Excerpts from the depositions - Wall Street Journal

Case 2:11-cv-10549-MRP-MAN Document 254-1 Filed 03/28/13 Page 1 of 35 Page ID 

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Deposition Testimony of Christopher J. Swift 

March 21, 2013 

Christopher Swift was the lead businessperson acting for AIG on Maiden Lane II. 

• “A. In the fall of 2008, I was the CFO of the Life and Retirement Services Business 

Unit.” 10:3–5. 

• “Q. You were involved with the Maiden Lane II transaction, correct? A. Yes. Q. Could 

you describe for me your role in connection with that transaction? A. I was, I would say, 

the principal business person quarterback to find the solution. Q. A solution to the 

securities lending program? A. Yes. The mission was to wind it down.” 35:14–25. 

• “Q. So, you were involved in negotiations over Maiden Lane II with the Fed, correct? A. 

Correct.” 42:4–7. 

• “Q. So, you said that―in response to one of Mr. Fry’s questions, that you were the 

principal business person, the quarterback to find a solution to securities lending. Do you 

recall that? A. Yes. Q. Were you also the principal business person, the quarterback, in 

negotiating the Maiden Lane II transaction? A. Yes.” 74:12–21. 

• “Q. And from your perspective as the chief negotiator for AIG, who were the primary 

negotiators on the Fed side of the table? A. I would say I interacted with two on a 

principal basis: Jim Mahoney on a daily basis, and Steve Manzari on a two-, threetimes-a-week 

basis during this time. So, those would be the two principal ones.” 

75:7–15. 

Swift testified that he had no discussions with anyone about transferring AIG’s fraud claims. 

• “Q. During that time period, did you ever discuss with anyone the question whether or 

not AIG would be transferring litigation claims to Maiden Lane II? A. No, I did not 

discuss it with anyone. Q. You didn’t discuss it with anyone at AIG? A. True. Q. You 

didn’t discuss it with anyone from the Fed? A. True. Q. You didn’t discuss it with any 

lawyers for the Fed? A. Correct. Q. You didn’t discuss it with any lawyers for AIG? A. 

Correct.” 58:6–23. 

• “Q. During the time period from when you first heard of what became the Maiden Lane 

II solution, until the time that the Asset Purchase Agreement was signed, did you have 

any written communications with anyone concerning the question whether AIG would be 

transferring litigation claims to Maiden Lane II? A. I don’t―I don’t recall having 

written communication dealing with claims in litigation at all. Q. And would your 

answer to that question be the same if I referred to transferring litigation claims to the 

Federal Reserve? A. Yes.” 59:4–19. 

• “Q. And with respect to discussions, is it correct that you did not have any discussions 

with anyone during that period concerning the question whether AIG would be 

transferring litigation claims to the Federal Reserve Bank of New York? A. Correct. I 

don’t recall talking about claims in litigation and―at all with the Fed.” 59:20–60:4. 

• “Q. What was the asset that comprised the bulk sale, from your perspective as the lead 

negotiator for AIG? A. $40 billion of par value of RMBS securities. Q. Did you 

believe that that asset included fraud claims? A. No. As we said, we’ve talked about a 

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lot of things, we negotiated a lot of things; we did not negotiate a transfer price of 

terms and conditions for transferring fraud claims.” 76:25–77:12. 

• “Q. Now, I want to take you back to your interactions with Mr. Manzari and Mr. 

Mahoney. You said you spoke with them. [Y]ou spoke with Mr. Mahoney on almost a 

daily basis during the negotiations of the ML II transaction, correct? A. Yes. Q. And 

with Mr. Manzari less frequently than that, but frequently? A. At least a couple of times 

a week. Q. [] Did Mr. Mahoney ever tell you that the Fed or Maiden Lane II wanted to 

acquire AIG’s fraud claims? A. No.” 81:13–82:3. 

• “Q. Now, did Mr. Mahoney ever tell you―and I’m going to quote from him 

directly―that ‘the FRBNY and ML II intended to receive all transferrable or assignable 

benefits associated with the securities and related instruments, including litigation claims 

associated with those securities or their acquisition by AIG?’ A. I never talked to him 

about litigation claims during this process. Q. And did he ever tell you he wanted to 

have an assignment, or the Fed wanted to have an assignment, of those tort claims―of 

those fraud claims? A. No. We never talked about claims, you know, of any types. Q. 

. . . [D]id he ever even mention the word ‘fraud claims’? A. No, he did not. Q. Did he 

ever say anything that suggested to you that the Fed wanted to acquire, or ML II wanted 

to acquire fraud claims? A. No, he did not. Q. Did he ever say anything that suggested 

to you the Fed needed to acquire all litigation claims to protect the Fed from downside 

risk? A. No. The downside risk was proved with the collateral performance in ML 

II. Q. And when you’re talking about ‘collateral performance’, are you speaking about 

the residential mortgage-backed securities? A. Yes.” 82:21–84:9. 

• “Q. Mr. Manzari, did he ever tell you that the Fed or ML II wanted to acquire fraud 

claims? A. No. Q. Did he ever mention fraud claims? A. No. Q. Did he ever say 

anything to suggest that the Fed or ML II wanted AIG’s fraud claims? A. No.” 84:10– 

19. 

• “Q. Did anyone at the Fed say or suggest that the Fed or ML II wanted to acquire AIG’s 

fraud claims? A. No. Q. Did anyone representing the Fed, including its attorneys, say or 

suggest that the Fed or ML II wanted to acquire AIG’s fraud claims? A. No.” 84:20– 

85:4. 

• “Q. Did anyone at AIG or representing AIG suggest, say anything to suggest that the Fed 

wanted to acquire AIG’s fraud claims? [Objection] Q. Were you told that by anyone at 

AIG? A. No.” 85:5–12. 

• “Q. During the negotiations of the ML II transaction, were you aware of any document 

suggesting an intent by the Fed or ML II to acquire AIG’s fraud claims? A. No.” 85:13– 

17. 

• “Q. If the fraud claims, the issue of assignment of fraud claims had been raised, is that 

something you would have expected to be brought to your attention? A. Yeah. I mean, 

we talked about, and presented to the Board, you know, what we thought the deal 

was; we presented to regulators, you know, what the deal was. And if it was a term 

and condition, I would have known about it.” 85:18–86:3. 

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• “Q. Based on your experience in the business world and your role as lead negotiator for 

AIG, did you believe that AIG was transferring its rights to bring fraud, or fraud 

claims―its rights to bring fraud claims to ML II? A. Absolutely not. I mean, it’s―we 

were working collaboratively, and those issues just weren’t discussed and/or 

transferred as far as our final document and final agreement.” 86:4–14. 

• “Q. Mr. Swift, based on all of the facts that you are aware of and your experience both as 

a businessman and lead negotiator for AIG, are you firm in your conviction that AIG did 

not transfer fraud claims to ML II? A. Absolutely. [Objections] A. We did not 

negotiate it; we did not intend to transfer it. And we were working, you know, 

collaboratively with the Fed and we talked about everything that was significant, we 

had a transparent discussion, they had their interest, we had ours. But this was 

never, ever discussed.” 127:4–21. 

Swift testified that he did not believe AIG transferred any fraud claims to ML II. 

• “Q. What is your understanding regarding whether or not the Asset Purchase Agreement 

transferred litigation claims from AIG to Maiden Lane II? [Objection] A. Again, as 

we―as we negotiated the tax points, as you mentioned before, or the residual equity 

interest, you know, that the five-sixth, one-sixth split, as we talked with, you know, 

the Finance Committee, the regulators, we did not talk about, you know, litigation 

because it really wasn’t a negotiated point. We didn’t believe we were transferring; 

we didn’t negotiate a transfer price. We didn’t talk about it because it just 

wasn’t―wasn’t part of, you know, the deal terms and conditions that we―we were 

trying to solve for.” 60:21–61:15. 

• “A. RMBS’s [are] generally made up of multiple of individual mortgages that 

go―that are pooled. So, I believe what we were transferring was, you know, the 

securities and all the rights, stuff that back-up the mortgages that make up the 

RMBS security. Q. Is it your understanding that AIG was transferring something more 

than the securities? [Objection] A. No. I―what I believe we―we negotiated on the 

Term Sheet and that we were primarily responsible for was the sale of securities. Q. 

Was there anything else besides the securities that AIG was transferring as part of the 

Maiden Lane II Asset Purchase Agreement? [Objection] A. It was transferring the 

securities and the rights of those securities. I mean, we were conveying to the Fed, in 

exchange, you know, for cash, the securities and the rights that securities have 

with―with those securities.” 64:2–65:4. 

• “A. [W]hen you trade a security, you’re giving up, you know, the economic rights to 

the underlying cash flows of it. So, whether it be in a market trade or the trade we 

did with the Fed, you know, the―the economics that back up the certificates, you 

know, the fees that you had to pay from a mortgage servicing side, the interests, the 

principal collections, all that is part of that security that we were selling. Q. And 

were there any other rights, besides that collection of rights, that you understood AIG was 

selling to Maiden Lane II? A. No, I’m not aware of anything else, and I probably 

should have been since, I mean, I was principally responsible for the Term Sheet.” 

68:14–69:7. 

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• “Q. Did you intend, as lead negotiator, to assign AIG’s fraud claims to ML II? A. No. 

Q. Did AIG [] intend to assign its fraud claims to ML II? A. No. Q. What did AIG 

believe it was selling and intend to sell to ML II? A. The underlying securities.” 

86:15–24. 

Swift testified that “Related Instruments” meant the documents and rights included in the 

securities. 

• “Q. At the time that this Agreement was signed, December 12, 2008, did you have an 

understanding of what was meant by the words ‘together with all right, title and interest 

in and to all Related Instruments’? A. As we were negotiating, you know, the deal, I 

had the understanding that we were transferring the security right and interest in 

all the underlying mortgages that were part of an RMBS package.” 63:5–15. 

• “Q. Did you understand the term ‘Related Instruments’ to include an assignment of 

AIG’s fraud claims to the Fed? A. No, I did not. Q. Why not? A. One, the word 

‘fraud’ is not mentioned in this paragraph; and two, I interpreted this to mean the 

activities, the documents, the stuff that goes with servicing mortgages.” 80:2–11. 

• “Q. Okay. I believe you said you’re not a lawyer, correct? A. Yes. Q. You’re a CPA and 

a businessman? A. Yes. Q. And from your perspective as a CPA and a businessman, 

when it lists the documents under the definition of ‘Related Instruments,’ what’s your 

thinking about what that means? [Objection] A. I believe it means . . . this is what 

people understood and they would have been clear if there was other things that 

would have included that could have been, can be significant. Q. And when you say 

they would have been clear if other things are included, are fraud claims within those 

other things that would have needed to be spelled out specifically? [Objection] A. That 

would be my understanding.” 80:12–81:10. 

