Combined 5532 APPEX Vol I

03690.61377/3102513.1

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

APPENDIX VOLUME I TO MOTION OF OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF LEHMAN BROTHERS HOLDINGS INC., ET AL., PURSUANT TO 11 U.S.C. § 105(a), FED. R. CIV. P. 60(b), AND FED. R. BANKR. P. 9024, FOR RELIEF FROM ORDER UNDER 11 U.S.C. §§ 105(a), 363, AND 365 AND FEDERAL RULES OF BANKRUPTCY PROCEDURE 2002, 6004 AND 6006 AUTHORIZING AND APPROVING

(A) SALE OF PURCHASED ASSETS FREE AND CLEAR OF LIENS AND OTHER INTERESTS AND (B) ASSUMPTION AND ASSIGNMENT OF EXECUTORY

CONTRACTS AND UNEXPIRED LEASES, DATED SEPTEMBER 20, 2008 (AND RELATED SIPA SALE ORDER) AND JOINDER IN DEBTORS' AND SIPA TRUSTEES

MOTIONS FOR AN ORDER UNDER RULE 60(b) TO MODIFY SALE ORDER

03690.61377/3102513.1

EXHIBIT No.

DESCRIPTION

1 Draft Complaint 2 Deposition transcript of Steven Berkenfeld, taken August 6, 2009 3 Deposition transcript of Bart McDade, taken on September 2, 2009 4 Deposition transcript of Hugh “Skip” McGee, taken on August 10, 2009 5 Deposition transcript of Mark Shapiro, taken on August 7, 2009 6 Deposition transcript of Alex Kirk, taken on August 31, 2009 7 Deposition transcript of Ian Lowitt, taken on August 20, 2009 8 Deposition transcript of Eric Felder, taken on July 31, 2009 9 Deposition transcript of Paolo Tonucci, taken on August 14, 2009 10 Deposition transcript of Robert Azerad, taken on August 17, 2009 11 Deposition transcript of Alastair Blackwell, taken on August 7, 2009 12 Deposition transcript of James Hraska, taken on August 14, 2009 13 Deposition transcript of Martin Kelly, taken on August 18, 2009 14 Deposition transcript of Rich Ricci, taken on September 8, 2009 15 Deposition transcript of Gerard LaRocca, taken on August 19, 2009 16 Deposition transcript of David Petrie, taken on August 26, 2009 17 Deposition transcript of Michael Klein, taken on September 12, 2009 18 Deposition transcript of Archibald Cox, taken on September 11, 2009

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QUINN EMANUEL URQUHART OLIVER & HEDGES, LLP Susheel Kirpalani James Tecce 51 Madison Avenue, 22nd Floor, New York, New York 10010-1601 (212) 849-7000 Erica Taggart 865 South Figueroa Street, 10th Floor Los Angeles, California 90017-2543 (213) 443-3000

Special Counsel to the Official Committee of Unsecured Creditors of Lehman Brothers Holdings, Inc., et al. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

In re LEHMAN BROTHERS HOLDINGS INC., et al.

Debtors.

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

Plaintiff,

-against-

LEHMAN BROTHERS HOLDINGS INC., and LEHMAN BROTHERS INC., and

Chapter 11 Case No. 08-13555 (JMP) Adversary Proceeding No.: 09-_____ (JMP) COMPLAINT FILED UNDER SEAL

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03690.61377/3097014.6 2

LB 745 LLC, and BARCLAYS CAPITAL INC.,

Defendants.

COMPLAINT FOR DECLARATORY RELIEF

PURSUANT TO 11 §§ 105(a)

TO THE HONORABLE JAMES M. PECK UNITED STATES BANKRUPTCY JUDGE:

The Official Committee of Unsecured Creditors of Lehman Brothers Holdings

Inc. ("LBHI") and its affiliated debtors and debtors-in-possession (the "Committee"), by and

through its undersigned counsel, hereby brings this Complaint for declaratory relief pursuant to

section 105(a) of Title 11 of the United States Code (the "Bankruptcy Code") against LBHI,

Lehman Brothers, Inc ("LBI"), LB 745 LLC ("LB 745") (collectively "Lehman" or the "Sellers")

and Barclays Capital Inc. ("Barclays" or the "Purchaser"), and allege as follows:

PRELIMINARY STATEMENT

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

transfers of billions of dollars in securities and other assets from Lehman to Barclays were not

authorized by the Bankruptcy Court in its September 19, 2008 order (the "Sale Order")

authorizing and approving the sale of the majority of the assets of the North American broker

dealer-business of LBI to Barclays (the "Sale Transaction") or any other order of the Bankruptcy

Court. Specifically, the Committee seeks a declaration that a self-styled "clarification letter"

dated September 20, 2008, but executed on September 22, 2008 (the “Clarification Letter”),

which the parties used as the vehicle to transfer billions of dollars in assets in connection with

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03690.61377/3097014.6 3

the Sale Transaction, was never presented to, reviewed by, or approved by the Bankruptcy Court.

Although it was stated at the September 19, 2008 hearing seeking entry of the Sale Order (the

"Sale Hearing") that the parties were "hoping to finalize and actually present [the Clarification

Letter] to Your Honor whenever it comes down here," this never occurred. In fact, the Court

was never asked to approve the Clarification Letter, which was filed with the Court on

September 22, 2008, after the Court entered the Sale Order, the date that the Sale Transaction

closed.

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

Sale Transaction approved by this Court. As an initial matter, the Clarification Letter

significantly altered the structure of the Sale Transaction from an asset sale to a trade that

accomplished the "sale" of estate assets through a termination of a repurchase agreement

previously entered into between the parties. Indeed, when the parties terminated the repurchase

agreement, Section 559 of the Bankruptcy Code required that the excess collateral value

constituted property of the estate.

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

mechanics of the sale. By setting forth certain “buckets” of securities, the Clarification Letter

crystallized Barclays’ receipt of a negotiated, but undisclosed, $5 billion block discount in the

value of the purchased assets. In addition to locking in this discount, the Clarification Letter

provided the means for Lehman to acquiesce to Barclays' demand for additional assets by

transferring certain additional assets that were not part of the original asset purchase agreement,

nor disclosed to the Court or specifically approved under the Sale Order.

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

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

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LBI that were listed on Schedule B to the Clarification Letter, (ii) certain 15-c3-3 securities

valued at between $750 million and $800 million, and (iii) an undisclosed amount of collateral

supporting Lehman's OCC accounts, valued at $2.3 billion. Thus, Barclays’ demand for

additional assets provided at least an incremental $5 billion of value for which no additional

consideration was provided to Lehman and their estates. Consequently, significant and real harm

has been inflicted on the creditors of the Lehman estates for which the Committee seeks

appropriate redress.

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

Clarification Letter and the transaction consummated thereunder were never approved by the

Court.

PARTIES

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

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

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

Seventh Avenue, New York, NY 10019 and its current principal business address at 1271

Avenue of the Americas, 45th Floor, New York, NY 10020.

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

Seventh Avenue, New York, NY 10019 and its current principal business address is James W.

Giddens as Trustee for SIPA Liquidation of Lehman Brothers Inc., c/o Hughes Hubbard & Reed,

LLP, One Battery Park Plaza, New York, NY 10004 (Attn: James B. Kobak, Jr.), attorneys for

the SIPA Trustee.

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03690.61377/3097014.6 5

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

place of business address at 745 Seventh Avenue, New York, NY 10019 and its current principal

business address at 1271 Avenue of the Americas, 45th Floor, New York, NY 10020.

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

of the United Kingdom with its principal place of business in London, England. It maintains

offices in Manhattan at 200 Park Avenue, New York, NY 10166 and 745 Seventh Avenue, New

York, NY 10019.

JURISDICTION AND VENUE

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

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

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

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

Bankruptcy Code.

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

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

BACKGROUND

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

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

"Debtors") were formerly the fourth largest investment bank in the United States. For more than

150 years, Lehman was a leader in the global financial markets by serving the financial needs of

corporations, governmental units, institutional clients and individuals worldwide. Lehman's

headquarters in New York and regional headquarters in London and Tokyo were complemented

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by a network of offices in North America, Europe, the Middle East, Latin America and the Asia

Pacific region.

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

LBHI and certain of its direct and indirect subsidiaries voluntarily commenced cases under

chapter 11 of the Bankruptcy Code with this Court. The Debtors' chapter 11 cases have been

consolidated for procedural purposes only and are being jointly administered pursuant to

Bankruptcy Rule 1015(b). On September 19, 2008, a proceeding under the Security Investors

Proceeding Act ("SIPA") was commenced for LBI. James W. Giddens as acting as the trustee in

the SIPA proceeding.

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

agreement (including its court reviewed and approved amendments, the "Asset Purchase

Agreement" or "APA") for the sale of the majority of the assets of the North American broker

dealer business of LBI to Barclays. The APA set forth the cash and securities that would be

transferred to Barclays as part of the Sale Transaction. In addition to certain real estate

transferred as part of the Sale Transaction, the APA generally provided for Barclays to pay $250

million cash plus up to $750 million in potential payments under a "true up" provision, receive

assets with a book value of $70 billion, and assume $69 billion in liabilities.

18. Specifically, the original APA defined Purchased Assets to include:

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

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

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

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

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

approve the Sale Transaction identified in the APA.

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

outlined the terms of the transaction to the Bankruptcy Court. Counsel explained that, pursuant

to the terms of the APA, a copy of which had been submitted to the Court, Lehman had agreed to

transfer approximately $70 billion of securities to Barclays in exchange for Barclays's

assumption of $69 billion of Lehman's liabilities. Taking into account all the exchanged

consideration, counsel to the Debtors explained to the Court that "looking at it from the net of

this transaction, there will be approximately 1,700,000,000 dollars yielded out of this

transaction" for Barclays.

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

the Court that the value of the assets to be exchanged between Lehman and Barclays had

changed. According to the Debtors, the value of the assets to be transferred to Barclays had

dropped to "$47.4 billion," and that Barclays would be assuming "$45.5 billion" in Lehman's

liabilities.

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

transaction:

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

2 Ex. 1, APA § 2.3(i).

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03690.61377/3097014.6 8

only selling assets that have a value of 47.4 billion dollars. Barclays is assuming liabilities, however, of 45.5 billion dollars in connection with those assets." 24. The Debtors also explained that—other than those changes detailed in an

amendment to the APA,3 which had been submitted to the Court—the other consideration to be

exchanged between Lehman and Barclays had not changed. Specifically, the Debtors stated that

"Barclays is still agreeing to pay the cure amounts on any leases that it assumes or that we

assume and assign to it. Barclays is also agreeing to the same employee compensation

arrangements. And it is also agreeing to pay the 250 million dollars of goodwill to LBI."

