portion of the

8

September retail draw, did he?

9

MR. CANTOR: Objection, argumentative.

10

THE WITNESS: Well, in that letter I did

11

not see that statement. It's a letter, so it

12

didn't have it in there. When I read it

13

yesterday, I didn't see it in there.

14

BY MR. DILLMAN:

15

Q.

Do you have any recollection of the

16

company ever having answered the question BofA

17

posed as to who paid Lehman's portion of the

18

September retail facility?

19

A.

I have no recollection of that.

20

Q.

Do you recall being concerned in the

21

September, October time frame that the company was

22

dodging the issue of who paid the September

23

payment?

24

A.

I don't recall being concerned.

25

Q.

Do you recall having --

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A.

I mean about that issue. I was

2

concerned about finishing the project and a lot of

3

other things, but about that issue I wasn't

4

concerned.

5

Q. Generally of concern when a borrower

6

fails to answer direct questions, isn't it?

7

MR. CANTOR: Objection.

8

THE WITNESS: I have been doing this a

9

long time. I mean, I think that if you ask

10

someone a direct question, they don't answer it,

11

yes, it could be concerning. I don't recall being

12

concerned at the time.

13

BY MR. DILLMAN:

14

Q. You recall having tried to set up a

15

meeting with the company and with the other

16

lenders, right?

17
18
19
20

A. Yes. That was really where my concern
was, was communication.
Q. And you recall that the company refused

to do that?

21

MR. CANTOR: Objection.

22

THE WITNESS: I don't recall -- I recall

23

I wasn't able to do -- that I wasn't able to get

24

it done. So you know, I don't recall being told

25

no or whatever. I just know that I was not able

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1

to accomplish it. I know that they chose to by

2

looking at documents yesterday, they chose to

3

write a letter. This is all based on the review

4

yesterday.

5

I believe and I thought we had a call at

6

one point, and I can't remember. I thought I

7

eventually talked them into having a call either

8

with -- directly with some lenders or having a

9

lender call.

10

But I know the initial one I was not

11

successful in getting them -- I had them agreed

12

and they cancelled it or backed out and decided to

13

write a letter instead.

14
15

BY MR. DILLMAN:
Q.

It wasn't from any lack of trying by you

16

that a group lender call didn't go forward in

17

October, November?

18

A. Yeah.

19

Q.

You thought that was something the

20

company should do?

21

A. Absolutely.

22

Q.

23

A. Absolutely.

24

Q.

25

You told Mr. Freeman that?

You thought it was important from both

the company's standpoint and so that the lenders

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could get information on topics that were

2

important to them?

3

A. From his mouth, yes.

4

Q.

5

A. If that was a question that the lenders

6

wanted to ask, that was their prerogative and he

7

would need to answer it himself.

8

Including who paid Lehman in September?

Q. And you were concerned when the company

9

did not agree to hold such a lender call in

10

October, weren't you?

11

A. I don't recall, but I was not -- that

12

was not -- looked bad on me. I felt I couldn't

13

get them to -- I always felt that the borrower

14

should address all the lenders.

15

Q. And as well, the company -- that was an

16

opportunity for the company to provide information

17

to lenders?

18

A. Yes.

19

Q. And the company wasn't doing that?

20

MR. CANTOR: Objection.

21

THE WITNESS: They did not do it.

22

mean and I can't remember if they actually ever

23

did have a call, but I know initially they didn't.
BY MR. DILLMAN:

24
25

Q.

Going back to the mid-September time

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1

frame, I'm going to place in front of you an

2

exhibit I marked as Exhibit 201. The top

3

e-mail is from you to Mr. Susman and Mr. Yunker

4

and Mr. Varnell.

5
6
7

8

A. I forgot John should be included. He
was on a lot of those calls, too, Mr. Varnell.
Q. And Mr. Varnell was with Mr. Susman's

group, correct?

9

A. No.

10

Q.

11

A. With Mr. Yunker's and Mr. Newby's group.

12

Q.

Whose group was he?

What was his role during these

13

discussions concerning the Lehman events in

14

September?

15

A. John's?

16

Q. Yes.

17

A. John was a client, you know, knew the

18

client very well. That was his job. So I think

19

he was on the phone just to, one, just being

20

involved since it was his client, making sure that

21

his client's interests were being represented, as

22

well as the bank's.

23

I don't remember John saying a lot, to

24

be honest with you, but I'm sure he was on a lot

25

of the e-mails and copies.

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1

Q.

2

A. Same, except Bret was much more

3

What was Mr. Yunker's role?

knowledgeable about the transaction.

4

Q. And Mr. Susman?

5

A. Jeff was on the portfolio management

6

side or credit -- I don't remember what name they

7

had at the time. Maybe it's on here. He kind of

8

handled it. He and Brandon handled it on a

9

day-to-day basis in terms of monitoring the

10

credit.

11

They were primarily responsible as it

12

related to the credit and also to managing Bank of

13

America's share of the loan.

14

Q.

What do you mean by managing the credit?

15

A. Oversee, making sure that the in-balance

16

tests were met, all the provisions in the

17

disbursement agreement, credit agreement were

18

being met, review any financial information, keep

19

tabs on the market to watch it in order to provide

20

a risk rating if market conditions changed.

21

I don't think they -- I think they may

22
23
24
25

have actually approved fundings.
Q.

When you say fundings, you mean

disbursements?
A. Disbursements.

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1
2

Q. They, in fact, approved the September

disbursement, didn't they?

3

MR. CANTOR: Objection.

4

THE WITNESS: I assume -- somebody did.

5

I don't know if it was Jeff or not. He probably

6

took it to somebody to get it -- I don't know.

7
8

BY MR. DILLMAN:
Q.

In this e-mail, the second one from Mr.

9

Susman to you and others, in the second paragraph

10

he says I realize there are more questions and

11

answers right now, and that we are formulating a

12

plan to address Lehman and the retail facility.

13

What plan was BofA formulating at this

14

time to address Lehman on the retail facility?

15

A. I don't recall. I think the concern, to

16

the best of my recollection, was a much broader

17

concern than an individual funding.

18

It was the ability to continue to fund,

19

and was there going -- this was a big event. We

20

didn't know how much Lehman had of the retail

21

facility, how much had been sold off.

22

We didn't know who the other people

23

were. We didn't know if they were going to step

24

in and fill the shoes. What was going to happen

25

to -- this was one funding.

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1

There were several more needed. I can't

2

remember the amount, but there was $80,000,000 or

3

$40,000,000. There was a certain amount left that

4

would, if not funded, would put the project out of

5

balance.

