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said deemed distribution (reduced by the amount of any cash and fair market value of any "marketable securities", deemed received.
H. The sale of the foreign currency contracts by the LLC, as a disregarded

entity for federal income tax purposes, would result in the
Corporation's (and, thus, the Investor's) recognition of ordinary gain
or loss, measured by the difference between the amount realized from

such sale and the Corporation's adjusted tax basis in the sold contracts (as determined in G above).

1. Assuming that the Investments and assets of the LLC (other than those assets gain or loss from the sale of which would be subject to Section 988) are capital assets for federal income tax purposes, the LLC's sale of any of such Investments or assets would result in the Corporation's (and, thus, the Investor's) recognition of capital gain or loss, measured by the difference between the amount realized from such sale and the Corporation's adjusted tax basis in the sold Investment or asset (as determined in G above).
J. The tax treatment described herein for the Investor in respect of the

Transactions would be upheld if challenged by the Service and would not subject the Investor to penalties under Section 6662(b)(2) or (3).

K. The Transactions would not constitute a tax shelter within the meaning of Section 6111 and, therefore, would not be required to bc registcred
under Section 6111(a).

The opinions set forth above are subject to the following qualifications, limitations and exceptions: no opinion is expressed regarding the tax treatment of the described transaction for the purpose of any foreign, statc or local income tax, or any tax other than the United States federal income tax. Any misstatement of a material fact or
omission of any faet that may be material or any change in any of the facts rcferred to may require a modification of all or part of our opinions.

Our opinions are limited to matters expressly set forth herein, and no opinion may be applied or inferred beyond the matters so stated. The opinions expressed herein are

based upon our interpretation of currcnt law. The opinions exprcssed herein are not
binding on the Service or the courts. Moreover, there is no assurance that the Service or a court considering this matter would agree with our opinions or conclusions expressed
herein. We do not undertake to advise you of any changes in law which may occur after
thc date hereof. The Code, the Regulations promulgated thereunder, and the
administrative position of the Service are subject to change either prospectively or

retroactively. Such changes could render certain or all of the opinions expressed herein
inapplicable.

145
i \lark Hutton)

100

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The opinions expressed herein are furnished by us solely for the benefit of the Investor, and thus may not be relied upon or delivered to any person other than the
Investor without our express, prior written approval.
Very truly yours,

1/ .' " ~.
~~~£~i':edacca, Ld~-7 ¿

146
Dpinion (\1ark Hutton)

101

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CANTLEV & SEDACCA, LLP
ATTORNEYS AT LAW

EDWAR SEDACCA
?ARTNER

5220 SPRlG VALLEY ROAD, SUITE 6l 0 DALLAS, TEXA 75254 TEL. (972) 361-D090

\.IA."lI, FL DALLA, TX SAN FRA'ictSCO. c.\

FAX. (972) 361-'64

Januar 23,2002

VIA FEDEX

Mr. Mark Hunon

7118 West Cleareadow Cour Wichita, Kan 67205
Dear Mr. Hutton:
Enclosed please find our opimon letter pertainig to your market-linked deposit

investment, as well as, two copies of the representations ("Investor RepresentatiQns'j that '.'.'e

will need from you, Cleareadow Investments, LLC (the "LLCj and Cleaneadow Capital Corp. (the "Corp.") in connection with our issuace of the opinion letter. Whle we are furshing you with the opinion letter, please be advised that the opinon letter may not be
relied upon (and is not otherwise released) uness and until we have received the following

items: (a) the Investor Representations fully executed by you, the LLC and the Corp.; (b) the fully executed additional representations that we require from Dan Brooks (and his entity. CF
Advisors X~\.vlI, LLC); and (c) any remaining agreements and documents that we have not

yet received but which are relevant to the opinon letter.

Please review the Investor Representations for accuracy and completeness and, if acceptable to you, kindly sign, date and have witnessed your signatue in two places where indicated by the "Sign Here" tabs and retu the signed Investor Representations (origial signatues only) to my attention at the following address: Cantley & Sedaeca, LLP, 5220
Sprig Valley Road, Suite 610, Dallas, Texas 75254.

Sincerely,

Edward Sedacca
Ene.

;: DEFENDANT'S

i EXHIBIT

l ,30A
M!

146A

C&SLLP004872

C&SLLP004872

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS No. 05-1223 T (Judge Allegra) CLEARMEADOW INVESTMENTS, LLC CLEARMEADOW CAPITAL CORP., Tax Matters Partner, Plaintiff, V. THE UNITED STATES, Defendant. DEPOSITION The deposition of MARK HUTTON, taken on behalf of the Defendant pursuant to the Federal Code of Civil Procedure and Notice before: DONNA M. LYTLE, CSR, RPR, CRR OWENS, BRAKE & ASSOCIATES 234 North 7th Street, Suite E Salina, Kansas 67401 a Certified Shorthand Reporter of Kansas, at the Epic Center, 301 N. Main Street, Suite 1200, Wichita, Kansas, on the 8th day of May, 2007, Stoddart Decl. Exhibit 31

25 starting at the hour of 2:00 P.M.

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APPEARANCES The plaintiff appeared by its counsel, Mr. Tom Pliske, of the firm Gasaway & Stientjes, LLC, 1120 Olivette Executive Parkway, Suite 220, St. Louis, Missouri 63132. The defendant appeared by its counsel, Mr. Robert Stoddart, of the U.S. Department of Justice, Tax Division, P.O. Box 26, Washington, DC 20044.

