Free Notice (Other) - District Court of Federal Claims - federal

Case 1:95-cv-00524-GWM

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________________________________ HOMER J. HOLLAND, ) STEVEN BANGERT, Co-Executor of ) the Estate of HOWARD R. ROSS, and ) FIRST BANK, ) ) Case No. 95-524C Plaintiffs, ) ) (Judge George W. Miller) v. ) ) (Winstar-Related Case) THE UNITED STATES, ) ) Defendant. ) ____________________________________) DEFENDANT'S NOTICE OF PROPOSED ALLOCATION OF TIME AT TRIAL Pursuant to the directive of the Court, defendant, the United States, respectfully sets forth our proposal concerning the amount of time to be allocated to each side at trial. To facilitate our discussion of our proposed allocation of time at trial, we begin by setting forth our calculations concerning the time available at trial, given the dates this Court has scheduled for trial. The trial of plaintiffs' claims seeking at least $65 million in damages is currently scheduled to begin on December 3, 2007, and to continue until December 21, 2007. It is then scheduled to resume on January 3, 2007, continuing until the trial's conclusion on January 18, 2008. Given the foregoing, there are 27 days of trial scheduled, 15 before the Holiday break, and 12 after the break. Next, given the schedule this Court has set forth for typical trial days, and given anticipated periods during each trial day in which witnesses will likely not be testifying, we calculate that there are approximately 154.75 hours of time available for witness testimony, or about 77 hours per side. Our calculation is the result of the following assumptions.

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The Court has stated that trial is to be held each day between the hours of 9:30 a.m. and conclude at 5:30 p.m., and that there will be a one-hour luncheon recess and two 15-minute recesses per day. Accordingly, there will be, at most, six-and-a-half hours per day in which the parties can examine witnesses. For the sake of argument and to be conservative, however, we assume that procedural and evidentiary matters not counting against either parties' time may consume an additional half hour per day at trial. Therefore, we assume that, for the purposes here, there will be six hours per day in which witnesses will be examined. Multiplying the six hours of witness examination time per day by the 27 days scheduled for trial results in a maximum of 162 hours of witness examination time. Other deductions from this total, however, should be computed. First, the Court has indicated that it will permit opening arguments of up to one hour per side, for a total of two hours. In addition, we anticipate the likelihood that we will file a Rule 52c motion upon the conclusion of plaintiffs' case. Thus, for our purposes here, we further assume a deduction of one hour per side, or a total of two hours, for argument of the Government's Rule 52c motion. Furthermore, the court has indicated that it might be amenable to breaking trial early on Friday, December 21, 2007. Accordingly, for our purposes here, we reduce the witness examination time by three-and-a-quarter hours (which assumes trial breaks at 12:00 on December 21, 2007, and that the one hour luncheon recess, 15 minute afternoon breach, and 30 minutes of procedural and evidentiary matters have already been deducted from the available trial time). Cumulatively, these deductions total seven-and-a-quarter hours; when subtracted from 162 hours of trial time, this leaves 154.75 hours of trial time. Divided evenly between the two parties, this leaves 77.37 hours (about 77 hours and 20 minutes) per side, or rounding down, about 77 hours per side. -2-

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Although there are only 77 hours per side given the foregoing assumptions, our witness disclosure list, which we have annexed, sets forth an estimate of 84.5 hours needed to present our listed witnesses at trial.1 Our list of witnesses and time computations are based on our understanding that plaintiffs' claims are limited to their current claims for damages, namely a "retained theory of damages," a claim for diminution of value, and a single $45 million claim for SAFSB-related damages.2 While our current calculation of time exceeds the total amount of time that we proposed be allocated to us, our total figure is within about 10 percent of our total available time. In short, while our current calculation of time reflects the uncertainties concerning those maters (and witnesses) that will ultimately require emphasis at trial, our calculation is within reasonable proximity of the amount of time that we believe is necessary to present our defenses to plaintiffs' claims for damages. To be clear, however, we do not believe that we can properly set forth our defense of plaintiffs' $65 million claims in less than 77 hours. There are several reasons for this. First, plaintiffs have set forth three distinct categories damage claims, requiring three separate factual inquiries with distinct expert analysis. Indeed, with plaintiffs' recently added "retained earnings" damage theory set forth in plaintiffs' third supplemental expert report, and put in place of their