6

So I think my assumption around the plan

7

was much broader than any individual funding. It

8

was more concerned about what's going to happen,

9

and there were other costs, and I can't remember

10

the details, but there were other loan -- there

11

were tenant improvement costs for the retail that

12

were going to be funded by the retail lenders.

13

So there was a thing called shared

14

costs, which is what -- that was the funding

15

mechanism that was most concern to -- which again,

16

was unusual to have two different lending parties

17

building the same building, since this was kind of

18

a condo air rights situation.

19

So there were other costs for the retail

20

to be completed. They weren't party necessarily

21

to the shared costs and inter-creditor agreement.

22

I think the shared costs were like

23

80-some million dollars, and then there was

24

another $100,000,000 of tenant improvements that

25

weren't part of this disbursement agreement, you

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know, that didn't have to come in to the -- but

2

still were going to need to be funded to have a

3

viable project because if you had a shell and you

4

had empty retail because these guys couldn't fund.

5

So I think the plan was to address given the

6

bankruptcy, what was going to happen.

7

Q.

Mr. Susman says we are formulating a

8

plan. You described the problem or at least some

9

aspects of the problem.

10

What was BofA -- what plan was BofA

11

formulating to address those problems?

12

MR. CANTOR: Objection.

13

THE WITNESS: I don't know. That may

14

have been a poor choice of words. I think it was

15

probably better -- aptly said analyzing the

16

situation.

17

I recall other lenders being -- would

18

somebody step in, could somebody buy Lehman's --

19

what are the options. This was very realtime and

20

this was considered to be something that could be

21

a future problem in terms of, you know, completing

22

the project.

23

So I don't know that, you know, it

24

was -- the plan could have been that he is

25

referring to here could have been related to

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communication with the other lenders, you know, I
2

don't know.

3

Those were the conversations that were

4

going on. What are you going to do on a macro

5

basis and, you know, are we making sure that the

6

lenders are getting the information from the

7

company that they need.

8

BY MR. DILLMAN:

9

Any discussions that you are aware of

Q.

1O

internally at BofA concerning the possibility of

11

taking over Lehman's portion of the retail

12

facility?

13

A. My memory was refreshed yesterday, an

14

e-mail that there was another group in BofA than

;5

rhe real estate group that Mr. Soffer did a lot of

16

1

17

Soffer had called him to see if they could come in

13

on the retail side to talk to BofA about it.

19

:ondo real estate financing in Florida, where Jeff

I know when I attended the retail

20

meeting, the other lenders just assumed BofA would

21

step in and fill the gap and make everything okay

22

'or them, which that was not the case.

23

So both I think -- I don't know if that

24

was a direct request. It was more of a verbal,

25

hey, can you guys -· this is your problem, too,

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why don't you pony up I don't know how many

2

millions of dollars, hundreds of millions of

3

dollars it was, which I knew internally that was

4

not something that was going to be entertained.

5

I'm sure there was lots of discussions that I may

6

not have been involved with.

7

Is there other ways to, you know, solve

8

this problem. Is this something that can be fixed

9

to primarily finish the project I think was the

10

overriding concern.

11

Q.

You said a number of things there.

12

want to try and break them down. The one was that

13

Mr. Soffer apparently contacted some BofA

14

representative?

15

A. Yeah, according to e-mail I saw -- I had

16

forgotten about this, but according to an e-mail

17

that I saw, it was Vinny Tria.

18

Q.

Mr. Tria is down in Miami Beach?

19

A.

In Miami, yes.

20

Q. And the e-mail that you saw reminded you

21

that you had heard at some point that Soffer had

22

contacted Tria asking if BofA would step into the

23

retail facility in some manner?

24
25

A.

I don't know what the request

specifically was. I think it was what can BofA

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do? That may have been the request. I just don't

2

remember. It was a short conversation with Vinny

3

from my standpoint, that they weren't able to help

4

out and do anything.
Why not?

5

Q.

6

A. I don't recall the reasons, probably

7

because BofA had a lot of money already invested

8

in Fontainebleau, way more than they probably

9

wanted to have and didn't want to invest anymore.

10
11

Q.

BofA's assessment of the Fontainebleau

Las Vegas project had -- strike that.

12

To your knowledge, in September of 2008,

13

BofA assessed the Fontainebleau Las Vegas project

14

as a higher risk than it did in June of 2007 when

15

it -- when the facilities were entered into?

16

MR. CANTOR: Objection.

17

THE WITNESS: I think BofA assessed

18

every gaming deal and probably every loan in their

19

portfolio as a higher risk at that time.

20

BY MR. DILLMAN:

21

Q.

Including this one?

22

A. Including this one.

23

Q. And at least because of that in part,

24

BofA was not prepared to put in any more money

25

into this deal, fair statement?

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MR. CANTOR: Objection.

2

THE WITNESS: I don't know why.

3

wasn't involved in the conversations as to why or

4

why not. I can only speculate.

5

BY MR. DILLMAN:

6
7

Q.

Would you have recommended they put more

money into this deal?

8

A. No.

9

Q.

1O

Were you involved in any conversations

other than the one that you just -- strike that.

11

Did you have any conversations with Mr.

12

Tria?

13

A.

14

Q. About this issue?

15

A.

I'm sure I did.

I'm sure I did. I knew Vinny. I didn't

16

remember that I had had a conversation about it

17

because he would call every once in awhile just to

18

check in, see how it was going.

19

He was more concerned about the property

20

in Miami because it was closer to his -- he could

21

see it going up. But that e-mail said -- I think

22

it said probably call him or something. I'm sure

23

I did. I don't recall the conversation.

24
25

Q. Any other conversations that you recall

with anyone internal at BofA with respect to

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whether or not BofA might be willing to take on

2

some or all of Lehman's commitment under the

3

retail facility?

4

A. I just don't remember them.

5

Q. Any conversations that you are aware of

6

between BofA -- anyone at BofA and anyone at

7

Lehman on issues relating to the Fontainebleau Las

8

Vegas project in or about the bankruptcy time?

9

A. I don't recall. I wasn't involved if

10

they were. I don't recall being involved.

11

Q. Are you aware that BofA reached out in

12

any manner to Lehman to find out what was going

13

on, what their plans were, etc.?

14

A. I don't know that anybody did.

15

Q.

16

Would you expect somebody to do that

under these circumstances?

17

MR. CANTOR: Objection.

18

THE WITNESS: I don't know.

19

BY MR. DILLMAN:

20

Q.

You would or wouldn't expect? I know

21

you don't know whether it happened. Would you

22

expect as a bank interested in finding out what's

23

going on that one of the calls might be to the

24

source of the potential problem?

25

MR. CANTOR: Objection.

