Free Affidavit - District Court of Federal Claims - federal

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 1 of 42

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

Nos. 01-256 T and 01-257 T

(Judge Lettow)

MARRIOTT INTERNATIONAL RESORTS, L.P., MARRIOTT INTERNATIONAL JBS CORPORATION,
T AX MATTERS PARTNER,

Plaintiff
v.

THE UNITED STATES,

Defendant

SECOND DECLARATION OF G. ROBSON STEWART

I, G. Robson Stewart, being of legal age and pursuant to 28 U.S.C., Section 1746, declare
as follows:
1. I am the Department of Justice trial attorney assigned to defend the above-

captioned case and I have in my possession relevant Department of Justice fies.
2. Attached hereto are true and accurate copies of

the following documents:

Exhibit 13 - Credit Suisse First Boston confirmation statements for three short

sales of U.S. Treasury Notes by Marriott Ownership Resorts, Inc.
Exhibit 14 - Deposition transcript excerpts from the deposition of

Roy Hahn,

taken in these action on February 13,2003.

-1-

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 2 of 42

I declare under penalty of

perjury, that the foregoing is true and correct. Executed in

Washington, D.C., on April 18, 2008.

G. ROBSON TEW A T

0.

Trial Attorney, x ision
U.S. Deparment of Justice

-2-

OPERATIONS

CUSTOMER COpy

13
80510(1 Chicago Dallas
Philadelphia San F-¡incisco

Five World Trade Center New York, N Y 10048

Hoiislon Siln Juan
Tokyo
THE FIRST BOSTON CORPORA nON

. _ Fii~ST BOSTON
PARK AVENUE PLAZA. NEW YORK, N.Y. 1005
SECUPIITY CODes

Telephone (212) 90-200

Allanta Los Angeles London

Geneva Mejhourne

-

YOU SOLD

09/30/199'+1 2D8,;H 0111 28RI ~I 120172 'J12827K';8
DUPLICATE FOR ACCOUNT BELOW 21 AC
MARRIOTT OWNERSHIP RESORTS IN'

~ARRIOT ~WNERSHIP RESORTS INC ATT MICHAEL DEARING VP CORPORATE MARRIOTT DRIVE

FINACE ATT MICHAEL DEARING
1200 U S HI~HWAY 98 SOUTH SUITE 19

DEPT '124-11
LAKELAND FL 33801

Case 1:01-cv-00256-CFL

WASHINGTON DC 2005~

MELLON BANK PITTS/TRUST ABA 0'+30002&1

IRS NO.S21 32 090'+

Document 95

A/e 1'1'1-803& MARRIOTT

U S TREASURY NOTES
0'+/30/199~ 5.1250
PLUS MARGIN

f1ACI Ofl 'HARle I ....ICI

,. PftlNdlML .. 'INT.-DIV.-OI8C. I

15,000,000 96.1500
VALUE OF eOLLATRL REPO INTEREST

14,SI2,SOO.00 2S';,94,;.33

AT 0,+.125 PCT FOR 30 DYS PAYABLE IN FEDERAL FUNDS

04/301 n98 fnTtr~~, 14,7&9,44&.33

125,9';4.81

Filed 04/18/2008

14,895,411.14 Si,202.98

AMOUNT OUE

Page 3 of 42

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Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 4 of 42

/OPERATIONS
F;~e WorlD Trade Center
los Angeles

CUSTOMER COPY

Atlanta
Philadelphia San Francisco

Boston Chicago Dallas
Houston
San Juan

m 'w

FIRST BOSTON

THE FIRST BOSTON CORPORA TlON

Case 1:01-cv-00256-CFL

New York. NY 100 Telephone (212) 90-200

london

Geneva Melbourne
Tokvo

PARK AVENUE PLAZA. NEW YORK, N. Y. 1005

MARRIOTT OWNERSHIP RESORTS INC ATT MICHAEL DEARING 1200 U S HIGHWAY 9& SOUTH SUITE 19

Document 95

LAKELAND FL 33&01

MELLON gANK PITTS/TRUST ARA 043000261

IAS NO.S21 32 0904
õT~.:

, '_, :,_~IJ~"1 ~'!'" "UÇI 1 '''I,' _'~ ~"'C6't.., . , ".NT...DIV.-DIBC.
'/.,11- 5~Ô,000,0¡¡ol" 96;7500 ,_.t'.'~&'31S'ÒÒO.OO' '&56,411.771

U S TREASURY NOT"S OV30/19~31 501250

04/30/1 q95
I""OCEEDI

Filed 04/18/2008

INTEREST AT 04.125 PCT FOR 30 DYS PLUS MARGIN
PROCEEDS PAYABLE IN FEDERAL FUNDS
VALUE OF C OLLATRL REPO INTEREST

49,2H,i.H.77

i.n,&&2.69
49,&51,370.106

17J,&7ó.59

Page 5 of 42

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IF THIS CONFIRMATION IS NOT IN ALL RESPECTS IN ACCORDANCE WITH YOUR UNDERSTANDING. PLEASE NOTIFY US IMMEDIATELY

..;JT.rn....l.l~
YOU

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~~~ ~~~ OUR NEW NAME IS C5 Fi~ST ROSTON CORPORATION ~~~

i.9,a2,'!,041.05
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'. ACClMT fOf 'lOlAC ANNk 'I' , '. ......YOU..AGENTWf HAVE BOUGT FOR YOUR ii AS YOU AG WE HA\l IØ AGNT fOR SEI.ER WE HA..E SoiO TO YOU 12-ASAO'ORI"WlHA\IBD FR'l. .' "" ... AGHT fOR snlER W£ HAVE soio THRO YOU ii _ AS Aoe fO I" WE HAVE II T' YOU. -. 11- M

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i~ _ M ~Al.l1' OU 0M.l" MA -l MOI you a - AI ~ AI'Ol OI OW AC _ ""VlIO TO 'I.
ILL. AS REPFNTATNE Of ON OA Ii Of THE SEfI ~CHRS, .. - AS

17 - WE HEREBY RECEIVl fl 'lOU 21 - Wi HEREBY OfllVfR TO YOU

W£ HAVE BOUGH fl YOU WE HAve SODRiEIENTATlE Of TO YOU

ON OR MOE OF THE SEVERAL f'Rl.