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

Barclays intended to execute a Clarification Letter that would supplement the APA and clarify

which Lehman subsidiaries would be transferred to Barclays as part of the transaction.

Specifically, the document would "clarify that the only subsidiaries that are being purchased by

Barclays are Lehman Brothers Canada Inc., Lehman Brothers Sudamerica SA and Lehman

Brothers Uruguay SA."

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

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

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

and was never presented to the Bankruptcy Court—and certainly not at the time the Court issued

the Sale Order on September 19, 2008. Although the Clarification Letter is dated September 20,

2008, upon information and belief, it was not finalized or executed until two days later on

September 22, 2008, the date of the closing of the Sale Transaction.

3 The First Amendment changed the APA's definition of "Purchased Assets" to provide

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

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03690.61377/3097014.6 9

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

the Debtors regarding the contents of the Clarification Letter, on September 19, 2008, the Court

approved the sale of LBI's North American operations to Barclays as purportedly described in

the APA and the Clarification Letter, the latter of which at that time had neither been finalized

nor executed. Thus, the Sale Order defined "Purchase Agreement" to include the Clarification

Letter.

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

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

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

approve of the sale because it had not had sufficient opportunity to evaluate the terms of the Sale

Transaction. Specifically, the Committee stated on the record that: "We're not affirmatively

supporting the transaction, Your Honor, because there has been insufficient time for us to really

do all the due diligence that we would feel should be done to take that next step of saying yes,

this is the best deal and we're supportive actively."

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

2008. During the weekend following the Sale Hearing, the parties expended considerable efforts

to finalize the Sale Transaction with the goal of closing the Sale Transaction before the markets

opened on the following Monday (September 22, 2008).

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

32. The transaction effected through the Clarification Letter executed on September

22, 2008 bears little resemblance to the transaction described to the Court at the Sale Hearing.

To be sure, the Clarification Letter identified the Lehman entities to be transferred to Barclays.

It also, without the Bankruptcy Court's knowledge or approval, fundamentally rewrote the terms

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of the transaction and redefined and expanded the scope and value of the assets to be transferred

from Lehman to Barclays as part of the deal.

33. The Clarification Letter made four significant material but undisclosed changes to

the Sale Transaction:

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

billion" in Lehman-owned assets to Barclays in exchange for the assumption by Barclays of

"$45.5 billion" in Lehman's liabilities relating to the assets.

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

securities and other assets pledged by LBI to Barclays in connection with a repurchase

agreement executed on September 18, 2008 (the "Barclays Repurchase Agreement") pursuant to

which Barclays provided LBI with $45 billion in short-term financing. In exchange for the

retained securities, LBI's obligations under the Barclays Repurchase Agreement would be

deemed satisfied.

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

one party sells assets to another for a set price with the agreement that the second party will buy

back those assets in a short time frame for that price plus a margin.

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

Bank of New York (the "Fed") had entered into a Repo contract (the "Fed Repurchase

Agreement") with LBI to provide short-term financing of $45 billion to LBI to help keep LBI's

brokerage business afloat.

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

in excess of the $45 billion financing provided by the Fed. This additional collateral is generally

known as a "haircut."

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

Barclays, the Fed demanded that Barclays "step into the Fed's shoes" and provide the $45 billion

Repo financing to LBI pending court consideration of the sale to Barclays. Thus, on September

18, 2008, Barclays and LBI entered into the Barclays Repurchase Agreement and the financing

arrangement thereunder replaced the financing previously provided by the Fed.

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

billion Repo financing to LBI, LBI agreed to transfer the collateral that it had pledged to the Fed

under the Fed Repurchase Agreement to Barclays. Consequently, on or about September 18,

2008, a majority of those assets were transferred from the Fed's collateral agent, JPMorgan

Chase N.A. ("JPMorgan"), to Barclays's collateral agent, the Bank of New York Mellon

("BONY").

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

Agreement was ultimately transferred to Barclays. The value of the haircut under the Barclays

Repurchase Agreement is believed to be between $5 to $7.2 billion.

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

Sale Transaction between Lehman and Barclays, as obliquely outlined in the Clarification Letter,

the net profit to Barclays (and net loss to the estate) for the transaction was several billion dollars

more than it would have been pursuant to the terms of the APA as described to the Bankruptcy

Court at the Sale Hearing and ultimately approved by the Bankruptcy Court in the Sale Order.

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

to the Bankruptcy Court at the Sale Hearing, they provided the Court with no indication that any

Lehman assets (including the haircut) would be permanently transferred to Barclays in

connection with the Repo financing arrangement or that the Barclays Repurchase Agreement

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03690.61377/3097014.6 12

would be the vehicle for the parties consummating the Sale Transaction and of Lehman assets to

Barclays.

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

not involve the sale of Lehman's assets, but the execution on collateral pledged by LBI in

connection with the Barclays Repurchase Agreement, pursuant to Section 559 of the Bankruptcy

Code, all of the excess value of the collateral not used to satisfy the debt owed to Barclays

pursuant to the Barclays Repurchase Agreement—totaling between approximately $5 and $7.2

billion—is property of the Lehman estates.

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

participant liquidates one or more repurchase agreements with a debtor and under the terms of

one or more such agreements has agreed to deliver assets subject to repurchase agreements to the

debtor, any excess of the market prices received on liquidation of such assets . . . over the sum of

the stated repurchase prices . . . shall be deemed property of the estate . . . ."

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

transfer to Barclays of the implied discount or haircut under the Barclays Repurchase

Agreement, the Clarification Letter expanded the scope of the assets to be transferred to Barclays

to include assets held in "clearance boxes" belonging to LBI that were listed on a Schedule B that

was attached to the Clarification Letter. At the time of the execution of the Clarification Letter,

these assets were not providing security for any debt owed by Lehman to any creditor. Thus,

they could be freely (and secretly) transferred from Lehman to Barclays without protest from any

secured creditor.

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

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03690.61377/3097014.6 13

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

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

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

Act of 1934, brokerages are required to keep on-hand assets sufficient to cover a specified

percentage of their customer portfolio, much like a depository requirement for banks. Because

of the unwinding of some customer positions in and around September 2008, LBI had excess

reserves totaling approximately $1 billion.

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

transferred to Barclays.

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

to Barclays to include certain property supporting exchanged-traded derivatives from Lehman to

Barclays. This included assets held in certain Lehman accounts at the Options Clearing

Corporation (the "OCC Assets").

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

Barclays pursuant to the terms of the Clarification Letter. Ultimately, billion of dollars in OCC

Assets were transferred to Barclays.

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

several billion dollars in assets to Barclays without consideration by or approval from the

Bankruptcy Court.

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

aware of the above-described material modifications to the terms of the APA through the

Clarification Letter, or of the extra-judicial transfer of assets from Lehman to Barclays. The

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03690.61377/3097014.6 14

Committee also never knowingly approved these modifications of the terms of the APA or the

extra-judicial asset transfers.

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

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

deal that was consummated and approved by the judge was a completely different deal than the

deal that was worked through" after the Sale Order was signed. As he further explained," I don't

know what was disclosed to the Court, but I also would say the transaction that was presented to

the Court was not the transaction that was the one agreed to on the Tuesday."

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

Lehman, who testified in a deposition that "[t]his transaction was very different than what had

been previewed [to the Court] two days before, and it would have to be explained why it came

up."

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

agreements" that would "have a material adverse effect on the Debtors' estates" could not be

made without Court approval. Non-material changes could only be made with the approval of

"the Committee, the Debtors and the Purchaser."

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

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

2008.

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

changes to the APA effectuated by the terms of the Clarification Letter as described above, any

post-petition transfer of assets from Lehman to Barclays made pursuant to the Clarification

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03690.61377/3097014.6 15

Letter were not authorized by the Sale Order or any other order of the Bankruptcy Court, and are

recoverable by the Lehman estates under §549 of the Bankruptcy Code.

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

Letter described above, to the extent they can be considered to be non-material changes to the

Sale Transaction, they are void pursuant to the terms of the Sale Order.

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

Clarification Letter and the transaction consummated thereunder. Based on this, the Committee

submits that billions of dollars in securities and other assets transferred post-petition from

Lehman to Barclays were not authorized by the Sale Order or any other order of the Bankruptcy

Court.

Count I (Declaratory Judgment as to Clarification Letter

pursuant to 28 U.S.C. §§ 2201, 2202)

62. The Committee repeats and realleges all the allegations contained in this

Complaint.

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

terms of the APA and the Clarification Letter at the Sale Hearing, the Bankruptcy Court

approved the sale of the majority of the assets of the North American operations of LBI to

Barclays as outlined in the APA and the Clarification Letter.

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

agreements" that would "have a material adverse effect on the Debtors' estates" could not be

made without Court approval. Non-material changes could only be made with the approval of

"the Committee, the Debtors and the Purchaser."

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03690.61377/3097014.6 16

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

Sale Order was issued, and was never presented to the Court for its review and consideration, the

Court could not have—and did not—approve or authorize the terms of the Clarification Letter

through the Sale Order or any other order of the Bankruptcy Court.

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

Section 8, and Section 13, which explicitly or in effect authorized 1) the retention by Barclays of

as much as $7.2 billion of excess collateral posted by LBI to Barclays under the Barclays

Repurchase Agreement, 2) the transfer from Lehman to Barclays of assets held in "clearance

boxes" belonging to Lehman, 3) the transfer from Lehman to Barclays of the 15-c3-3 assets, and

4) the transfer from Lehman to Barclays of the property supporting the OCC Assets—were not

approved by the September 19, 2008 Sale Order or any other order of the Bankruptcy Court.

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

assets to Barclays, which transfers were not disclosed to the Bankruptcy Court. These transfers

were not authorized by the Sales Order or any other order of the Bankruptcy Court.

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

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

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

Letter that were not disclosed to the Court at the Sale Hearing, including Section 1(a)(ii), Section

8, and Section 13, were not approved by the Bankruptcy Court pursuant to the Sale Order or any

other order of the Bankruptcy Court.

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

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

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03690.61377/3097014.6 17

Clarification Letter were not authorized by the Sale Order or any other order of the Bankruptcy

Court and thus are prohibited by the Bankruptcy Code.

