Datatreasury Corporation v. Wells Fargo & Company et al

Filing 585

RESPONSE to Motion re #522 MOTION to Compel Certain Documents Relating to Defendant First Citizens Bancshares, Inc.'s Jurisdictional Challenge filed by First Citizens Bancshares, Inc., First Citizens Bank & Trust Company. (Attachments: #1 Exhibit Exhibit A BancShares' Objections and Responses to Requests for Admissions#2 Exhibit Exhibit B BancShares' Objections and Responses to Interrogatories#3 Exhibit Exhibit C Cover letters showing the bates ranges of the production#4 Exhibit Exhibit D Excerpts to John Gray's deposition#5 Text of Proposed Order Proposed Order)(Carlson, Larry)

Datatreasury Corporation v. Wells Fargo & Company et al

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Exhibit D

Dockets.Justia.com

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IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TEXAS DATATREASURY CORPORATION, ) ) Plaintiff, ) ) VS. ) NO. 2:06-CV-72(DF) ) WELLS FARGO & COMPANY, ET AL.) ) Defendants. )

************************************************ VIDEOTAPED ORAL DEPOSITION OF JOHN GRAY FEBRUARY 7, 2007 CONFIDENTIAL - FOR OUTSIDE COUNSEL ONLY ************************************************

On the 7th day of February, 2007, at 9:18 a.m., the videotaped oral deposition of the above-named witness was taken at the instance of the Plaintiff, DataTreasury Corporation, before Michelle L. Munroe, Certified Shorthand Reporter in and for the State of Texas, at the offices of Ward & Smith, P.A., Two Hannover Square, Fayetteville Street, Raleigh, North Carolina, pursuant to Notice.

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APPEARANCES FOR THE PLAINTIFF DATATREASURY CORPORATION: Mr. Anthony Bruster NIX PATTERSON & ROACH, LLP 2900 St. Michael Drive Suite 500 Texarkana, Texas 75503 903.223.3999 telephone [phone] fax [e-mail]

FOR THE DEFENDANTS FIRST CITIZENS BANCSHARES, INC. AND FIRST CITIZENS BANK & TRUST COMPANY: Mr. Fernando Rodriguez, Jr. BAKER BOTTS, LLP 2001 Ross Avenue Dallas, Texas 75201-2980 214.661.4445 fax [e-mail]

ALSO PRESENT: Ms. Lauren Ragin, Video Technician Ms. Brook Berry, Document Technician

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(continued)

APPEARANCES

LIVENOTE CONNECTIONS VIA THE INTERNET: David Tatem Nita Hanson Anthony Bruster Dalton Young Ben King Jacala Hoffman Ed Chin Don Mullineau Ed Hohn Nick Nicholas CiCi Williams Sunja Smith Kelli Hearne David Curcio George Shipley Alison Ross Karl Rupp John Hiles

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WITNESS JOHN GRAY

INDEX

PAGE

Examination by Mr. Bruster............

6, 208

Examination by Mr. Rodriguez.............. 206

DEPOSITION EXHIBITS 16

IDENTIFIED

Declaration of John Gray in support of Defendant First Citizens BancShares, Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction.........................

54

17

First Citizens BancShares, Inc. Notice of Annual Meeting of Shareholders (Bates FCBS00938 to FCBS 00958)...... 123 First Citizens BancShares, Inc. Notice of Annual Meeting of Shareholders (Bates FCBS00938 to FCBS 00958)...... 123 First Citizens BancShares, Inc.'s Objections and Responses to Plaintiff DataTreasury Corporation's First Set of Interrogatories Regarding Jurisdictional Discovery............. 145 Commercial customer profile.......... 155 (produced today with no Bates stamps) First Citizens BancShares, Inc. Objections and Responses to Plaintiff DataTreasury Corporation's First Set of Request for Production Regarding Jurisdictional Discovery............. 169 10-Q filed by First Citizens BancShares, Inc...................... 180 (Bates FCBS00335 to FCBS00551) (Not marked.)

18

19

20 21

22

23

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DEPOSITION EXHIBITS (continued) 24

IDENTIFIED

Hewlett Packard news release, First Citizens Bank Selects HP to Support Automation Upgrade dated June 19, 2003................................. 185 (Bates D900585) 2005 Fiscal Year 10-K filed by First Citizens BancShares, Inc....... 189 (Bates D900410 to D900549) Invoice from KPMG.................... 198 (Bates FCBS 01219) Amended Notice of Intention to Take Oral and Video Deposition of 30(b)(6) Representative of First Citizens BancShares, Inc...................... 204

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY MR. BRUSTER: Q. A. Q. A. Q.