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THE WITNESS: Yeah, I don't know. They

2

just went bankrupt. There was lots of other

3

Lehman -- there was lots of issues going on.

4

don't think this was one that in the macro scheme

5

of the bank was taking forefront. I mean, we just

6

merged with Merrill. There was a lot of things

7

going on.
I think this was probably the most

8
9

unusual time in banking I have ever been into, so

10

anything that was usual would be -- there was

11

nothing that was happening that was normal in that

12

time frame.

13
14
15

BY MR. DILLMAN:
Q. And the credit markets were all but

evaporated during this time period?

16

A. Yeah.

17

Q.

Did you have any expectation that if

18

Lehman reneged on its obligations under the retail

19

facility, that you would be able to find somebody

20

to replace them?

21

MR. CANTOR: Objection.

22

THE WITNESS: Given the state of the

23

markets, I didn't know if there was anybody that

24

would. That being said, they are in bankruptcy.

25

You don't know price. There were people out

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buying stuff at deep discounts. There were other

2

retail lenders that had a position to protect.
They could have negotiated a deep

3
4

discount with Lehman. So there is things that

5

could have happened. Crazy things were happening,

6

and a lot of guys got rich taking advantage of

7

that disruption in the marketplace.

8

I didn't know how to fix it, but there

9

might have been somebody else a lot smarter than

10

me that could have figured it out.

11

BY MR. DILLMAN:

12

Q. You also mentioned -- this was back in a

13

question that had much in it or an answer, excuse

14

me. You mentioned that when you met with the

15

other retail lenders in, I'm assuming you mean

16

October?

17
18
19

A. Based on what I saw yesterday, that's
the time frame. I don't know what day in October.
Q.

That they seemed to have an attitude

20

that BofA was going to fix this problem. Is that

21

a fair characterization?

22

MR. CANTOR: Objection.

23

THE WITNESS: No.

24

MR. DILLMAN: That BofAwas somehow

25

going to --

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THE WITNESS: They asked -- they asked.

2

I think they rightfully so, anybody is going to

3

try anything.

4

I don't remember if it was myself or

5

someone else, but we were -- I think Bret may have

6

been there. We were clear that that was not going

7

to happen, and I was clear to them per the

8

documents, we weren't going to get -- if they did

9

not fund their share of the retail proceeds, that

10

the rest of it is not going to fund.

11

So they needed to -- it needed to be

12

their problem. They as retail lenders needed to

13

figure out how to continue to fund and get the

14

project built, and as long as the money came in

15

pursuant to you all the documentation, if

16

everything else was fine, that the lenders would

17

fund.

18

However, if they did not fund there was

19

going to be -- that was very clear that was not an

20

obligation to fund any more and that had been

21

expressed to me that wouldn't go back and ask for

22

a waiver from the lenders or anything like that.
BY MR. DILLMAN:

23
24
25

Q.

Did you at some point get some clarity

on how much Lehman's obligation was under the

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retail facility, the remaining un-funded

2

commitment?

3

A.

I'm sure I did -- I don't know if I knew

4

how much Lehman's was. I think we knew how much

5

the total was. I'm not sure at that time, and I

6

don't recall me ever really knowing or remembering

7

what their share was.

8

So I don't know what -- I'm sure there

9

is some documentation somewhere somebody may have

10

found out at some point what the -- we knew what

11

the total hole was, because it was the shared cost

12

minus whatever had been funded.
Plus the Tl costs?

13

Q.

14

A. Yeah, plus that and we knew what that

15

was supposed to be 100,000,000 or something like

16

that.

17

Q.

You knew in total that the hole that

18

would be left by the retail facility was in excess

19

of $200,000,000?

20

MR. CANTOR: Objection.

21

THE WITNESS: I don't remember what the

22

hole was. I mean I just don't remember. I knew I

23

had it at the time. I would have had the exact

24

numbers. I mean I can't remember three years,

25

four years ago what it was.

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2

BY MR. DILLMAN:
Q.

Let me mark as an exhibit here, because

3

I think I misspoke here. The hole was

4

190,000,000, and that's not a question. That's a

5

representation that I would like you to confirm

6

based on Exhibit 203, which I'm putting in

7

front of you.

8

Exhibit 203 is a series of e-mails,

9

the top one of which is from you to Mr.

10

Benningfield. Who is Mr. Benningfield?

11

A.

He was my boss at the time. I think --

12

well, I don't know that he was -- bosses moved

13

around a lot. He may not have been my boss at the

14

time, but he was somebody that my boss would have

15

wanted -- you know, may have asked for the

16

information from me. He used to be my boss. He

17

kind of went to a different role.

18

He would have been involved in the

19

troubled situations. He also was involved in --

20

in fact, he wasn't my boss, I remember that at

21

this time. He was for a long time.

22

On Miami he worked with a group and

23

oversaw the $40,000,000 mezzanine piece that we

24

put on the Miami property.

25

Q. All right, the e-mail that you are

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possible option and knowing that this was an issue

2

that was being discussed internally at BofA, in

3

connection whether or not it might violate the

4

master disbursement agreement, did you make any

5

effort to find out whether Fontainebleau funded

6

for Lehman in September of 2008?

7

MR. CANTOR: Objection.

8

THE WITNESS: I did not.

9

BY MR. DILLMAN:

10

Q. To the best of your knowledge, did

11

anyone else at BofA, that you are aware of, make

12

any efforts to make that determination other than

13

the letter that was sent out to the company that

14

we previously talked about?

15

A. I'm not aware of any.

16

Q. You knew from discussions with Freeman

17

that that was one of the things that Fontainebleau

18

was contemplating?

19

MR. CANTOR: Objection.

20

THE WITNESS: No. I never--where did

21

you know -- I don't recall talking to Jim about

22

that. I saw earlier you showed me an e-mail that

23

Bret Yunker did.

24
25

BY MR. DILLMAN:
Q.

You knew from conversations that BofA

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had with Freeman that were relayed to you by

2

others at BofA, that Fontainebleau was considering

3

the option of paying for -- paying Lehman's share

4

of the September draw under the retail facility?

5
6
7
8

A. Based on the e-mail that you showed me,
I read it then I guess.
You understood that this wasn't some

Q.

secret that Freeman was keeping under his hat?

9

MR. CANTOR: Objection.

10

THE WITNESS: I never talked to Jim

11

about it.

12
13

BY MR. DILLMAN:
Did you have any reason to believe that

Q.

14

the company was keeping secret from BofA

15

information about who was funding the Lehman

16

facility?

17

MR. CANTOR: Objection.

18

BY MR. DILLMAN:

19

Q.

Up until the funding actually occurred?

20

MR. CANTOR: Objection.