Count II (Attorneys’ Fees, 28 U.S.C. § 2202)

71. The Committee repeats and realleges all the allegations contained in this

Complaint.

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

"further necessary and proper relief based on a declaratory judgment . . . against any adverse party

whose rights have been determined by such judgment." 28 U.S.C. § 2202.

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

additional services from the undersigned attorneys to protect the rights of all parties in interest to

the Debtors’ chapter 11 cases. The Committee therefore seeks a judgment against Barclays for all

the Committee’s reasonable and necessary attorneys' fees incurred in recovering the assets

secreted from the estate by Barclays.

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

prevails on its request for a declaratory judgment.

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03690.61377/3097014.6 18

PRAYER FOR RELIEF

WHEREFORE, the Committee respectfully seeks an Order from this Court:

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

• awarding attorneys fees;

• awarding any and all other relief the Court deems appropriate.

DATED: New York, New York September 15, 2009

QUINN EMANUEL URQUHART OLIVER &

HEDGES, LLP

By: Susheel Kirpalani

James Tecce

51 Madison Avenue, 22nd Floor, New York, New York 10010-1601 (212) 849-7000 Erica Taggart 865 South Figueroa Street, 10th Floor Los Angeles, California 90017-2543 (213) 443-3000

Special Counsel for the Official Committee of Unsecured Creditors of Lehman Brothers Holdings, Inc., et al.

Page 1

HIGHLY CONFIDENTIAL - S. BERKENFELD2 UNITED STATES BANKRUPTCY COURT3 SOUTHERN DISTRICT OF NEW YORK4

5 In Re:6 Chapter 117 LEHMAN BROTHERS Case No. 08-13555(JMP)S HOLDINGS, INC., et al., (Jointly Administered)9

Debtors.10

11

12 * * *HIGHLY CONFIDENTIAL* * *13 DEPOSITION OF STEVEN BERKENFELD14 New York, New York15 August 6, 200916

17

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21

22

23 Reported by:24 KATHY S. KLEPFER, RMR, RPR, CRR, CLR25 JOB NO. 24035

TSG Reporting - Worldwide (877) 702-9580

Page 2

1 HIGHLY CONFIDENTIAL - S. BERKENFELD

2 August 6, 2009

3 9:30 a.m.

4

5 HIGHLY CONFIDENTIAL deposition

6 of STEVEN BERKENFELD, held at Jones

7

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

S New York, New York, before Kathy S.

9

Klepfer, a Registered Professional

10 Reporter, Registered Merit Reporter,

11 Certified Realtime Reporter, Certified

12 Livenote Reporter, and Notary Public

13 of the State of New York.

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2

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4 1111111111111111111111111111111111.111MOIMMIS

6 4111111111111111111111111111"

7 Q. What's your title at Barclays Capital?

8 A. Managing director.

9 Q. And what's your area of

10 responsibility?

11 A. I'm in the Investment Banking

12 Division.

13 Q. What's your job there? What do you

14 do?

15 A. I chair a few committees to approve

16 equity transactions, fairness opinions, and I'm

17 involved in various different capacities in

18 investment banking transaction development.

19

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21 41111111111.1111111111111110■111111mr22 irmimmoormas23

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2

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411111.11.

5 111111MINOMMINOMMIS6

7

8 tall11111.111111111M.9 Q. Now, you started -- we talked about

10 the exact date, and I don't care -- you started

,11 sometime in September of 2008, correct?

12 A. The agreement actually says the

13 employment commences on or before October 31.

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

15 your first anniversary yet?

16 A. That's correct.

17 Q.

18

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Page 591 HIGHLY CONFIDENTIAL - S BERKENFELD

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4 Q. Anyone else you think would have

15

knowledge of that fact, whether the business

16

terms included a $5 billion discount to

17 Barclays?

18 A. I would ask the principal negotiators

19 of the deal.

20 Q And that would be Dave Shafir and

21 McGee?

22 MR.. STERN: Objection to the form.

23 A. That's probably where I would start.

24 Q. Who would you ask on the Barclays side

25 of the table?


Page 661 HIGHLY CONFIDENTIAL - S. BERKENFELD

2 A. I would ask Rich Ricci.

Q. Anyone else?

4 A. I would 6:6k Gerard LaRocco, I would

5 ask Archie Cox, and I would ask Michael Klein,

who was not a Barclays employee, but who was

7 acting as an advisor.

Q. Now, are Mr. Ricci, LaRocco, Cox and

Klein, would you describe them as the chief

negotiators for Barclays?

A. I would describe the chief negotiators

as Ricci, Cox and Klein.

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3 Q. So when you add those comp and cure

4 assumed liabilities on top of the elements I

5 just gave you, there's certainly no gain on

6 acquisition for Barclays, if those numbers are

7 real?

a MR. STERN: Objection to the form.

9 A. Well, again, no one was actually --

10 I'm repeating my answer a little bit. No one

was saying this schedule, Exhibit 19, is the

12 deal and see how all these numbers add up. The

13 deal was the Asset Purchase Agreement. This was

14 meant as some guidance for that as what we meant

15 as 70 billion of assets. For instance, 70

16 billion of assets could have been 69 billion of

17 governments --

18 Q. Okay.

A. -- and 1 billion of other stuff, or it20 could have been 69 billion of corporate equity

21 and 1 billion of governments, right? So we

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

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

24 this stuff. And this gives you a little bit

25 better sense of what that stuff is.

TSG Reporting . Worldwide (877) 702-9580

Page 122

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111111.11111111110.111111111.1111.11.11111Q. And nobody looking at that agreement,

at least from the point of view of the man who

signed it, would read that to say there was a

discount being given to Barclays for what it was

buying?

MR. STERN: Objection to the form.

A. I didn't believe at the time when I

signed this agreement that the intent of the

agreement was to deliver assets with a material


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embedded gain to them, to Barclays.

imilmm=1■11IINNMIMMIN=MMUP

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9 1111111111111110 1111111111111111 111•1•111.11=11=i12

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21 Q. You know, with respect to both the

22 actually, all three of the Asset Purchase

23 Agreement, the First Amendment, which we marked

24 as Exhibit 24, and the clarification letter,

25 which is marked as Exhibit 25, why did you sign


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2 them? Why are you the guy who signs them?

A. I signed the Asset Purchase Agreement

4 because at the time there was nobody else who

5 was an authorized officer of Lehman Brothers

6 Holdings available to sign it there present who

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

8 amendments and the clarification letter were

brought to me by the counsel just for

consistency after that.


Page 164


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6 A1111111117 The negotiators included Mr. McDade.

8 Was he not authorized to sign on behalf of LBHI?

9 A. He was.

10 Q. Was he not present?

11 A. He wasn't present at the time the

12 document was ready to be signed.

1111111111111111111111110.1111111111=111111M

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Page 1

HIGHLY CONFIDENTIAL - B. McDADE

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

1

2

3

4

5 In Re:6

7

8

9

LEHMAN BROTHERS

HOLDINGS, INC., et al.,

Chapter 11

Case No. 08-13555(JMP)

(Jointly Administered)

11

12

13

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24

25

Debtors.

* * *HIGHLY CONFIDENTIAL* * *

DEPOSITION OF BART McDADE

New York, New York

September 2, 2009

Reported by:

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

JOB NO. 24045

10

TSG Reporting - Worldwide 877-702-9580

Page 2

1 HIGHLY CONFIDENTIAL - B. McDADE

2 September 2, 2009

3 9:57 a.m.

4

HIGHLY CONFIDENTIAL deposition

6 of BART McDADE, held at Jones Day, LLP,7 222 East 41st Street, New York,

8 New York, before Kathy S. Klepfer, a

9 Registered Professional Reporter,

10 Registered Merit Reporter, Certified

11 Realtime Reporter, Certified Livenote

12 Reporter, and Notary Public of the State

13 of New York.

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21 IMMO22 Q. Who were the Lehmanites who were again23 heading up the discussions? I know there were a

24

lot of people involved, but who would you

25 describe as the primary negotiators?


Page 19


A. Bart McDade, Skip McGee, Mark Shafir,

clearly Dick Fuld was an informed party but not

in the room in terms of those discussions, would

be how I would describe the main, the main

Lehman principals.

Q. And who were the principals for

BarCap?

A. Rich Ricci, Jerry del Missier, and

their advisor, Michael Klein. And sorry,

Archibald Cox, the CEO of the Americas.

Q. Was Diamond involved?

A. In and out.

2°

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Page 601 HIGHLY CONFIDENTIAL - B. McDADE

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9 Q. With whom were those -- which Lehman,

10 which senior Lehman personnel were the subject11 of those discussions or involved in them?

A. There was an established group of

13 eight individuals. That would have been the14 group.

15

Q. And who were they?16 A. McGee, Nagpal, Humphrey, Felder,

17

Donini, Gelband, Lee, and I apologize, I forget.18

the last.

19

11"1"1"1"1"1"01110"0".1111111.11111.20 t411111111.111.11.11.161141111"01PPIPINIONNIIIIMWT21 ViiiMMEMEMOMMOMMOMMOD

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IMOMMOMMiliiiiiiiiiMMOIMMONOMOMMOMMONOMIN24 411111MMINIMMISTAMOMMINIIRMa25

1111•110101011011.1.0

TSG Reporting Worldwide 877-702-9580

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Page 242


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4 1111111111111.111.11111111111111111111111111115

6 4111111111117

8

9 Q. Do you know if any residential real

10 estate mortgage securities ultimately were

11 transferred to Barclays at the end of the deal?

12

A. It's my understanding, yes.

13

Q. What's that understanding based on?

14 A. My understanding is based -- my

15 understanding is based on our inability to

16 transact much in the way of those assets over

17 that period of week in terms of what market

18 activity. So those balance -- those balances

19 and those assets would have been there and those

20 balances were part of the transaction.

21 411111111111.111111111•1111MMI

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Page 275


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14 Q. Did anyone tell you that you -- that

15 Lehman had an excess of those assets at OCC?

16 A. Not specifically, no.

17 Q. Do you recall whether at any time

18 anyone told you that Lehman had an excess of

19 $1.3 billion of cash deposited at the OCC?

20 A. No one told me that specifically, no.

21 Q. Did anyone tell you that Lehman had an

22 excess of $900 million in additional assets

23 beyond the cash deposited at the OCC?

24 A. No one told me that.

25 Q. Did you ever have any discussion with


Page 276


2 Barclays about Barclays acquiring the $2.2

3 billion of excess cash and assets margin at OCC?

4 MR. HOME: Objection. Lacks

5 foundation.