PROCEEDINGS THE VIDEOGRAPHER: JOHN GRAY, having been first duly sworn, testified as follows: EXAMINATION We're on the record.

Good morning. Good morning. Tell us your name, please. My name is John Gray. Mr. Gray, tell us your address, both business

and personal. A. My personal address is 2105 Chrisdale, ZIP

C-h-r-i-s-d-a-l-e, Court, Raleigh, North Carolina. code is 27607.

And my professional address is 4300 Six

Forks Road, Raleigh, North Carolina 27608. Q. A. What do you for a living? I am an employee of First Citizens Bank &

Trust Company. Q. And what position do you hold with First

Citizens Bank & Trust? A. Q. A. Q. I'm a senior vice president. Have you ever given a deposition before? No, sir. Okay. You're doing an excellent job of

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waiting until I finish asking questions before you start answering. I'm going to try and show you the same

courtesy and wait until you're done answering before I start asking. All that's going to help her because Okay?

she's typing down everything we say. A. Q. Okay.

If you need a break for any reason, bathroom, We'll be happy to

cell phone, errand, let us know. accommodate you? A. Q. All right?

Thank you. If you don't understand any of my questions,

let me know and I'll try and rephrase into some form of English that we can both comprehend. A. Q. All right. Do you understand the testimony you're giving All right?

here today has the same force and effect as if you're testifying in the court room in Marshall, Texas? A. Q. Yes, sir. Do you understand you're sworn here to tell

the truth? A. Q. Yes, sir. Tell me what you do in your job as a vice

president of First Citizens Bank & Trust Company. A. Q. I'm senior vice president. Senior vice president. Excuse me.

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A.

I am -- my operational title is manager of And I have responsibilities in

financial reporting.

that position for overseeing all of our regulatory reporting to the various agencies to which First Citizens Bank & Trust Company and First Citizens Bancshares, Inc. and all of our other related companies are subject. That includes the Securities & Exchange Commission, the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision and also the State banking agencies under which we are subject. In addition to that, I'm also responsible for the bank's insurance program to include everything -essentially everything except for employee benefits-type insurance. I have been involved in mergers and

acquisitions, the up-front work related to those transactions in the past. Q. Those are the primaries.

When you say you also have responsibilities

for the bank's insurance program for everything except employee insurance, what does that entail? of the bank's insurance program do you have responsibility for? A. Responsible for research and purchases related What parts

to our financial institution bonds, which has our

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Trust Company. Q. Do you know who pays the salaries of each of

those chief level executives you just listed? A. All four of those gentlemen are employees of It

and paid by First Citizens Bank & Trust Company. might be helpful to note though that there is a

management fee arrangement whereby part of their salary is reimbursed to First Citizens Bank & Trust Company by First Citizens BancShares. Q. A. Tell me about that management fee agreement. Well, there's not a formal agreement in place,

but there is a process by which we estimate the amount of time that each person -- and it actually includes more than those individuals, but the amount of time that various people or departments dedicate to services for companies other than the company that pays them. And

based on that estimate and their salary range or their salary, there is a management fee that's paid by the receiving company to the giving company. And in that particular case, it's a payment by First Citizens BancShares Inc. to First Citizens Bank & Trust Company. Q. Who else is -- you mentioned that those aren't

the only folks that subject to that management fee arrangement.

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Who else -- what other executives or officers are subject to that arrangement? A. I and the department I manage are. There's an

allocation of our expenses incurred to the different companies that we provide the services for. Also, our

income tax department has a similar allocation. In other areas of the bank -- is the question particularly with respect to First Citizens BancShares and First Citizens Bank & Trust Company? Q. A. Yes, we can start there. There is an accounting function allocation

that BancShares -- that First Citizens Bank & Trust Company provides to Bancshares and BancShares reimburses it for. To the best of my recollection, those are the

primary areas. Q. And who is the executive of First Citizens

that's over the accounting function? A. That is also an area that's managed by Ken

Black, the CFO. Q. Is there a written agreement between First

Citizens BancShares, Inc. and First Citizens Bank & Trust or any other subsidiary that reflects this process by which First Citizens BancShares, Inc. reimburses the subsidiaries for their executives's time? A. No, sir.

