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 375-30 Entered on FLSD Docket 12/03/2013 Page 1 of 1

Deposition Transcript Excerpts
of Mitchell Sussman
Filed Under Seal

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134

Yu, Henry 4/7/2011 12:00:00 PM

1

UNITED STATES DISTRICT COURT

2

SOUTHERN DISTRICT OF FLORIDA

3

In Re:

4

FONTAINEBLEAU LAS VEGAS

Banker Case No.:

HOLDINGS, LLC, et al.,

09-21481-BKC-AJC

MDL02106

5
Debtors.

6
FONTAINEBLEAU LAS VEGAS LLC, Adv. Pro. No.:

7
Plaintiff,

09-01621 ~AP-AJC

8
vs.

9
BANK OF AMERICA, N.A.,

1O
11

et al.,
Defendants.

12
13

14
15

VIDEOTAPED DEPOSITION OF HENRY YU

16

Thursday, April 7, 2011

17

New York, New York

9:37 a.m.

18

19
20
21

Reported By:
Josephine H. Fassett

22
23

JOB No. 160451

24

25
Bank of America - Fontainebleau

None

Page 1

Case 1:09-md-02106-ASG Document 375-32 Entered on FLSD Docket 12/03/2013 Page 2 of
134
Yu, Henry 4/7/2011 12:00:00 PM

1

Q

2

A

Yes.

3

Q

On how many occasions?

4

A

5
6

Have you ever been deposed before?

A couple. I don't recall exactly how

many times.
Q

In connection with your duties and

7

responsibilities at Bank of America or in other

8

capacities?

9
10
11
12

A

Once in other capacities, the rest for

Bank of America.
Q

Have you had a chance to meet with

your counsel before this deposition?

13

A

Yes.

14

Q

You had a chance to discuss with him

15

the procedures we're about to embark upon?

16

A

17

Q

18

Yes.
Do you have any questions before we

begin?

19

A

No.

20

Q

All right. You understand that this

21

lawsuit is one brought by my clients, a number of

22

term lenders in the Las Vegas Credit Facility?

23

A

Yes.

24

Q

And they brought this case against

25

your employer Bank of America?

Bank of America - Fontainebleau

None

Page 9

Case 1:09-md-02106-ASG Document 375-32 Entered on FLSD Docket 12/03/2013 Page 3 of
134
Yu, Henry 4/7/2011 12:00:00 PM

1

A

Yes.

2

Q

Okay. Did you do anything to prepare

3

for this deposition here today?

4

A

5

yesterday.

6

Q

Anything else?

7

A

That was it.

8

Q

How long did you meet with them?

9

A

We started sometime in the morning and

10

I met with Dan Cantor and Ken Murata

ended late in the afternoon.

11

Q

Did you review any documents?

12

A

Dan and Ken showed me several

13

documents.

14

Q

Any of those help to refresh your

15

recollection of the events .that occurred in the

16

past?

17

A

18
19

Those are just the documents that we

looked at, and nothing else came up.
Q

Did any of the documents that you

20

looked at help refresh your recollection concerning

21

any events that occurred in the past?

22

A

I don't believe so.

23

Q

Did you speak with anyone other than

24
25

your counsel concerning your deposition here today?
A

No.

Bank of America - Fontainebleau

None

Page 10

Case 1:09-md-02106-ASG Document 375-32 Entered on FLSD Docket 12/03/2013 Page 4 of
134
Yu, Henry 4/7/2011 12:00:00 PM

1

Q

Did you speak with any person who you

2

understood to have been deposed in this case

3

previously?

4

A

No.

5

Q

Did you review any transcripts?

6

A

No.

7

Q

Did you review any discovery

8

responses?

9

A

No.

10

Q

Are you -- what is your current --

11

strike that.

12
13

By whom are you currently employed,
Mr. Yu?

14

A

Bank of America.

15

Q

What is your position?

16

A

I'm a senior vice president in the

17
18
19
20

Special Assets Group.
Q

How long have you been a senior vice

president in the.Special Assets Group?
A

I joined the Special Assets Group in

21

the fourth quarter of 1986, and I believe I became a

22

senior vice president sometime in the early 1990s.

23

Q

And have been that since continuously?

24

A

No.

25

Q

What other positions have you held?

Bank of America - Fontainebleau

None

Page 11

Case 1:09-md-02106-ASG Document 375-32 Entered on FLSD Docket 12/03/2013 Page 5 of
134
Yu, Henry 4/7/2011 12:00:00 PM

1

A

I retired from the bank in the fourth

2

quarter of 1998. Was asked to rejoin the bank in

3

the fourth quarter of 2000. Retired again in the

4

second quarter of 2004. Was asked to rejoin the

5

bank fourth quarter of 2007. Retired again, I think

6

around August of 2008. Was asked to rejoin the bank

7

again around November of 2008. And that brings me

8

to the present.

9

Q

From November of 2008 until the

10

present, have you been a senior vice president in

11

the Special Assets Group?

12

A

Yes.

13

Q

What is the Special Assets Group?

14

A

The Special Assets Group work on

15

situations where we believe the borrower may have

16

problems repaying its obligations or that the

17

borrower may be unwilling to repay its obligations.

18

Q

How big is the Special Asset Group

19

now?

20

A

You mean in terms of how many people?

21

Q

Yes.

22

A

I would believe there would be

23

hundreds of people, but most of them work on what we

24

call middle market deals. I am in the group that

25

deals with large corporate workouts in North

Bank of America - Fontainebleau

None

Page 12

Case 1:09-md-02106-ASG Document 375-32 Entered on FLSD Docket 12/03/2013 Page 6 of
134

Yu, Henry 4/7/2011 12:00:00 PM

America, and that group may be, it's about 30,40,
2

50 people.

3

Q

4

Do you typically work on more than one

deal at a time?

5

A

Yes.

6

Q

Currently how many deals are you

7

working on?

8

A

Currently two or. three.

9

Q

Is one of them Fontainebleau?

10

A

Yes.

11

a

Have you worked continuously on

12

Fontainebleau since you began your assignment on

13

that matter?

14

15
16

A

No. I started working on

Fontainebleau in the middle of February of 2009.
Q

My question was: Have you been

17

working continuously on Fontainebleau since the time

18

that you began working on it? So it's from February

19

2009 to the present, have you at all times had

20

Fontainebleau Las Vegas as one of the matters that

21

you've been working on?

22

A

Yes.

23

Q

What are your current responsibilities

24

25

with respect to Fontainebleau Las Vegas?
A

I am acting as the client for

Bank of America - Fontainebleau

None

Page 13

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134

Yu, Henry 417/2011 12:00:00 PM

O'Melveny.
2

Q

What does that mean?

3

A

Right now practically everything

4

happening on Fontainebleau is related to litigation,

5

and so I am the businessperson at the bank

6

responsible for how the litigation is going to be

7

handled.

8
9
1O
11
12
13

Q

What are the other matters that you're

currently working on?
A

That is something that the bank does

not normally disclose.
Q

Okay. What are the other matters that

you're currently working on?

14

MR. CANTOR: Why do you need to know

15

that and how is it remotely relevant to this

16

case?

17
18

MR. DILLMAN: Let me get at it perhaps
a different way.

19
20
21

MR. CANTOR: Okay.
BY MR. DILLMAN:

a

On the other matters that-· on the

22

other matters that you're currently working on, are

23

you the client in connection with litigatlon or do

24

your job duties include other matters?

25

A

Not all of the other matters are

Bank of America - Fontainebleau

None

Page 14

Case 1:09-md-02106-ASG Document 375-32 Entered on FLSD Docket 12/03/2013 Page 8 of
134
Yu, Henry 4/7/2011 12:00:00 PM

1
2
3

litigation related.
Okay. There's only one or two, right?

Q

You said you were working on two or three matters?

4

A

Correct.

5

Q

Okay. So of the one or two -- how

6

many are you working on, one or two additional?

7

A

You could say two.

8

Q

All right. Of those two, are either

9

of them matters in which you are a client on behalf

10

of the Bank of America in connection with

11

litigation?

12

A

No.

13

Q

Okay. When you joined Bank of

14

America -- rejoined for the third time, in August of

15

'08, did your -- excuse me -- in November of '08,

16

did you understand that Fontainebleau Las Vegas was

17

one of the matters that you would be working on?

18

A

No.

19

Q

What was your understanding as to why

20

the Bank of America asked you to come out of

21

retirement in November of 2008?

22

A

Couple reasons.

23

The first was that when I came out of

24

retirement in 2007, I was asked to come back to work

25

on certain problems, and those problems are

Bank of America - Fontainebleau

None

Page 15

Case 1:09-md-02106-ASG Document 375-32 Entered on FLSD Docket 12/03/2013 Page 9 of
134
Yu, Henry 4/7/2011 12:00:00 PM

1

continuing, so the bank asked me to come back and

2

continue working on those.

3
· 4

The second reason was there was a
major blowup, if you will, in the corporate world

5

around that time that the bank wanted me to come

6

back to handle.

7
8

Q

When you came back, were you assigned

to any particular matter?

9

A

Yes.

10

Q

How many matters were you assigned to

11
12
13
14

at the time that you came back?
A

There was one major matter, and

several minor ones.
Q

These were all, however, in the --

15

under the general rubric of large corporate

16

workouts?

17

A

Yes.

18

Q

At the time that you began working on

19

the Fontainebleau Las Vegas matter, how many other

20

matters were you working on?

21
22
23

A

There were probably two or three major

matters, and maybe a couple of minor ones.
Q

When you say "two or three major," did

24

that include Fontainebleau Las Vegas or were those

25

in addition to?

Bank of America - Fontainebleau

None

Page 16

Case 1:09-md-02106-ASG Document 375-32 Entered on FLSD Docket 12/03/2013 Page 10 of
134
Yu, Henry 4/7/2011 12:00:00 PM

1

Who is the account officer who

2

requested Special Assets to get involved as a result

3

of a letter from Chase?

4

A

Brennan Bolio?

5

Q

At that time -- strike that.

6

And what was the specific concern

7

raised by Chase that caused Special Asset Groups to

8

be contacted, if you know?

9

A

If I remember correctly, in a monthly

10

report that IVI had produced around the end of 2008,

11

maybe early 2009, they pointed out that they were

12

not entirely confident that what Fontainebleau was

13

projecting to be LEEDs credits, and that is credits

14

apparently would come from the building being green,

15

would be all available.

16
17

Q

The concern was that the LEED credits

might not all be available?

18

A

Right.

19

Q

Okay.

20

A

That's my recollection.

21

Q

What was there about credits not being

22

available that was of sufficient concern to Chase to

23

have Mr. Bolio contact the Special Assets Groups?

24
25

MR. CANTOR: Object to the form. You
can answer.

Bank of America - Fontainebleau

None

Page 21

Case 1:09-md-02106-ASG Document 375-32 Entered on FLSD Docket 12/03/2013 Page 11 of
134
Yu, Henry 4/7/2011 12:00:00 PM

1

THE WITNESS: I'm sorry?

2

MR. CANTOR: I object to the form of

3

the question, but you can answer.

4

A

Could you rephrase the question?

5

Q

I'll just have it reread. If you

6

don't understand it, I'll be happy to clarify any

7

question you have.

8
9

(Whereupon, the requested portion was
read back by the Reporter:

10

"Question: What was there about

11

credits not being available that was of

12

sufficient concern to Chase to have Mr. Bolio

13

contact the Special Assets Groups?")

14

A

Are you asking me to speculate on

15

Brandon's frame of mind when he contacted the

16

$pecial Assets Group?

17

Q

I'm asking you to testify as to the

18

understanding within the Special Asset Group as to

19

why the LEED credit issue was of sufficient

20

importance to potentially warrant the utilization of

21

what I understand from your testimony to be scarce

22

resources of the Special Asset Groups at that time.

23
24
25

A

I believe there were two reasons from

my perspective.
One was that apparently up to that

Bank of America - Fontainebleau

None

Page 22

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134
Yu, Henry 4/7/2011 12:00:00 PM

1

time IVI had not raised issues of any consequence ·

2

that were not resolved before they issued the

3

monthly reports.

4

The second reason is that when you

5

have a participant in a deal actually write a letter

6

to you that it's not a usual circumstance.

7

Did you come to have an understanding

Q

8

of the concerns that Chase had with respect to the

9

LEED credit issue?

10

A

What timeframe are you referring to?

11

Q

At any timeframe.

12

A

Well, that would be hard to say,

13

because obviously that happened quite a while ago

14

and a lot of things have happened since then.

15
16

My question, though, has to do with

Q

Chase's concern.

17

Did you at any time come to understand

18

what the concern that Chase had with respect to the

19

LEED credit issues that caused it to contact

20

Mr. Bolio?

21
22

MR. CANTOR: The concern that was
expressed in the letter you mean?

23
24
25

MR. DILLMAN: Yes.
BY MR. DILLMAN:
Q

Or otherwise, but that topic, that

Bank of America - Fontainebleau

None

Page 23

Case 1:09-md-02106-ASG Document 375-32 Entered on FLSD Docket 12/03/2013 Page 13 of
134
Yu, Henry 4/7/2011 12:00:00 PM

1

issue.

2

A

Well, as I said, I have had lots of

3

contacts with Chase since February of 2009 and a

4

whole number of issues have been discussed, so I

5

don't know how to answer that question.

6

Q

Upon getting involved in the

7

Fontainebleau Las Vegas matter, did you have an

8

understanding that there were issues involving LEED

9

credits that were potentially significant?

1O

A

After I got involved, that was one of

11

the issues that repeatedly came up and we tried

12

repeatedly to get answers from Fontainebleau.

13

Q

And was one of the concerns that you

14

had was that you weren't getting sufficient answers

15

from Fontainebleau over time?

16

A

It would be correct to say that I was

17

very frustrated at the level of information we were

18

getting.

19
20

Q

And was this a concern to your

knowledge that Chase shared with you?

21

A

Yes.

22

Q

Who did Mr. Bolio contact at Special

23

Asset Groups after getting this letter from Chase,

24

if you know?

25

A

I don't know.

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1

something is in special assets.

2

Q

Okay.

3

A

So someone has to go turn on the field

4
5

or flag. Is that what you're asking?
Q

No, but that would certainly be

6

responsive. But no, I'm asking more about, you

7

know, a form, Special Asset Groups involvement in

8

this signed off by the necessary and appropriate

9

people, you know, sent to whatever person that

10

processes such forms, that kind of a process.

11

A

Yes.

12

Q

There is?

13

A

There is.

14

Q

And did that occur here?

15

A

Yes, I believe it did.

16

Q

Describe the process for me.

17

A

The -- as I said, the bank has various

18

computer systems and there are various operational

19

groups that would have the security access to put in

20

information into those databases. So when an

21

account transfers between the normal stream, if you

22

will, of account officer work into Special Assets,

23

there's a form that specifically say that, that is

24

sent to the operational people so they can turn the

25

flags on and off so that from that point onwards a

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1

different group of people would be allowed to enter

2

information.

3

Q

Who made the decision to have Special

4

Asset Groups at Bank of America become involved in

5

the Fontainebleau Las Vegas matter?

6

A

The decision resides in the Special

7

Assets Group. So, for example, in -- like I said,

8

in most situations the account officer would be the

9

one requesting help and it is up to the head of

10

Special Assets, or whoever he delegates that

11

responsibility to, to accept the handover, if you

12

will, of the account. That decision could be based

13

on a number of factors. One is the circumstances of

14

the particular deal. The second one is whether

15

Special Assets has the manpower to take it on.

16

So that situation is something that

17

both the account officer and the Special Assets

18

officer work together on the handover process.

19

In very rare situations -- in very

20

rare situations, and I have not seen such situations

21

since probably the 1990s, an account officer would

22

try to hang on to an account when the Special Assets

23

Group thinks that it should be in Special Assets.

24

In those situations the decision is with the head of

25

Special Assets to say "This account does not belong

Bank of America - Fontainebleau

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1

to you anymore, it's going to be in Special Assets,"

2

Those are extremely rare and, again, my recollection

3

is I haven't seen one since the 1990s.

4

Q

Fontainebleau was not one of those?

5

A

Fontainebleau was not one of those.

