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EXHIBIT D

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Transcript of the Testimony of Stephen A. Jay
Date: December 7, 2005 Volume: 1 Case: The Osage Nation v. The United States of America

Printed On: December 13, 2005

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Stephen A. Jay - December 7, 2005 The Osage Nation v. The United States of America

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

- - - - - - - - - - - - - - -x THE OSAGE NATION AND/OR TRIBE: OF INDIANS OF OKLAHOMA, : Nos. 99-550L & 00-169L

Plaintiff, : : Judge Emily C. Hewitt

THE UNITED STATES OF AMERICA,: Defendant. : - - - - - - - - - - - - - - -x

DEPOSITION OF STEPHEN A. JAY

Washington, DC Wednesday, December 7, 2005

REPORTED BY: VICTORIA L. WILSON

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Stephen A. Jay - December 7, 2005 The Osage Nation v. The United States of America
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Deposition of STEPHEN A. JAY, called for examination pursuant to notice of deposition, on Wednesday, December 7, 2005, in Washington, DC, at the offices of Akin, Gump, Strauss, Hauer & Feld, 1333 New Hampshire Avenue NW at 9:05 a.m., before VICTORIA L. WILSON, a Notary Public within and for the District of Columbia, when were present on behalf of the respective parties: JERRY E. ROTHROCK ESQ. Akin, Gump, Strauss, Hauer & Feld 1333 New Hampshire Avenue, N.W. Washington, DC Email: [email protected] On behalf of Plaintiff

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PROCEEDINGS (Jay Deposition Exhibits 1 through 10 marked.) VIDEO OPERATOR: On the record with tape number one of the videotaped deposition of Stephen Jay taken on behalf of the defendant in the matter of The Osage Nation And/Or Tribe of Indians of Oklahoma versus the United States of America, Cases Number 99-550L and 00-169L, in the United States Court of Federal Claims. This deposition is being taken at the law offices of Akin, Gump, Strauss, Hauer and Feld, located at 1333 New Hampshire Avenue, Northwest In Washington, D.C. on December 7th, 2005, at approximately 9:05 a.m. My name is T.J. O'Toole representing Ace-Federal Reporters, 1120 G Street, N.W., Washington, D.C. I am the certified legal video specialist. The court reporter is Victoria Wilson, also representing Ace-Federal Reporters. Will counsel please identify themselves and indicate which parties they represent. MR. ROTHROCK: Jerry Rothrock representing the Osage Nation.
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1 2 3 KEVIN S. WEBB, ESQ. 4 U.S. Department of Justice 5 Environment & Natural Resources Division 6 601 D Street, N.W. 7 Washington, DC 20004 8 Email: [email protected] 9 (202) 305-0267 10 On behalf of the United States of America 11 12 ELISABETH C. BRANDON, ESQ. 13 U.S. Department of the Interior 14 1849 C Street, N.W., Room 6038 15 Washington, DC 16 (202) 208-4218 17 On behalf of the Department of the 18 Interior 19 VIDEO OPERATOR: T.J. O'Toole ALSO PRESENT: Greg J. Chavarria and Charles R. 20 21 Lundelius, Jr. 22

APPEARANCES (Continued):

MR. WEBB: Kevin Webb, Department of Justice, on behalf of the United States. MS. BRANDON: Elisabeth Brandon, Office of the Solicitor, Department of Interior. MR. WEBB: I will state for the record that present, as well, are Greg Chavarria from Chavarria, Dunne & Lamey and Charles Lundelius from FTI Consulting. VIDEO OPERATOR: Thank you. Will the court reporter please swear in the witness. Whereupon, STEPHEN A. JAY was called as a witness and, having first been duly sworn, was examined and testified as follows: EXAMINATION BY MR. WEBB: Q Good morning. A Good morning. Q How you doing? A Good. Q Good. Could you please state your name for the record?
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Stephen A. Jay - December 7, 2005 The Osage Nation v. The United States of America
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A Stephen Allen Jay. Q And could you please state your business address? A 4312 East 51st Street, Tulsa, Oklahoma 74135. Q Great. And we have met before; right? A We have. Q And you know I'm an attorney for the United States in this case? A I understand that. Q Okay. And you are an expert witness on behalf of The Osage Nation? A I am. Q And your attorney, I assume, has explained depositions, the process of depositions to you? A He has. Q Okay. And you understand that you are under oath? A I do. Q And that your testimony today is the equivalent to trial testimony? A I understand that.
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Now, as you probably see here, the court reporter is taking down all the questions and answers and all the conversations between counsel but, unfortunately, at least not yet, she can't record nonverbal responses, so we need to verbalize, both of us, in terms of questions and answers. Do you understand that? A I do. Q Okay. And everything is being transcribed, as we just mentioned, and we will assume that everything is going to be on the record unless all of us agree that it is off the record. And you will have an opportunity to review and correct the transcript and thereafter sign it. And that if the changes that you put forth are substantial, I have the right to comment. Do you understand that, that process -A I do. Q -- that process? How are you feeling today? A I feel fine. Q Flight was okay?
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Q Okay. And please feel free to take breaks as needed. There is water -- Akin Gump has been very kind enough to supply their own brand of water -- and coffee, and please let me know if you want to take any breaks at any time for water, restroom, what have you. Also, I'm going to do my best to make my questions clear. If I have -- you feel any other questions are unclear, please let me know and that I will restate them. If you answer a question, I will assume that you have understood it. Is that acceptable procedure? A That's fine. Q Also, if you have any changes that you want to make to any of your prior answers that you have given at any time, please don't hesitate to say, you know, "Hold on. Can I go back and the answer I gave before, I would like to, you know, restate it or make a correction." Please don't hesitate to do that. Also, if you think of any documents that would be helpful, responsive, would move things along or be informative to the questions posed, please don't hesitate to identify those.