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MARK HUTTON, of lawful age, having been first duly sworn on his oath to state the truth, and nothing but the truth, deposes and says: DIRECT EXAMINATION BY MR. STODDART: Q. Could you please give us your name? A. Mark Edward Hutton. Q. Could you please give us your address? A. Home address, 7118 Clearmeadow Court, Q. My name is Bob Stoddart, I represent the United States which you are suing. Have you ever been deposed before? A. Yes. Q. In what connection? A. On a number of construction project litigations for a company that I worked for prior to starting my company. Q. What company is that? A. Martin K. Eby Construction. Q. Then you know how it works. A. A little bit. Q. Everything has to be oral and there can't be any sign language, and it's best if only one

11 Wichita, Kansas.

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person talks at a time. Is there any reason you can't give completely full and truthful testimony today? A. No, sir. Q. Okay. Let's start right in by asking you about the new suit that you filed in the U.S. District of Kansas against Deutsche Banc. You did file a suit? A. Yes, I did. Q. Did you have a chance to look at the complaint before it was filed? A. No, I did not. Q. Did you engage in an attorney to file this for you? A. I engaged Rob Stientjes, with the Gasaway, Stientjes law firm, to investigate this issue and then he took it from there. Q. By "he", you mean Stephen M. Gorny, G-O-R-N-Y? A. I believe that Rob Stientjes worked with him. I do not and have never met with Mr. Gorny. My contact has been Rob Stientjes with my law Q. Do you know if Mr. Stientjes ever got a copy of the complaint before it was filed?

23 firm, Gasaway, Stientjes?

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A. I don't know that he did. I assume that he did, I mean, that he actually prepared it. Q. Did he prepare it from the information you'd given him? A. Yes. Q. Is there any representation made in this complaint -- have you looked at it since? A. I've attempted to read it. I'm not big on legal stuff legalese. I've attempted to read Q. To the best of your knowledge, were there any representations made in this complaint that were false? A. I don't recall any that I read. Q. Let's just go through some of the ones that might concern me. I only have one copy I'm

10 through it and try to follow it.

17 afraid so I may have to push it across the table 18 for you to look at. 19 20 21 22 24 25 Looking at Paragraph 15 which says, and I'm breaking to the middle of the sentence here, quote, Deutsche Banc continued marketing, promoting and participating in this sham, Son of and others devised by them as part of the defendant's arrangement, closed quote.

23 Boss tax shelters, including ML tax investments

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Is this MLD transaction a sham Son of Boss tax shelter? A. That's not for -- I don't have the background knowledge in law and tax to really understand what defines a sham tax shelter or what a shelter is, so I couldn't tell you. That was written by Rob Stientjes and those are his words, so you'd have to ask him on that. Q. Okay. He is your attorney, and he represents you? A. He does. Actually, Tom is my direct representation. Q. And have you ever directed any of your attorneys to file an amended complaint removing that language? A. No, no. Q. Do you stand by it? A. Do I stand by it? Q. Yes. To the extent that you don't want A. Well, I don't -- I guess so. I'm not qualified to decide whether that's a relevant issue or not -Q. Okay. A. -- in the whole scheme of things. I'm a

20 to correct it?

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contractor, I'm not a tax CPA or an attorney, so when you start talking about, is this -- do I agree that this is a sham or not, I couldn't tell you. Q. Okay. A. I've never heard that word in that context until, you know, this whole thing came up. Q. As long as the attorney, who is representing you, says it and you don't disavow it, that would be fine by me. I will look at Paragraph 22, quote, you say that the ML deposit transactions were structured in a way that Deutsche Banc decided whether to control -- whether a profit was earned and how much that profit would be, and B, Deutsche Banc would exercise its discretion to ensure no profit would be earned, closed quote. Is that true? A. I did not give that information to Rob Stientjes. I think he obtained that information from other avenues, but he did not get that from me. I learned -- that's the first time I learned Q. Did you tell him it was wrong? A. I don't know that it's right or wrong.

23 of that, when I read this complaint.

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Q. Do you disavow it? A. I guess not because I don't know whether it's right or wrong. Q. That's fine. A. Again, I didn't -- that information I did not give Mr. Stientjes as it related to Deutsche Banc, he found that out through other investigations and you'd have to ask him whether that was something that he -- how he found that out, because that was new information for me. Q. But he is your representative; correct? A. Um-hum, yes. Q. And you don't disavow it? A. No, I guess not, no. Q. Going to read from Paragraph 56, quote, There was not a reasonable chance of earning a profit on the ML deposit transaction and other Son of Boss like transactions, closed quote. Is that true? A. Well, I think that's a question that we

21 have today. It appears to me that there was some 22 misrepresentations made to me back when this 23 24 25 transaction and investment opportunity was put forward, and that's what this -- that's really the root of this lawsuit is how I was mislead by

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taking their advice and their personal representations. Q. Do you disavow that statement? A. I guess not, no. Q. Going to read from Paragraph 28. Quote, Defendants knew that the various law firms that they worked with were using, quote, canned, closed quote, opinion letters concerning the ML deposit transactions and other Son of Boss like transactions and needed only to fill in several blanks for each of the many clients to which they rendered such, quote, opinion letters, closed closed quote, were, quote, canned, closed quote, was not disclosed to plaintiffs or class, closed quote. Is that true? A. I believe that to be true, yeah. We didn't know at the time it was a canned opinion. Q. If you would have known it was a canned opinion, would you have continued with the transaction? A. I can't say whether I would have or not. I think it would have -- we would have maybe investigated, but the word canned is somewhat erroneous because, I mean, there's all sorts of

13 quote. The fact that the, quote, opinion letters,

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legal documents that are used on a repetitious basis and put forward for various other -- all sorts of entities to use, that are consistent. For instance, an LLC. If I want to form an LLC, I call up my attorney and he doesn't start from scratch in generating the document that creates that LLC, he pulls it from other things that he's done, and so the fact that it's canned, quote, quote, is -- I don't know that that's, in Q. If you'd known it was canned, would you have investigated further? A. I think I would have -- I would have take a look at the opinion letter. That is so far above me as it relates to understanding or even attempting to understand the sophistication of the tax code and those transactions and everything, that was well above anything that I understood from a legality standpoint, and that's why I Q. If you'd known this was a canned opinion investigate? A. I suspect I would have. I mean, I would

10 itself, a reason that I would have rejected it.

