Combined 5532 APPEX Vol I

QUINN EMANUEL URQUHART OLIVER & HEDGES LLP
51 Madison Avenue, 22nd Floor

New York, New York 10010
Susheel Kirpalani
James C. Tecce
Erica P. Taggart
Special Counsel to the Official Committee of Unsecured

Creditors of Lehman Brothers Holdings Inc., et al.
UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------------------x
In re: : Chapter 11
: Case No. 08-13555 (JMP)
LEHMAN BROTHERS HOLDINGS INC., et al., : Jointly Administered
:
Debtors. :
------------------------------------------------------------------------x
In re: : SIPA Proceeding
: Case No. 08-01420 (JMP)
LEHMAN BROTHERS INC., :
:
Debtor. :
-----------------------------------------------------------------------x
APPENDIX VOLUME I TO
MOTION OF OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF LEHMAN
BROTHERS HOLDINGS INC., ET AL., PURSUANT TO 11 U.S.C. § 105(a), FED. R.
CIV. P. 60(b), AND FED. R. BANKR. P. 9024, FOR RELIEF FROM ORDER UNDER
11 U.S.C. §§ 105(a), 363, AND 365 AND FEDERAL RULES OF BANKRUPTCY
PROCEDURE 2002, 6004 AND 6006 AUTHORIZING AND APPROVING
(A) SALE OF PURCHASED ASSETS FREE AND CLEAR OF LIENS AND OTHER
INTERESTS AND (B) ASSUMPTION AND ASSIGNMENT OF EXECUTORY
CONTRACTS AND UNEXPIRED LEASES, DATED SEPTEMBER 20, 2008 (AND
RELATED SIPA SALE ORDER) AND JOINDER IN DEBTORS' AND SIPA TRUSTEES
MOTIONS FOR AN ORDER UNDER RULE 60(b) TO MODIFY SALE ORDER
03690.61377/3102513.1
EXHIBIT DESCRIPTION
No.
1 Draft Complaint
2 Deposition transcript of Steven Berkenfeld, taken August 6, 2009
3 Deposition transcript of Bart McDade, taken on September 2, 2009
4 Deposition transcript of Hugh “Skip” McGee, taken on August 10, 2009
5 Deposition transcript of Mark Shapiro, taken on August 7, 2009
6 Deposition transcript of Alex Kirk, taken on August 31, 2009
7 Deposition transcript of Ian Lowitt, taken on August 20, 2009
8 Deposition transcript of Eric Felder, taken on July 31, 2009
9 Deposition transcript of Paolo Tonucci, taken on August 14, 2009
10 Deposition transcript of Robert Azerad, taken on August 17, 2009
11 Deposition transcript of Alastair Blackwell, taken on August 7, 2009
12 Deposition transcript of James Hraska, taken on August 14, 2009
13 Deposition transcript of Martin Kelly, taken on August 18, 2009
14 Deposition transcript of Rich Ricci, taken on September 8, 2009
15 Deposition transcript of Gerard LaRocca, taken on August 19, 2009
16 Deposition transcript of David Petrie, taken on August 26, 2009
17 Deposition transcript of Michael Klein, taken on September 12, 2009
18 Deposition transcript of Archibald Cox, taken on September 11, 2009
03690.61377/3102513.1
DRAFT
QUINN EMANUEL URQUHART OLIVER &
HEDGES, LLP
Susheel Kirpalani
James Tecce
51 Madison Avenue, 22nd Floor,
New York, New York 10010-1601
(212) 849-7000
Erica Taggart
865 South Figueroa Street, 10th Floor
Los Angeles, California 90017-2543
(213) 443-3000
Special Counsel to the Official Committee of
Unsecured Creditors of Lehman Brothers
Holdings, Inc., et al.

In re
LEHMAN BROTHERS HOLDINGS INC., et Chapter 11

al.
Case No. 08-13555 (JMP)
Debtors.
_______________________________________
THE OFFICIAL COMMITTEE OF

UNSECURED CREDITORS OF LEHMAN Adversary Proceeding
BROTHERS HOLDINGS INC., et al.