Case 1:01-cv-00256-CFL
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CUSTOMER COPY
Houslon
Siln Juan
THE FIRST BOSTON CORPORATION

()I'FHATIONS

~iVf' Wnrlt1 Trilrjp Center

"-FIRST BOSTON
PARK AVENUE PLAZA, NEW YORK, N.Y. 1005

NI'w York N Y 10048

Tf'leptione (212) 909-200

Allanta Basion ChICilf)" Oallas Phllildelphril Silri Francisco I os Angeles Melhourne Geneva London
Tokyo

TRADE DATE lSETTLEMENT DATE

YOU SOLD

05/16/199~ 05/31/199~ Z1 ~ARRIOTT OWNERSHIP RESORTS INC ATT ~ICHAEL DEARING 1Z00 U S HIGHWAY 95 SOUTH SUITE 19

Case 1:01-cv-00256-CFL

LAKELAND FL 33501

~ELLON BANK PITTS/TRUST ABA 0~3000261

IRS NO.521 32 090~

Document 95

C

N....SEJI 0.. DAY'

"'CCR"'-'°l U S TREASURY NOTES INTK....T FACE OR SHARES I PRICE

PRINCIPAL -IIN'f.-DIV.-OI8C. I

05/31/19931 It. 7500

05/31/1995

PRoèlll- - . i,.'

Filed 04/18/2008

9,lt63,ltl0.00 213,133.59 1691 10,000,000 9~.63~1 LESS "ARGIN INTEREST AT 01t.125 PCT FOR 15 DYS CORRECT 09/23/9~ FOR DATE CHNG ~ATURITY. VALUE OF COLLATRL NT= 94266-61197 REPO INTEREST PROCEEDS PAYABLE IN FEDERAL FUNDS

9,651,5lt5.59 215,135.59 9,463,ltl0.00
16,265.21t

If THIS CONFIRMATION \S NOT IN AL L HESPECTS IN ACCORDANCE WITH YOUR UNDERSTANDiNG PLEASE NOTIFY US IMMEDIATELY.

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cec OUR NEW NA~E 'IS CS FIRST BOSTON CORPORATION e.... YOU

'),479,675.2,.
YO

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11 AS YOUR AGENT WE HAilE SOLO fOR YOUR ACCOUNT AND RISK 21 . A. YOUR AGEN WI HAVE BOUGT FOR YOUR ACCOUNT AND RISK

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14 _ YOU HAilE BOUOHT FOR OUR ACCOUNT AND RISK 24 - YOU HAVE SOO FOA OU ACCOUNT "NO RISK TO AC nHAYlII

15 _ .. "'tI"AL AN'Of OUR OWN ACCOUN WI H...I! -l..OI YOU. ~ -.. ~ALli'DIO& OW

Page 7 of 42

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16 _ AS REPRESENTATIVE OF ONE OR MORE Of THE SEVERAL PURCHASERS, 8. AS REPRESfNTATIVE Of ON OR MORE Of THE SEVERAL PURC9

17'N HAVE BOUOHT fROM YOU 27 - WE HEREBV D£lll/R TO YOU WE HEREBY RECfWF fROMVOU WE HAVE soio TO YOU

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Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

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MA - 008546

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 9 of 42

1

UNITED STATES COURT OF FEDERAL CLAIMS

2 3

---000--MARRIOTT INTERNATIONAL RESORTS, INC" et a1"

4
5 6 7
8

Plaintiffs,
vs,
THE UNITED STATES,

No, 01-256T No, 01-257T

Defendant, - -- - --- - - -- - - - - - - --- --- - ---j

9

10

11
12
\oj .,,'

ORIGINAL
DEPOSITION OF ROY HAHN
THURSDAY, FEBRUARY 13, 2003

13 14

15 16
17 18

19

Reported by:
KELLI E A, ZOLLARS, CSR, RPR, CRR CSR License No, 5735

20 21
22 23 24

UCCELLI & ASSOCIATES Certified Shorthand Reporters 1243 Mission Road South San Francisco, California 94080 Tel: (650) 952-0774

25

14
DEPOSITION OF ROY HAHN

1

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 10 of 42

1 2
3

I

N

D

E

X

EXAMINATION BY
MR,
RUCHELMAN

Page
4

4 5
6 7 8

E

X

H

I

B

I

T

S

9

EXHIBIT

Page

10

11
12 13

(No

exhibits

were marked, )

14 15
i 6

i 7

18 19
2 a

2 i

22 23

24 25
2

DEPOSITION OF

ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 11 of 42

1

BE IT REMEMBERED THAT, pursuant to
SUBPOENA DUCES TECUM, and on THURSDAY,

2
3

FEBRUARY 13, 2003, commencing at the hour of
9:45 a,m, thereof, at the offices of
McDERMOTT, WILL & EMERY, 3150 Porter Drive,
Palo Alto, California, before me, KELLIE A,