We updated our initial disclosure list to set forth the estimated time needed to present each witnesses' testimony at trial. Our calculation does not include time to introduce the deposition transcripts of Messrs. Blaber and Ross, who are both deceased. We believe that the most efficient and effective way to introduce their testimony at trial is through a motion to introduce designated passages of their deposition transcripts followed by cross designations, if any, of related passages chosen by the opposing party. We do not believe, in this instance, that the Court would be assisted through presentations whereby actors literally take the witness stand and read the transcripts into the record. -32

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previously asserted lost leverage lost profits claims, we retained the services of our fourth expert, Dr. Anjan Thakor.3 Second, plaintiffs in many respects have a much simpler case to put on at trial than we do. They can present almost all of their factual and expert opinion through one witness, Dr. Homer J. Holland, who performs roles here as key fact witness, expert, and plaintiff, and separately, as an ultimate recipient in any award connected with First Bank's purported damage claims. Moreover, Dr. Holland can testify as a fact witness on plaintiffs' behalf over an extended period of time, for example, from 1988 (or earlier) with the acquisition and formation of the River Valley thrifts, through First Bank's acquisition of the River Valley thrifts in January 1995. In contrast, the Government has bank examiners who may have only short periods of time overseeing the River Valley thrifts, in accord with the regulatory doctrine that examiners not engage in extended periods of repeated examinations of the same thrift. We also must present the oversight of the River Valley thrifts from the perspective of numerous regulatory agencies, including the Office of Thrift Supervision, Federal Deposit Insurance Corporation, Federal Home Loan Bank Board, and Federal Savings and Loan Insurance Corporation. Furthermore, different regulators have different oversight roles such that to complete one transaction (e.g., the authority to acquire another institution), a number of regulators (even within the same agency) must become involved in that decisionmaking process. In short, we will have to present a much

Dr. Thakor possess special expert knowledge in this particular aspect of corporate finance, and has testified before this Court in another case in which plaintiffs sought (unsuccessfully) to obtain "retained damages" on a theory similar to that now presented by Dr. Holland. See Bank of America, FSB v. United States, 67 Fed. Cl. 577, 589 (2005), aff'd --F.3d ---, 2007 WL 2137774 (Fed. Cir. July 26, 2007). -4-

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more complicated record in order to properly present the factual evidence in support of our defense in this case. Finally, we note that the amount of time currently allocated for trial of plaintiffs' claims in the Court's original scheduling order and in our proposed allocation of time is comparable to the amounts allocated in other Winstar-related cases. For example, in Citizens FSLA v. United States, No. 93-306C, a four-week trial was held during which plaintiff presented just a single (and structurally much simpler) lost profits claim seeking $21 million. See Citizens FSLA v. United States, 64 Fed. Cl. 498, 501 (2005). As other points of comparison, more than five weeks (twenty-eight trial days) were provided for the parties in First Federal of Rochester v. United States, No. 95-517C, and six-weeks were originally scheduled in Astoria Federal Savings & Loan Association v. United States, No. 95-468C. Given the foregoing discussion concerning the nature and amount of plaintiffs' damage claims, we respectfully request that at least 77 hours of trial time be given per party in order to present evidence at trial. Respectfully submitted, MICHAEL F. HERTZ Deputy Assistant Attorney General JEANNE E. DAVIDSON Director /s/ Kenneth M. Dintzer KENNETH M. DINTZER Assistant Director

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Of Counsel: SCOTT D. AUSTIN ELIZABETH A. HOLT WILLIAM G. KANELLIS BRIAN A. MIZOGUCHI AMANDA L. TANTUM JOHN J. TODOR September 17, 2007

/s/ John H. Roberson JOHN H. ROBERSON Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 8th Floor, 1100 L Street Washington, D.C. 20530 Tele: (202) 353-7972 Fax: (202) 514-8640 Attorneys for Defendant

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CERTIFICATE OF SERVICE

I hereby certify that on this 17th day of September 2007, a copy of the foregoing "DEFENDANT'S NOTICE OF PROPOSED ALLOCATION OF TIME AT TRIAL" was filed electronically. I understand that notice of this filing will be sent to all parties by operation of the Court's electronic filing system. Parties may access this filing through the Court's system.