• “Q. Okay. At the time that the Asset Purchase Agreement was being negotiated, did you 

discuss with anyone the meaning of the term ‘RMBS Issue’ in the contract? A. I 

personally did not. Q. Did you discuss with anyone the meaning of the term ‘Related 

Instruments’ in the contract? A. I personally did not.” 128:21–129:5. 

Swift testified that the sale price did not include any valuation of the ability to pursue fraud 

claims for losses already suffered. 

• “Q. Do you recall how the price paid by Maiden Lane for the assets that it bought was 

calculated? A. Market value. Q. Do you know how that number was calculated? A. 

Market value is determined in a number of different means: sometimes observable 

third-party trades, sometimes mark-to-model trades, sometimes, I’ll call it cost is 

used as a basis of market value. So, the intent of the transaction was supposed to be 

based on the market value of the securities.” 46:13–47:2. 

• “Q. And can you explain in a little more detail, please, the role of BlackRock? 

[Objection] A. I think BlackRock’s role in this transaction, you know, they were 

viewed as, you know, the leading industry expert on residential mortgage-backed 

securities and other structured product and had very sophisticated models that 

would predict ultimate cash flows coming off of, you know, mortgages for ultimate 

valuation purposes.” 115:22–116:8. 

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• Q. Now, does the market value include a valuation for potential fraud claims? [Objection] 

A. I don’t believe so. Q. Why not? A. The best way I can explain it is, is that this, it’s 

a security value and representing the economics on the underlying investments in 

the securities. And again, I’m not a lawyer, but I just viewed fraud, fraud claims as 

separate and are usually, you know, contingent upon outcomes, and highly―highly 

unpredictable from a value side. So, I don’t―I don’t think the street values fraud 

claims, tries to put a value on these, a fraud claim into a security.” 113:14–114:8. 

Swift testified that during the negotiation and sale of securities to ML II, he had general 

knowledge that AIG may have fraud claims. 

• “Q. So, are you saying that you were thinking about fraud but you didn’t have a strategy? 

Or are you saying that you weren’t thinking about fraud claims? [Objection] A. We had 

not developed, you know, the―the strategy to go after. We had not discussed it in 

any, you know, I’ll call it great length or details at all as it relates to, you know, the 

securities that we were transferring at this point in time. Q. So, you had the idea but 

you hadn’t discussed it at any length? A. That’s fair to say. I mean, we had an 

awareness; I had a general awareness. But it wasn’t brought forward into a 

coherent strategy of how we were going to approach it.” 131:16–22. 

Swift testified that had AIG been transferring fraud claims to ML II, he would have wanted to 

include that in the Term Sheet that was presented to the AIG Board of Directors. 

• “Q. What was your role in the preparation of the Term Sheet setting forth the deal terms 

for the Maiden Lane II transaction? A. I would have been working with the lawyers 

that would have prepared it to document the key components.” 90:13–19. 

• “Q. [W]hen the Term Sheet refers to ‘a certain pool of RMBS,’ what did you understand 

that to mean? A. The asset, the RMBS assets that were backing the securities lending 

obligations. Q. Is there anything in that definition that suggests to you that fraud claims 

are included in the asset being transferred? A. No. Q. Is the term ‘fraud’ used? A. No.” 

93:9–21. 

• “Q. There is a definition of ‘RMBS Assets’. Do you see that? A. Yes. Q. Could you read 

that definition into the record, please? A. ‘Collectively, the RMBS Issues listed in 

Schedule A hereto for each Seller and rights to the outstanding principal thereof 

and accrued interest thereon as of October 31, 2008 (for each Seller, an “Indicative 

RMBS Pool”) less the dispositions thereof and the collections of principal and 

interest thereon plus accrued interest thereon between October 31 and the Closing 

Date.’ Q. In your opinion as the chief negotiator for AIG, is that a fair description of the 

asset that was being sold to Maiden Lane II? A. Yes. Q. Is that what you understood the 

asset to be? A. Yes. Q. Do you see anything in that definition of the ‘Asset’ that 

suggests fraud claims are being transferred? A. No. Q. Do you believe that definition in 

any way includes fraud claims? A. No. Q. Why not? A. It doesn’t say so.” 93:24– 

95:7. 

• “Q. Let’s turn to Schedule A, which is referred to under the definitions. . . . [I]t includes a 

bracketed statement that says, ‘List of RMBS Issues in RMBS pool to come.’ Do you see 

that? A. Yes. Q. What did you understand the ‘list of RMBS Issues’ to mean? A. The 

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securities that were going to be sold. Q. Did you understand anything in the words ‘list 

of RMBS Issues’ to include fraud claims? A. No.” 95:8–96:10. 

• “Q. If the ML II deal had included an assignment of fraud claims, would you have 

expected that to be listed in the Term Sheet? A. Yes. Q. Why? A. I think it would 

have been a significant, you know, deal point that we would have, you know, 

negotiated, discussed, tried to value and would have been, you know, sort of the 

completeness of, you know, dealing with if we wanted a transfer. It would have been 

self-evident that was the intent and we would have documented it and talked 

through the terms and conditions of how we would transfer it.” 96:17–97:7. 


present that to the Finance Committee of the AIG Board of Directors. 

• “Q. What was the AIG[] Finance Committee’s role in reviewing the ML II transaction at 

this point in time? A. My understanding was it was the Committee that was 

responsible for major transactions, restructuring activities at the time for the full 

Board. Q. And do you recall that it―whether it had been delegated authority from the 

Board to address the ML II transaction at this point in time? A. I seem to recall they 

were responsible, so . . . .” 103:24–104:12. 

• “Q. In your presentation to the Finance Committee, how did you describe the assets that 

were being sold to Maiden Lane II? A. As securities that were being transferred. Q. 

Did you mention fraud claims in your presentation? A. No, I did not. Q. Why not? A. 

Because it wasn’t a deal point where we transferred fraud claims.” 106:2–13. 

• “Q. And if you had thought fraud claims had been assigned, what, if anything, would you 

have done differently? A. I would have mentioned it. Q. And why would you have 

mentioned it? A. As a significant deal point and an item that people would have and 

should have known that we were giving up, you know, rights to, to those future 

fraud claims.” 106:14–23. 

• “Q. Did Sarah Dahlgren or Davis Polk say anything to suggest that your description of 

the assets transfer was inaccurate? A. No. Q. Did Sarah Dahlgren or anyone from Davis 

Polk make any mention of fraud claims? A. No.” 106:24–107:6. 

• “Q. Do you see that the document, starting on page ‘2323, is a memorandum to the AIG 

Finance Committee? A. Yes. Q. And it is from David Herzog and Christopher Swift, 

correct? A. Correct. . . . Q. The first sentence of that bullet point says, ‘The LLC would 

immediately use the proceeds of the senior loan from the FRBNY described above to 

purchase the RMBS from the AIG insurance companies,’ correct? A. Yes. Q. What did 

you understand ‘RMBS’ to mean? A. The individual securities that were being sold. 

Q. Did you understand it to include fraud claims? A. No. Q. Does the memo anyplace 

mention fraud claims? A. No. . . . Q. And the last sentence is, ‘The RMBS will be the 

only assets of the LLC.’ Do you see that? A. Yes. Q. Again, in that sentence, what do 

you understand ‘RMBS’ to mean? A. The individual securities.” 107:12–109:15. 

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present that to the state insurance regulators. 

• “Q. What was your role in making presentations to insurance regulators about the ML II 

transaction? A. Yeah, I was the lead spokesperson for AIG’s Life and P[&]C 

companies on the securities lending matter. Q. And what type of oversight, what type 

of information did the regulators want to hear from you as the principal presenter? 

[Objection ] A. They want―they wanted, and expected, transparency on anything 

significant.” 99:13–100:2. 

• “Q. [Discussing presentation to insurance regulators] Is there any reference to the 

assignment of fraud claims to ML II in Exhibit 77? A. No. Q. In making your 

presentations to insurance regulators, how did you describe the assets that AIG was 

selling to ML II? A. Throughout the various pages in here, you can see that we 

were―we―we were referring to the assets, . . . either as the RMBS assets or the 

non-RMBS assets. . . . [T]he RMBS assets, as it related to the ML II transaction, 

were described as residential mortgage-backed securities. Q. And did you say 

anything to the regulators that might suggest fraud claims were being assigned? A. No.” 

101:3–102:2. 

• “Q. If you had believed that fraud claims were assigned to ML II, what, if anything, 

would you have done differently in your presentations to insurance regulators? A. At 

minimum, I probably would have had a bullet point just talking through it as―as a 

deal point. Q. Why? A. I think, again, if―if you really understand the nature of the 

securities lending pool, these were the assets and obligations of the underlying 

insurance company’s balance sheets. And if AIG gave up that right and obligation, 

the insurance commissioners will want to know about a future monetizable asset, or 

future recovery that was also, you know, given up. So, anyway, it would have just 

been a significant part of the overall transaction we would have talked about.” 

102:3–23. 

Swift testified that ML II was intended to stabilize AIG while ensuring the FRBNY would be 

repaid. 

• “Q. In structuring this Maiden Lane II transaction, what was your understanding of the 

objective as to AIG going forward? [Objection] A. I mean, the objective of AIG was 

to stabilize, continue to stabilize, you know, the organization with a solution to a 

program that―that created large credit losses and some inherent volatility in its 

equity position. Q. So, to put it in more simple terms: Was the transaction part of a 

solution to help AIG recover from the financial crisis? A. I believe so.” 120:14–121:4. 

• “A. The Fed made it very clear that it was a lender. It was intent on having its loan 

repaid, and it used BlackRock and us to give them comfort that, under various 

economic conditions and scenarios, their loan would be repaid. They made it very 

clear that they had never had a loss on a loan they made, and they never intend to 

have a loss on a loan that they made.” 82:7–16. 

• “A. That was the Fed’s primary objective, was to always be viewed as the lender, 

and they never were going to be allowed/permitted to incur a loss. Q. Did you 

understand why this transaction resulted in a very low likelihood of failing to repay the 

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senior debt? A. Because of the structure. Q. And with respect to the securities 

themselves, the RMBS that were being sold, how did that contribute to a low likelihood 

of failing to repay senior debt? A. The 24 billion [price] was viewed, at least by me 

and AIG, as a―as a depressed value due to the market conditions at that time. 