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A It was long. Q Yeah, I bet. Let me ask you this: Are you on any medication or drugs that would make it difficult for you to understand questions and provide answers? A No, I'm not. Q And have you consumed any alcohol or anything else that would make it difficult for you to understand questions and provide answers? A No, I haven't. Q Are you sick at all, under a doctor's care or anything that would make it difficult for you to understand questions and provide answers? A No, I'm not. Q And another thing, I will apologize, if I start going real fast, please don't hesitate to tell me to slow down. A Okay. Q I just trying -- I'm going to try and keep us on pace so we get you out of here tonight. A That's no problem. Q Is there anything that would prevent you
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Stephen A. Jay - December 7, 2005 The Osage Nation v. The United States of America
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from testifying accurately and truthfully today? A Not that I know of. Q Okay. Let's start off with the notice of deposition here, which we have pre-marked as Exhibit 1. Let me give you a copy. Let me just grab my copy here. All right. Can you identify this document, please? A This appears to be the notice I got of the deposition. Q Okay. And when did you first see this? A I don't remember the exact date. I received an e-mail copy from Mr. Rothrock and then I received the original later on but I don't remember the exact date. Q Okay. Did you review it with Mr. Rothrock or any of the other attorneys for The Osage Nation? A Not very much, no. Q Okay. Do you understand what its requirements were? A I do. Q And what were those requirements as you
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A I believe I have. Q Great. You can put this aside. Put it right here. And let's take a look at those documents. We will move on to pre-marked Exhibit Jay 2. MR. WEBB: Copy here and copy to Jerry. BY MR. WEBB: Q And could you identify this stack of documents marked as Exhibit 2? A I can only identify it from what you told me it is. It is what I produced but I haven't had a chance to go through it all yet. Q Okay. And I will give you that opportunity in a second. Let me just -- on the front here there is what appears to be a letter. Can you identify that letter for me, please? A This is a letter from yourself to -- or, excuse me -- from Jerry to yourself that was saying these are the documents in response to the subpoena. Q Okay. And the date of that document? A December 5th. Q Okay. Great. Then after it, you will see
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understood them? A Those requirements are that I was to be here on December 7th for a deposition and that I was to provide you with a substantial -- with the documents that I had used in preparing for my deposition and for preparing my expert report. Q Okay. And those documents -- if you could flip back to page 6 of the text, and just to be clear, there is a heading there says, "Documents"; do you see that? A I do. Q And it is, I guess, paragraphs 1 through 7. A Okay. Q And are those the -- the requests for documents that you mentioned before -A It is. Q -- in terms of the requests that the United States has made for you to produce? A Right. Q And you have produced documents in response?

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a collection -- I'm not certain, about the size of a phone book -- a collection of documents. Do you want to take just a quick look through those and see if those are the documents that you provided to Mr. Rothrock in response to the subpoena? (Witness reviewed the document.) (Jay Deposition Exhibit 11 identified.) THE WITNESS: I didn't remember providing these two documents that have to do with the Akin and Gump Pro West System but it is probable I did but I don't remember providing them. They were probably part of the e-mails that I provided. Aside from a question on those two, the rest of them appear to be my documents. BY MR. WEBB: Q That were produced in response to the subpoena? A Yes. Q Good deal. And I'm under the understanding from your attorney this morning that you also have some documents that you are producing to supplement the documents we just looked at; is that correct?
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Stephen A. Jay - December 7, 2005 The Osage Nation v. The United States of America
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I have. MR. WEBB: And, Jerry, did you want to speak to those? MR. ROTHROCK: Yes. I just want to state that, for the record, that prior to the start of the deposition, I handed Mr. Webb a letter dated December 7th, 19 -- 2005, which provided him with copies of a few more documents that were inadvertently omitted from the production. BY MR. WEBB: Q Okay. And let me just hand this to you just to verify. Whoops. A That didn't work good, did it? Q And the documents here we have I have marked as Jay Exhibit 11 and those are the -- that's the packet that I received from Mr. Rothrock this morning. I just want you to take a look through it and just confirm that those are documents as Mr. Rothrock stated. A They are. Q Those are documents produced responsive to the subpoena and supplemented to your prior
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A What you are looking at is a copy of a production that I made on the seven-year yield on an annual basis at the end of each of the calendar years for the U.S. government securities that came off the Federal Reserve Internet site. Q Okay. And were these the numbers that you used in your calculations for your report? A I can't remember if I used these numbers or not, to be honest with you, or if I just downloaded them to see what they looked like. Q Okay. A I would have to look back at each report and see what I used for the yield. Q Okay. So these may have been used but you are not certain? A It is possible. I'm just not sure. Q Okay. Okay. And the web site -- I apologize. A We have given you the web site before but it is the Federal Reserve statistical web site. Q Okay. That's FederalReserve.gov with a whole bunch of language underneath it at the bottom
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production? A That's correct. Q We can go ahead and let's get these back here. We will get into those after I have gotten a chance to take a look at them. A Sure. Q Put them on the bottom of the pile. Let's go now to -- I will also make the statement, because I'm certain you did not produce these documents with pretty little tabs on them which are on them now. What I have done to sort of save us some time, the documents I would like to discuss I have tabbed here and yours are in yellow, so what I would like to do is to go through Exhibit 2, and that's the documents you produced responsive to the subpoena, your initial production, and just talk about some of these documents and we will just go through them in the order they were produced and as I have tabbed them so hopefully it will guide us along. We are going to start with the first tab and what I have here is a printout, looks like from the Internet site of -well, let me ask you, what am I looking at here?