21

THE WITNESS: I'm only going on

22

hindsight what I read yesterday, that it was asked

23

and based on the response in the letter, it wasn't

24

directly answered.

25

I had no reason -- my recollection is I

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don't know that anybody was keeping anything from

2

anybody. I think it was -- my whole point was

3

making sure legal looked at it. They were

4

comfortable with the facts set around the

5

disbursement.

6
7

BY MR. DILLMAN:
Q. Your whole point was to try to get the

8

right people involved in looking at it from

9

various points?

10
11

A. Yeah. Quite frankly, I didn't want to
be involved in the decision.

12

Q. Whynot?

13

A. I just didn't think it was something --

14
15

I mean -Q. No good could come of it?

16

MR. CANTOR: Objection.

17

THE WITNESS: No good could come of it.

18

It wasn't my responsibility. I wanted to make

19

sure the guys that were responsible for it were

20

doing it right, and they had accountability for

21

the decision.

22
23

BY MR. DILLMAN:
Q. You wanted to make sure it was stuck in

24

the right lap and it wasn't yours?

25

MR. CANTOR: Objection.

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THE WITNESS: I just wanted to make sure

2

the right people made the right decision and it

3

wasn't my responsibility to make the decision.
BY MR. DILLMAN:

4
5

Q.

The second part of that was important to

6

you, it wasn't your responsibility, it was theirs?

7

A. Exactly. So I was focused on them

8

making the decision, what the outcome of that

9

decision is and making sure that they felt

10

comfortable from a legal point of view that

11

whatever decision they were making we could

12

represent that to the lenders.

13

Q. And back to Mr. Susman's e-mail that's

14

in the middle of Exhibit 204 here, the second

15

page.

16

He says after the provision I just read

17

regarding interpreting the FB funding is retail

18

agent funding, there is a parenthetical that says

19

or waive the condition if interpreted differently.

20

To re-affirm, you are not aware of any

21

waivers of any conditions by BofA of any sorts,

22

much less a waiver of condition relating to FB's

23

funding of the retail facility?

24

MR. CANTOR: Objection.

25

THE WITNESS: Huh-uh. I'm not aware of

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any waivers.
BY MR. DILLMAN:

2
3

Q.

Then he goes on and it says do we seek

4

required lender consent. You recall conversations

5

surrounding the issue of required lender consent

6

at this time period?

7

A. I don't recall them.

8

Q.

Were there discussions that you were

9

involved in regarding whether or not to get

10

consent from some or all of the lenders with

11

respect to any anything that was happening in

12

September of 2008?

13

MR. CANTOR: Objection.

14

THE WITNESS: I don't recall. That's

15

probably why I wanted legal involved is to

16

determine if that was, in fact, the case.

17
18

BY MR. DILLMAN:
Q. When did you understand under the

19

documents that you helped put together required

20

lender -- excuse me, lender consent was required?

21

MR. CANTOR: Objection.

22

THE WITNESS: Lender consent would be

23

required for anything that was not in conformance

24

with the documents.

25

BY MR. DILLMAN:

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Were there discussions at BofA about

Q.

2

possible options to address Lehman that would have

3

required some sort of an amendment or some sort of

4

change to the way in which the documents otherwise

5

would have worked?

6

MR. CANTOR: Objection.

7

THE WITNESS: I do not recall -- it may

8

have been broached briefly, but I don't recall any

9

subsequent -- substantive conversations around

10

that.

11
12

BY MR. DILLMAN:
Q. Any efforts that you are aware of by

13

BofA to obtain any consent from any lenders for a

14

modification or other change to the underlying

15

documentation?

16

A. None that I'm aware of.

17

Q. Any requests by BofA that you are aware

18

of to the other lender to approve any acts by BofA

19

within this time frame, September, October of

20

2009?

21

A. None that I'm aware of.

22

Q.

On this same issue, Mr. Howard, I

23

previously marked a document that we discussed

24

with Mr. Yunker at his deposition, Exhibit 74.

25

It's an e-mail, the top one of which is

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from Mr. Yunker to Mr. Varnell dated October 1st.

2

It follows an e-mail from Mr. Varnell to Mr.

3

Yunker on that same date, and he refers to the

4

requisite lenders, quote, as a possible, quote,

5

problem beyond mischief making rogues.

6

Do you know what he is referring to

7

there?

8

MR. CANTOR: Objection.

9

THE WITNESS: No.

10

BY MR. DILLMAN:

11

Q.

Mr. Yunker up above says in the top

12

e-mail in the second sentence, the requisite

13

lenders can't unilaterally decide to change a deal

14

in their favor after it's closed. Do you see

15

that?

16

A.

I see it.

17

Q.

Were there any discussions with any

18

other lenders that you are aware of concerning a

19

changing of the deal?

20

A. No. I don't recall.

21

Q.

22

Do you have any idea what Mr. Yunker is

referring to here?

23

A. No.

24

Q.

25

Do you agree with Mr. Yunker that the

Fontainebleau loan was underwater at the time?

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MR. CANTOR: Objection.

2

THE WITNESS: Define underwater.

3

BY MR. DILLMAN:

4
5

Q.

In your business you have heard of loans

being underwater, haven't you?

6

A. Uh-huh.

7

Q. When you hear that, what do you

8

understand it to mean?

9

A. It means different things, I guess.

10

Often it means it's -- in this context it would

11

mean the trading value is less than par, the

12

potential marked value. I would agree that the

13

potential marked value of this at the time was

14

less than par.

15

Q. Substantially less than par?

16

MR. CANTOR: Objection.

17

THE WITNESS: I don't know.

18

Construction loans are difficult, but given the

19

state of the markets, everything else was

20

substantially under par. So it would have been

21

correlated to other gaming transactions.

22
23

BY MR. DILLMAN:
Q. And thus substantially under par?

24

MR. CANTOR: Objection.

25

THE WITNESS: Depends on substantially.

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2

company to speak to the lenders.
Q.

In your e-mail you say company is not

3

ready to have the call. I assume that that was

4

information you got from Mr. Freeman?

5

MR. CANTOR: Objection.

6

THE WITNESS: I don't recall where I got

7

that information. It very well could have been,

8

but I don't recall exactly where I got it. It

9

could have been second party, could have been via

10

e-mail. I don't recall. Obviously I felt it was

11

credible information, but I don't know how I

12

received it. I can't remember.

13
14

BY MR. DILLMAN:
Q.

Do you recall having known in early

15

October what the issue was with respect to the

16

company's lack of readiness to have the call?

17

MR. CANTOR: Objection.

18

THE WITNESS: I don't recall what their

19

lack of readiness was.

20
21

BY MR. DILLMAN:
Q.

