Page 1 of 19 March 2, 2006
Page 1 UNITED STATES COURT OF FEDERAL CLAIMS
AMBASE CORPORATION and CARTERET BANCORP, INC., Plaintiffs, and FEDERAL DEPOSIT INSURANCE CORPORATION, Plaintiff-Intervenor, No. 93-531
v.
UNITED STATES OF AMERICA, Defendant.
Washington, D.C. Thursday, March 2, 2006 Deposition of JAMES F. VORDTRIEDE, a witness herein, called for examination by counsel for Plaintiffs in the above-entitled matter, pursuant to agreement, the witness being duly sworn by CHERYL A. LORD, a Notary Public in and for the District of Columbia, taken at the offices of COOPER & KIRK PLLC, 555 11th Avenue, Suite 750, Washington, D.C., at 9:38, Thursday, March 2, 2006, and the proceedings being taken down by Stenotype by CHERYL A. LORD, RPR, CRR, and transcribed under her direction.
Alderson Reporting Company 1111 14th Street, NW Suite 400 1-800-FOR-DEPO
Washington, DC 20005
Case 1:93-cv-00531-LAS Document 260-27 Filed 02/05/2008 James F. Vortriede 30 (b) (6) Washington, DC
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When we reorganized -- and I'm not sure of the date. It might have been Labor Day, which would put this after the reorganization date -- I report to a different person officially now, but I still more or less unofficially report to Wayne Green. Wayne generally gives me marching orders ifhe wants me to do something. Q. What is your official title at the FDIC? A. Officially my title is senior financial management analyst. Q. And what part ofthe FDIC are you in? A. Division of resolutions and receiverships -- called DRR, the acronym. I believe it's in the general accounting section. They change it all the time -- and the tax unit. Q. Now, it says in your email that the parent company would like to eliminate the large tax liability. Wouldn't the FDIC like to eliminate that tax liability as well to the extent it was possible? A. Well, all things equal, it would be, yes, but I mean, it's 1995, and it's 10 years later. I suppose we would not at this point be thinking in terms of amending the return, because the statute date has lapsed.
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A. If I approached them asking them if we could amend the 1995 return through normal channels like say through the center, yes, they would turn us down. Q. What happens if then -- you'd have the right to appeal that, wouldn't you? A. Yeah, but you need a basis to appeal upon. Q. Right. And if the statute would not prohibit you from filing the amended return, is there any other reason -- is there any reason not to amend it to make it -- if you concluded amendment would make it more
accurate? A. If the return was open for amendment under the statute of limitations, if you were still within the statute oflimitations, it would be available to be amended if you had a reason to do so. Q. And would the FDIC do so if amending it would conserve assets for the creditors? A. Yes. Q. And when you talk about the statute of limitations, is that the statute of limitations for the IRS to come after the FDIC for filing an inaccurate return? A. Yeah.
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Q. You mean the statute for the Internal Revenue Service to come after the FDIC for violating the Internal Revenue Code? A. To file an amended return if you could reduce the tax liability. Q. There's a statute that would preclude the FDIC from amending the 1995 return today? A. It would be the general statute of
limitations for amending a tax return once it's
filed.
Q. What's the source of authority for that?
Do you happen to know?
A. It's one of the sections. I'm not sure of
the exact code section. It's entitled 26 USC, the Internal Revenue Code. Q. It's the FDIC's position that it's precluded by law from amending the 1995 return? A. Except at the discretion of the service, yes. Q. Okay. And have you approached the service for such -- to ask for such discretion? A. No. Q. Okay. Do you have any reason to believe the IRS would you tum you down if you sought leave to amend the 1995 return to make it more accurate?
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I believe it's essentially the same statute, although I'd have to look at the code. It's a statute that says the IRS cannot come after the receivership for more taxes for an additional assessment, and the FDIC as receiver also cannot go back and ask for more money through an amendment. This doesn't include assets under a different statute. Q. What was your understanding of what the statute of limitations is for the FDIC's ability to amend returns? A. In general terms? Q. Specifically vis-a-vis the Carteret 1995 return. A. What the statute of limitations means? Q. How long was it? A. Oh. The standard statute date is 3 years plus -- 3 years from the due date of the return plus extensions. Q. Plus extensions that were obtained? A. Right. Q. SO if for example the an e>.1ension had been obtained until September 15th, 1996, for the 1995 return then vou could make amendments until
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interest, was intended to reflect the amount of interest that accrued in that year. Correct? A. Right. Q. And under the Internal Revenue Code, Carteret can only deduct interest expense in the 2003 tax return that occurred in 2003. Right? A. Right. Q. Oh. I'm not sure if! - A. Yes. 1 think I've been calling it the 2004 return. This is the 2003 return. I'm sorry. Q. Let me restate the question. MR. GILBERT: You just misspoke. It's 1993. BY MR. THOMPSON: Q. I meant 2003. Let me try that again. I apologize. A. Okay. Q. SO under the Internal Revenue Code, Carteret can only deduct interest expense accrued in
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Q. And I'd like to tum to another document. Keep this one out if you don't mind. MR. THOMPSON: I'd like to ask the reporter to mark as Vordtriede 6 a document that bears the Bates number AM 0096640, and I won't read all the Bates numbers. It skips around, but the last Bates number is 96975. (Vordtriede Exhibit No.6 was marked for identification.) BY MR. THOMPSON: Q. Now, these are the statements of operations that have been produced to us in this litigation, and if you tum to the back -- and what I've done is, I've just put in one exhibit, the year-end statements for both balance sheet and income statements for '95 through to 2004, which is the most recent information we have. But if you look at the third-to-Iast page -- it's 96973 - A. Yes. Q. -- you'll see -- oh, I'm sorry. I'm doing it the wrong way. Let's keep flipping forward to 2003, December 31st, 2003, which appears on page 96936.
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its 2003 tax return interest that accrued in that year; is that right? A. Yes. Q. Okay. And if you were to learn let's say today that the 2003 accrued interest that was reported in this tax return were incorrect, then you'd be under a duty to go back and amend it; is that correct? A. That would probably be what we would do, yes. Q. Well, you'd be under a duty to do it, wouldn't you, under the Internal Revenue Code? A. Well, it depends on what I found out. If someone came to me and said, wait a minute, wait a minute, we posted the wrong amount to the financials, it should have only been 4 million 6 683 67, we would change it. Q. Because that would be increasing tax income, and otherwise, you'd be cheating the government. If you were to find out actually it should be 12 million, wouldn't you also be under a duty to amend because you'd want to conserve assets for the creditors? A. Yeab assuminl! the statute is ooen.
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A. Okay. Q. And do you see the line item for estimated interest on claims? A. Yes. Q. Okay. And it's 133,002,377 dollars? A. Yes. Q. And then you might want to keep your finger there, but let's flip to December 31 st, 2002, which appears at 96896. Do you see where it says, estimated interest on claims, 124,334,011 dollars? A. Yes. Q. I'll represent to you that if you subtract one from the other, you get 8,668,366 dollars, so within a dollar of what was subtracted. And I'll further represent to you, and I'm happy to do the math with you, if you do it each year, you look at the end of'95 and the end of'96, whatever that difference is is what's reflected on the tax return. Does that reflect the fact that your division takes the division of finance numbers at face value and plugs them into the tax return? A. Yes. Q. Okay. Is the 2003 tax return consistent with the reauirements of the Internal Revenue Code?