14 expected Scott Hewitt, that's who I relied upon to

21 relied on Scott Hewitt for it. 23 letter, would you have asked Mr. Hewitt to

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have asked him to make sure that it was really no different than anything else, though. I handed it to him and I said, I need your opinion on this. Q. Going to read from Paragraph 83, Defendants breached their duties to plaintiffs by promoting the ML deposit transaction, and other Son of Boss like transactions, by making false representations by failing to disclose material or significant facts of the effects of those facts

10 and misrepresentations; by advising plaintiffs to 11 engage in and complete the ML deposit 12 transactions; by advising plaintiffs that the cost 13 of the currency long option purchased by them in 14 15 16 17 18 19 20 21 22 23 24 25 the ML deposit transaction could properly be included in their tax basis for computing capital loss for 2001; that the amounts received for selling the currency short option could be ignored, closed quote. Is all of that true? A. There's a lot there. Q. Is anything in it false? A. That's easier. As we see it today, I think that's a correct statement. I think we were mislead by Deutsche Banc. Q. As a factual matter, that's true, what I just read?

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A. I'm sorry, I didn't catch the question. Q. Is what I just -A. I thought you were talking to yourself. Q. Is what I just read true from this paragraph? A. Our assertion is true, we believe our assertion is true, that Deutsche Banc mislead us in what the tax ramifications and what the opportunities were in the whole investment, we were mislead. Q. Do you wish to disavow this A. I don't know any reason why I would. Q. I'm going to read from Paragraph 105, knowledge and awareness that the transaction was complex series of financial transactions were legitimate business transactions which had economic substance from an investment standpoint when, in fact, they lacked those features, paren, which was necessary for successful tax strategy, close paren, close quote. Is that true? A. We believe that's an accurate representation of what -- yeah.

12 representation made to the U.S. District Court?

15 closed quote, The defendants acted with full 17 disclosed to give the false impression that a

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Q. And you don't disavow that? A. No. Q. I have something that was an exhibit in previous depositions but I don't have anymore copies, so it won't be an exhibit here. I will just give you a copy to look at. A. Okay. Q. And if Mr. Pliske wants to look at it, it is a letter captioned agreement for your legal Mr. Hutton now. I'd like to look at Paragraph 3. MR. PLISKE: I have the October 4th letter. Q. Paragraph 3, third sentence of Paragraph 3, quote, In making the investment that will be required as part of the investment, you have relied solely upon your, paren, and your financial advisor's, paren, independent investigation of all matters or concerns regarding the investment and the investment. You, paren, or your financial advisor, close paren, possess the matters that ensures your, paren, and your

10 services from Cantley & Sedacca. Showing that to 12 Do you have that?

23 knowledge and experience in financial and business 25 financial advisor's, paren, capability to evaluate

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the merits and risks of the investment, and you are, therefore, making an informed decision as to the investment, closed quote. Do you have knowledge and experience in financial and business matters that would ensure your capability to evaluate the merits and risks of option trading in foreign currencies? A. Absolutely not, that's why I hire guys like Scott Hewitt. Q. And whom did you hire -- who was your financial advisor who did possess knowledge and A. I would look at that as Scott Hewitt. Q. But he says he didn't have that knowledge. A. Well, he may have said that, but I looked to him. I felt like he did when I -- when we analyzed this particular opportunity, that's who

12 experience in financial and business matters?

19 my primary person that I looked to, was Scott 20 Hewitt, in discussion of this. 21 23 25 Q. Did Mr. Hewitt ever give you any reason knowledge so as to evaluate the merits of trading A. Well, I'd answer that by saying he sure 22 to think that he had financial and business 24 options in foreign currencies?

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didn't tell me he didn't, and I've had a lot of faith and trust in Scott over the years. He's helped our company, he's been instrumental in helping our company grow and with his expertise in other areas and the like, he's proven to be a valuable consultant for me, and so I didn't really question in depth whether he was specifically comfortable with this, but he never indicated to me that he wasn't. Q. Did you ever ask Mr. Hewitt for an opinion on whether the option trading transaction would, apart from tax contributions, provide a reasonable opportunity for profit, apart from tax A. You know, I don't specifically recall asking him that, but in the course of our conversations, I had a comfort level that he was

14 considerations?

18 okay with it, but I really don't recall that I 19 specifically phrased a question to him like that. 20 21 22 24 25 Q. In his affidavit he said that he gave you the opinion that if it was not profitable, there would be down side protection because of tax MR. PLISKE: Objection. A. That wasn't really what the question was.

23 attributes.

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MR. PLISKE: I don't think he said that in his affidavit. MR. STODDART: Let's get his affidavit. Q. And while we continue, I'd like to ask you, when exactly did Mr. Hewitt tell you that this transaction had a reasonable possibility of producing a profit? A. I don't believe that I said that he said Q. So he didn't say that? A. No, what I said was that in the course of our discussions, that I had a comfort level that he believed that, but I don't believe that he ever specifically said what you're asking me the Q. What exactly gave you the comfort level? A. Scott and I've worked together on a number of things, and Scott's always been very open and honest with me as to issues that I've brought to him, and I felt like if he would have had a concern about that or a comment, he was So I guess I took his silence as a acquiescence, if you will, that yeah, it's an okay

10 that.

16 question is.

23 always very open in making those, and he didn't.

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deal, but I did not ask him specifically as it relates to that. That would have been out of character for me, quite frankly, for me to have drilled in that deep to a transaction like this. Q. Did Mr. Hewitt ever before then given you his opinion that any transaction you entered had a reasonable possibility of making an economic profit regardless of the tax consequences? A. No, no. Only thing I would qualify again is I suppose there's been times I've thrown out an

11 idea of maybe a direction I was going to take my 12 company, and we'd talk about the profitability 13 14 15 16 18 20 21 22 24 25 aspect of that, and the investment in a piece of real estate. Kind of good example would be building an office building for my company and how that was -that it had its -- it was profitable and Q. Would he give an opinion on the business merits of your transaction? A. If I asked him specifically to do that, Q. Did he ever? A. On this transaction or on others?

17 the ownership structure was going to be set up so 19 benefitted me the best for tax purposes.

23 he would be more than open to do that.