What was the conclusion that you are

22

referring here to, that the company is working on

23

a solution?

24

A. I don't recall specifically, however, my

25

thought would be as it related to future fundings

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2

of the retail piece.
Q.

You don't have any specific

3

recollection, but that's what you would surmise

4

from these words?

5

A. That's what I would surmise.

6

Q.

It was a solution to the retail facility

7

as opposed to a solution to the call going

8

forward?

9

MR. CANTOR: Objection.

10

THE WITNESS: That's the best I can

11

surmise.

12
13

BY MR. DILLMAN:
Q.

Let me place in front of you a document

14

that I think you already testified you saw

15

yesterday.

16

It's the -- it's previously marked as

17

Exhibit 18, and is an agenda, meeting agenda

18

from October 23rd meeting.

19
20

MR. CANTOR: He didn't testify whether
he saw this or not.

21
22
23
24
25

BY MR. DILLMAN:
Q.

I think you did. You saw this

yesterday, didn't you?

A. I didn't see this. I saw something else
that reminded me of the meeting. I don't remember

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2

what it was.
Q.

Your counsel was right on that then.

3

MR. CANTOR: Twice a day.

4

BY MR. DILLMAN:

5
6

Q. As I recall, you recall having attended
this meeting?

7

A. Yes, I do recall.

8

Q.

9
10

Attended it with at least Mr. Yunker, I

think you said?
A. You know, at the time I didn't recall

11

who went with me. I don't remember anybody else

12

being there, but it doesn't surprise me that Bret

13

and John were there.

14

Q. And prior to getting ready for this

15

deposition, did you even recall this meeting

16

occurred?

17

A. Yeah, I would have remembered this.

18

Q.

Did the document you looked at yesterday

19

help to refresh your recollection on the

20

particulars of that meeting?

21

A. A little bit, yes.

22

Q. And what was the document you looked at

23

yesterday?

24

A.

I don't recall.

25

Q.

It was yesterday for goodness sake.

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A. Yeah, I don't recall. We looked at a

2

lot of documents. I don't know exactly what it

3

was. It may have been an e-mail or something.

4

don't know.

5
6
7

Q.

Was it a summary of what occurred by one

of the parties that attended?
A. No. I don't know what it was. It was

8

something that just talked about this meeting and

9

that sparked my memory of the meeting and what

10

happened.

11

Q. Tell us what happened?

12

A. To the best of my recollection, there

13

was an update on the status of leasing. Jackie

14

Soffer and Jeff -- yeah, Jeff I think was there.

15

I can't remember, but Jackie Soffer was

16

there. That was the first time I met her. That's

17

Jeff Soffer's sister. I spent a lot of time about

18

what was going on with the leasing of the retail

19

space, who they were talking to to update the

20

retail lenders.

21
22
23

Q.

Let me stop you. Did you say Jeff

Soffer was there?
A.

I don't -- I don't recall him being

24

there, but I was at a lot of meetings at the

25

Sterling Club and he was in attendance at those.

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So remembering whether he was there or

2

not -- I do remember Jackie Soffer, because that

3

was the one and only time I recall meeting her.

4

Q.

Okay.

5

A. At that same venue a lot of meetings

6

over multiple years with Jeff. So remembering if

7

he was there or not, I don't recall.

8

I do remember that they spent a lot of

9

time going over the leasing, what tenants they

1O

were targeting, what was going on in the general

11

leasing market. There was an update with that.

12

Based on this agenda, I don't recall

13

discussion around the construction or overall

14

development. I don't recall the financial review.

15

I know Jim was there. I remember him speaking.

16

don't remember the substance of what he spoke.

17

I do recall the lenders, the retail

18

lenders discussing the fact that they were in

19

conversations with Lehman to fund, that ULLICO

20

stated that they had funded, I don't know how

21

many, once or twice or that they could do maybe a

22

couple more fundings, them asking the other retail

23

lenders how much they could do or maybe the

24

company was asking them if they could step up and

25

fund Lehman's share.

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I recall them asking directly to the
2

representatives of Bank of America -- I remember

3

it directed at me, but it could have been Bret. I

4

don't remember who answered, but I know asking us

5

if Bank of America could come in and stop gap and

6

fill in the hole here, which I don't know the

7

exact words or who responded, but the response was

8

that don't view that as an option.

9

You should pursue other avenues, and I

1O

remember making it very clear to them that they

11

would -- if there was no fundings on the retail,

12

that there would not be any continued fundings on

13

'he loan side.

14
15
i6

17

That's pretty much the gist of my
recollection of that meeting.
Cl. Did BofA, anyone from BofA make any sort
of presentation at that meeting?

18

A. I do not recall.

18

0. Don't recall that it happened or just

20

don't recall one way or the other?

21

.!\. I don't recail -- no, I don't recall

22

either way. I mean I just don't remember.

23

Q.

Mr. Kotite according to this agenda made

24

a presentation, an overview of the retail loan

25

status. Do you recall that having occurred?

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2
3
4

A.

I recall Sonny talking. I don't

remember what he said.
What was discussed by anyone about the

Q.

retail loan facility?

5

MR. CANTOR: Objection.

6

THE WITNESS: I have already told you

7

everything I can remember about the meeting. I am

8

not going to be able to -- I'm trying to remember

9

everything I can. It was a meeting several

10

periods ago. I think I -- what I said previously

11

is exactly what I recall.

12
13

BY MR. DILLMAN:
Part of what you recall is that someone

Q.

14

said that ULLICO had funded some or all of the

15

Lehman portion of the retail facility?

16

A.

I don't know the time frame of this.

17

Either they were going to fund the next one,

18

either they had. I don't remember. I remember

19

Herb, who I met one time a long time ago, Kolben,

20

talking about their ability to -- I was mostly

21

concerned with going forward, but I can't remember

22

if he said given the time frame they had already

23

done it or were going to do it. I don't recall

24

exactly.

25

Q.

With respect to going forward, did you

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understand from the presentation that ULLICO had

2

committed to funding in the future on behalf of

3

Lehman?

4

A.

I understood that they committed the

5

next draw one more time. I don't recall

6

remembering any more commitments after that.

7

We had testimony from other people.

Q.

8

There are other documents in this case that have a

9

different take on that meeting and that is that

10

ULLICO specifically said it wasn't willing to fund

11

all of the Lehman commitment, and that the group

12

as a whole, retail lenders as a whole were not

13

willing at that time to commit to funding Lehman?

14

A.

I'm just telling you exactly what I

15

remember, like one time they said they were going

16

to fund.

17
18

MR. CANTOR: Note an objection to the
last question, please.

19
20
21

BY MR. DILLMAN:
Q.

