Free Motion to Compel - District Court of Federal Claims - federal

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EXHIBIT B-1

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U.S. Depart ~ of Justice
Tax Division
Please repLy to: Cout of Fedeal Cla Section

Facmile No. (202) 307,0054
Tri Attey: Datr N. Geie
Atty's Diect Une: (202) 616,3448

26 Ben Frankln Station
P.O. Box

Washingt, D.C. 20044

EJO'C:DG:8.f:I)Geier 154-2457 )i
CMN 2006103503

November 8, 2006

Also via Facsimile (312) 706-9187
Thomas C. Durham, Esquire

MAYER, BROWN, ROWE & MAW LLP 71 South Wacker Drive Chicago, Ilinois 60606
Re: Consolidated Edison Company of

New York, Inc. & Subsidiares

v. United States Fed. Cl. No. 06-305 T
Dear Mr. Durham:

We have reviewed plaintiffs responses and objections to interrogatories (served on November 2, 2006). The responses and objections fall far short of what is required under the
rules. Ths is paricularly troublesome given the short time period allowed for discovery and the

fact that plaitiff requested, and obtaed, an extension of time to respond. Whle reserving our
right to raise fuer concerns, ths letter constitutes our initial effort to address the deficiencies in plaitiffs responses and to lear if plaintiff will promptly supplement, arend and/or clarfy its responses.
For your ease of

reference, we have grouped our concerns into categories.

Rule 26(a) Disclosures

identification of

Please clarfy whether plaintiffs response to Interrogatory No.1 (seeking the individuals with knowledge of the Lease Transaction) is intended as a supplement to its Ru1e 26(a) disclosures. Absent hearng back from you, we will continue to rely upon the representations made in your Rule 26(a) disclosures as constituting an exhaustive list of those individuals whom you intend to rely upon to support your case-in-chief.

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- 2Privilege Lo~

We have not received a privilege log in connection with plaitiffs interrogatory

responses. As you are aware, a privilege log must be provided and must conta descriptions the privilege or protection." Ru1e 26(b)(5), RCFC. Therefore, to the extent that information is being witheld on a clai of privilege (Response Nos. 7 and 12), please provide a detaled log describing what inormation is being witheld and
sufcient ''to assess the applicabilty of

why.
Withholdin~ Information Other than For a Privile~e

has witheld information other than on the basis of a privilege. By way of example, in response to our inquiry for inormation about communcations with has objected and outside consultats (Interrogatory No. 14),.mentioned in the complaint, plaitiff declined to respond. The interrogatory requests inormation that could support or refute a factul contention made by plaintiff in its complait. It was our expectation, given the representations made in ths case, that responsive inormation exists and is available.
It appears tht plaitiff

By way of additiona example, in response to Interrogatory No.1, plaitiff indicates that because it does not have "complete information," no information will be provided. This position not only falls far short of plaitiffs legal obligations to answer discovery, but is paricu1arly troublesome here, where plaintiff has complete access to the facts in support of its ta shelter scheme.
In many other instaces plaintiff has raised a myriad of objections that render it diffcult, if not impossible, to determine whether responsive information is being witheld. Therefore we ask that you inform us of each instance in which plaintiff has responsive information but wil continue to rely upon its stated objections to withold or refuse to provide information.
Internal Communications
In several instaces (Interrogatory Nos. 14 and 15) the United States sought to lear of

communcations, including internal communcations, which address the subject matter of the
lawsuit. These inquires are reasonably calculated to lead to the discovery of adssible evidence
in this case. In each instance, plaintiff has declined to answer citing generalized objections. We requested the information so that it might shed light on the merits of the plaintiffs claims. The objections, which include immateriality and relevance, do not provide a legal basis to withold

responsive information.

To the extent that plaintiff deems the Governent's requests to be overly broad and/or unduly burdensome, it has not ariculated any "burden," nor has it explained how the requests might be narowed instead of ignored.

Is

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Interro~atory No. 13

In response to our inquir about a factu contention made by plaintiff (Complait at ,¡,¡
22-24) regarding the actions of New York's Public Service Commssion, plaitiff

has refued to

respond diectly. Instead, plaitiff has represented that its response may be found in the public
records of

the PSC and generally refers the United States to plaitiffs Rule 26(a) disclosures.

The response neither answers the question posed nor does it specifically identify any documents that do. Such a tactic is improper and ignores plaitiffs obligation to anwer discovery.
Reference to Documents
Many of

the plaitiffs discovery responses (Response Nos. 1,2,5, 7, 12 and 13)

incorporate the contents of other documents which plaintiff then fails to either anex or otherwse Federal the Cour of specifically identify. The responses are in contravention ofRu1e 33 of
Claims.

Plaintiff's Review of Other Shelter Transactions
. The United States requested information about other shelter trsactions reviewed or
considered by plaitiff at or about the time of

the shelter transaction at issue (Interrogatory No.2).

The discovery was directed, in par, to the subjective component of the economic substace

doctrne.
Plaintiffs response challenges the Governent's definition of "shelter transaction" and

argues that it is overly broad. Whle we certnly do not agree that the interrogatory is over broad, in an effort to avoid fuer disagreement on ths point, we have identified certn listed transactions (see accompanying sheet) that you may deem to constitute a "shelter transaction" for
puroses of responding to ths interrogatory.
Negotiation of Rent and Option Prices

The United States requested information about rent and varous option prices in
connection with the Lease Transaction (Interrogatory No.3). Plaintiffs response contas no

factual support and instead relies upon conclusory contentions. For example, plaintiffs do not state what negotiations took place, if any, when, with whom, and over what issues the paries agreed or disagreed. Rather, in a self-serving fashion and conclusory, plaintiff indicates only that amounts were ultimately determined consistent with plaintiffs "objective" to maxmize economic
retus. In light of the number of

paries and documents employed to car out the transaction, the

factual inormation and is inconsistent with plaintiffs obligation to provide response is devoid of complete discovery responses.

Is

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- 4\

While we are available to discuss these matters with you, please formally advise us by close of business on Monday, November 13,2006, whether you intend to supplement, amend or clarfy your responses as requested herein, and if so, when we can expect to obtain the revised answers.

7!YZ; DAVIN. GEe\
JOSEPH A. SERGI JAMS E. WEAVER Trial Attorneys, Tax Division
Enclosure
cc: Caren Baerga, Esq.

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EXHIBIT B-2

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Case 1:06-cv-00305-MBH

Document 22-6

Filed 04/04/2007

Mayer, Brown, Rowe & Maw LLP
1909 K Stret, N.W.