6 A. I specifically did not.

7 Q. Are you aware whether Barclays ever

8 asked anyone at Lehman to include any of those

9 assets in the sale?

10 A. I'm not specifically aware of any

11 specific dialogue with respect to those options,

12 the collateral, BarCap and Lehman.

13 Q. And to your knowledge, was there ever14 any intent on the part of Lehman to transfer any

15 of those excess cash, that 1.3 billion or any

16 additional assets, that was clearing in margin

17 at OCC to Barclays as part of the sale?

18 A. My recollection is the original

19 contemplation of those positions would have

20 been, to your point, the actual positions

21 themselves. Collateral would have been a

22 secondary consideration. We were concerned

23 about our collateral positions.

24 However, I think over the course of

25 the week, that became -- that became, to my


Page 277


2 recollection, over the course of time, that

3 became something that ended up, I believe, in

4 the clarifying document.

Q. Did anyone tell you that the, under

6 the clarifying document, there had been some

7 agreement where Barclays to transfer to Barclays

a an additional $2.2 billion of cash and

9 securities representing margin, excess margin

10 and other assets at OCC?

11 A. No.

12 MR. HOME: Objection. Vague and

13 ambiguous. Lacks foundation.

14 Q. To your knowledge, was there ever any

15 intent on the part of Lehman that the clarifying

16 letter would provide Barclays an additional $2.2

17 billion in margin at OCC?

18 A. No.

19 Q. What about margin, additional margin

20 that Lehman had at any other clearing

21 corporations, and I want to specifically include

22 any foreign clearing corporations, counterparts

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

24 negotiations or intent on the part of Lehman to

25 transfer any such margin, cash or additional


Page 278


2 assets, at foreign clearing corporations to

3 Barclays?

4 A. I'm not aware of those.

6 amom■mli7 4==18 a■al9

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Page 1

1

2 UNITED STATES BANKRUPTCY COURT3 SOUTHERN DISTRICT OF NEW YORK4

In Re: Chapter 11s LEHMAN BROTHERS Case No. 08-13555 (JMP)

HOLDINGS, INC., et al., (Jointly Administered)6

7

* * * HIGHLY CONFIDENTIAL * * *9 DEPOSITION OF HUGH McGEE

10 New York, New York

Monday, August 10, 200912

13

14

15

16

17

18

19

20 Reported by:

FRANCIS X. FREDERICK, CSR, RPR, RMR21 JOB NO. 2403822

23

24

25

Page 21

2

3

4

5 August 10, 2009

6 10:00 a.m.7

a

9 HIGHLY CONFIDENTIAL deposition of

10 HUGH McGEE, held at the offices of Jones

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

12 York, pursuant to Notice, before Francis

13 X. Frederick, a Certified Shorthand

14 Reporter, Registered Merit Reporter and

15 Notary Public of the States of New York

16 and New Jersey.

17

18

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Page 13

H. McGEE - HIGHLY CONFIDENTIAL

2 all.11111111111111111111111111113 011111111111111111111111111111111MIS4 iNENERONIMINENRIMIMMEM5 411111111.1111111111M6 Q. Stay up at the top of the chain if

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

a lot of people who do something in connection

9 with it. I'm looking at the senior activities

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

11 involved in getting the transaction done?

12 A. Well, certainly Mike Gelband was

13 there as well.

14 Q. Was Paolo Tonucci involved?

15 A. Yes.

16 Q. What was his role?

17 A. Well, Paolo and Ian Lowitt were

18 both involved around some of the balance sheet

19 type items.

20

21

22 1111111111111111111111111111111111111111111111.23 d'INIIIII11111111111,24 1111111.11■1111i25


Highly Confidential

Page 1

1 M. Shapiro2 UNITED STATES BANKRUPTCY COURT3 SOUTHERN DISTRICT OF NEW YORK4

5 In Re:6 Chapter 117 LEHMAN BROTHERS Case No. 08-13555(JMP)

HOLDINGS, INC., et al., (Jointly Administered)9

Debtors.10

11

12 * * *HIGHLY CONFIDENTIAL* * *13 DEPOSITION OF MARK J. SHAPIRO14 New York, New York15 August 7, 200916

17

18

19

20

21

22

23 Reported by:24 KATHY S. KLEPFER, RMR, RPR, •CRR, CLR25 JOB NO. 24036

...


Page 2

1 M. Shapiro

2 August 7, 2009

3 9:30 a.m.

4


6 of MARK J. SHAPIRO, held at Jones

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

8 New York, New York, before Kathy S.

9 Klepfer, a Registered Professional


Certified Realtime Reporter, Certified12 Livenote Reporter, and Notary Public

13 of the State of New York.14

15

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Highly Confidential

19

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Highly Confidential

Page 7

M. Shapiro2 ffMN■M

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7 M■■■■=.8 annMI9

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14 Q.15 A.16 Q.17 A.

18 Finance

By whom are you presently employed?

Barclays Capital.

And what's your position there?

am the head of Restructuring and

within the Investment Banking Division.


Highly Confidential

Page 49

1 M. Shapiro2

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10 immomal11

12 INNAMMIN/N/Marfilfjp13

14 IIIIII■mmommimmiumma15

•

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19 111111111111111111111=11111111111111ft20 Q. Was Steve Berkenfeld involved in the21 negotiations on that Monday and Tuesday?22 A. Yes.23 Q. Would he have been one of the people24 negotiating what you call in the trenches?25 A. He was more involved in some of the


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Highly Confidential

Page 501 M. Shapiro

2 legal negotiations. He was definitely at the

3 table from time to time with the lawyers. He

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

5 meetings that took place between myself, Mark

Shafir, Archie and Michael Klein.

7

a

9


Highly Confidential

Page 63

1 M. Shapiro

2

3

4

5 0=====.1.6

7

8 WAIINAMP9 Q. And how did you go about trying to

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

11 this number?

12 A. So I think I first asked George Mack,

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

14 were the outstandings that were unpaid under

15 these contracts. And I think he went to

16 somebody and the answer came back we can't

17 possibly figure that out in this time

18 specifically to each contract. It was just, you

19 know, there was no ability, functionally, to do

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

21 was not humanly possible.

22 So but Barclays obviously wanted that

23 information from us, so we started thinking

24 about, well, how could we approximate that

25 amount. And so a group of us, we were talking


Highly Confidential

Page 64

1 M. Shapiro

2 about it on the Lehman side, and we said, well,3 one way that we could estimate this was by4 having somebody look at the payables run, the

normal payables run in the ordinary course,

6 exclude comp, right, whatever is normally paid

7 for compensation on a weekly or monthly basis,

take a snapshot of a normal payable cycle, all

9 right, so at any given time you have a certainly

lo amount of payables outstanding, not knowing when

11 under every contract a payment was going to be

12 made, and not knowing they were all monthly,

13 necessarily, but we assumed that a lot of them

14 would be paid normally, you know, on a monthly

15 cycle, and provide us with an overall number

16 that would be a proxy for what the payments

17 under, you know, if you were assuming many of

18 those contracts, what those payments estimated

19 could be.

20 So that this was an intent. And we

21 told Barclays we couldn't provide them with the

22 specifics that they were looking for, but we

23 would try to get them an estimate of, for them

24 and ourselves, obviously, an estimate of what we

25 thought the amount would be that could be paid


Highly Confidential

Page 65

1 M. Shapiro

2 if they were going to have to assume all of

3 these contracts.

4 Q. Who did that work?

5 A. I don't know. George -- George went

6 off and started talking to people in the finance

7 area. And there were many people that were

8 working around, obviously around the clock on

9 these things trying to pull this information

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

11 the work.

12 Q. Is George the person that you tasked

13 to get the number?

14 A. George is the person who I tasked to,

15 you know, to get people to provide us with those

16 numbers.

17

18

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Highly Confidential

Page 142

1 M. Shapiro

2

311111111111111111111110

4 Q.

maybe it

6 later in

7 was some

8 with the

you used.

10 anything

You testified previously that on,

was Thursday evening or at some point

the week, that you thought that there

concern about Barclays going through

deal, okay? I don't know what language

Tell me what the -- was there

that Barclays said to anyone at Lehman

11 that caused that concern, or was it just a

12 general anxiety about wanting to get something

13 done?

14 A. No, it was really a comment that was

15 made to me by Jim Seery, who said something like

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

17 show" going on between JPMorgan and Barclays

18 around the repo and that, you know, JPMorgan was

19 screwing around doing something that Jim

20 characterized, as I said, as something that was

21 not positive, and that, you know, that was

22 putting the deal potentially at risk. That was,

23 would say, the nature of what concerned me.

24 So that was it.

25


Highly Confidential

Page 148

1 M. Shapiro

2

3

5

6

7

8

9

10

11 MMMRWNM12 Q. Let me show you again what has been

13 marked as Exhibit 19 and draw your attention to

14 the cure amount about which you testified

15 previously --

16 A. Yes.

17 Q. reflected on this schedule as

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

19 that?

20 A. Yeah, I do see that.

21 Q. Do you recall that number ever

22 changing in the course of the week?

23 A. I don't remember -- I don't really

24 remember how that 2.25 got in there. I

25 personally have a better recollection of a $1.5


Highly Confidential

Page 149

1 M. Shapiro2 billion number that we were using for -- and

3 obviously it was an estimate, right?

4 So these were all, at the end of the

5 day, as I explained to you earlier, we were

6 trying to do our best at the time to provide7 Barclays, principally, with a perspective on

8 what it might cost them to take over all of the

9 contracts that could be subject to the

lo assumption of the assignment. And so, as I said11 earlier, we were trying to come up with an12 estimate of what that number was.13 My recollection was we -- I used, in14 my own head, a billion-five, and the reason I

15 remember that is that when we were negotiating16 the breakup fee, we were -- I was thinking17 about -- and I had negotiated the breakup fee in18 the transaction relating to the stalking horse19 bid -- I remember thinking, okay, we can do 3,20 typically 3 percent of the deal. Barclays asked21 for a lot more going in. They asked -- I think22 Victor Lewkow told me something like $25023 million or something like that. It was big24 number. And I told him we weren't going to do25 that, that in my mind that, you know, there


Highly Confidential

Page 150

1 M. Shapiro

2 was -- that that could be perceived as, you

know, chilling the bidding. I didn't want any

4 perception of anybody feeling that they couldn't

5 make a bid.