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Q.

When did that process first get implemented at

First Citizens? A. I do not recall it having been initiated after So

I came to work in the corporate finance department. I believe it pre-existed my entry into the corporate finance department in 1988. Q.

And there's just no written policy whatsoever

about this process? A. Not between First Citizens BancShares and

First Citizens Bank & Trust Company, that's correct. Q. What about between First Citizens BancShares

and any other company? A. First Citizens BancShares does not have any

relationships such as this with any of the other companies. There are no other companies providing

services to First Citizens BancShares. Q. A. Q. Do you know when this policy got started? I don't. Who is the person that's in charge of this

reimbursement to the subsidiary? A. I am the one who actually makes the

calculations, who accumulates the information and makes those calculations. The information is then passed on

to someone in our accounting function, and they actually handle the process of the exchange of funds between the

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companies. Q. How did you know how to start doing this

reimbursement calculation? A. Based on earlier work papers that we had for

this function. Q. When you say "earlier work papers," what are

you referring to? A. Documents that had been prepared by someone

who had done this analysis prior to my involvement. Q. When was the last time that you generated

documents that reflect this process? A. We updated it in November or December of 2006

and initiated that update in 2007. Q. We're here in February of 2007. When you say you "initiated that update," what do you mean by that? A. We began applying the updated amounts that

were paid beginning either in January or February of 2007, depending on the company. Q. A. What do you mean "depending on the company?" Well, most of the payments were updated There's one company that we have

effective in January.

a delayed billing procedure with them, so actually the updated management fee will not begin until February. Q. What company is that?

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A. Q. A. Q. A. Q. schedule? A.

I don't recall the title of it. Do you create that schedule? Yes, sir. You don't recall the title? No, sir. When was the last time you created this

It was revised during the months of November

and December 2006. Q. A. Q. So within the last 90 days? Yes, sir. Do you know whether the management fee that

First Citizens BancShares, Inc. pays to First Citizens Bank & Trust exceeds $100,000 a month? A. Q. A. Q. A. Q. I believe it does. Does it exceed $500,000 a month? No, sir, it definitely does not. Does it exceed $250,000 a month? I do not believe so. Did you produce this schedule to your lawyers

as part of the document production in this case? A. Q. No, sir. Did you participate in any of the document

collection in this case? A. Yes, sir.

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place whereby First Citizens BancShares, Inc. has agreed to pay the tax liability that's incurred by its subsidiary without being reimbursed by its subsidiary for that payment? A. The payment is reimbursed by the subsidiary.

The subsidiary funds BancShares, and then BancShares makes the remittance to the Treasury. Q. Do First Citizens BancShares, Inc. and First

Citizens Bank & Trust share any other form of expenses in the way you just talked about, the tax liability, whereby the subsidiary is incurring an expense and channeling money to the parent company to pay for it? MR. RODRIGUEZ: Q. A. Q. You may answer. Could you repeat the question, please? Sure. Are there any other types of expense Objection; form.

where the subsidiary is incurring the expense and is providing money to the parent company where the parent company is paying for it? A. Q. No, sir. Let's go back to the insurance scenario you

talked about earlier. Insurance procurement is part of your job responsibility, as I understand it; is that right? A. Correct.

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Q.

And you mentioned like, for example, property

and liability coverage or workmen's comp coverage. Does your department go negotiate -- when policies are up for renewal, go negotiate with insurance carriers to provide coverage for, for example, in the property and liability context, for the branches that are operated by First Citizens subsidiaries? A. The negotiations for our insurance renewals

are actually either handled by the agent or the consultant that we retain to assist us with that. So

they're the ones that are actually dealing directly with the insurance carriers. Q. Who is the consultant you retain to get -- for

insurance coverage purposes? A. Q. We use the firm McNeary Insurance Consulting. When you say "the agent," are you talking

about the actual agent of the insurance company? A. Q. A. No, the agent of our agency. Of that agency, McNeary? No. McNeary is not an agency. They are a

consulting firm. Q. A. Okay. Who is your agent?

Our agent is First Citizens Insurance

Services, which is a division of First Citizens Bank & Trust Company.

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Q.

