Free Affidavit - District Court of Federal Claims - federal

E.

llr15-00

Case 1:05-cv-00231-EJD
iZ:59~m

FronrERNST AND YOUllG

Document 97-13

Filed 07/17/2007

Page 1 of 9

November 15, 1999

d
n

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To:

Jerry Zwkzr (Fax (1: 843-747492)

From: Ray Knig

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Attached IS a copy of the r n d f i c d cngagcment lcrter. Two legal nplnlnnc from rcpurablc lnw firms w ~ l be pmv~dcd. l

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The equlry conrnbuuon and fee snucrun: are as follows.
Cosr of long opuon
5%

AI-risk

Cash lnjrcrlon to
pannrnh~p
E&Y fee L w firms and bank (billed xpararrly from E&Y)

2%
I YZYO 3%

Nor ar-nsk

The amount of the lass i s $50 mlllion (60%ordmmy loss and 40%long term capital loss). The
allocation of partnership interests i s W10 (1.e.. 10% u allocated w Jim)~

Produced by Plaintiff to United States o n 8/31/2005

11-15-99

Case 1:05-cv-00231-EJD I2:5Pm From-ERWST AND YOMG

Document 97-13

Filed 07/17/2007

Page 2 of 9

ERNST&YOUNG P LL
Privileged And Confidentid

Norcmbcr 15. 1999 Mr. Jcny Zuckzr 16 Buckingham Drive Charleston, South Carolina 29407 Dear Jerry: This letter will confirm our engagement ro provide rax advice to you concernrng the implementation of the COBRA suarcgy we have d~scussedwirh you. This strakg) will involve the creation o f a Pamershlp by you and third panies. Our work will include sststing in the tax planning mpccrs of t h ~ uansxuon, worhng wrth counsel and orher lhird p n l e s in rcr~ewing s the tax aspects of the entines and orher consulting services as nqulred If necessq, we also a g m 10 represent you before the Internal Revenue Service wirh respect to tiu issues *sociared w~rh rhls suategy up to and including rhe appellate level. If you would like us to represent you with regard to other tax Issues in the evenr of an audir, wc would charge our normal fees for rime and expenses in connection with such represenranon.
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In this cngagCmWI1, we will be using ~nforrnation providsd by you and the Pwnership md uill be nly~ng upon you and rhe Pmership for the accuracy and completeness of this information. We w~ll ma~ntain rnfomarion provided lo us in confidence with~n firm and will not disclose the our to others such confidentla1 infomarion except wirh your consent or as required by law or permitted under professronal srandards. Our fee for provihng the professional services referred ro above wrll he S675.000 on a [oral invesrmenr in rhe Parmership by you and ocher individual(s) in rhe amount of $3.5 million. Invssrmenr in panncrship equals Cost of long opnon c o n m qua1 to 5% of desired loss, plus cash equal ro 2% of rhe desired loss. We will invoice you for our fee afrcr the foreign curmncy option conuacrs and required amounr of cash have been conmbuud t rhe Parmership. In rhc o event you laur decide nor ro implcmcnr the technique dex-nbcd above. our fee wlll be paid by you m d w~ll lirnlvd to our rrme incurred f o the h e this letter is s~gned ro the dare we be rm up receive wntvn nouficatron of your decisron nor ro proceed, and will be brlled ar our standard hourly rates. In rdhtion ro bills for our hourly fees, an administrdtive expense charge of 8.5% of our aandurd fccs will be billed ar the same time.
All advice and other services we provide pursuant ro this arrangcmenr ue intended to be solely for your benefit and mar of rhe Pannsrship and are nor for the benefit of anyone else.