6

Q

So when Fontainebleau -- who made the

7

decision on behalf of the Special Asset Group to

8

take on the responsibility at whatever level it was

9

taken on for Fontainebleau Las Vegas?

1O

A

Tom Biaggi.

11

Q

And what was, if you know, what was

12

the basis for the decision to take Fontainebleau on

13

as a Special Asset Group project?

14

A

As I said, Tom was contacted by Mark

15

Cohen. Tom, Mark and I have known each other for a

16

very long time. I think I met Mark back in the late

17

1980s. And I think Tom would have been similar. We

18

have a lot of respect for Mark. And when he's

19

concerned, he usually has a very good reason. So

20

that's one reason.

21

The second reason, as I said, we have

22

gotten the letter from JPMorgan Chase. We also have

23

a very healthy respect for the workout group at

24

Chase. And, again, if they are concerned, then we

25

definitely think that the matters need some more

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1

looking into. So again, it goes back to those two

2

events.

3

Q

Run back the tape recorder of the

4

conversation that you had with Mr. Cohen and

5

Mr. Biaggi.

6

A

Are you asking me a question?

7

Q

Yes. I ask you to run back the tape

8

recorder, in other words, tell us what happened

9

during the conversation --

10

A

I did not talk to Mark.

11

Q

-- between you and Mr. Biaggi.

12

A

As I said, Mark contacted Tom, so I

13

don't know what they said to each other other than

14

that Tom told me that Mark said that someone in Bank

15

of America Special Assets should look into

16

Fontainebleau.

17

Q

I thought -- I apologize. I thought

18

you had said that you and Mr. Biaggi and Mr. Cohen

19

spoke.

20

A

No. I said --

21

Q

That's not correct?

22

A

No, I said Tom, Mark and I knew each

23
24
25

other for a very long time.
Q

No, you did say that, before that I

thought you had said you had spoken.

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1

A

No.

2

Q

But that's not the case; is that

3

right?

4

A

No.

5

Q

Okay. All right. I apologize, I may

6

have misheard you.

7

You said the Special Asset Groups gets

8

involved in situations where it believes the

9

borrower may have problems repaying obligations or

1O

may be unwilling to repay obligations. Was that a

11

circumstance that existed upon Special Asset Groups

12

getting involved in the Fontainebleau Las Vegas

13

matter?

14

A

No.

15

Q

So, as far as you know, the only, the

16

two -- the two factors that played into the decision

17

to get involved were, one, the issues raised by

18

Chase; two, the issues raised by Deutsche Bank?

19

A

Right.

20

Q

Did Mr. Bolio indicate his preference

21
22

to have Special Asset Groups involved?
A

I don't remember enough to say whether

23

it's a preference, so I don't know what the basis of

24

your question is.

25

Q

The basis of my question is simply to

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1

find out whether Mr. Bolio indicated that he would

2

like to have Special Asset Groups involved?

3

A

He requested that Special Assets Group

4

consult with him. There were a couple of reasons

5

for that. One was that his boss, Jeff Sussman, had

6

just been -- I guess was in the process of leaving

7

the bank, and Brian Corum was coming in to replace

8

him. So even on the account officer's side, it was

9

someone new coming in anyway. So to the extent that

10

any advice from Special Assets Group is useful, that

11

would be a good time for someone to come in and

12

help.

13

And then the second reason was that he

14

had gotten the concerns from IVI. And -- and in

15

addition to all that, there is a global set of

16

issues, if you will, that obviously the American

17

economy was not doing well at that point in time.

18

The Las Vegas situation economically was not good.

19

The fact that Fontainebleau had problems selling

20

condos at that point in time. So in addition to

21

kind of the micro factors affecting just

22

Fontainebleau, there were also some macro factors

23

that would be of concern.

24
25

Q

Fontainebleau in your estimation was a

troubled project when you got involved?

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1

A

Fontainebleau, when I got involved,

2

there were concerns on the macro level that, as I

3

said, the American economy was not doing well at

4

that time. Las Vegas was not doing well. There

5

were concerns about how Fontainebleau will be able

6

to -- whether Fontainebleau would be able to do as

7

well as they had hoped at the beginning of the

8

project. So yes, there were those kind of global

9

macro concerns other than, as I said before, the

1O

LEEDs credits IVI was getting concerned about.

11

Q

When Special Asset Groups first got

12

involved with Fontainebleau Las Vegas, at what level

13

were they involved?

14

A

Advisory.

15

a

Is that typical that you come in at

16

the advisory level?

17

A

Yes.

18

a

Would it be unusual to come in at

19
20

advisory hybrid or direct?
A

In the circumstances that

21

Fontainebleau was at advisory would have been

22

appropriate. Obviously another situation, let's

23

say, for example, a company had just filed

24

bankruptcy without any forewarning, then obviously

25

it would have been more appropriate for Special

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1

Assets Group to come in and take it over direct.

2

But at that point in time, when we were looking at

3

Fontainebleau, again, we were -- we had some

4

concerns about the macro factors. IVI had pointed

5

out that there may some issues with the LEEDs

6

credits. And if I remember correctly, the order of

7

magnitude of those LEED credits were like 20 million

8

dollars or so. So in the context of a 3 billion

9

dollar project, that is not a very material number.

10

So at that point in time, if I remember correctly,

11

the risk rating on Fontainebleau was still just a

12

special mention.

13

Q

What does "special mention" mean?

14

A

The American banking Regulators have a

15

classification system on credits. Special mention

16

is the first category of concern, if you will. It

17

suggests that there is something that should be paid

18

more close attention to from special mention, then

19

you have substandard, you have doubtful, and then

20

you have loss.

21

Q

And do those categories correspond to

22

any particular risk rating that BofA applies to

23

credits?

24

A

Yes.

25

Q

What is this, what is the

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1

corresponding risk rating to special mention?

2

A

Eight.

3

Q

Substandard?

4

A

Nine.

5

Q

Doubtful?

6

A

Ten.

7

Q

It don't get any higher than that,

8

does it?
MR. CANTOR: Yeah.

9
10

A

Loss is 11 .

11

Q

Eleven, okay. I'd been told that you

12

only went to 10. Okay, so loss is 11?

13

A

Yeah, but loss is loss.

14

Q

Loss is loss.

15

A

16
17
18
19

That's true, I don't know we actually

assign 11. Loss is loss.
Q

Okay. And risk -- Risk Rating 10, in

fact, assumes that there will be a loss, doesn't it?
A

Risk Rating 10 doubtful says there is

20

a high probability of loss but the amount and the

21

timing cannot be ascertained.

22
23

Q

When you got involved -- strike that.
When Special Asset Groups got involved

24

with the Fontainebleau project, it was at a risk

25

rating of 8?

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1

A

I believe that's correct.

2

Q

Ultimate -- subsequently it was moved

3

to Risk Rating 9?

4

A

Yes.

5

Q

This was within the first quarter of

7

A

I believe so.

8

Q

I take it it's 10 now?

9

A

It's 11.

10

Q

Eleven. · ·

11

A

Or loss.

6

'09?

12

Well, let me correct that. Sorry. It

13

was 10 and 11, because it was not a total loss.

14

Mr. Icahn did put in some money, so there was some

15

recoveries.

16

Q

17

At what level -- strike that.
Do you know how the bank carried its

18

loans on its books for Fontainebleau Las Vegas when

19

you got involved?

20

MR. CANTOR: Object to the form. You

21

can answer.

22

A

23

Q

24
25

Yeah, I mean it was 8.
In terms of how it marked it on its

books.
A

That is actually a very complicated

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1

question, so I'm going to take a few minutes to

2

explain.

3

The bank can hold funded loan amounts

4

in a couple of ways. One is to mark it to market

5

and one is based on what is called Financial

6

Accounting Standard 114, which is a discounted cash

7

flow analysis. Both of those only apply to --

8

primarily to funded outstandings. When I got

9

involved, there was no funded outstandings on

10

Fontainebleau Las Vegas. We only had approximately

11

$13 million of letters of credit outstanding, and

12

you do not mark unfunded undrawn letters of credit,

13

to market, it's just not done. That I am aware of.

14

So it was basically just a risk rating-based system.

15

FAS 114 also applies primarily to

16

funded outstandings. Because in the case of letters

17

of credit you don't even know when it's going to be

18

drawn, if ever. So you can't really do a discounted

19

cash flow. So again, it goes back to, it was just a

20

risk rating.

21
22

Does that answer your question?
Q

I just want to make sure you were

23

done. I didn't know if you were pausing or you were

24

done.

25

It does, at least for the period that

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1

there was unfunded obligations by BofA, but at some

2

point BofA funded, correct?

3

A

BofA funded when the beneficiaries

4

drew on those letters of credit after Fontainebleau

5

filed bankruptcy I believe.

6
7

Q

BofA funded in February when the

borrower drew down on the revolver, correct?

8

A

9

sorry. Yes.

1O

Q

Okay. At that point --

11

A

BofA drew down in February, that's

12

Oh, I'm sorry. Sorry, sorry, sorry,

correct.

13

Q

Actually, the borrower drew down?

14

A

The borrower drew down.

15

Q

BofA funded?

16

A

BofA founded.

17

Q

At that point -- at that point in time

18

how did BofA mark on its books its funded

19

obligation?

20

A

Those funded obligations were drew

21

down in the last week of February, I believe. And

22

was repaid the last week in March I believe. So

23

they were only outstanding for a month, and whatever

24

the risk rating was at that time would have applied.

25

Q

Okay. Let's assume that it was an 8,

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of Special Asset Group involvement?

2

A

Yes, I believe it was around that time

3

that we told Brandon that his own involvement was no

4

longer necessary.

5

Q

Why?

·6

A

Because the commitment was terminated.

7

Q

I don't understand the significance of

8

that in terms of why it would become direct.

9

Actually, I think I do, but I'd like you to explain

10

it.

11

A

As I said before, Fontainebleau was a

12

little unusual in that Brandon stayed on longer than

13

normal. And

14

on the -- worked on the account for a while and we

15

did not want to lose that knowledge and experience

16

administrating the revolver. But once the revolver

17

was terminated, a lot of those duties changed, and

18

then analysts in the Special Assets Group became

19

available, so we, Brendon, was relieved of his

20

responsibilities of continuing to help out in

21

essence the Special Assets Group.

alot of that was because he had worked

22

Q

I think it's Brandon, by the way?

23

A

Brandon. Sorry..

24

Q

Between February when you became

25

involved and April 20 when the revolver was

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terminated, was there an advisory hybrid level of
2

involvement by the Special Asset Group or did you

3

just go straight from advisory to direct?

4

A

No, it went through hybrid. In

5

February and for a certain amount of time I believe

6

in March, Doug Keyston was still the risk officer.

7

So if you remember my definition of advisory to

8

advisor hybrid, the changeover would be the time

9

when I'd go from concurring on credit actions with

1O

Doug as th.e approver to me ticking over as approver

11

and Doug approval no longer would be necessary.

12

Q

Did that happen?

13·

A

I believe it did, yes.

14

Q

When?

15

A

16

Again, I -- my recollection is that it

was sometime in March.

17

Q

Why?

18

A

Because it was becoming more obvious

19

that this was not a business-as-usual deal.

20

Q

21

A

Why was it becoming more obvious?
The·main thing that will stick in my

22

mind, and I remember this point in time, was that

23

when I first started getting involved, I called up

24

Jim Freeman the CFO and asked to meet with Jim and

25

said that I want to come introduce myself, and, by

Bank of America - Fontainebleau

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the way, I understand that IVI had raised certain

2

questions that have not been answered, so I'd like

3

to come talk to you about those. And Jim basically

4

refused to meet with me, so that to us indicates

5

that it was not business as usual.

6
7
8

Q

What do you mean "not business as

usual'.'?

A

Business as usual would be a situation

9

where the account relationship is still on a very ·

1O

cordial basis and we were still working on an

11

amenable basis with the borrower.

12

Q

It was not just a personality issue,

13

right, I mean it's something more of a business

14

nature that's the business as usual?

15

A

Well, I have never met Jim. I had a

16

very polite call with him. I couldn't -- I mean,

17

that's no reason for it to be a -- a personality

18

issue. When the borrower CFO declined to meet with

19

a bank officer, there's an indication that it's not

20

a usual situation.

21

Q

Something's going on?

22

A

Something's going on.

23

a

And was it that concern by you that

24

something was going on that caused the Special Asset

25

Group involvement to go from advisory to advisory

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1

hybrid?

2

A

Yes.

3

Q

And was that your recommendation?

4

A

Yes.

5

Q

Was it based on anything more than the

6

CFO's refusal to meet with you, were there other

7

things that went into that decision process?

8

A

Well, you have the whole set of things

9

that were happening at that time with IVI saying

1O

that they were not getting their questions answered.

11

And the fact that the CFO wouldn't even talk to me,

12

again, would indicate that a firmer approach, if you

13

will, may be in order.

14

Q

You say IVI was saying they were not

15

getting questions answered. Did this extend beyond

16

the LEED issue as you understood it in March?

17
18

A

My recollection is that it was mainly

around the LEED issue at that point in time.

19

Q

Mainly other issues also or --

20

A

I don't recall, there might have been

21
22

other issues, but that's the one that comes to mind.
Q

And the -- arid that existed at the

23

time that Special Asset Groups got involved as an

24

advisory level, right?

25

A

Yes.

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a

They go on here, and you don't quote

2

exactly from this page in the -- in your report, but ·

3

they go on to say: Additionally it appears that the

4

LEED credits are tracking behind projections and the

5

developer has begun a detailed audit. IVI will

6

continue to discuss this with the developer. Do you

7

see that?

8

A

Yes.

9

Q

That's the LEED credit issue that you

o

1

previously testified to?

11

A

Yes.

12

Q

And in your Declaration you describe

13

IVi's observation that it appears that the

14

anticipated LEED credits are tracking behind

15

projections possibly in excess of $15 million,

16

correct?

17

A

Yes.

18

Q

Did you understand -- did you have any

19

conversations with IVI concerning their -- the basis

20

behind their concern that the LEED credits were

21

tracking behind projections possibly in excess of

22

$15 million?

23

A

Yes.

24

Q

What did they tell you?

25

A

I do not recall the specifics.

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1

Q

Do you recall that they told you that

2

the borrower was engaged in an audit of their LEED

3

credits?

4

A

Yes.

5

Q

At this time in January of 2009 --

6

excuse me.

7

A

February.

8

Q

In February of 2009 when you'd first

9

gotten involved.

10

A

11

Q

12

Yes.
Did they indicate to you what that

audit consisted of?

13

A

I do not recall.

14

Q

How long it would take?

15

A

I do not recall.

16

Q

What they anticipated the results to

18

A

I do not recall.

19

Q

Okay. And, as you indicate in your

17

be?

20

Declaration at the bottom of page 10, any LEED

21

credit shortfall would increase the project's cost,

22

correct?

23

MR. CANTOR: Paragraph 10.

24

MR. DILLMAN: What did I say?

25

MR. CANTOR: Page.

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1

THE WITNESS: Page.

2

MR. DILLMAN: Thank you.

3

A

4

Q

Yes.
In Paragraph 11 you say: On February

5

13 Fontainebleau submitted its February advance

6

request. I show you what's been previously marked

7

as Exhibit 263 is that document, is it not?

8

A

(Reviews.) Yes.

9

Q

This was submitted before or after you

1O
11

became involved, do you recall?
A

It was submitted right around the

12

time, I cannot recall specifically whether it was

13

shortly before or it was shortly after.

14
15

Q

You became aware of it, but -- when

you first became involved; is that fair?

16

A

Yes.

17

Q

The Advance Request is dated February

18

13. Had you seen these kinds of docume.nts before in

19

projects where you had been involved?

20

A

Other projects?

21

Q

Yes, sir.

22

A

No.

23

Q

Before -- well, at some point in

24

February, did you review the Disbursement Agreement

25

and the credit facility for purposes of determining

Bank of America - Fontainebleau

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1

that the documentation and sequencing of both

2

funding requests and advance requests?

3

A

4

Q

5

Yes.
So you were familiar with those

shortly after you became involved?

6

A

Yes.

7

Q

And you understood that an Advance

8

Request was provided by the -- by the borrower on

9

certain dates of the month, that funding was to

10

occur on certain dates of the month, and that in

11

between things happened between request and funding?