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of the page? A That's right. Exactly. Right. Q Let's take a look at the next tabbed document and this -- can you identify this document, please? A This is a copy of the engagement letter that I have with the Wilson Pipestem law firm in regard to this litigation. Q And it appears to be three pages; is that correct? A That's correct. Q And can you tell me the signatures on the last page? A Signatures on the last page, one is mine and the other one I understand to be Wilson Pipestem's. Q Okay. And referring back to the first page, in the second paragraph, the first sentence, it states, "We require a retainer of $10,000 in regard to our engagement to be applied to our final invoice." Could you describe for me what that is, what that represents?
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Stephen A. Jay - December 7, 2005 The Osage Nation v. The United States of America
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A It represents a $10,000 retainer to be applied to our final invoice. Q And was that paid to you by -A Yes, it was. Q And that was by Pipestem law firm? A Yes, it was. Q And let me flip to the second page now and, let's see, it is the one, two, three, fourth paragraph, the one that starts, "The scope of." A Yes. Q Do you see that? The second sentence there, it states, "Moreover, because our engagement is limited in nature and scope, it cannot be relied upon to discover all documents and other information or provide all analyses which may have importance to this matter." Did I read that correctly? A You did. Q Can you explain to me what that means? A What it is -- what it means is that it is impossible for us to have found every document that could have related to this matter and it is just making a scope limitation to that effect.
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Were those documents provided to you by Mr. Rothrock? A Yes, they were. Q Were they provided at your request? A I can't recall if I requested any particular document. It is possible that I may have. I may have asked to see a certain thing. He may have told me he had something. I said, "Send me a copy of it." We have had many, many conversations and I can't recall every one of those. Q Okay. Let me ask you about the next sentence in this paragraph, and that's the last sentence in this fourth paragraph here on the page, I guess, it is 2. It states, "This engagement does not anticipate the compilation, review, or audit of financial records or financial statements." Can you explain to me what that sentence means? A It is just a scope limitation. It is stating that we are not doing a compilation, review or audit of the financial statements. Q Of the financial statements, in general, or -Page 21

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Q Is a part of your duties under this agreement to search for documents relative to the matter or which may have importance to this matter? A Well, it is my duty to take the documents that I have and try to determine the relevance -relevance they have to this matter. I didn't go back to the government's records and try to look for every document that I could possibly find. Q Did you go to the government's records? A No, I did not. I went to transactions at various times but I didn't go -- I haven't visited the United States Government and gone through their files. Q What about the files that were produced to The Osage Nation as part of this litigation, did you review those files? A When you say, "the documents that have been produced to The Osage Nation," the documents that Mr. Rothrock had in his possession, I have reviewed many of those. Q And were those -- did you request documents -- strike that and rephrase it.

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A It could be considered to be the financial statements of the Osage Tribe. It is just a scope limitation; it is just stating we are not doing an audit. Q Okay. But -A You want me to further explain? Q Yes, if you could. A Would that help you? Q Yes. A These are all boilerplate type scope limitations that go on every engagement letter we have. They are not engagement specific to this engagement. Q And why do you make this stipulation? A Because there are people -- you know, it is amazing, and I find this particularly -- you know, if I step on anybody's toes, I'm sorry, but lawyers, in particular, if you do any type of work at all, they call it an "audit" and so you have to be very careful with being able to limit them to the fact that you are not performing an audit every time you look at a document. So, you know, everybody thinks that if an
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Stephen A. Jay - December 7, 2005 The Osage Nation v. The United States of America
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accountant looks at a document, they have audited it and that's not true. Q What is your definition of the term "audit"? A Well, in my definition, the term "audit" has to do with an attestation type engagement and that is where I go in to perform an audit for the purpose of certifying financial statements. Q And if you could help me out with that, as to what you meant by the "attestation." A Where you attest, you attest to the financial records. Q Okay. A You say, "In my opinion, these financial statements represent" -- and that's called an audit or an attestation -Q And are there -A -- engagement. Q I'm sorry. I didn't mean to interrupt you. A Go ahead. That's all right. Q Are there any certain procedures or steps
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in effect, negative assurance in regard to those financial statements. And a third stage is a financial audit, in which you actually go in and test underlying data and arrive at an opinion that you certify to. Q Okay. And of those three for your work in regard to the Osage, which does your work qualify into one of those three? A No, it does not and that's what the scope limitation says is that it does not qualify for any of those. Q So how would you qualify the work that you have done on behalf of the Osage for this case? A The work I have done for the Osage in this case is to analyze data and to reach conclusions for the -- for preparing an opinion for the purpose of the court. Q Okay. And that doesn't -- that didn't involve compilation, review or audit of financial records or financial statements? A No, it does not. Q Now, of the -- now I see -- now I
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you have to follow that qualify that work as an audit? A Certainly, yes, there is Generally Accepted Auditing Standards that the American Institute of CPAs has provided publications on. Q Okay. And so that's the standard that's established. And do they establish standards for reviews other than audits? I assume that there are other types of reviews; is that correct? A There is three types of -- three types of financial statement engagements that CPAs get involved in, generally. One is called a compilation and, primarily, a compilation is a situation where you take a set of financial statements that a client provides you and you put them in form -- in a format that is acceptable to the third party so that they can understand them, because a lot of times they don't have the proper disclosures or all the adequate information. Second time is called -- second type is called a review statement and in a review, what you do is you perform analytical procedures in order to be able to determine whether or not you can provide,