What role does First Citizens BancShares, Inc.

play in the insurance procurement process? A. Q. A. Q. None. None? None. Does First Citizens BancShares, Inc. sign any

policies of insurance, any contracts for insurance? A. The policies are actually issued in the name

of First Citizens BancShares, Inc. as an efficient way of covering -- allowing the coverage under those policies to extend to all of the subsidiaries. The named endorsement that we typically use on our insurance company is First Citizens BancShares, Inc. and its direct and indirect subsidiaries. And the

applications for those policies require signature of the insured. And we typically have someone sign those

applications as -- in their official capacity as an officer of First Citizens BancShares, Inc. Q. Now, about 30 seconds ago I asked you what

role First Citizens BancShares, Inc. plays in the insurance procurement process. Your answer was, None.

I asked you again, None, and you said, None. And now you have just told us that the policies are actually issued to First Citizens BancShares, Inc. as the named insured, and that a First

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A.

Not on a stand-alone basis.

It would be

reflected in consolidated financial statements of First Citizens BancShares, Inc. but not to BancShares on a stand-alone basis. It would be reflected in -- to the extent that fee enhanced the shareholders' equity of IronStone Bank, it would be reflected as an increase in the investment that First Citizens BancShares, Inc. has in IronStone Bank. Q. Does First Citizens BancShares, Inc. receive

dividends from IronStone Bank? A. Q. No, sir. Does it receive dividends from First Citizens

Bank & Trust? A. First Citizens Bank does receive dividends

from First Citizens Bank & Trust Company. Q. again. Does First Citizens BancShares, Inc. receive dividends from First Citizens Bank & Trust? A. Q. Yes, sir. Does First Citizens Bank & Trust receive Did I ask the right question? Let me ask that

dividends from IronStone Bank? A. Q. No, sir. Does IronStone Bank dividend to anyone?

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Q. A.

Anyone else? I feel the need to mention Gary Williams and

Tom Morrison -- Tom Morris as well. Q. A. And their positions? They are in our facilities management

department. Q. Any other folks that are overlapping officers

of both companies? A. Q. None that I can recall. And the board of directors of First Citizens

Bank & Trust Company is composed entirely of individuals who are also directors of First Citizens BancShares, Inc. correct? A. Q. That is correct. How many times a year does the board of

directors of First Citizens BancShares, Inc. meet? A. occur. The board has four regular meetings that And then in addition to that, the board -- and And then

those are live meetings, in-person meetings.

in addition to that, there is a meeting scheduled each quarter -- I beg your pardon. For BancShares, there is a meeting of the board that occurs prior to the filing of the 10-K where the board -- the board has received a draft copy of the 10-K and receives the report of the audit committee with

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respect to their review of the 10-K prior its filing. Q. A. For discussion of the 10-K? Right.

Q. Other than those five meetings, are there any other regular meetings that the board of directors of First Citizens BancShares, Inc. holds? A. Those are the only regular meetings of the

board of directors. Q. And how many times a year does the board of

directors of First Citizens Bank & Trust Company meet? A. That board would convene four times. They

meet quarterly as well.

And for the board of First

Citizens Bank & Trust Company, that would be it. Q. What about the board of directors of IronStone

Bank, how often does it meet? A. The -- they meet at least quarterly. Any of

these entities could have special meetings called as needed, but there are four schedule meetings that occur each quarter. Q. When was the last time that the board of

directors of First Citizens BancShares, Inc. met? A. It was the fourth Monday in June -- of

January 2007. Q. Was that a quarterly meeting or prior to

filing the 10-K meeting?

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A. Q. Q. A. Q.

That was a quarterly meeting. The first Monday in January? So that was like what, two weeks ago? Seems like for ever. Yeah.

Time flies when you're having fun. When was the last meeting of the board of

directors of First Citizens Bank & Trust? A. Q. A. Q. That board met the same day. The fourth Monday in January? That's correct. When was the last board of directors meeting

of IronStone Bank? A. Q. That board met the same day as well. Do you know where the most recent board of

directors meeting was for First Citizens BancShares, Inc.? A. Road. Q. And what about the most recent board of That board meeting was held at 4300 Six Forks

directors meeting of First Citizens Bank & Trust Company, where was it held? A. Q. At the same location. What about the most recent meeting of the

IronStone Bank board of directors, where was it held?

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A. Q.

It was also held at 4300 Six Forks Road. What time was the board of directors meeting

of First Citizens BancShares, Inc. that occurred two weeks ago at 4300 Six Forks Road? A. Q. 1:00 o'clock. What time was the board of directors meeting

for First Citizens Bank & Trust Company that met two weeks ago? A. Q. It was also at 1:00 o'clock. What time was the board of directors meeting

for the IronStone Bank board of directors that met two weeks ago at that same address? A. I do not know the exact time they convened It followed the adjournment of the prior

that meeting. meeting.