12

A

Yes.

13

Q

All right.

14

MR. DILLMAN: We are getting to the

15

end of this tape, and I think it's probably a

16

good time to break for lunch, if that's okay.

17

MR. CANTOR: Okay.

18

THE VIDEOGRAPHER: This marks the end

19

of Media No. 2 of the deposition of Mr. Henry

20

Yu. We are off the record at approximately

21

12:20 p.m.

22

(Whereupon, off the record.)

23

(Whereupon, lunch recess.)

24

25
Bank of America - Fontainebleau

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Yu, Henry 4!7/2011 12:00:00 PM

1

Q

Told by whom?

2

A

Jim Free·man.

3

Q

Were you told the timeframe in which

4

they would be completed?

5

A

I don't recall.

6

Q

Was it important to you to understand

7

what the amount of the LEED credit issue was?

8

A

Yes.

9

Q

Did you at any point ask Mr. Freeman

1o

to get the audit completed by some date certain so

11

that you would have that info·rmation sooner rather

12

than later?

13

A

I don't recall if we gave him any

14

deadlines but we told him that those should be done

15

as soon as possible.

16 .

Q

Did you indicate to him that funds

17

would be held up unless he got the LEED audit

18

information done before any particular disbursement?

19

A

I don't recall.

20

Q

You don't recall ever having done

21

that, right?

22

A

I don't recall ever stating it in a

23

way that says, if you do not provide this

24

information, it's a default under the agreement so

25

that we can move over funds.

Bank of America - Fontainebleau

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Yu, Henry 4/7/2011 12:00:00 PM

1

Q

Did you ever say in sum or substance:

2

Unless and until you provide us this information on

3

the LEED credits, we cannot assess your advance

4

requests sufficient to allow us to authorize

5

disbursements?

6

A

I think it would be accurate to say

7

that that's the kind of communications we were

8

having.

9

Q

The "we" here is you and Mr. Freeman?

10

A

The lender group and Mr. Freeman.

11

Q

I'm talking about you meaning Mr. Yu

12

or BofA. Did you have those conversations with

13

Mr. Freeman?

14

A

I don't recall any specific

15

conversations that just had myself and Jim. But as

16

the steering committee we had those conversations.

17

For example, I believe we would have covered things

18

like that at the March meeting in Las Vegas.

19
20
21
22
23

Q

"Things like that" being the LEED

audit issue?
A

LEEDs audit issue, how the project was

doing in terms of the questions that IVI would have.
Q

And in March did you or anyone in your

24

presence indicate to Mr. Freeman or anyone else at

25

the Fontainebleau Resorts that unless the LEED audit

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Yu, Henry 4/7/2011 12:00:00 PM

1

issues were determined and resolved, the -- that

2

BofA would not be in a position to properly review

3

and thus recommend disbursements for the month of

4

March?

5

MR. CANTOR: Objection. Assumes facts

6

not in evidence. You can answer.

7

A

I don't recall.

8

Q

You don't recall that conversation

9
10
11

ever having occurred?
A

I don't recall whether a conversation

in those terms occurred.

12

Q

Sum or substance, sir.

13

A

I recall repeatedly asking Jim to make

14

sure that he supplies IVI with all the information

15

that IVI needed so that they can do a certification.

16

Q

Did you ever tell Mr. Freeman or

17

anyone else in sum or substance that unless the

18

LEEDs audit were completed prior to disbursement, at

19

the time for disbursement, that disbursements

20

couldn't be made because BofA wouldn't have

21

sufficient information to know whether or not the In

22

Balance Report was accurate or not?

23

MR. CANTOR: Objection. Asked and

24

answered. Also lacks foundation and assumes

25

facts not in evidence. Go ahead.

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1

A

Again, we reminded Mr. Freeman many

2

times that before funds could be disbursed, IVI has

3

to certify the in balance and so he should provide

4

IVI with whatever information IVI asks to be able to

5

do their job.

6

Q

Did the question of LEEDs credits that

7

you testified existed when you first became involved

8

in the Las Vegas facility continue through the time

9

that you, that you BofA, terminated the revolver in

10

late April of 2009?

11

MR. CANTOR: Objection. Go ahead.

12

A

I don't recall.

13

Q

Do you recall the issue of LEED

14

credits ever having been revolved in your mind?

15

A

No.

16

Q

And I believe I asked you this, but to

17

make sure: You're not aware of Fontainebleau ever

18

having completed the audit that IVI referred to in

19

various reports that it issued; is that right?

20

A

· 21
22
23
24
25

Right.
(Letter dated February 12, 2009 marked

as Exhibit 810, as of this date.)
BY MR. DILLMAN:
Q

810, just confirm for me, if you

would, sir, that this is the letter from Chase that

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1

you previously referred to when you said that there

2

was a letter from Chase that was one of the factors

3

that caused the Special Asset Group --Asset Group

4

to be become involved in the Fontainebleau Las Vegas

5

project?

6

A

7

8

(Reviews.)
That's right.

Q

Okay. Mr. Freeman responded to

9

Mr. Washington's letter on February 20, 2009,

10

correct?

· 11

A

I believe.

12

Q

Excuse me. February 23, 2009.

13

A

14

Q

I'm not, I'm asking you a question.

15

A

I'm sorry, what was the question

16
17

Are you showing me an exhibit?

again?
Q

Mr. Freeman responded to

18

Mr. Washington's letter that we just looked at,

19

Exhibit 498, on February 23, 2009 as reflected in

20

your Declaration at Paragraph 13.

21

A

22
23
24
25

Yes.
(Letter dated February 23, 2009 marked

as Exhibit 811, as of this date.)
BY MR. DILLMAN:
Q

Exhibit 811 is a copy of that

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1

2

response, correct?
A

3
4
5

(Reviews.)
Yes.

Q

Was that response satisfactory in your

opinion?

6

MR. CANTOR: Objection. You can

7

answer.

8

A

No.

9

Q

Why not?

10

A

Do you want to go line by line?

11

Q

No, in general.

12

13

It didn't address the questions you'd
asked, did it?

14

A

No.

15

Q

Okay.

16

A

And that was not all of them.

17

Q

And that was in general at least part

18
19
20

21

of the problem you had with the letter?
A

That's right, and that's why we kept

asking for more information.
Q

And, in fact, that same day Bank of

22

America sent Fontainebleau a letter requesting a

23

conference call among Fontainebleau and the lenders?

24

A

Yes.

25

Q

And that -- what was Fontainebleau's

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response?
2
3

A

I believe they sent a letter basically

refusing to hold a call.

a

4

Now, you indicated earlier that one of

5

the concerns that you had about Fontainebleau, about

6

the Fontainebleau project arose out of the

7

borrower's failure or refusal to meet with the

8

lenders, do you recall that?

9

A

I said one of the concerns I had was

1o

that they refused to meet with me as opposed to the

11

lenders. I say that because apparently other

12

lenders have met with Fontainebleau.

13

Well, did Mr. Freeman's refusal to

Q

14

meet with you occur before or after your February 23

15

request, BofA's February 23 request to meet with

16

Fontainebleau?

17

A

I believe it was before.

18

Q

Within using the February -- strike

19

that.

20

How long after you became involved

21

with Fontainebleau did Mr. Freeman refuse to meet

22

with you?

23

A

Very soon after.

24

Q

Within days?

25

A

Within days.

Bank of America • Fontainebleau

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Yu, Henry 4/7/2011 12:00:00 PM

Q

And when Fontainebleau refused to

2

participate in a call with the lenders after the

3

February 23 request, what was BofA's response?

4
5

6

A

We continued to ask for either a

conference call or a meeting.
Q

Did your individual level of concern

7

increase with this additional instance of the

8

borrower refusing to meet with the lenders?

9

A

I don't recall.

1o

a

You indicated that it was a bad sign

11

that borrowers refuse to meet with the lenders,

12

right?

13

A

Right.

1.+

a

Repeated re.fusals to meet with lenders

15

is even worse, right?
MR. CANTOR: Objection. Go ahead.

16
17
18

19

20

A

I think repeated refusals is just

being consistent with the first refusal.

a

Okay. So you saw that as a state of

mind not as a passing fancy?
MR. CANTOR: Object to the form. Go

21

:22

ahead.

23

/\

As I said.• the second refusal is just

24

being consistent with the first refusal, I don't

25

know if that qualifies under the wording that you

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had.
2

Q

Okay. And this second refusal

3

consistent with the first gave you even more

4

concern, right?

5

A

6

Q

It did not reduce my concern.
It showed you that the first one

7

wasn't just a bad day by Mr. Freeman but there

8

seemed to be a pattern of the borrower refusing to

9

meet with the lenders?

1o

A

Refusing to meet with me, yes.

11

Q

And now on February 24th the lender

12
13

group, right?
A

The lender group, asset group. As I

i4

said a few minutes ago, my understanding was that

15

Jim was still meeting individually with lenders.

16
17

Q

In February BofA sent out a request to

draw down on the revolver loan, right?

18

MR. CANTOR: BofA?

19

\'.A. DILLMAN: Excuse me.

20

BY MR. DILLMAN:

21

Q

Fontainebleau.

22

A

Fontainebleau submitted a notice, yes.

23

Q

To draw down on the revolver, not on

24
25

the term loan?
A

You mean the Delay Draw Term Loan?

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1

BofA to pay back 68 million dollars to the

2

revolvers; is that right?

3
4
5

A

And also to make money available to

the project, yes.
Q

I'm not asking "and also." Right?

6

Now we're just talking about money to the delay

7

draw -- to the revolvers.

8

A

Yes.

9

Q

Okay. What events occurred that

10

caused you to conclude in the exercise of your

11

judgment that it was appropriate to pay back the

12

revolvers even though all the delay draw funds

13

hadn't been received?

14

A

If my recollection is correct, out of

15

350 million dollars, about 330 had come in. And at

16

that point in time, for the project to continue, a

17

decision has to be made whether any money should be

18

disbursed. And I made a decision that if all the

19

other conditions required for money to be disbursed

20

were met, such as the IVI certificate, all the

21

events, requests, documents, and all the other

22

conditions have been met, then funds could be

23

released.

24

Q

25

And by funds being released you're

talking about at least in part funds to repay the

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1

revolver $68 million loan from February?

2

A

Yes.

3

Q

And that decision was made at the same

4

time as the decision that it was proper to release

5

funds that had been requested by the borrower as

6

part of their Advance Request for March?

7

A

Yes, that's my recollection.

8

Q

Okay. And was it your understanding

9

that -- strike that.

1O
11
12
13

Bank of Nevada, they were a revolver
at one point?
A

National -- First National Bank of

Nevada I think.

14

Q

Was a revolver?

15

A

Yes.

16

Q

17

A

That's correct.

18

Q

At some point Bank of America

FDIC repudiated their obligation?

19

concluded that they no longer should be considered

20

to be available funds for purposes of the revolver?

21

A

Yes.

22

Q

In February when the $68 million

23

request from the borrower went out, Bank of Nevada

24

was not considered to be available funds for

25

purposes of funding the project, right?

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1

A

Right.

2

Q

Who paid their 10 million -- their

3

portion of the 68 million dollar request?

4

A

I don't believe anybody did.

5

Q

So the 68 million minus -- the amount

6

paid was 68 million minus Bank of Nevada's share?

7

A

No. They were not part of --

8

Q

It had to be one or the other.

9

A

No. They were not part of the

10

denominator. So it is 68 million divided by the

11

revolvers that had active commitments at that point

12

in time, which excluded First National Bank of

13

Nevada.

14

Q

Okay. So, in effect, its portion was

15

pro rata allocated among all the revolvers based

16

upon their percentage interest in the -- or their

17

percentage commitment in the revolver?

18

A

When the FDIC repudiated that

19

contract, they were not considered part of the

20

revolver.

21

Q

Right.

22

A

So when -- so it's up to you how you

23

want to describe it, but what happened was they were

24

not part of the denominator.

25

Q

The effective result from that was

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1

that -- let's just take BofA. BofA paid more with

2

respect to the February 68 million dollar request

3

than it would have paid had Bank of Nevada remained

4

as a revolver lender?

5

A

Yes.

6

Q

And each of the other remaining

7

revolving lenders paid more than they would have?

8

A

Yes.

9

Q

Okay. I put in front of you Exhibit

10

499.

11
12

Is this a document you've seen
previously?

13

A

Yes.

14

Q

It's a draft of the Project Status

15

Report from IVI for the month of February?

16

A

Yes.

17

Q

This draft was sent to you by

18

Mr. Bolio?

19

A

Yes.

20

Q

And he was soliciting comments from

21

the group that included yourself?

22

A

Yes.

23

Q

You reviewed this?

24

A

I believe I did.

25

Q

You understand that IVI subsequently

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1

issued a Project Status Report No. 22?

2
3
4

A

I don't recall, but I believe they

Q

And with respect to your Declaration

did.

5

at Paragraph 18, you indicate that that Report No.

6

22 stated that, quote: The anticipated contingency

7

summary anticipates a balance contingency of

8

$15,545,000. However, IVI is concerned that the

9

anticipated balance may drop substantially in order

1O

to meet the aggressive schedule. This is of concern

11

specifically as all of the subcontractors have not

12

fully disclosed the potential cost to meet the

13

schedule.

14
15

You were aware that this was a concern
of IVl's in late February of 2009? Yes?

16

A

17

Q

18

Yes.
In fact, this remained, continued to

be a concern of IVl's from January of '09, right?

19

A

Yes.

20

Q

You were also aware that as stated

21

below IVI remained concerned that all the

22

subcontractor claims have not been fully

23

incorporated into the report and potential

24

acceleration impact to meet the schedule has not

25

beenincluded?

Bank of America - Fontainebleau

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1

A

Yes.

2

Q

You were also aware that IVI remained

3

concerned that the LEED credits are tracking behind

4

projections and that the amount disclosed by the --

5

by the developer had not yet been audited?

6

A

Yes.

7

Q

And you also were aware that the work

8

on the podium would need to be accelerated to meet

9

the aggressive target for that part of the project?

10

A

Yes.

11

Q

And when we talk about acceleration

12

that means more costs, right?

13

A

Most likely.

14

Q

Because in order to build things

15

quicker, you need to have more people and more

16

overtime, right?

17

A

Most likely.

18

Q

Well, when you talk about acceleration

19

costs and construction, that's what you're referring

20

to, aren't you?

21

A

Yes.

22

Q

So each of these items would result

23

potentially in an increase in the anticipated cost

24

to complete the construction of the project?

25

A

Yes.

Bank of America - Fontainebleau

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Yu, Henry 4/7/2011 12:00:00 PM

1
2
3
4

(Letter dated March 3, 2009 marked as
Exhibit 813, as of this date.)
BY MR. DILLMAN:
Okay. You mentioned earlier funding

Q

5

requests made by the borrower in -- in early March.

6

Exhibit 813 is the initial funding request submitted

7

by Fontainebleau Resorts to Bank of America on March

8

3, 2009.

9

A

10

Q

11
12

Yes.
Bank of America took issue with this

request, correct?
A

Can we backtrack? Are you saying that

13

this exhibit is what Fontainebleau sent Bank of

14

America?

15

Q

16

I'm sorry. This is what Bank of

America sent to Fontainebleau.

17

A

18

Q

Yes.
I misspoke.

19

You disagreed with the request for

20

the -- that Fontainebleau had made for the reasons

21

set forth in Exhibit 813?

22

MR. CANTOR: Object to the form. You

23

can answer.

24

A

Could you repeat the question?

25

Q

Sure.

Bank of America - Fontainebleau

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1

MR. DILLMAN: Read it back.

2

(Whereupon, the requested portion was

3

read back by the Reporter:

4

"Question: You disagreed with the

5

request that Fontainebleau had made for the

6

reasons set forth in Exhibit 813?")

7

A

The letter says what it says.

8

Q

Were you involved in the decision to

9

send this letter to Fontainebleau?

10

A

Yes.

11

Q

And the decision was that

12

Fontainebleau's submission on March 3, 2009 had not

13

been appropriate, right?

14

A

Right.

15

Q

And you were not going to process the

16

notice on behalf of the other lenders, right?

