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

Case 1:06-cv-00305-MBH

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EXHIBIT B-1

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u.s. Depa~:~it of Justice

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

Facimile No. (202) 307-0054
Tri Attey: Davi N. Geier
Attey's Direct Line: (202) 616-3448

Ben Frankl Stati Washingt, D.C. 20044

~J()' ~:I)(J:SJì~~(Jeier

1 54-2457 ~
~MN 2006103503
November 16, 2006

Also via Facsimile (312) 706-9187

Thomas ~. I)urham, Esquire MA YER, BR()WN, R()WE & MAW LLP 71 South Wacker Drive ~hicago, Ilinois 60606
Re: ~onsolidated Edison ~ompany of~ew York, Inc. & Subsidiares

v. United States Fed. ~l. ~o. 06-305 T
Dear Mr. Durham:

We have reviewed plaintiffs responses and objections to our request for production. Whle we are stil reviewing the documents and objections made to our request, we have several intial
concern regarding the privilege log. In many cases, in the context of

the communcations, we were

not able to discern the basis of the privilege clai because the redactions appear broader than

necessar to protect trly privileged material. We would appreciate any fuer clarfication
regarding the specific natue of

the languge redacted from the identified documents. To the extent

any of the redactions could be narowed to provide fuer context to plaitiffs privilege clais,

without revealing the claied privileged material itself, of course, such naowig would be of the
utmost help in discerng the basis for the privilege.

Business ~ommuncations with ~on-Lawyers
has witheld documents, although the communcations appear to be internal business communcations and not communcations with counsel. (~~003786-87, ~~004706-07, ~E012094, ~~007915, ~~01 1957-63, ~~01 1952-53, ~~011965-72). AsIamsure you are awar, if these communcations do not actully reflect privileged communcations with
In several instaces, plaitiff

counsel, they may not be entitled to protection. From the context of these documents we canot

conf whether all of the redactions meet ths criteria and would appreciate any assistace you
could provide in makng such a determation.

For example, the November 20, 1997 memorandum wrtten by Con Ed's vice-president Brian

l)ePlautt (~~ 003786-87) appears on its face to provide a factu update "regarding cert accounting and tax aspects of the transaction." In fact, the description of the document on the

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privilege log indicates that it does not discuss substative legal advice, but rather the statu of

Shearan & Sterling's work. Simlarly, another l)ePlautt memorandum, dated ~ovember 21, 1997 the EZH Lease" as well as (CE004706-07), purorts only to provide a status "on some issues of
certn timing issues. The unedacted portion of the memorandum does not indicate that any legal

advice is discussed in the memorandum, and does not provide sufficient context for the redacted portion of the memo to evaluate the claim of privilege.
Additionaly, a Febru 11, 1998 memoranda from Mr. DePlautt (CE 011954-56), conta

both a sumar and a detailed response; however redactions are made only to the section contag the detaled response. Agai, we are not able to discern the basis for the privilege clai. The same
is tre for the memoranda dated Jìebru 9, 1998 (C~011957-63) and Februar 13, 1998
(CEO

I 1952-53), which again do not provide the context for assessing the privilege.
Any fuer inormation regarding these internal ~on Ed communcations that would fuer

ilumnate the basis for ~on Ed's assertion of

privilege would be appreciated.

Legal ()pinions
We understand from the privilege log that plaintiff

has withheld the entirety of certin legal

opinions (dated~ovember 20, 1997, ~ovember 21, 1997, December 15, 1997, and Jìebru 28,

1998). Jìrom the documents we have received, it appears that a draf opinon was disclosed. See CE the subject matter of the opinion, albeit in draf form, we request 006789. Ciiven the disclosure of

that Con Ed disclose the remaining opinions on the same subject matter, all communcations
regarding the subject matter and any drafts. To the extent any other identified opinions have been
shared with thd paries, such as the financial institutions involved in the transaction, we request that

those opinions and any underlying drafts and communcations be produced.
Identification of Documents
Upon review of the bates numbers for the last document listed on your privilege log
(CEOI 1965-72/PJì004525-58), it does not appear that the numbers accurately reflect the document

in question. We would appreciate a clarfication of the specific location of the internal Con ~ison

memorandum so that we may appropriately evaluate the privilege asserted.

Redactions in ~on-Identified I)ocuments
Jìinally, our initial review of

the documents produced by ~on ~d reveals several instaces

of redactions without any assertion of privilege. See, e.g., C~003532, ~~003726, ~E0040I5, C~004755, ~~007887, ~~007888, and C~00794i. If ~on ~d is asserting a privilege to any
documents we would request that they be added to the privilege log with a description of the basis for such assertion or that unedacted versions of the documents be produced.

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We would appreciate your

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responding to permt us to understad why

the privilege lines have

been drawn where they have, and whether ~on ~d will release additional documents or portons
thereof to us to fuer such understading. Please also let us know whether you will be updating

your privilege log to address the other issues raised herein.

Enclosure
cc: Caren Baerga, Esq.