No.: 09-_____ (JMP)
Plaintiff,
COMPLAINT
-against-
FILED UNDER SEAL
LEHMAN BROTHERS HOLDINGS INC.,
and
LEHMAN BROTHERS INC.,
and
03690.61377/3097014.6
DRAFT
LB 745 LLC,
and
BARCLAYS CAPITAL INC.,
Defendants.
COMPLAINT FOR DECLARATORY RELIEF

PURSUANT TO 11 §§ 105(a)
TO THE HONORABLE JAMES M. PECK

UNITED STATES BANKRUPTCY JUDGE:
The Official Committee of Unsecured Creditors of Lehman Brothers Holdings
Inc. ("LBHI") and its affiliated debtors and debtors-in-possession (the "Committee"), by and
through its undersigned counsel, hereby brings this Complaint for declaratory relief pursuant to
section 105(a) of Title 11 of the United States Code (the "Bankruptcy Code") against LBHI,
Lehman Brothers, Inc ("LBI"), LB 745 LLC ("LB 745") (collectively "Lehman" or the "Sellers")
and Barclays Capital Inc. ("Barclays" or the "Purchaser"), and allege as follows:
PRELIMINARY STATEMENT
1. Through this action, the Committee seeks a declaration that certain post-petition
transfers of billions of dollars in securities and other assets from Lehman to Barclays were not
authorized by the Bankruptcy Court in its September 19, 2008 order (the "Sale Order")
authorizing and approving the sale of the majority of the assets of the North American broker
dealer-business of LBI to Barclays (the "Sale Transaction") or any other order of the Bankruptcy
Court. Specifically, the Committee seeks a declaration that a self-styled "clarification letter"
dated September 20, 2008, but executed on September 22, 2008 (the “Clarification Letter”),
which the parties used as the vehicle to transfer billions of dollars in assets in connection with
03690.61377/3097014.6 2
DRAFT
the Sale Transaction, was never presented to, reviewed by, or approved by the Bankruptcy Court.
Although it was stated at the September 19, 2008 hearing seeking entry of the Sale Order (the
"Sale Hearing") that the parties were "hoping to finalize and actually present [the Clarification
Letter] to Your Honor whenever it comes down here," this never occurred. In fact, the Court
was never asked to approve the Clarification Letter, which was filed with the Court on
September 22, 2008, after the Court entered the Sale Order, the date that the Sale Transaction
closed.
2. The misleadingly titled Clarification Letter is anything but a "clarification" to the
Sale Transaction approved by this Court. As an initial matter, the Clarification Letter
significantly altered the structure of the Sale Transaction from an asset sale to a trade that
accomplished the "sale" of estate assets through a termination of a repurchase agreement
previously entered into between the parties. Indeed, when the parties terminated the repurchase
agreement, Section 559 of the Bankruptcy Code required that the excess collateral value
constituted property of the estate.
3. More importantly, the Clarification Letter did not entail just a change to the
mechanics of the sale. By setting forth certain “buckets” of securities, the Clarification Letter
crystallized Barclays’ receipt of a negotiated, but undisclosed, $5 billion block discount in the
value of the purchased assets. In addition to locking in this discount, the Clarification Letter
provided the means for Lehman to acquiesce to Barclays' demand for additional assets by
transferring certain additional assets that were not part of the original asset purchase agreement,
nor disclosed to the Court or specifically approved under the Sale Order.
4. In particular, the Clarification Letter provided for Barclays to receive (i) certain
additional assets valued at no less than $1.9 billion and held in "clearance boxes" belonging to
03690.61377/3097014.6 3
DRAFT
LBI that were listed on Schedule B to the Clarification Letter, (ii) certain 15-c3-3 securities
valued at between $750 million and $800 million, and (iii) an undisclosed amount of collateral
supporting Lehman's OCC accounts, valued at $2.3 billion. Thus, Barclays’ demand for
additional assets provided at least an incremental $5 billion of value for which no additional
consideration was provided to Lehman and their estates. Consequently, significant and real harm
has been inflicted on the creditors of the Lehman estates for which the Committee seeks
appropriate redress.