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understand better that you have all three mentioned here in this last sentence. A Right. Q Of the audit, review and compilation, which of these three is the most rigorous? A The audit is. Q The audit. Okay. And is there a hierarchy? Does it go compilation is the least rigorous; then review is more and then audit is the most rigorous? A That's correct. Q Slowly getting it. My accounting classes were a long, long time ago. A That's all right. That's all right. Q So, please, I apologize for -A It is no problem. Q -- my slowness. Let me flip now to the next tab and I apologize for -- this tab sort of falls in the middle of a document and if we flip back, it goes about two pages before the tab and there is a document -- the document has a title, "Jay & Associates, P.C."; do you see that?
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Stephen A. Jay - December 7, 2005 The Osage Nation v. The United States of America
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A I do. Q Could you identify this document for me, please? A This is a copy of a billing that I sent to Wilson Pipestem for the work that I performed. Q And it is about a six-page document; is that correct? A Yes, it is. Q Okay. And -- all right. And the date of the document? A The date of the document is September 30th, 2005. Q And so this is work -- this is your bill for work associated with this case; correct? A That's correct. Q And as I flip to page 3 here, and that's the tab, at the bottom of page 3, on the date of September 19th, 2005 -- do you see that entry? A I do. Q The last one. A Uh-huh. Q And it says here in the second item,
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documents that I would be looking at in regard to disbursement transactions for head rights payments. Q Let's skip -- we can skip the next tab, then -- I will caution you about that -- and go to the last one, which is on page 5, the last page of the document -- I apologize; it is the secondto-last one -- actually, no, the last one. I'm throwing us all off here and I apologize. I just want to look at the -- this is page 6, looking at the current amount due, and that's $26,783.25; is that correct? A That's correct. Q And that represents work from the time period of about the end of August to end of -- pretty much August; is that accurate? A Yeah, from the date that I was hired until September 30th. Q Okay. And what date were you hired? A I would have to go back to that engagement letter again. Q Okay. A Well, the engagement letter is dated August
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"telephone calls with Jerry Rothrock, Jim Parris regarding disbursement calculations." Do you see that? A I do. Q And did I read that accurately? A You did. Q And can you identify who Jim Parris is? A Jim Parris is an individual that used to work for the Osage Tribe and was actually, I think, in their office in Pawhuska. I think he grew up in Pawhuska, even. And then I think later on he worked for the United States Government in regard to work performed on the various tribes. Q And did you have conversations with him regarding your expert opinions in this case? A I had conversations with him regarding some of the documents in the case, not regarding my expert opinion. Q Did he help -- did he provide you with information? A He -- basically, what Mr. Parris did was he provided me with an understanding of some of the

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24th. Discussions with Mr. Rothrock may have come a day or two earlier than that but that's a pretty good indication. Q Okay. Well, that appears from your -- the billing document that you have a bill for preparing the draft engagement letter so that makes sense. A Right. Q Okay. And it also states here at the bottom of page 6, "Retainer: Received $10,000 to be applied to final invoice"; is that accurate? A That's accurate. Q And did that occur? A Yes, it did. Q Let's flip now to the next document, and I apologize again that I tabbed one page at the end of a document. You can get the front page; we have got to back up a few. I tabbed what appears to be page 4 of the document and if you could flip back -- I think you have got it there. Can you identify this document for me? A This is a copy of my invoice at -- excuse me -- this is not a copy of the invoice. This is a
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Stephen A. Jay - December 7, 2005 The Osage Nation v. The United States of America
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copy of all the time that I have incurred up to the date that I was responsive to the subpoena. Q Okay. A And it is -- you can see, it doesn't have an invoice number on it and the reason being is because it hasn't been finalized and sent out yet. Q It says it's a draft? A It is a draft. Q And this is from the period of, looks, mid October to the end of November? A That's correct. Q Is that a fair -- and it appears that the current amount due on page 4 is 14,945.06; is that accurate? A That's correct. Q Okay. Now, the document we looked at first was August through September and so the only thing missing, really, did you submit a bill for the beginning of October? A Well, this -- if you look at the work in process right here, it starts on October 19th -Q Right.
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to read some of this. A There is a lot of people that have trouble with my writing. Q Likewise. There is a paragraph in the middle of this page and if you could read it for me, because I just -- I couldn't read it, to be honest. Looks like it says, "Asked" -A Sure. It says, "Asked to provide witness," I think that's -- that I'm being asked to provide witness, I think, "who we," I think, something, "knowledgeable interest for five to six months and asked them to explain correct or not." I think this is -- oh, okay. I think I can tell you. I think this was a note that I had taken in the original deposition of Mr. Chavarria, and that was a question that was asked of Mr. Chavarria, I think, but I don't recall exactly what the context was. Q So you had -- you attended the deposition of Mr. Chavarria? A I attended the deposition of Mr. Chavarria toward -- it would be back in my billings, that I think was done, oh, gosh, sometime late August.
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A That's when I began picking up again on October 19 after the September 30th date. Q So was this a break? A There was a break in time where I didn't do any work on it. Q Okay. I appreciate breaks. I like them very much, when I can get them. Okay. We can go on to the next tab. And the next tab is, I believe, is -- let me ask you this: Do you know the origin of these pages here? There seem to be a collection of pages, handwritten notes. A These are notes that I have taken at various times throughout this case. Q Okay. And kept in a note pad or notebook of some sort? A I had them just in my stack of documents. Q Okay. The tabbed page I have here, which the header, for the record, which I should be noting, is, "Books," I believe? A Yes. Q And it is in the middle of the page, there is a paragraph here -- I apologize, just I was unable

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Q Okay. Was that -- I'm sorry. I didn't mean to interrupt. A And I attended the beginning of the deposition that was taken sometime in October. Q So would that be both his fact deposition and his 30(b)(6) deposition in this case? A I believe six. Q You believe six? A I believe it was, yes. Q Good deal. The next page, which starts with what looks like a two and a circle, and there is a statement there, it is about, I guess, five lines down; it says, looks like, "AA," something, "on only available," something. Do you see? A Yes. Basically, what that says is, "Arthur Andersen numbers are only available except for," and I trail off. I don't know -- again, I don't know when that was done and what I was trying to say for it at that time. Probably just taking a note at some time. Q That's fine. Let's flip to the next tab, and this looks to be a fax cover sheet.
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A A what? Q Fax cover page, the next tab -- not the next page but the next page that has a colored tab on it. A Okay. You are going to have to direct me. I have gotten lost. Q I'm sorry. Just the next tab. A The next tab I have got is -Q Yes. A -- there. Q There we go. Could you identify this page for me, this document? A This is a copy of a fax that I sent to Mr. Rothrock that would provide him a background from AICPA professional standards as to what Agreed-Upon Procedures, requirements were and what they accomplished. Q And you -- this is the organization you mentioned earlier? A The organization, you are talking about the American Institute of CPAs. Q Yes. Thank you for saying -- thank you for
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A Well, Agreed-Upon Procedures is a form of what's considered to be a special report and what Agreed-Upon Procedure, basically, sets out is that an entity will hire a CPA to perform certain procedures that they sit down with the CPA and say, "Here's what we want you to do and give us the results of what these procedures are," and the certified public accountant firm will perform those procedures that they have agreed on with their client and provide a report as to the results of those procedures. Q Okay. And that's what's in the documents attached here, is that -- that's what that addresses? A Yes, it just talks about the standards that are associated with Agreed-Upon Procedures work. Q And you mention here in the second sentence on this fax cover sheet, "Refer to the requirements applicable to the 'specified party(s),'" and then you list a whole -- you know, a certain section, 2602.03, .04, .06, .07, .11, and.15. What do those -- what does that refer to? A Well, what I was trying to show Mr. Rothrock was that in regard to Agreed-Upon
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remembering it because I couldn't. A That's all right. Q Is this an organization that you belong to? A This is the organization that controls all the operations of certified public accountants in the United States of America. Q So this is the licensing organization; is that accurate? A The license is actually granted through states. Q Okay. A I'm licensed through the State of Oklahoma but I belong to the American Institute of CPAs and the American Institute of CPAs is the body that provides research and makes decisions as to what should be included in Generally Accepted Accounting Principles, Generally Accepted Auditing Standards and various and sundry other auditing programs. Q And here you talk about, at the bottom of the page, the -- "Attached are the AICPA Professional Standards relating to Agreed-Upon Procedures." What are "Agreed-Upon Procedures"?