4
5

6
7 8 9

ZOLLARS, CSR No, 5735, a Certified Shorthand
Reporter in the State of California,

personally appeared

10 11
12 13 14

ROY HAHN

called as a witness by the Defendant; who,

having been by me first duly sworn, was thereupon examined and interrogated as

15 16 17
18

hereinafter set forth, ---000--Appearing as counsel on behalf of Defendant:

19 20

21 22
23 24

CHARLES M, RUCHELMAN, ATTORNEY AT LAW U, S, DEPARTMENT OF JUSTICE, TAX DIVISION COURT OF FEDERAL CLAIMS SECTION 555 Fourth Street, N,W" Room 8112 Washington, D,C, 20001

Telephone: (202) 616-3423
Appearing as counsel on behalf of Plaintiffs:
ALEX E, SADLER, A TTORNEY AT LAW Law Offices of CROWELL MORING 100 i Pennsylvania Avenue, N, W, Washington, D,C, 20004-2595 Telephone: (202) 624-2704
3

25

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 12 of 42

1

Appearing as counsel on behalf of Roy Hahn:
CHRI STOPHER KLI EFOTH, ATTORNEY AT LAW Law Offices of McDERMOTT, WILL & EMERY 600 13th Street, N, W, Washington, D,C, 20005-3096

2
3

4 5
6 7 8 9

---000--EXAMINATION BY MR, RUCHELMAN
MR, RUCHELMAN:
Mr, Hahn,
Q,
Good morning 1

My name is Charles Ruchelman, I'm

an attorney with the United States Department
of Justice in the Tax Division,
And this is

10

11
12 13 14

your deposition in the case of Marriott
International Resorts Limited Partnership, et

~, versus United States, which is docketed
in the United States Court of Federal Claims;

15 16
17 18

and we're going to hold this deposition, which
is being taken in accordance with the rules of
the United States Court of Federal Claims,

I'm going to ask you a few questions about

19

what you know about the facts and allegations
pertaining to this lawsuit,

20 21
22 23

Just a few simple ground rules in
terms of taking a deposition,
If I've asked

you a question and you do not understand it,
please let me know; and I'll try and rephrase
the question so that you can understand it,
4

24 25

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 13 of 42

i
2 3 4 5

A,

Many of the investment banking clients that we

have are interested in minimi zing their

taxes,

And so the advice we give includes

trying to help them minimize the taxes that
they would pay,
Q,

6
7
8

And are you involved in that service?

A,
Q,

Yes,
The tax strategies?
Yes, I am,

9
i 0

A,
Q,

Now, back to page 8 again,
and Accounting,"

Where it says "Tax

ii
i 2

And it says "Tax and

Accounting:

Leader of Chenery' s West Coast

i 3

operations, Roy Hahn specializes in

i 4

understanding the complexity of today' s tax
codes while anticipating the changes of

i 5

i 6

tomorrow, With years of experience working
for the world's top accounting firms, Roy is able to engineer smart, cutting-edge financial

i 7

i 8

i 9

programs that leverage current economic
climates and deliver powerful tax advantages,"
Can you tell me what "engineer smart,

20
2 i

22 23 24

cutting-edge financial programs" means?
I guess focusing on the word
11 engineer. 11

25

A,

Well, the -- many of our clients are
i 5

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 14 of 42

1 2
3

international companies that have the need to

harmonize both accounting and tax regimes in

varying countries,

So I think the word

4 5
6 7 8 9

"engineer" was an attempt to capture the need

to achieve that harmonization in dealing in

varying jurisdictions,
Q,

Okay,

So does "engineer" mean to develop?
or design?

Is

that
A,
Q,

Yes,
Okay,

10

11
12
13

A,
Q,

Yes,

And, then, what does "leverage current
economic climates" mean?
referring to?

What is that

14

15
16

A,

I believe it would mean that in trying to come

up with advice to clients, being abreast of

17 18 19

economic economic situations around the
world are a part of engineering an effective

strategy,
Q,

20 21
22 23

Okay,

And last question on this document,

If

you turn to the next page, which is page 9,
There at the top paragraph it says,

"Let's face it
risk. "

when it comes to taxes, no
There's a lot of
What kind of
i 6

24 25

one likes to fool around,

What does that mean?

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 15 of 42

1 2
3

risk are you talking about there?
A,

I think -- I think risk in the sense that all

cross-border or even domestic strategies have

4
5

allocations of risk between the parties, So I
think I used the word risk as meant to
encompass just a broad category of risk that
would be inherent in any of the strategies,
Q,

6
7 8 9

Are you referring to financial risk?
It would include financial risk,

A,
Q,

10 11
12 13 14

Would it include market risk?
Yes, it would include market risk,

A,
Q,

Does that include risk of government oversight
from the Internal Revenue Service?

A,
Q,

Certainly,
It's a great website,

15 16 17 18 19

A,
Q,

Thank you,
Let's talk now, go back in history a little

bit, And go back to 1994, calendar year 1994,

when you were a consul tant,
1994?
A,

What type of

20 21
22 23

services were you providing in calendar year

My time was spent significantly being a
consul tant to CSFB, I was asked to primarily
provide internal U, S, federal tax support for

24 25

structuring suggestions that the firm was
17

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 16 of 42

i
2 3

ei ther implementing or considering,
Q,

Okay, How did you get hooked up with CSFB?
How did you form a relationship with them?

4 5
6 7 8 9
i a

A,

One of my former partners at Coopers and
Lybrand had recently left the firm to work for

CSFB, And he asked if I would be willing to

consul t wi th CSFB in the income tax area,
Q,

what was that person's name?