/s/ John H. Roberson John H. Roberson

Case 1:95-cv-00524-GWM

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________________________________ HOMER J. HOLLAND, ) STEVEN BANGERT, Co-Executor of ) the Estate of HOWARD R. ROSS, and ) FIRST BANK, ) ) Case No. 95-524C Plaintiffs, ) ) (Judge George W. Miller) v. ) ) (Winstar-Related Case) THE UNITED STATES, ) ) Defendant. ) ____________________________________) DEFENDANT'S INITIAL WITNESS DISCLOSURES PURSUANT TO APPENDIX A Pursuant to Rule 13 of Appendix A of the Rules of the Court of Federal Claims, defendant, the United States, sets forth its initial list of witnesses who may be called at trial for defendant's case-in-chief or rebuttal purposes. A. WITNESSES DEFENDANT MAY CALL AT TRIAL 1. Steven Bangert: Mr. Bangert was a President and Chief Executive Officer of the River Valley thrifts. He was also a minority shareholder in Western Capital Holdings Inc. ("WCHI"). Mr. Bangert will be called upon to testify on a wide array of matters connected with the operations and business strategies of the River Valley thrifts, regulatory oversight of the River Valley institutions, the valuation of the River Valley institutions, the opportunity to acquire San Antonio Federal Savings Bank ("SAFSB"), the compensation received by River Valley executives, dividends paid by River Valley, the formation of River Valley Holdings, Inc. ("RVHI"), the operations and financial condition of SAFSB, the sale of SAFSB to the International Bank of Commerce ("IBC"), the financial condition of WCHI and a number of other topics concerning the River Valley thrifts operating history relevant to plaintiffs' damage theories. Estimated time of examination: 6 hours.

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2.

W. Barefoot Bankhead: Mr. Bankhead is a certified public accountant. Before joining Navigant Consulting in 1998, Mr. Bankhead had over twenty years of experience in banking and public accounting, including a two-year accounting fellowship with the Federal Home Loan Bank Board ("FHLBB"). He is currently a Managing Director with Navigant Consulting, Inc. Mr. Bankhead will be called upon to provide expert opinion in response to plaintiffs' damage theories. Estimated time of examination: 8 hours. Alan Blake: Mr. Blake was a senior vice president of First Bank. Mr. Blake will be called upon to provide testimony concerning First Bank's acquisition of the River Valley thrifts, First Bank's corporate and capital structure and history, cost of capital, tax payments, retained earnings, the likelihood of First Bank's acquisition of SAFSB, and other matters relevant to plaintiffs' damage claims for the period following First Bank's acquisition of the River Valley thrifts. Estimated time of examination: 3 hours.

3.

4.

Dr. Andrew S. Carron: Dr. Carron has a PhD in economics from Yale University. He is a former employee of the Brookings Institution in Washington, D.C., and has over twelve years of experience in the securities industry working for Lehman Brothers and Credit Suisse. He is currently the President of Nation Economic Research Associates, Inc. He will be called at trial to provide expert testimony in response to plaintiffs' damage theories. Estimated time of examination: 6 hours. Annette Carson: Ms. Carson is First Bank's tax director. Ms. Carson may be called to testify with respect to tax considerations involving First Bank, should such matters be at issue. Estimated time of examination: 1 hour. Mr. Curtin was a thrift examiner of the Office of Thrift Supervision ("OTS") who participated in the OTS's 1990 and 1992 examinations of the River Valley thrifts. He will be called to testify concerning the financial condition and regulatory assessment of the River Valley institutions as

5.

6.