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Accordtngly, our advice may nor be relied upon by any othcr person or persons, used in connecuon w~th orhcr rransaction. or used for any othcr purpose wirhour our pnor wrirrcn any consent. Furthermore. rhe conrenr of any oral or wrincn communicarion ma& by us in connecuon with rhis engagement shall not be cammunicarcd t rhe public or orherwisc o publicized in any manner w~thour prior written consenr. our

Produced by Plaintiff to United States on 8/31/2005

Case 1:05-cv-00231-EJD
1615-99 01 :OOw

Document 97-13

Filed 07/17/2007

Page 3 of 9

F r d R N S T AND YOlFlG

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Mr. Jerry zucker

Page 2 November 15, 1999

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Emst & Young LLP will not be llablc for any clam for damages ansing out of or in connection wlth any rax serv~ces provldcd to YOLI in an amounr grcarcr than the amount of fees actually paid to Emsr & Young LLP wlth respect co the wrvlccs directly relating to and forming the basis of such clalm. Any controversy or claim arising out of or rriuing ro ran and ran-related x m c e s now or herdfur prov~dedby us to you (including any such marur involving my parcnr. subs~diary, affiliate, successor in m r m n , or agenr of Emst & Young LLP) shall be submirted firsr ro volunrary mediauon. and if medianon i3 not successful, then ro bindrng arbltranon, in accordance with h e dispute resolution procedures s ~fonh in the Attachmenc to rhis letter. Judgment on any t arbitration award may be entered in any coon having p m p r jurisdiction. fiucpt as expressly pmvided herein, r h ~ sengagement letter docs nor modify h e terms or provisions of any engagement letter for other professional m i c s which were ageed ro prior ro me aare noted below. Informarion daring ro federal tax adv~cs prov~de you. including commun~catrons we ro between us and marenal we create in the course of provrdmg rhar advlce. may be p n ~ l e g e d protected and f o drsclosure to the Internal Revenue Service. Should rhe lnrcmal Revenue Snvlce seek rm &sclosure from you (n us of wnrtcn or oral cornmunrcarions relating to such advlce, we will dscuss w~rh whether and how you assen, or wave, the pnvllege. you

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If any ponion of this lerrer is held to be void, invalid, or otherwise unenforceable, in whole or
pan. rhc remarning portions of rhls lerrer shall remain in effecr.

If these arrangements are accrprablc. please sign one copy of rhis lerrer and rerum n ro me in rhe enclosed self-adhssed envelope. If you have any questions concerning our engagemenr. please call Ray Knight a 704-331-1933. We appreciate the opponunity to work with you.

Agreed to by:

Name:

Produced by Plaintiff to United States on 8/31/2005

11-15-99

Case 1:05-cv-00231-EJD
0I:OOa
From-ERNSl AND YOUNG

Document 97-13

Filed 07/17/2007

Page 4 of 9

Dispute Resolution Procedures
The following-pmedures shall be used to resolve any conrroreny or claim ("dispute") as
provided in our sngdgement lener of November IS. 1999. If my of these provisions are derermined to be invalid or unenforceable, the nmalning provisions shall remain in effect and binding on the panics to the fullest extenr p d t r e d by law.

Mediation
A dispuu shall be subfirred ro med~auon wrinm notice ro the other party or parties. In the by mediaoon process, rhe parrtes will cry to resolve rhelr diffmnces volunranly wtrh rhe md of an imparrlal meheror. who wrll mtempt LO faciliture negotiadons. The mediaror will be selecred by e agreement of h pmies. If the parties cmnot agree on a mediator, a medi;uorshall be designated by rhe American Arbitratlm Association ( " A A A ) or JAMS/En&spure irr rhe request of a pmy. Any mediaror so designdtrd must be acceprilble to all pumes. The mediarion will be conducred as specified by rhc mediator and agreed upon by h e panio. The prrn~es r e e ro discuss rheir d~fferences good farh and ro anempr, wlrh the assisrance of y in the mediau>r,to reach an amlcable resolution of ms dlspure. The medialion will be mared as a seulcmenr d~scussion rhcreforc will be ionfidcnt~al. and 'The media:or nlly not rescify for either parry in an) later proceeding relanng to the dlspure. No reconling or transcript shdl be made of the mediarion pnxred~ngs. Each pmy wrll bear its own cosrs in the mediarion. Tht fees and expenses of rhe rnedlaror wrll be shwd rqunlly b j the pamss.