6

Obviously, you know, I said that 3

percent was a normal -- he was not a bankruptcy

lawyer, by the way. So I was -- I wouldn't say

9 I was educating him because he obviously was a

10 smart guy, but I was explaining to him in my

11 experience what an acceptable number would be12 from the court's perspective, and at the time my13 recollection is we were looking at $250 million

14 for goodwill, it was around a million to a15 million-450 for the buildings, which ultimately,

16 you know, that was our estimate, we didn't have17 our desktop appraisals yet --

18 MR. STERN: Billion.

19 A. Billion, yeah, sorry.

20 1.45 billion. That was a

21 billion-seven. We added this estimate for cure22 costs of a billion and a half, that got us to

23 3.2 billion, and we told them that the $10024 million breakup fee would be approximately 3

25 percent and that's what we would be willing to


Highly Confidential

Page 151

1 M. Shapiro2 do, plus some expense reimbursement, I think

3 maybe 25 million.

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5 MMOMMOMMOM6

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M. Shapiro

Q Now, in that conversation on late

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Page 153

21 Monday night or early Tuesday morning, you say

22 you used a number for cure of 1.5?

23 A. Yes. My recollection for the purposes

24 of calculating this $100 million.

25 Q. I understand. Do you have any

Highly Confidential


Highly Confidential

Page 154

1 M. Shapiro

2 recollection where you got that number and why

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

4 A. The only recollection I have is that,

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

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

7 it snapshot of a monthly payables number would

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

9 would really cover contracts that you're paying

lo under, excluding employee liabilities and things

11 like that.12 Somebody probably in my team who was13 tasked with that -- it could have been George14 Mack, it could have been somebody else, Dan

15 Flores -- I'm sure came back to me and said, I'm16 being told that rough cut around a billion-five,17 but it was a true estimate, we never told18 Barclays it was anything other than an estimate,

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

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

21 was always going to be based on what contracts

22 they ultimately assumed. So, you know, which we

23 didn't have any clear view on other than the

24 fact that we thought they were going to need a

25 good chunk of the contracts to operate the firm.


Page 1

1 HIGHLY CONFIDENTIAL - A. KIRK2 UNITED STATES BANKRUPTCY COURT3 SOUTHERN DISTRICT OF NEW YORK4

5 In Re:6 Chapter 117 LEHMAN BROTHERS Case No. 08-13555(JMP)a HOLDINGS, INC., et al., (Jointly Administered)9

Debtors.

* * * HIGHLY CONFIDENTIAL * * *

DEPOSITION OF ALEX KIRK

New York, New York

August 31, 2009

Reported by:

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

JOB NO. 24545

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HIGHLY CONFIDENTIAL - A. KIRK

August 31, 2009

9:30 a.m.


of ALEX KIRK, held at Jones Day, LLP,

222 East 41st Street, LLP, New York,

New York, before Kathy S. Klepfer, a

Registered Professional Reporter,

Registered Merit Reporter, Certified

Realtime Reporter, Certified Livenote

Reporter, and Notary Public of the State

of New York.

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Page 111 HIGHLY CONFIDENTIAL - A. KIRK

2

3 4111111P4

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2 who had signed employment agreements were

3 resigning from the firmillOMMIIIMIS4

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1 HIGHLY CONFIDENTIAL - A. KIRK

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Page 28


2

3

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5 AMMS

6 Q. During the period from Friday, the

7 12th, through Sunday, the 14th, were you dealing

8 with any particular people at Barclays who you

9 could name?

10 A. Archibald Cox. Bob Diamond. Rich

11 Ricci. Michael Klein, as their agent.

12 ?

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17 111111111110111111.1111.111.1101=1111MINM

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16 Q. Now, you referred to -- you said they

17 broadly outlined the first transaction. By the

18 Friday morning, is it your understanding there's

19 a second transaction, a subsequent transaction?

20 A. By the time we had this meeting --

21. Q. Uh-huh.

22 A. -- it was my view, my opinion, that

23 there would have to be a reworking of the

24 transaction because a vast majority of those

25 securities that had been planned for transfer

Page 55


2 were held at JPMorgan. There was a -- and

3 JPMorgan had a dispute of some sort about the

4 transfer of the repo with Barclays, which was

5 described to me by Mike Keegan, and in addition

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

7 down Lehman's DTC account, which led me to

8 believe that JPMorgan would not cooperate and

9 transfer the aforementioned securities to

10 Barclays on that Friday.

11 11111111111•11111mmIlm•I■11.12 IMINIIIIIMMIPIemsa"""m1111.11013

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Page 66

2

3

4 ANIMMEMINK5 Q. Describe that for me. What was your

6 understanding?

7 A. So, to be clear, I'm not an expert,

8 was not an expert on repo, so I was learning

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

10 understand how they actually worked prior to

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

12 a detailed explanation of the issue, but as

13 understood it from the way that Mike Keegan

14 explained it to me was that the Fed had been

15 providing a repo for Lehman Brothers earlier in

16 the week of approximately $50 billion, that the

17 Fed had made it known that they wanted to be

18 repaid on that repo, and that Barclays had

19 agreed to assume that repo obligation from the

20 Fed. Without that financing the firm would have

21 collapsed the next morning.

22 So the way it was explained to me was,

23 during the transfer of those -- that loan and

24 the collateral associated with that loan, there

25 were many pieces of collateral that Barclays

Page 67


2 could not value, so they did not accept them in

3 transfer from the Fed. And mechanically, it was

4 explained to me the way that worked was, in a

tri-party repo, the Fed transferred all of the

positions to JPMorgan and then JPMorgan began

7 transferring those positions upon the receipt of

8 money from Barclays transferred money, and then

they would transfer the positions that secured

10 that repo.

11 And at some point during that process,

12 Barclays became very uncertain as to some

13 percentage of that collateral, I don't recall

14 the exact amount, but it was a large number,

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

16 collateral, and when Barclays didn't accept

17 those positions, they, by definition, just got

18 left at JPMorgan.

19 They -- so JPMorgan was left with

20 collateral that they were not comfortable with

21 but Barclays would not accept, so -- and

22 JPMorgan, I guess they attempted to negotiate

23 but couldn't get that negotiation done.

24

25 staININ11#

Page 721 HIGHLY CONFIDENTIAL - A. KIRK2

3

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Q. And how did Klein, Ricci and Keegan or

any combination of those three men react to that

news?

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Page 73


2 A. There was some question as to, well,

3 what do we do now? I suggested that the only

4 reasonable course of action would be to proceed

5 with the transaction substituting the repo

6 assets, the assets that Barclays had lent

7 against, for all the other securities that had

been contemplated in the transaction and leave

MNIMMIEMMMM

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22

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24 VIENEENNIMININIIIM25

9 the rest of the transaction as was.

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22 4111111111111111111W23 MI"MINEMIMOMMMNIMft

24 41111111110...111411111111111110625

INININNINI11111111111111111

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

identifiable bucket of value until Barclays


2

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17 Martin -- somebody who worked for Martin Kelly18 had prepared it.19 Q. And within the balance sheet, sir, the

20 fifth column that's entitled Transaction21 Adjustments, do you see that?22 A. Yes.

23 Q. Do you know what that column

24 represents, what the entries in that column are25 10111111111M111111111P

Page 1

1



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In Re:

4

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7 LEHMAN BROTHERS

8 HOLDINGS, INC., et al,

9 Debtors.

1 0

Chapter 11



11

12 * * *HIGHLY CONFIDENTIAL* * *

13 DEPOSITION OF ERIC JONATHAN FELDER


15 July 31, 2009

1 6

17 Reported by:

18 MARY F. BOWMAN, RPR, CRR

19 JOB NO. 24018

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Page 2

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5 July 31, 2009

6 9:35 a.m.

9 Deposition of ERIC JONATHAN FELDER,

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

11 41st Street, New York, New York, before Mary F.

12 Bowman, a Registered Professional Reporter,

13 Certified Realtime Reporter, and Notary Public


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FELDER - HIGHLY CONFIDENTIAL

2 /41111.1NOMOMMOMMINIMIN3 101061.001111M111.1.MINOMMUIONSWIMI4

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25 411111111110MbaismilmilmmumisinlegoalmiftsTSG Reporting - Worldwide (877)702-9580

TSO Reporting - Worldwide (877) 702-9580

Page 1

HIGHLY CONFIDENTIAL - PAOLO TONUCCI 1

2 UNITED STATES BANKRUPTCY COURT

3 SOUTHERN DISTRICT OF NEW YORK

4

In Re:

Chapter 11

6

LEHMAN BROTHERS Case No. 08-13555(JMP)

HOLDINGS, INC. et al., (Jointly Administered)

8

9

Debtors.

10

11

HIGHLY CONFIDENTIAL

12

DEPOSITION OF PAOLO TONUCCI

13

Friday 14 August 2009

14 At: 7:00 am

15

Taken at:

16

Jones Day

21 Tudor Street

17

London

United Kingdom

18

19 Reported by: AILSA WILLIAMS

Certified LiveNote Reporter

20

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Page 2


APPEARANCES

JONES DAY, LLPAttorneys for Lehman Brothers, Inc.222 East 41st StreetNew York, NY 10017-6702BY: JAYANT W. TAMBE, ESQ

BRIDGET CRAWFORD, ESQ6

BOIES, SCHILLER & FLEXNER, LLP7 Attorneys for Barclays Capital and the

Witness8 5301 Wisconsin Avenue, NW

Washington, DC 200159 BY: HAMISH HUME, ESQ.

10 QUINN, EMANUEL, URQUHART, OLIVER & HEDGES,

LLP11 Attorneys for the Creditors Committee

865 S. Figueroa Street, 10th Floor12 Los Angeles, California 90017

BY: MATTHEW BUNTING, ESQ.13 ERICA TAGGART, ESQ. (By Phone)14 SIMPSON THACHER & BARTLETT LLP

Attorneys for the Witness15 425 Lexington Avenue

New York, NY 10017-395416 BY: CHRISTOPHER J. LUCHT17

18 HUGHES, HUBBARD & REED, LLPAttorneys for the SIPA Trustee

19 One Battery Park PlazaNew York, NY 10004-1482

20 BY: WILLIAM R. MAGUIRE, ESQ.21 Also Present:22 PHILIP E. KRUSE, Alvarez & Marsal23

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Page 5

1

HIGHLY CONFIDENTIAL - PAOLO TONUCCI

5

2

PAOLO TONUCCI

3

Having been sworn,

4

Testified as follows

5

DIRECT EXAMINATION BY MR. TAMBE:

6

MR. TAMBE : Morning, Mr. Tonucci. We

7 met this morning. My name is Jay Tambe with Jones

B Day, representing the Lehman Brothers Holdings

9

Estate. I will have counsel introduce themselves

10

to you and then we will get started.