Washington, D.C. 2000&.1101

MAYER BROWN

ROW E
& MAW

Main phone: (202) 263-3000 Main fax: (202) 26~3300

FACSIMILE COVER SHEET
FROM: Direct Tel:

Direct Fax:

Nicole M. Bielawski (202) 263-3452 (202) 762-4242

Date/time:

11/13/2006 -12:58 PM
8 lJ PAGES MUST BE NUMBERD

Pages:

TO THE FOllOWING: Name
David N. Geier

Company
u.s. Department of

Fax

#

Telephone #

Justice
MESSAGE:
Please see attched.

(202) 307-0054

THIS MESAGE IS !NDED ONY FOR THE USE OFTliE INDIVIDUAL OR ENlTO WHICH IT IS ADDRES AND MAY COAIN INFOTI THT iS APPLICA LAW. IF TH RE OF THIS MESE IS NOT THE INTED PRILEGED. COFlDE AN EXPT FRO DISCLOURE UNDER RECIPIEN, OR THE EMPLye OR AGEN RESPOIBLE FOR OEUINB THE MESSE TO THE INT RECIPIEN. YOU ARE HE NOFIED THT
Al DISSEMINATION, DJSIBON OR COING OF THIS COMUNCAl1ON IS STCTY PRHIBrrD.:IFYOU HAVE ERROR, PLEE NOTIFY US IMMEDTEY BY TEPHONE AND RET THE ORGINA MESSGE

RECEI THIS COUNICATION IN

TO US AT THE M! ADDRES BY MAL. ni YOU.

IF YOU HAVE AN TRMISSION OIFFCUL TV,

PlESE OONTACTTHE FACIMILE DEAREN AT (202 26
Berlin Biusls Charlol Chcago Cologne Flinkrt Housn Londim Lo Anel New Vork Pao Alto Pari Wuhingon, D.O.
'ndepnderil Mex CIty Coiri;int Jaul8gul. Nawl1lB y Nader S.C.

Mayr, BlOwn, Row & Maw UP operate In combnan wi our assocated Engsh Umit liailit paitl'hlp In the ofce lised Bb.

NOV 13 ' 06 13: 24 FR MBR&M LLP

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MAYER
t', R U \' N

RO\/VE
8. '\1 1\ \/
Mayer, Bro. Row & Maw LLP

November 13, 2006

71 Sou Wackr Dii

Chcago. IlUis806Main Tel (312. 78.(

VI FACSIME
(202) 307-0054
David N. Geier

Main Fax (312) 701-771

II.lTitnico
Thomas C. Durham
Tel (312) 701.7216

U.S. Deparent of Justice Tax Division 555 Four Street, N.W. Room 7919 VVashlgton, D.C. 20001
Re: Consolidated Edison Co. v. United States. Docket No. ~30S T

Dire

Idmflmirbro.eom

Dire Fax (312) 7069187

Dear Mr. Geier:
VVe are in rept ofy(iur correspondence of deficiencies in Con Edison's resonses to the United States' Fir Set of

November 8, 2006, concerg alleged

Interogatories and First
the

Request for Producton.
Con Edson intends to fuly comply with its discover obligations under the Rules of

Cour ofFeder Clai e'RCFC") an will supplement its resonses as necessar. The
strctue of ths respnse folluws your correspondence.

Fir Set of

Con Edison obtaed a one-day extenion and ser its resnses to th Unite Staes' Intergatories on November 2,2006. by elecnic mail and overght deliver. Con

Edison reoved a two-day e:Ktenion and sered its responses to the United States' Firt Reques
for Producton on November 3, 2006, by band. In rense to these request, Con Edison

produce 1,812 pages of documents. Con Edson provided the United States with a CD ROM

conta TIF images oftbe docuents an the begjnning and endig bates ranges, as
request that Con Edson provide its docoents in elecnic form. Whle Con Edson

requeted by the United StaR'S. The two--ay delay was atbutale, in par to the United States'

appecated the United State~' couresy in grti the requeed extenons, the net result of

these extensions was that the United States reeived Con Edin's responses to both its Fir Set
of Intergatories and Firs Request for Pruction earlier than it would have if Con Edison had

sered them by U.S. mai, on November 1,2006. .

Your leter serously mischarctes Co Edison's responses by reptedy alleging that
Con Edson faied to provide responsive inonntion or ignored the Unite Staes' requests,
when, as you are aware, Con Edison provided a detled response to eah Interogaor and

produce over 1,800 pages of docuents in resonse to the Requess to Produce. VV e believe
Bønin Bruls eti1tte Chicago Co Frankrt Housn Londn Lo Anel New York Pal AJ Pall Wasng. D,C. Indeendnt Me CI Corrndent Jaurgui. Navarre y Nadar S.C.
Mayer, Brown. Flow & Maw uP QpratBs In combtl VI our assciate Enris fimlt libl partrshi In the ofce \i ab.

NOV 13 ' 06 13: 25 FR MBR&M LLP
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David N. Geier

November i 3, 2006
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that accurately characterzing Con Edison's respnses would provide a beter framework for movig forward with ths case.
Rule 26(8) Disclosures
Con Edison is in the prOl.:ess of

reviewig its current disclosures under Rule 26(a)(1),

served on September 25, 2006, und intends to supplement its disclosures on or before

November 17,2006. Con Edison's First Supplement to its Rule 26(a) Disclosues will notify the

United States that Con Edison may use any document produced in discover in support of its
clais or defenses. Con Edison also will identify additional documents and individuals that it

may use to support its case. Con Edison does not intend to use all individuas identified in its resonse to United States' Inten"ogatoryNo. i to support its case.
Privße2e LoS!

As explicitly pertted by RCFC 33, Con Edison responded to sever Intergatories by

producig respnsive docuenti. These docuents were included in Con Edison's resnses to
the United States' Firs Request for Production. To the extent that resonsve docuents were

privileged, Con Edison provided a priviege log in connection with its response to the United States' First Request for Production, as requesed in the histrctons thereto. The United States
did not reques that Can Edison provide a privilege log in the Intrctons to its Fir Set of

Intergatories.
indicated that it was witholding legal opinions protected by the atomey-client privilege. These lega opiions and docwnents referencing them are identified and descrbed with parcuanty on the privilege log prouce in
In reponse to Intergatory No.7, Con Edison

comiection with Con Edson's riispnse to the United State' Fir RequeSt for Production. The

individuas who provided each legal opinion also ar identified on the privilege log.

the Tax Indemty Agreeent entered into in coimccon with the Lee Traction and indicated that the Agrent was entered into for the purose of addressing the mater set fort therei. Con
In resonse to Interoga1ory No. 12, Con Edson provided a copy of

Edison is not in possesion of ai iy docuents setting fort its reasons for enterng into the Tax

Indemty Agreeent.
Con Edson objected to ihe United States' request for an explanation of

its reaons for

enterg into the Agrent, to the extent that the request sought lega advice. Tht beig said,
Con Edison is not aware of any privileged communcations regag its reaons for enteg into

the Tax hidenty Agreeent and has not witheld any explanaton of its reons for enterg
into the Ageeent on the basis of privilege.