And that if you looked to different, you know, I’ll call it, conditions of how the cash 

flows would perform, not how the market, you know, was, you know, marking these 

securities to market at the time, there would be adequate cash to pay off the debt . . . 

and then be able to share any upside potential in the residual cash flows . . . . A. I 

think later in the document we show various scenarios that, you know, the Fed 

would still make money on this transaction.” 117:12–119:3. 

• “Q. Do you believe that further decline had any impact on the Fed’s likelihood of full 

recovery? [Objection] A. Not―not from what they ultimately funded. So, I don’t 

recall with specificity what they exactly funded in the final, final deal. But if we were 

modelling the 23, 23 and a half billion, I think they funded something less, so they 

put less principal at risk. And ultimately, AIG and its subsidiaries sort of bore the 

difference in value. Q. And the reason, again, that this further decline would not affect 

the likelihood of full recovery is what? [Objection] A. My belief was that the ultimate, 

you know, cash flows were still sufficient to pay off the Feds, you know, primary 

investment.” 125:19–126:16. 

• “Q. Did you believe at the time you were negotiating the ML II transaction, that the Fed 

was going to make money on the transaction? A. I did. Q. Do you know if the Fed, in 

fact, did make money? A. I’ve read press reports that they did make money. Q. Do 

you know about how much? A. About $2 billion.” 126:17–127:3. 

Swift testified that ML II was beneficial to many different groups. 

• “Q. Was the Maiden Lane II transaction viewed as beneficial to AIG? A. I would view it 

as, yes, beneficial to a lot of different constituencies. I would view it as beneficial to 

AIG and its shareholders; I would view it be beneficial to policyholders of the Life 

Company that had, you know, significant credit exposure. I viewed it as positive to 

the regulators that had more security. I viewed it as a good for the American 

taxpayers, because a lot of this money then went to others that were able to use it for 

their liquidity purposes and not have a continued meltdown on the financial system. 

So, it was beneficial to a lot of different groups, and primarily AIG.” 72:10–73:3. 

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Deposition Testimony of R. Edward Holmes, Jr. 

March 19, 2013 

Edward Holmes was the lead internal counsel representing AIG on Maiden Lane II. 

• “Q. You said you were involved in Maiden Lane II, correct? A. Yes. Q. And what was 

your involvement? A. I was the lead internal counsel representing AIG. Q. What did 

you do in that capacity? A. I oversaw external lawyers representing AIG; I spoke 

with and represented the business people within AIG; I interacted directly with the 

Fed, Davis Polk, and representatives of the Fed, for instance, Ernst & Young; and I 

coordinated with lawyers within AIG with regard to, for instance, insurance-specific 

issues.” 27:18–28:8. 

• “Q. Who did you consider your internal client in Maiden Lane II? A. There were a 

number of business people involved, but by that point in the deal, Chris Swift was 

really taking the lead among the business people.” 28:18–23. 

• “Q. And with respect to the terms of [] AIG’s agreement with the New York Federal 

Reserve Bank, who did you deal with internally on what those terms would be as opposed 

to operational issues? A. Mainly Chris Swift.” 30:3–8. 

• “Q. Were you involved in the documentation of the Maiden Lane II transaction? A. Yes.” 

35:20–23. 

• “Q. Were you involved in negotiations concerning the Asset Purchase Agreement that 

was signed in connection with Maiden Lane II? A. Yes. Q. [] What was your role in 

connection with the negotiation of the Asset Purchase Agreement? A. I was lead 

internal counsel representing AIG companies. Q. And could you describe what you 

did as the lead internal counsel concerning the negotiation of the Asset Purchase 

Agreement? A. Sure. I went to—I reviewed documents; I interacted with our outside 

counsel; I interacted with the Fed; I interacted with Davis Polk; I interacted with 

internal counsel on insurance issues; I interacted with business people, our own 

business people; I was in meetings relating to, you know, putting—putting the Asset 

Purchase Agreement in place, including the operational type of meetings that we’ve 

already talked about.” 35:24–36:23. 

• “Q. You mentioned that you reviewed documents. Did you review drafts of the various 

agreements that were put in place as part of Maiden Lane II? A. Yes. Both the Term 

Sheets and Asset Purchase Agreement. Q. Did you provide feedback on those drafts? 

A. Yes. Q. Did you provide that feedback directly to people at the Fed or representing 

the Fed? Or did you provide that feedback to someone representing AIG? [Clarification] 

A. I think—I think all. I think I provided feedback to our own business people, our 

outside attorneys, and on occasion, directly to people at Davis Polk.” 36:24–37:17. 

• “Q. Now, describe for us, if you would, your role, if any, in creating the Term Sheet on 

this deal? A. The Term Sheet itself, I believe, was drafted by Davis Polk. But I 

would have been involved in reviewing in detail the Term Sheet. Q. Did you play any 

part in negotiating the Term Sheet? A. Yes. I would have given comments to both my 

business people and to Sullivan & Cromwell, and those comments would have been 

passed on to Davis Polk and the Fed. Q. Did you deal directly with anybody at the Fed 

or any of their representatives in negotiating the Term Sheet? A. On at least—on at least 

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one occasion, I was dealing directly with Mr. Heckart. Q. [] What level of familiarity 

would you describe yourself as having with respect to the Term Sheet? [Objection] A. I 

reviewed the Term Sheet thoroughly.” 132:21–133:21. 

Holmes testified that he had no discussions with anyone about transferring AIG’s fraud 

claims. 

• “Q. I’d like to ask you some questions about the period from whenever you learned 

about it in October until when [the APA] was executed . . . in December of 2008. . . . 

During that time period, did you have—did you discuss with anyone the question whether 

AIG would be transferring legal claims to Maiden Lane II as part of the transaction? . . . 

A. There was—there was no discussion about transferring tort claims, we’ll call 

them—I’ll call them, during, during the course of those discussions and—I’ll end 

there.” 53:3–23. 

• “Q. Do you recall any discussion with anyone about whether AIG would be transferring 

legal claims that can be asserted in a lawsuit to Maiden Lane II as part of the transaction? 

[Objection] A. Yeah, so, as I think you know, we’ll just say, there are different 

rights that you have with—to pursue. So, as you know, the rights to get the—cause 

the trustee to go get securities, mortgages back whenever the mortgages don’t meet 

certain standards as set out in the documents is a right that goes with the 

documents. To the extent you’re asking me—and I think you are—about rights 

associated with AIG’s losses at the time AIG owned the securities, and that were— 

arose as a result of communications relating to the securities in connection with AIG 

buying them, those claims, those second set of claims, we never, ever discussed 

transferring those.” 58:23–59:24. 

• “Q. Mr. Holmes, I think you testified earlier that during the time frame we were 

discussing, between when you first learned of Maiden Lane II and when the con—the 

Asset Purchase Agreement was signed, you had no discussions with anyone about 

whether tort claims would be assigned by AIG to Maiden Lane II; is that correct? A. 

That’s correct.” 61:20–62:3. 

• “Q. Do you recall any discussions about whether any causes of action that AIG 

possessed would be transferred to Maiden Lane II? A. Other than enforcement rights 

in the documents, which we’ve talked about, AIG’s rights were not going to transfer 

and there were no discussions about that.” 62:25–63:8. 

• “Q. Do you recall any written communications that you had with anyone regarding 

whether or not AIG would be transferring any tort claims to Maiden Lane II? A. I don’t 

recall any communications on transferring tort claims.” 68:22–69:4. 

• “Q. And do you recall any written communications about whether or not AIG would be 

transferring the right to bring statutory claims relating to the RMBS to Maiden Lane II? 

A. . . . [T]here was no discussion of those types of claims. Q. And no written 

communications on the subject? A. No. No written, no oral. No. Nothing.” 69:12– 

70:4. 

• “Q. Do you recall any written communication concerning whether or not AIG would be 

transferring causes of action to Maiden Lane II? A. No, I would lump that in with the 

same general category of the previous two we talked about.” 70:5–11. 

EXHIBIT 2 

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• “Q. Are you saying that it’s not something that you thought about at the time because of 

what the circumstances were? Or are you saying you did think about it? [Objection] A. 

I’m saying that I knew the law from prior experience, and that there[] simply was 

no discussion of transferring what we’re calling the ‘tort claims’.” 74:18–75:2. 

• “Q. Do you know why it was that AIG was briefing its insurance regulators about the ML 

II deal? [Objection] A. Yes. Because a deal of this magnitude, we would not—we 

would not execute without having briefed the regulators. Q. And how do you know 

that? A. Custom and practice. It’s what we do for—for much, much smaller deals 

and points than this. . . . Q. [D]o you see any reference in there [the presentation to 

insurance regulators] to AIG assigning any tort claims to ML II as a part of the ML II 

transaction? A. No.” 137:16–139:22. 

• “Q. Is that something you would have expected to see in this document had such an 

assignment been intended? [Objection] A. It would have needed to be in this 

document. Q. Why? A. Because of the purchase price being market, market not 

including those types of claims. So, we would have needed to indicate to the 

regulators that was something we were―the insurance companies were giving up 

value on. And the regulator itself, one of the primary concerns of the insurance 

regulators is affiliate transactions which is, effectively, transfer of value from the 

regulated balance sheet to other affiliates. That was a particular concern during 

this time, and the regulators would have been looking for, you know, whether or not 

there was value going to other parts of the organization and being given up by the 

insurance companies as a result of, you know, having given those claims away for, 

effectively, free.” 139:23–140:25. 

• “Q. At any point in the negotiation of the Asset Purchase Agreement, did anybody from 

the Fed or any of the Fed’s representatives convey to you in words or substance that the 

Fed sought to acquire, through the ML II transaction, litigation claims associated with the 

RMBS securities or their acquisition by AIG? [Objection] A. No. I never saw, heard, 

was aware of any intent on the part of Maiden Lane II or the Fed to acquire the 

litigation claims.” 145:24–146:12. 

• “Q. At any point during the negotiation of the Asset Purchase Agreement, did anybody 

from the Fed or any of the Fed’s representatives convey to you, in words or substance, 

that the Fed or ML II sought to acquire, through the ML II transaction, all transferrable 

and assignable benefits associated with the RMBS securities and related instruments? 

[Objection] A. No.” 146:13–24. 

• “Q. At any point during the negotiation of the Asset Purchase Agreement, did anybody 

from the Fed or any of the Fed’s representatives convey to you that the Fed and ML II 

sought to receive, through the ML II transaction, litigation claims associated with the 

RMBS securities or their acquisition by AIG? [Objection] A. They never did.” 147:10– 

20. 