5. Accordingly, through this action, the Committee seeks a declaration that the
Clarification Letter and the transaction consummated thereunder were never approved by the
Court.
PARTIES
6. The Committee was appointed pursuant to section 1102 the Bankruptcy Code and
is a party in interest in these chapter 11 cases under section 1109(a) of the Bankruptcy Code.
7. LBHI is a Delaware corporation with its former principal business address at 745
Seventh Avenue, New York, NY 10019 and its current principal business address at 1271
Avenue of the Americas, 45th Floor, New York, NY 10020.
8. LBI is a Delaware corporation with its former principal business address at 745
Seventh Avenue, New York, NY 10019 and its current principal business address is James W.
Giddens as Trustee for SIPA Liquidation of Lehman Brothers Inc., c/o Hughes Hubbard & Reed,
LLP, One Battery Park Plaza, New York, NY 10004 (Attn: James B. Kobak, Jr.), attorneys for
the SIPA Trustee.
03690.61377/3097014.6 4
DRAFT
9. LB 745 LLC is a Delaware limited liability corporation with its former principal
place of business address at 745 Seventh Avenue, New York, NY 10019 and its current principal
business address at 1271 Avenue of the Americas, 45th Floor, New York, NY 10020.
10. Upon information and belief, Barclays is a corporation organized under the laws
of the United Kingdom with its principal place of business in London, England. It maintains
offices in Manhattan at 200 Park Avenue, New York, NY 10166 and 745 Seventh Avenue, New
York, NY 10019.
JURISDICTION AND VENUE
11. The Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. §
1334. This is a core proceeding within the meaning of 28 U.S.C. § 157(b).
12. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
13. The statutory predicates for the relief requested herein are sections 105(a) of the
Bankruptcy Code.
14. The Court has the authority to issue a declaration of rights and grant future
necessary or proper relief pursuant to 28 U.S.C. §§ 2201, 2202.
BACKGROUND
A. The Bankruptcy Court Approved the Sale of LBI's Assets to Barclays Based on the
Specific Representations Regarding the Nature and Value of the Assets to be
Transferred from Lehman to Barclays Contained in APA and Stated During the
Sale Hearing
15. Lehman together with their debtor and non-debtor affiliates (collectively, the
"Debtors") were formerly the fourth largest investment bank in the United States. For more than
150 years, Lehman was a leader in the global financial markets by serving the financial needs of
corporations, governmental units, institutional clients and individuals worldwide. Lehman's
headquarters in New York and regional headquarters in London and Tokyo were complemented
03690.61377/3097014.6 5
DRAFT
by a network of offices in North America, Europe, the Middle East, Latin America and the Asia
Pacific region.
16. Commencing on September 15, 2008, and continuing from time to time thereafter,
LBHI and certain of its direct and indirect subsidiaries voluntarily commenced cases under
chapter 11 of the Bankruptcy Code with this Court. The Debtors' chapter 11 cases have been
consolidated for procedural purposes only and are being jointly administered pursuant to
Bankruptcy Rule 1015(b). On September 19, 2008, a proceeding under the Security Investors
Proceeding Act ("SIPA") was commenced for LBI. James W. Giddens as acting as the trustee in
the SIPA proceeding.
17. On September 16, 2008, the Sellers and the Purchaser executed an asset purchase
agreement (including its court reviewed and approved amendments, the "Asset Purchase
Agreement" or "APA") for the sale of the majority of the assets of the North American broker
dealer business of LBI to Barclays. The APA set forth the cash and securities that would be
transferred to Barclays as part of the Sale Transaction. In addition to certain real estate
transferred as part of the Sale Transaction, the APA generally provided for Barclays to pay $250
million cash plus up to $750 million in potential payments under a "true up" provision, receive
assets with a book value of $70 billion, and assume $69 billion in liabilities.