A, Q,

Ed Wallace,
Did you work for -- provide consulting
services for other entities as well?

ii
i 2

A,
Q,

Yes,
Who were they?

13
i 4

A,

I did small matters of work for Merrill

i 5

Lynch,

I spoke briefly with the people at

i 6

Arthur Andersen,

There may have been others,

i 7

but those are the names I recall,
Q,

i 8

Sure,
Who at Merrill Lynch did you work

i 9

2 a

with?
A, Q,

2 i

I don't recall,

22 23

How about Goldman Sachs?
them at all in 1994?

Did you work wi th

24 25

A,

I wasn't paid anything by Goldman Sachs in 1994, but I may well have met and spoke with
i 8

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 17 of 42

1

them,
Q,

2
3

Okay, Did you work with an individual named
David Ackart, A-c-k-a-r-t, at Goldman?

4
5 6

A,

Yes,

I was introduced to David,

I don i t

believe we ever closed a transaction. In
which I was a consultant and David was at

7
8

Goldman,
Q,

But, yes, I remember David,

And in 1994 where was your office located?
I was working out of my home,

9

A,
Q,

10 11
12 13

And that was in San Francisco?
On Chenery Street,

A,
Q,

Can you tell me a little bit about the
arrangement that you had with CS First

14 15 16 17
18

Boston? Were you paid a consulting fee per

transaction?

Was there a retainer?

Or was

there, you know, a monthly salary?

MR, SADLER: Objection, Compound,
THE WITNESS: I was paid for the time I spent working at CSFB, I recall there was an

19 20 21
22
23

hourly billing rate, I was required to send
CSFB a statement every month, which included
hours worked and any expenses for which I was
claiming reimbursements,

24

MR, RUCHELMAN: Q,
to CSFB?

Did you bring clients

25

19

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 18 of 42

1 2 3

A,
Q,

No,
They had the clients and you worked for their

clients?
A,
Q,

4 5
6

Yes,
In 1994 with whom at CS First Boston did you

work?
A,

7
8 9

My main point of contact at CSFB was Phil

Hamon,
Q,

Okay, Did you report to Mr, Hamon?

10 11
12 13

A,
Q,

Yes, I did,
How did you meet Mr, Hamon?

A,

I met Mr, Hamon while he was an employee at
Mitsubishi Credit sometime in the 1980s,

14 15
16

Q,

You mentioned Ed Wallace, you worked with Ed

Wallace, Did you work with Mr, Eckelstein?
A,
Q,

I don't recall that name,

17
18

What about Don Kendall?
Yes,
What do you remember about Don Kendall?

A,
Q,

19 20

A,

My recollection is that Don was the
relationship manager at CSFB for some of the

21
22 23

clients,

Don was a very outgoing,

24 25
Q,

demonstrative individual, current recollections,
Okay,

Those are my

What about an individual named
20

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 19 of 42

i
2 3

Mr,Odebayo? O-d-e-b-a-y-o,
Bayo, I think, B-a-y-o,
A,
Q,

Sometimes called

Yes, I recall Bayo as well,

4
5 6 7 8 9
i 0

And was there a certain department that you
worked in, or worked for, as a consultant for
CSFB?

A,

There likely was, but I don't know what it

was,
Q,

Okay, Do you presently have a working
relationship with CSFB?

i i

A,
Q,

No,
When did the arrangement end?

i 2

i 3

MR, SADLER: Objection, Vague,

i 4

MR, RUCHELMAN: Q, When did the
arrangement wi th CSFB end?

i 5

i 6

A,
Q,

I don't remember,

17
i 8

Do you remember - - okay, Strike that last

question, Or that last phrase,
Could you explain to me the history

i 9

20
2 i

of your professional relaLionship with

Marriott International,
MR, SADLER:

22
23

Objection,

Assumes fact not

testified to already,
MR, RUCHELMAN:

24 25

Well, it's backup,

Did

you have a working relationship with Marriott
2 i

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 20 of 42

1 2
3

International at any time?
A,
Q,

No,
Did you work on any transactions with or for

4 5 6 7
8

Marriott International?
A,
Q,

Other than the one we are discussing?
Including the one we're discussing?

A,
Q,

Yes,
And what transaction was that?

Or

9

transactions,
A,
Q,

Was this the only transaction

10

you worked on for Marriott International?

11
12
13

Yes,
Okay,
And what services did you provide for

Marriott International?
A,
Q,

14

I didn't provide any services to Marriott,

15 16 17
i 8

Well, you said you worked on a transaction

wi th them or a deal,
them?
A,

What were you doing for

Well, in my capacity as a consultant to CSFB,

19
2 a

I was asked to be a part of an explanation to
the Marriott team,

And I think that was the

21
22 23
Q,

extent of my involvement,

Okay,

An explanation of the transaction that

is at issue in this lawsuit?
A,
Q,

24 25

Yes,
Okay,
In 1994 were you aware that Marriott
22

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 21 of 42

1 2 3

was in the timeshare business?
A,
Q,

Yes,
Okay,
And how did you become aware of that? I remember that during our discussions some of

4 5
6

A,

the Marriott team members talked about the

notes receivable held by Marriott relating to
the sale of interests in the Marriott
properties, the so-called timeshares,
Q,

7
8

9

What Marriott team members?
individual's names?