NOV 13 '06 13: 25 FR MBR&M LLP
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November 13, 2006
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Witbholdl1! Information Other than for a Privles:e
Con Edison has not withheld any responsive information other than on the basis of
privilege. The one exception is documents regardig the NUON transaction, identified in

Interogatory Response No.2. These documents, as noted in the resonse, would be volumous to produce and are not relevant, as they conce a traction entered into two taxable years afer
the Lease Transaction.
Con Edison objected to cer Interogatories and set fort the grounds for such objections, includig privilege. As clearly stated in its resonses, notwthtading its objections,
Con Edison answer all Interrogatones as fuly

as possible and witheld infonnation only on

the basis of privilege.
Con Edison noted instances in which it did not have cer information or the

inomiation it had was limited in scope. In doing so, Con Edison followed the United States' instrction that "(i)f, for any reason, the information canot be fushed as requested, Plaintiff should respond to the extent ptissible an specify the reon for its inabilty to reply in full."
For example, in response to Interrogatory No. I, Con Edison identified all individuals who, to its knowledge, may have discoverble infonnation regarding the Lease Trancton. The
United States' allegation that "no informaton" was provided in resonse to Interogatory No. i

is inaccurte. Con Edison's respnse to Intergatory No. i is six pa.ges long and identifies 28 individuas associated with i 1 entities other than Con Edison.
The United States" allegation that "plaitiff

ba complete aCcess to the fact in suppo of

its ta shelter scheme" is also inaccwte. Con Edison does not have Ucomplete information"

with repec to thrd-par indj viduas or docuents. The Leae Traaction was a business
tracton which, like most business tranacton. involved thd pares with whom Con Edson dealt at ~'s len. The intere of these pares wer not aligned with those of Con Edison.

The role playe by these thrd pares is evident from the Operave Documents produce.
Fuerore. Con Edson, as descrbed below, has prvided all resonsive informon frm

thrd pares in its possession.
In resnse to Interrogatory No.2, Con Edison limted its response, as stted to LILO

and other leaing t:tions which it entered into or consider. In rense to hitergatory
No. 14. Con Edison limite the scope of its reonse, as stted. but did not "declinen to resnd" as the United States eroneou.o.ly alleges. Con Edison identified its key advisors, including Cornertone Financial Adviscirs, and produced all relevant docuents referencing Cornertone

Fincial Advisors' assistace in reviewi the Lee Traacton (see Inteal CommuncatioÌl
below). Based upon the broad nate of

thes Intergatories, Con Edson believes tht such

limitations wer reaonable. The United States has narwed the scope of

Interogatry No.2,

and Con Edison will resnd to the revised Intergatory.

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November 13, 2006 Page 4

Internal CommW1cations
Con Edison adequately )'esnded to Interogatories No. 14 and No. 15. The United States' allegation that Con Edison "declined to answer" ignores the fact that Con Edison produces over 1.800 pages of respnsive documents, most of which are responsive to either Intergatory No. 14 or 15.
Interogatory No. 14 requests that Con Edison "(i)dentify all outside consultats (it)

conuuncated with..., including... the opportities that were preented... and all
documents. . ..n Con Edison identified its key advisor with respect to the Lease Transaction and
provided aU documents referencing such advisor's assistace in reviewing the Lease Trasaction,

Interational Energy Parer, the other advisor identified, did not provide any advice in connection with any LILO or other leasing tranacton which Con Edson entered into or considered. and thus Con Edison did not produce any documents referencing International Energy Parer other than Batl3 #PF0Q426-44 which was included in Con Edison's Rule 26(a)

Disclosures. Interogatory No. 14 does not call for Con Edison to disclose the contents of oral
communcations. Even if Intei-rogatory No. 14 did request the content of ora conuuncatons, Con Edison would not be able to resond for the reaons discused in coection with
Interogatory No. 15 below.

Interrogatory No. 15 reques that Con Edison set fort "the contents of communcations" and ''identifY the docuents .. . constituting the communcations" with relevant pares before
enterg into the Lee Traa~tion. Con Edson produce all responsive documents, as
pertted under Rule 33(d) and as requeted by Interogatory No. 15. The majority of

the over

1,800 pages of documents produced are resonsive to Integatory 15. These docuents
include miutes of relevant B()ard of

Diector meetigs, as well as all nonwprivilege materal considered by the Board of Di retors, which includes numerous detled presentaons conceg the Lease Tranaction. Con Edison has not witheld any materal respnsve to

Intergatory No. 15 except a.t; set fort in the pnvilege log provided in connection with its response to the Fir Request j or Production. Thereforet as requied by Intergatory No. 15,

Con Edison has identified the "docuents mentioning discusig, refer to or constituting the
communcations."

It is not clea whether the United States intended to include ora communcations in Intergatory No. 15. To the extent that hiterogatory No. 15 could be constred as applyig to
ora conuuncations not refkcted in any docuent, Can Edson is not in a position to cerfy,

under oath. the content of all ora communcations with employee, former emloyees, or thd
pares. The Lee Traction was a business tranacton which involved multiple paes and

spamed sever month. In order to identify and cerfy al such oral communcations. Con

Edison would have to conduc.t depositions, under oath of al relevant individuas. Ths would
constute a tremendous burden and would extend beyond Con Edison's discover obligaons.

Con Edison is not requied to conduct discover for the Uiuted State, at its own expense. Con

Edison, however, has smnaried in its Rule 26(a) Disclosures and its reonse to Interogatory

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Page 5

No.1, the general natue ofthe 1ìictul information believed to be known by each peron

identified.
Interroe:ato\X No. 13

Intergatory No. i 3 reuests inormation that is not unque to Con Edison. The steps

taken by the New York Public Serce Commssion ("PSC") to develop a competitive elecc public record. The United States' claim that Con Edison industr in New York are a matter of

has ''rfued to respond" is, OnCll aga inaccurte as Con Edson provided the citation for a
published case which provides a detiled sumar of Con Edison also produced PSC documents, all of

the deregulation process in New York.
which are a matter of

public recrd, that are in its possession wider RCFC 26(a)(1) and 33(d). PSC documents were included at begiiuing Bates ## PF004645, 004999,005000,005001,005002,005039,005061,005125,005135,
005146, and 005308.