Is

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EXHIBIT B-2

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MAYER -- ---- --BROWN ~ - ~~--

ROW E --~ ----

& MAW

December 1, 2006

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

Chicago, Illinois 606-37

VIA COURIER David N. Geier U.S. Deparent of Justice Tax Division 555 Fourth Street, N.W. Room 7919 Washington, D.C. 20001
Re: Consolidated Edison Co. v. United States. Docket

Main Tel (312) 782-0
Main Fax (312) 701-771

ww.mayerbrorow.co
Thomas C. Durham
Direct

Tel (312) 701-7216

Direct Fax (312) 7069187

tdurhamimayeiblQlOwe.co

No. 06-305 T
Dear Mr. Geier:

Weare in receipt of your correspondence dated November 16, 2006, requesting further information regarding certain redacted documents and documents identified on the privilege log provided in connection with the Plaintiffs Response to the United States' First Request for Production. This letter follows the strcture of your correspondence.
Con Edison is fully cognizant of its obligation to provide all responsive documents with the exception of privileged communications. Con Edison intends to comply with this obligation and wil supplement its production as necessar.
Business Communications with Non-Lawvers:

The documents identified by the United States as business communications with nonlawyers discussed requests for legal advice from counsel and/or legal advice received from counseL. These communications are protected by the attorney-client privilege. See Shriver v. Baskin-Robbins Ice Cream Co.. Inc., et al., 145 F.R.D. 112 (D. Co!. 1992) ("An otherise privileged communcation by a lawyer to a corporate agent does not lose its protected status simply because the agent then conveys the attorney's opinion to a corporate commttee charged with acting on such issues."). Con Edison's privilege log wil be revised to clarfy that witheld or redacted communications with non-lawyers convey confidential requests for legal advice or legal advice.
The memorandum from Brian DeP1autt to Rober Ste1ben and Hyman Schoenblum, dated
November 20, 1997 (CE003786-87), conveys communications with Sheaan & Sterling
regarding the anticipated substance of

their legal advice. In paricular, the memorandum discusses the legal advice included in the Tax Risk Letter and the Tax Change Letter. A revised this memorandum (CE004704-05) disclosing the portions discussing the status redacted copy of
Berlin Brussels Charlotte Chicago Cologne Frankfurt Houston Londn Los Angeles New York Palo Alto Paris Washington, D.C.
. Independent Mexico Cit Correspondent: Jauregui, Navarrete y Nader S.C.

Mayer, Brown, Rowe & Maw LLP oprates in combination with our associated English limited liabilit partnership in Ihe office listed abve.

T"

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David N. Geier
December 1, 2006
Page 2

of the letters, but not the portions discussing the information to be included in the letters, is attached. Electronic copies of all documents attached to this letter wil be included in the Plaintiffs Second Supplement to its Response to the United States' First Request for Production.

The memorandum from Brian DePlautt to Mar Jane McCarney, dated November 21, 1997 (CE004706-07), describes a request for legal advice made to Con Edison's in-house counsel, including the information provided to counsel in connection with such request, and summarzes legal advice received from Shearman & Sterling. A revised redacted copy ofthis letter is attached.
The memorandum from Brian DePlautt to Mar Jane McCarey, dated November 21, the Sheanan &

1997 (CE012094), is being produced. This memorandum transmits a copy of

Sterling Tax Change Letter but does not discuss the legal advice provided in the letter.
The email correspondence dated December 11 and 12, 1997 (CE007915) is not
responsive to the United States' First Set of

Interrogatories or its First Request for Production.

The emaIl correspondence discusses legal advice regarding an unrelated issue. These

communications were inadverently included on the privilege log and are being removed.
The redacted portion ofthe email from Brian DePlautt to Mar Jane McCarney, dated Februar 9, 1998 (CEOl1957-63), transmits legal advice received.
The redacted portion of et aI., dated Februar 13, 1998 (CEO

the memorandum from Charles Muoio to Mar Jane McCarney,
1

1952-53), describes legal advice received.

The redacted portion ofthe memorandum entitled Leasing White Paper (ENECO 4) (CE011965 -72) transmits legal advice received.
Lef;al Opinions:

December 10, 1997. To Con Edison's knowledge, neither the final

A draft of the Sheanan & Sterling legal opinion was shared with Pricewaterhouse on legal opinion nor any other

related communications were provided to Pricewaterhouse. The draft verion was dated

December 1, 1997, approximately two weeks before the final opinion was provided, and was not complete.

The disclosure ofthis draft to Pricewaterhouse did not result in a subject-matter waiver of the attorney-client privilege, because the disclosure was not made in the context of a judicial
proceeding and did not provide Con Edison with any tactical advantage. See Yankee Atomic Elec. Co. v. United States, 54 Fed. CI. 306, 315 (2002) ("subject matter waiver (of the attorney-

client privilege) is inapplicable where the disclosure is not made in the context of a judicial proceeding and did not afford the client an adversaral gain"). The disclosure occurred before

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David N. Geier
December 1, 2006
Page 3

Con Edison entered into the transaction. Con Edison has not relied upon, and does not intend to rely upon, the legal advice received from Sheanan & Sterlíng or any other counsel in the
context of

this litigation. There is, as a result, no unfairness to the governent. See In re: Commercial Fin. Svcs.. Inc. & CF/SPC NGU, Inc., 247 B.R. 828,848 (Ban. N.D. Okla. 2000)

("The doctrine of subject matter waiver is narowly constred and should only be employed when unfairness (i.e., a tactical or strategic advantage) is implicated - otherwise, the doctrne of
subject matter waiver serves no useful purose.").

