Excerpts from the depositions - Wall Street Journal

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Case 2:11-cv-10549-MRP-MAN Document 254-1 Filed 03/28/13 Page 6 of 35 Page ID #:16595 • 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 EXHIBIT 1 5
Case 2:11-cv-10549-MRP-MAN Document 254-1 Filed 03/28/13 Page 7 of 35 Page ID #:16596 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. Swift testified that had AIG been transferring fraud claims to ML II, he would have wanted to 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. EXHIBIT 1 6
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Excerpts from the depositions - Wall Street Journal

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