Con Edison is not obligated to swnare these documents for the United States. RCFC 33(d) states that "(w)here the answer to an interogatory may be derved or asceraied from the
busness records of

the par ... and the burden of dervig or ascertg the answer is

substatially the same for the party serng the interogatory or the par sered it is a suffcient

answer to such an interogatory to specfy the rerds from which the anwer may be derved or
asceaied.. u" The buden of suuarzig these documents would be SUbstantially the same

for Con Edison as it would be f()r the United States.
Con Edison ha recetly identified several additional documents related to the New York Public Serce Commssion and will inolude these docuents in its Firs Supplement to its Rule

26(a) Disclosur.
Reference to Documents

The documents referenc~ were all included either in Con Edson's Rule 26(a) Disclosues or its reonse to the United State First Reques for the Prducton as petted under Rule 33(d). These docurrients wer provided, as requesed by the United States, on a CD

ROM with TIF files. Beging and ending bates rages wer also provided. In its reonse to the Firs Request .for Producton, Con Edson specificay referced documents prvided in
resonse to Intergatory No.2. Con Edison also identified a list of.infrascte project

reponsive to Intergatory No. 14. Con Edson fuer identified the Deloitt & Touche work

pape.

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Most of

the documents iirovided were responsive to both Document Request No.1 and

Request No.2. and thus, it was not possible to organize the documents by request. Furerore,

the requests to identify documeiits made in Interrogatories No.7 and No. 15 were broad and the produced documents relate to both Requests. Similarly, documents overlapping, and most of responsive to Interrogatory No. 14 overlap with those responsive to Intergatory Nos. 7 and 15. The process of organzing the documents provided by reference to each Interogatory would be substatially the same for Con Edison as it would be for the United States,

Plaintif's Review of Other Shelter Transactions
Con Edison will supplement its anwer to Interrogatory No.2 to respond to the resed

November 8.

intergatory set fort in the Uiute States~ correspondence of

In its Supplement to Interogatory No.2, Can Edson will inorm the Uiùted States that it
did not enter into or consider aiiy listed tranactions, as identified on the attchment to your
November 8 letr, with the exootion of

the leaing tractons identified in its resnse to

Intergatory No.2.

Neiotiation of Rent and O))Jion Prces

Intergatory No.3 is vague and unclear. In its reonse to Interrgatory No.3, Con
Edison explained how the amounts of

rent and the purche option prices were negotiated. To

fuer assist the United States, Con Edison directs your attention to Bates #PF003241-46 which
wa included as par of

Con Edison's Rule 26(a) Disclosues. The invesent in the Lee

Traacton was subjec to a competitive bidding proces. Bates #PF00324146 set fort the
ters of

Con Edison's bid and the assuptions on which that bid were based as accted by

South Holland Electic. As set for in Can Edson's response to Intergatory No.3. computer
softare was used to set forth retal schedules which "optie" the yield to Con Edison while

maintanig the net present value beneft offeied to South Hollan Elecc. The net prest the benefit reted by
value benefit bargaed for by South Holland Elec1rc is the amount of

South Holland Electrc afer takg into accunt the net preent value of its obligations under the leae, including the potential exercise of the purchase option should South Holland Electic
choose that option. As explaî oed in r~ponse to Interogatory No.3, the allocations of renta

income and deductions with resect to the Lee Traacton for feder ta purses were designed to comply with section 467.
As note above, Interrogatory No.3 is extremely generand vague. Con Edison wiU
repond to fuer Intergatories wmch request more specfic infonnaton in light of Con

Edison's respons to Intergatory No.3

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In conclusion, Con Edist)n fuly intends to comply with its discove obligations. We will serve Con Edison's First S\.ipplement to both its Rule 26(a) Disclosures and Responses to
United State' Firt Set of Inten'ogatories by November 17,2006. If

you have fuer concers,

please let us know. We will be glad to work with you to resolvi any remain concer regarding Con Edison's responses.

Ver trly your,

~ L-cu~'
Thomas C. Durhai

Nicole M. Bielawski
00: A. Scher

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November 17, 2006

MAYER --~._--.~-~--BROWN --"----._.-,--,-----

ROW E
& MAW

VIA COURIER

Mayer, Brown, Rowe & Maw LLP

190 K Street, NW. Washington, D.C. 2001101
Main Tel (202) 263-300 Main Fax (202) 263330 ww.mayeibrownrowe.co

David N. Geier

U.S. Departent of Justice
Tax Division, Room 7919 555 Fourth Street, N.W. Washington, DC 20001
Re: Consolidated Edison Companv of

Nicole M. Bielawski
Direct Tel (202) 263-3452 Direct Fax (202) 762-4242 nbielawski ~mayeibrownrowe.co

New York. Inc. & Subsidiares v. The United States. Docket No. 06-305 T

Dear Mr. Geier:

I have enclosed the following:
(1) Con Edison's First Supplement to its Rule 26(a) Disclosures;

(2) Con Edison's First Supplement to its Responses to the United States' First
Request for Production;

(3) a CD ROM containing CE# beginning and ending bates numbers for the
documents PF#00552i through 7333, previously produced on November 3,

2006; and

(4) a CD ROM containing images and CE# and PF# beginning and ending bates numbers for documents PF#007334 through 7842, produced in connection with the supplements referenced in paragraphs I through 2 above.
It was not possible for us to segregate the documents PF#007334 through 7842 between the Rule 26(a) Disclosures, the varous Interrogatories and the Document Request. The majority of the documents fall into more than one category. As a result, we are producing the CE# beginning and ending bates numbers which, when organized sequentially, reflect the organization as provided to Mayer, Brown, Rowe & Maw LLP from Con Edison's files.

Con Edison, however, notes that documents PF#007494 though 7511 and 7708 through 7842 are responsive to Interrogatory No. 13 regarding the Public Service Commission, and the activities of the Public Service Commission also are discussed in some of the board minutes provided.
Con Edison has conducted additional due diligence in response to the United States' revised Interrogatory No.2. Con Edison, despite such due diligence, is not prepared to respond at this time. As we are sure you can appreciate, the responsible individuals at Con Edison are
Berlin Brussels Charlotte Chicago Cologne Frankfurt Houston London Los Angeles New York Palo Alto Paris Washington, D.C.
Independent Mexico City Correspondent: Jauregui, Navarrete y Nader S.C..
Mayer, Brown, Rowe & Maw LLP operates in combination with our associated English limited liabilty partnership in the offices listed above.

.i ..-,

..

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November 17, 2006
Page 2

cautious about making a representation under oath as to whether other current or former employees ever considered or reviewed transactions, other than those previously identified, that may constitute listed transactions. It is diffcult for a corporation to make a negative representation, i.e., a representation that something did not occur, approximately ten years ago.

The response to revised Interrogatory No.2 wil represent that Con Edison did not paricipate in any other shelter transaction, as defined by the United States' correspondence of November 8, 2006, during 1996 through 1998, other than the NUON transaction previously identified in its response to Interrogatory No.2.