Do you recall

10 11
12 13 14

A,
Q,

Lester Pulse and Griff Lindsey,

Do you recall the name Dawn Morton,

D-a-w-ni

M-o-r-t-o-n?
A,
Q,

No,
What about Michael Dearing?
From Marriott,

15 16 17 18 19 20

Do you recall speaking with him?
A,
Q,

No,
Were you aware in 1994 that Marriott held
mortgages on the timeshare units that it

sold?
A,
Q,

21
22
23 24

Yes,
Were you aware that they were fixed rate

mortgages?
A,

I remember that the rates of interest were

25

either fixed or floating,
23

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

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Page 22 of 42

1 2 3

A,
Q,

Yes,
And do you recall what the name of that
department was?

4 5
6 7 8 9

A,
Q,

I do not,

Is that the department that you were working
with as a consultant?

A,
Q,

I believe it was,

Okay,

Do you know where that department was

located?
A,

10 11
12 13 14

Well, Phil Hamon's office and the offices for

Bayo -Q,

Okay,
- - were in Midtown New York,

A,
Q,

Okay, And in 1994 did CSFB have a department
that was involved in designing tax advantaged
products for corporations?

15 16 17
18

MR, SADLER: Objection, Ambiguous,

MR, RUCHELMAN: Q, I used the word
"designing" similar to the way you used the
word "engineeringl! earlier.
A,

19 20

21
22 23 24

Yes, I think it was the group about which I
just spoke,

Q,

Okay, Now, just to spend a few more moments
on this one page here, and then we'll move

25

on, Does the term under "Transact ion Type,"
28

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 23 of 42

i
2 3

"Leasehold Interest," have meaning to you?
A,
Q, A,

Yes,

Yes,

What is that?

4
5

It's a transaction that viewed -- viewed

presently would relate to a rent stripping

6
7 8

Q,

transaction, Okay, And what about advantage lease?
does that mean to you?

What

9
i 0

A,

Advantage lease was a synthetic lease, primarily a financial accounting strategy,

ii
i 2

Q,

And moving down a little bit further, tax
lease, what does that mean?

i 3

A,

I'm not sure,
that I recall,

There is no special meaning

i 4

i 5

Q,

Okay, And what about at the bottom there,
Section 956? What does that mean to you?
Section 956 refers to a Internal Revenue Code
section; and I don't recall the strategy,

16
i 7

A,

i 8

i 9

Q,

Okay, Now, except for Section 956 and tax
lease, which you said you weren't presently
familiar with, or you can't recall what the

20
2 i

22 23 24

strategy was, were you involved in marketing

the other products identified on 1061? And I
just state what they are: Leasehold interest,
short sale, and advantage lease,

25

29

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 24 of 42

i
2
3

MR, SADLER:

Objection,

Ambiguous as to

the term "marketing,"
THE WITNESS:

As to the advantage lease,

4
5

I had no involvement,
MR, RUCHELMAN:
THE WITNESS:

Okay,
I may have responded to

6
7 8 9
i a

questions on the leasehold interest program,
but don't recall any specifics,

The short

sale transaction, uhm, I recall discussing it
with the Marriott team,
MR, RUCHELMAN:
Q,

11
i 2

Okay,

Do you recall

discussing the short sale transaction with any
other corporations?
A,
Q,

13
i 4

Yes,
And who were they?

i 5

i 6

A,

I don i t remember whether they were
corporations or other entities,
And all I

i 7

i 8

remember is they were generally clients of

i 9

CSFB,
Q,

2 a

Okay,
But don't remember - - I don i t remember names

2 i

A,

22 23

or whether there were any transactions

concluded,
Q,

24 25

Okay,

Do you recall talking to people at

Safeway about the short sale transaction?
3 a

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 25 of 42

1

A,
Q,

No,
How about any biotechnology companies?
I don 't,

2
3 4 5 6 7 8 9

A,
Q,

How about pharmaceutical companies?

A,

There was a pharmaceutical company with whom I

spoke while at CSFB, I don't remember whether
a particular product was discussed,
Q,

Okay, So you don't recall if you discussed
short sale with that company? Is that what
you're saying?

10 11
12 13 14
Q,

A,

That's correct, I do not recall whether I
discussed short sale with them,

Okay,

The short sale transaction

I'm still

on Exhibit 164 -- do you know how this
transaction came to your attention?
A,
Q,

15 16 17 18

I didn i t hear the complete question,
Do you know how this transaction came to your

attention?
A,
Q,

19 20 21
22

The short sale transaction?

Yes, sir.
Yes,

A,
Q,

And how was that?
In the early 1990s a law firm in San Francisco engaged Coopers and Lybrand to review the

23 24 25

A,

short sale strategy and offer our comments on
31

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 26 of 42

1
2 3

the tax efficacy of the strategy,
Q,

Okay,

What law firm was that?

A,
Q,

Jackson, Tufts, Cole & Black,

4 5
6

How do you spell Tufts?

A,
Q,

T-u-f-t-s,
And Black?

7
8 9

A,
Q,

B-l-a-c-k,

All right,
Were there any particular
individuals at the law firm that you spoke

10 11
12 13 14

with about it?
A,
Q,

Yes,

And who were they?
The partner was Emil, E-m- i-I; Peseri,

A,

15 16 17 18 19
Q,

P-e-s-e-r-i, Is that it?
Yes,

Just the individual?

A,
Q,

Do you know how Mr, Peseri became familiar

wi th the transaction -MR, SADLER: Objection,
MR, RUCHELMAN: Q, Did he tell you?

