Free Response to Proposed Findings of Uncontroverted Fact - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS STERLING SAVINGS ASSOCIATION, a state chartered savings association, STERLING FINANCIAL CORPORATION, a Washington corporation, Plaintiffs, v. UNITED STATES OF AMERICA, Defendant. ) ) ) ) ) ) ) ) ) ) ) )

No. 95-829C (Judge Wheeler)

DEFENDANT'S RESPONSE TO STERLING'S PROPOSED FINDINGS OF UNCONTROVERTED FACT IN CONNECTION WITH ITS CROSS-MOTION FOR SUMMARY JUDGMENT AS TO DAMAGES Pursuant to 56(h)(2) of the Rules of the United States Court of Federal Claims ("RCFC"), the United States submits the following responses to the proposed findings of uncontroverted fact submitted by plaintiffs Sterling Savings Association and Sterling Financial Corporation ("Sterling" or "plaintiffs"), in support of Plaintiffs Cross-Motion for Summary Judgment as to Damages served on March 29, 2007. General Objections: 1. The Government objects to plaintiffs' proposed findings of uncontroverted fact

("proposed findings") to the extent that they set forth legal conclusions with respect to the ultimate issue in this case ­ whether Sterling Savings Association ("Sterling") suffered damages as a result of the Government's breach of its contracts with Lewis Federal Savings & Loan Association ("Lewis Federal") and Tri-Cities Savings & Loan Association ("Tri-Cities"). We have responded to the legal issues presented by Sterling in our response to its cross-motion for summary judgment on damages.

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2.

We object, upon the ground of vagueness, to Sterling's proposed findings which ask us to

confirm the content of a specific witness's testimony, or the contents of a specific document. While we have attempted to answer these questions, our answers are limited solely to determining whether the cited transcript, declaration, document, or affidavit are consistent with the proposed finding. The proposed findings do not ask whether the document is accurate or whether the witness has offered other testimony which is contradictory or which undermines the cited testimony, and we have not sought to provide such information in our answers. Similarly, the proposed findings do not seek information as to the admissibility of the cited testimony or document (such a request would ask for a legal conclusion) and we have not sought to address the admissibility of the cited testimony. As such, we reserve our right to challenge the admissibility, accuracy, and veracity of any of the cited testimony or documents under the Federal Rules of Evidence, the RCFC, and 12 C.F.R. § 510.5 (1990). Subject to the forgoing qualifications and objections, pursuant to 56(h)(2), defendant submits the following responses to the proposed findings of uncontroverted fact submitted by Sterling. 1. Sterling began operations in 1983 as a State of Washington-chartered federally

insured stock savings and loan association headquartered in Spokane, Washington. App. 1245:821. Defendant's Response: Undisputed. 2. In contrast to the vast majority of thrifts, Sterling was a profitable and sound

financial institution all during the troubled period of the 1980s. App. 9, ¶ 18; App. 105.

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Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 1. Object to the proposed finding because it is vague as to time period and the meaning of the words "vast majority," "sound," and "troubled period." Disputed because the document cited does not substantiate this vague, overbroad assertion. Sterling cites to an unsubstantiated assertion in an affidavit by Mr. Gilkey. Sterling also cites to a summary of Sterling financial data from 1983 to 1989, but provides no information or analysis about its peer institutions or the thrift industry as a whole. 3. During this time, Sterling's market area enjoyed more favorable growth than most

states, and completely avoided the 1990-1991 recession. App. 3-4, ¶ 11; App. 1253:11-12:54:4. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "market area," "favorable growth," and "completely avoided." Disputed because the document cited as App 3-4, ¶ 11 does not substantiate this overbroad assertion. First, there is no ¶ 11 in App. 3-4. Second, App. 3 addresses the temporary restraining order Sterling obtained and responds to the Government's argument that Sterling's damages model is "unsound." While there is mention of Sterling's growth, App. 3 does not address Sterling's growth with respect to other states, nor the 1990-1991 recession. App. 4 is the signature page for the Declaration of Harold B. Gilkey, which begins on App. 1. Further, the document cited as App. 1253:11-1254:4 does not substantiate this overbroad assertion. App. 1254:11-1254:4 is

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deposition testimony discussing the "outstanding" environment in the Pacific Northwest and "some problems" at unidentified "other competitor institutions" at an unreferenced time period. 4. Because Sterling opened in 1983, after peak interest rates, it did not have a

portfolio of low-rate mortgage loans made in the 1960s or 1970s, but instead held all loans at current market rates, exceeding the rates it was paying on deposits. App. 1254:18-24; 2006 App. 131. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "peak interest rates" and "current market rates." Disputed because App. 1254:18-24 does not support this vague, overbroad assertion and because it is unclear what Sterling is citing to when it references 2006 App. 131. Undisputed to the extent that Sterling commenced operations in 1983. Comp. ¶ 1.1. Undisputed to the extent that the document cited as App. 1254:18-24, an excerpt from Harold Gilkey's June 6, 2000 deposition, states: Q. How was Sterling able to avoid the interest rate problems being experienced by other thrifts in the state? A. We ­ the bulk of our assets were adjustable rate mortgages, and so we didn't have any fixed rate mortgages on the books to burden us down where other institutions did. 5. By the end of its first year of business, Sterling was profitable. App. 10, ¶ 19;