Holmes testified that he did not believe AIG’s fraud claims transferred. 

• “A. It was my understanding throughout the process that we were transferring title 

to the securities, and the other ancillary rights that went with the securities, which 

meant voting rights, the right to enforce documents, the right to receive principal 

EXHIBIT 2 

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and interest; the types of claims that an owner of the documents or an owner of the 

securities would have.” 57:19–58:3. 

• “A. If somebody had asked me, if anybody had asked me, you know, are the tort 

claims transferring as part of this deal? I would have told them no.” 75:3–6. 

• “Q. So, you thought about whether or not there would be a legal claim that AIG could 

pursue to recover those losses on these RMBS? [Objection] A. I knew that there was a 

loss. I knew it would be realized from AIG’s perspective. But whether or not it 

would have been actionable in the legal sense, you know, was unclear and would 

have required the litigators to come in, look at the facts, and figure out whether or 

not if it was actionable. And that analysis had not been done at that time. Q. [] So 

you hadn’t reached some conclusion about whether or not AIG could pursue claims? A. 

That’s correct. Q. But you thought about maybe we could pursue claims? A. Yes.” 

77:10–78:7. 

• “A. [Referring to ML II Term Sheet] And so, what’s being stated here is that the 

securities that would be listed on Schedule A is—is what’s transferring, less 

principal and interest payments that accrue between October 31st and the Closing 

Date, which were payments that we would have collected already. So, that was being 

backed out of the purchase price. Q. So, according to the Term Sheet, as you 

understood it, what was being transferred to ML II in this deal? [Objection] A. The 

securities that were listed and the rights in those securities.” 134:14–135:4. 

• “Q. To your understanding, did the scope of what was being transferred, as you just 

described it, change between the Term Sheet and the execution of this final [APA]? 

[Objection] A. No.” 135:9–16. 

• “Q. Mr. Holmes, what is your understanding regarding whether the Asset Purchase 

Agreement transfers tort claims from AIG to Maiden Lane II? A. My understanding is 

it does not.” 98:20–24. 

• “Q. And did you have an opportunity to review the Complaint in this case before it was 

filed by AIG? A. Yes. Q. And did you understand that that Complaint asserted tort 

claims against the Defendants arising out of their sale to AIG of certain of the RMBS that 

were later sold to ML II? [Objection] A. They were earlier sold to ML II, yes. Q. And 

did you have at that point any objection to AIG filing that Complaint? A. No.” 148:2–17. 

• “A. My initial reaction [to BoA’s argument that AIG transferred claims to ML II] 

and my reaction now are the same, which is that those claims were never 

transferred.” 149:6–8. 

Holmes testified that he had prior experience with transferring tort claims, and that he would 

have taken different steps had he been aware the FRBNY intended to acquire such claims. 

• “Q. Now, you testified earlier that you were familiar with certain law relating to the 

transfer of tort claims at the time the Asset Purchase Agreement in ML II was negotiated 

and executed. A. Right. Q. What did you understand about the law on that subject back 

at that time? [Objection] A. It’s my understanding that in order to transfer tort 

claims, you need to specifically address it in the—in the assignment documents. Q. 

EXHIBIT 2 

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And to your understanding, did that occur in the Asset Purchase Agreement? [Objection] 

A. No, it didn’t.” 143:5–24. 

• “A. I knew from work I [had] done, I felt the law was that to transfer tort claims, 

they have to be specifically addressed. And there are types of form documents out 

there that specifically addressed transferring tort claims.” 71:9–14. 

• “A. We had specific experiences where we had done that [transferred tort claims], 

and due to the misalignment of interest between the people that ultimately held 

them and our witnesses, and other data, we—we hassled. But really it was, you 

know, we would have to provide data, depositions and things whenever—we had 

never – and we didn’t have an interest in the outcome of the case anymore. And so, 

you know, had – had I known, had I known that, you know, the Fed might have 

wanted those claims, that would have been one of the things we would have needed 

to talk about. We would have needed to talk about price, enforcement, whether— 

you know, how we stop it whenever, whenever it’s getting out of hand for us, 

because of the potential misalignment of interest in previous work I’d done in that— 

in that regard.” 71:15–72:11. 

• “A. [M]y own experience and AIG’s experience in transferring those types of claims, 

which we had done in other context, was that you needed to deal with additional 

issues like the potential misalignment of interest between the party that has the 

claims then and can—for lack of a better way to say it, pursue, pursue those claims 

without regard to the cost to AIG in providing data, depositions and other materials 

necessary in order to pursue those claims.” 144:7–18. 

• “A. So, you can be put in a position where you’re doing a whole lot of work to 

support the claims and, yet, at the same time, you’re not getting any of the value out 

and you can’t stop the other party from continuing to pursue them. We had had a 

problem with that, you know, previously that I was involved in. Q. And are there 

any provisions in the final version of the Asset Purchase Agreement that deal with that 

potential problem that can arise when tort claims are assigned? [Objection] A. No . . . 

[there are] not.” 144:19–145:11. 

• “A. I knew at the time, under New York law, that you needed to specifically refer to 

them [tort claims]. I knew that we would have needed to deal with making data 

available to the Fed to allow them to pursue those claims if they were to have 

received them. We needed to think about limiting the scope of data. If we wanted 

to, we needed to think about if the price being paid made sense. If there is no 

additional compensation in terms of the security, we needed to think about whether 

or not the one-sixth remainder would justify some of the potential lawsuits that 

might have been filed. There were a number of things that needed to be thought 

through and dealt with in order to—to transfer those claims in a meaningful way.” 

149:9–150:3. 

• “Q. And was that your only other prior experience with the transfer of litigation claims 

that you were referencing in your earlier testimony? A. No. . . . There were others, both 

in the context of—of an assignment, and then separately having to deal with the 

misalignment of interests that occurred in one case whenever we transferred the 

EXHIBIT 2 

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litigation claims, and didn’t retain any rights to the proceeds as a result of the 

litigation. So—so, there were multiple times that I dealt with transferring litigation 

rights . . . .” 157:17–158:12. 

Holmes testified that the “Related Instruments” language was meant to clarify what ML II 

was acquiring from AIG. 

• “A. I don’t recall any specific discussion on ‘Related Instruments’. Q. Did you have 

any written communication with anyone regarding the definition of ‘Related 

Instruments’? A. I don’t think so. Q. . . . I want you to focus on specifically the 

phrase ‘all right, title, interest in and to all Related Instruments.’ Do you see that 

language? A. Yes. Q. Prior to the execution of the Asset Purchase Agreement, do you 

recall discussing that language with anyone? A. No. Q. Prior to the execution of the 

Asset Purchase Agreement, do you recall any written communications with anyone 

regarding that language in this definition? A. No.” 85:10–86:13. 

• “Q. Did you have any discussions about whether breach of contract claims would be 

transferred from AIG to Maiden Lane II? A. I don’t remember that specifically. What 

was clear to me was that the Fed wanted to control the securities, and—and so they 

were interested in making sure that they got the right to have full control of the 

securities, you know, while they were owned by Maiden Lane II.” 62:5–14. 

• “A. [T]he point of the sections that we talked about [definitions of ‘Related 

Instruments’ and ‘RMBS Issue’] is to ensure or to clarify exactly what’s being 

assigned. And the ‘Related Instruments’ definition adds to or creates additional 

clarity around exactly what it is ‘RMBS Issue’ includes. So, you got the main— 

main securities listed on Schedule A, and then, you know, together with ancillary 

rights in the related instruments; and then you’ve got—you’ve got the other types of 

deal documents here listed that you might have in a mortgage-backed security.” 

107:9–22. 

• “Q. So, in your understanding, the—what the language ‘together with all right, title and 

interest in and to all Related Instruments’ does, is to say that you get all the rights you 

would have gotten in a market sale of these securities? A. Basically. Q. Is there 

anything else that that language does? A. No.” 108:22–109:7. 

• “Q. Is it your understanding that the Maiden Lane II received exactly the same rights it 

would have received if it purchased the securities in the open market? A. Yes.” 109:8– 

12. 

• “Q. Okay. And so, in your understanding, there were contract rights that were transferred 

to Maiden Lane II? A. That’s correct. Q. But if AIG was harmed while it owned the 

security and had a legal cause of action it could pursue regarding that harm, that was not 

transferred? A. That’s correct. Q. And that doesn’t matter whether it’s a tort claim or a 

breach of contract claim or a statutory claim? A. That’s correct.” 120:7–19. 

• “Q. And in this instance, why was it—why was an Asset Purchase Agreement necessary? 

Why not simply transfer all these securities electronically? [Objection] A. Among other 

things, the—so—so, the exhibit to the Asset Purchase Agreement, which lists out all 

the securities and the pricing, needed to be agreed ahead of time; we needed to know 

how much money would go from Maiden Lane II to the AIG companies; the Fed 

EXHIBIT 2 

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and Maiden Lane II needed to know the CUSIPs that were transferring; we needed 

to deal with the purchase price mechanics and principal and interest payments 

afterward. So we’ll call those operational reasons. And we would have needed to go 

through that exercise regardless. In addition to that, the Fed was, for instance, 

interested in receiving ‘true sale’ opinions, that we talked about earlier, to ensure 

that—that Maiden Lane II was getting the true sale of the securities. And, in 

addition, the Fed got some—some representations from the sellers that they 

wouldn’t have otherwise received. Q. Do you know whether all of the securities that 

were transferred through the ML II deal were publicly traded? A. I believe some of them 

were private. Q. And with respect to residential matter—residential mortgage-backed 

securities that are not publicly traded, can those be transferred, to your understanding, 

without some sort of asset purchase agreement? A. Typically you’d have an 

assignment document that goes with them.” 141:13–143:4. 

Holmes testified that AIG did not sell its RMBS into the market in order to avoid depressing 

already depressed prices for those securities. 

• “Q. Why didn’t AIG just sell them in the open market then? A. Because you can’t sell 

the mark—the volume in the market was such that you couldn’t sell that volume of 

securities in any reasonable period of time. And so we didn’t want to further 

depress the market by selling into it, and the Fed didn’t want us to do that. Q. Is it 

your testimony that if AIG took all of these securities to market on, say, October 31, 

2008, it could not have sold them? A. That’s correct.” 109:22–110:15. 

EXHIBIT 2 

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#:16607 

EXHIBIT 3


#:16608 

Deposition Testimony of Steven J. Manzari 

March 15, 2013 

Steven Manzari was the FRBNY’s “number two” person in charge of its relationship with 

AIG. 