In addition, the draft legal opinion was prepared in anticipation of litigation and constitutes work-product. Pricewaterhouse was not an adversar to Con Edison, and thus, the production of the opinion to Pricewaterhouse did not waive the work-product protection. Regardless, there is no subject matter waiver for work-product protection. Any waiver is limited
in scope to the document disclosed. See In re: United Mine Workers of Am. Employee Benefit

Plans Litig.: 159 F.R.D. 307, 311 (D.D.C. 1994) ("The subject matter waiver doctrne applies only to attorney-client privilege claim and not to work product immunity claims.. .."). Thus, any waiver of the work-product protection for the draft legal opinion did not constitute a subject matter waiver of other documents protected by the work-product protection.
To Con Edison's knowledge, none of

the legal opinions identified on the privilege log

were shared with any third paries.
Con Edison has identified two additional pnvileged documents which have been added to
the privilege log.

Identification of Documents

The document identified as CEOl1965-72 was inadvertently not produced and is attached to this letter.
Redactions in Non-Identified Documents

Certain documents, not identified on the privilege log, were originally redacted for
relevance when produced to the Intemal Revenue Serce durng the audit. These redactions
were completed by Con Edison's legal counsel prior to Mayer Brown's receipt of

Mayer Brown requested unedacted versions of these documents which were not received until

the documents.

after Con Edison provided its responses to the United States' First Set of Interrogatories and First Request for Production. We have reviewed all documents for responsiveness, and unedacted versions of responsive documents wil be produced in the Plaintiffs Second Supplement to its Response to the United States' First Request for Production and Plaintiffs Second Supplement to its Rule 26(a) Disclosures. Many of these documents have already been produced to the United States in unredacted form.

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David N. Geier
December 1, 2006 Page 4

The Gramercy Development, Inc. agenda, dated September 25, 1997 (CE003532), is
produced at CE017779.

October 29, 1997 are produced at CE014323-24. The portion of the minutes on CE003726 are from the meeting of September 25, 1997, which were produced to
The board minutes of

the United States in unedacted form at PF0055 1 4-17.

The February 1 998 report to the Board of

Directors (CE004015-l6) was produced in

unredacted form at PF006293-94.
CE004755 and CE007887-88 are excerpts from a draft of the Leasing White Paper which is produced at CE016913-20. Other versions ofthe White Paper, previously produced, include PF004350-55 and 7327-33. In producing these drafts, cerain privileged and protected information was inadvertently not redacted. In particular, on page PF0004354 (CE012022), the second paragraph under number 3, "Pending U.S. Tax Regulations," and portions of

the first

paragraph under number 4, "U.S. Tax Audits," should have been redacted as confidential attorney-client communications and work product. On page PF007332 (CEOII962), portions of the first paragraph under number 4, "U.S. Tax Audits," also should have been redacted as a confidential attorney-client communication and work product. Revised redacted copies of these
documents are attached. Con Edison notes that, pursuant to its General Objections to the United States' First Set ofInterogatories, "(t)he inadverent disclosure by Con Edison of any
privilege shall not constitute a waiver of

information protected by the attorney-client privilege, the work-product protection or any other the applicable privilege or protection as to that information or any other related information." Con Edison requests that the United States destroy all paper and electronic copies of the previously provided documents.

We have not been able to obtain an unedacted copy of the December 10, 1997 agenda (CE00794l). We have produced resolutions from the December 10, 1997 meeting at PF0030113018 and a summar of

the meeting at PF005671. Legal counsel for Con Edison is continuing to

search for the agenda, and we wil provide an unedacted copy if it is located.

Very trly yours,

~BJ~'
Thomas C. Durham Nicole M. Bielawski
'.--r

cc: A. Scher Con Edison

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EXHIBIT B-3

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Document 21-4 u.s. Depam it of Justice 11 of 29 Filed 04/03/2007 Page

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

Facimile No. (202) 307-0054
Tril Atty: David N. Geier
Attey's'Direct Line: (202) 616-3448

Ben FrankUn Station Washingt, D.C. 20044

~J()' C:I)Ci: SF :DNCieier

I54-2457~,
CMN 2006103503
December 12, 2006

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

MA YER, 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:

I am writing in fuherance of our effort to resolve certin outstading issues arising from Plaintiffs responses to wrtten discovery which remain prior to seeking assistace from the Cour. I)espite the exchange of correspondence, your most recent response,