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we'll try to streamline things so that Wayne does not have to do the data dump, but we definitely need to get the drilldown for this line item, which appears on the 1995 assets and liabilities and liquidation called, noncash adjustment. BY MR. THOMPSON: Q. Now, let's switch gears to premiums back on the tax return, and that's 134 million dollars. Do you know what that represents? A. I've never seen all the pages of pro forma work papers, which usually generate this amount. But my understanding, it's the premium paid by assuming banks in 3 separate -- 1 guess you could say 3 separate purchase and assumption transactions. Q. And I think actually One of them was October 28, '94, so I think this is the 2 in '95, but -- okay. So these were basically branch sales; is that right? A. Well, I would say it would be transfer of the deposit base and sales of assets out of the branches, right. Q. And would the taxpayer be entitled to a deduction of the basis it had in its branches? A. They would be entitled to an offset for
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So we'd also need to transfer the branches, which we did. A. Well, that is the branch. The deposits are the branch. Q. Yeah. A. Piece -- the branches are really just little -- little components of the overall C corporation. They're not entities unto themselves. Q. Sure. A. If we put this into the formula for gains and losses under section 1001, we'll say deposits assumed are X plus 134 million. That's the amount realized. Okay? Less the adjusted basis is the cash that's going over. We have a basis in the cash, so that's 100 million. Our gain or loss is 134 million, and that's a net figure. Q. Okay. Now, are you familiar with the term core deposit intangible? A. I've heard of it. I'm not - Q. Okay. A. -- overly knowledgeable. Q. That's fine. Do you know whether there's tax basis in
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the basis and the assets sold. Q. And have you found anywhere in this tax return where such a deduction was taken? A. I believe by virtue of fact that they're reporting the premium as a line item, which agrees to the financials, that would be a figure which took into account book value of the assets that were sold to the different assuming banks. Q. Well, we'll check the math tonight, but I'm -- let's assume for present purposes that that's the face amount of the premium, the deposit premium, in other words, the acquiror said, you give me all of your deposits and a like amount of cash minus 134 million, et cetera, and I think we'll see that that's what the 134 million, so in that instance, Carteret would be entitled to take a deduction for any assets that transferred in that transaction? A. With regard to your example? Q. Yes. A. Your deposit base transferring over is X plus 134 million dollars? Q. M-hm. A. And let's see, we're transferring cash of X amount to go with the deposits? O. RiQ'ht.
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core deposit intangibles? A. I'm not aware of what the issue is. Q. Okay. And do you know whether there's - so you don't know whether a deduction for core deposit intangible was taken on this tax return? A. No, I don't. Q. And do you know whether a deduction was taken for supervisory goodwill in connection with this tax return? A. No, I don't. Q. But does the FDIC have a position on whether the deduction for supervisory goodwill was appropriate at the time all the branches were sold. A. I'm sorry? Q. Does the FDIC have a position on whether it was appropriate to take a tax deduction for the supervisory goodwill carried on the tax books at the time all the branches were sold? A. I don't ever recall taking a deduction or seeing a return where we took a deduction for supervisory goodwill, so I guess it's something we don't take into account. Q. But are you sure of that, or are you just drawing an inference from the fact that it hasn't been done?
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page, you've got columns of the book gain in the left-hand column and then the tax gain in the right-hand column; is that right? A. Yes, Q. And for '92, '93, '94, you don't have the information for the book gain or loss; is that right? A, That would be my assumption, I just couldn't find it in whatever financial statement I was trying to use. Q. Right. Okay. Now, in 1995, there's about a million-dollar difference where the book loss is a million dollars bigger than the tax loss, and is that because some of the basis wasn't deducted for tax purposes? A. I don't know. Q. Okay, And do you know why there's also a discrepancy in 1996? A, No, I don't. Q. Okay, Now, let's turn to the next page. What does this document show? A. This was an attempt to summarize the elements that were going to be fed into the section 597 model that we were just looking at for the various years, basically increases and repayments of
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Q. Okay. Yeah. A. Per the return, the Carteret subgroup taxable income before FFA would have been 66 million, They took a net deduction for FFA on the return for 6 million, which brought this amount to zero, Q, I thought it was the other way around. I thought that in 1993, there was positive taxable income of 51 million and then they improperly took a deduction of 51 million, A. This is 1994, Q. Right. But then in '94, they made the opposite mistake, where there was a loss of 66 million, but they improperly included 66 million of FFA? A. This is per the return, Q. Oh, this is per the return? A. I haven't- Q, All right. That's fine, Now, turning back to the 1995 tax return, this was signed on -- by -- it may be hard to read, but Mr, Feit on December 20th, 1996, and it was signed by -- Mr, Door, did you say? A. I believe his -- I believe it was David Jones. Q, Oh, Jones, Sorry,
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federal financial assistance, Q. Now, how has your model been affected by the fact that RTC notes payable are 1,766 billion but according to this chart only 1.7 billion has been repaid? Does that factor into your calculations at all? A, I believe the difference would be an element of -- carried over to 1995 of deferred FFA. Q. That's taken into account in your model? A. II should be, yes, Q. Now, turning back to the 1995 tax return -- just turning back to Vordtriede 35 for one second, the last page of the document. II says -- on 1994, it suggests -- under column, bank subgroup taxable income before FFA, shouldn't that be a negative 66 million dollars under 1994? A, The last page? Q, Yeah. The last page on 1994, I had thought your summary had shown that there should be positive taxable income of 51 million in '93 and negative taxable income of 66 million. A. We're lookinll at an old document.
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-- Mr, Jones the next day, Do you know when the '95 return was due? A. With extensions, the date -- the final due date would have been extended to September 15th of 1996, Q. And do you know whether it was Watkins Meegan's fault that it was late or whether it was the FDIC's fault that it was late? MR, GILBERT: Objection to characterization. You can answer. A, I suppose the late date -- are we talking about the 12-96 date? BY MR, THOMPSON: Q, Yes. A, I would imagine it was a cumulation of records-gathering problem, but 1 have no specific knowledge, Q. Do you know when Watkins Meegan started their work? A. No, I don't. MR. THOMPSON: I'd like to ask the reporter to mark the following document as Vordtriede 36. II bears a Bates number 91 145, N ordtriede Exhibit No, 36
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1111 14th Street, NW Suite 400 1-800-FOR-DEPO
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was marked for identification.) BY MR. THOMPSON: Q. Now, this document, Mr. Vordtriede, is from the IRS, and the date of the notice is February 17, 1997; is that right? A. Yes. Q. Okay. And this is a notice of a penalty; is that right? A. Yes. Q. Okay. A. In part. Q. Does it indicate when the return was received? Does the notice date of February 17 indicate that's when the IRS got the return? A. The date of the notice is February 17th of 1997. That would not necessarily correlate to the date the IRS counted as filed. That date would be derived from the 150 code in the BMF transcript. Q. Does this document in any way indicate when the IRS -- well, jfyou look at page 91150, about two-thirds of the way down it says, transactions, and it says, code 150. Is that what vou were referring to?