• “Q. Were you the second most senior? A. So, there were several senior vice 

presidents. Sarah [Dahlgren] was a senior vice president at that time, but she was 

the team leader of the team, and I functioned as her number two.” 17:9–14. 

• “Q. You told us that Sarah Dahlgren was the most senior person and you functioned as 

her number two, correct? A. Yes. Q. . . . Was there another number two? Or did you 

understand your role to be the next senior person on the team below Sarah Dahlgren? A. 

I think that’s how Sarah would have described my role.” 146:19–147:7. 

• “A. So, to the extent that, for instance, one of my colleagues was assigned to the 

Maiden Lane III transaction, another one was assigned to the Maiden Lane II 

transaction, they, I think, would have been far more involved in the specific 

drafting of the legal agreements, etcetera. Q. And who was that . . . for Maiden Lane 

II? A. James Mahoney.” 106:2–12. 

• “Q. [Y]ou certainly understood what the terms of the transactions were as between ML II 

and AIG, correct? A. Yes.” 110:4–8. 

Manzari repeatedly testified he had no discussions with anyone about transferring AIG’s 

fraud claims. 

• “Q. Do you remember any discussion leading up to the execution of the Maiden Lane II 

documents about AIG somehow giving up its rights to try to seek any recovery from 

anyone for the losses of the $17 billion? A. No.” 99:15–20. 

• “Q. At any point in time, were you involved with any—in any discussion? And this is 

either with AIG or internally at the New York Fed—in which there was a discussion that 

in entering into Maiden Lane II, AIG would be in any way giving up its right to seek a 

recovery against any banks associated with that $17 billion loss? [Colloquy] A. I don’t 

recall any discussions.” 99:21–100:14. 

• “Q. You’re not aware of any discussions that you participated in with anyone from AIG 

in which there was any discussion about AIG giving up claims that it might have to go 

after the banks that had sold it the RMBS to try to recover those losses, correct, sir? 

A. I don’t recall any conversations in that regard.” 100:18–101:2. 

• “Q. [T]here was no discussion between the New York Fed and AIG regarding what 

would happen with such legal claims, right? [Objection] A. If your question is about 

legal claims, I don’t recall any conversations about—if you’re talking about things 

like reps and warranties, I don’t recall any conversations about that. Q. With AIG? 

A. With AIG. Q. How about internally at the New York Fed? A. I don’t—I don’t 

recall any conversations about those . . . specific factors.” 103:17–104:13. 

• “Q. [E]arlier I asked you the question of whether you recall any discussions with anyone 

regarding the idea or the concept of AIG somehow giving up claims that it would have 

against bank counterparties with respect to its losses suffered when it initially purchased 

EXHIBIT 3 

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the RMBS that it then sold to ML II. Am I correct, sir, you don’t recall any such 

discussions even with Mr. Mahoney? A. No, I don’t recall. I do not recall that topic 

coming up.” 108:24–109:12. 

• “Q. And I take it that Mr. Mahoney has never raised the issue with you at any point in 

time, correct? A. No. Q. I’m correct? A. Yes, correct.” 121:9–14. 

• “Q. Have you ever heard anyone, through today, within the New York Fed, ever say that 

in connection with the Maiden Lane II transaction, AIG somehow gave up or gave away 

its claims to pursue against the bank counterparties that initially sold it its RMBS? 

[Instruction] A. Oh, I really do not recall this topic coming up.” 117:23–118:12. 

• “Q. Have you ever had conversations with anybody about that subject matter? A. Yes. 

Q. Okay. And would that be counsel? A. Yeah. Q.[] Other than counsel, I take it you 

haven’t had conversations with anybody? A. I don’t remember having a conversation 

about this. Q. And the conversations that you had with counsel, how recent were those? 

A. A week or two ago maybe.” 119:5–17. 

• “Q. Would it be correct, then, at least from your standpoint when you entered into—the 

New York Fed, when it entered into the Maiden Lane II transaction, you did not have an 

understanding that AIG was in any way giving up legal claims that it might have to 

pursue against the banks that had sold it the RMBS issue that it was now selling on to 

ML II? [Objection] A. So, we didn’t have—I just don’t recall this topic coming up.” 

122:3–18. 

• “Q. [Regarding negotiating the APA] And so, if it contained language that refers to ‘all 

right, title and interest and related instruments,’ you’re not familiar with that language? 

A. That is correct.” 232:6–10. 

Manzari testified that ML II was always a sale of securities—and nothing else. 

• Manzari understood ML II to be a sale of securities—and nothing else. 

• “Q. It was your understanding that what was being proposed is that the assets that 

would be sold by AIG to Maiden Lane II was a pool of residential mortgagebacked 

securities, correct, sir? A. Yes. Q. Anything else? A. I don’t think so.” 

98:3–10. 

• The Board of Governors approved the purchase of RMBS by ML II—and nothing else. 

• “Q. But roughly, when did you understand the authorization had already been 

given to execute the Maiden Lane II transaction? A. I believe —the formal 

authorization happened with a—by the Board of Governors some time—in 

early November shortly prior to sort of the announcement of all the 

transactions.” 116:13–21. 

• “Q. And they were also authorizing that what Maiden Lane II would be 

purchasing were AIG’s residential . . . mortgage-backed securities, correct, sir? 

A. Yes, that’s right.” 254:23–255:5. 

EXHIBIT 3 

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• The loan to ML II was to be repaid by cash flows and asset sales—and nothing else. 

• “Q. The loan would be paid—would be repaid by virtue of cash flows from the 

underlying mortgages within the residential mortgage-backed securities as one 

source, correct? A. Yes. Q. And the other source being the sale of those 

securities, correct? A. That’s right. Q. And that’s it, correct, as far as you 

understood it? A. I—yes. I don’t know how else Maiden Lane II would have 

gotten repaid.” 255:25–256:13. 

• The FRBNY and its advisors determined the price for AIG’s RMBS based on the value of 

the securities’ cash flows—and nothing else. 

• “A. [W]e had BlackRock run, using its own fair value process on the firm— 

on those same securities.” 60:16–19. 

• “Q. [T]he cash flows that you talked about coming out of the underlying loan 

pools, would be the cash flow that’s generated from [] the principal—principal 

payment of the mortgages, correct? A. Yes, They—it would be the underlying 

interest and principal payments that flow through the [underlying] mortgage 

pools as a result of just about any of the consumer behavior that generates 

cash flows out of mortgages.” 62:25–63:13. 

• “Q. So, to be clear, the price that was determined by the modelling to arrive at 

fair value was based upon modelling of the expected future cash flows generated 

by the underlying mortgages with some discount factor being applied back, 

correct, sir? A. That’s right. Q. And that’s what your understanding was in the 

totality of how that market value pricing was arrived at, correct, sir? A. That’s 

right.” 67:10–20. 

• “Q. In your understanding, did the model that BlackRock used to determine fair 

value take into account any risk associated with possible fraud in the issuance of 

the securities? [Objection] A. I don’t believe it would have.” 225:22–226:6. 

• The FRBNY’s loan to ML II was fully secured by RMBS—and nothing else. 

• “Q. And in connection with the $85 billion credit facility that was extended to 

AIG on September 16 th , that credit facility, to your knowledge, was in compliance 

with 13.3; that is, the Fed believed that it was secured to its satisfaction? A. Yes, 

that’s correct.” 237:16–23. 

• “Q. And am I correct that the same 13.3 issues existed; that is, that the Fed had to 

be satisfied that the loan to Maiden Lane II was fully secured at least to the Fed’s 

satisfaction? [Objection] A. That’s right. Q. And in fact, once the loan was made, 

can we take that as the strongest indicia that the Fed was satisfied that it was fully 

secured to its satisfaction? [Objection] A. The—yes, we believed that we were 

secured to our satis—I believe we were secured to our satisfaction. Q. And 

that’s because you had a—‘you’ meaning the New York Fed, had a, as collateral, 

the assets of Maiden Lane II, correct? A. Yes. The RMBS that w[ere] 

purchased from AIG. Q. Okay. So, the residential mortgage-backed securities 

that had been sold into Maiden Lane II was the collateral that gave the New York 

EXHIBIT 3 

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Fed the comfort under 13.3 that it had security, or full security, to its satisfaction 

. . . correct? A. Yes.” 238:18–239:24. 

Manzari was never asked about his intent with respect to whether litigation claims were 

transferred, although he was intimately involved in the FRBNY’s negotiation of ML II. 

• “Q. Do you have any recollection at all of being asked by Mr. Baxter or anyone within 

the New York Fed, for you to provide historical information or views as to the rights that 

were or were not transferred to Maiden Lane II in 2008? A. No.” 143:23–144:5. 

• “Q. [Referring to representation of FRBNY’s intent to obtain litigation claims in 

Settlement Agreement] You’ve never seen that representation before, correct, sir? A. 

That is correct. Q. And you were asked whether you had any basis to disagree with it. 

You also have no basis to agree with it, correct, sir? A. Yeah, that’s correct.” 234:3– 

13. 

• “Q. At the time that Maiden Lane II documentation was being executed, the Asset 

Purchase Agreement, or the APA which you were asked about, Mr. Taylor [who executed 

the Settlement Agreement] had nothing to do with Maiden Lane II; am I correct? A. 

He—I don’t believe he was employed by the New York Fed at that time. Q. . . . 

You do know, because you were involved, you do know what the Fed’s intent was in 

entering into Maiden Lane II, correct, Mr. Manzari? A. I believe I do, yes.” 235:21– 

236:12. 

Manzari testified that the FRBNY did not enter into ML II to make a profit. 

• “Q. And is it the case that at that point in time—so, the fall into the winter of 2008—the 

markets themselves were in crisis? A. Significant stress.” 53:5–9. 

• “A. What I would say is that we became involved with AIG when senior 

policymakers at the Federal Reserve, and the Treasury, and other parts of the 

government made a determination that the disorderly failure of AIG would have 

been unacceptable consequences for the U.S. economy.” 165:23–166:5. 

• “A. Our overall objective was to prevent the disorderly failure of AIG. ‘Cause we 

believed it was—it would have been a very big problem for the U.S. economy.” 

154:21–155:2. 

• “A. I think that’s all indicative of some fairly unique stress in the financial system. 

Q. So, it wasn’t a problem that was unique to AIG, correct? [Objection] A. I think it 

was—in my view, it would be both. AIG had their own specific issues, and there was 

broad stress as well.” 245:2–11. 

• “A. The point of that was to demonstrate to the rating agencies that there was a 

comprehensive package of actions that—that the U.S. Government was going to 

take to support AIG.” 161:24–162:4. 