Interroeatories
(i) Interrogatory No. 1 - identif individuals with knowledge
Plaintiff s response to Interrogatory ~o. I Plaintiff indicates that the ()ctober 13,2006 constitutes a list of the individuals that Plaintiff would expect to have information pertining to the RoCa3 shelter transaction, but then declines to provide any fuher information with respect to these individuals, citing the fact that Plaintiff does not have "complete information regarding their knowledge of the facts." Plaintiff has an obligation
In the final paragraph of individuals listed in our letter of

to respond with whatever information it may have regarding the knowledge these identified

individuals may have pertnig to the facts of the RoCa3 shelter trsaction. Ths is tre whether

or not such a response may be a complete recitation of all of the facts known by these individuals. Plaintiff canot hide behind an assertion that it does not have "complete information" regarding these respective individuas' knowledge and simply refuse to provide any information.
(U) Interrogatory No. 2 - listed transactions

With respect to Plaintiffs response to Interrogatory No.2, followig our volunta narowig
of the Interrogatory by provision of specific listed transactions, you first indicated in your ~ ovember

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13, 2006 correspondence that you anticipated Plaintiff would supplement its response to indicate that Plaintiff did not enter into or consider any such listed transactions except those already identified in response to Interrogatory No.2. However, by your ~ovember 17, 2006 correspondence, Plaintiff supplemented its response to indicate that Plaintiff did not enter into any listed transactions durng the years 1996 through 1998, and that Plaintiff 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 Plaintiffs representation in the final paragraph of its response to Interrogatory No.2, that the Plaintiffs documents identify other LIL() transactions considered by Plaintiff. Please let us know whether Plaintiff intends to respond to ths portion of Interrogatory ~o. 2, or whether Plaintiff intends to rely on the statement
in your November 17, 2006 correspondence as the reason for failing to respond to this portion of the interrogatory .

(ii) Interrogatory No.3 - pricing information
In regards to Plaintiff s response to Interrogatory No.3, in which the Ciovernent requested

information about how the rent and option prices were negotiated, calculated 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. Becausethe

reference to PF003241-PF003246 does not provide a suffcient response to Interrogatory ~o. 3, we request that Plaintiff supplement the information contained in that document to provide a complete response to this 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 Plaintiff 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 ~o. 3 to provide a complete
response thereto.

(iv) Interrogatory No. 12 - tax indemnity agreement
In your December 1, 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 Plaintiffs response to Interrogatory ~o. 14, in which we asked
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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 ~omplait, it appears that Plaitiff has improperly and unlaterally limited its response to identifying only what it deems to be "key"

advisors for the RoCa3 shelter transaction, namely Cornerstone Financial Advisors, LP. Furer, Plaintiff has indicated that all "relevant" documents relating to that advisory relationship have been

produced. This explanation indicates that Plaintiff has failed to identify "all" advisors and
consultats with respect to potential international energy infastructue investment opportties, including all advisors consulted with respect to the RoCa3 shelter transaction. The stated objections of relevance and immateriality are paricularly inappropriate in response to this interrogatory given the allegations in Plaintiffs Complaint. Jìurher, 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 ariculated a valid objection to the identification of the requested consultants and advisors.

Therefore, we request that Plaintiff immediately supplement its response to identify all such
consultants 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
Plaintiff s response to Interrogatory ~o. 15, in which the Ciovernent requested that Plaintiff identify all individuals and entities, including employees, board members and third 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 requires 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. Furher, a review of pertinent documents previously produced by Plaintiff indicates that the number of Plaintiffs
employees that purortedly paricipated in the RoCa3 shelter transaction is not so great a number that inquiring of them would 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 written communcations have been requested. Second, the document production is far from

complete given that 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 officers and directors of Con ~d discussing or referrng to the Roca3
transaction which have not been produced or identified by Plaintiff.
In addition, your I)ecember 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 final note, while I am sure you are aware the scope of discoverable inormation goes well beyond the simple notions of relevancy, Plaintiff s continued insistence to claim that much of
Is

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the inormation sought from Plaintiff is not relevant to the ta treatment of the Ro~a3 shelter
transaction is misplaced. For example, Plaintiff

ignores the fact that it made numerous allegations

in its Complaint pertining to the purose of the RoCa3 transaction as it related to Con Ed's
purorted overall business plan, thus entitling the United States to discover information pertining to Con Ed's paricipation and consideration of other transactions. Furher, the "routine business communcations" of Con Ed employees regarding the RoCa3 shelter transaction are highly relevant to Con Ed's subjective view of the transaction, an importt consideration in the instant matter.
Therefore, Plaintifts continued insistence to rely on relevancy objections lacks a valid basis here

where the requested information goes directly to the allegations in the Complaint and the elements of the claims at issue.

Privilege Log
Several issues remain with respect to the updated privilege log and the documents produced

in conjunction with your December I, 2006 correspondence. First, while you stated in your
correspondence of November 17,2006 and again on December 1,2006, that Plaintiff

wil produce

non-redacted copies of documents not included on the privilege log, we have not yet received any such production and there has been no indication when we can expect to receive additional documents. Because you did not assert a privilege pertining to any of these documents originally, I see no reason for the delay in producing the unedacted documents.
In light of your explanation of the substace of the communications contained in the

~ovember 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 regarding the "anticipated substance" of the legal advice of Shearan & Sterling. Similarly, to the 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 draft legal opinion of Shearan & Sterling produced in discovery.
Please confrm whether or not Plaintiff is withdrawing its claim of privilege with respect to
Interrogatory ~o. 12.

