Free Motion in Limine - District Court of Federal Claims - federal

Case 1:95-cv-00524-GWM

Document 453-2

Filed 12/10/2007

Page 1 of 6

Todor, John (ClV)
From: Roberson, John (CIV) Sunday, December 09, 2007 9:51 AM Sent: Jeffrey Yushchak; Austin, Scott (CIV); Davis, Monica (CIV); Dintzer, Kenneth (CIV); To: Gnarra, Patricia (CIV); Holt, Elizabeth (CIV); Jacques, Jeffrey (CIV); Kanellis, William (CIV); Mizoguchi, Brian (CIV); Presley, Richard (CIV); Rexrode, David (CIV); Roberson, John (CIV); Tantum, Amanda (CIV); Todor, John (CIV); Yerawadekar, Sameer (CIV) Subject: FW: Holland v. U.S. Attachments: Microsoft Word -2014947 6 DOC.pdf; 2017210 3 XLS.pdf; 2017210 3 XLS.pdf; 2017210 3 XLS.pdf; 2017210 3 XLS.pdf; 2017210 3 XLS.pdf

From= [email protected] [mailto:[email protected]] Sent= Sunday, December 09, 2007 9:48 AM To; Roberson, John (CIV) Subject= Holland v. U.S.

John, Pursuant to paragraph 7 of the September 6, 2007 pretrial order in this case, attached to this e-mail please find six pdf files containing demonstrative exhibits plaintiffs may use on or after Wednesday, December 12 with our witness Dr. Homer Holland. -Mike

12/10/2007

Case 1:95-cv-00524-GWM

Document 453-2

Filed 12/10/2007

Page 2 of 6

Dr. Thakor's Lost Profits Formula (Exh. 4 to his Report)

Debt-equity ratio

X

Unlevered expected return on equity Margin

Expected return on debt

Marginal tax rate

Debt/Equity

x

After-tax rate I

After- Tax Return From Leveraging Intangible Capital (Lost Profits)

Case 1:95-cv-00524-GWM

Document 453-2

Filed 12/10/2007

Page 3 of 6

Dr. Thakor's Lost Profits Formula* Applied to Breach Excluded Capital
Unlevered
Debt-equity ratio x expected return on -

equity
I Debt/Equity

Expected return on debt

x I 1 - Marginal tax rate x After-tax rate

Margin
After- Tax Return From Leveraging Intangible Capital (Lost Profits)

Actual Values for River Valley
Date Core Capital Ratio Debt Equity Ratio [3] = 28.67 28.85 28.41 25.74 20,28 18.34 15.72 14.48 11.61 I3.86 13.90 14.24 14.75 14.13 13.71 14.02 16.15 17.76 . 17.42 Asset Yield [4] 0.0245 0.0264 0.0243 0.0235 0.0274 0.0278 0.0286 0.0264 0.0279 0.0236 0.0225 0.0161 0.0152 0.0169 0.0201 0.0191 0.0172 0.0124 0.0166 Cost of Funds [5] 0,0206 0,0206 0~0206 0.0206 0,0176 0.0176 0.0176 0.0176 0.0155 0.0155 0.0155 0 0155 00107 0 0107 0 0107 0 0107 00103 0 0103 00103 Margin [6] = [4]-[5] 0.0039 0.0058 0.0037 0.0029 0.0098 0.0102 0.0110 0.0088 0.0124 0.0081 0.0070 0.0006 0.0045 0.0062 0.0094 0.0084 0.0070 0.0022 0.0064 Tax Rate per Dr. Thakor [7] 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 0.0361 A~er Tax Rate After Tax Return 0.1078 0.1613 0.1013 0.0719 0.1915 0.1803 0.1667 0.1228 0.1391 0.1085 0.0941 0.0086 0.0643 0.0848 0.1245 0.1138 0.1082 0.0368 0.1066 Breach Excluded Regulatory Capital [10] $19,955,570 $19,812,500 $19,669,250 $19,526,000 $19,382,750 $19,239,500 $19,096,250 $18,953,000 $18,809,750 $16,952,214 $16,808,964 $16,665,714 $16,522,464 $15,695,214 $15,551,964 $15,408,714 $15,265,464 $14,389,357 $14,246,107 TOTAL Sources: * [2] [3] [4] [5] [7] [10] Thakor Report Exhibit 4 Thakor Report Exhibit 7 Leverage ratio is reduced by one to reflect conversion of capital-to-assets ratio to debt-to-equity ratio Thakor Rep. Exh. 16-19 Backup A Thakor Rep. Exh. 12 Thakor Dep. (9/4/2007) at 38 Holland 3rd Supp. Rep. Exhibit E; "Lost Profits" Per Dr. Thakor's Formula [11] =[9]x[10] $2,151,012 $3,195,629 $1,993,057 $1,404,810 $3,712,517 $3,469,614 $3,183,404 $2,327,863 $2,615,510 $1,839,961 $1,582,457 $143,010 $1,062,819 $1,330,569 $1,936,447 $1,753,726 $1,651,851 $529,660 $1,518,642 $37,402,558