• “Q. Was it also important to structure the assistance in a way that made it more likely that 

the assistance would be paid back? A. We have a requirement that we need to be 

secured to our satisfaction. Q. But along with preventing the failure, it was important 

that the credit you were extending, in fact got paid back? A. Yes, that would—yes. 

Very much so.” 173:25–174:15. 

EXHIBIT 3 

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• “Q. Is that part of what was motivating the New York Fed in entering into Maiden Lane 

II, to generate profits? Or was it—that was not something factored into the Fed’s 

thinking? [Objection] A. No, it was not a significant factor in our thinking. Q. 

Meaning profits? A. That’s correct.” 85:20–86:5. 

• “Q. [Referring to Ms. Dahlgren and Mr. Baxter’s testimony] Do you see right above 

‘conclusion’, the two witnesses testified: ‘that said, our goal was never to make money. It 

was to avoid the systemic consequences that would have resulted’? Do you see that? A. 

Yes. Q. And that is consistent with your view, correct? A. Absolutely.” 87:5–14. 

• “A. Just to be quite clear, it was never our intention. This wasn’t a profit-seeking 

venture. Q. I appreciate that. But it turned out, nevertheless, to have been a profitable 

venture, correct? A. Yes.” 248:7–13. 

EXHIBIT 3 

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#:16613 

EXHIBIT 4


#:16614 

Deposition Testimony of James M. Mahoney 

March 18, 2013 

James Mahoney was the “business lead” for the FRBNY on Maiden Lane II. 

• “A. That question has to do with my interaction as the business lead on the 

purchases of those RMBS securities from Maiden Lane into the―from AIG into the 

Maiden Lane vehicle.” 60:25–61:5. 

• “A. I was the business lead and so I did not have the pen in drafting any of the legal 

language. I relied exclusively on counsel for that.” 138:23–139:2. 

• “Q. . . . [Y]ou would be among the persons most knowledgeable? A. Yes. I may be the 

most knowledgeable. Because I―I pursued this from the very beginning, in 

September 2008, through the closing in―in December of 2008 so . . . .” 99:21–100:4. 

• “A. What I was involved with is picking the securities that would be bought in to 

this Maiden Lane vehicle; the date at which they would be transferred; their 

valuation date will be done with the cash flows that the securities generate between 

the valuation date and the execution date; the prices at which things would be 

transferred; how accrued interest and how interest on those cash flows that came in 

between.” 139:3–14. 

• “Q. [Davis Polk] was the law firm that was representing the New York Fed and ML II, 

correct? A. That’s correct. Q. And . . . Davis Polk was orchestrating the legal 

documentation for both ML II and ML III, correct? A. That was my understanding.” 

242:8–16. 

Mahoney repeatedly testified he had no discussions with anyone about transferring AIG’s 

fraud claims. 

• No discussions about transferring fraud claims with anyone from AIG. 

• “Q. Do you remember discussing with AIG the idea of potentially assigning away 

fraud claims that AIG may have had in connection with its purchase of those 

RMBS securities? A. No, I do not.” 80:18–23. 

• “Q. And you[] also, by definition, had no such conversations with anyone from 

the AIG side, correct? A. That’s correct.” 82:18–21. 

• “Q. Do you know if—do you know if anyone at the New York Fed or 

representing the New York Fed ever told AIG in words or substance that the Fed 

expected to receive AIG’s fraud claims or tort claims as part of the ML II 

transaction? A. No.” 85:7–13. 

• “Q. You didn’t have any discussions with anyone from AIG in which there was a 

discussion that AIG was somehow giving up its rights to pursue a recovery for 

that $18 billion loss against the institutions that may have wronged it; am I 

correct? [Objection] A. It is correct that I have no knowledge of any 

conversations like that.” 124:3–12. 

• “Q. Do you ever recall having a conversation with Sonia Hamstra in which you 

said to her that, as part of the ML II transaction, you want ML II to acquire or to 

EXHIBIT 4 

1


#:16615 

receive an assignment of AIG’s rights to pursue claims against the bank’s 

counterpart—parties that sold it the RMBS securities? A. No.” 228:2–10. 

• “Q. Do you remember having that conversation with Mr. Swift? A. No.” 228:11– 

13. 

• “Q. Do you ever remember having that conversation with Mr. Holmes? A. No, 

definitely not.” 228:14–16. 

• “Q. And do you remember having that conversation with anyone from AIG or its 

representatives? A. No.” 228:17–20. 

• “Q. [D]o you remember ever discussing with Mr. Swift or with Ms. Hamstra the 

concept of what additional rights are going to be transferring with the securities 

into ML II? A. I don’t think I ever discussed with them that question. That 

would have been taking us far, far, far from the standard conversations we 

were having about which securities would be transferred, what date, all the 

business questions that we were being asked. So, our conversations did not 

get into questions like that.” 245:7–19. 

• No discussions about transferring fraud claims with anyone at the FRBNY. 

EXHIBIT 4 

• “Q. Do you remember ever discussing that internally with anybody at the New 

York Fed, that as part of this transaction, We should be telling AIG or asking 

AIG, Hey, we want you to assign to us any tort claims that you might have against 

the bank counterparties that initially sold you this RMBS? A. I recall no such 

conversations.” 80:24–81:8. 

• “A. [O]ur general direction, general stance had been to derisk the company, 

and we would take the downside risk; but as protection of that, we would get 

all the protections associated with that. But we had no conversations 

specifically about tort claims.” 82:4–10. 

• “Q. When you say ‘we had no conversations specifically about tort claims’, 

you’re talking about even internally at the New York Fed, correct? A. I was not 

involved in any conversations that talked about those tort claims.” 82:11– 

82:17. 

• “Q. Did you ever have discussions, through the creation of ML II, a discussion 

with anyone within the New York Fed about seeking to obtain or receive from 

AIG its rights to pursue tort or fraud claims—tort or fraud claims against the 

banks that sold it the RMBS securities that were being sold to ML II? A. Not— 

not until late 2012 when I was asked by legal counsel what my interpretation 

of those transfers were.” 84:10–20. 

• “Q. Did you ever have a discussion with Ms. Dahlgren about the New York Fed 

acquiring from AIG the rights to pursue recoveries against the banks that sold 

AIG the securities that were being sold to Maiden Lane II? [Objection] A. No, I 

did not have any conversations with Sarah Dahlgren about that topic.” 

100:5–15. 

• “Q. How about Mr. Manzari, same question? [Objection] A. Same answer.” 

100:16–19. 

2


#:16616 

• “Q. Am I correct that at no time prior to the closing of the ML II transaction did 

you, James Mahoney . . . specifically consider an assignment of AIG’s tort claims 

from AIG to ML II? [Objection] A. Well, given that I couldn’t define exactly 

what a tort claim is, I would have to answer that no . . . .” 118:25–119:21 

• “A. The transfer of litigation rights, to the extent that that’s something 

particular, I was really just concerned about moving all the upside and 

recourse over to the Fed. I didn’t contemplate taking something away . . . .” 

129:8–15. 

• “A. Right. And so I do not have in my mind, I don’t believe the business side 

had in its mind that if there was a legitimate claim, that [AIG] couldn’t 

pursue it.” 126:16–19. 

• “Q. And you also didn’t have any conversations, you personally, with anyone 

within the New York Fed that AIG was giving up those rights, correct, sir? 

[Objection] A. That is correct.” 124:13–19. 

• “Q. After the legal documentation had been executed . . . creating Maiden Lane II, 

the structure and the APA itself, did you discuss with anyone at the New York 

Fed, including its advisers, in other words, did you say to them in words and 

substance . . . Hey, by the way, I just want to know, did we or how did we effect a 

transfer of AIG’s rights to assert claims? A. No. [Objection] Q. That never came 

up, did it? A. That never came up in the months subsequent to the—a 

transaction.” 136:22–137:14. 

• No discussions about transferring fraud claims with anyone who met with the Federal 

Reserve Board of Governors. 

• “A. I was part of one preparation for the presentation, but not any 

involvement with the direct Board of Governors, the seven-member Board of 

Governors, no. . . . In the preps for it, I was.” 83:11–20. 

• “Q. In the preps . . . do you recall there being any discussion with people on 

behalf of the New York Fed who would be meeting with the Board of Governors 

about seeking to obtain or receive from AIG its right to pursue tort or fraud claims 

against the banks that sold it the RMBS securities? A. No.” 83:21–84:6. 

• “Q. Do you recall ever saying to any of the staff members at the Board of 

Governors with whom you spoke in the fall of 2008, up until closing of ML II, 

about the idea or the issue of receiving from AIG an assignment or transfer of 

AIG’s rights to seek recoveries for the losses it was about to undertake in 

connection with the Maiden Lane II transaction? A. No.” 296:20–297:5. 

• No discussions about transferring fraud claims with any of the FRBNY’s advisors. 

EXHIBIT 4 

• “A. I had no specific conversations with lawyers about any particular 

terminology—legal terminology, tort claims, or litigation claims—related to 

that.” 81:23–82:3. 

• “Q. And did you have any specific conversations on tort claims or assignment of 

tort claims with your advisers, any of them? A. I don’t recall. I don’t recall 

any.” 82:22–83:2. 

3


#:16617 

• “Q. Am I correct that you don’t recall ever having a discussion with any of your 

advisers in which you instructed the advisers to seek an assignment of AIG’s 

fraud and tort claims? [Objection] A. I’m not aware of that.” 89:13–22. 

• “Q. And you also didn’t direct any adv[is]ers to effect the transaction in a way 

that would result in AIG giving up those rights of recovery, correct, sir? A. 

There was no specific direction to someone about any type of claim like that.” 

124:20–25. 

• “Q. Did you ever have a discussion with BlackRock—now I’m asking in the 

period post-closing of ML II . . . where you on the one hand, and BlackRock on 

the other hand, discussed the issue of whether AIG had assigned or given up its 

tort or fraud claims to ML II? [Objection] A. No. No.” 150:7–17. 

• “[Referring to Morgan Stanley presentation] Q. [Morgan Stanley] w[as] advising 

the New York Fed on . . . the structure for the ML II transaction? A. Yes. . . . Q. 

And am I correct that what it shows in the lower half is, from the AIG’s insurance 

companies, whether a sec lending pool, what’s being transferred to ML II is $40 

billion par face amount of residential mortgage-backed securities; do you see that, 

sir? A. Yes, I do. . . . Q. [W]ould you confirm for me, sir, that in Exhibit 6A, 

there is no indication at all of AIG transferring or assigning away any rights that it 

may have in connection with seeking recoveries for the losses on the residential 

mortgage-backed securities it was selling to ML II? [Objection] A. That is true 

. . . .” 230:2–233:12. 