17

A

Right.

18

Q

And the reason that you considered it

19

to be not appropriate was for the reasons set forth

20

in this letter?

21

A

Right.

22

Q

Now, before you made that -- strike

23

that.

24

Shortly after the March 3rd letter,

25

you sent a letter to Mr. Freeman. And if I can find

Bank of America - Fontainebleau

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1

a sticker, I'm going to put it in front of you and

2

confirm that.

3
4
5

(Letter dated March 4, 2009 marked as
Exhibit 814, as of this date.)
BY MR. DILLMAN:

6

Q

Correct?

7

A

Yes.

8

Q

And Exhibit 814 is that letter?

9

A

Yes.

10

Q

11

A

Yes.

12

Q

You start off by saying: I'm an

Dated March 4, 2009?

13

officer within Bank of America Special Asset Group

14

with responsibility for Fontainebleau Nevada. The

15

tone of the letter makes it sound like you and he

16

had never spoken before. Is -- that wouldn't be

17

correct, would it?

18

A

That would not be correct.

19

Q

Okay. You go on to say: We have

20

formed an ad hoc steering committee with other

21

lenders under the Credit Agreement constituting a

22

majority in interest of the lenders under the Credit

23

Agreement. The ad hoc steering committee was

24

comprised of whom, do you recall?

25

A

I can name certain members, I don't

Bank of America - Fontainebleau

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1

know if I can name the complete list. So it would

2

include Bank of America, JPMorgan Chase, Deutsche

3

Bank, Highland Capital, and maybe there are others.

4
5

Q

You say in your letter that all of

the -- excuse me.

6

You say: The Steering Committee

7

unanimously concurred that your loan notice does not

8

conform to the requirements of the Credit Agreement.

9

Do you see that?

10

A

Yes.

11

Q

That wasn't exactly true at the time,

12

was it?

13

A

It was true.

14

Q

Highland didn't agree, did they?

15

A

It did.

16

Q

Do you recall Kevin Rourke sending you

17

an e-mail saying Highland was taking no position one

18

way or the other with respect to the position of

19

BofA in its March 3rd letter?

20

A

That e-mail arrived after I send this

21

letter. Kevin had a conference call when we

22

discussed the issue was in concurrence.

23

Q

Did you at any point -- and when did

24

the e-mail arrive that Mr. -- Mr. Rourke -- in which

25

Mr. Rourke told you that he was taking no position

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one way or the other?
2

A

I do not recall, but I recall that it

3

was after I sent this letter, otherwise, I would not

4

have said unanimous.

5
6

Q

You again call for a meeting with

Mr. Freeman in Exhibit 814?

7

A

Yes.

8

Q

What was his response?

9

A

I don't recall, but it should be in my

10

Declaration.

11

Q

You don't recall sitting here?

12

A

I'm sorry?

13

a

Sitting here you don't recall what his

14

response was?

15

A

I don't specifically recall, no.

16

Q

Okay. We'll get there.
In your letter to him you attach a

17
18

list of topics that you want to discuss with him at

19

a lender meeting, do you see that?

20

A

Yes.

21

a

Many of the same topics that you

22

previously or that were previously set forth in

23

a

letter to Mr. Freeman?

24

A

Yes.

25

Q

Had you at this point received

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adequate answers in your opinion to these questions?
2

A

Well, the fact that these question's

3

are still here means that we have not received

4

adequate answers.

5

Q

Exhibit 602. Sorry. Is a l_etter that

6

same day from IVI to Mr. Bolio that is update to

7

supplement information provided in the Project

B

Status Report No. 22. Why was a, if you know, why

9

was a supplement provided only days after the

1O

Project Status Report was issued?

11

A

The way the schedule works is that the

12

monthly report reflects events of the month before,

13

but IVI continues to have conversations with

14

Fontainebleau. So if they found out anything that

15

they think is material, subsequent to the issuance

16

of the report, they bring it to our attention.

17

Q

And is it your understanding that IVI

18

did in fact have a meeting with Fontainebleau after

19

the date of its Status Report No. 22 and prior to

20

the date of this letter?

21
22

A

Yes. At -- I .think it's dated in

Paragraph 2 in this letter.

23

a

The date of the meeting?

24

A

Yes, March 1st and 2nd.

25

a

Were you at that meeting?

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1

A

No.

2

Q

Other than this letter, did you

3

receive any download of what occurred at that

4

meeting?

5

A

I don't recall.

6

Q

Did you talk with Mr. Barone

7

concerning the issues set forth in his Status Report

8

No. 22?

9

A

Yes.

1O

Q

Did you talk with Mr. Bonvicino?

11

A

Yes.

12

Q

Did you talk to them about the issues

13

set forth in their supplement which is Exhibit 602?

14
15

Yes.

A
Q

Did you understand after talking with

16

them that the LEEDs issues still hadn't been

17

resolved?

13

A

That's correct.

19

Q

And that they still believed there was

20

a $15 million decrease in credits that wasn't being

'21

reported?

22

A

Yes.

23

Q

Or shortfall of credits?

'.24

A

Yes.

25

Q

Exhibit 604.

.3ank of America - Fontainebleau

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1
2

On March 5th, 2009 you wrote to Mr. -excuse me -- Mr. Barone wrote to Mr. Kumar, correct?

3

A

Was there a question?

4

Q

There was, but that's okay. I thought

5

you were reading the letter so I didn't want to

6

interrupt your concentration.

7

A

Oh, sorry.

8

Q

On March 5th Mr. Barone sent a letter

9

to Mr. Kumar, correct?

10

A

Correct.

11

Q

You received that letter?

12

A

(Reviews.)

13

Q

Whether you were copied on it or were

14

a recipient, you in fact received it in connection

15

with your duties on behalf of Bank of America for

16

the Fontainebleau project?

17

A

Yeah, I believe I did.

18

Q

And you're certainly familiar with the

19

letter, right?

20

A

21

letter?

22

Q

23

Am I sitting here familiar with the

Or you were familiar with it when you

wrote your Declaration --

24

A

Right.

25

Q

-- on July 1st, 2007, right?

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1

A

Right.

2

Q

Okay. And at that time you

3

specifically noted at the bottom of page 1 IVl's

4

conclusion that there appears to be a delay in the

5

execution of owner change orders which it seems to

6

have gotten larger recently. Do you see that?

7

A

Yes.

8

Q

That's not a good thing, is it?

9

A

No.

10

Q

It means that the budget for the

11
12
13
14

project is going up?
A

I don't specifically recall whether I

drew such a conclusion, but it was not a good thing.
Q

Well, if there's additional owner

15

change orders that haven't been previously disclosed

16

and that means that the anticipated costs for

17

completion are going to go up, not down, right?
MR. CANTOR: Objection. You can

18
19

answer.

20

A

If you read the sentence here it says:

21

There appears to be a delay in the execution of

22

owner change orders.

23

Q

Yes.

24

A

That does not necessarily mean that

25

those owner change orders have not been floating

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1

around but that they just have not been executed.

·2

Q

Okay. Well, it was your understanding

3

that IVI was aware of these change orders but they

4

just hadn't been executed?

5

A

I believed what IVI was saying was

6

that they were seeing that there was certain owner

7

change orders that were getting delayed in

8

execution, yes.

9

Q

And that IVI had not previously seen?

1O

A

I don't recall if that's the way it

11

was.

12

Q

You don't?

13

A

I mean, I don't recall if it is a fact

14

that IVI had not seen owner change orders or whether

15

IVI has seen the owner change orders but that they

16

were just not executed. Executed meaning I -- I

17

read it as say someone signed it.

18

Q

All right. Not seeing the change

19

orders would be certainly worse than having seen

20

them but just not having seen a signature on them,

21

wouldn't you agree?

22

A

I would agree.

23

Q

Because if there's a delay in

24

presenting change orders to IVI that means there's

25

going to be a delay in the lender's understanding of

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1
2

Did you have a better more full
understanding of this back in 2009?

3

A

I don't recall.

4

Q

Did you do anything to try and get a

5

better understanding of it?

6
7

MR. CANTOR: Objection.
A

As I said, we repeatedly asked

8

Fontainebleau to make sure that they supply IVI with

9

all the information that IVI needs, and if that

1O

included why the worst case seems to be what it is,

11

they have to explain it to IVI.

12

Q

Okay. No, my question was: Did you

13

do anything to get a better understanding of what

14

this sentence that I just read meant, and that would

15

be an understanding from Mr. Barone since he wrote

16

the sentence?

17

A

I do not recall.

18

Q

Okay. So when it says "all the

19

anticipated additional costs have now been included

20

in TCW's latest requisition as a credit entry

21

labeled TW Construction Commitments Against POCs.

22

You didn't have any independent understanding of the

23

significance of that; is that right?

24
25

MR. CANTOR: Objection.
A

Are you saying me sitting here today

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1

or at that point in time?

2

Q

At that point in time.

3

A

I do not recall.

4

Q

Okay. Sitting here today.

5

A

Sitting here today, again, it's an

6

elaboration in a sense of what the previous

7

sentences said.

8

Q

Okay. Is it a good thing or a bad

9

thing that the anticipated additional costs have

10

been included in TWC's latest requisition? Is that

11

.generally a good thing for the bank or a bad thing

12

for the bank in the context of this facility?

13
14

A

Generally it would not be a good thing

that there's no additional contingency.

15

Q

And that's how you read this?

16

A

Yes.

17

Q

Okay. And he goes on to say: It

18

seems that TWC -- you understand that was Turnberry

19

West Construction?

20

A

Yes.

21

Q

The contractor on the project?

22

A

Yes.

23

Q

Has already committed all the

24

anticipated additional costs into their project as

25

subcontractor change orders in Fontainebleau Las

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1

Vegas has not signed the owner change orders. Do

2

you see that?

3
4

A

second paragraph?
MR. CANTOR: No.

5
6
7
8
9

You mean the first sentence of the

Yes, sir. The second-to-last sentence

Q

of the top paragraph.
A

Second-to-last sentence of the first

paragraph?

10

Q

Yeah.

11

A

Okay, I see that.

12

Q

It seems that TWC has already

13

committed all the anticipated additional costs. Do

14

you see that?

15

A

Yes.

16

Q

Do you have an understanding sitting

17
18
19

here today the significance of that?
A

I don't know what you mean by

"significance."

20

Q

What does it mean?

21

A

It says what it says.

22

Q

Is it a good thing or bad thing for

23

the bank?

24

A

25

As I said before, if that leaves no

room for additional contingencies, it's not a good

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1

thing.

2

Q

And he goes on to say that this leads

3

us to believe that FBLB and TWC are not on the same

4

page with respect to the owner change orders, which

5

needs to be resolved, and that the entire picture

6

regarding additional pending costs are not being

7

fully shown. Do you see that?

8

A

9

Q

10

Yes.
Now, that's a bit terrifying for a

bank, isn't it?

11

A

It is definitely a concern.

12

Q

And this was not the first time this

13

concern had been expressed by Mr. Barone, this was a

14

theme that he was banging on from the beginning of

15

2009 forward.

16

MR. CANTOR: Objection.

17

Q

Right?

18

A

I don't know -- let me reword that.

19

My recollection is that Barone's

20

concerns evolved over time, so I don't know if

21

that's his view from the beginning of 2009.

22
23

Q

Fair enough. They evolved and

increased his level of concern, right?

24

A

25

Q

That would be accurate.
Okay. And Mr. Barone at one point

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1

talked about doing an audit of the change orders for

2

the project, do you recall that?

3

A

Yes.

4

Q

Did you discuss how much that might

6

A

I do not recall.

7

Q

Or how long it would take?

8

A

I do not recall.

9

Q

Okay. You understood it would be a

5

10

be?

matter of weeks, not months?

11

MR. CANTOR: Objection. Lacks

12

foundation.

13

A

I do not recall.

14

Q

Okay. We'll get there in a minute

15

where Mr. Barone says it would be weeks.
Did you ever consider on behalf of

16
17

BofA as the agent on this facility to say "we're not

18

going to do any disbursements on this until we get

19

to the bottom of these questions"?

20

A

My recollection is that we kept

21

reminding Jim Freeman and Fontainebleau that they

22

had to supply IVI with all the information that IVI

23

needed to be able to issue IVl's certificate. And

24

that IVI certificate is one of the conditions for

25

funding.

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1

Q

You knew that IVI had and continued to

2

have concerns about the -- about the information

3

that it wasn't being shown through April of 2009,

4

right?

5
6

MR. CANTOR: Objection.
A

I believe the picture changed

7

considerably in April, so I think you may need to

8

describe the phase between, let's say February and

9

March differently from what happened in April.

10

Q

You knew that IVI certainly up through

11

t.he end of March, maybe April is a different set of

12

factors, but up through the end of March IVI

13

continued to have concerns that the entire picture

14

regarding additional pending costs were not being

15

fully shown?

16

A

Throughout March IVI was concerned and

17

Bank of America was concerned and we kept asking

18

Fontainebleau to make sure that they supply IVI with

19

all the information they needed to do their job.

20

Q

Okay. Well, the borrower was the one

21

that was not showing stuff to IVI, that's the

22

concern that Mr. -- that Mr. Barone had was that the

23

borrower was not coming clean, right?

24
25

A

IVI is expressing a concern that they

may not be getting all the information they needed.

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1

Q

Okay. So simply asking the borrower,

2

"please give them all the inforr:nation," when Barone

3

has been saying for some time "they're not giving it

4

to me," cause you some level of distrust--

5

A

Yes.

6

Q

-- and concern about the integrity of

7

the borrower?

8

A

What do you mean by integrity?

9

Q

Some distrust of the borrower, let's

1O
11
12
13

put it that way.
A

We were concerned that the borrower is

not giving IVI all the information IVI needed.
Q

Right. And so simply saying to

14

somebody who you don't trust, do the right thing,

15

might not necessarily-result in the right thing

16

being done, right?

17
18

MR. CANTOR: Objection.
Argumentative.

19

You can answer, if you can find a

20

question in there.

21

A

22
23

Are you suggesting -- I don't know

what you're suggesting or asking.
Q

Okay. Was there anything preventing

24

BofA as far as you understood it from saying we're

25

not going to disburse funds, and unless and until we

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1

get to the bottom of these concerns that IVI has

2

expressed and the way that's going to be done is

3

with an audit of the change orders as Mr. Barone has

4

suggested?

5
6

MR. CANTOR: Objection. Calls for a
legal conclusion.

7

You can answer, to the best of your

8

understanding.

9

A

The documents describe what is

10

supposed to happen. We did our best to follow what

11

the documents say.

12

Q

Did you understand that you were

13

required, obligated under the documents to disburse

14

funds even if you had a level of concern and

15

distrust over whether or not the borrower was being

16

forthright in the amount of change orders that it

17

was presenting to your construction consultant?

18
19

MR. CANTOR: Objection. Calls for a
legal conclusion.

20

You can answer to the extent you had

21

an understanding.

22

A

The documents say what they say. The

23

way you phrased it was, do you have an obligation to

24

do certain things when you have a certain level of

25

distrust, I think you have to read the documents if

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1

that's the way the documents state it. I don't

2

believe that's the way the documents are stated.

3

Q

How do you believe -- what did you

4

understand at the time that you were the Special

5

Asset Group Senior Vice President on this credit,

6

did you understand that BofA had an obligation to

7

disburse funds in March of 2009, even if it had

8

concerns regarding the honesty of the borrower and

9

whether or not it had disclosed all of the

10

information that it had to your construction

11

consultant?

12

A

My understanding was that there were a

13

number o.f conditions that have to be met, including

14

the consultant issuing a certificate, and if all

15

those conditions are met, including the construction

16

consultant certificate, then the documents say we're

17

supposed to do what we're supposed to do.

18

Q

And if BofA had concerns that the

19

borrower was not being honest, was not being

20

forthright in the information that was provided and

21

yet there was a construction consultant certificate

22

that was signed off on, is it your testimony that

23

BofA was nonetheless obligated to disburse?

24
25

MR. CANTOR: Objection. Calls for a
legal conclusion. It's an incomplete

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1

hypothetical.