November 15,2006, and we wil provide a detailed response to you. We have recently received additional documents from Con Edison in non-redacted form and wil supplement Con Edison's responses with non-redacted documents, as
We are in receipt of your correspondence of

appropriate.

Sincerely, . ().
Nicole M. Bielawski

~~~

Enclosures:
cc: (via electronic delivery)

Thomas C. Durham David F. Abbott Andrew W. Scher

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EXHIBIT B-4

.

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Please reply to: Court of Fedeal Clams Section
P.O. Box 26

Facimile No. (202) 307,0054
Tri Attey: David N. Geier Atty's DirectUne: (202) 616,3448

Ben Frankln Station
Washingt, D.C. 20044

EJO'C:DG:~:DNGeier

154-2457'\\
CMN 2006103503

December 12,2006
Also via Facsimile (312) 706-9187
Thomas C. Durham, Esquire

MAYER, BROWN, ROWE & MAW LLP 71 South Wacker Drive Chicago, Ilinois 60606
Re: Consolidated Edison Coinpany of

New York, Inc. & Subsidiares

v. United States Fed. Cl. No. 06-305 T
Dear Mr. Durham:

I am writing in fuerance of our effort to resolve certin outstanding issues arising from
Plaintiffs responses to wrtten discovery which remain prior to seeking assistance from the Cour.

Despite the exchange of correspondence, your most recent response,

Interroeatories
(i) Interrogatory No. 1 - identif individuals with knowledge
Plaintiff s response to Interrogatory No. 1 Plaintiff indicates that the the individuals that Plaintiff individuas listed in our letter of October 13,2006 constitutes a list of would expect to have information pertining to the RoCaJ shelter transaction, but then declines to
In the final paragraph of

provide any fuer information with respect to these individuas, citing the fact that Plaintiff does
not have "complete information regarding their knowledge of the facts." Plaintiff

has an obligation

to respond with whatever information it may have regarding the knowledge these identified individuals may have pertnig to the facts of the RoCaJ shelter transaction. Ths is tre whether
or not such a response may be a complete recitation of all of the facts known by these individuas. Plaintiff canot hide behind an assertion that it does not have "complete information" regarding these respective individuals' knowledge and simply refuse to provide any information.

(ii) Interrogatory No. 2 - listed transactions
With respect to Plaintiffs response to Interrogatory No.2, following our voluntar narowig
of the Interrogatory by provision of specific listed transactions, you first indicated in your November

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13, 2006 correspondence that you anticipated Plaitiff would supplement its response to indicate that Plaintiff did not enter into or consider any such listed transactions except those aleady identified in response to Interrogatory No.2. However, by your November 17, 2006 correspondence, Plaintiff supplemented its response to indicate that Plaitiff did not enter into any listed transactions durng

the years i 996 through 1998, and that Plaitiff could not respond as to whether any of the listed transactions were considered because it could not locate anyone that would commit to such a statement under oath. Such a position is paricularly troubling given the Plaitiffs representation in the final paragraph of its response to Interrogatory No.2, that the Plaintiffs documents identify other LILO transactions considered by Plaintiff. Please let us know whether Plaitiff intends to
respond to ths portion of Interrogatory No.2, or whether Plaitiff intends to rely on the statement
in your November 17,2006 correspondence as the reason for failng to respond to ths portion of

the

interrogatory .

(ii) Interrogatory No. 3 - pricing information
In regards to Plaintiffs response to Interrogatory No.3, in which the Governent requested

information about how the rent and option prices were negotiated, calcwated and allocated, while the recent citation to PF003241-PF003246 does provide some information regarding assumptions Con Ed purortedly relied upon in submitting the "proposal" included in cited documents, it does
not indicate how the specific amounts were negotiated or allocated between the. paries. Because the

reference to PF003241-PF003246 does not provide a suffcient response to Interrogatory No.3, we request that Plaintiff supplement the information contained in that document to provide a complete
response to ths interrogatory. Finally, your recent attempt to object that the interrogatory is vague

and unclear ignores the fact that no such objection was asserted in Plaintiffs initial response to the interrogatory. Your claim that we must now ask Plaintiff more specific questions concerning how the varous rent obligations and option prices were negotiated, calculated, and allocated is specious at best. If Plaintiff has more specific information regarding the requested negotiations, calculations, and allocations, it is Plaintiffs obligation to provide such information where responsive to the request. For example, an oblique reference to "computer softare" is insuffcient to describe the

negotiation process. We request that Plaitiff supplement its response to identify the specific
softare and to describe how the softare was utilzed the instat case. Please let us know whether

or not Plaintiff intends to supplement its response to Interrogatory No.3 to provide a complete
response thereto.

(iv) Interrogatory No. 12 - tax indemnity agreement
In your December i, 2006 correspondence, you have represented that there are no documents

detailng Plaintiffs reasons for entering into the tax indemnty agreement. Whle Plaintiff may desire to reference documents in lieu of providing a wrtten response, the apparent absence of a document does not alleviate Plaintiff of its obligation to answer the interrogatory. Therefore,
Plaintiff must state its reasons for entering into the tax indemnty agreement.

(v) Interrogatory No. 14 - identity of outside consultants

In your explanation of Plaintiff's response to Interrogatory No. 14, in which we asked
Is

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Plaintiff to identify the outside consultats it communcated with to locate potential international
energy infastrctue investment opportties as it had pled in its Complait, it appears that Plaitiff has improperly and unlaterally limited its response to identifying only what it deems to be "key"

advisors for the RoCaJ shelter tranaction, namely Cornerstone Financial Advisors, LP. Furer,
Plaintiff

has indicatbd that all "relevant" documents relating to that advisory relationship have been

produced. This explanation indicates that Plaitiff has failed to identify "all" advisors and
conswtats with respect to. potential international energy inastrctue investment opportties, including all advisors conswted with respect to the RoCaJ shelter transaction. The stated objections of relevance and immateriality are paricularly inappropriate in response to ths interrogatory given the allegations in Plaintiffs Complaint. Furer, because the "over breadth" objection, which we do not believe to be applicable in any event, only relates to the production of documents, Plaintiff
has not aricwated a valid objection to the identification of

the requested consultats and advisors.

Therefore, we request that Plaintiff immediately supplement its response' to identify all such
conswtats and to identify and produce all responsive documents, not simply those Plaintiff and its counsel deems relevant.

(vi) Interrogatory No. 15 - communications re Lease Transaction
Plaintiffs response to Interrogatory No. 15, in which the Governent requested that Plaintiff

identify all individuas and entities, including employees, board members and thrd paries, that it communicated with about the Lease Transaction prior to entering the transaction, including the contents of such communcations, is also troubling. Plaintiff taes a position directly contrar to the

law by asserting that Plaintiff canot be required to ask its own employees for responsive
information. In fact, Rule 33 requies that Plaintiff conduct an investigation, and inquire of the employees and representatives likely to have relevant information in order to respond to the interrogatory. Plaintiffs objection that a response would improperly require it to depose its own