20 21
22 23

MR, SADLER: Objection, Calls for

speculation,
THE WITNESS:

24 25

No, I don't,
Q,

MR, RUCHELMAN:

Do you know if
32

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 27 of 42

i
2 3

third and fourth pages of the document,
A,
Q,

Yes, I am,

Okay,

Do you know who was involved in

the

4 5
6 7 8 9
i a

creation of this document?
MR, SADLER:

Objection,

Calls for

speculation,
THE WITNESS: I don't know,
Q,

MR, RUCHELMAN:

Okay,

You said you

were familiar with documents that at least
were similar to this type of document,
How

ii
i 2

did you become familiar with the documents
that you're referring to?
A,
Q,

i 3

As a general matter?

i 4

Yes,
In a transaction such as the one we're

i 5

A,

i 6

discussing, CSFB team members would draft a presentation which they referred to as "the

i 7

i 8

pi tch book,"
Q,

i 9

Okay,
And the pitch book was circulated among CSFB

2 a

A,

2 i

people that had relationship responsibility
wi th Marriot t,

22 23 24

It would also have been

circulated, at least in the design stage, to

Mr, Peseri for his comments, And it was often
the case that copies would be sent to me for
37

25

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 28 of 42

1 2 3

my comments as well,
Q,

And did you provide comments on the short sale
transaction in the pitch book?

4 5
6 7 8 9

A,

From time to time I did,
about this one,

I don i t remember

Q,

Now, it references Lester Pulse there on the
first page,

Do you know what prompted CSFB to

send this presentation to Marriott?
MR, SADLER:
Obj ection,

Calls for

10 11
12 13

speculation,
THE WITNESS:

No, I don't,
Q,

MR, RUCHELMAN:

Do you know who

introduced Mr, Hamon to Mr, Pulse?
A,
Q,

14 15
i 6

I don't know,

Were you aware that Marriott ultimately
engaged CSFB to work on a transaction that was
similar to this presentation?

i 7

18
i 9

A,

I was not aware of that, Until our
conversation some months ago,

2 a

Q,

Okay, Let's take a look at the third page of
the document, Now, the first paragraph, the
first bullet there says, "Marriott

2 i

22
23

International desires to hedge its exposure in interest sensitive assets presently owned

24 25

and/or to be acquired, After an evaluation of
38

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 29 of 42

1 2 3

its financial risks, Marriott International

enters into a series of security transactions

to be managed by CS First Boston as part of an
overall plan to manage financial risks
inherent in its business,

4 5
6 7 8 9

One strategy will

involve selling short 2 -year Treasuries and

investing the proceeds in intermediate term
Treasuries as a hedge against future increases

in interest rates, The short obligation is

10 11 12
13

not considered to be a i 1 iabil i ty i for tax purposes, An alternative might include the
same strategy using foreign currencies against

the D,S, dollar,

Any strategy will involve

14 15

some risks and be designed to earn a profit,"

The first paragraph, was this a

l6 l7
18
i 9

presentation that was sent out to all
prospective corporations?

Or is this tailored

to Marriott's specific needs?
MR, SADLER:

Objection,

Vague,

20 21
22 23

MR, KLIEFOTH:

Do you mean is that

specific language, other than changing the
name "Marriott International," this
MR, RUCHELMAN:
MR, KLIEFOTH:

Right,

Exactly,

24 25

thi s line was sent out

to any prospective client who may be
39

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 30 of 42

i
2
3

interested in dealing with First Boston?

MR, RUCHELMAN: Right, Well, in this

transaction,
THE WITNESS:

4
5 6 7
8

No,

This was - - this was

tailored to Marriott's interest rate issue,
MR, RUCHELMAN:
Q,

Okay,

In order to be

interested in the short sale transaction, does

a corporation have to have an interest rate

9
i 0

issue?
A,
Q,

No,
"No. II

ii
i 2

Under what circumstances would
they - - could they still engage in the

i 3

i 4

transaction without having a interest rate

i 5

issue?
MR, KLIEFOTH: Obj ection, Overbroad,
Calls for speculation,

i 6

i 7

i 8

THE WITNESS: There were clients of CSFB
that had foreign currency exposures,

i 9

There

20
2 i

were also clients that had exposure to
specific companies or the credit of specific

22 23

companies in which the short sale transaction

was discussed,
MR, RUCHELMAN:
Q,

24 25

Can you say that

again?

Credi t?
40

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

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i
2 3

A,

The - - yes, In some cases there were

companies that did not have an interest rate

risk -Q,

4 5
6 7
8

Okay,

A,

- - but the company had a short position wi th
respect to a third-party company,
And SOl on

occasion, the short sale might be thought
about as a way to hedge that risk,
Q,

9
i 0

Okay, Is that what is -- well, let's get into
the foreign currency exposure, Is that what's
being discussed there in the second to the
last sentence of the first paragraph where it says, "an alternative might include the same strategy using foreign currencies against the

ii
i 2

i 3

i 4

i 5

U,S, dollar"?
A,
Q,

i 6

Yes,
What terms were used to identify this

i 7

i 8

transaction?
MR, SADLER:

i 9

Objection,
Q,

Vague,

20
2 i

MR, RUCHELMAN:

Were there in-house

terms or industry terms like "short sale"

22 23

maybe I'll give you a few, see if it may ring
a belL.

Was this transaction called capital

24 25 A,

loss transaction?

No,
4 i

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

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Page 32 of 42

1
2 3 4 5 6

Q,

Was it ever referred to as a basis pump

transaction?
A,

No,
I only recalled it being referred to
as the short sale transaction,

Q,

Okay, Let's go on to the sticking with
that first paragraph there, "One strategy will

7
8 9

involve selling short 2-year Treasuries and investing the proceeds in intermediate term
Treasuries as a hedge against future increases

10

11
12 13 14

in interest rates," What is that referring

to?
A,
Q,

Are you asking about the mechanics?