2
3
4
5

Go ahead, give it a shot.
A

The documents laid out our legal

duties and I'd just refer you back to the documents.
Q

I'm talking about Mr. Henry Yu who was

6

the BofA man on the scene, so to speak, for Special

7

Asset Groups at the time. The man who made the

8

decision to disburse. Right? Isn't that right?

9

A

That's correct.

10

Q

Okay. When you made the decision to

11

disburse, was it your understanding that despite any

12

concerns regarding -- relating to the honesty of the

13

borrower and whether or not they were being

14

forthright in the production of information, that

15

you nonetheless were obligated to fund to

16

disburse -- excuse me -- so long as you had, among

17

other things, a construction certificate signed off

18

by the construction consultant?

19
20

MR. CANTOR: Objection. Go ahead.
A

Our legal obligations are laid out in

21

the documents. We acted in accordance to what

22

documents say were our responsibilities.

23

Q

Right, and that's not my question. My

24

question was: Was it your understanding, Mr. Henry

25

Yu, wherever that understanding came from, the

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1

documents or otherwise, that you, that BofA was

2

obligated to disburse funds, despite any concerns it

3

might have had about the honesty of the borrower and

4

whether or not full information was being provided,

5

so long as the various documents, including a

6

construction consultant certificate, were received?

7

A

8

We're-MR. CANTOR: Objection. Same

9

objections. Go ahead.

10

A

We're going around in circles. You

11

have asked your question many times. I have given

12

you my answer many times. We can keep doing this or

13

we can move on.

14

Q

15

told me --

16
17

You haven't given me an answer. You

MR. CANTOR: Objection.
Q

-- to look to the documents. Okay?

18

I'm asking you, Mr. Henry Yu, without recourse of

19

the documents or anything else, whatever your

20

understanding was, you can tell me you didn't have

21

an understanding, I don't know what it was.

22

Was it your understanding in late

23

March of 2009 that when you made the decision to

24

disburse, that you were obligated to disburse given

25

what you had received from the construction

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1

consultants and otherwise, even if you had a concern

2

about the honesty of the borrower and about the

3

completeness of the information the borrower had

4

provided?

5
6

MR. CANTOR: Objection.
A

Again, I think we've covered this

7

question many times. I'm not changing my answer.

8

You can keep asking the same question and I'm going

9

to keep giving you the same answer.

10
11

Q

Except you keep pointing to the

documents.

12

A

Right.

13

Q

Is that--

14

MR. CANTOR: He believes he's given

15

you an answer. If you disagree, you can go

16

to the court.

17
18

BY MR. DILLMAN:
Q

I'm asking your understanding, I'm not

19

asking what the document say. Your understanding,

20

Henry Yu's understanding.

21

A

My understanding is that the documents

22

say, laid out a set of conditions of, if all those

23

conditions are met, our obligation is to fund

24

according to the documents. The document doesn't

25

say, if there's an earthquake in Japan, you don't

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1

have to do it, or if there's a tsunami, you don't

2

have to do it. The documents say what it says.

3
4

Q

All right. And, to the extent that

the documents don't say and -- strike that.

5

And unless the documents said

6

something about BofA's conclusion as to the

7

integrity and honesty and forthrightness of the

8

borrower, that was not a consideration that you

9

would take into account; fair statement?

10
11

MR. CANTOR: Objection.
A

If you are positing a hypothetical

12

that says: One of the conditions is that you have

13

to totally trust the borrower and there's no trace

14

of doubt about any information that the borrower

15

gave us, that's a totally hypothetical that you have

16

just inserted into the process.

17

Q

That's not my question, sir.

18

A

Again, I'm going back to, we followed

19
20

what was in the documents.
Q

Okay. And was it your understanding

21

that the borrower's integrity entered into that at

22

all unless, except as otherwise expressly stated in

23

the documents?

24
25

MR. CANTOR: Objection.
A

The documents say what it says, and we

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1

read our obligations as what the documents say.

2
3

MR. DILLMAN: All right. Let's take a
break.

4

MR. CANTOR: Okay.

5

MR. DILLMAN: We have to change the

6

tape.

7

THE VIDEOGRAPHER: This marks the end

8

of Media No. 3 of the deposition of Mr. Henry

9

Yu. We are off the record at approximately

10

2:52 p.m.

11

(Whereupon, offthe record.)

12

(Whereupon, resumed.)

13

THE VIDEOGRAPHER: We are back on the

14

record at approximately 3:01 p.m., and this

15

marks the beginning of Media No. 4 of the

16

deposition of Mr. Henry Yu.

17
18

(Letter dated March 6, 2009 marked as
Exhibit 815, as of this date.)

19
20
21
22

(Letter dated March 9, 2009 marked as
Exhibit 816, as of this date.)
BY MR. DILLMAN:
Q

Mr. Yu, I've placed in front of you

23

Exhibit 815. It's a letter from Mr. Freeman to

24

yourself dated March 6, 2009. This followed upon a

25

request by you to meet with Fontainebleau, correct?

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1

A

Yes.

2

Q

And in this letter Mr. Freeman says

3

he's not going to meet with you until basically you

4

agree to fund his -- the revolver commitment that

5

they set on March 3rd, something like that, right?

6

A

Something like that, right.

7

Q

He says: Once funding has occurred,

8

we will welcome the opportunity to meet with the

9

representatives of all constituents of lenders to

10

discuss the project and to resume the working

11

relationship we've always enjoyed with the lenders.

12

What was your reaction to his refusal to meet?

13

A

I don't recall.

14

Q

It wasn't exactly what you thought on

15

an appropriate borrower response was to a request by

16

a lender to meet, was it?

17

A

No.

18

Q

Shortly after that, Mr. Freeman

19

submitted a revised notice of borrowing requesting

20

$350 million from the delay draw term lenders but no

21

component from the revolvers, right?

22

A

Right.

24

Q

And Exhibit 815 is that request?

25

A

Sixteen.

23

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. Yu, Henry 4/7/2011 12:00:00 PM

1
2

MR. CANTOR: 16.

Q . ·816. Oh, thank you.
Correct, 816 is that request?

3 ·
4

A

Yes.

5

Q

Bank of America concluded that this

6

was an appropriate request?
MR. CANTOR: Object to

·7

8

A

1O

·Q

form. Go

ahead, you can answer.

9

th~

The lenders did.
Bank of America processed the request,

11

right?

12

A

Yes.

13

Q

Bank of America refused to process the

14

request on March 3rd for the reasons set forth in

15

the letter from Mr. Washington, correct?

16

A

Correct.

17

Q

All right. This request Bank of

18

America did process and at least in part was paid by

19

some of the delay draw term lenders, correct?

20

A

Yes.

21

Q

A subset of delay draw term lenders .

22

did not pay· in March, right?

23

A

Yes.

24

Q

That included Z Capital and a series

25

of funds that were managed by Guggenheim? .

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1

A

Yes.

2

Q

The total amount of those unpaid

·3

amounts in March was approximately $21,666,000?

4

A

That sounds about right.

5

Q

Indeed z Capital for 11,666,000 never

6

paid; is that right?

7

A·

That's right.

8

Q

And the Guggenheim funds aggregating

9

$10 million paid.at some point in early to mid

10

April?

11

A

12

My recollection would be early April

or late March.

13

Q

After March 25th one way or the other?

14

A

Right.

t5

Q

Mr. Freemijn's refusal to meet with ·

16
17
18 .

your letter to him dated March 1 of 2009? · ·2009.
O
· MR. CANTOR: You can give us that
version.

19

MR. DILLMAN: Huh?

20·

MR. CANTOR: You can give us that

21
22 .
23
24

version.
MR. DILLMAN: It wouldn't of

much~

help, believe me. Just to show you.
MR. CANTOR: Been there, done that.

25

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1

BY MR. DILLMAN:

2

Q

3

Exhibit 819.

4

A

And that letter is -- we've marked as

(Reviews.)

5

That's right.

6

(Letter dated March 10, 2009 marked as

7

Exhibit 819, as of this date.)

8
9

MR. DILLMAN: Now, I will note for the
record --

10

MR. CANTOR: 817.

11

MR. DILLMAN: No, I marked it 819

12

because --

13

MR. CANTOR: On purpose, okay.

14

MR. DILLMAN: -- because the reporter

15

goes down with the numbers -- excuse me --

16

across with the numbers, I typically go down.

17

MR. CANTOR: Okay.

18

MR. DILLMAN: We'll catch up to it

19

sooner or later.

20
21

22
23

MR. CANTOR: Got it.
BY MR. DILLMAN:
Q

And that was your letter to

Mr. Freeman?

24

A

Yes.

25

Q

Is that right?

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1

Now, in this letter March 10th you

2

indicate that the determination that the Notices of

3

Borrowing did not comply with the terms of the

4

Credit Agreement was unanimously supported by the

5

members of the Steering Committee, and you list

6

those as including Highland Capital, right?

7

A

Yes.

8

Q

Now, as of March 10, you had received

9

Mr. York's -- Rourke's -- excuse me -- e-mail saying

1O

that Highland Capital had not agreed and, in fact,

11

taking no position on whether or not BofA was

12

correct in its assessment of the March 3rd funding?

13

A

The sentence says "was unanimously,"

14

and I believe I was referring to the March 4th

15

letter I sent to Mr. Freeman.

16

At this date you knew it was not

Q

17

Highland's position that they had supported that,

18

right?

19

A

20

I don't recall, but the sentence here

referred to March 4th.

21

Q

You don't recall what?

22

A

I don't recall if on March 10th --

23

Q . You don't recall what?

24

A

25

sentence.

I was -- I have not finished my

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1

Q

Yeah, I know.

2

A

I don't recall on March 10th where we

3

were with Highland.

4
5
6
7

(E-mail Exchange sent 3/14/2009 marked
as Exhibit 817, as of this date.)
BY MR. DILLMAN:
Q

Well, let's look at 817, which was a

8

March 4 e-mail from Mr. Rourke to yourself, in which

9

Mr. Rourke states at the bottom: Finally, Highland

1O

does not express any opinion on the legal

11

interpretation of the Credit Agreement that was

12

attributed to the ad hoc Steering Committee in your

13

letter to the company. Do you see that?

14

A

Yes.

15

Q

And you understood that he was

16

referring here to your letter to the company

17

indicating that BofA would not process the March 3rd

18

request?

19

A

Right. And as you just read, he

20

referred to a letter that I sent, so again that's

21

why I think my memory was correct that I got this

22

after I sent the letter.

23

Q

24

A

25

Q

Sure, you got it on March 4th?
Yes.
Now on March 1Oth you said, you told

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1

Mr. Freeman that there was unanimous consent

2

unanimously supported by the members of the Steering

3

Committee the decision to not process the March

4

3rd --

5

A

Yes.

6

Q

-- request, right?

7

A

On March 4th.

8

Q

On the March 4th what?

9

A

I was just adding to your sentence.

10

You said on March 10th you told Mr. Freeman that

11

there was unanimous support of that determination

12

and I said I was referring to March 4th, not March

13

10th. You kept going to March 10th and I kept

14

pointing you to March 4th.

15
16

Q

consent, was there?

17

A

18

Q

19
20

The fact was there wasn't unanimous

The fact was on March 4th it was.
Because Highland said yes and then

changed its mind?
A

When I sent the letter, I have not

21

gotten this communication from Mr. Rourke. So when

22

I sent my letter, it was unanimous, past tense.

23

Q

Because Mr. Rourke --

24

A

I can't go back and correct something

25

that was sent, no, that was not re-sent.

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1
2
3
4

Q

On March 4th that very same day

Mr. Rourke said "by the way, I don't unanimously
. consent," right?
A

Whatever time this was, yes, that was

5

his statement. And, as I pointed out to you, I was

6

referring to the letter that I sent him on March

7

4th, which was before I got this one.

8
9

Q

You were referring to that in the

March 10 letter?

10

A

Yes.

11

Q

Don't you think it's a little

12

misleading to tell Mr. Freeman on March 10th six

13

days after Mr. Rourke had said "I don't consent,"

14

that the determination that these notices of

15

borrowing did not comply with the terms of the

16

credit agreement was unanimously supported by the

17

members of th.e Steering Committee?

18
19
20

MR. CANTOR: Objection.
Q

Don't you think that's a little

misleading?

21

MR. CANTOR: Objection.

22

Argumentative.

23

Q

24
25

Just a little?
MR. CANTOR: Objection.

A

I believe I was stating what was the

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1

state of affairs at the time I sent the March 4th

2

letter.

3

Q

And you don't find anything misleading

4

then in your letter to Mr. Freeman; is that right?

5

MR. CANTOR: Objection. Asked and

6

answered.

7

A

8
9
10

You have to ask Mr. Freeman whether it

was misleading.
Q

You don't find anything about it

misleading; is that right?

11

A

I don't.

12

Q

Now, Mr. -- your letter to Mr. Freeman

13

demanding a meeting in Las Vegas on March 17th,

14

that's the Exhibit 819, attaches the identical or at

15

least very similar set of issues that had been now

16

attached to at least one, or perhaps two other

17

letters, right?

18

A

Right.

19

Q

Is it safe to say then that as of

20

March 10, 2009 you in your mind didn't have

21

sufficient answers to these questions?

22

A

That's right.

23

Q

And shortly thereafter on March 11

24

Fontainebleau submits an Advance Request that's been

25

marked as 264 and placed in front of you, right?

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1

A

Right.

2

Q

And that request sought an amount of

3

137,925,000 and change. It says, "retail amount

4

requested zero," do you know why that was?

5

A

I don't recall.

6

Q

Did you have an understanding as to

7

whether or not retail facility was required to pay

8

shared costs in some amount in connection with this

9

Advance Request?

10
11
12

A

I don't recall what the retail share

cost was in March.
Q

And what role did you have, if any, in

13

determining whether or not this Advance Request --

14

strike that -- whether or not funds should be

15

disbursed as requested by this Advance Request?

16

A

What my role was was to make sure that

17

Brandon Bolio and Jeanne Brown have all the

18

information that they normally would require

19

including, for example, the certificate from IVI and

20

other reports that are required out of the project

21

before said requests can be approved. But I did not

22

personally look at all the reports.

23

Q

What team at Bank of America -- I

24

don't mean a formal team -- but what group of

25

people, other than yourself, Mr. Bolio and

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1

Ms. Brown, were responsible for determining any

2

aspect of whether or not the Advance Request should

3

be funded?

4

A

Other thari the teams at Jeanne Brown's

5

unit and at Brandon's unit, because I don't know if

6

Brandon has any administrative help at his unit. At

7

Bank of America would be myself and at times we

8

would consult with in-house counsel.

9

Q

Okay, is that it?

10

A

11

Q

12

A

That's it.

.13

Q

You recall that there was, as with all

Yes.
In terms of the team?

14

advance requests and In Balance Report that was

15

provided by the borrower?

16

A

Yes.

17

Q

That In Balance Report showed a

18
19

positive in balance of $42 million approximately?
A

20
21
22
23
24
25

Yes.
(In Balance Report dated February 28,

2009 marked as Exhibit 818, as of this date.)
BY MR. DILLMAN:
Q

Exhibit 818 is that In Balance Report

submitted with the March 11 Advance Request, right?
A

Yes.

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1

Now after or around the time that this

Q

2

Advance Request was submitted, the borrower

3

conditionally agreed to meet; do you recall that?

4

A

Yes.

5

Q

Conditioned upon the execution of a

6
7

prenegotiation agreement?
A

8
9
10
11

Correct.
(E-mail Exchange sent 3/11/2009 marked

as Exhibit 820, as of this date.)
BY MR. DILLMAN:
Q

And Exhibit 820 is a copy of the draft

12

prenegotiation agreement that the borrower required

13

as a condition of meeting, yes?

14

A

Yes.

15

Q

What was your reaction to Exhibit 820?

16

A

I did not think it was appropriate.

17

Q

Why not?

18

A

Because it included the concept of a

19

standstill.

20

Q

21

standstill"?

22

A

What do you mean "the concept of a

Well, Section 1 entitled Standstill, I

23

believe, if we signed this document, would limit our

24

actions if we find something out during the meeting

25

that are actionable.

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Yu, Henry 4/7/2011 12:00:00 PM

Q

At any point prior to receiving

2

Exhibit 820, had you or to the best of your

3

knowledge anyone at the Bank of America spoken to

4

Fontainebleau Resorts about defaults or potential

5

defaults under the credit facility?