Gary Curtin:

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determined by the OTS in its examination of the thrifts. Estimated time of examination: 1.5 hours. 7. Richard Dalton: Mr. Dalton was an officer of River Valley and SAFSB. He may be called to testify with respect to the operations of River Valley and SAFSB. Estimated time of examination: 1 hour. Mr. Daniels was a lending officer of American National Bank ("ANB"). He will be called to provide testimony concerning ANB loans to RVHI, WCHI, and Messrs. Holland and Ross. Estimated time of examination: 1.5 hours. Mr. Dierberg is the Chief Executive Officer and Chairman of the Board of First Bank, Inc. Mr. Dierberg will be called to provide testimony concerning First Bank's acquisition of the River Valley thrifts, First Bank's corporate and capital structure and history, cost of capital, tax payments, retained earnings, the likelihood of First Bank's acquisition of SAFSB, and other matters relevant to plaintiffs' damage claims for the period following First Bank's acquisition of the River Valley thrifts. Estimated time of examination: 2-5 hours.1 Mr. Earle was a Regional Director of the Mergers and Acquisitions Division of the FHLBB. He will be called to provide testimony concerning the valuation by the Federal Savings and Loan Insurance Corporation ("FSLIC") of the preferred stock issued to the River Valley as part of the River Valley Assistance Agreements, the foreseeability of a River Valley acquisition of SAFSB, the transferability of the regulatory capital set forth in the River Valley Assistance Agreements to third parties, and other matters connected with the FSLIC's oversight of the River Valley acquisitions. Estimated time of examination: 1 hour.

8.

C. Bryan Daniels:

9.

James Dierberg:

10.

J. Richard Earle:

The time range depends upon the degree to which plaintiffs are willing to stipulate to First Bank financial information, for example, as set forth in audited financial statements and public filings. -3-

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11.

Susan Vranes Ells: Ms. Ells was an assistant portfolio manager, vice president, and eventually a senior vice-president in charge of the River Valley's capital markets group. She also had responsibilities with respect to the capital markets investments at SAFSB. Ms. Ells will be called to testify concerning River Valley's mortgage backed securities derivative investments and strategies, regulatory oversight of those activities, River Valley's valuation in the postFIRREA period, and other matters relevant to plaintiffs' damage theories. Estimated time of examination: 1.5 hours. Larry Ferries: Mr. Ferries was an OTS Field Supervisor based out of the OTS's offices in Chicago, with oversight responsibilities for the River Valley thrifts during a significant portion of the time relevant to this case. Mr. Ferries will testify concerning the OTS oversight of the River Valley thrifts, the oversight relationship between the OTS and Federal Deposit Insurance Corporation ("FDIC"), the differences between the OTS and FDIC in their assessments of the financial condition of the River Valley thrifts, and other matters concerning the OTS's oversight of the River Valley thrifts relevant to plaintiffs' damage theories. Estimated time of examination: 2 hours. Mr. Gerbick was the head of the OTS Applications Division, and later a Deputy Director with responsibilities over the Corporate Activities Section. In 1993, Gerbick became the Regional Director of Operations for the OTS in Chicago. He is currently the Assistant Director for the OTS Central Region. Mr. Gerbick will testify concerning the OTS oversight of the River Valley thrifts, the oversight relationship between the OTS and FDIC, the differences between the OTS and FDIC in their assessments of the financial condition of the River Valley thrifts, the OTS assessment of any attempt that might have been made by River Valley to acquire SAFSB, and other matters concerning the OTS's oversight of the River Valley thrifts relevant to plaintiffs' damage theories. Estimated time of examination: 2 hours. Dr. Griffin has a PhD in Accounting from Ohio State University. He is a professor of management and an -4-

12.

13.

Philip Gerbick:

14.

Paul Griffin:

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associate dean at the Graduate School of Management, University of California Davis. He is also a principal with LECG, Inc., Emeryville, California, a company that provides expert financial and economic advisory services in complex litigation and other areas. Dr. Griffin will be called at trial to provide expert testimony in response to plaintiffs' damage theories. Estimated time of examination: 3 hours. 15. Herbert Held: Mr. Held was a Regional Director of the Mergers and Acquisitions Division of the FSLIC, based in Chicago. Mr. Held will be called to provide testimony concerning the FSLIC's valuation of the preferred stock issued by the River Valley thrifts to the FSLIC as part of the Assistance Agreements, the foreseeability of a River Valley acquisition of SAFSB, the transferability of the regulatory capital set forth in the River Valley Assistance Agreements to third parties, and other matters connected with the FSLIC's oversight of the River Valley acquisitions. Estimated time of examination: 1 hour.