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Procedures work, that "specified party," which is either the client or it could possibly be a third party that specifies the procedures, have a significant responsibility to make sure that those specified procedures or those procedures that they specify are the ones that are going to satisfy whatever the needs of the users are. Q Okay. And the document that's attached here, which looks to be a -- I'll just call it a multipage document, looks like about 15 pages -A Something to that effect. Q Something to that effect. And that's -where does this come from? A These come from the American Institute, Publications for Auditing Standards. This, in effect, is a -- it is a book that they use to condense all the different rules that have to do with Agreed-Upon Procedures work or any other type of audit work. Q And what does this -- how is this to be used by CPAs? A Well, if I am performing an Agreed-Upon
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Procedure engagement, this is where I start, because I want to make sure that when I establish my AgreedUpon Procedure engagement, I don't leave out any steps that are important. I make sure that the understandings that -- that are included in the requirements are done, documentation; these are kind of my guidelines or -- "these are my kind of my guidelines," they are my guidelines. Q Are these the guidelines you used in preparing your expert report in this case? A No, they are not. Q Why did you consider these guidelines as part of your preparation for this case? A Well, these guidelines -- the Agreed-Upon Procedures was the report that was prepared by Arthur Andersen that was referred to numerous times in this case and so what I was trying to do was to give Mr. Rothrock the capability of understanding what Arthur Andersen had done, what their role was and what the role of the Bureau of Indian Affairs was in this regard. Q Okay. So this is -- these procedures that
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Rebuttal Report Exhibit D," as in dog -- or delta, I guess I should say. Can you explain what this document represents? A I'm not sure if this was a draft of one of my Exhibit Ds for the rebuttal report or the final. It is probably the final but I'm not certain of that. But it is a draft of my Exhibit D that was utilized in my rebuttal report. Q And did you prepare this? A I did. Q Let me direct -- I'll put that aside. We will come back to that one later. Why don't we go ahead and flip to the next tab. And, once again, I tabbed something in the middle of a document and I'll apologize once again. Can I have a continuing apology? MR. ROTHROCK: Absolutely. MR. WEBB: Thank you. BY MR. WEBB: Q And this appears to be in the middle of a document that's entitled, "Rebuttal Expert Report of Stephen A. Jay In Support of the Tranche One
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Andersen followed in terms of their analysis of the Osage accounts? A I have no idea if they followed them. Q Okay. A They say they did. Q They say they did. Okay. Were you able to determine whether they followed them or not? A No, I wasn't. I would have to review their audit work papers to do that. Q Okay. Did you review their audit work papers? A No, I did not. Q Okay. Let's flip to the next tabbed document and it appears to be a chart. I think it is the next page or a couple pages back. A Okay. Q And can you explain to me what this document represents? And I'll say just for the record the document is entitled, "In The United States Court of Federal Claims, The Osage Nation And/Or Tribe of Indians of Oklahoma, Plaintiff, v. The United States of America, Defendant, Experts

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Investment Claims of Plaintiff Osage Nation," and it is noted in the upper right-hand corner as "Draft, 11/23/05, East#7505575v1," dated November 23rd, 2005 and -MR. ROTHROCK: Kevin, we need to go off the record for just one second. MR. WEBB: Sure. VIDEO OPERATOR: The time is 9:45:31. Off the record. (Discussion off the record.) VIDEO OPERATOR: On the record. The time is 9:45:53. BY MR. WEBB: Q Okay. Could you please identify this record -- this document for the record, please? A This was one of the drafts of the rebuttal report that I prepared in regard to this case. Q Okay. And is this draft as of November 23rd? A I believe so. Q Believe so. Okay. And flip to the -- now we can flip to the tabbed page. And look at what's
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numbered here, I guess it is page 2, and it is numbered as paragraph 6, and the second sentence in 6 is what I would like to ask you about. It says here, "According to Exhibit B of his Report, Mr. Chavarria relied on the same data on which I relied in order to compute interest lost due to deposit lag time, i.e., the data used by Arthur Andersen in its Reconciliated Project." Is that an accurate reading of -- pardon my stumbling through it but is that accurate? A I believe so. Q And can you tell me -- tell me what this -what you meant by this sentence? A I think that what I was trying to say was that Mr. Chavarria relied on some of the same data that I did. Q Okay. And when you mentioned the -- and we have done this already and I should probably clarify this. The Arthur Andersen -- you call it here the reconciliated project. Is that the -- are you referring to the Arthur Andersen Agreed-Upon Procedures report? A I am.
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electronic transfer sometimes have to be withdrawn" -A Excuse me. I'm lost. Q I apologize. Did I -A What page was it again? Q Page 6 -A 17, okay. Q -- paragraph 17. A I'm there. Thank you. Q Second sentence, it says -- do you see, "In my experience"? It starts at the end of that first line. A Yes, I do. Okay. Q "In my experience, funds for an electronic transfer sometimes have to be withdrawn from an account one day prior to the electronic transfer of those funds to a different account." Could you explain to me what you mean with that -- by that sentence? Actually, let me ask you first, did I read that accurately? A You read it accurately. Q Okay. Can you explain to me what you meant
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Q And we will get to that in a second. I just want to make sure that we are being consistent with our terminology. I typically refer to it offhand as the Andersen report or the Arthur Andersen report just for shorthand, if that's okay. A That's fine. Q If you flip to the next page, and it is page 3, paragraph 9, and the first sentence there, it states, "During his deposition, Mr. Chavarria confirmed that, in computing interest lost due to deposit lag time, he used the data captured by Arthur Andersen in its study of deposit lag time as the 'receipt date' for a royalty payment from a Tranche One Lease." Did I read that accurately? A You did. Q And what do you mean by that sentence? A Exactly what it says, in that -- that Mr. Chavarria confirmed the fact that in computing deposit lag time, he used the Arthur Andersen data. Q Okay. Let's flip to the next tab, page 4 -- page 6, paragraph 17, and the second sentence there says, "In my experience, funds for an