6

A

I don't recall.

7

Q

Do you have any idea why Fontainebleau

8

Resorts would send you a prenegotiation agreement

9

of -- with a Standstill provision in it, as of this

10

date, March 11, 2009?

11

A

No.

12

Q

Did it strike you as a little strange

13

that here you are asking for a meeting to discuss ·

14

the project and they were saying "you can't use

15

anything we say to -- to bring an action for default

16

against us"?

17

A

I find it objectionable, yes.

18

Q

Did it provide some additional concern

19

that they were -- perhaps there was information that

20

they had that they hadn't fully shared with you?

21
22
23

A

It is a continuation of the behavior

of not providing information, that's correct.
Q

And you refused - "you" being Bank of

24

America and others -- refused to go forward with the

25

meeting conditioned upon execution of this document?

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1

A

Correct.

2

Q

There were no further negotiations by

3

you with respect to the terms of this agreement, you

4

just rejected it out of hand; is that right?

5

A

We rejected it out of hand, correct.

6

Q

Ultimately you did meet with the

7
8
9

borrower on March 17?
A

believe it was March 20.
(Letter dated March 16, 2009 marked as

10
11
12
13

On or about March 17, yes. In fact, I

Exhibit 821, as of this date.)
BY MR. DILLMAN:
Q

And Exhibit 821 is a letter from you

14

to Mr. Freeman confirming that meeting on -- on --

15

excuse me -- March 20th, right?

16

A

17
18

(Reviews.)
Yes.

Q

On the second page of Exhibit 821 you

19

say: Finally, we acknowledge receipt of the Advance

20

Request and supporting information last week. That

21

would be the March 11 Advance Request, yes?

22

A

Yes.

23

Q

You go on: We have conducted the

24

general review of the documentation required by

25

Section 2.4.4 of the Master Disbursement Agreement

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1

to in Paragraph 2 of this Construction Consultant

2

Advance Certificate except as noted in 3.C, D and E

3

above. Right?

4

A

That's right.

5

Q

You understood that according to IVI

6

the errors contained in the March 11 Advance Request

7

called out by them in Paragraphs 3.D, C and E were

8

material?

9

A

Yes.

10

Q

And the same statement is made in I

11

that the undersigned has not discovered any material

12

error in the matter set forth in the current Advance

13

Request or current supporting certificates except as

14

noted in 3.C, D and E?

15

A

16

Q

17

You mean L.
Is that an L? You're right, it is an

L. I need to borrow your glasses for that I think.

18

A

No, I just read K was above, so.

19

Q

The Braille method of reading?

20
21
22
23

MR. CANTOR: Please don't make any
assumptions like that in the future.
BY MR. DILLMAN:
Q

Now, to your -- well, are you aware of

24

any certificate by IVI over the course of this

25

entire project prior to March 2009 having contained

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1

statements that in effect IVI believes that there

2

were material errors contained in the Advance

3

Requests submitted by the borrowers?

4
5

A

My recollection is this was the first

time IVI has pointed out this kind of thing.

6

Q

And that was a serious matter?

7

A

Yes.

8

Q

When your construction consultant

9

tells you that the borrower has made material

10

misstatements in its Advance Certificate, you take

11

that seriously?

12

A

13

Yes.

Q

Did you demand an explanation from

14

Fontainebleau as to how and why it made material

15

misstatements to its lenders in the Advance Request?

16

A

Yes.

17

Q

What -- to whom did you direct that

18

question?

19

A

This was dated March 19. We met with

20

many individuals from Fontainebleau the day after,

21

March 20th, and we asked that question to everybody

22

present from Fontainebleau side.

23

Q

What did they say?

24

A

They would work with IVI and make sure

25

that whatever information IVI needed and whatever

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1
2

corrections need to be made will be made.
Q

Hadn't the borrower been saying that

3

for now three months that they work with IVI and

4

provide them the information that they needed?

5
6

A

Three months meaning January, February

and March?

7

Q

Yes.

8

A

If your statement was the borrower has

9

not been able to answer some of IVl's questions

10

since January, I believe that was correct.

11
12

MR. DILLMAN: Let's take a quick
break.

13

THE VIDEOGRAPHER: The time is

14

approximately 3:43 p.m., and we are going off

15

the record.

16

(Whereupon, off the record.)

17

(Whereupon, resumed.)

18

THE VIDEOGRAPHER: The time is

19

approximately 3:50 p.m. and we are back on

20

the record.

21

BY MR. DILLMAN:

22
23

Q

Mr. Yu, at some point in this March

period you went on vacation, right?

24

A

I think so.

25

Q

Okay. Let me mark as Exhibit 823,

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1

just so we can figure the dates out here.

2
3
4
5

(E-mail Exchange dated March 12, 2009
marked as Exhibit 823, as of this date.)
BY MR. DILLMAN:
Q

It's an e-mail from you dated March

6

12, most of it's redacted, but there is a little

7

sliver there that says "By the way, just to make

8

sure you guys know, I will be on vacation from March

9

24 through 27 and will be difficult to get ahold

1O

of." Do you see that?

11

A

Yes.

12

Q

Did you go on that vacation, or were

13

you gone for that period?

14

A

I believe I did.

15

Q

Where'd you go?

16

A

I was playing at the senior nationals.

17

Q

Badminton?

18

A

Badminton.

19

Q

How'd you do?

20

A

I was probably third. I don't

21

remember.

22

Q

23

sorry?

24

A

I was satisfied.

25

Q

I would be too. Of course I'd be

Should I say congratulations or I'm

Bank of America - Fontainebleau

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1

satisfied to survive at badminton.

2

After the meeting in Las Vegas,

3

Fontainebleau submitted a second Advance Request for

4

March, do you recall that?

5

A

Yes.

6

Q

And ask you to confirm that Exhibit

7

265 is that second request.

8

A

(Reviews.) Yes.

9

Q

This was submitted on March 24th?

10

A

The date stamp appears to be March

11

23rd.

12

Q

Okay. What are you looking at?

13

A

I'm looking at page 9, the top left

14

corner.

15

Q

The signature pages?

16

A

Yes.

17

Q

And that would -- appears to be a fax

18

dated March 23 of signature from Mr. Freeman, right?

19

A

Yes.

20

Q

Now you say in your Declaration that

21

on March 24 -- this is at Paragraph 33 -- on March

22

24 Fontainebleau revised its Advance Request and

23

supporting documentation. Did you determine at that

24

time that while the fax letter or fax cover here

25

says March 23 that in fact it was submitted on March

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1
2

24?
A

3
4
5

(Reviews.)
I cannot recall at this time why

there's a difference between the 23rd and the 24th.
Q

Do you believe that given the fact

6

that you were submitting your Declaration under

7

penalty of perjury to a court that you would have

8

made the necessary -- would have taken the necessary

9

steps to confirm that the date was in fact March

10

24th and therefore do you believe that the date was

11

March 24th?

12

A

Could you repeat your question?

13

Q

Sure. Let me shorten it, how's that?

14
15
16

Based on your declaration, do you
believe the date was March 24th?
A

At the time ofthe declaration, my

17

recollection was the 24th, but looking at it now,

18

according to this date stamp, it appears to be the

19

23rd. Again, I do not recall why I said the 24th.

20

It could be that I did not personally receive it on

21

the 23rd but I got it on the 24th. Again, I think

22

around that time I was either on vacation or about

23

to go on vacation, so I could well have not seen it

24

until the 24th.

25

Q

You were on vacation on the 24th,

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right?

2

A

That's what the previous e-mail said,

4

Q

Okay. And so --

5

A

So it could have gotten to me on the

3

6
7
8

yes.

24th when I was not at home.
Q

Well, your Declaration that you

provided to the court.

9

A

Right.

10

Q

Which was drafted in the first

11

instance by your counsel says: On March 24, 2009,

12

Fontainebleau revised its Advance Request and

13

supporting documentation.

14

A

Uh-hum.

15

Q

The -- on July 1, 2009, the date that

16

you signed this, the events in March were certainly

17

much fresher in your mind, correct?

18

A

Right.

19

Q

And at that point you had the

20

resources of the counsel that were assisting you in

21

drafting this declaration as well, correct?

22

A

Correct.

23

Q

And you knew that you were submitting

24
25

it under penalty of perjury to a court?
A

Correct.

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Based on all that, do you believe that

Q

2

the date set forth in your declaration of March 24,

3

2009 is correct?

4

A

Based on that I would believe the 24th

5

is correct.

6

Q

The Advance Request -- and let's, to

7

keep things demarcated, I'm going to refer to the

8

March 11 Advance Request and the March 24 Advance

9

Request. Okay?

10

A

Okay.

11

Q

All right. So, the March 24 Advance

12

Request, according to your declaration, projected

13

additional costs associated with Fontainebleau's

14

decision to delay the project scheduled opening date

15

from October 1, 2009 to November 1, 2009, including,

16

one, an $88,854,000 construction cost increase; two,

17

a 21,747,000 debt service increase; and three, a $5

18 ·

million condo selling cost decrease. Do you see

19

that?

20

A

21

Q

22
23

Yes.
Do you know what the decrease for

condo selling costs resulted from?
A

My recollection is that that was

24

because they have given up hope of selling the

25

condos, so any associated costs would be gone.

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1

Q

And the 88, almost $89 million

2

construction cost increase, do you know what the

3

major components of that were?

4

A

I do not recall.

5

Q

Did it concern you that as of this

6

date, March 24th, 2009, and some approximate two

7

weeks after the submission of the Advance Request,

8

the first Advance Request on March 11, that there

9

were projected to be an increase in construction

1O

costs of an additional 89 million that weren't

11

previously disclosed?

12

A

Yes.

13

Q

Did IVI approve this Advance Request?

14

A

I don't remember when they approved,

15

but at some point before the March funding they did

16

approve.

17

Q

And when you say "approved," did they

18

submit a Construction Consultant Certificate of the

19

sort that we previously looked at where they had

20

indicated material errors for the March 11 request?

21

A

At some point they sent in a

22

certificate that was in conformance of what was

23

required under the documents.

24
25

Q

Which would have been a Construction

Consultant Certificate?

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1

A

Yes.

2

Q

And they set that..:_ sent something,

3

they sent that certificate in for the March 24th

4

Advance Request?

5
6
7
8

MR. CANTOR: Objection. Go ahead.
A

At some point before funding we

received a compliant certificate from IVI.
Q

You refer in your Declaration to an In

9

Balance Report that was part of the March 24 Advance

10.

Request that showed an in balance of -- excuse me --

11

a positive in balance number of $13,785,000. Let me

12

just put in front of you Exhibit 824 and ask you if

13

this is a copy of that In Balance Report.

14
15

(In Balance Report dated February 28,
2009 marked as Exhibit 824, as of this date.)

16

(Appendix I to Budget/Schedule

17

Amendment marked as Exhibit 825, as of this

18

date.)

19

BY MR. DILLMAN:

20

Q

Is it?

21

A

What was the question?

22

Q

Yes, it was. I said, let me hand you

23
24
25

Exhibit 824 and ask you if that's a copy of that In
· Balance Report?
A

Yes.

Bank of America - Fontainebleau

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1

Q

Thanks.

2

A

Starting to fade here.

3

Q

If you need to take a break, let me

4

know. I mean, we can take more frequent breaks if

5

you'd like.

6

A

Keep going.

7

Q

In Paragraph 24 of your Declaration

8

you refer to a second revision to the supporting

9

documentation for its March 2009 Advance Request, do

10

you see that?

11

A

Yes.

12

Q

You indicate that this was submitted

13

on March 25th, 2009. Exhibit 825 is that Appendix 1

14

to Budget and Schedule Amendments set of revised

15

documents, correct?

16
17

A

Yes.
MR. CANTOR: Wait, I'm sorry. Unless

18

I missed something, you're referring to the

19

document that's referred to in Paragraph 34?

20

MR. DILLMAN: Correct.

21

MR. CANTOR: Which, according to the

22

declaration, was annexed as Exhibit 23, and I

23

would only note -- maybe, I could be wrong

24

about the number -- the document itself has a

25

court stamped document on the top of it that

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says Doc 103-24. I don't know -- I don't

2

know if that is a meaningful discrepancy or

3

not, but I just want to --

4
5

MR. DILLMAN: I believe it was loaded
into the system in pieces.

6

MR. CANTOR: Is that right? Okay.

7

MR. DILLMAN: So that was -- that's

8

why there's a page 2 of 18 whereas there was

9

also a page, you know, I think you'll find a

10

page 2 of 18 to his declaration as well.

11

MR. CANTOR: Okay.

12

MR. DILLMAN: One way or the other,

13

and so that we don't have to include the

14

entire forest.

15

MR. CANTOR: No, I didn't -- I just --

16

I don't want him -- I want him to give a more

17

thoughtful answer and not simply assume that,

18

you know, it's correct. I don't think you're

19

trying to mislead him, I'm just saying, you

20

know.

21

THE WITNESS: I think all Kirk said

22

was this was Appendix 1 to the Budget

23

Schedule Amendment, which was just reading

24

off the title, and I said yes.

25

MR. CANTOR: Okay.

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2

BY MR. DILLMAN:
Q

And this was the document that you

3

referred to when you said in your Declaration on

4

March 25th, 2009, Fontainebleau submitted a second

5

revision to the supporting documentation for its

6

March 2009 Advance Request, correct?

7

A

I don't recall.

8

Q

If you look at this document and you

9

go to the in-balance test on the -- one, two,

10

three -- fourth page, you'll see that the in balance

11

positive/negative is 14,084,701?

12

A

Yes.

13

Q

You recall that that was the final

14

in-balance test in March, the final results of the

15

in-balance test in March.

16
17
18
19

A

My recollection was the final number

was around 14 million, yes.
Q

Okay. And that was higher than the

March 24th Advance Request In Balance Report, right?

20

A

Slightly, yes.

21

Q

It went from 13,8 to 14 and change?

22

A

Yes.

23

Q

Do you know why it was higher?

24

A

I do not recall.

25

Q

And looking at that, that in balance

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1

number, does that cause you now to refresh your .

2

recollection that indeed Exhibit 825 was what you

3

were referring to in Paragraph 34 of your

4

Declaration?

5
6

A

It doesn't, but the easy way is to

look at what Exhibit 23 was and just match them up.

7

Q

8

A

Then it is.

9

Q

But -- okay. But without looking at

10

I think you're looking at it.

that exhibit you can't tell me?

11

A

I cannot recall.

12

Q

And in part -- well, do you recall

13

that there was a different submission after the

14

March 24 Advance Request by Fontainebleau Resorts?

15

In other words, that which is referred to in

16

Paragraph 34 of your Declaration, do you recall

17

that?

18

A

I recall that there were at least one,

19

maybe more, maybe at least two I should say,

20

revisions to the in-balance test during that period

21

of time when IVI was working very intensely with

22

Fontainebleau to make sure the number's correct.

23

Q

And do you recall that the final one

24

in the series didn't have the -- all of the

25

documentation and so on as we see in Exhibit 265

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1
2

labeled Advance Requests Certificate Date, you know,
· all the formalities of a typical Advance Request?

3

A

I'm sorry, what was the question?

4

Q

Did you recall that the final in the

5

series of submissions by Fontainebleau in March did

6

not have all of the formalities of the prior two,

7

did not have the sort of standard Advance Request

8

formalities that we've seen in the prior ones?

9

A

I thirik it was amending what I

10

previously submitted. So if they did not completely

11

replace all the pages, it was because those pages

12

didn't have changes in it.

13

Q

Did IVI approve the -- well, the

14

submission that you refer to in Paragraph 34 of your

15

Declaration?

16

A

At some point before funding IVI

17

issued a Construction Consultant Certificate that

18

was in compliance with the documents.

19

Q

With respect to -- I think you already

20

told me that IVI did so with respect to the

21

submission referred to in Paragraph 33 of your

22

complaint -- of your Declaration, which we've called

23

the March 24 Advance Request.

24
25

MR. CANTOR: I don't think he said
that.

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1

A

2

Q

3

Yeah, I don't think I said that.
No. Okay. I'm pretty sure you did

but --

4

MR. CANTOR: I think he actually gave

5

you the same answer he just gave you, you may

6

be assuming what that means.