employees to ascertn the requested information has no basis in the law. Furer, a review of

pertinent documents previously produced by Plaintiff indicates that the number of Plaintiffs
employees that purortedly paricipated in the RoCaJ shelter transaction is not so great a number that inquiring of them wowd be burdensome, much less unduly burdensome.. -.
Furer, to the extent that Plaintiffs response relies on documents produced in discovery,

such reliance is faulty for several reasons. First, the reliance ignores that oral communcations as

well as wrtten communcations have been requested. Second, the document production is far from

complete given tht the United States is aware of addit ional documents responsive to. this
interrogatory that have yet to be produced by Plaintiff. For example the United States is aware of
several emails between offcers and directors of Con Ed discussing or referrng to the Roca3

transaction which have not been produced or identified by Plaintiff.
In addition, your December 1,2006 correspondence purorts to belatedly assert an attorney-

client privilege when heretofore none had been timely or properly raised. Failure to raise the
privilege constitutes a waiver.

As a fial note, while I am sure you are aware the scope of discoverable inormation goes well beyond the simple notions of relevancy, Plaintiffs continued insistence to claim that much of
Is

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the information sought from Plaintiff is not relevant to the ta treatment of the RoCaJ shelter
transaction is misplaced. For example, Plaintiff ignores the fact that it made numerous allegations

in its Complaint pertning to the purose of the RoCaJ transaction as it related to Con Ed's
purorted overall business plan, thus entitling the United States to discover inormation pertinng to Con Ed's paricipation and consideration of other transactions. Furher, the "routine business communcations" of Con Ed employees regarding the RoCaJ shelter transaction are highly relevant to Con Ed's subjective view of the tranaction, an importt consideration in the instat matter.
Therefore, Plaintiffs continued inistence to rely on relevancy objections lacks a valid basis here

wherè the requested information goes directly to the allegations in the Complaint and the elements
of

the clais at issue.

Privilei:e Loe
Several issues remain with respect to the updated privilege log and the documents produced

in conjunction with your December l, 2006 correspondence. First, while you stated in your
correspondence of

will produce non-redacted copies of documents not included on the privilege log, we have not yet received any such production and there ha been no indication when we can expect to receive additional these documents originally, documents. Because you did not assert a privilege pertining to any of I see no reason for the delay in producing the unedacted documents.
November l7, 2006 and agai on December 1,2006, that Plaintiff

In light of your explanation of the substace of the communcations contained in the
November 20, 1997 memo found at PF005618-19 and CE004704-05, even if a privilege were

applicable, that privilege has been waived by production of other documents to the United States Shearan & Sterling. Similarly, to the the legal advice of regarding the "anticipated substace" of extent any of the other identified documents contain or discuss the advice of Shearan & Sterling, it appears that any privilege that may have applied to those documents has been waived by the production of documents actually containing or referring to such advice.

In addition, to the extent that you are asserting a work product tp shield documents from production, please state the basis for that assertion, including a specific identification of the basis for your claim that these documents were prepared "in anticipation of litigation," as you have
claimed with respect to the draf legal opinion of Shearan & Sterling produced in discovery.

Please confrm whether or not Plaintiff is withdrawing its claim of privilege with respect to
Interrogatory No. 12.

Rule 26(a) Disclosures
intends to fuer supplement its Rule 26( a) you ths is stil your intention, and given the press of deadlines, please let us know if disclosures. If will be makng any additional disclosures, and if so, when.
You have represented for some time that Plaitiff

Is

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We would appreciate a prompt response to the issues raised herein.
Sincerely yours,

LLR
Enclosure
cc: Caren Baerga, Esq.

Trial Attorney, Tax Division

Is

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EXHIBIT B-5

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MAYER BROWN

HOW E &MAW
December 2 L, 2006

..' .,.~ .,~_"""'._'_'m_..__'~~__

Mayer. Brown, Rowe & Maw LLP 71 South Wacker Drive

VIA UPS

Chicago, Illnois 60606-437

David N. Geier
Joseph A. Sergi

Main Tel (312) 782-Q Main Fax (312) 701-nl1
YM.mayerbrownrowe.com

U.S. Department of Justice Tax Division 555 Fourth Street, N.W. Room 7919 Washington, D.C. 20001
Re: Consolidated Edison Co. v. United States, Docket No. 06-305 T

Thomas C. Durham
Direct Tel (312) 70t-7216 Direct Fax (312) 706-9187
tdurham0

mayerbrownrowe.com

Dear David and Joe:

This letter responds to the United States' con-espondence of December 12,2006, identifying additional concems with respect to Con Edison's responses to the United States' First Set of Interrogatories and First Request for Production of Documents. This letter follows the
strLlcture of the United States' correspondence.

As explained in this letter, Con Edison has complied with its discovery obligations, and
the United States' allegations to the contrary lack merit. Con Edison sU,bmits that the United

States' current tactic of demanding on-going follow-up to its Inten-ogatories based upon overly broad interpretations of such Interrogatories is not effective. It would be more useful for both parties if the United States served directed Inten-ogatories.

Con Edison, as it has repeatedly stated, fully intends to satisfy its discovery obligations under the Rules of the Court of Federal Claims ("RCFC"). Con Edison, although it does not believe its responses are deficient, wil provide additional information in an effort to address the United States' concerns.

Interroeatories
(i) Interrogatory No. 1: Individuals with Knowledge

The United States mischaracterizes Con Edison's response to Interrogatory No. I. In its response to Interrogatory No. i, Con Edison identified individuals who Con Edison believes may have discoverable information regarding the Lease Transaction, including nine current and
Berlin Brussels Charlotte Chicago Cologne Frankfurt Houston london Los Angeles New York Palo Alto Paris Washington, D.C. Indepndent Mexico City Correspondent: Jauregui, Navarrete y Nader S.C.
Mayer, Brown, Rowe & Maw LLP operates in combination with our assocated English limited liabilty partnership in the offces listed above.

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David N. Geier
December 21, 2006
Page 2

former employees of Con Edison and sixteen additional individuals associated with unrelated entities which were retained by Con Edison as advisors. Con Edison further described the nature of each individual's involvement in the Lease Transaction and the general substance of the facts Con Edison believes to be known by each. Con Edison's response to Interrogatory No. l is six
pages in length.

(n the last paragraph of its response to Inten"ogatory No. I, Con Edison stated, in regards to Defendant's letter of October 13,2006, "(w)e expect that the persons named in the letter may
have information regarding their respective institution's role in the Lease Transaction...." (emphasis added). Contrary to the United States' allegation, Con Edison has not "declineld) to

provide any further information."
Con Edison has produced extensive documentation regarding the Lease Transaction. Many of the individuals identified in the Defendant's letter of October 13,2006, are referenced
in these documents. Pursuant to RCFC 33(d), it is acceptable for Con Edison to produce