Yeah,
Well, it would assume that Marriott
International would be selling short or taking
a short position on 24 -month treasuries,

15

A,

l6
l7
18 19
2 a

taking the cash proceeds and acquiring
treasuries with a different maturity,
I don't

remember or know what the tenor would be for
an intermediate treasury, that doesn't have a

2 1

22 23

particular meaning to me other than it's not

2 -year treasuries,
Q,

24
25

Okay, Is it longer than 2-year treasuries?
I don't remember,
42

A,

DEPOSITION OF ROY HAHN

.

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 33 of 42

i
2
3

Q,

Okay, Now, the second bullet point says,
"Marriott International enters into the trade
discussed above,

Subsequently, a partnership

4
5 6 7 8 9
i 0

is formed with Marriott International as a

1 imi ted partner to reflect any investments and
obligations on a net basis on the company's
financial statements,"

What's the purpose of

forming the partnership?

MR, SADLER: Obj ection, Lack of showing
personal knowledge as to this point, Or as to
this specific document,
THE WITNESS:

ii
i 2

One of the concerns that

i 3

was expressed by the Marriott team was the
financial accounting for the short sale

i 4

i 5

strategy, CSFB believed that the use of a
partnership in which Marriott was a limited
partner would result in off-balance-sheet
treatment for Marriott with respect to the
short sale strategy,

i 6

i 7

i 8

i 9

20
2 i

MR, RUCHELMAN: Q, Okay, Were there any
other benefits for partnership from this

22 23 24

transaction?
MR, SADLER: THE WITNESS:

Objection, Vague,
Well, there were

several

25

come to mind,

43

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 34 of 42

1

MR, RUCHELMAN: Okay,
THE WITNESS: One is that, certainly, the
tax benefits and the strategy assumed the use
of a partnership,

2
3

4
5 6 7 8 9

Secondly, the members of the

Marriott team were questioning the financial
risk of the transaction, and I believe the

partnership was one way to help manage that

risk,
MR, RUCHELMAN:
Q,

10

Okay,

What type of

11
12 13 14

tax benefits were derived from using a
partnership in the transaction?
A,

Well, the-MR, KLIEFOTH:

Just let me make clear

15 16 17
18

when you say "this transaction," I think there
is a transaction that was actually done which
is reflected in the complaint,

MR, RUCHELMAN: Right,

19
2 a

MR, KLIEFOTH: Right, And we don't know
whether that transaction -- there's been no
testimony here today, nor do I think there

21
22 23

will be any testimony here today, that that
transaction is as this description states,
THE WITNESS:

24 25

Right,
So when you say in the
44

MR, KLIEFOTH:

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 35 of 42

1 2
3

transaction, I think it maybe could confuse

the record a little bit when, say, Mr, Hahn
testified there may be some tax benefits or
some of the tax benefits assume the use of a

4
5 6 7 8 9

partnership, I think he's talking about this
document here (indicating),
MR, RUCHELMAN:

Absolutely,

Yeah,

Thank

you,
MR, KLIEFOTH:

I want to make sure you're

10 11
12 13 14

talking about this document (indicating),

MR, RUCHELMAN: Yeah, I apologize for

that,

I'm talking about the transaction that

is expressed in this document, Exhibit 164,
THE WITNESS:

Could you repeat your

15 16 17
18
Q,

question?
MR, RUCHELMAN:

Yeah,

what are tax benefits when using a partnership
in the transaction described in Exhibit 164?

19

A,

The partnership permitted - - the partnership
permitted proceeds from the short sale to be

20

21
22 23 24

measured for federal income tax purposes, By
not treating the short sale obligation as a

tax liability, The partnership permitted
those sale proceeds and their tax basis through a technical termination of the
45

25

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 36 of 42

1 2 3

partnership to mechanically be transferred

other assets,
Q,

From your discussions with the Marriott team,

4
5 6 7 8 9

were you aware that they were interested in
that tax result?
MR, SADLER:
Obj ection,

Calls for

speculation,
THE WITNESS:

Well, from my discussions

wi th them, I think they were broadly

10 11 12
13

interested in tax planning strategies,
MR, RUCHELMAN:

okay,

THE WITNESS: I had no understanding
about this particular result,

14 15
16

MR, RUCHELMAN: Q, Okay, Let's take a
look at the next exhibit, Which is 155, Put
some time references on the documents we're

17 18 19

going to look through now, This first
document, Exhibit 164 - - or the last document

we looked at, 164, was that fax from phil

20 21 22
23 24

Hamon to Lester Pulse and it was dated

January 3rd, 1994, And going to the next
document, which is Exhibit 155, it is a
handwritten memo dated March 3rd, 1994, that
Marriott produced in this litigation,

25

And it's referencing either a
46

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 37 of 42

1 2 3

meeting or a phone conversation with First
Boston, Phil Hamon, and someone named Roy

Cohn, We think that might be a misspelling of
your name there, but maybe you can help us

4
5 6 7
8

out,
A,
Q,

Do you recall having a conversation in

March with Marriott people?
I don't recall,

Okay, Do you recall having face-to-face
meetings with Marriott people about the short
sale transaction?

9

lO
1 1

A,
Q,

I do,

12
13 14 15

Did you go down to them, or did they come
up - - or go out west to you?