7

MR. DILLMAN: May very well be.

8.

A

Yes.

9

Q

Okay.

1O

A

What I said was at some point before

11
12

funding IVI issued the certificate.
Q

All right. Whether it was -- whether

13

there was more than one, or not, you believed that

14

IVI provided a Construction Consultant Certificate

15

at some time prior to funding that covered the March

16

24 Advance Request as it might be changed by the

17

submission that you referred to in Paragraph 34 of

18

your Declaration?

19

A

At some point IVI issued a

20

Construction Consultant Certificate that covered the

21

Advance Request for the funding in March.

22

Q

Okay. And just to be clear. The

23

Advance Request for the funding in March was the

24

March 24 certificate as supplemented by the March

25

·25th submission that you refer to in Paragraph 34 of

Bank of America - Fontainebleau

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1

your Declaration; is that right?

2

A

I don't know if you are adding to what

3

my recollection is. My recollection is that at some

4

point in March all the conditions. for funding were

5

satisfied, including a Construction Consultant

6

Certificate from IVI.

7

Q

Okay. I got that. My question was a

8

little different, and let me see if I can hone in on

9

that.

10

When you -- when BofA disbursed, it

11

was disbursing pursuant to some request by the

12

borrower, right?

13

A

Right.

14

Q

Now, am I correct that BofA believed

15

that the request it was disbursing for was the March

16

24, 2009 request as it might be supplemented by the

17

March 25th submissions referred to in Paragraph 34

18

of your Declaration?

19

A

As I sit here today, I cannot recall

20

all the documents that was part of the package of

21

required documents and when exactly they came in.

22

So when you label something March 24th or March

23

25th, I cannot answer that because I cannot

24

remember.

25

Q

Okay. Well -,.

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1

A

And all I'm saying is, my recollection

2

was that at some point before funding I determined

3

that all the conditions required for funding,

4

including the Construction Consultant Certificate,

5

have been delivered.

6

Q

And the In Balance Report that was

7

part of the package that was delivered that you

8

understood to be operative for the disbursement that

9

you authorized was an In Balance Report that showed

10

a positive balance of $14,084,701?

11

A

That's my recollection, approximately

12

$14 million.

13

Q

14
15

It was not an in balance request that

showed a positive balance of 13 million and change?
A

13.8 million is actually fairly close

16

to 14 million, and I said my recollection is that

17

the final IVI number was around $14 million. The

18

final in balance number was around $14 million).

19

Q

20
21

Okay. Thank you.
Do you know when the disbursements

were made?

22

A

In March?

2·3

Q

Yes, sir.

24

A

Of 2009?

25

Q

Yep.

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1

A

It would be around March 25th, 26th.

2

Q

Do you know when it was?

3

A

Not exactly, I do not recall.

4

Q

The requested advance date was March

5

25th, you realize that, right? If we look at 264,

6

that's --

7

A

265 or 264?

8

Q

264. It's the March 24 Advance

9

Request.

10

THE WITNESS: That's 265.

11

MR. CANTOR: There you go. I don't

12

know where your copy is.

13
14

THE WITNESS: It got to be in here
somewhera.

15
16
17

MR. CANTOR: Don't worry, you can work
of this, that's fine.
BY MR. DILLMAN:

18

Q

So 264.

19

A

The requested advance date is March

20
21

25th.
Q

Do you have any reason to believe that

22

the disbursements were made on some date other than

23

the requested advance date?

24
25

A

On my declaration it said that, on

Paragraphs 34, that on March 25th Fontainebleau

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1
2
3
4

submitted a revised set of documents.
Q

Right. And we've looked at those, at

least -A

And so we would not have approved the

5

release of funds until we got the final documents.

6

So I don't know operationally, and again, I don't

7

have any specific recollection, so I'm just raising

8

a question. I don't know operationally if -- if we

9

were just getting documents on the 25th whether we

10

also advanced on the 25th. If operationally that

11

was feasible, then I don't have a reason to believe

12

why we would not advance on the 25th.

13

Q

Okay. But weren't at the bank --

14

A

I was --

15

Q

-- on either of those days, were you?

16

A

No.

17

Q

At the -- from where you were offsite,

18

were you involved in the back and forth about

19

disburse or not disburse over the 24th, 25th, 26th .

20

time period if it went that late?

21

A

No, because I would be playing my

22

matches and I would doubt that I would be involved

23

in those conversations.

24
25

Q

Before you left on vacation, you sent

a letter out to the -- to the lenders via

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1

lntralinks, do you recall that?

2

A

Yes.

3

Q

And that's Exhibit 212; is that right?

4

A

That's right.

5

Q

And on this date you hadn't received

6

yet the March 24 Advance Request and certainly not

7

the March 25th submission; fair statement?

8

A

Fair statement.

9

Q

Did you -- had you at this point

10

received the Construction Consultant Certificate,

11

couldn't have, right?

12
13

A

I have to check the date of that but

unlikely.

14

Q

I'm sorry, were you done?

15

A

I was done.

16

Q

Okay. This letter to the lenders is

17

dated March 23, 2009, like I said, I'd like you to

18

confirm, it did go to lntralinks, yes?

19

A

Yes.

20

Q

And you say in the first paragraph:

21

There are two issues which may impact this

22

calculation. The calculation being the in balance

23

calculation?

24

A

Uh-hum. Yes.

25

Q

You say: There is a divergence of

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opinions as to the reading of 2.1 (c)3 of the Credit

2

Agreement. Let me just ask you: Who was on -- who

3

was on the differing sides of this, of these, of

4

this opinion?

5

A

6

Now Bank of America obviously was on

one side.

7

Q

Yep. Who was on the other side?

8

A

And on -- I do not recall specifically

9

who was on the other side.

10

Q

Was it divergence of opinions within

11

BofA?

12

A

No.

13

Q

Well, you say that BofA's position is

14

that since the borrower has requested all the Delay

15

Draw Term Loans and almost all of the loans are

16

funded whether or not the outstanding 21,666,000 is

17

ultimately received, Section 2.1 (c)3 now permit.s the

18

borrower to request revolving loans which result in

19

the aggregate amount outstanding under the revolving

20

commitment being in excess of $150 million. You

21

say: As a result we would permit the relevant

22

portion of the revolving commitment to be reflected

23

in available funds.

24

A

Yes.

25

Q

So there's a couple of things that

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seem to be going on here.

2

One of which is, if the Delay Draw

3

Term Loans had fully funded then we would include

4

the remaining revolving commitments as part of

5

available funds?

6

A

7

Q

Yes.
If they didn't fund at all, we

8

wouldn't include the revolving commitment in the --

9

to be reflected in available funds?

10

A

If they were requested and not funded,

11

then I believe that would be the case. Because if

12

the borrower had requested the funds -- let me, let

13

me backtrack.

14

What happened was that there was a

15

request for initially the entire amount of the

16

delayed draw, and the available amount under the

17

revolver, we determined that that was not a valid

18

request. Because under the documents the amount of

19

the revolver that col.ild be drawn until the delay

20

draw loans have been fully funded was limited, so

21

they could not have requested the amount they did.

22

Subsequently Fontainebleau requested

23

the full availability under the delay draw of $350

24

million. And the Delay Draw Term Loan lenders

25

funded all of that except for about $20 million, as

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you said, $21 million.

2

At that point in time the question

3

that people had differing opinions on was whether

4

the 350 minus 21 was sufficient to satisfy 2.1 (c)3.

5

Bank of America's position was, yes,

6

that was sufficient to satisfy 2.1 (c)3, but there

7

were other lenders that were of the opinion that

8

because the $21.7 million had not come in, that

9

2.1 (c)3 had not been satisfied.

10

So, for example, if a request comes in

11

in April for a drawing on the revolver exceeding

12

$150 million, that would be an invalid notice of

13

borrowing. Bank of America's position on March 23rd

14

was that we were satisfied that although there was a

15

shortfall of 21. 7 million dollars, we would consider

16

Section 2.1 (c)3 to be satisfied. So that on April

17

1st, if there was a compliant notice of borrowing on

18

the revolver for the full amount of then available,

19

Bank of America would fully fund this portion.

20

That's what the first paragraph says.

21
22
23

Q

Okay. Let me ask you' to clarify a

couple things there.
Because I -- my -- my prior question

24

was: Was it Bank of America's position that -- and

25

I just want to break this into three different

Bank of America - Fontainebleau

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1
2

BY MR. DILLMAN:
Q

Did you have any opinion at the time

3

or understanding at the time in March of '09 as to

4

whether or not the failure by term lenders to fund

5

their obligations under the credit facility was a

6

breach of their obligations under the credit

7

facility?

8
9
1O
11
12

A

conclusion as your previous question.
Q

15

My question is your understanding.

You either had one or you didn't?
A

13
14

I think it asks for the same legal

I do not recall.
MR. CANTOR: He already answered that

actually.
BY MR. DILLMAN:

16

Q

You don't recall?

17

A

I do not recall.

18

Q

You say below that -- you say: We

19

request that any lender which does not support these

20

interpretations. Let me just -- when you say "these

21

interpretations," what part of point 2 is an

22

interpretation in your assessment, I mean what are

23

you interpreting there?

24

A

25

Q

As I said in Paragraph 1 -Paragraph 2. I'm sorry, Paragraph 2.

Bank of America - Fontainebleau

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Yu, Henry 4/7/2011 12:00:00 PM

1
2
3
4
5

I'm focusing on Paragraph 2.
A

Well, these interpretations refer to

everything above.
Q

Right. I'm not interested in

Paragraph 1, just Paragraph 2.

6

A

Okay.

7

Q

What interpretations are included in

8

Paragraph 2 that you were seeking when you were

9

requesting lenders who did not support them to

10

notify you?

11

A

12

There could be two ways to treat the

$21.?million.

13

Q

Okay.

14

A

One is to include them in available

15

funds, and the second one is to not include them in

16

available funds.

17

Q

And if you included them the -- there

18

would be a positive in balance according to the

19

schedules provided by the borrowers, and if you

20

didn't include them, there would be a negative

21

balance, correct?

22

A

Correct.

23

Q

Okay. And what portion of any

24

agreement were you interpreting in deciding that the

25

better interpretation was to allow these amounts to

Bank of America - Fontainebleau

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1

be included as opposed to excluding them?

2

MR. CANTOR: Objection. Foundation.

3

Go ahead.

4

A

The facts were that we fully

5

anticipated that Guggenheim would fund, it was just

6

a matter of mechanics of them getting the funds

7

wired to Bank of America. So if you consider the

8

fact that if Guggenheim funds were coming in, then

9

the in balance would be positive anyway.

10
11

Q

Okay. We'll get there in a minute,

but my question was different.

12

What interpretation are you making in

13

point two, are you -- let me ask you it this way:

14

Is there any interpretation going on? Are you

15

interpreting some provision of an agreement or was

16

this just sort of loose language when you said

17

"anybody who doesn't support these interpretations,

18

please let me know"?

19

A

I don't know what you mean by "loose

20

language."

21

Q

Okay. Interpretation means that

22

you're rendering a decision or an opinion on· a

23

particular text typically. I am interpreting

24

something. Okay? Was there any text that went into

25

your conclusion of how treatment of unfunded delay

Bank of America - Fontainebleau

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1

draw commitments should go forward or are you simply

2

saying under these circumstances we've elected to

3

treat them as remaining available funds?

4

A

From a non lawyer point of view, I

5

think your letter categorization would be reasonable

6

way of looking at it from my perspective.

7

Q

All right. I mean, if you -- if there

8

was some provision in the Credit Facility Agreement

9

or the Disbursement Agreement that you said, but I'm

1O

looking at this provision and I'm interpreting it in

11

a manner that said these should be treated as

12

available funds, I'd like to know.

13
14
15

A

I cannot point you to such a paragraph

in the documents.
Q

Okay. Now, you said Guggenheim, you

16

had information that Guggenheim said that it was

17

coming in and there was just some logistics that

18

they were not able to get it to BofA?

19

A

Right.

20

Q

Tell me about that.

21

A

I think at some point you will find in

22

the documents that I actually send Guggenheim an

23

e-mail that says 'Why did some of your funds not

24

wire?" And I believe I had a conversation with

25

Guggenheim, with Guggenheim saying ''Yes, we're

Bank of America - Fontainebleau

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1

rounding up all the parties, all our investors, and

2

we intend to send those funds, and as they come in,

3

we have been sending them, that's why you already

4

got some and the rest a.re coming."

5
6

Q

And that was in April that those

communications occurred?
MR. CANTOR: Objection.

7
8

A

No.

9

Q

Or some date after March 25th,

10
11

correct?
A

No, I believe some of that could have

12

been before March 25th, I don't recall specifically

13

when.

14

Q

15

As of March 25th, did you have any

communications with Guggenheim on this topic?
MR. CANTOR: Objection. Asked and

16
17

answered.

18

A

I do not recall the specific dates of

19

the communications. I believe there may be some

20

e-mail, and you can look at when that was dated.

21

But my recollection is that sometime in late March I

22

have - I had those communications with Guggenheim.

23

Q

And the communications related to they

24

were rounding up funds, they hadn't gotten them from

25

all their funds, right?

Bank of America - Fontainebleau

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1

A

Right.

2

Q

Right. And any other communications

3

with Guggenheim, other than those as set forth in

4

that e-mail or those series of e-mails, that would

5

lead you to believe on March 25th that the

6

Guggenheim fund -- Guggenheim was going to be paying

7

its commitment?

8

MR. CANTOR: Objection. He didn't

9

testify that his communications with

10

Guggenheim were limited to e-mails.

11

A

They had phone calls I believe.

12

Q

Any other communications other than

13

those surrounding the e-mails that you've testified

14

about?

15
16
17
18
19
20

A

Are you asking me if I ever talked to

Guggenheim about other issues?
Q

No. These issues about whether

they're going to pay.
MR. CANTOR: So he's testified that
there had been phone calls and --

21

MR. DILLMAN: Counsel, counsel.

22

MR. CANTOR: -- e-mails. I mean, do

23
24
25

you mean smoke signals?
MR. DILLMAN: I'd be happy to put you
in that chair if you want to testify.

Bank of America - Fontainebleau

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1
2

MR. CANTOR: Go for it.
A

It's the same answer. I had

3

communications with Guggenheim about the fundings,

4

and those were the communications.

5

Q

Okay. And I'm trying to get now to

6

make sure that we get these sort of cabined, because

7

the communications and e-mail -- the e-mails that

8

you're talking about was after March 25th, 2009.

9

MR. CANTOR: Objection. Misstates the

10

record. Lacks foundation.

11

Q

Correct?

12

A

I don't recall the specific dates.

13

recall having conversations with someone with

14

Guggenheim -- at Guggenheim about when the fund's

15

coming in.

16

Q

17

And this was before you wrote your

March 23, 2009 letter, or after?

18

A

I don't recall.

19

Q

Would it make -- would typically if

20

Guggenheim had said we're paying, wouldn'tthat have

21

been something that you would have wanted to inform

22

the other lenders about that in fact there's not a

23

21.666 million dollar shortfall but rather it's

24

smaller than that because Guggenheim's gonna pay?

25

MR. CANTOR: Objection.

Bank of America - Fontainebleau

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Yu, Henry 41712011 12:00:00 PM

1

2
3

A

Are you asking me to speculate whether

I would have done it that way?
Q

Isn't as a representative of BofA who

4

is representing it, who is signing things as

5

disbursement agent and as administrative agent in

6

that time period, placing a letter on lntralinks for

7

all the lenders to see, wouldn't you typically have

8

wanted them

9

apparently a $21 million shortfall, don't worry, the

10

Guggenheim money is coming in, so that's going to be

11

okay?

12

13
14

MR. CANTOR: Objection.
Q

Isn't that something you think they'd

want to know?

15
16

to know that while there's at least

MR. CANTOR: Objection.
A

I don't know whether they want to know

17

that, but I was not going to put something like that

18

in unless I was sure and I didn't want to speculate.

19

Q

Okay. So you weren't sure as of the

20

writing of this letter whether Guggenheim was paying

21

or not?

22
23

24
25

A

Until the money comes in, you're never

sure.
Q

All right. And it would have been

speculation for you to conclude otherwise, right?