I'm sure there was a period of break allowed

in there as well. Q. Did you attend the board of directors meeting

that took place on that day? A. Q. A. Q. A. Q. A. No, sir. For any of those entities? No, sir. Were minutes taken at that meeting? Yes, sir. Have you seen the minutes of those meetings? No, sir.

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CRA committee, their board of directors? A. Q. I don't believe so. Is there any kind of, you know, name tag or

some sort of physical demarcation that these directors take into the board of directors meetings with them to show when they make a comment in the directors meeting, if they're making that comment on behalf of First Citizens BancShares, Inc. or on behalf of First Citizens Bank & Trust? A. Q. I don't know. How many committees does the board of

directors of First Citizens BancShares, Inc. have? A. Q. A. Allow me to list them. Sure. There's an audit committee. There's an

executive committee.

There is a nominations committee. There's also -I'm not at the moment

There's an investment committee. there's a compensation committee.

clear whether or not it is a committee of BancShares or the First Citizens Bank & Trust Company board. I believe it is a BancShares committee. And

even though BancShares does not have any employees that are employed in the name of First Citizens BancShares, Inc., it exists to ensure that the employment practices are consistent across all the companies that do have

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employees. Q. Any other committees of the First Citizens

BancShares, Inc. board of directors? A. Q. None I can recall. So that's executive, nominations, investment, And is there an audit committee? If I didn't mention that, I should

compensation. A. have. Q. A. Q.

Audit.

Those five committees? Yes, sir. Do you know what the committees are that are

comprised of the First Citizens Bank & Trust board of directors? A. There is also an executive committee. There's

an audit committee, compensation committee, CRA committee, investment committee. compensation committee? Q. A. Q. Did I mention

There's a trust committee.

What about an executive committee? Yes, there is. So the same five committees that -- by title.

I mean, there's the same five named committees for the First Citizens Bank & Trust board of directors as there is for BancShares, plus there's a trust and a CRA committee? A. That's correct.

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Q.

Do you know whether or not the same

individuals serve on the executive committee for First Citizens BancShares, Inc. that serve on the executive committee for First Citizens Bank & Trust? A. The same individuals serve on both of those

executive committees. Q. What about for the nominations committee for

First Citizens BancShares, Inc., do those same individuals serve on the nominations committee for First Citizens Bank & Trust? A. Q. Yes, sir. What about for the audit committee for First

Citizens BancShares, Inc., do those same individuals serve on the audit committee for First Citizens Bank & Trust? A. Q. Yes, sir. And the investment committee of First Citizens

BancShares, Inc., do those same individuals serve on the investment committee for the board of First Citizens Bank & Trust? A. Q. To the best of my knowledge, yes. And the compensation committee, are those the

same individuals that comprise the boards for both of those? A. If BancShares has a compensation committee,

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they are the same. MR. RODRIGUEZ: point, we can take a break. MR. BRUSTER: No problem. THE VIDEOGRAPHER: We're off the record. Yes, let's take a break. When you hit a convenient

(Recess taken 11:23 to 11:35 a.m.) THE VIDEOGRAPHER: record. Q. Mr. Gray, we're back on the record after a We were talking when we left off about the We're back on the

short break.

overlapping committee structure between the boards of directors of First Citizens BancShares, Inc. and First Citizens Bank & Trust Company. And you made a comment,

I believe, that at the most recent board meeting, there was an authorization to empower Jim Hyler to conduct the annual meetings of the wholly owned subsidiaries? A. Q. That's correct. And what is Mr. Hyler's position with First

Citizens BancShares, Inc.? A. He is the vice chairman of First Citizens

BancShares, Inc. Q. And why was he -- tell me the rationale behind

that authorization, if you know. A. He's chief operating officer, and I suspect it

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listed here to timely file their -- their required reporting requirements. Q. And he would have reviewed that as an officer

of First Citizens BancShares, Inc., correct? A. Correct. To the extent -- yes, because that

relates to our proxy filing. Q. Here is some discussion down here about the

board of directors and the committees we have been talking about for a while. And the first committee

discussed here is the audit and compliance committee. The first sentence notes, The audit and compliance committee is a joint committee of our -- which is First Citizens BancShares, Inc., correct? A. Q. Correct. -- "First Citizens Bank and IronStone Bank's

boards of directors;" is that correct? A. Q. Correct. Does that joint committee meet and discuss

business in the way that you described previously, a joint meeting amongst all those directors? A. Among the directors who comprise that board --

that committee. Q. A. Q. Correct. Yes, sir. And there's no distinction drawn between which