[1]
3/31/90 6/30/90 9/30/90 12/31/90 3/31/91 6/30/91 9/30/91 12/31/91 3/31/92 6/30/92 9/30/92 12/31/92 3/31/93 6/30/93 9/30/93 12/31/93 3/31/94 6/30/94 9/30/94

[2]
0.0337 0.0335 0.0340 0.0374 0.0470 0.0517 0.0598 0.0646 0.0793 0.0673 0.0671 0.0656 0.0635 0.0661 0.0680 0.0666 0.0583 0.0533 0.0543

/1/[2]).1

[8] = 1 - [7] [9] = [3]x[S]x[8] 0.9~39 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639 0.9639

Case 1:95-cv-00524-GWM

Document 453-2

Filed 12/10/2007

Page 4 of 6

Dr. Thakor's Formula* Applied to Retained Earnings Functioning to Replace Regulatory Capital
Debt-equity ratio x lexpected return on Expected x equity return on debt I Debt/Equity x Margin After-Tax Return From Lew;raging Intangible Capital (Lost Profits) Actual Values for River Valley
Date [1] 3/31/90 6/30/90 9/30/90 12/31/90 3/31t91 6/30/91 9/30/91 12/31/91 3/31/92 6/30/92 9/30/92 12131!92 3/31/93 6/30/93 9t30/93 12/31/93 3131/94 6/30/94 9/30/94 Core Capital Ratio [2] 0.0337 0~0335 0.0340 0.0374 0.0470 0.0517 0.0598 0.0646 0.0793 0.0673 0.0671 0.0656 0.0635 0.0661 0.0680 0.0666 0.0583 0.0533 0.0543 Debt Equity Ratio [3] = (1/[2])-1 28.67 28.85 28.41 25.74 20.28 !8.34 15.72 14.48 11.61 13.86 13.90 14,24 14.75 14.13 13.71 14.02 16.15 17.76 !7.42 Asset Yield [4] 0.0245 0.0264 0.0243 0.0235 0.0274 0.0278 0.0286 0.0264 0.0279 0.0236 0.0225 0.0161 0.0152 0.0169 0.0201 0.0191 0.0172 0.0124 0.0166 Cost of Funds [5] 0.0206 0.0206 0.0206 0.0206 0.0176 0.0176 0.0176 0.0176 0.{:)155 0.0155 0.{)155 0.0155 0.0107 0.0107 0.{)107 0.{)107 0.0103 0,0103 0.0103

1

Marginal tax rate

x

After-tax rate

Margin [6]=[4]- [5] 0.0039 0.0058 0.0037 0.0029 0.0098 0.0102 0.0110 0.0088 0.0124 0.0081 0.0070 0.0006 0.0045 0.0062 0.0094 0.0084 0.0070 0.0022 0.0064

Tax Rate per Dr. Holland [71 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0,35 0.35

After Tax Rate [8] = 1 - [7] 0.65 0.65 0.65 0.65 0.65 0.65 0.65 O.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 O.65 0.65

After Tax Return [9] = [3]x[6]x[8] 0.0727 0.1088 0.0683 0.0485 0.1292 0.1216 0.1124 0.0828 0.0938 0.0732 0.0635 0.0058 0.0434 0.0572 0.0840 0.0767 0.0730 0.0248 0.0719

Retained Earnings Functioning to Replace Regulatory Capital [10] $4,927,318 $5,238,1031 $5,675,426i $6,510,652i $7,843,096i $9,689,992i $11,532,036 $12,653,555 $14,107,347 $14,546,283 $15,351,824 $14,726,630 $16,236,750 $15,449,500 $15,306,250 $15,163,000 $15,019,750 $14,186,500 $14,043,250