App. 131. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See

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General Objection 2. Object to the proposed finding because it is vague as to time period. Sterling's citation to page 131 of its appendix indicates that as of fiscal year end June 30, 1983, Sterling had negative net income of ($130,000) and a return on average assets of negative 2.22 percent. Undisputed only to the extent that plaintiffs are referring to Sterling's first full fiscal year-end June 30, 1994, and that Sterling's "ROAA before taxes and Amortization" was .69 percent for that period. App. 131. 6. Its deposits, assets and profits increased each year without interruption through

fiscal year 1989. App. 10, ¶ 19; App. 105. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period. Disputed because the documents cited do not support the proposed finding. According to page 105 of Sterling's appendix, as Sterling's total assets increased from $433.953 million as of June 30, 1988, to $730.933 million as of June 30, 1989, its net income decreased from $1.2 million to $981,000, respectively. According to this same document, Sterling's profitability decreased from fiscal year end June 30,1986, through fiscal year end June 30, 1989, as demonstrated by its return on average assets which declined as follows: 1.02 percent for 1985, .93 percent for 1986, .91 percent for 1987, .73 percent for 1988 and .65 percent for 1989. Thus, although Sterling's deposits and assets increased through fiscal year 1989, its profitability steadily declined during the same period. 7. Sterling had a relatively small market share in the markets that it entered, so it had

a substantial market available to it for growth. App. 1278:1-19. 5

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Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "relatively small market share," "markets that it entered," and "substantial market available." Undisputed to the extent that Mr. Gilkey, in his June 6, 2000 deposition, testified, without substantiation, that "we are such a small portion of any of those markets, that we have a substantial market available to us." App. 1278:17-19. Disputed to the extent that in that same portion of testimony Mr. Gilkey also testified that "we are limited ­ size of the company is limited by our capital base." App. 1278:10-11. Also disputed in that, even if the plaintiff had a "small portion" of the relevant markets, that does not lead to the conclusion that the remainder of that market was necessarily available" to Sterling. 8. The success of Sterling during the 1980s was due primarily to its good management.

App. 10, ¶¶ 20-21; App. 61. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the word "success." Disputed because, as demonstrated by page 105 of Sterling's appendix and discussed in our response to PFUF No. 6 above, although Sterling's deposits and assets generally increased throughout the 1980's, its profitability steadily declined as indicated by its return on average assets profitability ratio, which consistently decreased every fiscal year from 1.02 percent in 1985 to .47 percent in 1990.

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9.

Management success included the development and adoption of a business

strategy that focused on generating deposits in Spokane and small towns in Washington, and building a lending capability in Spokane and Western Washington where loan demand was stronger. Id. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "success" and "loan demand was stronger." Disputed because Sterling's business strategy had a broader focus than indicated in the proposed finding. As detailed in a Securities and Exchange Commission filing in 1989, subsequent to the enactment of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat. 183 ("FIRREA"), Sterling desired to achieve "a more geographically diversified loan portfolio." Govt. App. 34. In addition, in 1993 Sterling implemented a growth strategy predicated upon buying wholesale assets funded with wholesale liabilities. Def. App. 777. 10. Sterling's plan was implemented with considerable skill, and success was achieved. Id. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "considerable skill" and "success was achieved." Undisputed only to the

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extent that Sterling's acquisitions furthered its strategy to grow its asset base by acquiring other thrifts rather than opening its own branches. 11. Sterling had the same management team throughout this period (and still does),

and the same management and business strategy would have been in place absent the breach. Id. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period. Undisputed only to the extent that Harold Gilkey, William Zuppe, and Daniel Byrne were executive officers between 1984 and today. 12. The supervisory acquisitions that are the focus of this litigation were consistent

with the growth plan, which from the outset included goals to achieve steady and consistent growth. App. 10, ¶ 22; App. 59. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "growth plan" and "steady and consistent." Disputed because the statement is inconsistent with Sterling's own pre-FIRREA business plan, which projected nogrowth. Gov't Supp. App. 31.

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13.

Sterling pursued a strategy of internal growth combined with strategically-suited

acquisitions. App. 1111:1-10. Defendant's Response: Undisputed 14. Sterling's plan was to grow aggressively through a balanced combination of

acquisitions and branch creation. Id.; App. 1243:4-25, 1244:1-6, 1240:11-1247:19. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "grow aggressively" and "balanced combination." Disputed because Sterling pursued a strategy to grow its asset base by acquiring other thrifts rather than opening its own branches. Undisputed only to the extent that Sterling instituted a 50/50 growth policy, whereby it planned to grow through 50 percent acquisition and 50 percent internal growth. App. 1246:9-1247:1. 15. By the late 1980s, the number of insolvent thrifts threatened to swamp the

resources of the FSLIC. Winstar, 518 U.S. at 847 (noting that by 1988 the FSLIC was itself insolvent by over $50 billion). Defendant's Response: Undisputed only to the extent that the FSLIC's resources were insufficient to cover its potential financial commitments by the late 1980s. 16. The FSLIC found, however, that some healthy institutions were willing, under certain

circumstances, to take on thrifts whose liabilities exceeded the value of their assets without cash assistance sufficient to fill the net worth "hole" (excess of liabilities over assets). Id. at 848.