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entity they're acting on behalf of in the minutes of those meetings, is there? A. No, sir. There are some matters that they They

review that are specific to a given institution. do review regulatory examination reports that are

specific to whatever entity is being examined by that particular agency. Q. you? A. Q. No, sir. Here on page 11, there's discussion of the You don't serve on any of these committees, do

compensation committee, which we were wondering whether or not it existed for First Citizens BancShares, Inc. And this document says, "The compensation committee is a joint committee of First Citizens Banks and our" -meaning First Citizens BancShares, Inc.'s -- "board," correct? A. Q. Yes, sir. So there is, in fact, a joint compensation

committee between the parent company and the subsidiary, correct? A. Q. A. Q. Correct. That's an accurate statement? Yes, sir. Okay. Here on page 13, there's a discussion

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related to IronStone Bank. Q. Has there ever been any instance, to your

knowledge, where First Citizens BancShares, Inc. has paid money to Ward & Smith, P.A., for legal services rendered on behalf of one of the two subsidiaries? A. I believe that when we were in the early

stages of forming IronStone Bank back in 1997, matters related to its establishment were billed to First Citizens BancShares, Inc. Beyond that, I don't recall

any particular item that falls into those -- into that circumstance -- into the situation you described. Q. We may have already discussed this. But First

Citizens Bank & Trust Company makes dividend payments to First Citizens BancShares, Inc., correct? A. Q. Yes, sir. Which is, in fact, the majority of the way

that First Citizens BancShares, Inc. recognizes revenue, correct? A. Q. A. On a stand-alone basis, yes. What do you mean by that? Looking at its revenue just -- not as part of

the consolidated financial group, but on a stand-alone basis, the primary source of its income is -- in recent years has been the dividends it has received from First Citizens Bank & Trust Company.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 it.

Q.

For example, for the last complete fiscal year

that the bank operated, do you know what the total revenue that First Citizens BancShares, Inc. realized was? A. I don't recall. It's available in our 10-K.

I would be happy to find that. Q. We have got it here. We're going to look at

Do you recall approximately what it was? A. Q. No, sir. Do you recall what percentage of that revenue

came from First Citizens Bank & Trust Company from dividends? A. Q. I don't remember the amount, the percentage. But your testimony is the majority of it is as

a result of First Citizens Bank & Trust Company? A. Q. My recollection is it was more than half. Does First Citizens BancShares, Inc. make any

loans to First Citizens Bank & Trust Company? A. Q. No. Does it enter into any, you know, credit

obligations -A. Q. Trust? No. -- with respect to First Citizens Bank &

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. Q. this?

THE VIDEOGRAPHER:

We're off the record.

(Recess taken 2:16 to 2:33 p.m.) THE VIDEOGRAPHER: We're on the record.

(Exhibit No. 20 marked.) MR. RODRIGUEZ: Before we begin, I just

want to make one designation under the protective order, that the question and answer discussing the sale price of American Guaranty, we designate that as for outside counsel eyes only under the terms of the protective order. We can provide the line and -- the page and line

numbers once the transcript is circulated. Q. Mr. Gray, we're back on the record. I wanted

to hand you what I have marked as Exhibit 20, an actual old school paper document here. We left off with some

discussion about Pacific Medical Limited Partnership. MR. BRUSTER: Do you have it? MR. RODRIGUEZ: I have it. Do you need another copy of

The document I handed you was given to me

before the deposition started this morning, so it doesn't have a Bates stamp. I think counsel is going to The one I

probably Bates stamp it and produce it again.

have handed you is a copy of what was given to me. Do you recognize this document, sir? Yes, sir.

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Q. A.

Tell us what this is. This is a printout of an inquiry that we made

against our customer information system to identify the customer that upon inquiry we determined that had a Texas address. This is the customer that had elected to

invest in the overnight master note agreement of First Citizens BancShares, Inc. It is a customer of First

Citizens Bank & Trust Company who had made that election. Q. And when did you print -- did you print this

document out? A. Q. A. Q. No, sir, one of my associates printed this. And do you know when this was printed out? It was printed yesterday actually. And this document reflects a Texas Limited

Partnership and its investment in a master note that First Citizens BancShares, Inc. is obligated on, correct? A. It reflects again, a customer that on our If you

customer information file had a Texas address.

recall our discussion about Mark Johnson having helped me back when he was assisting me in the preparation of the declaration, he had done an inquiry against, I guess, the same system that this produced -- that was produced -- or that this was extracted from.