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Q. On others before this, let's say. A. Yeah, yeah. Q. Such as? A. Well, he brought me the idea of starting the company EquipLease, as an equipment rental company that's outside of Hutton Construction, and we discussed the benefits of that. Q. Did he tell you that it was reasonably likely or did he give you the impression, or did he say, did he say this was likely to give you a A. Well, I think -- in that particular case, we knew it would be a profitable deal, how the long-term financially is really what the Q. I'm interested in the occasions before which you specifically went to Mr. Hewitt for business advice, apart from tax advice. A. Gosh, I mean, it was all so intermixed. advice that we didn't discuss in context with that anything specific to that, but we've had a lot of

11 profit?

14 profits were handled, and its impact on me 16 discussion of that particular deal was. 18 you entered this MLD transaction on which -- in

22 I can't say that I ever went to him for business 24 the tax ramifications of it, that I recall

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conversations about various business things that we do and how that affects things. Q. And when you have conversations about business things, does he actually implicitly talk about the business things? A. I don't really understand what you're... Q. You're saying you got a comfort level because Mr. Hewitt didn't speak up and say, this is unlikely to produce a profit -A. Yeah. Q. -- apart from tax? Were there other occasions in which he gave you this kind of implicit business advice because he failed to say it would not be profitable? A. Well, I think I know what you're getting at. I'm not sure that I could say explicitly that there's any one thing like that, that you're asking me. Q. If there's not any one thing, does that mean there is no thing? A. No. Q. What does it mean? A. Well, I think it means that in the

14 that something is going to be profitable just

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context of literally thousands of conversations that I've had with Scott as my accounting partner and that I can't say yes or no that he's ever sat down and that we've had that context, just to talk about the profitability of something and not have tax implications intermixed. It's just not generic to our conversations. Q. So your testimony is that he gave you the advice -- that you had a reasonable opportunity to excess of all fees and transaction costs and without regard to tax benefits because he never opportunity? A. Yeah, I mean, he never brought it up and

10 earn a significant profit from the transactions in

13 told you that you did not have a reasonable

16 said, Mark, this doesn't feel right, doesn't smell 17 right. I mean, he never said anything like that, 18 and that would be something that would be in his 19 20 21 22 23 24 25 character to do. Q. And when you went to him and asked for his opinion, what opinion did you ask for? A. I asked him what he thought of the deal, and that would be a direct quote, what do you think of this, and he -- go ahead. Q. Did you give him the Black/Scholes

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analysis that you were supposed to have discussed with Mr. Brooks? A. I would not have a clue as to what the Black/Scholes analysis was if you put it in front of me today. Q. Did you ask Mr. Hewitt to look into Daniel Brooks' Black/Scholes analysis? A. No. I wouldn't have known what that is or anything to be able to ask him. Why I would Q. Do you have any reason to think that Mr. Hewitt would know about the Black/Scholes A. I couldn't answer that. Q. Had he ever mentioned it to you before? A. No. Q. Had he ever talked to you about valuing A. None. Q. Did you know from other transactions that A. No. (WHEREUPON, the reporter marked for identification Deposition Exhibit No. 1.)

10 have asked him?

13 analysis?

18 option trades?

21 he, in fact, did value option trades?

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Q. Do you know what this Exhibit 1 is. It's captioned at the Top Investor Representations? A. Yeah, um-hum. Q. And you signed this? A. Yes, I did, looks like on the back. Q. On March 11th, 2002? A. Um-hum. Q. In Paragraph 5 that, quote, Based on the advice of CC and Brooks as to the probability of the investments reaching certain price levels at which they would be profitable, and on the advice of my own investment advisors, I believe and have a reasonable opportunity to earn a significant economic profit from the transactions in excess of all fees and transaction costs, and without regard for tax benefits, closed quote. Ask you again, what was the, quote, advice of my own investment advisors, closed quote, on which you believed that you had a reasonable opportunity to earn a significant A. I based my opinion of that on the fact Q. And his lack of objections was his

13 continue to believe that I have and continue to

22 economic profit from the transactions? 24 that Scott Hewitt had no objections to it.

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advice? A. That's how I saw it, yeah, I was comfortable with that. I asked him to look at it and he came back and said he thought it was okay. Q. Let's look at another sentence from this paragraph, quote, in fact, my decision to invest in the transactions with CC and Brooks was based in large part on CC's and Brooks' representations that A, there was an approximately 28 percent statistical probability, paren, based on Black/Scholes, paren, of realizing a 60 percent net of all my direct transactions costs associated with the positions, and an approximate 1.3 percent statistical probability, paren, based on Black/Scholes, paren, of realizing a 14,446 percent return on my net investment in the MLD positions net of all my direct transaction costs associated with the positions, closed quote. It is your testimony that Mr. Hewitt -28 percent statistical probability based on you the opposite? A. We didn't discuss that segment of it, so

12 return on my net investment in the MLD positions,

21 that Mr. Hewitt advised you that there was a 23 Black/Scholes, et cetera, because he did not tell

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you can draw the conclusion how you want to. I go back to my -- what I said originally, I had him look at the whole deal, I asked him what he thought of it, he said he thought it'd be okay. Q. Did you give him the information from Mr. Brooks that determined that there was a 28 percent statistical probability of realizing a 60 percent return, et cetera, et cetera? I can tell you he didn't provide any documents like that to me. A. I don't believe I received all that information directly. I was kinda depending upon Scott to get information that he needed to be fact, I think they had some conversation about that, as well as Cantley & Sedacca. Q. Did you believe that Bryan Hanning had 28 percent statistical probability based on A. I don't believe that he had that ability

13 comfortable with this from Bryan Hanning and, in

17 the ability to determine that there was a 19 Black/Scholes? 21 to actually determine that statistically. I did 22 believe Bryan to understand the basics of this 23 25 transaction and the viability of it as it related Q. Did you ask him whether in his opinion 24 to its ability to yield a profit.

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the transaction had a reasonable probability of producing an economic profit in excess of taxes and out-of-pocket costs? A. No, I didn't ask him that specifically. Q. Did you ask anybody that? A. No, I don't believe I asked that specific question. Q. Did you ask the general question of anyone whether this would produce an economic A. We certainly discussed that as the reason of this investment was the fact that it had a probability, although it be a high risk, of

10 profit net of taxes?