Do you recall

where the discussions were?
A,

The meeting I recall was at Marriott's offices
in Bethesda, Maryland,

l6
l7
18 19
Q,

Okay, And do you recall who else was there?
Who from the Marriott team was

there?
A,

20
21 22 23 24

The day of my meeting there were actually two

meetings that I recall, There was a initial
meeting with several CSFB people present, of
which phil Hamon was one,
Q,

Okay,
And from Marriott's team, Pulse and Lindsey
47

25

A,

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

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Page 38 of 42

1 2 3

were present,
There may have been other people in
that meeting, but those are the names I

4
5 6

recall,
Q,

And that first meeting was in Bethesda,

Maryland?
A,
Q,

7
8 9

Yes,
And do you recall what was discussed at that
first meeting?

10

A,

We talked about the presentation that you've

11
12 13

just showed me, I don't remember whether it
was a written presentation, but there were

questions and specifics that the Marriott team

14 15 16 17 18

had of primarily the CSFB people, So at that
meeting the income tax issues were not taking
up significant time, it was mainly having to

do with financial statement presentation and
determination of the interest rate exposure,

19 20

What dates it would be present, how long it

would last, and then a - - and a preparation
for a larger meeting later that day with more
members of the Marriott team,
Q, A,

21
22 23

What was your role at that first meeting?

24 25

I was there as a resource to CSFB to respond
to tax questions that might arise,
48

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

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Page 39 of 42

1 2 3

Q,

And were there any tax questions at that

meeting?
A,
Q,

None that I recall,

4
5 6

And then there was a second meeting later that

same day?
A,
Q,

Yes,
Okay, And who was at that meeting?
I don't remember any of the people that were

7
8 9

A,

there,

There were approximately a dozen

10

people in the meeting,

They were more senior

11
12 13
Q,

members of the Marriott team,

Do you recall the name Michael Dearing?
MR, SADLER:

Objection,
I do not,
Q,

Asked and

14 15 16 17 18 19
A,
Q,

answered,
THE WITNESS:

MR, RUCHELMAN:

Michael Stein?

No,
Ray Murphy?

A,
Q,

No,
Carolyn Handlon?

20 21
22 23 24

A,
Q,

No,
Who from CSFB were at that second meeting?

A,

My recollection is that Phil Hamon was present, I believe Ed Wallace was present at

25

that meeting, And the relationship manager at
49

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 40 of 42

1
2 3

Marriott, that is the CSFB employee who had
relationship management responsibility for

Marriott,
Q,

I don't remember who that is,

You

4
5 6 7 8 9

asked me about Don Kendall,
Okay,
That name rings a bell, but I don't remember
if Don was there,
Q,

A,

What about was Brit Bartter from CSFB there?
I don't recognize that name,

A,
Q,

10 11
12 13

Okay, Irene Sinrich?
I don't remember,

Was she present?

A,
Q,

And who took the lead at the second meeting
from CSFB' s side?

14 15

MR, SADLER:

Objection,
Q,

Vague,

THE WITNESS:

I don't remember,

l6

MR, RUCHELMAN:

Was it you or Ed

l7
l8
19 20
2 1

Wallace or Phil Hamon?
A,

It was not me,

And I don't recall who at CSFB was
the primary spokesperson,
Q,

Okay,

And what was discussed at that second

22 23
A,

meeting?
There were three broad areas of discussion and
the topics interrelated; but they were the
financial accounting treatment of the short
50

24 25

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 41 of 42

i
2 3

sale, the tax treatment of the short sale, and the correlation of the short sale strategy to

the interest rate risk,
Q,

4
5

What do you mean by that last item, the

correlation of the strategy to",
A,

6
7 8 9
i 0

In the meetings I was at, there was an ongoing
evaluation of the precise amount of risk that
Marriott had with respect to the MORI notes,

how long the risk was present, and the
magni tude of the risk,

ii
i 2

Both Lester Pulse and Griff Lindsey
had told me in the meetings that they were

i 3

working with others inside of Marriott to
properly understand the interest rate risk,

i 4

i 5

Again, how long the risk would be present and
the amount of the risk,
Q,

i 6

i 7

Who took the lead - - who was the lead

i 8

spokesperson on the Marriott side at this
second meeting?
A,

i 9

20
2 i

There was a so-called chair of the meeting on
Marriott's part whose name I don't recall,

22 23

But the chair's opening comments lasted 30 seconds, after which Mr, Pulse was invited to

24 25

address the group and discuss the state of the

transaction,
5 i

DEPOSITION OF ROY HAHN

Case 1:01-cv-00256-CFL

Document 95

Filed 04/18/2008

Page 42 of 42

1 2 3 4 5 6 7 8 9

Q,

And Mr, Pulse was their -- was Marriott's tax

person?
A,
Q,

Yes,

And the short sale - - the short sale
transaction was discussed at this meeting?

A,
Q,

Yes,
Okay,
And the short sale transaction is a tax

advantaged product?

MR, SADLER: Objection,
prior testimony,
THE WITNESS:

Mischaracterizes

10

11
12 13
i 4

Yes,
Okay, Now, from your
did Marriott

MR, RUCHELMAN: Q,
perspective, was Marriott

become aware -- did Marriott become interested
in the short sale transaction for the tax
advantages, and then they sought to fit a transaction for a business reason for entering
into the transaction after they had become
interested in the tax advantages of the

15
i 6

i 7

i 8

i 9

20 21
22 23 24

transaction?
MR, SADLER:

Objection,

Calls for

speculation,
MR, KLIEFOTH:
THE WITNESS:

Lack of foundation,
I don't know,

25

MR, RUCHELMAN:

Q, Let's take a look at
52

DEPOSITION OF ROY HAHN