16.

Dr. Homer J. Holland: Dr. Holland was a president, CEO, and vice chairman of the River Valley thrifts. He is also one of plaintiffs' experts. Dr. Holland will be called to testify concerning a wide array of matters connected with the operations and business strategies of the River Valley thrifts, regulatory oversight of the River Valley institutions, the valuation of the River Valley institutions, the origination of the opportunity to acquire SAFSB, the compensation received by River Valley executives, dividends paid by River Valley, the formation of RVHI, the operations and financial condition of SAFSB, the sale of SAFSB to IBC, the financial condition of WCHI, the sale of the River Valley thrifts to First Bank, and a number of other relevant topics concerning the River Valley thrifts' operating history. Estimated time of examination: 16 hours. Ronald Karr: Mr. Karr was the Deputy Regional Director, and then the Regional Director of the OTS in Chicago. He will testify concerning regulatory concerns with the River Valley thrifts, and the relationships and differences in opinion between the OTS and FDIC in their oversight of the River -5-

17.

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Valley thrifts, and the effect of supervisory agreements upon permissible thrift activities. Estimated time of examination: 1.5 hours. 18. Larry Kenny: Mr. Kenny is a capital markets examiner at the OTS. He will be called to testify concerning the regulatory oversight of the River Valley thrifts, the relationship between the OTS and FDIC in their oversight of the thrifts, and the differences between the two agencies concerning the oversight and view of the River Valley thrifts' capital markets instruments and strategies. Estimated time of examination: 2 hours. Mr. Kipnis was an attorney at the law firm of Holleb and Coff from 1974 to 1998; following that, he was General Counsel at Hollinger International, Inc. He was a Secretary and a Director of the River Valley thrifts, RVHI, SAFSB and WCHI, with ownership percentages in the River Valley entities and SAFSB. Mr. Kipnis will be called to testify concerning the operations and valuations of the River Valley thrifts, the opportunity to acquire SAFSB, the compensation received by River Valley executives, dividends paid by River Valley, the formation of RVHI, the operations and financial condition of SAFSB, the sale of SAFSB to IBC, the financial condition of WCHI and a number of other topics concerning the River Valley thrifts' operating history relevant to plaintiffs' damage theories. Estimated time of examination: 1.5 hours. Mr. Madson was an FDIC field supervisor. He will be called to testify concerning the FDIC's oversight of the River Valley thrifts' operations, capital markets instruments and strategies, reports of examination, and the FDIC's oversight responsibilities and policies in relation to its insurance responsibilities. Estimated time of examination: 2 hours. James Meyer was a financial analyst and a supervisor at the Financial Assistance Division of the FSLIC (and subsequently the FDIC). Mr. Meyer will provide testimony concerning the FSLIC's valuation of preferred stock issued by River Valley I, the later redemption and valuation of that

19.

Mark Kipnis:

20.

Peter Madson:

21.

James Meyer:

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stock by the FDIC, and other matters concerning the FDIC's oversight of the River Valley thrifts. Estimated time of examination: 1.5 hours. 22. Helen Mirza: Ms. Mirza was the Vice-President of Mergers and Acquisitions by the Federal Home Loan Bank of Chicago ("FHLB-Chicago") between 1986 and 1989, and was involved in the regulatory approval of the River Valley II acquisition. Ms. Mirza will testify concerning the foreseeability of the effects of a potential breach upon River Valley II and any proposed acquisition by it of an institution located in Texas. She will also testify concerning the River Valley II Assistance Agreement's restrictions concerning River Valley II's capacity to transfer goodwill and other regulatory capital assistance to third parties. Estimated time of examination: 1 hour. Mr. O'Connor was a certified public accountant and a tax partner at KPMG in Chicago. Mr. O'Connor will be called to testify concerning River Valley's financial condition and investments, KPMG's assessment of tax restructuring alternatives with respect to the River Valley entities in Illinois and SAFSB, and various tax-related matters relevant to plaintiffs' damage theories. Estimated time of examination: 1 hour. Mr. Pikus was a senior vice president and, later, president and chief executive office at River Valley, and a director at WCHI. He also worked at SAFSB. Mr. Pikus will be called to testify concerning the operations and financial condition of the River Valley thrifts, the assessment of the SAFSB opportunity and analysis by River Valley and WCHI, River Valley's involvement in facilitating the SAFSB transaction, regulatory oversight of the River Valley thrifts, the First Bank acquisition of River Valley, differences between the OTS and FDIC concerning River Valley's investments, and other matters relevant to plaintiffs' damage theories. Estimated time of examination: 3.5 hours. Mr. Rada was an FDIC bank examiner with particular expertise in the area of capital market instruments. Mr. -7-

23.

Frank O'Connor:

24.

Ronald Pikus:

25.

John Rada, Jr.:

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Rada will testify concerning the FDIC's assessment and classification of River Valley's mortgage backed securities derivatives, FDIC policy concerning the classification of derivatives, and FDIC examination findings. Estimated time of examination: 1.5 hours. 26. John Rose: Mr. Rose was responsible for bringing the SAFSB opportunity to Messrs. Holland and Ross. He was a shareholder of WCHI, and a senior vice president and a director of SAFSB. Mr. Rose will testify concerning the SAFSB opportunity, acquisition, operations, and sale. Estimated time of examination: 1.5 hours.

27.

Dr. Anjan V. Thakor: Dr. Thakor is the John E. Simon Professor of Finance and Senior Associate Dean at the John M. Olin School of Business at Washington University in St. Louis. Dr. Thakor was previously a professor and Chairperson of the Finance Department at the University of Michigan Business School, and at the Finance Department at the School of Business at Indiana University. He has also taught at Northwestern University and at the University of California at Los Angeles. Dr. Thakor will provide expert testimony in response to plaintiffs' damage theories. Estimated time of examination: 6 hours. Nicholas Wilson: Mr. Wilson was an investment banker employed by Lawrence Barr & Co. He will testify concerning Lawrence Barr's valuation of River Valley's common stock and preferred stock as of July 1988. Estimated time of examination: 1.5 hours. Mr. Wright was the Department Head for Loans and Other Assets for the Resolution Trust Corporation ("RTC") in San Antonio, Texas. He will testify with respect to issues involving the RTC's sale of SAFSB. Estimated time of examination: 1.5 hours.

28.

29.

James Wright:

B.

WITNESSES WHOSE DEPOSITION TESTIMONY DEFENDANT INTENDS TO INTRODUCE AT TRIAL 30. Leo Blaber: Mr. Blaber was a Principal Supervisory Agent of the Federal Home Loan Bank of Chicago. We intend to

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introduce portions of his deposition transcript at trial because he is deceased. We propose that the deposition transcript be introduced into evidence by motion seeking leave to file selected deposition transcripts at trial. 31. Howard R. Ross: Mr. Ross was the chairman of the board of the River Valley thrifts, and a shareholder of the River Valley thrifts and RVHI along with Dr. Holland. In addition he was a major shareholder in WCHI. We intend to introduce portions of his deposition transcript at trial because he is deceased. We propose that the deposition transcript be introduced into evidence by motion seeking leave to file selected deposition transcripts at trial.

MICHAEL F. HERTZ Deputy Assistant Attorney General

JEANNE E. DAVIDSON Director /s/ Kenneth M. Dintzer KENNETH M. DINTZER Assistant Director

Of Counsel: SCOTT AUSTIN ELIZABETH A. HOLT WILLIAM G. KANELLIS BRIAN A. MIZOGUCHI AMANDA L. TANTUM JOHN J. TODOR

/s/ John H. Roberson JOHN H. ROBERSON Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit 8th Floor, 1100 L Street Washington, D.C. 20530 Tele: (202) 353-7972 Fax: (202) 514-8640 Attorneys for Defendant

September 17, 2007

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