business records in response to an interrogatory. The burden of culling through these documents and summarizing the information that mil.). be known by individuals identified would be "'substantially the same" for Con Edison as it would be for the United States.
Con Edison initiated a telephone conference yesterday aftemoon in an attempt to discuss some of the concerns raised in the parties' correspondence and work towards the resolution of
such concerns. During the conference, counsel for the United States clarified their expectations

with respect to Interrogatory No. l. In particular, Joe Sergi articulated the United States' position that Con Edison has an obligation to summarize information contained in the business records produced. Con Edison does not agree with this position, but in an effort to assist the United States, Con Edison wil supplement its response to IntelTogatory No.1 to provide such
i nfoimation.

Finally, Con Edison notes that in the United States' Rule 26(a) Disclosures, the United States identified all "individuals identified in the documents produced herewith" as individuals it may use to support its claims or defenses. The United States, despite our requests, has not provided any further information concerning these individuals it has indicated an intent to rely upon or the subject matter of the information possessed by them. Since the United States has identified these individuals as persons upon whom it intends to rely, we would expect the United States to describe the subject matter of their information, which it has not done. Con Edison, in contrast, has supplied information concerning the "subjects of the information" possessed by those individuals it intends to rely upon. Thus, Con Edison has been considerably more foi1hcoming than the United States in this regard.

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David N. Geier
December 21, 2006
Page 3

(ii) Interrogatory No.2: Listed Transactions

Con Edison, after further discussions with Con Edison employees, supplemented its response to IntelTogatory No.2 on December 13, 2006.
(iii) Interrogator.',. No.3: Pricing biformatiOll

Con Edison's initial response to Inten'ogatory No.3 was adequate. The fact that the United States may have follow-up questions as a result of that response does not indicate that Con Edison's response was deficient. Con Edison provided a supplemental response to Intenogatory No.3, which the United States admits was helpfuL.
Con Edison's objection to Intellogatory NO.3 as vague and unclear was based upon the
United States' attempt to expand the scope of the IntelTogatory in its correspondence of

November 8. 2006, thereby causing the Interrogatory to become vague and unclear.

As explained previously. Con Edison and South Holland Electric negotiated the rent and option prices in order to maximize their respective economic retuiis from the transaction, should
the option be exercised. Also. as explained previously, the rental amounts were allocated in

accordance with section 467 of the Intemal Revenue Code for tax purposes. Rental amounts were calculated by reference to the fair market rental value of the property. As explained in the supplemental information provided, which the United States agreed was helpful, the parties' negotiations on these points were constrained by factors such as the fair market value of the property and its useful life. If, by its request, the United States intended a different meaning for "negotiated," "calculated," and "allocated" other than the meanings of those words as we understand them, Con Edison requests that the United States clarify its request.
In response to the United States' follow-up question in its cOlTespondence of December 12,.2006, the computer program used was called "ABC." This computer program is identified on the top of each of the pricing runs which Con Edison previously produced. The program was created by Wan-en & SeIbert, Incorporated. See www.wan.en-selbeit.com. Robert Holzman, identified in Con Edison's First Supplement to its Rule 26(a) Disclosures, ran this software program on behalf of Con Edison. Con Edison has already provided information on "how" the software was used. The ABC program is standard software which is widely used in the leasing
industry in order to perform the calculations required in connection with leasing transactions. As

previously indicated, one of the functions of this software is to calculate rental amounts in a manner which wil optimize the economic returns to each party. It is also capable of performing the calculations required by section 467 in order to ensure compliance with those provisions.

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David N. Geier
December 2 I , 2006
Page 4

(iv) Interrogatory No. 12: Tax Indenl1ity Agreement

Tax indemnity agreements are commonly used in leveraged leasing transactions. Since such agreements are normally used in leveraged leasing transactions, both parties (through their counsel) would likely have expected the closing documents to include a tax indemnity agreement. The Tax Indemnity Agreement is a contract between two unrelated, adverse parties. As is the case with all contracts, the purpose of the'contract is to set forth the terms of the paities' agreement with respect to the matters described in the contract. Thus, the "reasons for entering the agreement" can best be understood by examining the terms of the Agreement. The Agreement is a thirty-page document. Since Con Edison has produced a copy of the Tax Indemnity Agreement, and the burden of summarizing the terms of this agreement would be "substantially the same" for Con Edison as it would be for the United States, Con Edison has provided a complete response to this Interrogatory. See RCFC 33(d).
(1') ¡'iierrogaiory No. ¡ 4: Idemtfy Oulside Consullanls

The United States' claim that Con Edison has failed to identify "all advisors consulted with respect to the RoCa3" transaction is not correct. Con Edison wishes to make clear that it has identified all of its consultants with respect to the RoCa3 investment. Furthermore, in response to IntelTogatory No.7, Con Edison has provided all non-piivileged cOlTespondence with siich consultants in its possession regarding the due diligence review of the transaction.
In response to IntelTogatory No. 14, Con Edison identified Cornerstone as "the outside
consultant" who helped Con Edison "locate" the RoCa3 investment. Con Edison did not retain
any

other consultants with respect to locating the RoCa3 investment. Cornerstone also located the other leasing investments identified in response to Interrogatory No.2. No other consultants were retained in the process of locating those investments.
As for non-leasing investments, Con Edison previously identified International Energy Partners as an outside consultant which helped to locate infrastructure investments. International Energy Partners was responsible for locating the Genor investment, which was Con Edison
Development's first non-leasing infrastructure investment. We have previously provided you with extensive material regarding International Energy Parners. See PF004426-44. This

material identified potential infrastructure investments, including the Genor project, and described the merits of those projects.

In addition, Con Edison has provided extensive information regarding its plans for other
non-leasing investments. This material includes, but is not limited to:

· all Minutes of Board of Trustee meetings in 1996 through 1998, see, e.g., PF005950-53;

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David N. Geier December 2 i, 2006
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· extensive and detailed business plans, highlighting potential investments, see,
e.g., PF6438-89;

· reports to the Board of Trustees and other status repoits, set', e.g., PF6295-300;
and
· numerous' presentations to the Board of

Trustees, see, e.g., PF4223-43.

Two other early infrastructure investments highlighted in these materials were the Ada
and Carson projects. See, e.g., PF6295-300. Both of these investments were located by Delta

Power Company, LLC.
In vie\-v of the extensive information provided. the United States' claim that Con Edison has not provided responsive information is clearly incolTect.