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A. I don't believe we have per se for that issue. We're challenging the penalty period, and the interest will follow from whatever tax is due. So the answer to your question I believe would be no. Q. And is there any reason why the .- well, strike that. Is it fair to assume that the FDIC did not promptly mail the return in after it was signed on December 21st, given the fact that the IRS is saying that it wasn't filed until February 17th? A. I don't know what the exact situation is. However, I would say the return was probably mailed before the end of 1996 solely because we had a definite mandate to be current as ofthe end of the year of 1996, and we took it very seriously. Q. And "current" meant having mailed it? A. Yes. That would mean "filed" to us. Q. In your experience, how long does it typically take the IRS from the date it receives a tax return to the date it deems it filed? A. I've never really tried to ascertain what the answer to that was, because we reallv
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Yes. This is the transcript - Q. Okay. A. -- I'm talking about. Q. All right. A. For 1995. 7 Q. For 1995. All right. 8 And it says, returned, filed, and tax 9 assessed. l O A . That's correct. II Q. February 17th, 1997. l2 And so that's the day that it was filed? l3 A. That's the date IRS counted it as being l4 filed. l5 Q. How much discretion does the IRS have? l6 I mean, if it were mailed, let's sayan l7 December 21 st, can they say, okay, well, we l8 appreciate that, we got it on the 23rd, but it is the 19 holidays, so we're going to not assess -- not deem it 20 filed for another 2 months? 2l Do they have discretion to do that? 22 A. 1 really don't know. 23 Q. Okay. Has anyone ever challenged this as 24 not being -- that this is a tardy and unacceptably 25 late filin" date?
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look at transcripts in a limited number of circumstances. MR. THOMPSON: It's about 5 minutes to 5. We've made terrific progress, Mr. Vordtriede. 1 really appreciate your answers today. And what I'd like to do if it's all right is to try to streamline my remaining questions, because we've covered a lot of ground, and I think that will be more efficient. And I'd like to have an opportunity to review all the things in Vordtriede exhibits 20 through 35, make sure that there's not something else in there that we need to cover, but I would think there would be an hour or 2 more of questioning from Amhase in the morning ifthat's acceptable. MR. GILBERT: Certainly. Does the Justice Department expect questions? MS. HART: We definitely will, so once you conclude, to be a transition. MR. THOMPSON: Do you have a rough sense asto- MS. HART: It shouldn't take more than a couple of hours I would say, an hour mavbe.
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Yes. And it was timely filed. Correct? A. Yes. Q. And what role did you play in the preparation of this return? A. For 2004, I would have been the signer and the reviewer. Q. Okay. And is the amount ofFFA that's included in this tax return consistent with the final FFA regs? A. According to the recomputation of this same model, I believe yesterday, we detennined that the current FFA reportable would have been 62,000 dollars, 180 dollars Jess under the new computation. Q. SO there is a slight difference, then? A. Yes. Q. Do you know what the nature of that difference -- you know why there is that difference? A. My -- ] have not compared each year by year on the source of the reason why there was a difference in each year, but my guess is for this year, the difference is the activation and the recomputation ofthe computation of the beginning net equity on a tax basis in this loop 1 .- my term is A.
Q.
Q.
Yes.
Okay. And are you going to amend the 2004
return?
A. I'd be happy to if there's a tax effect.
I don't think there's a tax effect. I
mean~ there's additional -- there's a reduction based
on the new computation of FFA to be reported.
Q. Well, and is that the general approach to
the FDIC, that if there is a tax effect, they'll
amend if they're pennitted to?
A. More or less, I mean, depending on how
much time you have.
Q. Okay.
A. We want to be current with all our returns
to be filed for the filing period. That's why we I
couldn't do, say, the extra computations that would ,
have gone with this return going back all the way to
day I. That's pretty strenuous computation, and
,
multiply it times all the receiverships. You get j into a time factor.
So you have a case here with Carteret
where you need special attention, so we did the extra
computation and will continue with it.
I donlt remember your question. "
Q. That's fine.
Page 222 1 2 3 4 5 6 7 8 9 10 1 loop 1 .- and the remaining equity computation 2 activation in this loop 2 down here. 3 The new computation, we made an effort to 4 go back to the beginning of Carteret's receivership 5 period -- actually I believe the conservatorship period and worked forward, and this computation, w 6 7 would not have done that. i 8 Q. And so is that the difference? 9 A. I believe so. 11 0 Q. Okay. And are the assumptions that you used in putting together the 2004 return the same 111 , 12 assumptions that you used in putting together the model that we discussed yesterday? 13 14 A. Yeah. ] believe the model is the same. It's 15 just we went a little farther with the recomputation. 16 17 Q. Okay. And do you plan on using the new 18 model that was Vordtriede 19 in the preparation of 19 the 2005 return? 20 A. For Carteret? 21 Q. For Carteret. 22 A. Now, that we have -- let's see, you're asking me if we planned to continue with the new set 23 24 of computations in 2005? 125 Q. Yes.
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Page 224 MR. THOMPSON: I'd like to ask the reporter to mark as exhibit 39. (Vordtriede Exhibit No. 39 was marked for identification.) BY MR. THOMPSON: Q. And this was another one of the documents that was faxed yesterday. This is the blueprint for 2004? A. Yes, I believe it is. Q. And are the calculations ofFFA that are included in this blueprint consistent with the ones that we saw attached to the 2004 return? A. Yes. The work paper section of the blueprint or the template is a work paper section SM I, slash, 2. And the SM 1 refers to schedule M I, and 2 is just second series of work papers. The IRS asked I believe in 2003 if we would begin putting copies 0 our computations into the returns, so I believe a copy of the FFA computation from this template played -- is in the tax return. And they should be the same. MR. THOMPSON: All right. I'd like to ask the reporter to mark this as Vordtriede 40.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A. Yes. Q. And who was Ms. Stohl? A. Barbara was -- she was -- I believe a tax
accountant was her title. Maybe it wasn't. But she
was in the tax unit functioning as a tax accountant.
I believe she would have been also tenned a team
leader.
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(Vordtriede Exhibit No. 40 was marked for identification.) BY MR. THOMPSON: Q. Now, Mr. Vordtriede, tilis is a letter from you to Debra Nolan dated March 15til. 1999; is that right? A. Yes. Q. Now, this is an unexecuted version. Do you know whetiler you sent tilis letter? A. I believe I did. Q. Okay. And it says in tile first line: By this letter, the FDIC requests copies of tile consolidated federal income tax returns for the subject taxpayer for the years 1986 through and including 1993. A. Yes. Q. And did you receive those? A. I believe we did. Q. And again, you know at this point, Mr. Vordtriede and Mr. Gilbert, we do request the production of any and all material that hasn't been produced that relates to Carteret's taxes, but specifically the schedules and the tax returns relating to 1992. We do have some questions abou
I
This system was set up when I got to Dallas in 1998. And Barbara reported to Nanci Applebee. The tax unit was split into 2 parts. Nancy and I were co-managers, Nancy over the operations section, which did more compliance-type activities, filing returns, and my group was issues group dealing with audits and things like tila!. So Barbara is sending correspondence to
Nancy as her manager.