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by that sentence? A My experience is in two regard, in regard to electronic funds transfers. One is that -- and I will just take a personal case. I have a -- I have a bank account for my company and I have my personal bank account with the same bank and my payroll transaction, I don't get paid by a paper check anymore, it just transfers from one account to the other. The interesting thing about it is it comes out of my bank account on the one day and it doesn't show up in my other bank account until the next day. They pull it out one day in advance and it doesn't show up until the second day. Same thing has to do with the transfers in regard to EFT for payroll deposits. If you are going to make a payroll deposit to the United States Government to pay your withholding federal income taxes, it comes -- you have to make it the day before. You can't make it the day of. So it goes out the day before and it hits on the next day. So in my opinion there is a one-day lag. Q And do you have any other experience with
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electronic fund transfers? A Oh, wire -- if you call wire transfers, you know, that, yes, I do. Various times, I have had clients that have had to make wire transfers or particularly accounts that I have been custodian for for one reason or another and I have made those transfers. Q And are wire -- are wire transfers considered electronic fund transfers? A I don't think so. I think they are separate. Q They are separate. How are they distinct from one another? A There is an EFT system that you have to be established on. Q Okay. A And a wire transfer doesn't require you to do that. It just requires you to have ABA numbers that will be able to transfer from one bank to the other. Q So do you have any other, I guess, EFT or electronic funds transfer experience other than these
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A That's correct. Q Have you looked to see whether the electronic funds transfer process for The Osage Nation and its trust fund lines up with your experience? A It is impossible to tell. I have looked at some documents that show transactions that have to do with electronic funds transfers. They are primarily the ones that Mr. Chavarria relied on for the Tranche One months. You can't tell from those documents when the transfer was actually made and when it hit the books so I don't -- I can't tell from those documents what -- what the lag was. Q Are there documents that you could look at that would enable you to tell the lag? A I would -- I would imagine there probably are somewhere. I haven't seen them. Q Okay. Have you requested those documents? A No, I have not. Q So have you looked at any actual data regarding electronic -- have you looked at any actual data regarding electronic funds transfers as they
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two instances you mentioned? A Just payroll records and the experience that I have had in my bank. Q Are you familiar with the EFT's as they work within the federal government? A When you say, "the federal government," if you are talking about payroll transfers, I'm knowledgeable of the fact they come out one day prior to the time they hit the government. Q That was a vague question. I apologize. A I don't work in the federal government system, if that's what you are wondering. Q And I apologize. That was a vague question. How about electronic funds transfers as they deal with the depositing of royalties with the federal government? A I have never been involved in that, no. Q What about electronic funds transfers as they deal with disbursements from trust funds held by the federal government to individuals? A I have never been involved in that either. Q And that applies, I assume, for the Osage?

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relate to the management of the Osage fund? A I have. It is those documents I just referred to that Mr. Chavarria utilized for his documentation. Q Okay. And from those documents, were you able to determine that they have to be -- those electronic transfers sometimes have to be withdrawn from an account one day prior to the transfer of those funds to a different account? A No. As I stated before, you can't tell that from the data. Q Okay. Let me flip to the next tab. And that's page 11, paragraph 32. It is the third sentence -- let me see how many lines -- one, two, three, four, five, six lines down. The line says, "quarterly basis," is the beginning of the line. A Okay. Just a second. Paragraph 32, sixth line down? Q Yes. It starts, "quarterly basis." The sentence starts, "The reality." A Okay. "The reality as to the operation"? Q Yes.
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A Okay. Go ahead. Q Let me -- it is, "The reality as to the operation of the Osage trust account is that funds are received continuously from oil and gas leases and added to an existing account balance with a quarterly distribution of a portion of the funds in the account." Did I read that accurately? A You certainly did. Q Could you explain to me what you meant when you said, "quarterly distribution of a portion of the funds"? Primarily, the "portion" is what I am interested in. A Here's -- here's what I was trying to express. And the best way I can do this is maybe try to provide you some kind of a picturesque description, and that is if you had a bucket and you set the bucket below a spigot and you had water continuously coming into the bucket and then you also had a -- some type of a drain plug at the bottom of the bucket and, occasionally, in this case quarterly, you went and pulled that drain plug, there would be water coming out the bottom at the same time while
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A Well, what I am talking about as far as portion is the total amount that's in the fund, okay, which there is money that's in the fund that is not just what came in the last quarter. Q Okay. A And so what I am saying is a portion of the total amount of money that's in the fund, which usually is similar to what came in that quarter, is distributed out at the end of the quarter. Q And that goes back to your bucket analogy, the water coming in? A Exactly. Exactly. Q Does that analogy -- does that rely on that you always have water coming in? A Yes. Q Okay. And what happens -- and that you always have water coming in at a pretty consistent level? A You know, if you want to try to describe it in terms of what was actually happening with the Osage, it changes. It is not always at a consistent level. You can see trends. During a certain period
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water is coming in the top. So what you have got is a process where quarterly money comes out but while money is coming out, money is also coming in at the same time. So it is just a continuous filling and depletion process. Q Okay. And as to the depletion, how much is being depleted? A Generally, what's depleted is the amount that's accumulated over the -- let's just take, for example, a Tranche One month or a Tranche One quarter. Okay? What came in during the period that contains -- that contains -- that was received in that quarter is generally what's depleted back out. Q That's your understanding that -- that royalties are received -- let ask you this: Is it your understanding that the royalties received for a quarter minus expenses of the tribal counsel and taxes are to be distributed to the right owners on a quarterly basis? A That's correct. Q And so -- so when you mention your portion, that's a pretty considerable portion?