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Defendant's Response: Object to the proposed finding because it is vague as to time period and the meaning of the words "net worth hole" and "certain circumstances." Otherwise, undisputed. 17. The Office of Thrift Supervision recognized Sterling's ability to meet its business

plan, and on this basis recommended it as a thrift capable of acquiring troubled institutions. App. 1353-54, ¶¶ 16-17, 1356, ¶ 25, 1358, ¶ 33. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "troubled institutions." Object to the proposed finding as irrelevant. The Government has already been held liable for breach of contract in connection with Sterling's acquisitions of Lewis Federal and Tri-Cities. Paragraph 17 of App. 1354 relates to the insolvency and acquisition of Lewis Federal, for which "the FHLBB asked Sterling to submit a takeover bid." Paragraph 25 of App. 1356 relates to the acquisition of Tri-Cities, for which Sterling was "one of the thrifts asked" to bid. App. 1358, ¶ 33 relates to the insolvency and acquisition of Central Evergreen Federal Savings & Loan Association ("Central Evergreen"), which Sterling initially sought to acquire without Government involvement. Further object to the proposed finding as irrelevant because App. 1358, ¶ 33 discusses the acquisition of Central Evergreen, and Sterling has been found not to have breached a contract with respect to Central Evergreen. Sterling Sav. Ass'n v. United States, 72 Fed. Cl. 404 (2006). Disputed to the extent that the Office of Thrift Supervision ("OTS") was not in existence prior to FIRREA. Further disputed to the extent that the documents cited do not discuss Sterling's "ability to meet its 10

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business plan" and, therefore, whether that was the basis upon which Sterling was "recommended [] as a thrift capable of acquiring troubled institutions." PFUF No. 17. Undisputed to the extent that App. 1354-54, ¶¶ 16-17, from Mr. Zuppe's May 28, 1990 affidavit, states only: "As a solvent and healthy thrift, Sterling was asked, commencing in 1985, by the FSLIC and the FHLBB, its regulators, to acquire certain troubled thrifts." 18. Sterling completed three of these acquisitions of troubled thrifts, Lewis, Tri-Cities

and Central Evergreen. E.g., id. Defendant's Response: Undisputed. 19. These acquisitions were consistent with Sterling's growth strategy of gathering

deposits gathering in smaller communities. App. 10, ¶ 22; App. 59. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and, as worded, is unclear. Undisputed only to the extent that each of Sterling's acquisitions were accomplished in furtherance of its strategy to grow its asset base by acquiring other thrifts rather than opening its own branches. Govt. App. 34. 20. The inducements offered by the Government in exchange for these three

acquisitions were the key factor that justified Sterling's assumption of liabilities in excess of the total of assets acquired plus cash assistance. App. 1108:13-19, 1112:19-1113:5, 1114:121115:23; App. 1251:18-22. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See 11

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General Objection 2. Sterling's acquisitions were the result of several key factors that it viewed as advantageous. In a 1989 Securities and Exchange Commission filing, submitted subsequent to the enactment of FIRREA, Sterling detailed the advantages of its acquisitions as follows: These acquisitions have enabled [Sterling] to expand its deposit and mortgage delivery systems considerably in a relatively short period and have added significant assets, a more geographically diversified loan portfolio, and potential future tax benefits . . . . Through consolidation, the Association has reduced the cost of performing administrative functions and increased the operating efficiencies of these acquired institutions. Management of the association believes that continued disciplined supervision of the assets acquired from Lewis Federal, Tri-Cities and Central Evergreen will result in increased profitability to [Sterling.] Govt. App. 34. 21. Sterling would not have done the deals without the Capital Inducements made by

the Government. App. 1108:13-19, 1109:21-1110:1, 1112:19-1113:5; App. 273:18-22, 292:1-9. Defendant's Response: Disputed. See our response to PFUF No. 20 above. 22. Sterling's growth and profitability were attained through sound and conservative

operating policies. App. 10, ¶¶ 20-21; App. 882. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "sound," "conservative," and "operating policies." Disputed because the documents cited do not support the proposed finding. Further, Sterling's operating policies allowed for high interest rate risk, which is an unsafe and unsound practice for attaining growth and profitability. Gov't Supp. App. 33.

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23.

As of June 30, 1989, Sterling had total assets of $731 million, and deposits of

$519 million. App. 958-996. Defendant's Response: Undisputed to the extent that, as of June 30, 1989, Sterling had total assets of $730.1 million and total deposits of $519.9 million. App. 977. 24. It earned net income of $1.3 million for fiscal year 1989 (an actual increase from

1988) despite the very large, unassisted absorption of Central Evergreen in December 1988. App. 978. Defendant's Response: Disputed. Object to the proposed finding because it is vague as to the meaning of the words "net income" and is misleading as written. As indicated on page 105 of Sterling's appendix, Sterling Savings Association's net income decreased from $1.2 million for fiscal year 1988, to $981,000 for fiscal year 1989. Similarly, consolidated net income before taxes decreased from $1.971 million for fiscal year 1988, to $1.571 million for fiscal year 1989. Consolidated net income after taxes increased slightly from $1.219 million for fiscal year 1988, to $1.285 million for fiscal year 1989. Thus, the isolated and minimal increase in consolidated net income after taxes was solely due to a $527,000 decrease in the provision for income taxes that slightly exceeded the $460,000 drop in consolidated net income before taxes over the same period. Thus, absent Sterling's reduced 1989 tax liability, its consolidated net income after taxes would have also decreased, just as Sterling's net income decreased. Undisputed to the extent that Sterling (consolidated) reported $1.285 million in after-tax income for the fiscal year-end 1989, App. 978, and that this was below the projected after-tax net income for the fiscal year-end 1989 of $1.341 million stated in Sterling's Central Evergreen business plan. App. 1330. 25. In 1989, then, prior to the breach, Sterling was well on its way towards its goal of 13