Q. Okay. Aod it says in the fourth full paragraph of the text: I already mentioned in an email and will iterate here that I think it would be a good idea to have a meeting to discuss the return preparation process. In reviewing the returns that Jake prepared for the March 15th deadline and in discussing with other members of the tax staff, it would appear that there is some confusion over SOffi( of the details involved in preparation of the
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1992 and just want to make sure, but before we get into those questions, we need to see the documents. And perhaps when we see the documents, we woo't hay any questions, but -- so we're going to hold this deposition open until we get those documents. 1 2 3 4 5 6 7 8 9 10 11 12 13
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returns. Mostly it's the little things, what needs to be stamped when attachments are added, the nuances of the alternative minimum tax, FFA, who signs what, and how do returns get routed, et cetera, close quote. Do you recall that there was some confusion at the time of this email about how to prepare tax returns? A. I arrived in Dallas the first week of January 1998, so I'm just getting down to Dallas. I'm looked upon as the technical as the technical source for all these types of things, although some of them have to do with processing, routing sheets
6
7 8 9
We're happy to do the followup by phone.
I wouldn't expect it would be very lengthy. We'll do it promptly as soon as we get the documents. But that is going to be the process for moving forward.
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MR. GILBERT: Ifwe have them, we'll turn MR. THOMPSON: Okay. Now, there are a few
11 them over.
13 more things. 14 Let's have marked as exhibit 41 a document
14 and things like that.
15 So we're probably in the process of 16 switching over from what was being done to what I
15 that bears the Bates number AM 52170707. 16 (Vordtriede Exhibit No.4 I 17 was marked for
18 identification.)
17 wanted done, and that's probably the type of
18 19 20 21 22 23 24 25 confusion. We had the FFA model in its earlier version simplified fonn, and we hadn't computerized it yet and placed it into the blueprint, so that was coming up. So here is a preparor and a return reviewer who is probably asking for a meeting to put all the heads together and see if everybody is on the same page.
19
BY MR. THOMPSON:
20 Q. Okay. Mr. Vordtriede, this is an email 21 from Barbara Stohl to Nancy Applebee, and you and 22 Steve Johnston are copied; is that right? 23 A. Yes. 24 Q. Aod it comes from March 16th, 1998. Correct? 25
8 (Pages 225 to 228)
1 I 11 14th Street, NW Suite 400 Alderson Reporting Company 1-800-FOR-DEPO Washington, DC 20005
Case 1:93-cv-00531-LAS
James F. Vordmede 30(b)(6)
Document 260-27
Filed 02/05/2008
Page 9 of 19
April 14, 2006
Washington, DC
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Page 317
Q. What is the standard practice in terms of retaining e-mails versus deleting e-mails or printing them out? A. I tend to keep too many. I'm afraid that the ones I delete will be needed as soon as I delete them. But I tend to keep things longer than not. MR. THOMPSON: Let the record reflect Mr. Ziegelbauer has just arrived. BY MR. THOMPSON: Q. When you say, Mr. Vordtriede, that yOll print them, keep them, do you print them out or keep them on your hard drive? A. For me, keeping them would mean not deleting them, which would mean they would remain or the U drive, which is the network drive. Q. Did you personally search the U drive for e-mails that related in any way to Carteret? A. Yes. Q. Okay_ Did you search the U drive for issues that would relate to Carteret's tax liability? A. I believe I searched under Carteret and under FBI number 1309. 1 believe that's all 1 searched.
1
2 3
4
identification as
5 6 7 8 9
10 11
12 13 14 15 16 17 18 19 20 21 22 23 24
Exhibit No. Vordtriede-51.} 2 BY MR. THOI\1PSON: 3 Q. Mr. Vordtriede, by way of background, can 4 you remind me, have you been on the offensive team 5 6 goodwill or the neutral team or both. What team are you on? ! 7 8 A. I believe one day as part of a conference call. I was casually designated as neutral. 9 Q. Okay. And have you been neutral ever 10 since? ! 11 A. Yes. j 12 Q. Okay. And is there anyone within the tax 113 group who is offensive? 14 A. I really don't know. l 15 Q. Okay. Do you know if there's anyone in j 16 the tax group who is defensive? I 17 A. I don't know. ; 18 Q. In terms of neutrality, what does that mean? Does that mean you are trying to get the right! 20 result? To figure out what Carteret receivership's j 21 appropriate tax liability should be? 22 A. 1 believe that would be a good : 23 interpretation. Perhaps J'm infonnational to both
I
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, 1 I'm not aware of it.
or
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word searches into the U drive? A. Assuming I did it right, yes. Q. All right That's fine. A. I did come up with some things and sent them on to counsel. Q. Yes. No, I appreciate that. We1ve seen a number of things that were either to you or from you, and I can See -- they don't reference Carteret or 1309. I think that may be where therels the disconnect. MR. THOMPSON: Mr. Kuiper, we may need to follow up with a letter to make sure we have everything responsive from the U drive. We'll take a look at that. If we think there's some easy key word search that can be done, we'Blet you know about that BY MR. THOMPSON: Q. Now, turning to this e-mail.this is a footnote for the Hansen Bank. And about halfway
through the footnote -- and take your time,
Mr. Vordtriede. Any time you want to read any
portion of a document.
l'llIet you read the footnote and then
I'll have a question.
MR. KUIPER: With all the documents today,
5
6
7 8
9
10 11
12 13
14 15
16 17 18
19 20 21 22 23 24 25
Q. Okay. That's what's reflected on the 1 second page of this document, when it says neutral 2 3 team, neutral tax litigation support, Jim Vordtriede? A. 1 didn't know it was formalized. 4 Q. Okay. 5 I 6 MR. THOMPSON: 1 would like the court reporter to mark as Vordtriede 52, a document bearing 7 the Bates number AM 0011816 through 818. I 8 (A document was marked for 9 identification as , 10 Exhibit No. Vordtriede-52.) BY MR. THOMPSON: Q. Mr. Vordtriede, this is an e-mail printed 13 out by Elaine Tama, but from Christopher Wood to 14 yourself dated September 3, 1998; and who was 15 Mr. Wood? : 16 A. I don't remember him at all. Q. Okay. 118 : A. I'm sorry. I 19 Q. Well, it was a long time ago. I· 20 By the way, let me ask you, because we did 21 find with Ms. Tama that she had this sort of treasure 122 trove of e-mails, is there a policy at the FDIC about e-mail retention? 24 A. I don't believe so. If there is a policy, 125
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1111 14th Street, NW Suite 400 Alderson Reporting Company 1-800-FOR-DEPO
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Case 1:93-cv-00531-LAS
Document 260-27
Washington, DC Page 3191
Filed 02/05/2008
Page 10 of 19
April 14, 2006
Page 321 And really, Mr. Vordtriede, I'm going to
show you these, have them, Bates number AM 0011816 '
through 818, marked for the record. To the extent
there are any differences from what we were looking
at in March, if you can indicate that, that would be
great. The first one will be Vordtriede 53.