11

MS CRAWFORD: Bridget Crawford from

12

Jones Day.

13

MR. MAGUIRE: Bill Maguire, Hughes,

14 Hubbard & Reed for the Trustee.

15

MR. BUNTING: Matthew Bunting, Quinn,

16 Emanuel, Urquhart, Oliver & Hedges for the

17 Creditors Committee and on the phone Erica

18 Taggart, also Quinn, Emanuel, Urquhart, Oliver &

19

Hedges.

20

MR. KRUSE: Phil Kruse with Alvarez &

21 Marsal on behalf of the LBHI Estate.

22

MR. LUCHT: Christopher Lucht, Simpson

23 Thacher & Bartlett, on behalf of the witness in

24 his individual capacity.

25

MR. HUME: Hamish Hume from Boies,

Page 6


6

2 Schiller & Flexner representing Barclays.

3

MR. TAMBE: Erica, can you hear us?

4

MS TAGGART: Yes, thank you.

5

MR. TAMBE: Morning, Mr. Tonucci. By

6 whom are you currently employed?

7

A. Barclays.

8

Q. In what capacity?

9

A. I work in the treasury area.

10

Q. What is your position?

11

A. Head of group balance sheet.

12

Q. And is that head of group balance sheet

13

for global operations?

14

A. That is right, for global operations.

15

Q. How long have you held that position?

16

A. Since February of this year.

17

Q. How long have you been employed by

18

Barclays?

19

A. Since September, 26 September 2008.

20

Q. What was your position at Barclays when

21 you first joined Barclays in September 2008?

22

A. US treasurer for Barclays Capital.

23

24

25

16

Page 17

1 HIGHLY CONFIDENTIAL - PAOLO TONUCCI 17

2

3

4 ammilmlimo

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

6 in secured funding haircuts", is that right? I

7 want to understand what you mean by "haircuts"?

A. The difference between the market value

9 and the cash received is known as the haircut in

10 a secured funding arrangement, the market value of

11 the securities I should say.

12

t

13

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291 HIGHLY CONFIDENTIAL - PAOLO TONUCCI

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22 Q. Let me rephrase. You understood the

23 5 billion dollars all in economic loss versus our

24 marks to be a reference to a discount off the

25 marks, correct?

5

6

7

8

9

30HIGHLY CONFIDENTIAL - PAOLO TONUCCI

A. Yes.

Q. The deal that was ultimately done and

4 closed on September 22, that too included

a discount off of Lehman's marks, correct?

6 A. That is correct.

Okay, and the amount of that discount

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

9 that right?

lo MR. HUME: Objection, lacks foundation.

11 A. It is uncertain, because obviously there

12 were a lot of valuation movements and so

13 I couldn't say with certainty, but certainly what

14 I can say is versus the valuations that I recall

15 seeing from our analysis it was about that number.

16 Q. About $5 billion?

1

2

3

7 Q.

Page 30

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Page 32


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4 Q. How did Barclays get the

5 5 billion-dollar discount?

6 A. Right. I think what was contemplated in

7 the negotiation, and what was executed in terms of

the settlement probably differed slightly, you

9 know, and involved over the week the settlement of

10 the transaction, meaning the actual transfer of

11 securities and cash was through the repo

12 agreements, and essentially the termination of

13 those repo agreements.

14 Q. Was the discount given to Barclays by

15 defaulting on the repo?

16 MR. HUME: Objection. You are asking

17 the witness very general questions about

18 a complicated transaction without walking him

19 through any of the details of that transaction. I

20 think the line of questioning lacks foundation.

21 MR. TAMBE: You have an objection to

22 form, right, Hamish? So noted. Answer the

23 question, please.

24 MR. HUME: I think the line of

25 questioning is calling for speculation and lacks

331

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foundation.

MR. TAMBE: Do you remember my question?

Probably not. Do you want it read back?

A. Yes, please.

(Read back)

A. Yes, I would say that was the way in

which the transaction was settled, so that is

fair.

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22

23

Q. Tell me briefly what the changes were,

24

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

25 Tuesday to later in the week?

Page 37


A. I can't recall the exact details. I

recall that the Barclays repo on the -- again, I

am not certain about this but the Barclays repo on

the 16th, I believe, was for $5 billion. On the

17th I believe it was for $8 billion and then on

the Thursday there was obviously a much bigger,

transaction and so that changed the Fed repo,

which became zero.

Q. Let's talk about that bigger transaction

on Thursday, okay. Describe for me how the Fed

repo went to zero and what happened with the

Barclays repo on Thursday?

A. It is difficult for me to talk about the

mechanics because I am not that close to the

operational mechanics of the repo being unwound,

but my understanding was that the repo unwound on

the Thursday morning, which would be typical in

a tri-party repo, that an overnight repo would

unwind, you would return the collateral and the

cash and the transactions would then settle with

that collateral that was released, and at the end

of the day a new financing transaction would be

settled.

In this instance there was complexity because

Page 38


38

JP Morgan was the tri-party agent for Lehman and had been

the tri-party agent in the transaction with the Fed. BONY

was the tri-party agent for Barclays and so there was a need

to transfer collateral from JP Morgan to Bank of New York

tri-party system, and I am not sure about the mechanics

involved in that transfer but it was clearly a more

complicated transaction than if the financing had just been

through the JP Morgan tri-party system.

Q. Is it your understanding that on

Thursday, in this bigger transaction on Thursday,

Barclays effectively replaced the Fed and the Fed

funding transaction?

A. I was not involved in the discussions

with Barclays or with the Fed on the removal or

replacement of the Fed in that transaction, so I

can't really talk to the specifics, but my

understanding was that the Fed transaction was

going to mature on the Thursday and they were not

really providing any financing subsequently.

Q. Wednesday night into Thursday, do you

recall the size of the Fed funding being

approximately $45 billion?

A. Yes, that sounds about right.

Q. And the Fed was holding approximately

Page 39


39

2 $50 billion in collateral against that financing?

3

A. That sounds right.

4

Q. And the big transaction that you

5 described on Thursday effectively had Barclays

6 coming in and putting in $45 billion to pay off

7 the Fed repo, correct?

8

A. I understood that they were going to be

9 putting in 45, that it was going to be

10 a 45 billion-dollar transaction, yes.

11 Q. And all the collateral that was being

12 held by the Fed was then going to be transfeired

13 to Barclays, correct?

14 MR. HUME: Objection, asked and

15 answered. He has already explained.

16

A. To be honest, I was not close enough to

17 the actual transaction that was being booked to

18 know exactly where all the collateral was going to

19 end up, nor was I close enough to any agreements

20 with Barclays or with the Fed as to where all of

21 the collateral was going to end up.

22 Q. So effectively on Thursday the Fed

23 funding goes down to zero, correct?

And they exit the financing picture at

Page 40

401


2

that point?

3

A. That is correct.

4

Q. And what you have left is the Barclays

repo, correct?


Q. Describe for me what happens with the

Barclays repo over the next few business dates?

9 We are now into Thursday on to Friday the 19th.

10

MR. HUME: Again, objection to the form

11

of the question and the lack of foundation.

12

A. That transaction happened on Thursday.

13

That was essentially the last of that transaction

14

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

15 on Thursday night and settled Thursday night into

16

Friday morning and that was the end of that

17

transaction. After that it was just a matter of

18

that transaction terminating and the collateral

19 being rebooked as a purchase by Barclays and as

20

a sale by Lehman.

21

22 1/11111111101.1PMPPPRIMMIS

23 111111■11111110111111.1111

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25 01111.111110MailirilliniMMilin

Page 54


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4 MOMMOMMMOINIMMOMMOMMIR

5 NNNON/NiiinlaSRMO-

dIIMIIIMNIMPINMOIMENMIMINIMMNIMMIMMOIMIIMII.

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8

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16 14.1.10=110111111111.111MIMPLINIMINiumummagm

17 4111IMMWD18 OMMUOIMMONIONIMINM

1111111=010.11111•••=simiiiiiiiiisaillmimmilla20

21

22

23

24 Q. And do you recall there being an effort

25 on September 19 to find additional collateral for

1

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Q. Asked by whom?

A. I believe I was asked by Ian Lowitt.

Q. Did Ian Lowitt tell you why he was

24

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■=llowsolvmmiNNW*digimmi=11.1.11M.

Page 55


2 Barclays?

3 A. I do.

4 Q. What can you tell us about the efforts

to find additional collateral for Barclays?

6 A. That we were asked on the morning of the

7 19th to find if there was additional collateral to

8 include in the transaction.

12 asking you to find additional collateral?

13 A. He said that it was necessary for the

14 transaction to close and he reiterated that

15 through the day.

16

17 SIMPI.OffirMnrifflill.g.....INMIIMOIMIMMEMIlis.

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21 1111/IMMiNiiiiiiatliMWMifek/MWO~Naiii.

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imilmommem

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simmommimmommisQ. You have a second item: "Their opening

balance sheet should also include 1.9 billion of

box assets". Correct?

A. Correct.

Q. What is that a reference to?

A. The unencumbered collateral.

Q. Schedule B?

A. Which became Schedule B.

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41011=111111111111

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8 aM=IIMMMII=MMNIOMMIIMINOMMie

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23 Q. The third item reads: "Not clear on the

24 amount of blocked discount or how we make it

25 happen." Do you see that?

Page 133

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2

A. Yes.

3

Q. And you understand that to be

4 a reference to the 5 billion-dollar discount that

5 we talked about earlier?

6

MR. HUME: Objection, lacks foundation.

7

A. I understand it to be a reference to the

8 discount on purchase, so I would have linked it to

9 that $5 billion.

10

Q. Then the next sentence reads:

11

"Defaulting on repo could be the best as

12

discounts could be taken from the haircut."

13

Do you see that?

14 A. Yes.

15

Q. Do you remember discussing with anyone

16 at Lehman defaulting on the repo as a way of

17 providing the discount to Barclays?

18

A. Yes.

19

Q. With whom did you discuss that?

20

A. I think it was with Ian and with Gerry,

21 perhaps Martin Kelly as well.

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23 aMOMMIIIIM=Millumwm=lsouress24

25 461.1.MONIMMINNIIMMIN.M.IMINEMINII

Page 142

HIGHLY CONFIDENTIAL - PAULO TONUCCI 142

armiall1111•111111111111111111111■

411■1111■111111111.10IM

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11111011111111011.11111111111111.11111111■1101■11■1•10■11m.