Arbitration
If a d~spute nor been resolved wirhin 90 days afrer the wrinen norice beginning me med#ation hm process (or a longer period. if rhe pmies agree to extend rhe mediarion). rhe mediation shall rerminare and the dispure will be serded by arbitration. The arbitrarion will be conducted in accordance wirh the procedures in this document and the Arbirrdtion Rules for Professional Accounting and Relared Servces D~spures the AAA as in effecr on the dare of the mgagemenr of letler (*AAA Rules"). In ihe event of a conflicr, rhe provrsions of [his document will conrrol.

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The arbirra~ion br conducted before o panel of three arbiualors, regardless of thc sizc of thC will dispute, ro be selecred as provided in rhe AAA Rule;. Any issue concerning the extcnr to which any dtspurc 1s sub~ccr arbirratlon, or concerning the applsab~lity. to interpretanon, or enforceability of these pmcsdurcs, incluhng any conrenuon that all or pan of these procedures arc invalid or unenfoceablz, shall be governed by the Federal Arbitration Acr and resolved by the arbitrators. No porenrial vbiuaror may sene on the panel unless he or she h u agreed in wriring 10 abide and be boundby these procedures.

Produced by Plaintiff to United States on 8/31/2005

Case 1:05-cv-00231-EJD
11-15-88 0I:OOpm

Document 97-13

Filed 07/17/2007

Page 5 of 9

Fron-ERNST AND YOUNG

The arbiuarors may not award non-monnary or equitable reltef of m y son. They shnll hare no power ro award punitive damages or any other damages not measured by the prev~iling parry's actual damages, and the panles expressly waive the~r right to obtain such damages in arbitration or in any other forum. ln no event, even if any orher pomon of these prov~s~onnheld ro be is invalid or unenforceable. shall rhe arbitraron have power ro make an award or impose a remedy that could nor be made or imposed by a c o w decid~ng marrer in the same jurisdiction. the

No mscovery will be permitted in connection wirh rhe arbination unless ir is expressly aurhorized by the arbim~aon panel upon a showing of subsranrial need by h e parry seeking discovery. All aspects of rhe arbiuarion s h d l be treated a confidentid. Neither the paties nor the s arbiuaors may disclose the existence, content or resulrs of r k arbinaoon. except as necessary to comply wirh legid or regulatory reqmrcmenrs. Before making any such disclosure, a party shall 1 l give wrirren notice to 4 other panes and s h ~ lafford such panies n reasonable opponuniry ro protect rheir inrerests.

The result of the .arbirrdrlon wlll be binding on rhs panies, and judgmenr on rhe arbiuarors' award
may be entered in any coun having ~uns&crlon.

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Produced by Plaintiff to United States on 8/31/2005

11-15-88

Case 1:05-cv-00231-EJD
01:01pm

From-ERNST AND YOUNG

Document 97-13

Filed 07/17/2007

Page 6 of 9

November 1 5 , 1999
Mr. James G. Boyd 3530 Bohicker Road Johns Island. Sourh Carolina 19155

Dear Jtm: This letter will confirm our engagement ro prov~de tax advice ro you concerning rhe implementation of the COBRA srraregy we have discussed wlrh you. Thts srraregy will involve the.creauon of a Pannenh~p you and rhird panics. Our work will include assistins in rhe C by a x planning aspects of this mnsncrion. working wlrh counsel and orhm rhird panies in reviewing rhe tax aspecrs of rhz enrlllcs and other consulnng services as requlred. If necessary. we also agree 10 represent you before rhe Internal Revenue Service with respect to tax issues associated wlth mis strategy up to and lncludtng rhe appellare level. If you would like us to represent you with regard ro other t i Issues m the evenr of an au&r. we would charge our norms1 fees for rime and ehpenses in connection wtrh such rspresenrarion.
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In this engagement. we will be usrng informarion provided by you and rhe Partnership and will be
relying upon you and the Parmership for the accuracy and completeness of this informanon. Wc