(A document was marked for
idel)tification as
Exhibit No. Vordtriede-53.)
BY MR. THOMPSON:
Q. Looking at Vordtriede 53, is the key line
in terms of how your model would impact Carteret's
tax liability the shaded line about halfway through
the page which says, "increase (decrease) to taxable
income via recomputed FFA It?
A. (Indicating).
Q. Yes, sir.
A. Yes, that's right.
Q. Those numbers look, anyway, familiar to me
from our March deposition of the positive 51 million
or so for '93, negative 66 million for '94, no change
in '95. '96, negative 6.3 million and on down the
line.
Have your bottom line numbers changed
since the deposition in March?
1
2 3
4
if you feel you need to read other pages to put them in context, take whatever time you need.
BY MR. THOMPSON: Q. My question, Mr. Vordtriede, relates to the sentence in the middle of this paragraph, where it states, "However, as a member of a consolidated group, the failed institution is subject to the
intentions of the parent. II
!1 !2
'.1 1
3
5
6 7 8 9
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4 5 6 7
10 11 12
13 14
15 16 17 18 19 20 21 22 23 24 25
Is that an accurate statement of tax law? 9 MR. KUIPER: Objection, counsel, to the I 10 extent you're asking for a legal opinion from this 11 witness, who is not a lawyer. 112 MR. THOMPSON: He's a CPA. He's been I' 13 designated as the person who's most knowledgeable at 14 the FDIC about the codes. I know there's sort of an 115 intersection between accountants know a lot about the 116 code and lawyers know a lot about the code. And 17 certainly, you know, I understand, Mr. Kuiper, your
118
objection. MS. HART: I have to object, too. Just because somebody is a CPA does not mean they have specialty in tax. MR. THOMPSON: I understand. In these depositions, we've had the FDIC interposing the objections, not multiple objectors. But let me ask
J'
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Page 3201,
,
1 2 3 4 5 6 7 8
1 2
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it this way. BY MR. THOMPSON: Q. This is an accurate statement that was in this footnote? A. It's a little vague. Q. Okay. Well, how is it vague, do you think? A. I believe I know what the person is trying
to say. Q. What do you think the person is trying to
1
10 11 12 13 14 15 16 17 18 19 20
21
22 23 24 25
say? A. Whether -- I believe it is trying to say 12 whether or not the receivership files on a 13 consolidated basis or not is up to whether the parent 14 wants to file on -- wants to fulfill its compliance ' 15 obligations or not. Not all of them do. 116 Q. Is that an accurate statement, what you just said? I 18 A. I hope so, yes. : 19 Q. Okay. Would that be true for Carteret and i 20 AmBase? 1 21 i A. Yes. 22 Q. All right. Now I'd like to go to the 23 Excel spreadsheets that your counsel forwarded to USI2 4 I guess a couple of days ago. 25
III
117
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9
10
i
A. I believe for 2000, we found that the sign
needed to change, I changed that one. 3522828 became
a positive instead of a negative adjustment. An
increase to taxable income instead of a decrease.
Are we just speaking about the top now?
Q. Why don't we start with the top and we can
go elsewhere. For that top sort of key bottom line
row, is that the only change for March?
A. I believe so, yes.
Q. Now, what other changes are reflected in
Vordtriede 53?
A. Other than the captions, which are a
little better, but this middle section, I'm still not
very comfortable -- happy with what I did there.
think I could simplify it a great deal. The tax
numbers for 1993 on the March spreadsheets were
wrong.
Q. Let's just take this one at a time. When
you say the middle section, you're not -- and that
you think you could simplify it, the substance of
your model is accurate; is that correct?
A. Yes.
Q. What you're talking about is presentation
only?
A. Presentation, yes.
·
6 (Pages 319 to 322) IIII 14th Street, NW Suite 400 Alderson Reporting Company
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Q. Okay. 1 2 A. Of the tax liability section. Q. Good. In tenus of the 1993 number, I'm I' 3 sorry, go ahead. What were you saying? 4 A. I believe --I don't have the old 5 spreadsheet here, but I believe I was preseuting it ,6 ',i 7 as tax per the original return. And it started witb 17990967, and then I added a 2093 something to that 8 effect for an 1120X that was filed. I misunderstood 9 what the tax per the return was showing -- what the t 10 tax per the return was. The actual tax per the l 11 return, I believe was zero. And it was zero per the amendment. But the preparer was making a I 13 presentation I believe trying to comply with the i 14 regulations, but I believe he misunderstood what the I 15 regulations were asking for. So he was making a memo entry trying to ! 17 show what the tax would have been without any FFA 18 effect, whereas the IRS was asking for a memo accoun 19 of what the tax effect of the FFA effect actually II 20 was. 21 So he was actually doing the mirror image of what the IRS was asking for. But the tax in that 23 column would have been zero, and I had in the old I spreadsheet, I had numbers in the column which was 25
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---
122 24 I
will ask the court reporterto mark the next Excel spreadsheet as Vordtriede 54. (A document was marked for identification as Exhibit No. Vordtriede-54.) BY MR. THOMPSON: Q. Just one last question about Vordtriede 53, just so the record is clear. Under your -- the finalized regulations for FFA, there'd be a tax loss of some 66 million dollars in '94 which would have been available to cany back to '93, and shield that income from tax; is that right? A. Correct. Q. Now moving on to Vordtriede 54, what is this document, if you'd identify it for the record since it has no Bates numbers on it? A. Up in the upper right comer, it's identified as Carteret 12-31-2004, and it is the updated version of the new FFA model for 2004, firs two pages. Q. Okay. Is there anything that's changed since we were together in March? A. Yes. I believe this one -- let me see. I believe this one did change -- welve already talked about the deferred balance on line 4-A
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11 Now, in this case, I'm actually starting 2 3 with the tax on the recomputed taxable income based on the new computation, the model, the new model 4 computations ofFFA. So notwithstanding that, I'm 5 not happy with the captions that I have here right 6 7 now, the numbers should be right. And again, the 8 operative line would be the increase/decrease in tax liability line at the bottom of the middle section 1 9 110 and there's only one tax effect jn that line, and I 11 that's for 1993. Q. And just to be clear, when you say one tax i 12 effect, under your analysis, the appropriate amount j 13 of taxable income that Carteret should have i , 14 appropriated for 1993 was $51,402,763; is that right? i 15 A. That's what I estimate the tax liability : 16 would have been had the section 597 model been usedJ 17 based on the finalized regulations. l18 Q. Very good. Okay. Any other changes 119 120 reflected in Vordtriede 53? A. I believe so other than in the -- in the 21 numbers, I don't believe so, MR. THOMPSON: We printed these out -23 they came as separate attachments. We kept them that 24 way. That's why there will be multiple ones. We 125
wrong.