14 yielding a significant return on the investment, 15 yeah, we discussed that. 16 17 18 19 20 Q. And what did you do to determine that such a probability existed? A. Well, I guess, again, I relied on Scott Hewitt and his understanding of financial things and somewhat Bryan Hanning as well, believing that

21 Bryan Hanning would not have brought this to me if 22 it didn't have at least some reasonable 23 24 25 opportunity to make some money. Q. Did you rely on anything other than that? A. I don't recall that I did, no.

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(WHEREUPON, the reporter marked for identification Deposition Exhibit No. 2.) Q. This is Exhibit 2. Do you know what Exhibit 2 is? A. Looks like a letter. Q. Have you signed it? A. I did. Q. And the letter authorizes somebody at

10 Deutsche Banc to pay out an amount that adds up to 11 27 and a half million dollars from a certain 12 account. 13 14 16 17 19 20 21 22 24 Did you have 27 and a half million dollars in that account when you authorized the A. Well, this was a part of a -Q. First the answer, then the explanation. A. Not that I'm aware of. Q. Did you? A. Not that I'm aware of. Q. Had you put 27 and a half million dollars A. No, but my understanding of the

15 transfer of funds?

18 Did you have 27 and a half million dollars?

23 into that account? 25 transaction was that Deutsche Banc was actually

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going to be loaning that. Q. Did you ever sign a promissory note for 27 and a half million dollars? A. Not that I recall. Q. If you do find such documents referencing a loan from Deutsche Banc, will you please make sure that I get a copy? A. Of course, of course. (WHEREUPON, the reporter marked for identification Deposition Exhibit No. 3.) Q. Do you know what Exhibit 3 is? A. This is a statement of account from Deutsche Banc. Q. And for what period is it? A. Oh, gosh, let me find it here. Net value as of December 31st of 2000, October -- statement of account, October 1st to October 31st, 2001. Confusing. Q. Go to the second page, under activity, do you see anything that would indicate that there account -A. No, sir. Q. -- in October?

22 was 27 and a half million dollars in this

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Scott Hewitt suggested that I talk to Tony. Q. What did he say you should talk to Mr. Gasaway about? A. When I got the notification from the IRS that they were looking at this transaction, I called up Scott, Scott called up a friend of his at Stinson, Morrison and Hecker, guy named John Better, I believe is his name, I think it's John, and John knew of Tony Gasaway who was employed by the St. Louis office of Stinson, Morrison and

11 Hecker at the time, and that's kinda how it all 12 came to be. That's when I started talking to 13 14 15 16 17 18 19 20 21 22 23 24 25 Tony. Q. Going to leap ahead because this gets very tedious after a while. Did you complete high school? A. Yes, sir. Q. Do you have an undergraduate degree from a college or university? A. Yes, sir. Q. What's the name of the school? A. Kansas State University. Q. What were your years of enrollment? A. I was at Kansas State from 1974 through 1977.

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A. No. Q. Did you receive any training or education in the areas of accounting, finance and income taxes? A. Absolutely not. That would have been cruel and unusual punishment. Q. Have you attended any investment related classes or investment seminars? A. No, not seminars, no. Q. Any investment related classes? A. No. I've gone to deals that a bank puts

12 on on kinda economic outlooks and stuff like that, 13 and generally you don't get out of one of those 14 16 18 19 20 21 22 23 24 25 that they don't pitch something to you, so, that's Q. Do you have any professional or business A. I'm a licensed general contractor. Q. What was the date you received your license? A. As Hutton Construction, 1992. Would have been about March of 1992. Q. Was the certification or license ever involuntarily revoked or suspended? A. No, sir. 15 it. 17 certifications or licenses?

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Q. What was your work history for the last 15 years? A. All 15 years, as the president of Hutton Construction Corporation. Q. Would you identify all business entities in which -- in the last 15 years you had an ownership interest and also served as an employee? A. Yeah, you want me to go through those? Q. Yes. A. I'll try to hit them all. There's corporation that the sole purpose is to rent

11 EquipLease, LLC, which is a limited liability 13 equipment to Hutton Construction. I'm partners in 14 an LLC called Insight Medical Partners. We build 15 17 19 21 22 24 25 and lease real estate to medical tenants such as There's another entity, Cyprus Medical Partners different group -- one extra investor, so we well it, that I can remember. Q. Do any of those entities or does any of A. EquipLease and Hutton Construction, of course, uses Scott Hewitt but not in-house. When 16 medical office buildings and surgery centers. 18 that did one building in the same context, just a 20 created a separate LLC. I think that's pretty

23 those entities have an in-house accountant?

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Deutsche Banc? A. I'm assuming it is because that's what they say it is on their statement. They usually aren't in the habit of increasing that. Q. So all in all, about how much would you say you paid out of pocket? A. I think it was around $225,000, that I recall. Q. I'm going to show you something I'm not going to make an exhibit, because I don't have any more copies, but it's been an exhibit in other depositions. It is that e-mail from Bryan Hanning

13 at the top, I will wait for Mr. Pliske to get his 14 copy out. 15 16 17 18 20 21 22 MR. PLISKE: Okay, go ahead. Q. You'll see here at the top of the e-mail that has Bryan S. Hanning at the top of the printout, the subject is Leman's strategy. Do you A. No, sir. Q. Now, look at the bottom here. This is an e-mail apparently from you because your name is on

19 happen to know what Leman's strategy is?

23 the "from" line. Is that your e-mail address, 24 which is [email protected]? 25 A. That's changed now, but that was it at

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that time, uh-huh. Q. Did you send that e-mail that's at the bottom there? A. I would say yes, yeah. It sounds like me and certainly looks like it's from me, um-hum. Q. I'll read this into the record then. It says Bryan slash Jeremy. Scott and I met today and figured this out. We would like to take down $1,005,000 of loss for year 2001. I would think the balance for next year, but if possible, I would like to wait until later in 2002 to decide on this. Is that possible? First, could you identify Bryan and Jeremy? A. Well, I don't know Jeremy, I'm assuming that he was Jeremy Nerenberg, but Bryan Hanning would be who I was referring to there. Q. And what loss were you talking about taking down? A. Well, it was my understanding that in the

21 failure of this opportunity to yield a profit, 22 that there was some tax benefits, and that would 23 have been that loss. 24 25 Q. So this is from the MLD transaction? A. I believe so, yes, sir.