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of time, it will go up. For example, during the early eighties, that amount of money went up, then it started trailing back off during the latter part of the eighties when the oil boom went off. Now it is starting to probably trend back up again. So it is not a continuous exact replacement dollar for dollar, it is a flow. Q So, with that fluctuation, and to go back to your analogy, how much water do you know to let out of the bottom of the bucket, given the -- you are not certain how much is coming in? A You want to know how I would do it if it was -- you want to know how I would do it if it was me? Q Yes. Please. A It is pretty -- it is pretty simple, you know, and I have done this in one of my documents. I have loaded in what the balances were as far as cash and invested funds over a period of time and you can see a pretty good trend, and knowing -- you know, oil and gas prices don't just change overnight. It is not like today you wake up and oil is back to three14 (Pages 50 to 53)

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dollars-and-a-quarter like it was in 1971. It has a tendency to rise slowly; it has a tendency, generally, to fall slowly. It is pretty easy to -- a person with just a little bit of common sense to be able to forecast what's going to happen as far as the ebb and the flow of that oil and gas money. Q But is there a possibility that you could have a significant drop or, for that matter, a significant rise? A Well, if you say, "possible," you know, anything is possible. Q Right. A Is it probable? Probably not. Q Okay. What about in terms of the water stopping; you don't have water coming in? A The Osage has been pumping oil out of that ground up there since early 1900's, and so far it hasn't dried up. Q What if you did have a significant drop in, say, the water that was coming in? And I may be harping too much on the analogy but I love analogies. If you have too much -- if you have a
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distribution is due. If they are not receiving money on a quarterly basis, there is no distribution due. Q Right. But here in the Osage, money is received on a quarterly basis; correct? A And so the bucket -- and so the bucket doesn't have any kind of a problem filling up. Q Assuming that the bucket -- the water is always coming in at a relatively consistent or easily forecasted level. A Well, you know, I think -- let's make it clear. If they don't get any oil and gas revenues, they don't pay any money out. Q Granted. But if you are talking about trying to -- I think we are getting too deep in the analogy and getting away from what's actually happening. But if we are dealing here with the needs to distribute royalties on a quarterly basis and some of those royalties may be tied up in long-term investments and you don't have the funds to cover those royalties that are tied up in long-term investments that should be disbursed, you mentioned that you would have to liquidate those long-term
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significant drop in the water coming in and you have already let out a lot of water at the bottom and you are left with a little bit, some drips, at the bottom of the bucket and you have to disburse a hell of a lot more and you just don't have the water to compensate for that coming in the top, what do you do? In other words, what happens if you have a shortfall? A If you have got a shortfall, you can't disburse, but that's the way it should be. If you don't have money coming in, you can't send it back out. Q But wouldn't your inability to disburse be predicated on your -- on the fact that you have tied up that money in long-term investments? A Oh, you are making a -- you are throwing in a new assumption on me now. All right. Now, if you are -- if you are saying that, in effect, you did have money in there but you have tied it up in longterm investments, well, then you would have to somewhat go in and liquidate those long-term investments in order to make a distribution, if a

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disbursements to cover it, to make the disbursement; is that accurate? A Well, I think -- I think we are getting tangled up in an argument that really is not that complicated. A prudent investor, what they would do is they would see to it that they had enough liquidity to pay out those quarterly investments -or quarterly distributions. Excuse me. If they had money that was in there on a long-term basis, they would consider the possibility of investing that money on a long-term basis because it is not prudent to treat it as if it is going to paid out if it wasn't going to be paid out. Q Okay. And to go to the liquidation, if you were to be required to liquidate long-term investments to make a distribution payment, would you suffer any lost revenue to do that in terms of having to cut the long-term investment short? A I don't know if you would suffer any lost revenue. You wouldn't receive any revenue due to the fact that you had to pay the money out. That's not lost revenue.
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Q But if you were in a situation where, say, interest rates increased over the duration of a long-term investment and now you have to sell it at a lower price, wouldn't you be losing income? A If you had a situation where interest rates decreased, then the possibility is that if you were holding a long-term investment that you couldn't hang onto until the time that you waited for that to mature, you possibly could have a decrease in value. Now, whether or not that's lost income or not, I don't think I would characterize it that way. Q I'm probably way over my head now in terms of my understanding of finances and what not but let me see if I can eke out one other question before my head explodes. Have you undertaken the type of financial forecasting that you described? Have you done that as part of your business, as part of your consulting for companies? A I have served as a trustee and in that trustee responsibilityship, I had to determine what I thought the cash flows would be and make investments appropriately.
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approximately five years and in that five-year period of time, we would forecast what our cash flow needs were, make investments when we considered it appropriate, some of which were fairly long term, in excess of -- and I'll call long term in excess of a year -- and money would come into the bucket as we would settle litigation with various parties; we would turn around and make distributions out to the unsecured creditors on that and, in effect, did somewhat of a forecasting system similar to this. Q That may be one I don't understand at all. One is my lack of knowledge of the area. Let me ask you this: Have you ever been the trustee of a pension plan? A No, I haven't. I have been -- I have a client that has a very significant pension plan. I am the accountant for that pension plan and I am at every meeting of the trustees and involved in it. I'm submersed in it. Q But you are not the trustee? A I'm not the trustee. Q Let me ask you -- let me -Page 61