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becoming a major player in the Northwest market in accord with its original and consistently maintained business strategy. App. 961-62. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague with respect to the meaning of the words "well on its way" and "major player." Undisputed that each of Sterling's acquisitions was accomplished in furtherance of its strategy to grow its asset base, and that Sterling viewed its execution of this strategy as successful. Evidence shows however, that, although Sterling viewed its execution of this strategy as successful, regulators and others had issues with some of Sterling's assets and business strategies. Gov't Supp. App. 35. Other documents show that Sterling, like other thrifts in the area, also faced challenges during this period as a result of a weakening economy, interest rate pressures, and competition, among other factors. See, e.g., Gov't Supp. App. 37, 39. 26. However, this rapid growth during the 1980s, coupled with the acquisitions of the

three troubled thrifts, each with liabilities in excess of its assets, left Sterling in an undercapitalized position, although it had regulatory capital modestly in excess of its requirements. App. 13, ¶ 28; App. 60. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period and the meaning of the words "rapid growth," "troubled thrifts," "undercapitalized position," and 14

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"modestly in excess of its requirements." Object to the proposed finding because it is irrelevant. To the extent that Sterling's "rapid growth" left it "in an undercapitalized position," this is irrelevant to the determination of whether Sterling suffered damages as a result of the finding that the Government breached two contracts with Sterling. Similarly, Sterling's acquisition of Central Evergreen is irrelevant to Sterling's claim for damages because the Court has already determined that the enactment of FIRREA did not result in a breach of contract with respect to the acquisition. Sterling, 72 Fed. Cl. 404. In addition, Sterling was provided cash assistance in the Lewis Federal and Tri-Cities acquisitions in the amount of $1.75 million and $11.73 million, respectively. Govt. App. 17, 24. 27. Sterling had always been sensitive to its capital needs, and in 1989 planned an

equity offering of $10.5 million that would have left the institution with a comfortable margin above the minimum requirements, and would provide for the growth Sterling intended to pursue. App. 1008. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object that the proposed finding is vague with respect to the meaning of the words "sensitive," "comfortable margin," and "minimum requirements." The cited document does not support the proposed finding. App. 1008 does not indicate Sterling's capital relative to any "minimum requirement," with or without the planned equity offering. Undisputed that Sterling planned an equity offering of $10.5 million in 1989. Disputed that the $10.5 million capital offering would have provided a sufficient capital base for consistent growth and attainment of future regulatory capital requirements. As page 1008 of Sterling's appendix 15

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indicates, the proposed equity offering of preferred stock provided for the payment of dividends, a capital disbursement, which would have reduced Sterling's regulatory capital by unforeseeable amounts. Further, this proposed finding is misleading and irrelevant to the extent that the elimination of the noncontractual goodwill attributable to the Central Evergreen acquisition would have rendered Sterling noncompliant with the minimum capital requirements of FIRREA as of December 31, 1989. Def. App. 813 n.8 28. The proposed equity offering was included in Sterling's 1989 Business Plan

(although at a level of $5 million), to which Sterling and the government were committed by the terms of the Central Evergreen acquisition agreement. App. 779. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "committed by the terms." Object to the proposed finding as irrelevant because the Government has been found not to have breached a contract with respect to Sterling's acquisition of Central Evergreen. Sterling, 72 Fed. Cl. 404. Disputed because Sterling has not cited to evidence demonstrating that the Government was committed to an offering. In fact, the Court has held that the Government was not contractually obligated to permit Sterling to pay dividends. Sterling Sav. Ass'n v. United States, 53 Fed. Cl. 599, 614-15 (2002). Undisputed only to the extent that a $5 million proposed equity offering was included in Sterling's Fiscal 1989 Business Plan Update. App. 778-779. See also Response to PFUF No. 27. 29. This offering did not take place due to the Government's breach. App. 14, ¶ 32. 16

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Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding as irrelevant because Sterling has been found not to have breached a contract with respect to its acquisition of Central Evergreen. Sterling, 72 Fed. Cl. 404. Disputed because Sterling has not identified any document or testimony demonstrating that the Government was committed to a proposed payment offering. In fact, the Court has held that the Government was not contractually obligated to pay dividends after raising capital. Sterling, 53 Fed. Cl. at 614-15. Undisputed only to the extent that a $5 million proposed equity offering was included in Sterling's Fiscal 1989 Business Plan Update. App. 778-779. 30. After the enactment of FIRREA, the Government began to treat Sterling as an

undercapitalized, troubled thrift, forcing Sterling to shrink its business operations and to abandon its growth strategy through the imposition of certain operating restrictions. App. 1165:8-25; App. 849-50. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period. Sterling was, in fact, undercapitalized as a result of the new capital regulations resulting from FIRREA, which became effective on December 7, 1989. Gov't Supp. App. 41. Further, OTS's first examination of Sterling subsequent to FIRREA disclosed a deterioration in asset quality. Gov't Supp. App. 35. Further disputed with respect to Sterling's statement in the proposed 17