I want to be fair to you and let you

know that's the testimony in the documents?

22

A.

I'm just telling you what I remember.

23

Q.

My question is this.

24

A. Okay.

25

Q.

Could you be confusing this meeting with

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some other meeting at which you learned that

2

ULLICO had or, in fact, intended to fund Lehman's

3

share of the retail facility?

4

A. To the best of my recollection, this is

5

the only meeting I attended in person with the

6

retail lenders.

7

Q.

You knew Mr. Kolben from other deals?

8

A.

I knew who he was.

9

Q.

Had you met him in conjunction with this

10

deal before?

11

A.

No.

12

Q.

Did you meet him after this meeting?

13

A.

Shook his hand.

14

Q.

VVhen?

15

A.

Right after when I left.

16

Q. After this meeting occurred, did you

17

have subsequent opportunity to meet Mr. Kolben

18

face to face?
No.

19

A.

20

Q. As far as you know, there was just one

21

meeting where you actually face to face were in

22

the same room as Mr. Kolben?

23

A. As far as I can remember, yes.

24

Q.

25

Slow down just a little so I can finish

my question.

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Q.

Did you at any point come to learn that

2

ULLICO had, in fact, funded some or all of

3

Lehman's draw under the retail facility?

4

A. I may have. To my recollection, I found

5

out yesterday that they had. That was a

6

confirmation. Whether I knew it in the past or

7

not, I cannot remember.

8

Q.

You can't confirm something you didn't

9

previously know. Did you, when you saw whatever

10

you saw yesterday that caused you to conclude that

11

ULLICO had funded, did that bring back a

12

recollection that that was information that you

13

previously knew?

14
15

A. I was told that they funded. I didn't
see anything.

16

Q.

This is yesterday?

17

A. This is yesterday, and to the best of my

18

recollection, that was -- I don't recall knowing

19

that before. So that was probably the first time

20

I read confirmation that that was, in fact, the

21

case that I can remember.

22

Q.

Were there discussions you had with

23

people at BofA or anyone else prior to your

24

meeting yesterday where the supposition was that

25

ULLICO was funding on behalf of Lehman, whether

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2

you actually knew it for a fact or not?

A. I believe so, because I in my opinion

3

and I may have been mistaken about what somebody

4

said, I gleaned that from this meeting that --

5

this one here, that they had either funded or were

6

going to fund at least the next draw, and they

7

were seriously looking into the fact that funding

8

in the future, they would not commit to it, nor

9

would any of the other lenders.

10

But I do -- I clearly do remember, and I

11

could be mistaken, but I do remember them saying,

12

yes, we are going to -- the next draw we have got

13

approval to fund.
I couldn't -- I can't completely

14
15

remember if they, given the timing, if they had

16

already funded one. I can't recall that or not,

17

but that's the first time I heard them say that

18

they were going to fund yesterday was the first

19

time I had real confirmation that that had

20

actually happened.

21

I don't recall having specific knowledge

22

other than from this meeting hearing that they

23

were going to take care of it on the next one.

24

That's the best of my recollection.

25

Q.

Did you make any efforts at any time

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or by its consultant, IVI, with respect to the

2

project costs at Las Vegas?

3

A. I don't -- I kind of checked out on some

4

of this stuff by this time. I just don't

5

remember. What I do remember is that people were

6

very -- I remember that they had lots of

7

conversations, and I remember people urging them.

8

That was going to be a point of

9

contention that IVl's reports were correct and

10

true, and that there weren't any overruns because

11

there was lots of rumors in the market that this

12

was overrun here and this was overrun here, and

13

this guy wasn't getting paid, and none of us were

14

experts other than we had hired an expert in IVI.

15

I know there was a lot of focus on IVI,

16

and what they had to say. What they said and what

17

they got out of it, I don't really recall. I kind

18

of left it up to those guys to determine the

19

outcome of that. I was not on any calls that I

20

can remember with IVI.

21

Q. You became aware at some point that

22

there were rumors in the marketplace that people

23

weren't getting paid on the project?

24

MR. CANTOR: Objection.

25

THE WITNESS: Not paid, overruns. I may

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have said paid. The rumors I'm referring to --

2

and this was secondhand, and we would hear it from

3

other lenders, oh, that there is an overrun at the

4

project.
BY MR. DILLMAN:

5
6

Q.

Who did you hear -- from who did you

7

hear that there were overruns at the Las Vegas

8

project?

9
10

A. I don't recall. I think it was a
lender, another lender.

11

Q.

Other lenders on the Las Vegas facility?

12

A. Yes.

13

Q.

14

A. I don't know. To be honest, at this

Deutsche Bank?

15

point it was very difficult to trust what

16

anybody's motive was in terms of the information

17

that they were giving you.

18

Q.

19

A. Different people within the capital

20

Why is that?

stack had a different desired outcome.

21

Q.

Explain.

22

A. If someone was already funded, they

23

wanted those not funded to continue to fund. If

24

somebody wasn't funded, they may not want to

25

continue to fund or fund at all.

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Q.

Why?

2

A.

I don't know. I felt that any lender

3

that was feeding me information, always I felt had

4

to be taken with a grain of salt because they had

5

a very vested interest in protecting their own

6

interest in creating a situation that would

7

benefit them whatever the situation was.

8

Q. Were you aware that there were lenders

9

who hadn't funded that had an incentive or an

10

interest in not funding in the future?

11

MR. CANTOR: Objection.

12

THE WITNESS: Well, I don't know that

13

there -- no one said that to me, but it was easy

14

to deduce by the materials that you produced here,

15

and that we already testified that people

16

considered the loan underwater.

17

The bonds were trading below par. No

18

one is going to come out and say their motives,

19

but you had to be very careful with what people

20

were going -- so my overriding theme was to make

21

sure that the internal team at Bank of America was

22

doing everything correctly by the book, whether

23

it's with legal, IVI, the resources and doing

24

things that they deemed because they were the ones

25

going to be responsible to make sure that they

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could answer to the lenders and to everybody else

2

they had done the right thing.

3

There was a lot of rumors about a lot of

4

things going on at that time. So one guy would be

5

I want to fund. One guy was nobody should fund.

6

You didn't know what to believe as to wh·at

7

somebody's motive was.

8

They didn't tell you what their motive

9

was. You just had to be careful as to what it may

10

or may not be, and that was a speculation and

11

that's why we tried to research any rumor that we

12

heard.

13

If we heard that there is overrun, I

14

would pass that on to them and say you should make

15

sure -- I have heard this. Pass this on to IVI.

16

We need to make sure that IVI is on top of the --

17

as our third-party consultant.