Immismamm■11111111■Mmil•

àí

Q. And your understanding was that

a default on the repo really converted what was a

two-leg transaction; the repurchase leg would go

Page 143

1


143

2 away and there would effectively be a sale of the

3 asset?

4

MR. HUME: Objection.

5 A. That is correct. It would become

6 a sale.

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8 Mi/mo■www■roo9 am■N/wwm•Rimi10 •■=mmmmair

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Page 146


2 1111111111111011.110111.11.1.111111111111.111.111.11111111.3 11111111.111.11.1111111.

4 11111111111111=

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10

11 Q. I have talked about the components at

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

13 recap the opening balance sheet, right, you have

14 the repo component and then you have 1.9 billion

15 for what we have talked about, became Schedule B,

16 and then you had another billion dollars of the

17 15c3 receivables?


19 Q. And the 1.9 and the 1 is about

20 $2.9 billion, right?


22 Q. And that was additional value over and

23 above the repo, correct?

24 MR. HUME; Objection.

25 A. Additional assets over and above the

Page 147


147

2 repo assets that were transferred on the Thursday

3 night.

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6 10M1.11.141.■7

8 4MOIMIIMINNUMIIMIM

9

MnaMliaMM/MMORIMMMN/Man/NER/OWEel10 alUMIIMM

11 ONIOMMIIIMIIM,MONIMIMPOOliMMIMMMIMP

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24 iiii.111.11.11111111.1.1011.1...IMMOillOMMMINMO25

TSG Reporting Worldwide (877) 702-9580

Page 1

HIGHLY CONFIDENTIAL - R. AZERAD



In Re:

Chapter 11

LEHMAN BROTHERS Case No. 08-13555(JMP)

HOLDINGS, INC., et al., (Jointly Administered)

Debtors.

REVISED


DEPOSITION OF ROBERT AZERAD

New York, New York

August 17, 2009


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August 17, 2009

9:29 a.m.


of ROBERT AZERAD, held at Jones Day

LLP, 222 East 41st Street, LLP, New

York, New York, before Kathy S.


Reporter, Registered Merit Reporter,

Certified Realtime Reporter, Certified

Livenote Reporter, and Notary Public

of the State of New York.

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3 41011011111.1111111111111111111111110.4 1111111111111.111MW

5 Q. Mr. Azerad, by whom are you employed

6 currently?

A. Barclays Capital.

Q. And how long have you been employed by

9 Barclays Capital?

10 A. Since September of 2008.

11 Q. In what position are you employed by

12 Barclays?

13 A. I am a director in the Treasury

14 Department of Barclays Capital.

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l'SG Reporting - Worldwide (877) 702-9580

Page 110

HIGHLY CONFIDENTIAL - R. AZERAD2

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5 TL6

OnEDMIM7

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4MMIMMIIMEMMMUMI

PMMUMMIMIMMObeftAMMMMEM%

amimonos

■===mmisiMir tw

410.11M.NnMUMEIMMMMM

flTTlet me -- I just want to kind of define it. The

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1 HIGHLY CONFIDENTIAL - R. AZERAD

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

3 financed on an unsecured basis. The reason it's

4 called non-actionable is because it's -- as part

of our analysis of the box, we try to separate

assets which we thought were left in the box,

left unencumbered, but could be financed from

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

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

the same 1.9 billion.

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24 VOW

TSG Reporting. Worldwide (877) 702-9580

Page 1

2 UNITED STATES BANKRUPTCY COURT3 SOUTHERN DISTRICT OF NEW YORK4

In re: )

) Chapter 116 LEHMAN BROTHERS ) Case No. 08-13555(JMP)

)7 HOLDINGS, INC., et al., )

)8 Debtors. )

)9

10

11

12

13

14 HIGHLY CONFIDENTIAL DEPOSITION OF15 ALASTAIR BLACKWELL16 New York, New York17 Friday, August 7, 200918

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23 Reported by:24 KRISTIN KOCH, RPR, RMR, CRR, CLR25 JOB NO. 24037


Page 2

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4 August 7, 2009

9:21 a.m.

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8 Deposition of ALASTAIR BLACKWELL,

held at the offices of JONES DAY, LLP, 222

10 East 41st Street, New York, New York,

11 before Kristin Koch, a Registered

12 Professional Reporter, Registered Merit

13 Reporter, Certified Realtime Reporter,

14 Certified Livenote Reporter and Notary

15 Public of the State of New York.

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14 11111111111111111111"1111111111.11111MMINI15 You are currently employed by

16 Barclays Capital; correct?

17 A. I am, yes.

18 Q. And what is your present position?

19 A. I am responsible for the Americas

20 operations department for capital markets.

21 Q. Okay. And do you have a title?

22 A. I am a managing director.


Page 1

5

In Re:

HIGHLY CONFIDENTIAL - Cr. HRASKA



1

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4

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7 LEHMAN BROTHERS

8 HOLDINGS, INC., et al.,

9

Debtors.

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Chapter 11



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DEPOSITION OF JAMES HRASKA

New York, New York

August 14, 2009

Reported by:


JOB NO. 24039

Page 2

1 HIGHLY CONFIDENTIAL - J. HRASKA

2 August 14, 2009

3

9:25 a.m.

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5


6 of JAMES HRASKA, held at Jones Day

7 LLP, 222 East 41st Street, LLP, New

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Certified Realtime Reporter, Certified

12

Livenote Reporter, and Notary Public


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Q.2

Okay. Before I forget, what is your

current position at Barclays?

4 A. I am in a very similar role.

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

6 equivalent to SVP. I manage, again, Secured

7 Financing Operations for both equities globally

8 and fixed income in North America.

9 Q. Is it fair to say your role is -- your

10 duties and responsibilities are relatively the

11 same as you had when you were at Lehman?

HIGHLY CONFIDENTIAL - J. HRASKA

12 A. Responsibilities are reasonably the

13 same, not quite as extensive as they were at

14 Lehman from a global perspective.

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01111011.11111MIPM11110.1111.110110.Orimmillio01011111.11M1111.1111110

Page 58

HIGHLY CONFIDENTIAL - J. HRASKA

111111111111111.16

tiosamainimariimailmigaiiiimaismosisegis

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

Q. And so what was the haircut associated

with the September 18 repo?

A. There wasn't a -- there wasn't a

specific stated haircut. There was a total loan

amount, which was this $45 billion, and the

total collateral value that we were trying to

transfer over to Barclays or what we were

directed to transfer over to Barclays was

approximately $50 billion.

Q. And that $50 billion was comprised of

the approximately $42 billion in securities that

you mentioned earlier plus the cash?

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1 HIGHLY CONFIDENTIAL - J. HRASKA

2 A. It turned out that that was the case.

3 It was initially intended to be all collateral,

but the market value of what we were to transfer

initially was $50 billion.

6 Q. Okay. And Barclays was, after the --

' after they received the proceeds of the loan and

a the collateral, was Barclays satisfied that it

9 had received the entire amount of collateral

10 that it was expecting with respect to that repo?

11 MR. SHAW: Objection. Foundation.

12

A. Yeah, I don't know whether they were

13 satisfied or not. I mean, we completed the

14 securities transfers until the point that we

15 couldn't make any transfers because the system

16 had been shut down, and we were requested at

17 that point to deliver an additional 7 billion in

18 cash, which we did.

19

20 41111MMOMMINIIMM4

21 emmulansgairemmis

22 11111111111111M23

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41111111.111111111111111111111111011125

Page 1

HIGHLY CONFIDENTIAL - M. KELLY



In. Re:

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9

LEHMAN BROTHERS

HOLDINGS, INC., et al.,

Chapter 11



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Debtors.


DEPOSITION OF MARTIN KELLY

New York, New York

August 18, 2009

Reported by:


JOB NO. 24042

10


Page 2

1 HIGHLY CONFIDENTIAL - M. KELLY

2 August 19, 2009

3 9:30 a.m.

4


6 of MARTIN KELLY, held at Jones

Day, LLP, 222 East 41st Street,

New York, New York, before Kathy S.






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--•-•----/- ,,,, • - • •TSG Reporting - Worldwide 877-702-9580

Page 8


2 By whom are you currently employed?

3 A. By Barclays Capital.

4 Q- How long have you been employed there?5 A. Since late September of '08.

6 Q. And what's your title at Barclays

7 Capital?

A. I'm a Managing Director and I'm the9 Chief Financial Officer in the Americas.

10 Q. And is that the position you have held

11 since you joined Barclays in September of '08?12 A. No, it's not. No, my --

13 Q. Go ahead.

14 A. My title has remained the same. My15 position changed in March, and upon going into

16 Barclays from Lehman, I had three different

17 positions. The first was the Financial

18 Controller for Barclays Capital on an interim19 basis, and that was a London-based position.

20 Second position was the head of Finance for21 Structured Capital Markets.

22 Q. Also in London?

23 A. Also in London. The third position24 was head of Americas Financial Decision Support.

25 Q. Financial Decision Support?


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A. Support, yeah.

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Q. Was that in London or in the Americas?

4

A. That was an Americas-based role.

Q. Are you based in New York?

6

A. I am. I have remained living in New

7 York. I commuted to London for that period of

8 time between September and March..

Q. Okay.

10 A. I should also say that, in addition to

11 being CFO of the Americas now, I retained the

12 second of those three positions, so I remain

13 head of Finance for Structured Capital Markets

14

today.

15

16

17 sommusgamaamosivall.18

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0110111Milsa10

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Page 46


11 Q. When you wrote, "Approx. a 5 billion

12 all in economic loss versus our marks," what did

13 you mean by that?

14 A. I recall that the 5 billion represents

15 the difference between the negotiated price and

16 the values of those assets on Lehman's books.

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7 0. As far as you know, sir, for these

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a asset classes, exclusive of cash, were they

shown on Lehman books at an amount higher than

$62 billion at or about the time this schedule

was prepared?

A. My understanding is yes, they were, in

aggregate.

Q. Were they $5 billion higher; is that

your understanding?

A. Approximately $5 billion higher.

11111111111111MINNIMMIMAIMINimi

111111111111.011~10111MinasmallamMOM

Page 108

3. HIGHLY CONFIDENTIAL - M. KELLY

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.Page 1161 HIGHLY CONFIDENTIAL - M. KELLY

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18

19 Q. Is it your understanding that the

20 entries on the liability side of this schedule

21 for cure payment for comp represent liabilities

22 that Barclays was going to assume in the

23 transaction?