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

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

iLR
Enclosure
cc: Caren Baerga, Esq.

Trial Attorney, Tax i)ivision

Is

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EXHIBIT B-4

VCL 14 '~b 14- ¿b r~ M~~~M LL~

202 TO 93070054

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P. 01/04 Page 17 of 29

Mayer, Brown, Rowe & Maw LLP
1909 K Street. N.W. Washington, D.C. 20006-1101

MAYER BROWN

Main phone: (202) 263-3000 Main falc; (202) 263-3300

ROW E

& MAW

FACSIMILE COVER SHEET
FROM:
Direct Tel:

Direct Fax:

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

Date/time:

12/14/2006 - 02:00 PM
4 ALL PAGES MUST Be NUMBERED

Pages:

TO THE FOLLOWING:

Name
David N. Geier
MESSAGE:
Please see attached.

Company

Fax

#

Telephone #

U.S. Departent of
Justice

(202) 307-0054

THIS MESGE IS I~DED ONLY FOR TH US OF rHE INDIDUAl OR EN TO WHICH IT IS ADRESED AND MAY COAIN INFORMTION THT 1$

THIS MESGE IS NOTHE INT RECIPIEN, OR TIE EMPlYEEOR AGEN RESNSIBU: FOR DallNG TIE MESGE IF nlE REAERINTED RECPIEN, YOU ARE HEEB NOllFI THAT TO THE OF
Nf DISSINATI, DlIBUOON OR CONG Of THIS COMMUNICAll0N IS STICTY PROHIBrr.IFYOU HAVE RE THIS COUNTI IN
ERROR, PLEAE NOl1FY US IMMEDIATEY BY TEHONE AND RETRN ruE ORIGINA MESGE TO US ATTH ABVE ADDRESS BY MAIL 'TK YOU.
IF YOU HAVE AN TRSMISSION DIffCULTY, PLEsr CONTACTTIE FACSIMILE DEPARTMENT AT (20) 26-3

PRIVLEED. CONFIDENAN EXPT FRM D1St.'LOSURE UNDER APPUCA LAW.

Berlin Brussels Ch8l0le Chica Cologne Frankfurt Houon Londn Loa Angeles New Voi Pa Alto Pa Washing D.C.

Indepnden Mii Ci Condent: Jaurøgui, Nava y Nader S.C.
Mayr, Bro, Row & Maw lLP operates In combinatlon wi our aad Erh limll8d Rabßl pal3hip in the ofce listd abi.

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TvAYfR
13"R(JV\N

RCJWE
& Tvi A VV

December 14,2006
VIA FACSIMILE (202) 307-0054

Mayer, Bro, Rowe & Maw LL
71 South Wacker Dri

Chicago. illinois 606
Main Tel (312) 782.06
Maìn Fax (312) 701-771

David N. Geier
Joseph A. Sergi

l'.mayeilIOWIro.i
Thomas C. Durham

U.S. Deparent of Justice Tax Division 555 Four Street, N.W. Room 7919 Washington, D.C. 20001

Dil8ct Tel (312) 701-7216 Direct Fax (312) 706-9187
1dui1am Omiyerbril'.com

Re: Conslidated Edson (~o. v. United Sta. Docket
No. 06-305 T
Dear David and Joe:
Ths letter responds to the United States' correspondence of

requestig additiona informaiion regardin two docuents which Con Edison identified as conta inadverent discio~nires of communcations protecte by both the attmey-client privilege and the work produtt production.
two drft the Leing Whte Paper produce to the United States contaed conuuncaons which were
On Decber t, 2006. Con Edson notified the United State tht excets of

December 11,2006,

of

indvertly not rected in 1\.11. The fi docuent. PF0043S0-55, was prduce on

September 25,2006, as par ofeon Edison's Rule 26(a) Disclosues. The secnd document,
PF007327-33, was produce on November 3~ 2006, in resonse to the Uiute Staes" Fir

Reques for Pruction ofDoouments. Th latter docuent (pF997327-33) was redcted in par.
However, as explained in COIl Edion's corrondence of

and protected inormation wa'i inadverently not redted in both docunents. In parcuar, on
page PF00043S4 (CE012022), the second pargrph under number 3, "Pendi U.S. Tax Reguatons," and portons of the fi pargrph under number 4, "U.S. Tax Audts:" should

Deoember 1, 2006, ce privileged

have bee rected as confdential attorney-client commUlcations and work prduct. On page
PF007332 (CE011962), porClns of the fist pargrh under number 4, "U.S. Tax Audts," al

should have bee redcted as ¡i confdential attrney-client oommuncaon and work product.

BerUl' Biis Chrlot Chicao Cologne Frart Houa Lonon lo Angeles New Yor Pao Alo Pañs WasIngn, D.C.

Independent Mexi Clly ColTepnclnt Jauregui, Niivlll'te y Nader S.C.
Mayor, Brown, Rowe & Maw LLP operalllsln conation wi our assDcìd Enfish fimll8d UabB pahip in th offce li abo.