Con Edison continues to believe that Interrogatory No. 14 is overbroad. Con Edison isto state the obvious-an energy company. Its entire business involves investment in energy

infrastructure, and thus InteITogatory No. 14 in effect requests information regarding virtually all of Con Edison's business operations over an unlimited time span. The United States has not nan'owed the Inten'ogatory either by reference to a specific time span or a specific entity, such as Consolidated Edison Development. In response to this overbroad inten'ogatory, Con Edison has provided, as described above, extensive information regarding the other infrastructure investments considered by Con Edison Development. As described in its Complaint, this material provides information regarding Con Edison's plans to operate in a deregulated environment.

Con Edison is wiling to work with the United States in order to narrow the scope of
InteITogatory No. 14. Absent the United States' cooperation in this matter, however, it is

difficult for Con Edison to know how to proceed, as the United States' request that Con Edison provide all matei;al regarding all infrastructure investments over an unlimited time span is clearly overbroad.
Con Edison would like to avoid the United States' current practice (see, e.g.,
InteITogatory Nos. 2, 3, and 14) of serving Interrogatories which are overbroad or which the

United States interprets in an overbroad manner and then unfairly alleging a lack of cooperation by Con Edison. Con Edison, as it has repeatedly stated, is committed to complying with its discovery obligations. Con Edison believes, however, that this process would be aided if the
Uniteçi States asked more specific questions.

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David N. Geier
December 21, 2006
Page 6

(vi) Interrogatory No. 15: CommUliicatiol1s regarding Lease Transactio1ls

Con Edison, as permitted under RCFC 33(d), provided business records which set forth
the communications of its cUITent and former employees regarding the Lease Transaction. These documents provide extensive detail regarding Con Edison's review of the Lease Transaction.

We have communicated with Con Edison's employees and they have confirmed to us that the documents previously provided set forth the substance of the communications of Con Edison with regard to the Lease Transaction. In response to Inten'ogatory No. 15, Con Edison has provided all responsive non-privileged documents in its possession. These documents identify the individuals who were parties to the communications regarding the Lease Transaction.
The United States indicates that it is aware of additional documents responsive to InteITogatory No. 15 that have not been produced. Con Edison requests that the United States provide copies of such documents so that Con Edison can evaluate the matter.
The United States cIaiified its interpretation of IntelTogatory No. 15 in yesterday
afternoon's telephone conference. Specifically, the United States informed Con Edison that it

inteq)Jets Interrogatory No. 15 as callirig for a written response summaiizing communications, regardless of whether such communications are included in the documents produced. Con Edison does not agree with the United States' interpretation or the validity of that interpretation under the RCFC, but wi II supplement its response to provide such information in the spirit of cooperation.
Con Edison, in its General Objection No.1, objected to all InteITogatories to "the extent

that the InteITogatories call for the disclosure of information that is subject to any claim of privilege or protection or that was prepared in anticipation of litigation. This includes without limitation, the attorney-client privilege or the work product protection." Thus, Con Edison reserved its right to object to any Interrogatory on the basis of attorney-client privilege.

Finally. Con Edison wishes to emphasize that it has not withheld any responsive, nonprivileged information in its possession with respect to Interrogatory No. 15.
Privileee Loe

Con Edison believes it has produced unredacted copies of all responsive documents
currently in its possession. It would be helpful if the United States could specifically identify

any redacted document which it believes should have, but has not been, produced in unredacted form.
Con Edison disagrees with the United States' position regarding a waiver of the attorneyDecember 1, 14, and 21,2006, and does not intend to produce further documents protected by either the attorney-client privilege

client privilege for the reasons set forth in our correspondence of

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David N. Geier December 2 J, 2006
Page 7

or work product protection at this time. The United States has not explained why it disagrees with the legal analysis and authorities set forth in Con Edison's cOlTespondence of December J and 14,2006, or cited any legal authority to the contrary. In order for the parties to engage in a meaningful dialogue regarding the alleged waiver, it would be helpful for the United States to explain its legal analysis and identify the legal authority upon which it is relying.
Con Edison, although not waiving any objection to the United States' Interrogatories on
the basis of privilege, states that it has not withheld any information in response to IntelTogatory

No. 12 on the basis of privilege.

Rule 26(a) Disclosures
Con Edison supplemented its Rule 26(a) Disclosures on November 17,2006 and on
December D. 2006. Both supplementations have been timely. Con Edison will coniinue to

supplement its responses as necessary.

The United States' response to Plaintiff's InlelTogatory No. I indicates that the United States plans to contend that the transactions at issue were part of a pattern in which so-called "promoters" "sold" LILO transactions to "large corporations." In view of the United States' claims in this regard, Con Edison believes it is necessary to produce additional evidence which indicates that the United States government, through the Federal Transit Administration, played a crucial role in "promoting," reviewing, and approving LILO transactions. Con Edison, as a result of the United States' claims in this regard, will further supplement its Rule 26(a) Disclosures with mateiial substantiating the Unites States' role in this regard. Furthermore, Con Edison will serve additional discovery with respect to this point. Depending upon the level of the United States' compliance with respect to the discovery requests, Con Edison may be required to identify additional witnesses who have knowledge of the United States' extensive role in promoting LILO transactions.

* * *
Con Edison has fully complied with its discovery obligations. The United States' allegations to the contrary are unsubstantiated and unwalTanted and do not serve both paries'
mutual interest in furthering the discovery process. Con Edison has, in no way, limited the

United States' ability to conduct full and complete discovery in this matter.

Many of the United States' criticisms of Con Edison's discovery responses may relate to the United States' pre-conceived notion that a "promoter" "sold" the EZH transaction to Con Edison. See United States' response to Con Edison's Interrogatory No.1. Con Edison is not aware of any information which would support this claim. It is not Con Edison's responsibility if the facts do not conform to the United States' pre-conceived notions.

Case 1:06-cv-00305-MBH
-,
Mayer, Brown, Rowe & Maw LLP

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David N. Geier
December 21, 2006
Page 8

Notwithstanding the United States' repeated cOlTespondence to Con Edison, the United States has failed to respond to the Con Edison's cOITespondence of November 21,2006 regarding a timeline for the exchange of expert witness reports, expert witness rebuttal reports.
and expert witness depositions. Con Edison would appreciate it if the United States would respond to the issues raised in this correspondence at its earliest 0ppoJ1unity.

~J~
Thomas C. Durham

Sincerely,

Nicole M. Bielawski

cc: A. Scher Con Edison

Case 1:06-cv-00305-MBH

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Case 1:06-cv-00305-MBH

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