I
I 122 I I
which carries down. This one has the bad numbers on it. Q. Right. A. I believe also for this year, this year, line 5-D on the March version was off. And it was a footing error where all the cells weren't footed which carried forward. Q. When you say footing error, I'm sorry, I'm not a computer guy. What does that mean? A. Ws not a computer tenn. They weren't -- all the figures in the colunm werenlt added. I didn't include all the- Q. Okay. A. When I inserted a row, the formula didnlt adjust to include all the rows. So one or -- one of the numbers I believe was left out before it was carried forward. Q. Okay. But this numher of approximately 357 million is accurate in terms of what the remaining equity at the beginning of the tax year was for 2004; is that right? A. I believe that's the correct number. Q. Okay. Any other changes?
A. Other than the two we've talked about, I
donlt believe so.
7
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1111 14th Street, NW Suite 400
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1-800-FOR-DEPO
Washington, DC 20005
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Filed 02/05/2008
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1 2
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Q, Okay,
MR, THOMPSON: I'd like to ask the court
reporter to mark the next spreadsheet as Vordtriede
II 1 Q, Okay, And does this -- has this changed ,2 since the March deposition?
(A document was marked for identification as 7 Exhibit No. Vordtriede-55,) 8 BY MR, THOMPSON: 9 Q, SO now, Mr, Vordtriede, would you please 10 identify this document for the record? 11 A. This looks to be for Carteret for 12 12-31-92, very first year, Updated 4-11-2006
13 version. The vel)' final page, work sheet of the
4 5 6
55,
I4 5 I6
,ii,
3
A.
I donlt believe for '94, the numbers
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changed, Q, Okay, By the way, let me just ask generally. What was your purpose and what were you trying to accomplish in doing these updates? A, For 1996 through '98, the line 3-B-l - 3-B-I wasn't carrying forward, It was that footing error. It wasn't adding all the cells in the fonnula on the workpaper -- the second to last work sheets, the SM 1-2,3A, all the numbers weren't being footed,
I 13 added together so the 'NTong number was appearing or
14 updated model for FFA computation, 114 the lead spreadsheet. 15 Q. Okay. When it says tax basis beginning 1 15 Q. When you say the wrong number, the wrong 16 net equity for the intervention year, that means how number in tenns of continuing equity?
116
19
20
21
17 much tax bases there was at the beginning of 1992; i," 17 A. Yes. This loop 1, my tenn, in the section 18 that right? 18 3, they call it the excess of tax basis of assets A. Yes. over liabilities. But essentially that's what it is,
119
Q, A,
22
And it is 427 million dollars? Yes, MR, THOMPSON: I would like to ask the
23 court reporter to mark as Vordtriede 56, the next
24 spreadsheet.
25 (A document was marked for
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Page 328/1 1
20 yes, i 21 Q, Okay, : 22 A. And you update it every year, Ii 23 So some of the updates weren't flowing 24 through for '96, '97, and '98, 25 Q. SO I'm clear on what we're talking about, Page 330
1 2 3 4
5
6 7
identification as
8
9
Exhibit No, Vordtriede-56,) 2 3 BY MR, THOMPSON: Q, And Mr. Vordtriede, Vordtriede 56, if I 4 you'd please identifY this for the record? 5 A, For Carteret, this is the 12-31-93, April 6 11,2006 updated version of the FFA model, the veryl 7 first work sheet, the lead sheet for -- updated FFA ,8
I I
< <
if you start the year with a tax basis of $400 million and then you have a deduction of 10 millio dollars, then at the end of the year, you should have
390 million dollars of remaining tax basis?
A, Right.
Q, SO that simple arithmetic computation
wasn't occurring; is that it?
A,
Right.
recomputation.
9
Q, But the analytics of your model have not
10 ]. 2 13 14
15 16
11 our March deposition?
17 18 19 20 21 22 23 24 25
8
i 10 changed since March?
A. No,
j 11 MR, THOMPSON: Let's ask the court
A, I don't believe the numbers on this one 112 changed, 13 reporter to mark as the next spreadsheet, Vordtried
MR, THOMPSON: I'd like to ask the court ,14 58,
(A document was marked for
reporter to mark the next spreadsheet as Vordtriede j 15 57, i 16 identification as
Exhibit No, Vordtriede-58,)
(A document was marked for 11 7 BY MR. TIlOMPSON:
identification as 118 Q, All right, Mr, Vordtriede, If you'd
Exhibit No, Vordtriede-57.) ,12109 BY MR, THOMPSON: please identifY this document for the record,
Q. And Mr. Vordtriede, would you please 21 A. For Carteret, this is the 12-31-95 April
identifY this document for the record? ; 22 11, 2006 updated version of the section 597
A. For Carteret, this is the 12-31-94, April 1 23 recomputation of federal financial assistance.
II, 2006 updated version of thelead work sheet for 124 Q, Have there been any changes to this
the FFA recomputation according to FDIC's modeL I 25 document since the March deposition?
Q, Okay, Has this changed in any way since
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Q. SO you need to know how much FFA was thert and how much tax basis is there; is that right? A. Yes. I Q. Okay. I would like to ask the court reporter to mark the next spreadsheet as Vordtriede
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6 7 8
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10 11 12 13
14 15 recomputation of federal financial assistance under
(A document was marked for identification as Exhibit No. Vordtriede-62.) BY MR. THOMPSON: Q. Would you please identitY this document for the record? A. For Carteret tax year 12-31-99, the April 11,2006 version, updated version, section 597
16 the FDIC model. 17 Q. Okay. And has this changed since the 18 March deposition? 19 A. I don't believe 1999 changed. 20 Q. Okay. So it is accurate? 21 A. 1believe so. 22 MR. THOMPSON: I'd like to ask the court 23 reporter to mark the next spreadsheet as Vordtriede 24 63. 25 (A document was marked for Page 336
1
identification as
April 11, 2006 updated version of the section 597
federal financial assistance recomputation, under the
3 FDIC model.
Q. Okay. And have there been any changes
4 5 since the March deposition?
6 A. I believe for 2001, there were no changes.
7 Q. SO this is accurate now?
' 8 A. Yes, it should be.
MR. THOMPSON: Okay. I'd like to ask the
9 10 court reporter to mark the next spreadsheet as
11 Vordtriede 65.
12 (A document was marked for
13 identification as
14 Exhibit No. Vordtriede-65.)
MR. THOMPSON: What are you noticing?
15 16 THE WITNESS: This is 2002. It has the-
17 itls got the correct beginning deferred number -
18 looks like it has the correct beginning deferred
19 number in it.
20 BY MR. THOMPSON:
Q. That is surprising because when we started
21 22 today we -- we were looking -- we were looking at -
23 let's go back in time. Vordtriede 49, which on the
I 24 printout had an incorrect number, and then you had
25 handwritten in 85,079,107 which is exactly what's in
Page 338
1 this computer printout.
2 3
4
5
6 7 8
document for the record?
9
10 11 12
13
14 15 16 17 18 19 20 21 22 23 24 25
about exactly what Vordtriede 49 is, right?
MR. KUIPER: Take your time to review it,
6 ifYOll need to understand the changes.