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Case 1:06-cv-00305-MBH

Document 21-4

Filed 04/03/2007

Page 19 of 29

David N. Geier
December 14, 2006
Page 2

Con Edison provided revised redcted copies of these documents on December 1, 2006, the docuents prevously provided. The facts and circumstaces establish that the production of the protected
and requested tht the United States destroy all paper and electronic copies of

portons of the documents was inadverent and did not constitute a waiver of either the attomey-

client privilege or the work product protection.

In the event of an inadvertent waiver, the document does not lose its protected status. See Alaska Pulp Corp., Inc. v. United States, 44 Fed. Cl. 734, 735 (1999) (fiding that because "plaintiffs production of the ... documents was inadverent... it has not lost its privileged charcter"); see also Telephollics Corp. v. United States, 32 Fed. Cl. 360,361 (1994) ("There are many factual circumstances in which the privilege can be kept despite inadverent disclosure. n).
In Alaska Pulp, the Cour otTederal Claims, in upholding privilege, charactered the production of the privileged docwent as "an oversight" and noted that "the screeg proceures employed

to protect privileged materals were not so lax as to dee plaintiff indifferent to disclosure of the documents." ¡d. at 736. The same conclusions should be reached with respect to Con Edison's disclosure of discrete portion... of two dr of the Leasing Wlte Paper. ,
The Court of

Federal Clai applies a two-par test to detenine whether an inverent

disclosure results in waiver. See National Helium Corp. v. United States, 219 Cl Cl. 612 (1979).-

see also International Business Machines Corp. v. United States, 37 Fed. Cl. 599,603 (1997) (fiding that the two prong test outled in National Helium remains the applicable staard in
the Cour of

Feder Clais). Puant to National Helium, Con Edison need only demonstrte

that "it did not intend to discIiise the privíleged docuents and that, desite the indverent disclosure, plaintiff took adeq uae steps, given the cicumstance, to prevent the disclosue. ,.

IBM, 37 Fed. ct. at 603; see also National Helium, 37 Fed. Cl. 612, at *2.
Con Edison produced 7,842 pages of documents in its Rule 26(a) Disclosues and Firt Supplement thereof and its re~'Pnse to the Unite Staes' First Requet for Production and its

Firt Supplement therf. Th~ Rule 26(a) Disclosues were cafuly revewed for priviege,

sever times, by Thomas C. i luram, a parer at Mayer, Brown, Rowe & Maw LLP. The

resonse to the United States' Fir Request for Producon and First Supplement therto and the
First Suplement to the Rule ~6(a) Disclosues were fit reviewed for privilege by Nicole M.

Bielawski, a senor associate at Mayer, Brown, Rowe & Maw LLP. Ms. Bielawski reviewed all
docuents eleconicaly for privilege on two separate occions. The documents were subsequetly reviewed by Mr. Durham for privilege. Ms. Bielawsk conduct a fi review of

all docuents produc, in hard copy, before the protion. The prence oftbs prcedur
estalishes th Con Edson .'wished to retai its privilege as to all attmey-cent docuents."
National Helium, 219 Ct. Cl. 612, at *2 (emphasis in orial) (fidig proceure for review of

privieged materal demonsated plaitiffs intent to ret privilege). Fwer, Con Edson's
Gener Objecton No, i to th~ United States' Firt Request for Pructon on the basis of
attorney-client priviege and work pruct protecon reirces that Con Edison did not intend
to produce any privileged ma1 erals.

lJt:L 14 'lib 14:¿"( i-i. Ml:i.~M LLI-

202 TO '33070054

P.04/04
Page 20 of 29

Case 1:06-cv-00305-MBH

Document 21-4

Filed 04/03/2007

David N. Geier
December 14, 2006
Page 3

The procedure employed by Mayer, Brown, Rowe & Maw LLP constituted a "good fath, suffciently caeful, effort." National Helium, 219 Ct. Cl. 612, at *2. The numerous reactions of inormation protected by tJ ie attorney-client prvilege, the work product protection and/or both
demonstrates the careful revi.;w widertaken: The inadverent disclosue of thee pargrphs is small in the context ora production of 7,842 pages.

Con Edison identified the inadvertent disclosure in the process of re-reviewig November 16,2006, requestig additional information regarding documents identified on Con Edison's privilege log. Con Edison promptly notified the United States of the inadverent disclosue in its response to this request for additional infoImlLtion on December 1, 2006.
documents in response to the United States' correspondence of

Regardless ofwhethei the previously produced docwnents are destroyed, the inverent
production of

these docuems did not effect a waiver of either the attomey-client privilege or

the work product protecton. Con Edison clealy stated in General Objection No. 1 to the United States' First Set of Interogatories tht "(t)he inverent disclosue by Con Edison of any inormation protected by the attorney-client priviege, the work product protection or any other
privilege shall not constitute a waiver of the applicable privilege or

information or any other related inormation."

protection as to tht

Based upon the factual inormation and legal analysis set fort in ths letter, Con Edison's
reques that the United States destroy the previously produced copies of

Paper is approprate.

the dr Leaing Whte

Ver try

'your,

~ 1Jtú~ r
Thomas C. Duam
Nicole M. Bielawski

cc: A. Scher

Con Edison

** TOTAL PAGE. 04 **

Case 1:06-cv-00305-MBH

Document 21-4

Filed 04/03/2007

Page 21 of 29

EXHIBIT B-5

.