18. Specifically, the original APA defined Purchased Assets to include:
(a) the Retained Cash; (b) all deposits . . . ; (c) the Transferred Real Property
Leases . . . ; (d) government securities, commercial paper, corporate debt,
corporate equity, exchange traded derivatives and collateralized short-term
agreements with a book value as of the date hereof of approximately $70 billion .
. . (e) 50% of each position in the residential real estate mortgage securities.1
1
APA § 1.1 (definition of "Purchased Assets") (emphasis added).
03690.61377/3097014.6 6
DRAFT
19. In addition, the APA further provided for assumption of liabilities "with a book
value as of the date hereof of approximately $69 billion."2
20. On September 17 and 19, 2008, the Court held hearings to consider whether to
approve the Sale Transaction identified in the APA.
21. At the September 17, 2008 bid procedures hearing, counsel to LBHI and LB 745
outlined the terms of the transaction to the Bankruptcy Court. Counsel explained that, pursuant
to the terms of the APA, a copy of which had been submitted to the Court, Lehman had agreed to
transfer approximately $70 billion of securities to Barclays in exchange for Barclays's
assumption of $69 billion of Lehman's liabilities. Taking into account all the exchanged
consideration, counsel to the Debtors explained to the Court that "looking at it from the net of
this transaction, there will be approximately 1,700,000,000 dollars yielded out of this
transaction" for Barclays.
22. Just two days later at the September 19, 2008 Sale Hearing, the Debtors informed
the Court that the value of the assets to be exchanged between Lehman and Barclays had
changed. According to the Debtors, the value of the assets to be transferred to Barclays had
dropped to "$47.4 billion," and that Barclays would be assuming "$45.5 billion" in Lehman's
liabilities.
23. Specifically, the Debtors stated the following with respect to the changes to the
transaction:
"Let me try to summarize the changes that were made to the transaction. In terms of the
economic changes, they result largely because of the markets, unfortunately. And from
the time that the transaction was actually entered into till now, the markets dropped and
the value of the securities dropped as well. So, originally, we were selling assets that
had a value of seventy – approximately seventy billion dollars. And today . . . we're
2
Ex. 1, APA § 2.3(i).
03690.61377/3097014.6 7
DRAFT
only selling assets that have a value of 47.4 billion dollars. Barclays is assuming
liabilities, however, of 45.5 billion dollars in connection with those assets."
24. The Debtors also explained that—other than those changes detailed in an
amendment to the APA,3 which had been submitted to the Court—the other consideration to be
exchanged between Lehman and Barclays had not changed. Specifically, the Debtors stated that
"Barclays is still agreeing to pay the cure amounts on any leases that it assumes or that we
assume and assign to it. Barclays is also agreeing to the same employee compensation
arrangements. And it is also agreeing to pay the 250 million dollars of goodwill to LBI."
25. In addition, at the Sale Hearing, the Debtors informed the Court that Lehman and
Barclays intended to execute a Clarification Letter that would supplement the APA and clarify
which Lehman subsidiaries would be transferred to Barclays as part of the transaction.
Specifically, the document would "clarify that the only subsidiaries that are being purchased by
Barclays are Lehman Brothers Canada Inc., Lehman Brothers Sudamerica SA and Lehman
Brothers Uruguay SA."
26. The Debtors provided the Court with no further description of the document, but
promised that once the letter was finalized it would be "present[ed] to Your Honor."
27. The Clarification Letter, however, was not finalized until after the Sale Hearing,
and was never presented to the Bankruptcy Court—and certainly not at the time the Court issued
the Sale Order on September 19, 2008. Although the Clarification Letter is dated September 20,
2008, upon information and belief, it was not finalized or executed until two days later on
September 22, 2008, the date of the closing of the Sale Transaction.
3
The First Amendment changed the APA's definition of "Purchased Assets" to provide
that all of LBI's residential real estate securities would be transferred to Barclays as security for
clearing services provided by the Depository Trust Clearance Corporation ("DTCC"). Under the
APA, Lehman was going to retain 50% of such securities.