3ank of.America - Fontainebleau

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1
2
3
4

MR. CANTOR: Objection.
Q

I just used your words, but you didn't

want to speculate, right?
A

I would not want to add in the forum

5

of lntralinks call out any particular lender and

6

describe conversations that I have had with that

7

lender, I do not think that would be ·appropriate.

8

Q

How about just saying, my information

9

is that the full 21 million is not going to be

10

outstanding, that in fact some portion of it is

11

going to be paid in this amount without naming

12

names?

13
14

MR. CANTOR: Objection.
A

Well, if I - if I - if I say the

15

amount, people could tell who that was, so I don't

16

think it was appropriate for me to do it that way.

17
18

Q

And, as you said, you weren't sure

what's coming in, right?

19

MR. CANTOR: Objection. Asked and

20

~mswered.

21

A

Well, again, as I said before, until

22

something happened, there's always a chance that

23

it's not going to happen.

24
25

Q

Did you talk to Guggenheim while you

were playing badminton between the 24th and the

3ank of America - Fontainebleau

~~one

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1

· Q

That's Exhibit 213. Thafwas an
.

·2

3

.

important letter in the history of the Fontainebleau
Las Vegas project?

4

A

Yes.

5

Q

It ~ertainly got the attention of · ·

6

BofA, didn't it?

7

A

Yes.

8

Q

And it specifically got your

9.

attention?

10

A

Yes.

11

Q

Mr. Freeman says that, on the second

12

page: Please be advised that one or more events,

13

occurrences or circumstances have occu'rred which

14 ·

reasonably could be expected to cause the in-balance

15

test to fail to be satisfied or render the project

· 16

entities incapable of, or prevent the project

17

entities from, A, achieving the opening date on or

18

before the scheduled opening dated; or B, meeting

19

one or more material obligations under the prime

20

construction agreement or the other material

21

contracts as and when required thereunder.

22

· You. had a meeting after this,

23

receiving this letter with the borrower, did you

24

not?

25

A

1. believe we had a meeting with the

Bank of America - Fontainebleau

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1
2

3
4

borrower several days after.
·Q

And when you say "we," who is part of

that meeting; do you know?
A

My recollection was that the members

5

ofthe steering committee was invited and the

6

steering committee was expanded for the purpose of

7

that meeting.

8

Q

When did that meeting occur?

9

A

I believe on April 17th.

1O

Q

Where was the meeting?

11

A

New York.

12

·Q

13
14

Okay. There was a presentation handed

out at the meeting, presentation materials?
A

It was a presentation that started out

1.fr

without handouts, and I requested handouts, and that

16

was complied with.

17
18
19 .

Q

Okay. Before that meeting, the·April

17th meeting arid -- excuse· me, let me start ov~r.
Between April 13 when you received

.20

·Mr. Freeman's letter and April 17 when you had the

21

meeting in New York, are there any other meetings or

22

telephone calls between BofA and Fontainebleau

23

Resorts that you're aware of?

24
25

A · I believe we called and tried to find
out more about this letter.

Bank of America - Fontainebleau

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. Yu, Henry 417/2011 i2:00:00 PM

1

.MR. DILLMAN: I don't~- I'll let you

2

reminisce over old times while they're doing.

3

that.

4
5

Thanks.
.BY MR. DILLMAN:

6

7
8
9
10

11
12
13

14
15

16
17
18

19
20
21

22
23
24

A

25

Q

Oo you recall coming away with an

Bank of America - Fontainebleau

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of 134
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1

what did the borrower say that led you

Q

2·

to the conclusion that there. was no way that they

3

could meet their obligations a,s they came due?
A

4

· They stated that they would not make

5.

any payments on the 675.million dollars of second

6

mortgage notes. Those would be totally wiped out.

7

And that they are asking the senior lenders to

8

convert, I believe, approximately 40 percent of the

·9

. senior debt to eqwity, So the fact that' they

1O

declared that they have no way and no intention of

11

ever paying the second mortgage notes by itself,

12

satisfy the condition that they would not be able to

13

meet the -- their debt obligations when they come

14

due.

t5

· Q.

When the -- when was the -- when were

16

the second mortgage notes due, as far as you

17

understood?

18

A

19

Q

20

·1 do not recall.

down?

Not around the corner, right, sometime

21

A

Not around the corner.

22

Q

Okay. Sometime after the opening?

· 23

A

It would be definitely after the

24
25

opening.
Q

Okay. And that was not until -- the

· Bank of America - Fontainebleau

None

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1

Did. !VI continue to work with the ..

2

borrower after April 20, 2009 to deterr:nine what the

3

. additional costs were to complete the project?
Yes.

4

A

5

Q

For how long did IVI contiriu~ that?

6.

A

For considerable amount of time.

7 .

Q

Exhibit 828 is

.

8

.

a Project Status Report

by IVI. It's Report No. 23 dated April 23, 2009.

9

Do you know why this report was issued

·1O

after the date that Bof A had terminated its --

11.

strike that -~ the revolving lenders had terminated

.. 12
13
14
15

the· revolving facility?
A . Because certain lenders, including
· Bank of America, continue to explore ways whereby
the projectcould be built and the debt repaid.

· 16

Q · .. You say in your -- in your" Declaration

17

of Paragraph 42 t_hat on April 23, 2009, based upon

18

the new information received from Fontainebleau, IVI

19

issued Project Status Report No. 23. Do you know

20

what new information they received _other tha~ the

21

dra.f~ anticipated cost report that you and I just

22

looked at a. moment ago?

23

A

I don't recall.

24

Q

Oid they receive change orders and so

25

on prior to April 23, 2009?

Bank of America - Fontainebleau

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1

2

I do not recall specifically what they

A

were getting.

3

·Q

Exhibit 298 is entitled Cost to

4

Complete Review by IV! dated May- 15, 2009. · Did Bank

5

_of America request IVI to do this report?

6

A ·Yes.

7

Q

.8

A

9

For what purpose?
As I said, certain lenders, including

Bank of America, continued to explore ways whereby

1O

th~

11

that were outstanding be repaid.

12 ·

project can be complet~d and the senior debt

Okay. Wh_at point in time did BofA

Q

13

conclude that that was not a path that it was

14

prepared to spend any more time going down?

15
16

MR. CANTOR: Objection.
A·

·

I'm sorry, could you repeat the

17

questi_on?

18

Q

19

At point -- is BofA still pursuing

possible efforts. in that regard with the borrower?

20

A

You mean as I sit here today?

· 21

Q

Yes.

22

A

Well, no, because the borrqwer is no

.23
24
25

longer in the picture.
Q

Right. At what point did BofA

determine that it was not going to continue those

Bank of America - Fontainebleau

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1

efforts any further?

2

MR. CANTOR: Objection. Go ahead.

3

MR. DILLMAN: Overruled.

4

MR. CANTOR: It wouldn't be the first

5

time you've acted like a judge today.

6

A

I believe Bank of America stopped

7

exploring ways to finish a project and get the

8

senior debt repaid at the mediation, which was some

9

time after the bankruptcy filing I believe.

10

Q

You recommended .in -- before you went

11

on vacation that the project, the Fontainebleau

12

project be downgraded to RR-9, Risk Rating 9, do you

13

recall that?

14

A

Yes.

15

Q

Why?

16

A

The main reason was Fontainebleau is

17

what is called a shared national credit, which means

18

that it is above a certain dollar amount threshold

19

and it involved a certain number or more of

20

regulated banks. So the examiners are coming in in

21

late March and April to look at, among other

22

situations, Fontainebleau, and that prompted us to

23

make sure that the risk rating was correct, and at

24

that time we decided to downgrade it to substandard.

25

Q

What events existed on February 21st,

Bank of America - Fontainebleau

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1

2009 that caused you to conclude that it should be

2

downgraded to a Risk Rating 9?

3

A

February 21st?

4

Q

May 21st.

5

A

Oh, May 21st. May 21st?

6

MR. CANTOR: That's not right either.

7

MR. DILLMAN: Did I get like two

8
9
10

months in a row wrong?
BY MR. DILLMAN:
Q

What caused you to conclude as of

11

March 21st, 2009 that Fontainebleau should be

12

downgraded to a Risk Rating 9?

13

A

By March 21st we have had the meeting

14

in Las Vegas on March 20th when the borrower

15

declined to answer a lot of questions and would not

16

talk about a whole number of things. So to be

17

prudent in this circumstance, and those

18

circumstances, we decided that substandard is more

19

appropriate than a special mention classification.

20
21
22
23

(E-mail Exchange sent 3/21/2009 marked
as Exhibit 829, as of this date.)
BY MR. DILLMAN:
Q

And just so that we -- the record's

24

clear. I'm going to put in front of you 829 which

25

is your e-mail to Mr. Corum and Mr. Brandon Bolio

Bank of America - Fontainebleau

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1

indicating that you're projecting a downgrade Risk

2

Rating 9 for the second quarter before you went on

3

vacation the next week, and that's dated March --

4

excuse me -- yeah, March 21st. Do you see that?

5

A

Yes.

6

Q

That is an e-mail that you sent?

7

A

Yes.

8
9
10
11

(E-mail Exchange sent 3/30/2009 marked
as Exhibit 830, as of this date.)
BY MR. DILLMAN:
Q

Exhibit 830 is an e-mail from

12

Mr. Corum. It says, in pertinent part, given

13

funding of DDTL earlier this month -- that's the

14

Delay Draw Term Loan, correct?

15

A

Yes.

16

Q

-- an expected request to draw the

17

full 800 million revolver in early April, which as

18

of this time you fully expected --

19

A

Yes.

20

Q

-- the debtor to do, right, the

21

borrower?

22

A

Yes.

23

Q

This could be a battle for the cash

24

collateral by the banks. And in parentheses, in the

25

event of a default, which is entirely possible, in

Bank of America - Fontainebleau

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1

the company. So a battle for the cash collateral by

2

the banks and the company in the event of a default

3

which is entirely possible is sort of a different

4

way of reading that sentence, correct?

5

MR. CANTOR: Objection, but go ahead.

6

A

I'm sorry, what's your question again?

7

Q

No, no, let me strike that.

8

What was the -- was it your assessment

9

at that time that it was entirely possible that

10

there would be an event of default in the near

11

future?

12

A

I think it was certainly possible.

13

Q

How about entirely possible?

14

A

Entirely possible is still possible.

15

Q

Was it your assessment that there was

16

a likelihood of a default with respect to the

17

Fontainebleau project as of this date March 30,

18

2009?

19

A

I do not recall if I made an

20

assessment that's likely, but we definitely thought

21

it was possible.

22

Q

And did you understand what Mr. Corum

23

meant by "a battle for the cash colla -- for the

24

cash collateral by the banks and the company"?

25

A

My understanding of that would mean

Bank of America - Fontainebleau

None

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Yu, Henry 4/7/2011. 12:00:00 PM

1·

in the in-balance test?
MR. CANTOR: Objection. G~ ahead.

2
3·

A

I think you.asked that question

4

before, and. ITlY judgment was, until a. lender has
.
.

5

officially repudiated his obligation to lend, and

6

has told us definitively that it would never honor

7

that obligation, they should be included:

8

Q

9

re~ponding

Down below in the e-mail that she's
to or that -- from you that follows below.

10

it, in p9int two it says, for Z Capital position,

11

there was. a question at the meeting whether Barclays

12

had stepped into Z Capital's shoes on the Delay Draw

13

Term Loan commitment. Barclays just confirmed to me

14

this morning that they have not. Do you see that?

1'5

A

Yes.

16

Q

At this

p~int

in time.when you said

17

"stepped into Z Capital's shoes," did you understand

18

that Z Capital no longer intended to pay on the

19

Delay Draw Term Loan?

20
\

.

A

No~

What I was referring to was that

21

apparently Barclays had bought into some of the

22

Z Capital positions.

23

Q

Yes.

24

A

And that all this says was Barclays,

25 .

it was not -- Fontainebleau was not one of the

Bank of America - Fontainebleau

No.ne

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1

A

2

I only heard about -MR. CANTOR: Well, respond -- respond

3

to his question, don't reveal any

4

conversations that you had with Bill or any

5

other lawyer.

6
7

THE WITNESS: Right.
A

I only heard from Highland and, as I

8

said, potentially another term lender. Now, there

9

was some questions as to how the April retail

1O

facility was funded and we continued to pursue the

11

company on those issues.

12
13
14

Q

what knowledge BofA had internally on those issues?
A

15
16

I don't recall.
MR. DILLMAN: I don't have any further

questions.

17
18

Did you make any efforts to determine

MR. CANTOR: I have a couple quick
ones. Sorry, Henry.

19

EXAMINATION BY

20

MR. CANTOR:

21

Q

Do you recall earlier today you were

22

talking with Mr. Dillman about Guggenheim funding

23

the March 25th Advance Request?

24

A

Yes.

25

Q

Okay. And you told Mr. Dillman that

Bank of America - Fontainebleau

None

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Yu, Henry 4/7/2011 12:00:00 PM

1

there were some e-mails and telephone calls, right?

2

I believe there was at least one

A

3

e-mail and I think there was at least one phone

4

call.

5

And the e-mail was -- well, withdrawn.

Q

6

What do you recall the e-mail to

7

consist of?

8

A

I think I was asking Guggenheim why we

9

have not gotten wires from some of their funds.

10

MR. CANTOR: Stickers, Kirk.

11

MR. DILLMAN: Yeah.

12

(E-mail sent 3/12/2009 marked as

13
14
15

Exhibit 835, as of this date.)
BY MR. CANTOR:
I'm going to show you a document

Q

16

that's been marked as Exhibit 835, and let me ask

17

you: Is that the e-mail to which you were

18

referring?

19

A

This was what I was referring to.

20

Q

And the date on this e-mail is what?

21

A

March 12th.

22

Q

March 12th, and does this refresh your

23

recollection as to when the phone calls between you

24

and representatives of Guggenheim occurred?

25

A

It would be around that time.

Bank of America - Fontainebleau

None

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Yu, Henry 4/7/2011 12:00:00 PM

1

Q

Okay.

2

MR. CANTOR: I have nothing further.

3

MR. DILLMAN: Well, let me hand you

4
5

Exhibit 491.
FURTHER EXAMINATION BY

6

MR. DILLMAN:

7

Q

Exhibit 491 is an e-mail from

8

Mr. Bolio that attaches a letter dated March 12th,

9

2009 to Miss Trinh, T-r-i-n-h, at Guggenheim. The

10

letter is from Mr. Naval and it itemizes, I'm

11

guessing, $10 million of commitments for the Delay

12

Draw Term Loan, and it says: Please confirm our

13

understanding that the foregoing lenders do not

14

intend to fund in response to the company's request.

15

Do you see that?

16

A

Yes.

17

Q

As of March 12th, 2009, did you

18

understand that Guggenheim had informed BofA that it

19

did not intend to fund on behalf of these particular

20

parties?

21

MR. CANTOR: Objection. Assumes facts

22

not in evidence. Go ahead, you can answer.

23

A

My recollection was that Guggenheim

24

was chasing after its investors to get the money in,

25

but that they were not funding on behalf of the

Bank of America - Fontainebleau

None

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Yu, Henry 4/7/2011 12:00:00 PM

1

investors.

2

Q

And that as of March 24 there had been

3

no commitment by Guggenheim or the investors to

4

fund; isn't that correct?

5

A

Could you repeat the question?

6

Q

As of March 24, 2009, there had been

7

no commitment by Guggenheim or the investors listed

8

on the letter from Mr. Naval to fund their Delay

9

Draw Term Loan commitment; isn't that correct?

10

A

My recollection is that around that

11

time Guggenheim was still chasing after its

12

investors.

13

Q

And, in fact, as reflected by

14

Mr. Bolio in his e-mail, BofA did not know what the

15

funding status and intention of the lenders

16

described in Mr. Naval's letter were; isn't that

17

right?

18

A

19
20
21

As I said, as of March 24th Guggenheim

was still requesting funds from their investors.
Q

And as of that date still had not

received them?

22

A

23

them.

24

Q

25

And as of that date have not received

And does this help you refresh your

recollection, Exhibit 491, that while you were at

Bank of America - Fontainebleau

None

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