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finding: "forcing Sterling to shrink." Sterling's own document states that it was allowed to grow so long as growth did not exceed net interest credited. App. 850. 31. These restrictions included: (1) a limit on asset growth; (2) a moratorium on

capital distributions; (3) limits on residential loans to conforming loans; (4) consumer lending restrictions; (5) loans to one borrower limits of $500,000; (6) no authority to purchase or sell any asset or group of assets in excess of $500,000; (7) approval of OTS required to increase compensation of any executive officer or director; and (8) inability to accept uninsured deposits. Id. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of all of the alleged "restrictions" listed in PFUF No. 31. Undisputed to the extent that Rodney W. Barnett, in his April 11, 2000 deposition, identified, in an answer to a question that does not identify the time period, certain "restrictions" placed upon Sterling. App. 1165:8-25. In addition, the document cited as App. 849-850 is misleading. This citation is to a June 19, 1990 letter to Carol Friend, OTS, from Daniel G. Byrne, Senior Vice President, Sterling Savings Association, attaching a "listing of the operating restrictions imposed upon Sterling pursuant to your letters dated November 9, 1989, January 26, 1990, March 9, 1990, and May 11, 1990." Mr. Byrne's letter is in response to Ms. Friend's letters of June 5, and June 18, 1990. Ms. Friend's June 5, 1990 letter specifically states: "In light of the May 29, 1990 Temporary Restraining Order, please provide weekly reports of any actions taken that are not in keeping with the restrictions imposed by our letters of January 26, 1990, March 9, 1990 and May 18

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11, 1990." App. 848. This June 5, 1990 letter, on its face, conveys that Sterling was permitted to engage in those activities that it was not permitted to engage in prior to the entering of the injunction. If Sterling was not allowed to engage in those activities, there would be no need for such a report because Sterling otherwise would have been prohibited from engaging in the activities. The June 5, 1990 letter was clarified in Ms. Friend's June 18, 1990 letter, Govt. App. 46, which is the other letter to which Mr. Byrne responds in his June 19, 1990 letter, App. 849-850. In Ms. Friend's June 18, 1990 letter, she expressly stated OTS's intent to "strictly obey" the district court order prohibiting it from enforcing any restrictions in contravention of the contracts. Govt. App. 46. Therefore, Mr. Byrne's June 19, 1990 letter does not refer to operating restrictions placed upon Sterling by the OTS, in violation of the temporary restraining order, but was only required to be a report of those activities in which Sterling would not have been permitted to engage in the absence of the temporary restraining order. App. 849. 32. Sterling was forced to curtail its operations significantly. App. 1166:15-1167:12. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time and the meaning of the words "curtail its operations significantly." Disputed because Sterling has not demonstrated that a breach caused Sterling to curtail its operations. See Responses to PFUF Nos. 31 and 36.

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33.

From June 1989 to June 1991, Sterling shrunk its asset base, declining in size for

the first time in its history. App. 10, ¶ 21; App. 161-163; App. 1271:13-1274:17. Defendant's Response: Undisputed that Sterling shrank its asset base between June 30, 1989, and June 30, 1991, and, as a part of that reduction, reduced its nonperforming assets by 43 percent. Govt. App. 601. 34. Sterling's total assets shrank to $609 million in June 1991 from the $731 million

of June 1989, a decline of over 17 percent. App. 161-63. Defendant's Response: Disputed. The percentage decline in Sterling's total assets from June 30, 1989, to June 30, 1991, did not exceed 17 percent, but was slightly less. As part of that reduction, Sterling reduced its nonperforming assets by 43 . Govt. App. 601. Otherwise, undisputed. 35. Because of the breach, Sterling's commercial lending ability was all but

destroyed, its residential construction mortgage business severely curtailed, and its real estate lending crippled. App. 1116:2-1117:15; App. 1255:1-18, 1256:19-1257:1, 1257:15-23, 1284-85, 1286:22-1287:15, 1288:1-3; 1290-92. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period and the meaning of the words "all but destroyed," "severely curtailed," and "crippled." Disputed because Sterling has not demonstrated that a breach caused these effects. See Responses to PFUF Nos. 31 and 36. 20

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36.

Sterling lost valuable employees. App. 1118:15-1120:2; App. 1286:15-1287:15. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of

vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "lost" and "valuable employees." Object to the proposed finding as irrelevant with respect to the testimony cited as App. 1118:15-1120:2. The testimony at App. 1118:15-1120:2 includes names of employees that left Sterling, but does not contain any reason as to why these employees left. To the extent the employees left for reasons not related to the breach, their actions are irrelevant to the determination of whether the alleged breach caused Sterling damages. Further, this proposed finding is misleading and irrelevant to the extent that, but for the breach, the elimination of the noncontractual goodwill attributable to the Central Evergreen acquisition would have rendered Sterling noncompliant with the minimum capital requirements of FIRREA as of December 31, 1989, even incorrectly assuming, as Dr. Horvitz did, that Sterling would have completed a $10.5 million public offering in December 1989. Def. App. 813 n.8. In calculating tangible capital in a "but-for" world that does not assume that such a public offering would have occurred, the addition of the contractual Lewis Federal and Tri-Cities goodwill would only improve Sterling's tangible capital deficit from negative $22.833 million to negative $7.276 million. App. 177 (Horvitz 2006 Report, Ex. 6, Table 4a); Gov't Supp. App. 17. That tangible capital deficit would have rendered Sterling non-compliant with the 1.5 percent minimum tangible capital requirement of FIRREA, 12 C.F.R. § 567.9(a) (1989), and subjected it to the restrictions that were imposed in the actual world. 21

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Also, to the extent that Mr. Gilkey, in his June 6, 2000 deposition, at App. 1286:151287:15, testified that employees of Intervest Mortgage left because of the breach, he incorrectly assumed that the Central Evergreen goodwill was contractual. 37. Sterling was forced to forgo investment opportunities, including acquisitions.