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Q. And there was more of a loss that you were going to take in some other period? A. Yes. I mean, it's... Q. How much was the remaining loss that you were going to take? A. I don't recall. Q. You remember what period you took the loss in? A. Well, this would have been in 2001. Q. I mean, the remaining loss? A. Never took it. I believe it was shortly after this that we determined that this was a red

13 flag, you know, that the IRS had ruled that this 14 was not a viable deal, and so we commenced to 15 unravel it. 16 17 18 19 20 21 22 23 24 25 (WHEREUPON, the reporter marked for identification Deposition Exhibit No. 4.) Q. Do you know what Exhibit 4 is? A. It's an amended tax return for 2003. Q. Did you sign it? A. Yes, sir. Q. Did you file it? A. Yes, sir. Q. It says in the second page under part 2

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him prior to 2001? A. Yes. Q. Did you approach him or did he approach you with respect to this 2001 transaction? A. He approached me. Q. Was your 2001 taxable year as it was developing in 2001, was it unusual in any way? A. No. I mean, it was showing kind of the same systematic growth in profit that we'd had over prior years. It was a profitable year. Q. It was -A. Not significantly so. Q. Not a spike in income? A. No, not what I would consider a spike. There was an increase, but not a spike. Q. Did you find it unusual that Bryan Hanning would approach you with an investment opportunity? A. No. I mean, over the times that we got together on a fairly regular basis going to lunch and visit, I mean, we threw all sorts of ideas around from investment opportunities and structuring various deferred compensation plans insurance, which is kind of life insurance, stuff

24 and continuity, what I called continuity

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A. Yes, sir. Q. You mentioned that you're familiar a bit with margins but you don't use that. A. I know what they are. Q. Do you know what a margin call is? A. I do. Q. Did you receive the equivalent of a margin call from the MLD transaction? A. No, not that I recall. Q. Were you ever told that you might receive A. I don't remember receiving that or being told that, no. Q. Do you have any disclosure at all that you might be called upon to actually pay the 27 have transferred? A. I don't recall any. Q. Would you please look for any document A. I believe -- I've given absolutely everything that's related to this has been transferred to my law firm so if they have it, I mean, if it's in there, that's what I have. Q. If you'd had it -- is there a possibility

11 a margin call?

16 and a half million dollars that you purported to

20 you might have that would reflect at all on this?

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you would have lost it? A. I suppose there's always that possibility. I've seen my office at home. Q. You think it's likely you would have lost it? A. Probably not. Q. You say that Cantley & Sedacca led you to believe that there was a reasonable opportunity to make a profit; true? A. I believe that's true, yes. Q. And you said primarily Cantley & Sedacca opportunity for profit; true? A. True. Q. Did anybody else lead you to believe there was a reasonable opportunity to make a A. Not when I made the decision to pursue the transaction, no. Q. So there was no one else? A. No one else. Q. You say that Mr. Hewitt told you that he wanted to check some things out about the Cantley & Sedacca opinion letter? A. Um-hum.

12 led you to believe there was a reasonable

17 profit?

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Q. What did he do to check it out? A. I don't know. Q. So when you said that you assumed he did some research, were you only speculating that he did research? A. I think that's what assume means, yeah, I assumed he did research. Q. You don't know that he did? A. I don't know that he did. Q. Did he tell you that he did? A. Don't recall that he specifically said Q. Okay. MR. STODDART: That's enough for RECROSS EXAMINATION BY MR. PLISKE: Q. Just a follow-up question. You just make a profit based on Cantley & Sedacca's A. Um-hum, yes, sir. Q. And you were asked the question did anyone else tell you you could reasonably make a

12 that I researched this or that.

15 redirect.

19 testified that you reasonably believed you could 21 representation; is that correct?

25 profit?

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MR. STODDART: Objection, that wasn't the question I asked, did anyone else lead you to believe that you could make a profit. Q. The fact that Bryan Hanning was involved and was a trusted professional and did not tell you to stay away from this investment, did that reasonably give you some assurance as to making a profit in this? MR. STODDART: In your opinion, may I MR. PLISKE: Yeah. A. In my opinion, I can tell you -- if it opportunity, I probably would not have considered it because of its sophistication and the like, but

13 hadn't been Bryan Hanning that brought me this

16 I trusted Bryan that he would bring me a viable 17 and profitable opportunity, and so the answer to 18 19 20 21 22 24 25 that is, yes, I did trust Bryan. Q. So are you saying because of the negative implication -A. No, positive implication. I trusted Bryan very much, still do, in what he brings me, Q. You're not relying on me with respect that this was a reasonable opportunity to make an

23 and his advice on various matters.

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investment, are you? A. No. Q. Are you relying on Mr. Stoddart? A. No, I think it's pretty clear, he doesn't think it's a very good deal. Q. But you're relying on Mr. Hanning, even though he didn't say, use any words to tell you that this was a reasonable opportunity to make a profit; is that correct? A. I think that's correct. I mean, I relied, like I did with Scott Hewitt, on, at that relationships, and multiple monetary transactions that we had done together, so it was -- I was relying upon that trust and faith that we had developed over that 12 years, and continue to have today. MR. PLISKE: I don't have any further MR. STODDART: Just one. REDIRECT EXAMINATION BY MR. STODDART: Q. Did you have any reason to believe that Mr. Hanning had experience in evaluating options

12 time, 12 years of relationship, of business

19 questions.

25 trades?