Case 1:06-cv-00305-MBH

Document 21-4u.s. Departt of Justice Filed 04/03/2007 Page 22 of 29

Tax Division
Please reply to: Court of Federal Clams Section
P.O. Box 26

Fdcimile No. (202) 307-0054
Tril Attorey: David N. Geier
Attoey's Direct Line: (202) 616-3448

Ben Franklin Station
Washingt, D.C. 20044

EJ()' C :DCi:SF:DNCieier

154-2457 CMN 2006103503

I)ecember 19, 2006

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

Nicole M. Bielawski, Esquire MA YER, BR()WN, R()WE & MAW LLP 71 South Wacker Drive Chicago, Ilinois 60606
Re: Consolidated Edison Company of

New York, Inc. & Subsidiaries

v. United States Fed. Cl. No. 06-305 T
I)ear Tom and Nicole:

This letter is in response to your letter of I)ecember 14, 2006. That letter set forth Plaintiffs explanation why its production of certain relevant information was "inadvertent." For the reasons set forth herein, as well as for those reasons in our prior correspondence, we do not agree and our position remains as set fort in our letter of December 11, 2006.
Because we did not find support for Plaitiffs position in our review of controllng law,

we asked Plaintiff to provide its authority for its position in its December 1, 2006 letter regarding documents PF004354 and PF007332 and the subject matter ofthóse documents. To date, Plaintiff has either failed or refued to identify support for its position that the destrction of records is required prior to such a determination by the Cour, or that there has not been a subject matter waiver of any privilege that may have attached to the material contained in those two documents.
More significantly, Plaintiff has failed to address the fact that it had already produced simlar information to the IRS, as we pointed out in our letter dated I)ecember 7, 2006. Wht is more, on December 13, 2006, a mere twelve days afer first contending it had "inadvertently produced" matenal, Plaintiff provided documents contaning information substatially similar to
the items you request we destroy. For example, Plaintiff produced unedacted copies of the LeaSing White Paper or drafs thereof, at PJì008614-8620; PJì008645-8651; PF008652-8658; PJì0093

16-93 20; PF00862I-8628; PF008629-8636; PF00863 7-8644; PF009307 -9314;

has also produced an unedacted memorandum at PF007852-7853 discussing legal advice from Shearan & Sterling, as well as an unedacted email from Mr.
PF008790-8794. Plaintiff

Case 1:06-cv-00305-MBH

Document2- 21-4

Filed 04/03/2007

Page 23 of 29

l)ePlautt to Ms. McCarey and Mr. Muoio discussing fuer legal advice from Shearan & Sterling at PF008570-8572. Although Plaintiff identified these documents on its most recent privilege log, each document was produced in unedacted form. This production, especially following the previous disclosure discllssed in our December 11, 2006 letter, indicates that ary applicable privilege has been waived.

Plaintiff s approach to the turning over of information is, at a minimum, inconsistent with the positions taken in your letters of December i and 14, and raises serious concerns about whether the Plaintiff is fulfillng its obligation to turn over discoverable information about its tax
shelter scheme. Not only is the Ciovernent entitled to discover relevant information, but the

repeated production of the information contained in the leasing white paper in unredacted form constitutes a subject matter waiver for which the Ciovernent is entitled to obtain the opinions, correspondence and drafts of the documents pertaining to the matters discussed therein that have yet to be produced. Please promptly advise us whether additional related documents regarding the legal
advice requested from Shearan & Sterling and the substance of that advice wil be produced.

~SinCereiY yours, ~

v

o PH A.~I
Trial Attorneys, Tax Division
cc: Caren Baerga, Esq.

~ ID N. R

Is

Case 1:06-cv-00305-MBH

Document 21-4

Filed 04/03/2007

Page 24 of 29

EXHIBIT B-6

-:.

Case 1:06-cv-00305-MBH

u.s. Filed 04/03/2007 Document 21-4 Departei'if JusticePage 25 of 29

Tax Division
Please reply'

Facsimile No. (202) 307-0054
Tril Attorey: David N. Geier
Attoey's Direct Line: (202) 616,3448

to: Court of Federal Ckiims Section
P.O. Box 26

Ben FrankUn Station

Wa.~hingtm, D.C. 20044

~J()'C:D. Ci:SYJiCieier

154-2457 ~
CMN 2006103503
December 20, 2006

Also via Facsimile (312) 7069187
Thomas C. Durham, Esquire

Nicole M. Bielawski, Esquire MA YER, BR()WN, R()WE & MAW LLP 71 South Wacker Drive Chicago, Ilinois 60606
Re: Consolidated Edison Company of

New York, Inc. & Subsidiaries

v. United States Fed. Cl. No. 06-305 T
Dear Tom and Nicole:

In keeping with the spirit of the discovery rules governing this case, and in furtherance of yesterday's correspondence, we wanted to inform you of additional problems with your most recent production of documents. ()ur continuing review of the materials produced with your I)ecember 13,2006 transmittl, demonstrates that Plaintiff continues to assert positions inconsistent with its claim that it has not waived any privileges and request that we destroy the documents you have produced.