will matnraln rhc infomarion provided ro us in confidence w~thin fim md wlll nor disclose our to otncrs such confidcnrisl information exwpr with your consent or as requlred by law or permined under professional standards. Our fee for providing !he professional servtces referred to above will be $75,000 on a rord lnvesnncnr in rhe b n e r s h i p by you and other indivtdu;rl(s) tn the amount of $3.5 mlllion. Invesmcnr in panncnhip equals Cosr of long opuon conuxt equal to 5% of des~red loss, plus cash equal ro 2% of rhe desired loss. We will invoice you for our fee after the fomgn cumncy opuon convacu and required amount of c s h have been conmbuvd to the Pmnershtp. In rhe evenr you later decide not to implement the rechniquc dcscnbcd above. our fee will be paid by you and *ill be llmlted to our rime incurred f o rhe dare rhis lerrer is signed up to the dare we rm receive written no~fic;lrionof your dccts~onnor ro proceed, and will be billed at our standard hourly rates. In addiuon to bills for our houdy fees, an adminisrrarive -pens? charge of 6.5% of our srandnrd fees will be billed ar rhe same time.
All advlce a d ocher serviccs we provide pursuant ro this arrangzment ; intended ro be solely m

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for your benefit and rhar of rhe Pam-~ershrpand are nor for the brnefir of anyone else. Accodngly, our advice may nor be relied upon by any orher person or persons. used tn connecuon wlrh any orher uansxrton, or used for any other purposc wirhour our pnor wnrtcn consenr. Funhermorr, the content of my oral or wnncn communtcauon made by us in connecrion with this engagement shall nor bc communlcarcd ro rhc public or otherwise publicized m any manner wirhout our prior wnnen consent.

Frnv& nwnp uP is

111~lhcr UI

~ ~ I & Y o u ~ IIIICINDOII31. Lld &s

Produced by Plaintiff to United States on 8/31/2005

11-15-98

Case 1:05-cv-00231-EJD
01:OIpn
FronrERNST AND YOUNG

Document 97-13

Filed 07/17/2007

Page 7 of 9
Page 2

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Mr. James G. Boyd

November 15,1999

Emst Bc Ywng U P will nor be l~able any claim for dmages arising our of or in connection for wrrh any rax scrvlces pmv~dcd you in an amount greater rhan the amount of fees actually paid to ro Ernsr & Young LLP wlrh rcspccr ro rhc rervlccs directly relating ro and forming rhe basis of such claim. Any controversy or clam arising out of or relating ro rar and rax-whred services now or hereafter provided by us ro you (including any such mrrer involving any pmnr, subsl&aq. affiliate, successor in inrerest, or agent of Ernsr & Young IlP) shall bc submrrcd first ro voluntary mediation. and if mediaion is not successful. then ro blnding arbirrarron, in accordance w11h rhe dispute resolution procedures. wr fonh in rhe Anachmenr ro rh~s leuer. Judgment on any arbinxion awvd may be entered in any coun having proper junsdxtion. Except w expressly prov~dedherern, rhls engagement letter does nor modify rhe r e m or pmv~sions any engagement leuer for other professional services which w m agreed to prior 10 of
thc

a r c n o d bclou.

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Informarlon relar~ng 0 federal tax adv~ce provide to you, rncluding communications between 1 we us and matenal we meare i the course of providing that aclvlce. may be privileged and prorrcred n from dixlosure ro the Internal Revenue Service. Should the Inrcmal Revenue Service seek disclosure from you or us of writwn or oral communications nlaring ro such advice. we will discuss with you whether and how you asserr. or waive, the privrlegc. If any porrion of rhis lsner is held to be void, invalrd, or orherwix unenforceable. In whole or pan, rhs remanlng ponions of rhis l s n a shall r e m n in effect.

I rhese arrangemmrs are acceprable. please sign one copy of rhis lener and return 11 t me in the f o
enclosed self-addressed envelope. If you have any questions concerning our engagement, please call Ray Knighr a1 704-331-1933. We appreclare the opportunity to work wirh you.