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Q But did you have a situation here where you had money coming in on a regular basis and the quarterly distribution and investing some of that money on a long-term basis and using the money that's coming in in the interim to cover disbursements as you described? A In effect, yes. Q You have? A It wasn't -- it wasn't exactly like the Osage account. Q Okay. Could you explain to me what -how -- maybe I will understand it better if you could explain to me how it worked, the situation you have experience with. A What it was is I was a trustee of a company that had been in bankruptcy and, in that regard, we had a certain amount of money that was to be utilized for all the expenses of the process of trying to pay out to -- basically, it was an unsecured creditors' trust -- pay out to the unsecured creditors the moneys that were, in effect, due to them under their claims. The bankruptcy had been going on for

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A Wait a minute. I need to change that answer. Q Okay. A Effective last week, I am the trustee of a pension plan. Q Okay. You just became -A I just became one. Q The one you were just discussing? A No. Q A different one? A It is the one for my firm. Q Okay. Very good. A I hadn't thought about that until just a minute -Q Let me go to the next tab now and let me just get one more question and we can take a break. The next tab is on page 14 and I have tabbed page 14 here and I'm looking at -- do you have 14? Yes. It is paragraph 42. A Uh-huh. Q Do you see that -A I do.
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Q -- on the page? A Right. Q It says in brackets here, "Discussion of claimed clerical error," close bracket. Can you explain to me what that reference is? A It is just a footnote to explain the discussion that had been -- or the fact that it had been pointed out to me that I had used fiscal year 1980 rather than fiscal year 1981 by Mr. Lundelius in computation of one of my damage calculations in Schedule, I think, E, I believe. Q Was that -- was that the only schedule wherein that clerical error appeared? A That's the only one, I believe, that clerical error appeared, yes. Q We'll take a look at that -- at those in a little bit. And that was a clerical error? A Yes, it was. I just got confused on my fiscal years. Q So 19 -- I guess you said -A It was November 1980. I put that into fiscal year '80 rather than '81. I forgot to switch
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A Yes. Q And let me ask you this: Do you recall that this was a clerical error for one of your schedules? Is it possible it appeared in two? A Well, there is two clerical errors in the schedule. Q Okay. A All right -- or excuse me. There is two clerical errors in the exhibits to the report. Okay. One of them had to do with the one that I'm talking about in 42, and that was the one I explained about the fiscal year difference. The other one had to do with on a schedule that had to do with disbursement of funds, disbursement lag, where I had accidentally gotten an investment amount included in my computation of disbursements. Q And that was a clerical error? A That was a clerical error, also. To further help you understand that it was a clerical error, that error was not carried forward into the following schedule where I computed the amount of percentage of the disbursement compared to the total
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my thought process from calendar year to fiscal year. Q So it should have been '81, as opposed -A That's correct. Q Okay. Why don't we go ahead and take a break with that because I think we have been going for just about an hour now. Is that fine with you? A That's fine. MR. WEBB: Why don't we take about a five-minute break. MR. ROTHROCK: Five minutes? MR. WEBB: Sound good. VIDEO OPERATOR: The time is 10:07:11. Off the record. (Recess.) VIDEO OPERATOR: On the record. The time is 10:21:28. BY MR. WEBB: Q Okay. If we can step back, actually, we were just talking about -- it is a little chilly in here -- page 14 of this draft report, paragraph 42 where you mention a discussion of the clerical error.

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disbursement for that Tranche One month. Q And other than those clerical errors, was the methodology being used, was that correct? A In my opinion, it was, yes. Q Okay. And let me take a look -- why don't we -- I apologize for mixing up exhibits and throwing them in here but why don't we just go ahead and take a look at Jay Exhibit 3. If we can take a look at that. MR. WEBB: And, Jerry, did you have a copy? Let me get you one. BY MR. WEBB: Q While I'm searching for this for Mr. Rothrock, could you identify that document, please? A This appears to be a copy of my original expert's report. Q Okay. And could you refer to the last page or, I should say, the signature page of the document? A Okay. Q And is that your signature? A No, it is not. It is a printed signature.
17 (Pages 62 to 65)

202-347-3700

Ace-Federal Reporters, Inc.

800-336-6646

Case 1:99-cv-00550-ECH

Document 207-6

Filed 03/20/2006

Page 20 of 123

Stephen A. Jay - December 7, 2005 The Osage Nation v. The United States of America
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Q Okay. But you did sign this document at one point, I assume? A I did. Q Okay. And if I -- I remember correctly, counsel correct me if I am wrong, but you did forward me a signed version of the signature page? MR. ROTHROCK: Yes, we did. MR. WEBB: Okay. BY MR. WEBB: Q And can you take a look at the document just to make sure it's got all the appropriate exhibits -- I believe you refer to them as schedules -- just to ensure that we are looking at the same thing? Mine has got 12 pages of the text and then a -- let's see -- it's got what appears to be your CV and then, let's see, a Schedule A, which is two pages, Schedule B, Schedule C, which is two pages, and Schedule D, Schedule E, and Schedule F. A Okay. Q Is that accurate? That has everything it's supposed to? A Looks to me like it does.
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A That's correct. There is three amounts: 6-million-604, 2-million-116 -Q Right. A The 1-million-656 is an error. That was an investment transaction. Q So that shouldn't have been included? A That's exactly right. Q And let me draw your attention to Schedule E, as well. Flip back to that. And taking a look here, and the calculations you did on the far right where you started totaling out the dollars, appears that you referenced fiscal year 1980 here, as well. A I was consistent in that error, yes. Q Okay. So that should be 1981? A Right. Q So we have the Schedule B and the '80 should be '81 and then the investment not disbursement for the Schedule C? A That's exactly right. Q And otherwise -- other than those clerical errors, the methodology approach that you used is accurate and correct?
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Q Good deal. Let's take a look at the errors you were just referencing, the clerical errors. A Okay. Q And I think you said it was -- was it Schedule B that had -A E, Sc