• No discussions with anyone about transferring fraud claims. 

• “Q. Okay. And at any point in time . . . after the consummation of Maiden Lane II 

. . . do you recall ever discussing with anyone the concept of, Hey, don’t worry, 

because if these securities go down in value, we have AIG’s claims that we can 

pursue against the banks? A. No, I don’t recall having any such 

conversations.” 137:15–25. 

• “Q. [B]ut at the time . . . you were unaware of any actual claims that may have 

existed, correct? A. We had no specific knowledge of any claims that were in 

the making; we had no specific knowledge of any reasons why there was 

something special―’special’ in the negative sense―about these issues. That’s 

right.” 65:10–19. 

• “Q. At the time in 2008 that ML II was being consummated, you weren’t even 

thinking about the concept that AIG may have had tort claims against particular 

entities that sold it the security? A. Right . . . We didn’t think, Wow, that’s got 

a lot of value there, and we want that transferred to us; we have a lot of value 

there.” 133:10–134:8. 

• No documents discussing transferring fraud claims. 

• “Q. [Referring to BlackRock presentation] [Y]ou would agree with me, Mr. 

Mahoney, there is no reference at least here in this document to a . . . in the page 

we’re looking at in terms of objectives and structure, there is no reference here to 

the ML II or the New York Fed seeking to obtain AIG’s rights to pursue 

EXHIBIT 4 

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#:16618 

recoveries with respect to the $18 billion in losses that AIG was going to 

ultimately be realizing? [Objection] A. That’s correct. There is no reference on 

this page to that. Q. Are you aware of a reference to that effect on any document 

that you’ve seen anywhere? A. No.” 200:4–19. 

• “Q. Do you know whether there’s a document in existence or that has ever been in 

existence in which the New York Fed has stated publicly that it believes that it 

acquired from AIG, AIG’s fraud or tort claims with respect to the residential 

mortgage-backed securities that were sold into ML II? [Objection] A. No. Q. 

Have you ever seen any such statement to that effect by the New York Fed? A. 

No. Q. . . . Have you ever seen a non-public statement to that effect? [Objection] 

A. No.” 248:18–249:22. 

Mahoney testified that he did not understand the term “Related Instruments” to include 

litigation claims. 

• “Q. In that respect, the terms RMBS . . . we’re focused on the words ‘Related 

Instruments.’ Do you recall in 2008 having discussions with anyone at AIG as to what 

that provision in the APA meant? A. No. . . . [T]he legal documents were drafted by 

legal counsel, outside counsel. And I would not have gotten involved in those types 

of discussions with AIG, with members of AIG or AIG’s counsel. Q. . . . Do you 

remember discussing what the phrase or term ‘Related Instruments’, the defined term in 

the Asset Purchase Agreement, meant with anyone internally at the New York Fed? A. 

No, I do not. Q. And how about with respect to your outside advisers? Do you remember 

discussing it with any of your outside advisers, legal or banking or accounting advisers? 

A. No.” 50:9–51:8. 

• “Q. [] Is it fair to say you also don’t recall spending any time in 2008 focused on that 

provision, ‘Related Instruments’, as the Maiden Lane transaction was being 

consummated? [Objection] A. It would be fair to say I did not focus on that. I read 

the legal documents more for things that contradicted my understanding of what 

should be in it. But . . . it’s a pretty involved definition that I would interpret has 

meanings beyond a laymen’s interpretation of those meanings. So, I did not probe, it 

would have taken too long to probe every single thing I didn’t fully understand.” 

51:9–52:2. 

• “A. For example, when I first read of ‘related instruments,’ I thought of derivative 

contracts, maybe interest rate swaps or FX swaps that are related to the RMBS. 

Because CDOs, for example, do have embedded derivative contracts.” 37:20–25. 

• “A. From a business perspective reading this, you would think that this would 

include the legal documentation and the governance supporting that is being 

transferred in the purchase of these assets over to Maiden Lane II.” 159:7–12. 

• “Q. [D]o you recall the issue of ‘Related Instruments’, or the definition of ‘Related 

Instruments’, ever being the subject of any discussion . . . irrespective of whether you 

ever partook in it, being the subject of any discussion between AIG on the one hand and 

the New York Fed on the other? [Objection] A. So, there were a lot of conversations 

that I was not privy to. But no, I’m not familiar with any . . . conversations with 

third parties.” 52:12–53:3. 

EXHIBIT 4 

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#:16619 

• “Q. Which provisions of the legal contracts at issue in this case do you believe have 

ambiguity? [Objection] A. So, I think this revolves . . . around the ‘Related 

Instruments.’ . . . So, this term ‘Related Instruments’ is supposed to be more 

broad, more comprehensive. But if you read it, it doesn’t say tort claims; it doesn’t 

say litigation claims. So was that the intent or not?” 134:19–135:20. 

• “Q. Do you have any recollection of having considered that question . . . in 2008? That 

is, what are we referring to here when we’re talking about these various documents 

within—the definition of ‘Related Instruments’? Do you have any recollection of 

considering that question in 2008? [Objection] A. In 2008, I wouldn’t necessarily have 

tied—I certainly don’t recall, tying the language in this definition with the transfer 

of those types of rights, litigation or tort rights.” 159:17–160:9. 

In fact, Mahoney could identify no provision in the contracts that transfers AIG’s litigation 

claims. 

• “A. But when I read this, the ‘Related Instruments’ definition, I doubt very much 

at the time I was thinking, Oh, that’s where we’re going to get these nonstandard 

rights transferred to us. Q. Okay. Do you remember thinking any other provision in the 

APA which did, to your . . . understanding at that time, affect those nonstandard transfer 

of rights to you? A. No.” 160:22–161:10. 

Mahoney testified that no premium was paid to AIG for the transfer of litigation claims. 

• “Q. And before the Fed, as a matter of law, could lend nearly $20 [b]illion to ML II, what 

did the Fed have to do to assure itself that there was adequate security for that loan? 

[Objection] A. Well, the 13(3) clause is that the Reserve Bank has to be secure to its 

satisfaction in the collateral that supports the loan. So, that’s why we spend a lot of 

resources to ensure that the collateral had the value we were ascribing to it that 

could support the loan. Q. And you did a lot of work using outside advisers to come to 

that conclusion? A. That’s right. We hired a set of outside advisers with legal counsel 

as well as three different types of advisers externally to support that.” 70:10–71:5. 

• “Q. And is it correct that the valuations that were arrived at by BlackRock were arrived at 

by projecting the future cash flows from the underlying mortgages in each of the 

residential mortgage-backed securities? A. That’s correct. So, it was estimated future 

cash flows based on how similar RMBS performed to term. Q. And other than using 

future cash flows in arriving at a valuation, was there anything else that was done in 

terms of arriving at what would be paid by Maiden Lane II to AIG for each of these 

securities? A. So, that’s what we relied upon.” 77:20–78:10. 

• “Q. Am I correct, sir, that in terms of the values, those—that BlackRock came up with, 

those became the actual prices at which the RMBS were sold? A. Those became the 

prices at which the RMBS were sold into the vehicle. Q. And am I correct that there 

was no particular price or value that was associated with the surrendering or giving up of 

any rights AIG might have had to seek recovery on the $18 billion of losses that it 

suffered? [Objection] A. Right. . . . [T]he price estimates were based solely on the 

cash flows generated by the securities in―were purchased into the vehicle.” 78:22– 

79:14. 

EXHIBIT 4 

6


#:16620 

• “Q. So, is it correct, sir, that there was no value or price associated with any tort claim 

that AIG may have been giving up? [Objection] . . . A. [T]here was no premium added 

on to the prices above and beyond the estimated cash flows discounted back. . . . 

That’s correct.” 79:19–80:17. 

Mahoney testified that, when he sent a March 12, 2012 Letter advising AIG that the “RMBS 

Issue” had been disposed of, he was referring to the securities—and nothing else. 

• “Q. [T]he circumstances or the reasons for this letter, Exhibit 32, March 12, 2012, is it 

correct to say this was advising AIG of the fact that the New York Fed had sold off all of 

the residential mortgage-backed securities that were owned by ML II? [Objection] A. 

Right. In my understanding, this was a letter to AIG to inform them of 

developments―material developments on the vehicle which they owned a billion 

dollars stake in. So, I believe that was the intent of the letter. It was addressed to 

AIG from, effectively, the Maiden Lane II vehicle.” 30:12–31:2. 

• Q. [] If you turn to the second page, you will see that at the top of the second page, it 

says, ‘Recognizing that all the RMBS Issues have been disposed of.’ . . . And do you see 

that that ‘RMBS Issues’ is a capitalized term? A. Yes, I do. Q. And do you understand 

that it is the capitalized term to mean the definition that’s found in the Credit Agreement 

and the Asset Purchase Agreement for Maiden Lane II? A. In my mind, I didn’t jump 

to look up for a definition of that. I thought it was not a legal term but, rather, a 

business term, the ‘RMBS issues.’ I understood it to be, as I said earlier, the 855 

CUSIPs or issues that were bought into the AIG—Maiden Lane II vehicle. Q. All 

right. So, your understanding of the statement that ‘all the RMBS Issues have been 

disposed of’, was a statement that said that all of the 855 CUSIPs for the residential 

mortgage-backed securities had now been disposed of, sold? A. Sold. Q. Am I correct, 

though, on the preface to my statement? A. That all hundred―855 RMBS, what I’ll 

call CUSIPs, have been sold to external parties for cash receipt into the vehicle.” 

31:3–32:11. 

• “Q. Okay. Did you understand that statement regarding RMBS Issues in any way related 

to tort claims that the Maiden Lane II vehicle may or may not have owned? A. I would 

not have jumped to that, that statement. I looked at that more from a business 

perspective. . . . The RMBS issues, CUSIPs, had been sold.” 32:12–21. 

• “Q. [Referring to the letter] [I]t was presented to you to sign on behalf of Maiden Lane II 

because you had historical knowledge of Maiden Lane II from the 2008 time frame; is 

that fair? A. That’s right. The institutional knowledge from the original Maiden 

Lane vehicle set-up. Q. And before you signed, did you, i[n] fact, review this letter 

carefully to make sure that any statements in it that related to that historical knowledge 

were, in fact, accurate? A. That’s really what I would be reviewing this letter for. 

Anything subsequent to my involvement in the origination of Maiden Lane II, I 

would be relying on my internal counsel to verify the accuracy of those statements. 