A g r d to by:

Name:
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Dare;

Produced by Plainti to United States on 8/31/2005

11-15-88

Case 1:05-cv-00231-EJD
01 :Olpm

From-ERNST AND YOUNG

Document 97-13

Filed 07/17/2007

Page 8 of 9

Dispute Resolution Procedures
The following procedures shall be used to resolve any conrrovcrsy or claim ("dispute") as provided in our engagement letter of November IS. 1999.If any of these prov~sions are determined ro be invalid or unenforceable, the remaining provisrons shall r e m m in effect and b~nding rhe parries ro rhe fullesr exrent permirted hy law. on Mediation
A dispute shall be subm~rted mediation by wriiun nolice to the orher pany or panies. In rhe to

mcdtarion process, the panies w~ll to resolve their differences volunrsrily wirh the aid of an uy impanla1 mcd~aror. who w~ll ntrcmpt to fac~liute negotiarion.r. The medi3ror will be selected by agreement of the p r i s If the panies cannot agree on 3 mediator. a mediator shall be &signaced are. by rhc American &birration Association CAAA") o .JAMSlEndispurc at rhc rcqucsr of IS pan) r Any mediaror so designated must be acceptable ro all panics. The mcdiar~on will bc conducted as spccificd by rhc mc&awr and agreed upon by thc parnes. Thc panics agree w discuss their d~fferences good fiurh and to attempt, wirh the ;ts%istimcs in of [he mtdiaror, r reach an amicable resolurion of [he dispute. o The mediarion will be created as a senlem6nr discussion and therefore will be confidenrisl. The mediator may nor tesrify for eirher pan) in any lsrer pmced~ng relar~ng rhe dispuu. No ro recording or tranwnpt shall be made of rhc mediation proceedmgs.
Each pany will bear its own cosn in the mediation. The fees and eapem?s of rhe mediaror will be shared equally by the parries.

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Arbitration If a dispuu has not been resolvcd within 90 days after the wrirrrn notice beginning the mediarion process (or a longer penod, if [he parries agrcc to cxrcnd the medtxton). the mediation shdl rernunate and rhe &spure will be settkd by arbirranon. The arbitrarion will be conducud In accordance with the proccdurcs in this doc~mcnr the Arbitrdtion Rules for Professlonill and Accounting and Related Servtces Disputes of the AAA as in effect on the date of the mgngemenr Iener ("AAA Rules"). In rhe event of a conMcr. the provisions of rhi3 documenr will control.
The arbiudnon will bc conducted before a panel of rhrcc arbtmrors. regardless of the s ~ z of rhe c dispute, to be selected as prorrded in rhe AAA Rules. Any ~ssuc concerning the envnt to which

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any &spure 1s S U ~ J C C ~ arbmarion, or concerning the applicabiliry, intcrprctation, or to cnforceab~lity these procedures. including any contention rhat all or pan of rhese procedures of are invalid or unenforccablc, shall be governed by the Fedenl Arbicmion Act and resolved by rhc urbitrdton. No porenrial arhitraror may serve on the p n c l rrnlcss he or she has agreed in wnung to ablctr and be bound by thcxr procedures.

Produced by Plaintiff to United States on 8/31/2005

Case 1:05-cv-00231-EJD
11-15-99

Document 97-13

Filed 07/17/2007

Page 9 of 9

D l :OIm

F r o d R N S T AND YOUNG

The arbirrarors may nor award non-monetary or quirable rcl~ef any son. They shall have no of power ro award puniuve damages or any orhcr damages not measured by r prevailing party's k anual damages, wd the panies expressly waive their right to obrain such damages in arbluar~on or in any other forum.In no event. even if any orhcr ponion of rhev provlslons is held to be invalid or unenforceable, shall the ~biuclrors hare power ro make an award or Impose a remedy that could nor be made or imposed by a coun deciding the marer in me same jurisdiclion.
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No discovery will be pmnirted in connecrion with the arbiuarion unless ir is expressly authorized by the arbmanon panel upon a showing of subsranrial need by the pany seeking discovery.

bc treated as confidennal. Neither the panies nor the arbitraton may disclo& the extsrence, content or msuln of the hiu- tio on. c u e p t as necessary ro comply with legal or regulatory requlremenrs. Before making any such d~sclosure, pany shall a gtre wnnen norice ro all other p m ~ c and shall afford such panics a reasowble opponuniry tu s prorecr [heir lnrercsrs.

All spectS of rhe urbrudt~onshall

The rcsulr of the a h i t r ~ t i o n br binding on rhz piirs. and judgment on rhc arbirrarors' sward will
may be entered in any coun having jurirdicrion.

Produced by Plaintiff to United States on 8/31/2005