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And then based on that information I received from him, Ruth Clark then provided me with the agreement with that customer that we had previously provided to you. But we recognized that we had not -- that that

document was actually addressed to someone in Fayetteville, North Carolina, and that was not exactly clear as to why we had produced that to you. An this was attempted to -- an attempt to link that customer to the Texas address. Q. Is this an example of First Citizens

BancShares, Inc. conducting business in Texas? A. No, sir. This is a customer of First Citizens

Bank & Trust Company that we had a relationship with in Fayetteville, North Carolina. The relationship

actually, at least with respect to the master note agreement, no longer exists. time ago. But the customer contact that we had was between one of our bankers in Fayetteville and a cash management representative with a customer in customer designated this Austin address as the address to -- I assume its banking statements were sent to this address. Q. I suspect that's the case, but I'm not sure. To the Texas address? It was terminated some

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Q.

Okay.

Before you met with counsel or talked

with counsel about this request, did you review it to consider -- to consider producing documents? A. Q. I don't recall. For example, documents that might be

responsive to that request would be board meeting minutes that we have discussed earlier today, correct? A. To the extent those board meetings include

officers, directors or employees of BancShares and officers, directors and employees of First Citizens Bank & Trust Company. Q. A. Q. Well, they're joint boards, aren't they? Correct. I mean, when the board of directors of First

Citizens BancShares, Inc. is meeting, so is the board of First Citizens Bank & Trust, correct? A. separate. Well, but the minutes of the meetings are So there are minutes that are maintained for

the meeting of the board of directors of First Citizens BancShares, Inc. and separate meetings -- separate meetings maintained -- separate minutes maintained for the meeting of the board of directors of First Citizens Bank & Trust Company. Q. So that would be an example of documents you

guys have responsive to that request, right?

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Citizens Bank & Trust, would it? MR. RODRIGUEZ: A. Q. I can't answer that. I mean, does it state in there which entity Objection; form.

has made an unfunded loan commitment to a related party? A. No, sir. But it is part of the consolidated

financial statement presentation for First Citizens BancShares, Inc. Q. I understand. It just doesn't say who made

those commitments, those off balance sheet commitments, does it? A. We do not differentiate between commitments

made by the different companies, again, because that's not the requirement. The requirement is to present it

on a consolidated basis. Q. Okay. Other than what we have talked about

here today, to your knowledge, has First Citizens BancShares, Inc. either paid money or earned money to or from directly persons or companies in the state of Texas? A. No, sir. (Exhibit No. 26 marked.) Q. I have marked as Exhibit 26 a document that

was recently produced to us. Have you seen this document before?

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A. Q.

Yes, sir. It's Bates stamped FCBS 01219. And it appears

to me to be an invoice from KPMG, the consulting firm, correct? A. Q. That's correct, the accounting firm. Accounting firm. Excuse me.

It's addressed to First Citizens BancShares, Inc., correct? A. Q. Yes, sir. And it says, Please remit to KPMG, LLP

department --it looks like 0613, P.O. Box 120001, Dallas, Texas 75312, correct? A. Q. Correct. And the project number was final billing for

review of registration statement, consent issuances and comfort letter procedures performed in connection with trust preferred offering, right? A. Q. A. Q. bill? A. Q. Yes, sir. Did it pay it in accordance with KPMG's Yes, sir. For $8,000? That's correct. Did First Citizens BancShares, Inc. pay this

remittance requirements?

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A.

Could you please explain what remittance

requirements mean? Q. In accordance with what it says, please remit

to, right there. A. Q. Yes, sir. So it paid KPMG this bill that was sent to

First Citizens BancShares, Inc.? A. Q. That is correct. And it paid it by sending a bill to Dallas,

Texas, sending a check to Dallas, Texas? A. Q. I believe it was remitted by check, yes, sir. About two minutes ago I asked you whether

other than what we have talked about today, to your knowledge, has First Citizens BancShares, Inc. either paid money or earned money to or from directly persons or companies in the state of Texas and your answer was, no, sir. A. Q. A. Have we not talked about this today? No, sir. In that case, we have made this payment to a

company in the state of Texas. Q. A. Q. A. So this is -And --- clarification your change -Yes, sir. I apologize for the --

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Q. A. Q.