Profits "Bought Back" with Retained Earnings [11] =[9]x[10] $358,155 $569,734 $387,804 $315,871 $1,013,029 $1,178,398 $1,296,376 $1,048,029 $1,322,818 $1,064,672 $974,613 $85,217 $704,312; $883,2141 $1,285,199i $1,163,756 $1,095,986 $352,137 $1,009,505 $16,108,826 $7,088,706

TOTAL PROFITS RECAPTURED BY MITIGATION THROUGH 9194 = TOTAL COST OF MITIGATION THROUGH 9/94 = Sources: [2] [3] [4] [5] [7] [10] Thakor Report Exhibit 4 Thakor Report Exhibit 7 Leverage ratio is reduced by one ~o reflect conversion of capital-to-assets ratio to debt-to-equity ratio Thakor Rep. Exh. 16-19 Backup Thakor Rep. Exh. 12 Holland 3rd Supp. Rep. at para. 45 Holland 3rd Supp. Rep. Exhibit D

Case 1:95-cv-00524-GWM

Document 453-2

Filed 12/10/2007

Page 5 of 6

Dr. Thakor's Lost Profits Formula* Applied to Breach Excluded Capital

Debt-equity ratio x I expected return on - Expected return x on debt I equity I I Debt/Equity x Margin x

1

Marginal tax rate After-tax rate I

After- Tax Return From Leveraging Intangible Capital (Lost Profits)

Actual Values for River Valley
Date Core Capital Ratio Debt Equity Ratio 1 Asset Yield [4] 0.0245 Cost of Funds [5] 0.0206 Margin [6] = [4] - [5] 0.0039 Tax Rate per Dr. Thakor [7] 0.0361 After Tax Rate After Tax Return [9] = [3]x[6]x[8] 0.1078 Breach Excluded Regulatory Capital [10] $!9,955,570 TOTAL "Lost Profits" Per Dr. Thakor's Formula [11] =[9]x[10] $2,151,012 $2,151~012

[1]
3/31/90

[3] = [2] /1/[2]).
0.0337

[8] = 1 - [7] 0.9639

28.67

Sources: [2] [3] [4] [5] [7] [10]

Thakor Report Exhibit 4 Thakor Report Exhibit 7 Leverage ratio is reduced by one to reflect conversion of capital-to-assets ratio to debt-to-equity ratio Thakor Rep. Exh, 16-19 Backup A Thakor Rep. Exh. 12 Thakor Dep. (9/4/2007) at 38 Holland 3rd Supp. Rep. Exhibit B

Case 1:95-cv-00524-GWM

Document 453-2

Filed 12/10/2007

Page 6 of 6

Dr. Thakor's Formula* Applied to Retained Earnings Functioning to Replace Regulatory Capital

Unlevered Debt-equity ratio x expected return on equity I Debt/Equity x

Expected return on debt

xI1

Marginal
tax rate

Margin

x

After-tax rate

After-Tax Return From Leveraging Intangible Capital (Lost Profits)

Actual ValuesforRiverValley
Date Core Capital Ratio [2] 0.0337 Debt Equity Ratio [3] = 1/[2] 28.67 Asset Yield [4] 0.0245 Cost of Funds [5] 0.0206 Margin [6] =[4]- [5] 0.0039 After Tax Rate per Tax Dr. Holland Rate [7] [8] = 1 -[7] 0.35 0.65 After Tax Return [9] = [3]x[6]x[8] 0.0727 Retained Earnings Functioning to Replace Regulatory Capital [10] $4,927,318 Profits "Bought Back" with Retained Earnings [11] =[9]x[10] $358,155 $358;155 $123,899

[1]

3!31/90

TOTAL PROFITS RECAPTURED BY MITIGATION THROUGH 3/90 =

I TOTAL COST OF MITIGATION THROUGH 3/90 =

Sources: [2] [3] [4] [5] [7] [10]

Thakor Report Exhibit 4 Thakor Report Exhibit 7 Leverage ratio is reduced by one to reflect conversion of capital-to-assets ratio to debt-to-equity ratio Thakor Rep. Exh. 16-19 Backup A Thakor Rep. Exh. 12 Holland 3rd Supp. Rep. at papa. 45 Holland 3rd Supp. Rep. Exhibit D