18

That's not my job. I don't know how to

19

go and verify whether there is overruns in the

20

construction project. Neither do you. But that's

21

why we hired these guys.

22

So I know there was a lot of not

23

concern, but reliance, dependence on IVI and their

24

ability to assess the project and the cost needed

25

to finish it.

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2

BY MR. DILLMAN:
Q.

Bank of America was looking to reduce

3

its exposure to Fontainebleau in the first quarter

4

of 2009, wasn't it?

5

MR. CANTOR: Objection.

6

THE WITNESS: I don't-- what's that

7

premised on? Is that a fact that you know?

8

don't know that as a fact.

9

BY MR. DILLMAN:

10

Q. Are you aware from any source that Bank

11

of America was looking to reduce its exposure to

12

Fontainebleau in the first quarter of 2009?

13

A. I don't recall.

14

Q.

15

Would it surprise you to learn that that

was the case?

16

MR. CANTOR: Objection.

17

THE WITNESS: At that time nothing would

18

have surprised me. They were looking to reduce

19

exposure in lots of things, but that's not

20

something I have knowledge of.

21

BY MR. DILLMAN:

22

Q.

Consistent with being a highly placed

23

executive at the bank, it would not surprise you

24

that BofA was looking to reduce its exposure to

25

Fontainebleau Las Vegas -- excuse me, to

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Fontainebleau Resorts in 2009?

2

MR. CANTOR: Objection.

3

THE WITNESS: No, I thank you kindly for

4

saying I was a highly placed executive. That's

5

very kind of you. A lot of those decisions were

6

made way over my head. They did things that

7

surprise me on a regular basis.
Positions that should not have been sold

8
9

were sold. Positions that should have been sold

10

were not sold. So, you know, I have no idea, and

11

in fact, was very frustrated by macro decisions

12

made by the bank.

13

One of the reasons I left because I

14

didn't-- places where I would have done something

15

they didn't. So I cannot speculate one bit what

16

they were thinking or what I would do.

17

This was very, very unusual times, but

18

to my knowledge, I had no idea they were trying to

19

reduce exposure.

20
21

BY MR. DILLMAN:
Q.

Based on what you knew at the time,

22

would you have terminated the revolver facility in

23

April of 2009?

24

MR. CANTOR: Objection.

25

THE WITNESS: In April of 2009? It

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wasn't my decision.

2

BY MR. DILLMAN:

3

Q.

I know it wasn't.

4

A. I wasn't even there at the bank.

5

Q.

Based on what you knew, did you agree

6

with the decision not to fund by BofA on the March

7

draw notice?

8

A. Honestly, I did not think about it.

9

did not -- didn't have a thought about it as to

10

whether I would agree or disagree.

11

Q.

You were involved in those discussions?

12

A. I listened to people talk about it. I

13

did not form an opinion. On one side I was very

14

disappointed that a great project was not going to

15

be built. On the other side I understood the

16

dynamics of those from a financial point of view

17

they wouldn't want to fund.

18

That's why at all times this ended up

19

having, in my opinion, had to be governed by

20

whatever the documents said.

21

Q.

Exhibit 209 is an e-mail from

22

yourself to a group begins with Mr. Henry Yu dated

23

February 23, '09. This is your e-mail, right?

24

A.

25

Q. And you relayed in this e-mail a

It says it's from me.

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conversation you had with Mr. Freeman at FBR. Do

2

you see that?

3

A. Yes.

4

Q.

Do you recall the conversation?

5

A.

Do not.

6

Q.

Does this help you to recall that Mr. Hu

7

was involved in this at least as of February 23rd?

8

A. Yes, this would help me to recall that.

9

Q. And I believe you testified that from

10

the time he got involved forward, you were, I

11

think to use your words, checked out?

12

A. Transitioning away from things like

13

this, yes. At this point I may not have disclosed

14

that I was planning on leaving.

15
16

Q.

Mr. Susman was gone by this time we

determined from the prior e-mail.

17

A.

Right.

18

Q.

Who was running the facility at that

19
20
21
22
23

point? Who had stepped in for Mr. Susman?
A.

I believe Brandon Bolio had. That's the

best of my recollection.
Q.

From the time that Mr. Hu got involved,

what was his role?

24

MR CANTOR: Objection.

25

THE WITNESS: With SAG, I mean he kind

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of took over the day-to-day responsibilities and

2

strategy of how to deal with the loan and form --

3

there was a lot of committees being formed. I

4

believe they did form a steering committee with

5

the other lenders. You probably know better than

6

I do. You looked at all the documents, and you

7

know, he kind of took over.

8

When I talk about decisions, they kind

9

of would flow through him and his chain of command

10

as to what to do, what not to do.

11

BY MR. DILLMAN:

12

Q.

He was running the ship at that point?

13

MR. CANTOR: Objection, foundation.

14

THE WITNESS: That was my impression.

15

was leaving the ship.

16
17

BY MR. DILLMAN:
Q.

You were getting off at the next port?

18

MR. CANTOR: He was in the dingy.

19

BY MR. DILLMAN:

20
21

Q.

When you say -- to whom did Mr. Hu

report in this matter?

22

A. I don't know who his direct report was.

23

I believe at the time Tom Biaggi was the head of

24

special assets group and workout.

25

Q. Anybody else in special assets in that

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group that you associate with the Fontainebleau

2

issues other than potentially Mr. Biaggi and Mr.

3

Hu?

4

A. I see Joe Fuszard's name on here. He

5

was the real estate SAG. I don't remember Joe

6

ever speaking up. He may have listened on calls.

7

He probably was copied.

8

So I don't -- to my recollection, I

9

don't recall him being involved. He has a lot of

10

construction loan experience, because of his

11

position, so he may have just been a resource for

12

construction loan matters.

13

Q. Anybody else other than Mr. Fuszard?

14

You remember the question was SAG. Was there

15

anybody else that you associated with

16

Fontainebleau Las Vegas other than Mr. Hu,

17

potentially Mr. Biaggi, and then now because you

18

see it in an e-mail, Mr. Fuszard?

19

A. Yes, that's all that I can recall.

20

Q. Why were you talking to Mr. Freeman in

21

this time period about having a meeting with the

22

lenders?

23

MR. CANTOR: Objection.

24

THE WITNESS: Well, as previously

25

stated, that was often my role was to facilitate

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communication to the lenders. I can only assume,

2

because I do not recall having the conversation

3

with him. I'm supposing by this e-mail I did,

4

that Henry probably asked me to have that

5

conversation with Jim.

6

He probably had met Jim at the time or

7

had a relationship with him, and wanted somebody

8

that didn't have a relationship to impress on Jim

9

that he needed to have a call with the lenders.