24 MR. HUME: Objection. Vague.

25 A. Can you repeat the question, please?


15

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Page 117


2 (Record read.)

3 A. My recollection is that these amounts

4 were initial estimates of liabilities that

5 Barclays was to assume.

6 4. Well, the comp number of 2 billion was

an agreed number, correct?

a A. Yes, that was my understanding.

9 Q. And it was your understanding that the

10 2 billion comp number that was agreed was a

11 billion dollars over the accrual that Lehman

12 carried on its books for comp, correct?

13 A. It was approximately a billion dollars

14 over the cash component of the accrual.


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3 waa/alissiassmaw/i/O/MA4

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5 MMEI6 Q. What do you mean when you say there

7 was an effort to identify other assets? What

8 other assets are you talking about?

A. My recollection is that there was an

effort to identify whether there was a surplus

in funds segregated under the 15c3 requirement.

Q. Apart from the effort to find a

surplus in funds, the segregated funds under

15c3, were there other types of assets that were

being searched for to transfer to Barclays?

A. My recollection is there was a general

effort to identify unencumbered and pledgeable

assets.

qM■


Page 134


23

4

5 Q. Why was it reduced from 2 and a

6 quarter to $1 billion?

7 A. It was reduced after a review of the

8 schedule that Ian, Ian Lowitt, and I undertook

9 at some point during that week whereby we

10 observed that the estimated liability appeared

11 to be high relative to the expense run rate of

12 the firm.

13 Q. And was it you and Mr. Lowitt who made

14 that determination that it was high relative to

15 the expense run rate?

16 A. My recollection is that it was Ian and

17 I that made that observation.

18 Q. And at what point in the week did you

19 and Mr. Lowitt make that observation? Early in

20 the week? Late in the week?

21 A. I can't recall.

22 Q. Was it before Friday of the week?

23 A. I believe it was before Friday, but

24 I'm not certain.

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2 Q. Tell me what you said, what Mr. Lowitt

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

4 A. My recollection is that I explained

5 the observation that we had, meaning that the

6 liability estimate appeared high relative to the

7 run rate. I don't recall what Ian said in that

meeting. And I recall Bart's reaction to that

9 as being: We just left a billion dollars on the

Page 136

table.

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

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

4 Lehman. Did that calculate -- is it fair to say

that's primarily a function of the difference

6 between the book value of the inventory and the

7 value negotiated -- and the negotiated value in

8 the contract for the securities?

9 MR. HUME: Objection. Vague and

10 ambiguous.

11 A. It may. It may. It likely accounts

12 for the difference based on these estimates at

13 this point in time.

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16 awaniummunaumii.001■111111111aNaft


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Q. Uh-huh. Did you have an

8 understanding, sir, that the agreement, the

9 pricing of the agreement was that Barclays would

10 pay Lehman 5 billion less than Lehman had

11

thought the assets were worth?

12

A. My understanding was that the

13 negotiated sales price across all those asset

14 portfolios resulted in a $5 billion,

15 approximately $5 billion loss to Lehman relative

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to its marks at that time.

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Page 1

1 HIGHLY CONFIDENTIAL - G. LaROCCA


3 SOUTHERN DISTRICT OF NEW YORK4

5 In Re:

6 Chapter 11

7 LEHMAN BROTHERS Case No. 08-13555(JMP)

8 HOLDINGS, INC., et al., (Jointly Administered)9

Debtors.10

11


13 DEPOSITION OF GERARD LaROCCA


15 August 19, 200916

17

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ISO Reporting - Worldwide (877) 702-9580

Page 2

HIGHLY CONFIDENTIAL - G. LaROCCA

2 August 19, 2009

3 9:30 a.m.

4


6 of GERARD LaROCCA, held at Jones

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

New York, New York, before Kathy S.



11 Certified Rea1time Reporter, Certified


13 of the State of New York.14

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Q. Okay.

A. And said we needed to get on the phone

with the Fed, okay? And Jonathan used words

like if the Fed is going to support this, you

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

support this transaction that we want to try to

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

that -- we're going to have to take the Fed out


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2 of my -- of their financing obligation with

3 Lehman Brothers.

4

I participated in a phone call with

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

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

and after my phone call, the urgency was evident

to me and I dropped what I was doing and headed

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

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

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

almost positive it was Tuesday night early

evening and met with Lucinda Brickler and other

colleagues of hers from the Fed.

And Lucinda had explained to me that

the Fed was financing Lehman Brothers, had

provided roughly $45 billion in financing for

Lehman Brothers, and that they were using --

that Lehman was using three facilities to

finance collateral and the Fed had lent them $45

billion.

111111111.


Q. The cash is how much? 45 billion?

Page 36

2 HIGHLY CONFIDENTIAL - G. LaROCCA

A. Originally, the -- we moved 5 billion

initially, and the securities did not move

across quickly, and as a matter of fact, we

actually didn't get $5 billion worth of

securities for the first $5 billion worth of

cash that moved across.

At that point in time, I alerted the

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Page 371 HIGHLY CONFIDENTIAL - G. LaROCCA

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

3 was Lucinda Brickler or Stephanie Heller, that

4 we had agreed a transaction, we were having a

5 great deal of difficulty because JPMorgan was

6 not cooperating, and they had gone onto the --

7 they had gotten -- I was told that they were

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

9 you what they said.

10 They came back to me, the Fed, and

11 said that JPMorgan wanted to hold the excess

12 collateral in margin for the transactions to

13 satisfy, you know, their potential exposure to

14 Lehman Brothers, and I said that's a

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

16 had agreed on the Wednesday.

17 We had agreed a transaction with the

18 Fed to take the Fed out of the transaction, not

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

20 exposures to Lehman Brothers. That was a lively

21 discussion with me and the Fed, and at that

22 point in time, I had escalated to Rich Ricci

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

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

25 Q. Something colorful?

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

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Page 383. HIGHLY CONFIDENTIAL - G. LaROCCA

2 A. Something colorful, right? They

3 didn't play nice in the sandbox, okay?

4

And, you know, and several -- now

hours have passed, right? And, you know, we

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

7 much securities.


Page 1

1 HIGHLY CONFIDENTIAL - D. PETRIE


3 SOUTHERN DISTRICT OF NEW YORK

5 In Re:

6 Chapter 11

7 LEHMAN BROTHERS Case No. 08-13555(JMP)


Debtors.10


13 DEPOSITION OF DAVID PETRIE


15 August 26, 200916

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Page 2


2 August 26, 2009

3 9:29 a.m.

4


6 of DAVID PETRIE, held at Jones Day

7 LLP, 222 East 41st Street, New York

8 New York, before Kathy S. Klepfer

9 a Registered Professional Reporter

10 Registered Merit Reporter, Certified

11 Realtime Reporter, Certified Livenote

12 Reporter, and Notary Public of the

13 State of New York.

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Page 93


2 Q. And the next line below that?

3 A. The next line below that reads,

4 "Haircut charged will be implied."

5 Q. What does that mean?

6 A. Given that the Fed had extended

7 funding for Lehman assets, the Fed employed its

8 own haircut schedule for those assets. Given

9 that Barclays had been asked by the Fed and we

10 were undertaking taking the Fed out of their

11 lending of money to Lehman Brothers for those

12 specific assets, when we would receive those

13 assets versus the cash that we were lending to

14 Lehman, the collateral that we would receive,

15 which would be at this point identical to what

16 the Fed had been funding on that Thursday, the

17 haircuts would be implied because they had

18 already been applied to the Lehman loans.


Page 113

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2 collateral that we received.

3 Q. Is that consistent with your

4 recollection of what happened that evening into

the Friday?

A. My recollection is in dollar terms.

7 We received 42.7-ish billion dollars worth of

a collateral and got $7 billion in cash to

complete the Fed repo trade. This breakdown

from John Haley is something I wouldn't be able

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

not.


Page 1

1 HIGHLY CONFIDENTIAL - M. KLEIN



4 X

5 In Re:

6 Chapter 117 LEHMAN BROTHERS Case No. 08-13555(JMP)

a HOLDINGS, INC., et al., (Jointly Administered)9

Debtors.10

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13 DEPOSITION OF MICHAEL KLEIN


15 September 12, 200916

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Page 2

HIGHLY CONFIDENTIAL - M. KLEIN

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September 12, 2009

3 10:40 a.m.

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6 of MICHAEL KLEIN, held at Jones Day

7 LLP, 222 East 41st Street, New


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Page 177

HIGHLY CONFIDENTIAL - M. KLEIN

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WilaMMortimamiMiNWMOIMMElaMIMMM•MMIIMINNISMIIMMInaft00

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Q. Do you have an understanding as to

whether or not Barclays received any residential

real estate securities in connection with the

,



Page 1

1 HIGHLY CONFIDENTIAL - A. COX2 UNITED STATES BANKRUPTCY COURT3 SOUTHERN DISTRICT OF NEW YORK4

In Re:6 Chapter 117 LEHMAN BROTHERS Case No. 08-13555(JMP)


Debtors.10

11


13 DEPOSITION OF ARCHIBALD COX


15 September 11, 200916

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23 Reported by:

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

25 JOB NO. 24300


Page 2

1 HIGHLY CONFIDENTIAL - A. COX2 September 11, 2009

3 10:19 a.m.4

5 HIGHLY CONFIDENTIAL deposition6 of ARCHIBALD COX, held at the law7 offices of Jones Day, LLP, 222 Easta 41st Street, New York, New York, before9 Kathy S. Klepfer, a Registered Professional

10 Reporter, Registered Merit Reporter,11 Certified Realtime Reporter, Certified12 Livenote Reporter, and Notary Public13 of the State of New York.14

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TSG Reporting Worldwide (877) 702-9580


1 HIGHLY CONFIDENTIAL - A. COX

Page 99

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3 fearammommoimaisimaiimmomait4

Iminsimiusionamina

MOM

11.1111Mallat

.10111M4111M111111111MMINIMMIONNOMINIO

110011111611111111111111111111111.Do you have an understanding as to

whether or not Barclays received any residential

mortgage securities in connection with this sale

transaction?

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Page 100

1 HIGHLY CONFIDENTIAL - A. COX

2 A. The residential mortgages were subject

3 to a good deal of negotiation and discussion. I

4 do not recall where we came out on those.

5 Q. Okay. Do you have an understanding as

6 to whether or not they were pledged to the DTC

7 in connection with the sale transaction?

8 A. I do not know for certain, no.


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