-- of previous testimony, right? Yes, sir. How many other times have we talked about

things today where actual documents prove otherwise? MR. RODRIGUEZ: A. Objection; form.

I'm aware of one other instance where we have

made payment to a company in the state of Texas. Q. Q. What is that? That payment was made directly by First

Citizens BancShares, Inc.? A. Q. Yes, sir. Do you think that paying people like this that

do business in Texas and First Citizens BancShares, Inc. paying them is conducting business in Texas? MR. RODRIGUEZ: A. Q. No, sir. Even though people from Texas are sending Objection; form.

First Citizens BancShares, Inc. direct bills, and the company is turning around and paying them directly in Texas, you don't believe that's conducting business in Texas? A. In this particular situation, the KPMG bill,

we had contact with members of KPMG in their Raleigh and Charlotte offices, and I cannot explain why they asked

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us to remit it to this Dallas, Texas address.

But we

did, and for that reason we disclosed that to you. Q. Is it your testimony that when First Citizens

BancShares, Inc. is directly billed by just like this, a matter here that it turns around and pays and sends a check to Dallas, Texas, that that's not conducting business in Texas? A. I do not recall having any contact with any To the

individual from Texas related to this matter. best of my recollection, we handled -- or this

engagement was handled by members of the Raleigh and Charlotte offices. Q. Let me ask the question again. Do you not

consider being invoiced -- First Citizens BancShares, Inc. being invoiced and First Citizens BancShares, Inc. turning around and sending a check directly to Texas to pay that invoice conducting business in Texas? A. Q. No, sir. Do you not consider that directing an activity

toward the state of Texas? A. Q. A. No, sir. Mailing a check? We remitted as they requested us to do for the

services that were provided to us. Q. Mailing a check to a company in the state of

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MR. RODRIGUEZ:

Pass the witness.

FURTHER EXAMINATION BY MR. BRUSTER: Q. Did you have a chance to visit with your

counsel before answering these last couple questions? A. Yes, sir. MR. BRUSTER: Nothing further. We're off the record.

THE VIDEOGRAPHER:

(Deposition concluded at 4:22 p.m.)

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 WITNESS: PAGE NO.

DEPOSITION CHANGES JOHN GRAY LINE NO.CHANGE REASON FOR CHANGE

___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________ ___________________________________________________

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ______________________________ Notary Public in and for the State of _____________________ County of ____________________ My commission expires: _______________ Subscribed and sworn to before me by the said witness, JOHN GRAY, on this the __________ day of ____________________, 2007. THE STATE OF _________________ COUNTY OF ____________________ ______________________________ (Signature of the Witness)

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STATE OF TEXAS

)

COUNTY OF DALLAS )

I, Michelle L. Munroe, Certified Shorthand Reporter in and for the State of Texas, certify that the foregoing deposition of JOHN GRAY was reported stenographically by me at the time and place indicated, said witness having been placed under oath by me, and that the deposition is a true record of the testimony given by the witness. That the amount of time used by each party at the deposition is as follows: Mr. Bruster Mr. Rodriguez 5 hours, 4 minutes 3 minutes

That pursuant to information given to the deposition officer at the time said testimony was taken, the following includes counsel for all parties of record:

FOR THE PLAINTIFF DATATREASURY CORPORATION: Mr. Anthony Bruster NIX PATTERSON & ROACH, LLP 2900 St. Michael Drive Suite 500 Texarkana, Texas 75503

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FOR THE DEFENDANTS FIRST CITIZENS BANCSHARES, INC. AND FIRST CITIZENS BANK & TRUST COMPANY: Mr. Fernando Rodriguez, Jr. BAKER BOTTS, LLP 2001 Ross Avenue Dallas, Texas 75201-2980

I further certify that I am neither counsel for nor related to any party in this cause and am not financially interested in its outcome. Given under my hand on this the __________ day of ____________________, 2007.

______________________________ Michelle L. Munroe, CSR No. 6011 GRETCHEN SHORE COURT REPORTING & RECORDS Firm Registration Number 90 P.O. Box 1789 Longview, Texas 75606 903.758.2183 phone My commission expires 12-31-07 Original deposition sent to Mr. Rodriguez on ___________________, 2007 for signature.

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