A. Carteret for the tax year 12-31-2000, the 7 BY MR. THOMPSON:
April 11, 2006 version of the section 597 Q. This might claritY. Maybe not.
recomputation of federal financial assistance under 8 9 Vordtriede 49, where did this document come from?
the FDIC model. 10 A. That was my copy of what was transmitted Q. And has this spreadsheet changed since the 11 to Andrew Gilbert, our counsel, to be transmitted to March deposition? 12 you. A. I don't believe 2000 -- the year 2000 113 I And I -- I made -- had made the changed. 114 corrections to line 3-B-l and 5-D that I knew -- the Q. Okay. Is it accurate? I 15 errors I knew about, but I did not catch these A. It should be, yes. MR. THOMPSON: I would like to ask the 16 beginning deferred errors so I didn't know about 117 them. court reporter to mark the next spreadsheet as 118 So yesterday I was going through and found Vordtriede 64. I 19 these additional errors, but all I could do was make (A document was marked for 20 manual computations because I didn't have my identification as 21 computer. I can't explain - Exhibit No. Vordtriede-64.) 122 Q. How- BY MR. THOMPSON: I 23 A. -- the date and the -- unless this somehow Q. Mr. Vordtriede, please identitY this 24 super -- I can't explain. document for the record? 25 Q. One explanation would be if the printout A. For Carteret, tax year 12-31-2001, the
Exhibit No. Vordtriede-63.) BY MR. THOMPSON: Q. Mr. Vordtriede, please identitY this
, 3: I
2
A.
Right.
Q. That raises some interesting questions
!
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10 (Pages 335 to 338) 1111 14th Street, NW Suite 400 Alderson Reporting Company 1-800-FOR-DEPO Washington, DC 20005
Case 1:93-cv-00531-LAS
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Page 339] 1 2
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Page 341 Now we really have a mystery. Well, if you'd get the most recent version of the model, sir, we would definitely appreciate receiving a copy of that.
MR. THOMPSON: At this point,
Mr. Vordtriede, I'd like to ask the court reporter to
mark as Vordtriede 67, another document.
(A document was marked for
identification as
Exhibit No. Vordtriede-67.)
BY MR. THOMPSON:
Q. Mr. Vordtriede, this was a document
produced to us subsequent to your last deposition,
and Ijust -~ I believe it came from your files; is
that correct?
A. Yes.
Q. What is -- if you could just identify this
document for the record?
A. It looks to be a pre-1992 attempt to
summarize 1988 through 1991 book to tax differences ~
for the entire affiliated group under Carteret
Bancorp, Inc.
Q. And did you use this to help inform your
calculation of the tax basis in Carteret?
4 5 6 7 8 9
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24
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that you had with you when you were traveling ,1 happened to be an older version than what's on you~ 2 computer; is that one possible explanation? i 3 A. Yes. I only updated the dates as of 4 4-1I-2006;so-5
Q. Okay. 6 A. I don't know. 7 8 Q. Well, that is a bit ofa mystery. But Vordtriede 65, which is what you have before you, I 9 , that's, in fact, accurate, isn't it? ! 10 A. It looks to be accurate, yes. I 11 Q. And given that this version is accurate, 112 are there any changes from the March deposition? 113 A. I don't believe so. 114 Q. Okay. 115 A. Other than the deferred question. 116 Q. When you say other than the deferred 117 question, just so the record is clear -1 18 A. Beginning -- the beginning balance for 1 19 deferred, whether it was the right amount or not. I 20 Q. Okay. I' 21 MR. THOMPSON: I'd like to ask the court 122 reporter to mark the fmal spreadsheet as Vordtriede 23 66. 124 (A document was marked for 25
I I
-_._-_._-_......_--_._--_._---._
340 identification as Page 11 Exhibit No. Vordtriede-66.) BY MR. lBOMPSON: Q. Mr. Vordtriede, please identify this document for the record? A. This is the Carteret tax year 12-31-2003, April 11, 2006 version of the section 597
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recomputation of federal fmancial assistance under
13
10 11 12
14 15 16 17 18 19 20 Q. Yes, sir. 21 Mr. Vordtriede, does this have the 22 adjustment -- the correct numbers in it? 23 A. No. This One is wrong. 24 Q. This one is wrong? Is that reflected in 25 the handwritten notes?
the FDIC model. I 9 Q. Has this changed since the March 110 deposition? I 11 A. This one has the same mystery. It appears 112 to have the correct beginning deferred balance on line 4-A, so other than that mystery, this -114 everything should be correct on this one. As far as 115 I can tell. 1 16 Q. Let's look back for a moment at Vordtriede 11 7 54 in your stack. I 18 A. 54? 119
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A. Yes. I used it to -- for 1992, I used it to attempt a representation of beginning equity in the year of intervention on a tax basis rather than on a book basis. Q. Very good. 1have no further questions about this document. MR. THOMPSON: At this point, I'd like to ask the court reporter to mark as Vordtriede 68, a document that bears the Bates number AM 0013788. (A document was marked for identification as Exhibit No. Vordtriede-68.) BY MR. THOMPSON: Q. Mr. Vordtriede, I'd like to direct your attention to the original message on this e-mail which is from Elaine Tama to yourself dated July 21, 1998, the subject is footnote Carteret. And in particular, the last sentence of Ms. Tama's e-mail to you says, "No IRS proof of claim is currently on file. " Is that correct? A. I really don't know. Q. Let me show you another e-mail. MR. THOMPSON: I'd like the court reporter to mark this next document as Vordtriede 69. 11 (Pages 339 to 342)
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1 2 3 A.
Page 357 December '99 to reflect these changes?" Then Mr. Cywinski responds, nit is too late. Besides they're just estimates and we know they are overstated since IRS stated that penalties should probably he abated." Do you know what Mr. Cywinski's statemen that these numbers in the .. for the tax liability are just estimates and are probably overstated because the IRS will abate the penalties? A. I believe that's a generally accurate statement. Q. Okay. Let's go back to the memo from Mr. Anderson to Karen Hughes. First, start offwitl this potential tax liability section and in the second paragraph under potential tax liability .. MR. KlITPER: You are on page I. MR. THOMPSON: Oh, yes. Page I, I'm sorry. BY MR. THOMPSON: Q. Page I, second paragraph under potential tax liability. It states, "in April of 1999, representatives from FDIC legal and DOF met with' representatives from the IRS national office and discussed a number of tax issues. One of the issues discussed was the taxability of any goodwill
Yes.
In the first paragraph, it says in part, "in the April meeting, the IRS indicated that
Q.
4 the penalties would probably be eligible for 5 abatement but that this matter should be pursued 6 through the various district directors." 7 Were you aware that the IRS had indicated 8 that the penalties would probably be eligible for 9 abatement? lOA. Where specifically were you just reading? 11 Q. Sorry. 12 A. The very bottom? Okay. 13 Q. Yes. 14 A. I'm not sure exactly who would have 15 indicated this to Jim, but that's always been their 16 infonnal indication. They tend to be reasonable with
17 respect to these types of penalties, as they should
I;
I~
1
III
112 13 114 115 116 117 118 i 19 i 20 I i 21 22
11~
18 be. 19 Q. Wbenyou say they, you mean the IRS? 20 A . Y es.