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A. You know, I really believed that Bryan was sophisticated enough and knowledgeable enough that he understood this transaction. Q. What did he do, if anything, to let you think that he had experience in valuing options? A. Well, not specific to options, but in past deals, Bryan always appeared to have a good handle on the tax code and investment opportunities and the complexities of, like, split and proved to be good at guiding me, if not

10 dollar life insurance issues and things like that, 12 personally through that, but recommending people 13 in various things, like Dan Peare at Hinkle 14 15 17 18 Elkouri, as related, developing a trust and everything like that. He was a trusted advisor on level of communication to me on other sophisticated issues, that he brought this to me,

16 that kind of stuff, and I believed because of his

19 and understood it, and was, therefore, by its 20 nature, kind of put his stamp of approval on it. 21 I would have expected Bryan not to bring me 22 something that he didn't feel was out of my best 23 24 25 interest to do. Q. If he'd brought you any investment of any sort promising heaven knows what, you would have

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signed it? A. Absolutely not. I mean, he has brought me some insurance policies that we've regrouped on, and I said, that isn't really what I want to do and we've backed up, but I've stayed with Bryan Hanning on them. It's no different than any other financial -- I don't throw Bryan out because I don't like the deal he brought me. We work together to put a deal together that meets my Q. And what were your personal efforts to see whether your reliance on Mr. Hanning in an options trading deal promising 14,000 percent

10 needs.

14 return, what were your personal efforts to see if 15 he had the capacity to evaluate it? 16 17 18 20 21 22 A. Again, I felt like the 12 plus years of direct business relationship with him gave me an opportunity that I was reasonable in relying on relationship, and that we have, you know, that we had done numerous deals together that I had not drilled down into the very minute details on.

19 him, that that was not outside our normal business

23 They were based on him bringing it to me and my 24 trust in him and that we moved forward on them. 25 Q. You said that there were some that you

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looked into and you decided not to do as he proposed? A. As we discussed it, we made changes to it. Q. Why didn't you look into this one? A. I was comfortable with it. Q. Why? A. Because he brought it to me. Q. Only because he brought it to you? A. Primarily, yeah, and Scott Hewitt said it

11 was okay, too. It wasn't just Bryan Hanning, it 12 was a combination of Bryan Hanning and Scott 13 14 15 16 17 18 19 20 21 23 24 Hewitt that brought me this deal, and by Bryan bringing it to me, and by Scott saying I think it's okay, gave me the impression and the comfort that I would be able -- that this was an okay deal to do. Q. Even though you paid $225,000 down for more than a million dollars in tax loss, didn't that strike you as different from the sort of transaction that you'd relied on those two A. Certainly was different, yes. MR. STODDART: All right, I have no

22 gentlemen for in the past?

25 more questions.

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1

2 3
4

5
6
7 8

MARK1HUTTON

vV.-L'ss:

STATE OF KANSAS

) )

9

COUNTY OF

)

10 11 12 13
14
,~~

Subscribed and sworn to before me,

the undersigned authority, this, the ~~~ day of

-f

___________lt~~~--- ' 2 007 .

15

16
17 18

-NOf~~~lni ~--- ---.. NOTARY PUBlC
. . STATE OF KA SA
,., - My A,øt. Exp. i

19 20 21
22

. PEGGY M. WEST

My appointment

23
24

Ex pi res : ____~_iL~---------------

25

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1 2
3
4

CERTIFICATE
STATE OF KANSAS
SALINE COUNTY
)

) )

sS:

I, Donna M. Lytle, Certified

5 Shorthand Reporter within and for the State of

6 Kansas, hereby certify that the within-named

7 witness was first duly sworn to testify the truth,
8 and that the deposition by him given in response
9 to the questions propounded, as herein set forth,

10 was first taken in machine shorthand by me and

11 afterwards reduced to writing under my direction

12 and supervision and is a true and correct record
13 of the testimony given by the witness. I further certify that I am not a 14
15 relative or employee or attorney or counsel of any

16 of the parties, or a relative or employee of such

17 attorneys or counsel, or financially interested in 18 the action.
19

WITNESS my hand and official seal at

20 21
22

my office, this _1~-- day of _~Û~U~~------' 2007.

","""11'"," ~. f ", ",\'"tl M 'i, /"

.

/~~~~1Äl~~;\ Donna-M~-Lytle~- C SR~-RPR~-CR R

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185

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS
l"o. 05-1223 T (Judge Allegra)
CLEARMEADOW INVESTMENTS. LLC CLEARMEADOW CAPITAL CORP.. Tax Matters Partner.

Plaintiff
V.

THE UNITED STATES.
Defendant.

( c
I

-.

f') C'': c:,

CD

cC'

AFFIDAVIT
L Donna M. Lytic. a Certified Shorthand Reporter for the State of Kansas.

do hereby certify that the original deposition of Mark Hutton taken on the
8th day of

May. 2007. has been filed with Robert Stoddart for his keeping.

No corrections were made by the witness.

Filed: June 6. 2007
\\",\\~i1"" "'1. ",\ '" M """

~ 1Y. -t-t
Donna M. Lytle. CSR. RPR. CRR OWENS. BRAKE & ASSOCIATES 234 North Seventh. Suite E Salina. KS 67401

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Investor Representations
In connection with the opinion to be delivered by Cantley & Sedacca LLP ("Cantley & Sedacca") to me regarding cerain investment transactions (the "Transactions"), and recognizing that (1) Cantley & Sedacca will rely upon the following representations in issuing its tax opinion letter
(the "Tax Opinion") to me, and (2) the tax opinions set forth therin may not be accurte if any of

the following representations are not accurate in all respects, I hereby certify that the following
representations are tre, correct and complete:

1. I am a United States citizen.

2. I, through my wholly owned corporation, Cleareadow Capital Corp., a Delaware

corporation (the "Corporation") have joined together with CF Advisors XXII, LLC
("CC") in the formation of C1eareadow Investments, LLC, a Delaware limited liability
company ("LLC"), in good faith with a common investment purpse. In connection

therewith, I had contrbuted $287,500 in cash to the LLC in order that the LLC acquire investments in long and short market linked deposit ("MLD") positions and other foreign
curency investments and, thereafter, contributed my membership interest in the LLC to the

Corporation and caused the LLC to admit CC as a member of the LLC for such business reasons including, among other things, diversification of our portfolio and the professional management to be provided by CC and its sole member, Dan Brooks ("Brooks").