App. 1121:17-24, 1131:22-1144:2; App. 1279:13-1281:8. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "forced," "investment opportunities," and "acquisitions." As demonstrated by Sterling's return on average assets profitability ratio, which steadily declined from 1.02 percent in 1985, to .65 percent in 1989, Sterling's profitability declined as its asset base steadily increased from $112 million in 1985, to $730 million in 1989. Therefore, a primary reason for any decisions by Sterling to forgo any investment opportunities or business acquisitions would have been the institution's need to return to profitability. In addition, this proposed finding ignores the fact that Sterling obtained an injunction that prohibited the Government from enforcing any restrictions inconsistent with Sterling's acquisition agreements. The implication that Sterling was "forced" to forgo opportunities is also misleading because Sterling maintained significant excess capital after its 1991 recapitalization. Govt. Supp. App. 45. Finally, we object to the proposed finding because, even absent the breach, the elimination of the noncontractual Central Evergreen goodwill from regulatory capital would have rendered Sterling noncompliant with the minimum regulatory capital requirements. See Response to PFUF No. 36. In addition, Sterling ignores the fact that, as of May 1990, the 22

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District Court of the Eastern District of Washington enjoined the Government from enforcing any restrictions imposed in connection with FIRREA's minimum capital requirements. See Response to PFUF No. 31. 38. Moreover, Sterling suffered damage to its reputation because of the Government's

restrictions on the type and amount of business in which Sterling could engage. App. 1213:71214:24; App. 1217; App. 1219:22-1233:24, 1234:3-1235:14; App. 1238-1239; App. 1255-57. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period and the meaning of the words "damage," "reputation," "restrictions," "type and amount of business," and "engage." Disputed because, even absent the breach, the elimination of the noncontractual Central Evergreen goodwill from regulatory capital would have rendered Sterling noncompliant with the minimum regulatory capital requirements. See Response to PFUF No. 36. In addition, Sterling ignores the fact that, as of May 1990, the District Court of the Eastern District of Washington enjoined the Government from enforcing any restrictions imposed in connection with FIRREA's minimum capital requirements. See Response to PFUF No. 31. Finally, the deposition testimony relied upon for this proposed finding does not establish a causal link between the enactment of FIRREA and changes in Sterling's operations. See, e.g., App. 1222-23; see also App. 1255-56.

23

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39.

In addition, Sterling was forced to cancel the 1989 offering because the OTS

refused to commit to allow Sterling to pay dividends on the preferred stock that was part of the offering. App. 1008. Defendant's Response: Disputed. The court has already determined that Sterling was not contractually entitled to pay dividends. Sterling, 53 Fed. Cl. At 615. Further, the document cited as App. 1008, an annual report that provides only self-serving and unsubstantiated assertions by Sterling's management after its filing of a suit in federal district court, does not support this finding. Sterling was permitted to continue with its 1989 offering provided that no open-ended commitments to pay future dividends, a capital disbursement, were included as part of the equity offering. As an alternative, Sterling could have offered $10.5 million in nonpreferred or common stock, which would not have carried the same unascertainable risks to future capital as a preferred stock offering requiring future dividend payments. 40. The Government's breach severely damaged Sterling's ability to engage in

residential construction lending through its subsidiary, Action Mortgage. App. 1290:5-9. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period and the meaning of the words "severely damaged." We object to this finding because, even in the absence of the breach, the elimination of the noncontractual Central Evergreen goodwill from regulatory capital would have rendered Sterling noncompliant with the minimum regulatory capital requirements. See Response to PFUF No. 36. In addition, Sterling ignores the fact that, 24

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as of May 1990, the district court enjoined the Government from enforcing any restrictions imposed in connection with FIRREA's minimum capital requirements. See Response to PFUF No. 31. 41. Residential construction lending was a high profit area. App. 1290:10-14. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "high profit area." Furthermore, the cited deposition merely states that residential construction lending was a high profit area without providing any supporting evidence. 42. Prior to the breach, Sterling intended to expand Action Mortgage into Seattle,

Portland, Vancouver (WA), Lake Oswego (OR), Boise and Salt Lake City. App. 1290-91. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period. The testimony is irrelevant because Sterling has not demonstrated that a breach prevented the opening of these offices. See Responses to PFUFs No. 31 and 36. 43. Action's business plan was to quadruple lending activity, to be achieved through

opening these offices. App. 1292:9-13. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See 25

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General Objection 2. Sterling also fails to cite Action's business plan. Undisputed to the extent that Mr. Gilkey's testimony is consistent with the proposed finding, although the testimony is irrelevant because Sterling has not demonstrated that a breach prevented the opening of these offices. See Responses to PFUFs No. 31 and 36. 44. Sterling attempted to support an Action Mortgage office in Salt Lake City, but

could not make a profit without the ability to engage in construction lending. App. 1290:21-25. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period. Object as irrelevant because Sterling has not demonstrated that a breach caused its inability to provide construction lending. See Responses to PFUFs No. 31 and 36. Undisputed to the extent that Mr. Gilkey's testimony is consistent with the proposed finding. 45. Sterling thus had to close that office. Id. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the word "thus." Object as irrelevant because Sterling has not demonstrated that a breach caused its inability to provide construction lending. See Responses to PFUFs No. 31 and 36. Undisputed to the extent that Mr. Gilkey testified: "Salt Lake we opened up, but only as a production office of single family loans, did not do construction. We then found that we couldn't make money doing that without the construction. It was closed, we withdrew." App. 1290:2125. 26

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46.