. .

First, with regar to the two documents that your I)ecember 1, 2006 letter requests be destroyed, the documents have once again been produced to us in unredacted form on I)ecember 13. See CEOII957-63 (PF007327-33) and ~EOI20l8-23 (PF004350-55) produced as PF00825864 and PF008275-80, respectively.

Second, we are awar of two additional documents listed on the most recent version of your privilege log that also have new identifying numbers that do not appear on the privilege log and which were produced to us in unredacted form. Thus, ~E004706-7 (PF005647-8) and
C~OI 1965-72 (erroneously listed as PF004525-58) have now been produced as PF007854-5 and

PF008265- 72, respectively.

Case 1:06-cv-00305-MBH

- 2Document 21-4

Filed 04/03/2007

Page 26 of 29

Weare continuing to review the information provided.

Sincerely yours,

()S PH A.)å~;
cc: Carmen Baerga, Esq.

V N.~~

Tria Attorneys, Tax Division

Is

Case 1:06-cv-00305-MBH

Document 21-4

Filed 04/03/2007

Page 27 of 29

EXHIBIT B-7

Case 1:06-cv-00305-MBH

Document 21-4

Filed 04/03/2007

Page 28 of 29

MAYER BROWN

ROW E

_.~& MAW

December 21, 2006

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

VIA COURIER
Joseph A. Sergi, Esq. U.S. Deparent of Justice Tax Division 555 Fourth Street, N.W.
Washington, D.C. 20001
Re: Consolidated Edison Company of New

Chicago, Illnois 60637
Main Tel (312) 762-(
Main Fax (312) 701.771

WN.mayeitrorowe.com

Thomas C. Durham
Direct Tel (312) 701-216 Direct Fax (312) 706.9167

tdurtm Omayerbv.rowe.com

York. Inc. & Subsidiares v. United States. Fed. Cl. No. 06-305 T
Dear Joe:
As a result of your letter of

December 19, 2006, it has come to our attention that there

the CD Rom associated with Plaintiffs Second Supplement to Responses to United States' First Request for Production (December 13,2006) ("Second Supplement"). As a result of this error, material marked for redaction in our electronic database was inadvertently not redacted in the CD Rom provided to the United States.
was an error in the production of

In connection with this production, counsel for Plaintiff, using the Concordance database, carefully reviewed the documents and marked a number of documents for redaction on the basis of attorney-client privilege and work product protection. These redactions were noted on the privilege log produced to the United States, as you have acknowledged. Furtherore, in our letter dated December i, 2006, Con Edison produced hard copies of several documents in redacted form. As noted in our December 1,2006, letter, electronic copies of these documents were included in the Second Supplement.
your letter of December 19,2006, it has now come to our attention that the passages marked for redaction in the Concordance database were inadvertently not redacted as As a result of

the result of an error in producing the CD Rom provided on December 13,2006.

December 14,2006, it is clear that the error in production of

For the reasons stated above, and applying the legal standards described in our letter of the CD Rom constituted an inadvertent waiver. Plaintiff clearly did not intend to produce the documents in unedacted form, as it included them on a privílege log. The documents were reviewed and redacted for attorneyclient privilege and work product protection. Hard copies of some of the documents were

Berlin Brussels Charlotte Chicago Cologne Frankfrt Houston London Los Angeles New York Palo Alto Paris Washington, D.C. Independent Mexico City Corrspondent: Jauregui, Navarrete y Nader S.C.
Mayer, Brown, Rowe & Maw LLP operates in combination with our associated English limited liabilit partnership in the offices listed above.

Case 1:06-cv-00305-MBH

Document 21-4

Filed 04/03/2007

Page 29 of 29

Joseph A. Sergi, Esq.
December 22, 2006
Page 2

produced in a redacted roim. The eror in producing the documents in unedacted roim resulted
solely from an error in the production of

the CD Rom.

We have enclosed a new CD Rom, which contain the redactions as originally marked for
the December 13, 2006 production.
Our letter of December 14,2006 explains the applicable law in the Court of

Federal
December 19,2006 did not set forth

Claims with respect to an inadvertent waiver. Your letter of

any contrary authority. Accordingly, it is our position that the eroneous production of the material included in the CD Roms for the Second Supplement constituted an inadverent waiver, as Plaintiff inspected this material for privilege and work product, redacted relevant materials, produced redacted hard copies, and noted its redactions in the privilege logs. Thus, the documents remain protected by the applicable privilege and/or protection identified on the privilege log. In addition, as described in our December 1, 2006 letter, the material in question was, as is evident from the material itself, prepared in anticipation of litigation and therefore does not result in a subject matter waiver.

Finally, as stated in General Objection No.1 of the response to United States First Request for Production of Documents and incorporated by reference into the Second Supplement, any inadvertent disclosure of privileged or protected material does not result in a subject matter waiver.

Very truly yours,

Thomas C. Durham Nicole M. Bielawski

~Mti~