But I was looking at it for anything that would contradict, in my mind, things that I 

knew to be factual.” 29:9–30:5. 

EXHIBIT 4 

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#:16621 

Mahoney never saw the Settlement Agreement between Bank of America and ML II, nor 

discussed intent, prior to signing the declaration in this action. 

• “A. And I would be, from the business side, one of the most knowledgeable people 

about the intent. And so I was asked to sign a statement that I did not draft, but 

which I carefully reviewed, changed several minor aspects of it including, as I 

mentioned earlier, the ‘Related Instruments’, specifically having inserted, making 

reference to the APA because I didn’t want the ambiguity about what ‘Related 

Instruments’ meant. So, I believe that’s why I was asked to sign it. Because I was, 

from the business side, the person most knowledgeable about the transfer.” 99:6–20. 

• “Q. Were you ever asked to make a statement about what you understood AIG intended? 

A. I don’t think I was ever asked to make such a statement, and I didn’t. Q. You 

wouldn’t have any basis to, would you? A. Right. Again, crafting those legal 

documents were a lot of discussions that were outside my personal knowledge, so I 

could say what my personal knowledge was but I wouldn’t be able to represent 

AIG’s perspective or their intent.” 106:2–14. 

• “Q. So just, again, to break that down. Until having been shown the capitalized term 

‘Related Instruments’, you had a business understanding of what ‘related instruments,’ 

small r, small i, meant, correct, sir? A. Right. My interpretation reading the 

Declaration, the original draft Declaration, my mind went to the business 

interpretation of that phrase. If you would see that in the Wall Street Journal 

article, for example, you’d be thinking about related financial instruments. Q. 

Right. And your understanding of related financial instruments for residential mortgagebacked 

securities would be what? A. It would be something like an—an interest rate 

swap contract, which would convert a floating rate to a fixed rate or vice versa, help 

him to help you manage the interest rate risk on a residential mortgage-backed 

securities.” 43:15–44:12. 

• “Q. But is it also true that prior to being shown the term ‘Related Instruments’ in 

December 2012, in connection with your Declaration, you didn’t have a recollection of 

having actually focused on the definition of that term in the APA? A. So, right, in 

December 2012, I don’t remember having focused on that term in 2008.” 108:20– 

109:4. 

• “Q. You said that you didn’t draft your Declaration but you reviewed it. Do you know 

who drafted it? A. I do not.” 101:21–24. 

• “Q. [] And how many drafts of the Declaration do you think it went through before you 

were prepared to sign it? A. So, I don’t know how many drafts it went before the 

original draft was given to me. There was a single set of cha[nges] to the . . . 

document. Q. Just one time you made changes and then it was to your satisfaction? A. 

That’s correct.” 102:10–21. 

• “A. So when I got―yes, so when I got the draft, it was consistent with the 

conversation and―with the exception of a couple of point which were adjusted, and 

I was willing to sign it at that point. Q. Who was that conversation with? A. Our 

internal legal counsel. . . . Q. And how long did that conversation last? A. It was a 

short conversation. . . . It was less than 10 minutes, let’s say. It was really about 

EXHIBIT 4 

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#:16622 

what was the intent; I expressed the intent. There was some question at some point, 

either by e-mail or phone, ‘Would you be willing to sign a declaration to that?’ I 

said, ‘Well, I have to review it first’, which I did. Certain aspects of it were adjusted, 

and I was willing to sign it . . . based on the agreement of the words on the page with 

my understanding of my intent at that time.” 184:3–185:9. 

• “[Referring to the Settlement Agreement between Bank of America and Maiden Lane II] 

Q. Have you ever seen this document before? . . . A. No, I am not familiar with this 

document. Q. All right. So, is it your testimony that prior to right now, today, you’ve 

never seen this before? A. That’s correct. Q. And I take it you had no role in 

negotiating any type of a settlement with Countrywide at any point in time? A. That is 

correct.” 100:20–101:20. 

• “Q. But prior to December 2012, in connection with your Declaration, had you ever been 

consulted by anyone at the New York Fed to provide any view as to what was or was not 

intended at the time Maiden Lane II had been entered into? A. . . . I don’t recall that 

happening before then.” 105:14–25. 

• “Q. Other that what you told us . . . occurred in December of 2012 when you were sent a 

draft of a declaration, and then you were asked to review it and you felt comfortable 

signing it, between 2008 and that event in 2012, did anyone ever come speak with you or 

question you about what was intended back in 2008 in respect of the assignment or 

transfer of any rights that AIG might otherwise have had? . . . So, I’m omitting the point 

where you get the Declaration. A. I understand. I don’t recall anyone asking me 

about that . . . prior to that.” 181:8–182:2. 

Mahoney testified that neither the FRBNY nor its advisors ever considered bringing fraud 

claims. 

• “Q. And what role did BlackRock play in relation to Maiden Lane II and its assets? 

[Objection] A. They were under contract with the Federal Reserve Bank of New 

York, so via the Maiden Lane vehicle, to manage the assets held in the three Maiden 

Lane vehicles.” 22:21–23:5. 

• “Q. Were you aware, for example, when―as of May 2010, that one of the things that 

BlackRock was pursuing was remedies against IMPAC and certain underwriters because 

of discrepancies in the governing transaction documentation? A. . . . I was aware that 

BlackRock was aggressively purs[u]ing a variety of ways of maximizing cash flows 

that included a very close read of all of the documents related to the underlying 

transaction, and where discrepancies were identified to seek recourse or resolution 

to those discrepancies.” 147:19–148:11. 

• “Q. Do you have an understanding today of what type of legal claims at any point in time 

BlackRock was pursuing or attempting to pursue to try to maximize cash flow 

recoveries? A. As I said, they were aggressively pursuing a variety of different 

avenues to ensure we were getting all of our expected rights, cash flows, title and 

interest and, in fact, in addition to not overpaying for services that service providers 

provided.” 164:25–165:11. 

• “Q. To the extent that Maiden Lane II’s advisers, legal and nonlegal[,] believed or came 

to understand that Maiden Lane II had received an assignment of AIG’s tort claims[,] was 

EXHIBIT 4 

9


#:16623 

it your expectation that those advisers would be exploring ways to pursue those claims? 

A. Yes.” 168:3–16. 

• “Q. Am I correct that through the period of early 2011, which is when you told us the 

Investment Committee dissolved, you’re not aware of any discussions with or among ML 

II’s advisers about pursuing recoveries with respect to any AIG assigned tort claims? 

[Objection] A. I am not aware of any such discussion.” 169:14–24. 

Mahoney testified that the FRBNY created ML II in order to secure AIG’s ongoing viability. 

• “Q. And you agree that it was not the purpose of the New York Fed to try to make a 

profit in connection with ML II? A. . . . [W]e did not have a profit motive in entering 

into Maiden Lane II.” 120:24–25. 

• “Q. . . . Was it your view—First of all, was the restructuring done at least in part to assist 

AIG in avoiding a ratings downgrade? A. It was responsive to the concerns of a 

variety of [stake] holders. And important [stake] holders there were the credit 

rating agencies.” 282:21–283:6. 

• “Q. But at that point in time, you believed that those four components of the 

restructuring— A.—avoided a near term downgrade by the rating agencies, yes. Q. 

And did you believe that, at least in the near term, it assured AIG’s viability? A. In the 

near term, yes. Q. And then you’re saying that there was always risk and you didn’t 

know what the future had in store, but at least at that point in time, you believed it was 

sufficient for AIG to continue as a going concern, correct? A. Going concern. Q. And to 

be a viable entity, correct? A. Right.” 283:14–284:7. 

• “Q. And you agree that it was not the purpose of the New York Fed to try to make a 

profit in connection with ML II? A. We have policy objectives in creating the 

instrument. The LIBOR plus 100 interest rate would be a low interest rate relative 

to what a private sector institution would require for the risk that were being 

obtained. So, we did not have a profit motive in entering into Maiden Lane II.” 

120:15–25. 

Mahoney testified that the FRBNY’s loan to ML II was always extremely likely to be repaid. 

• “Q. And is it true, sir, that all of those outside advisers, after evaluating the collateral, 

their conclusions were that the New York Fed was unlikely to take any losses on the loan 

even in severe stress scenarios? [Objection] A. That is the conclusion that our 

advisers arrived at, communicated to us, and which we understood.” 71:6–14. 

• “Q. And in all of those instances, all of your advisers—in other words, in all of those 

scenario, stress test scenarios, your advisers’ conclusions were that, even under the 

worse stress case scenario that they used, their model showed that the Fed’s loan would 

be repaid in full, correct, sir? A. That is the results of their modelling, yes.” 72:2–10. 

• “Q. [Referring to BlackRock presentation] [I]t says ‘Very low likelihood of failing to 

repay senior debt (P&I)’—principal and interest—’even under extremely severe stress 

scenarios.’ Do you see that? A. Yes, I do. Q. And that was BlackRock’s view at the 

time, correct? A. So, it was their view at the time, but maybe you can reinterpret 

that that was their direction to structure something that would pay off the Federal 

Reserve principal plus interest even under extremely stressed scenarios. Q. And is it 

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your understanding that it was their view or it was their instruction, or both? A. Both.” 

194:24–195:18. 

• “Q. [D]o you think that that view of . . . BlackRock . . . that there was a very low 

likelihood of failing to repay the senior debt, including principal and interest even under 

extremely severe stress scenarios, remained all the way through the closing of ML II in 

December? A. I would say that’s true in the way they modelled it.” 195:19–196:6. 

• “Q. And then it says, ‘Results at very low likelihood of failing to repay the senior debt 

even under severe stress scenarios.’ That was the view. I understand it may have been 

based upon the advisers’ model, but that was the view, at least as of October 25, 2008, 

within the New York Fed? A. Right. That was—we did believe that the models 

were—the bases for our pricing and bases for our feeling that the loan was secured 

to our satisfaction.” 213:11–21. 

• “Q. At any point in time, did BlackRock advise the New York Fed, even in that period in 

the next quarter, did BlackRock or any of the Feds advisers advi[s]e the New York Fed 

that the prior conclusions, which were that the loan would be repaid in full, had changed? 

A. So, we were provided in each quarter, in the type of analyses that we discussed 

this morning, that quarterly BlackRock decks on Maiden Lane II and III; each 

quarter revised a new estimated date on which the loan would be repaid. And [in] 

the base case, we were always going to be repaid; and under the adverse conditions, 

we would also be repaid.” 292:20–293:11. 

EXHIBIT 4 

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Excerpts from the depositions - Wall Street Journal

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