Sterling was able to keep open a Boise office to handle single family loans, but

could not expand that office into residential construction lending, the more profitable side of Action Mortgage. App. 1291:1-4. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period. We dispute this proposed uncontroverted fact because the cited testimony does not support the contention that residential construction lending was "the more profitable side of Action Mortgage." 47. Utah subsequently underwent an economic upswing, which Sterling could not

benefit from because the Action office had to be closed. App. 1283:15-25. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period. Disputed because Sterling has not demonstrated that a breach caused the closure of its Utah office. See Responses to PFUFs No. 31 and 36. Undisputed to the extent that Mr. Gilkey, at a 2000 deposition, testified, in response to being asked about the government's "breach," that "[w]e closed our Utah office of Action Mortgage Company and lost out on the entire economic boom of Utah." App. 1283:23-25. 48. The restriction also stopped Sterling from opening Action Mortgage offices in

Seattle, Portland and Lake Oswego until after January of 1992. App. 1291:12-25; App. 1292:4-6. 27

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Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period and the meaning of the word "restriction." Disputed because Sterling has not demonstrated that a breach prevented Sterling from opening these offices until 1992. See Responses to PFUFs No. 31 and 36. 49. By that time, Sterling had lost contact with the persons it intended to hire to

supervise those offices, thus leading to further cost to find appropriate staff. App. 1291:15-17. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "further cost" and "lost contact." Disputed because Sterling has not demonstrated that a breach prevented Sterling from contacting these individuals until 1992. See Responses to PFUFs No. 31 and 36. 50. Sterling eventually opened the Seattle and Lake Oswego offices, which have been

highly profitable. App. 1291:19-21. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "eventually" and "highly profitable." We do not dispute that Sterling opened these offices. 28

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51.

However, Sterling lost years of time in Lake Oswego and in Seattle due to the

breach. Id. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period and the meaning of the words "years of time." Disputed because Sterling has not demonstrated that a breach prevented Sterling from opening these offices. See Responses to PFUFs No. 31 and 36. 52. Two-thirds of the existing staff of Intervest, another Sterling subsidiary, left

following the Government's breach, including all of the big producers of assets, and Intervest was forced by the breach to eliminate almost all of its lending. App. 1286:22-1287:15. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period and the meaning of the words "big producers." Disputed because Sterling has not demonstrated that a breach caused Sterling to eliminate all of Intervest's lending. See Responses to PFUFs No. 31 and 36. 53. Had the larger producers stayed and the breach not occurred, Intervest would have

been able to substantially increase the size of its staff and therefore the size of its assets and lending capacity. Id.

29

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Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period and the meaning of the word "substantially." Disputed because Sterling has not demonstrated that a breach caused Sterling to eliminate all of Intervest's lending. See Responses to PFUFs No. 31 and 36. Further, the cited testimony does not support Sterling's contention that Intervest would have been able to substantially increase the size of its assets and lending capacity. 54. Specifically, Intervest's operations would have expanded to cover northern

California, Oregon, Idaho, parts of Utah, Montana and Washington. 1287:9-15. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to proposed finding because it is vague as to time period and under what circumstances the operations "would have expanded." Disputed because Sterling has not demonstrated that a breach caused Sterling to eliminate all of Intervest's lending. See Responses to PFUFs No. 31 and 36. 55. Sterling suffered a reduction in servicing income because OTS restrictions did not

permit it to originate certain types of construction loans that would have been converted to permanent loans. App. 1116:2-1117:15. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See 30

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General Objection 1. Object to the proposed finding because it is vague as to time period. Disputed because Sterling has not demonstrated that a breach prevented Sterling from originating such loans. See Responses to PFUFs No. 31 and 36. 56. Sterling was forced to withdraw business banking, consumer lending, commercial

real estate and residential construction activity. App. 1285:1-3. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and what "forced" Sterling to withdraw. Disputed because Sterling has not demonstrated that a breach caused Sterling to withdraw from the activities listed. See Responses to PFUFs No. 31 and 36. 57. The Government forced Sterling to withdraw from fixed rate lending and public

funding activities for a period of time. App. 1285:4-9. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding as vague as to "period of time." Disputed because Sterling has not demonstrated that a breach caused Sterling to withdraw from the activities listed. See Responses to PFUFs No. 31 and 36. 58. Sterling also was forced to stop gathering uninsured deposits. App. 1285:6-10. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and as 31

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to what "forced" Sterling to stop gathering uninsured deposits. Disputed because Sterling has not demonstrated that a breach caused Sterling to withdraw from the activity. See Responses to PFUFs No. 31 and 36. 59. Sterling lost many customers with deposits in excess of $100,000, including a

priest in Salish who had deposits in excess of $ 1 million. App. 1255:1-11; App. 1256:19-15; App. 1257:1. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the word "lost." Disputed because the same individual's testimony also indicates that some depositors withdrew and then returned. App. 1257:7-8. Further, Sterling has not demonstrated that a breach caused the priest to withdraw deposits. See Responses to PFUFs No. 31 and 36. 60. Condron Homes and Baker Construction left due to OTS limitations on Sterling.