21 Q. On the next page of the memo in the second
22 paragraph, it says, "With regard to the late payment 24 Internal Revenue Code sense 507 justified deferred
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25 payment of income taxes."
i
23 penalties, both the interagency agreement for RTC and 23
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Page 356
1 2 3 4 5 6 7 8 9
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litigation or settlement proceeds. The IRS confirmed
that in most cases, any proceeds from goodwill would,
in fact, be taxable to the receivership. tf
Were you part of that meeting?
A. No, sir, I was not.
Q. Okay. And were you aware of that meeting?
7 A. Very vaguely.
Q. Okay. Do you remember anything about that
8 9 meeting?
lOA. All I remember was .. and I .. my
11 recollection is maybe something from Richard Peyster
12 to the effect that what's represented here in this
13 paragraph ..
14 Q. The IRS was taking the position they were
15 going to tax the awards in the Winstar cases?
16 A. Yes.
Q. Okay. And then .. and do you have an
17 18 opinion as to whether it is appropriate to tax those
19 awards?
20 A. I really don't. I haven't studied the
21 issue at all.
22 Q. Okay. Now. let's tum to the second page
23 of the memo. \¥hat this is discussing is what 24 Mr. Anderson calls the problem. It's the third line. 25 It says, "mainly the prohlem is two·fold, the failure 1 2 3 4 5 6
Do you agree the interagency agreement also justifies deferred payment of income taxes? A. Yes. Q. Okay. And then I'd like to -~ keep this memo in front of you, if you don't mind. We're going to come back to it. It touches on a number of items. Just to close the loop on this one subject, I'd like to ask the court reporter to mark as Vordtriede 74, a document with the Bates number AM
10 0005.
(A document was marked for identification as 12 Exhibit No. Vordtriede·74.) 13 BY MR. THOMPSON: 14 Q. So this is an original message from 15 16 Mr. Johnson to Rick Cywinski saying in part. "are you
17
aware that you still owe me revised tax opinions for
18 the following FINs." These are FINs that were
19 changed due to amended returns, and Carteret is one 20 of the entities that's listed there.
21
Then he says, "in addition, these two FINs
22 had additional tax on the '98 return that was added 23 to our original estimate." And he says Old Stone,
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24 then he concludes, l1if it is too late to defer our 25 December '98 estimate, maybe you want to wait until
15 (Pages 355 to 358) II I I 14th Street, NW Suite 400 Alderson Reporting Company 1·800·FOR·DEPO Washington, DC 20005
Case 1:93-cv-00531-LAS
James F. Vordtriede 30(b)(6)
Document 260-27
Washington, DC Page 367
Filed 02/05/2008
Page 16 of 19
April 14, 2006
Page 369 1 2 3 4
6 7 8
1
just touched on, Roman IV of tax liabilities on
solvent banks. What is the issue here, do you recall? A. When a receivership turns solvent, in quote, unquote -- certify the bank as insolvent. And
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
17
essence under the interagency agreement, we cannot - 5
at that point, the IRS in theory can pursue
collection of its priority 8 claim.
18 19 20 21 22 23 24
25
Okay. 9 And I suppose -- ther.e's no certification 10 '11 process under section 7507, but I suppose it would essentially work the same way, although the IRS may 12 not become as instantly aware of the fact that the 13 receivership has turned solvent. 14 mean credits instead of contra - Q. All right. I have no further questions 15 Q. Yes. about that document. A. I generally use contra versus the nonnal 16 MR. THOMPSON: I would like to ask the 17 account balance. court reporter to mark as Vordtriede 75, some Q. Right. 18 drill-down reports that have the date of March 7, A. Assuming these brackets mean credit versu 19 2006 on them. 20 debit, this would mean they discovered 19 million (A document was marked for 21 dollars in equity posted to a discovered asset 122 account on the asset side of the balance sheet. So identification as , Exhibit No. Vordtriede-75.) :23 here is the corresponding set of accounts measuring, i 24 the equity effect ofthose discoveries. BY MR. THOMPSON: Q. Mr. Vordtriede, during our last 125 Q. We talked a long time about oil wells, ._--- Page Page 370
deposition, we talked about how there might be 1 Fannie Mae certificates, titles in drawers, that sort
Q. A.
MR. KUIPER: Negative. MR. THOMPSON: Oh, negative 352.
THE WITNESS: Yes.
BY MR. THOMPSON:
Q. Is that an increase of assets?
A. rm not sure. I believe from the balance
sheet to these drill-downs, the sign might switch.
Q. I think it does. As you recall from the
195 tax return, there was an increase of taxable
income of exactly the amount that's reflected as the total for the, you know, post-resolution equity adjustment. Right. I think the signs are reversed? A. So we're thinking here that the brackets
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of thing. We're not going to go back over that, which was on the discovered assets and liabilities You were kind enough to provide these. We appreciat¢ 4 side. But there's 22 million dollars here that I5 that. Jjust wanted to, if you could, briefly 6 says equity adjustments to assets that's different walk through what we're looking at here and how it 7 from discovered assets. In other words, it is broken translates to that piece of the '95 tax return. The 8 out of the discovered assets. That piece of it is first three pages I take it, are the balance sheet as 9 about 350,000 dollars and the equity adjustments te of December 31, 1995 for the receivership; is that ! 10 assets is 22 million dollars. right? Do yon know what that equity adjustments A. Yes. /12 to assets is referring to? Q. If we tum to the fourth page of this 13 A. I'm sorry. My prior answer, I misread document, it shows a total of some 19.3 million 14 this fonn. The deferred -- it is not just the dollars? 15 discovered assets with the effect -- the equity effect shown here. The discovered assets, adjusted And now it says equity discovered
assets, discovered liabilities, adjusted liabilities. 18 assets, LIN. Do you know what the LIN is for?
Your question is, do I know the difference A. J don't know. The L might refer to
119 between adjustments to assets versus discovery of
drill-down reports for the post-resolution equity 2 adjustment that were included in the 1995 tax return. : 3
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I
111
I'
~: ~~:~.
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; 20
20 liquidation versus corporate, but I'm not sure what
assets.
21 the N means.
Q. Okay.
22 23 A. It might mean something else.
Q. Fair enough. It says equity discovered
24 25 assets. What does that reflect, 352,000 dollars?
18 (Pages 367 to 370) 1111 14th Street, NW Suite 400
Q. Yes. )22 A. My understanding is that the adjustment to , "3 asset is that the asset was there, but it was booked l~ i 24 incorrectly, so ifs being increased or decreased 125 versus the discovery of an asset which wasn't there.
! 21
Alderson Reporting Company 1-800-FOR-DEPO
·
Washington, DC 20005
Case 1:93-cv-00531-LAS
James F. Vordtriede 30(b)(6)
Document 260-27
Filed 02/05/2008
Page 17 of 19
April 14,2006
Washington, DC Page 371
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Q. Is that because, one, the pro forma 1 adjustments are made at the time of closing? There 2 is an attempt to get the fair market value of the 3 asset? A. No, I donlt believe so. I'd have to look at an account description to talk about adjustments to assets, to see exactly what it's trying to I 8 measure. I don't believe it is tied to fair market value. Q. Okay. A. I believe there's another series of accounts tied to e
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