3. Prior to enterng into the Transactions, I was aware of Brooks' extensive background and

experience in MLD and other foreign currency transactions, including his nearly 20 years of
experence trading in, managing and advising clients with respect to MLD investments,

foreign currency contracts and similar types of investments. Prior to entering into the
Transactions, I discussed with Brooks the Transactions and his investment strategy.

4. No portion of my investment in the Transaction was, is or wil be guaranteed (directly or
indirectly) by any person, nor am I otherwise protected (either directly or indirectly) against
loss through a stop loss agreement or other argement.
5. I entered into the Transactions for business reasons, with the intent to produce a significant

economic profit from price movements of foreign currency contracts, MLD positions and other similar investments (collectively, the "Investments"). Based on advice of CC and Brooks as to the probability of the Investments reaching certin price levels at which they would be profitable, and on the advice of my own investment advisors, I believed, and continue to believe, that I have, and continue to have, a reasonable opportnity to ear a significant economic profit from the Transactions in excess of all fees and transaction costs
and without regard to tax benefits. In fact, my decision to invest in the Transactions and with CC and Brooks was based, in large par, on CC's and Brooks' representations that (a) there was an approximate 28% statistical probabilty (based on Black/Scholes) of realizing a 60% retu on my net investment in the MLD positions, net of all of my direct transaction costs associated with the positions, and an approximate 1.3% statistical probability (based on
~ DEFENDANTI5

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Black/Scholes) of

realizing a 14,446% return on my net investment in the MLD positions, net

of all of my direct trsaction costs associated with the positions, and (b) if I were to continue

my investment in the Tranactions and with CC and him for at least five (5) years, I could reasonably expect that his investment strategy would yield for me an anual retu on my total investment in the Transactions of somewhere between 15% and i 7%, net of all of my fees and expenses from the Transactions and without regar to tax benefits. It is my current intention to continue the Corporation's (and, thus, my) investment in the Transactions and

with CC and Brooks for such period of time so as to be able to achieve a reasonable
economic retu on my investment, without regard to tax benefits .and net of all of my fees and expenses from the Transactions.

6. I am not entering into the Tranactions in reliance upon the Tax Opinion and would have
entered into the Transactions even without the Tax Opinion being issued to me.

7. LLC was and is a validly formed and validly existing limited liability company under
Delaware law.

8. The Corporation was and is a validly formed and validly existing corporation under Delaware
law. A Deparent of

the TreasurlIternal Revenue Service Form 2553 (Election by a Small

Business Corporation under section 1362 of the Internal Revenue Code) was timely filed to
be effective beginnng with the Corporation's first taxable year. Such election remais, and

wil remain, effective and has not been and wil not be terminated (either voluntarly or
involuntarly) at any time durig the Corporation's existence.

9. My purose in holding my investment in the Transactons through the Corporation was to
have a vehicle for holding my investment in the Transactions while retaining the flexibility to be able to make other investments in which Brooks or CC would not paricipate.

i O. Cantley & Sedacca has been furnished with the curent version of the operating agreement of the LLC (the "Operating Agreement") and the certificate of incorporation, bylaws and other
organizational documents of the Corporation.

11. At the time that I contrbuted my Class A LLC Units to the Corporation, and immediately following such contribution, neither the LLC nor the Corporation had any liabilities or obligations (other than the LLC's contractual obligations to Societe General ("Ban") in respect of the short MLD position) and none of the assets then held by the LLC or the Corporation were subject to any liability or obligation. At no time did I receive, nor am I entitled to receive, any money or other property in connection with my investment in the Transactions from ce, Brooks or any other person.
12. The short and long MLD positions (deposit amount: 27,472,520 Eurodollars) that the LLC invested in was an investment made by the LLC on its own behalf and independently of, and not as agent for, any other person.

Investor representations (Mark Hutton)

2

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13. I have not (either directly or indirectly) hedged, nor will I hedge, my

exposure from my net investment in the Transactions, nor have or will I identify any aspect of the Transactions as

being par of a hedging transaction under Treasur Regulations Section 1.446-4.

14. The U.S. dollar has been, and will remain, the fuctional currency for myself, the
Corporation and the LLC.

15. At any time afer the expiration of the period ending fifteen (15) days prior to end of the first calendar quaer after the effective date of the Operting Agreement, I have the option to require that CC either purchase all of my Class A LLC Units or sell to me all of its Class B
LLC Units, in either case, for a purchase price equal to the book value of as determined in accordance with Treasur Regulations Section 1. when and how I exercise either of 704-1

the units being sold

(b)(2)(iv). Whether, these options is within my sole discretion and control. It is

my understanding that "book value" for these puroses means the fair market value of the

units being sold, after booking up or down the LLC members' capital accounts to reflect any and all realized gain and loss from the Investments and other assets of the LLC based upon their then fair market values.

16. The LLC has not elected, and wil not elect, under Treasur Regulations Section 301.7701-3 to be classified as a corporation for federal tax purposes.
i 7. The Operating Agreement, and no other agreement (whether oral or wrtten), covers the rights and obligations of the members of the LLC. The LLC has fied (and will file) its own income
tax returs and has maintained (and wil maintain) its own separate books and records. The

Corporation has fied (and will file) its own income tax returns and has maintained (and will maintain) its own separte books and records.
18. Prior to my enterng into the Transactions, I was not related to CC, Brooks, Ban or any other person having any involvement with the Transactions,
19. There does not exist, nor will there exist, any understanding, agreement, obligation, or

arrangement pursuant to which either I am, or the Corporation, LLC, CC, Brooks, Ban or any other pary involved in the Transactions is, committed to undertake all or any of the
transactions comprising the Transactions upon the happening of any other transaction, except to the extent that any person is contractually obligated to perform under the MLD positions in accordance with their stated terms.

20. LLC has not elected, and will not elect, under Treasury Regulations Section 1.988-3(b), to treat exchange gain or loss on any forward contracts, future contract or option contrcts as capital gain or loss.
21. I, along with the LLC and the Corporation, are all cal