App. 1255:12-18. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "OTS limitations" and "lost." Disputed because Sterling has not demonstrated that a breach caused the end of the customer relationship. See Responses to PFUFs No. 31 and 36. 32

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61.

Fred Burstad and Burstad Construction of Seattle left due to OTS limitations.

App. 1257:15-23. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it calls for a legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period and the meaning of the words "OTS limitations." Disputed because Sterling has not demonstrated that a breach caused the end of the customer relationship. See Responses to PFUFs No. 31 and 36. 62. Sterling could not make certain loans to its customers and was forced to refer

those customers to other financial institutions; "[Sterling was] not only turning them away, we were walking them across the street to our competitors to avoid the restrictions that we were placed under." App. 1282:20-23. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period. Disputed because Sterling has not demonstrated that a breach caused it to lose customers. See Responses to PFUFs No. 31 and 36. 63. The following customers left Sterling as a result of uncertainty about the Bank:

(1) Boyd, Bjockman & Frickle, an accounting firm with a term loan for equipment and leasehold improvements as well as a credit line; (2) CRM Optical, a contact lens manufacturer with multiple term equipment loans and a credit line; (3) DIVCO Energy Control Company, a heating and air conditioning company, and its principal, Robert Nelson, considered a $5 million 33

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customer, with several equipment loans and a large credit line; (4) Latah Creek Winery, which had a $1 million equipment loan and a credit line; (5) Miller-Jordan Travel, a travel agency, had a credit line and a few equipment term loans; (6) Northern Technologies, Inc., a technology company that manufactured surge protectors, had a rapidly increasing credit line designed to keep pace with the company's growth; and (7) Northwest Ski Exchange, a retail shop, had several term loans and inventory financing. App. 1184:8-1185:16, 1186:17-1193:7, 1193A:141193B:5, 1193B:24-1204:25, 1205:12-1210:18; App. 1211. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding because it is vague as to time period and the meaning of the words "uncertainty about the Bank." We dispute this proposed finding of fact because Sterling has not demonstrated that a breach caused the end of these customer relationships. See Responses to PFUFs No. 31 and 36. The cited testimony also indicates that the customers left for various other reasons unrelated to the breach, including: because of their own changing business needs, because they were contacted by Mr. Beil after he started working for a new bank, and because some customers followed Mr. Beil to his new bank. App. 1191-92; 1195-1196; 1206-1207; 1209:13-18. 64. Sterling's inability to continue commercial activity and the uncertainty of when

the issues with the Government would be resolved cost Sterling many valuable business customers, including the following: (1) Aslin-Finch; (2) Dane Armstrong; (3) Ted Beasley; (4) Larry Biggs; (5) Cedar Builders; (6) Empire Jewelry and Loan; (7) George Hansen; (8) Don Howell; (9) Craig Jacobs; (10) Bill Lawson of A & A Construction; (11) Michael Manz; (12) 34

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Metallic Arts; (13) Grant Person; (14) Randy Ramey of Ramey Construction and Ramey Development; (15) Red Barn, NSE Inc.; (16) Doug Romney; (17) Roy Mitchell, Inc.; (18) Kevin and Chris Rudeen, Rudeen Development; (19) John Schreinir; (20) Harry and Daryl Siria; (21) G. Wesley Sodoroff; (22) Vandervert Development; (23) Mike Walker; and (24) Woodland Montessori School. App. 1213:7-1214:24; App. 1217. Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Object to the proposed finding as calling for legal conclusion. See General Objection 1. Object to the proposed finding because it is vague as to time period and the meaning of the words "issues with the Government." Disputed because the cited deposition testimony does not support this proposed finding. The deponent, Mr. Cajer Neely, was merely asked to list accounts that left Sterling during a specific time period, and he admitted that he did not know why the vast majority of the accounts left. Govt. App. 50-53. Further, we dispute this proposed finding of fact because Sterling has not demonstrated that a breach caused the end of these customer relationships. See Responses to PFUFs No. 31 and 36. 65. Likewise, specific customers sought construction loans from Sterling during that

time or inquired about the possibility of loans and Sterling was unable to accommodate them, including the following: (1) Bill Lawson, who sought approximately $1.5 million; (2) Dick Vandervert; (3) Dick Villelli, who sought approximately $2.0 million; (4) Harlan Douglas; (5) Richard Naccarato of Cedar Pines General Partnership; (6) Bob Spears; (7) Ted Gunning; (8) Dean Grafos of Opportunity Plaza; (9) Thompson and Brumback. App. 1219:22-1233:24, 1234:3-1235:14. 35

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Defendant's Response: Disputed. Object to the proposed finding upon the grounds of vagueness, because it asks us to confirm the contents of a specific witness's testimony. See General Objection 2. Objection to proposed finding as vague as to "during that time" and as to "unable to accommodate." Disputed because the cited testimony does not establish that loans would have been made to these indi