10
11

BY MR. DILLMAN:
Q.

Do you recall telling Mr. Freeman you

12

thought it would be a good idea for him to comply

13

with that request?

14

MR. CANTOR: Objection.

15

THE WITNESS: I don't recall what I said

16

to him. Thematically in all conversations with

17

him, communication was important to the lenders

18

every time I talked to him.

19

It was never okay not to stand up and

20

face the music. Whatever the music was going to

21

be, he needed to address all the lenders and allow

22

them to ask him questions rather than do it via

23

letters or verbal communication.

24

That was always my advice to him.

25

Whether he followed it or not, he would have --

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nor, I don't believe in the documentation they

2

were ever required to.

3

BY MR. DILLMAN:

4

Q.

Did he follow your advice here?

5

A. I don't remember. I don't know.

6

MR. CANTOR: Objection.

7

BY MR. DILLMAN:

8

Q.

Exhibit 210 is an e-mail from Mr.

9

Freeman to Mr. Naval, and copied to others

10

including yourself and attaches a letter.

11

Take whatever time you need to review

12

both the e-mail and the letters, but I will tell

13

you that the letter basically says they are not

14

going forward with the call, and my question after

15

you review this is, do you recall these

16

circumstances?

17

A. I really don't even remember this

18

letter. I remember we had a hard time getting

19

them to step in front of everybody, and I can't

20

remember if he ever did or not.

21

Q.

Did you ever attend a meeting in this

22

time period, February, March 2009 before you --

23

just before leaving the company in Las Vegas

24

regarding the Fontainebleau Las Vegas project?

25

MR. CANTOR: Objection, asked and

Bank of America - Fontainebleau

None

Page 177

Case 1:09-md-02106-ASG Document 375-12 Entered on FLSD Docket 12/03/2013 Page 90 of
93
Howard, David 3/11/2011 12:00:00 PM

1

Q.

We are kind of past that point, though,

2

at this stage in terms of the disbursement funds

3

that were in the bank --

4

A. Okay, this is past that. After that I

5

am out. I really quit listening. This is a week

6

before I l.eft.

7

Q.

Blah, blah, blah, blah, blah, blah?

8

A.

I wouldn't even come down on calls at

9

that point.

10
11

MR. CANTOR: I think I need to note an
objection to blah, blah, blah, blah, blah.

12

MR. DILLMAN: What would that be?

13

MR. CANTOR: That I don't speak that

14

~nguage,form.

15
16

BY MR. DILLMAN:
Q.

The second point here refers to

17

treatment of un-funded delay draw commitments.

18

Were you aware that there were un-funded

19
20

delay draw commitments in March of 2009?
A.

I remember hearing that some people

21

didn't fund. I don't recall if they ever

22

funded -- if they were ever able -- I just

23

remember that there was analysis, are they able to

24

fund and didn't fund or are they unable to fund,

25

and I think that was going to go be researched.

Bank of America - Fontainebleau

None

Page 190

Case 1:09-md-02106-ASG Document 375-12 Entered on FLSD Docket 12/03/2013 Page 91 of
93
Howard, David 3/11/2011 12:00:00 PM

1

I don't know what the outcome of that

2

research was. I don't know if guys ultimately

3

funded or not, but I know at the time that the

4

delay draw was requested to be fund -- I don't

5

know how many it was, one, two, three, ten.

6

don't have any idea, recollection, but I just

7

remember that, yes, some guys didn't fund, and

8

that the discussion that I listened to was - I

9

may have even thrown this out there, you need to

10

find out, are they able to fund? Are they under

11

FDIC and can't fund or they choose not to fund,

12

and if they chose not to fund, it would be given

13

the way this loan is documented, that's the

14

borrower's obligation, not the bank's obligation

15

to go sue them to fund.

16

Now, it potentially could be the bank's

17

problem if they didn't fund because they would

18

have a loan out of balance with someone not

19

funding. But the way these loans are crafted, if

20

a lender does not fund, other lenders don't have

21

to fund in their stead.

22

They create a defaulting lender and

23

since the note is directly with the borrower, it's

24

the borrower's -- the borrower has legal recourse

25

to them for not funding.

Bank of America - Fontainebleau

None

Page 191

Case 1:09-md-02106-ASG Document 375-12 Entered on FLSD Docket 12/03/2013 Page 92 of
93
Howard, David 3/11/2011 12:00:00 PM

1

Q. Any discussions on this issue with

2

respect to whether or not the failure to fund by

3

one of the retail lenders presented any issue to

4

disbursement with respect to the conditions

5

precedent?

6

A

7

Q. Any discussions as to whether the

8

failure to fund by the retail lenders -- excuse

9

me, the resort lenders created any issue of failed

10

conditions precedent under the disbursement

11

agreement?

You have to repeat that question.

12

MR. CANTOR: Objection.

13

THE WITNESS: I don't recall hearing

14

those discussions. Mr. Cantor mentioned that

15

yesterday, that they had those discussions. I

16

just don't recall being a part of them. I very

17

well could have sat in on a phone call. I just

18

don't remember.
BY MR. DILLMAN:

19
20
21

Q.

Failure to fund by a lender would be a

default under the credit facility, would it not?

22

MR. CANTOR: Objection.

23

THE WITNESS: Under -- I don't know.

24

have drafted lots of credit agreements. This was

25

a pretty complex one, highly negotiated. I would

Bank of America - Fontainebleau

None

Page 192

Case 1:09-md-02106-ASG Document 375-12 Entered on FLSD Docket 12/03/2013 Page 93 of
93
Howard, David 3/11/2011 12:00:00 PM

1

have to go back and look at the documents to see

2

what it said.

3

I know there is typically provisions

4

what happens if a lender doesn't fund and becomes

5

a defaulting lender, but I have seen lots of cases

6

where people haven't funded and especially we had

7

lots of cases where Lehman was involved, other

8

transactions where it didn't constitute a default

9

under the agreement, it just created a shortfall,

10

i.e., it was all about if a borrower asked for

11

$100,000 and a defaulting lender didn't fund their

12

$10,000 share, they only got 90,000.

13

It didn't necessarily create a default

14

under the document. So I don't know how this one

15

was written.

16

My guess is it was much more around the

17

in-balance test as to the overriding premise of

18

all the documentation was to finish the project if

19

at all possible, and make sure that there was

20

adequate funds at every step of the way to finish

21

it.

22
23
24
25

BY MR. DILLMAN:
Q.

If let's say BofA under the retail

facility -- strike that.
If a lender under the resort facility

Bank of America - Fontainebleau

None

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Deposition Transcript Excerpts
of Herbert Kolben
Filed Under Seal

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