03690.61377/3097014.6 8
DRAFT
28. Notwithstanding this, based on the representations made at the Sale Hearing by
the Debtors regarding the contents of the Clarification Letter, on September 19, 2008, the Court
approved the sale of LBI's North American operations to Barclays as purportedly described in
the APA and the Clarification Letter, the latter of which at that time had neither been finalized
nor executed. Thus, the Sale Order defined "Purchase Agreement" to include the Clarification
Letter.
29. Simply put, the Court never saw the Clarification Letter and never reviewed its
terms at any time prior to the entry of the Sale Order.
30. At the Sale Hearing, the Committee made clear that it did not affirmatively
approve of the sale because it had not had sufficient opportunity to evaluate the terms of the Sale
Transaction. Specifically, the Committee stated on the record that: "We're not affirmatively
supporting the transaction, Your Honor, because there has been insufficient time for us to really
do all the due diligence that we would feel should be done to take that next step of saying yes,
this is the best deal and we're supportive actively."
31. The Court entered the Sale Order in the early morning hours of September 20,
2008. During the weekend following the Sale Hearing, the parties expended considerable efforts
to finalize the Sale Transaction with the goal of closing the Sale Transaction before the markets
opened on the following Monday (September 22, 2008).
B. The Terms of the Executed Clarification Letter Do Not Comport with the
Description of the Letter at the September 19, 2008 Hearing; Lehman Transfers
Billions in Assets to Barclays that are Not Disclosed to the Court
32. The transaction effected through the Clarification Letter executed on September
22, 2008 bears little resemblance to the transaction described to the Court at the Sale Hearing.
To be sure, the Clarification Letter identified the Lehman entities to be transferred to Barclays.
It also, without the Bankruptcy Court's knowledge or approval, fundamentally rewrote the terms
03690.61377/3097014.6 9
DRAFT
of the transaction and redefined and expanded the scope and value of the assets to be transferred
from Lehman to Barclays as part of the deal.
33. The Clarification Letter made four significant material but undisclosed changes to
the Sale Transaction:
34. First, it eliminated the original core of the sale transaction: the transfer of "$47.4
billion" in Lehman-owned assets to Barclays in exchange for the assumption by Barclays of
"$45.5 billion" in Lehman's liabilities relating to the assets.
35. Instead, pursuant to the terms of the Clarification Letter, Barclays would retain
securities and other assets pledged by LBI to Barclays in connection with a repurchase
agreement executed on September 18, 2008 (the "Barclays Repurchase Agreement") pursuant to
which Barclays provided LBI with $45 billion in short-term financing. In exchange for the
retained securities, LBI's obligations under the Barclays Repurchase Agreement would be
deemed satisfied.
36. A repurchase agreement (or "Repo") is a common financing arrangement whereby
one party sells assets to another for a set price with the agreement that the second party will buy
back those assets in a short time frame for that price plus a margin.
37. During the early part of the week of September 15, 2008, the Federal Reserve
Bank of New York (the "Fed") had entered into a Repo contract (the "Fed Repurchase
Agreement") with LBI to provide short-term financing of $45 billion to LBI to help keep LBI's
brokerage business afloat.
38. As is generally the case with Repo contracts, LBI was required to post collateral
in excess of the $45 billion financing provided by the Fed. This additional collateral is generally
known as a "haircut."
03690.61377/3097014.6 10
DRAFT
39. In light of the pending sale of the majority of LBI's North American assets to
Barclays, the Fed demanded that Barclays "step into the Fed's shoes" and provide the $45 billion
Repo financing to LBI pending court consideration of the sale to Barclays. Thus, on September
18, 2008, Barclays and LBI entered into the Barclays Repurchase Agreement and the financing
arrangement thereunder replaced the financing previously provided by the Fed.
40. Pursuant to Barclays's assumption of the Fed's role as the provider of the $45
billion Repo financing to LBI, LBI agreed to transfer the collateral that it had pledged to the Fed
under the Fed Repurchase Agreement to Barclays. Consequently, on or about September 18,
2008, a majority of those assets were transferred from the Fed's collateral agent, JPMorgan
Chase N.A. ("JPMorgan"), to Barclays's collateral agent, the Bank of New York Mellon
("BONY").
41. The full value of the collateral posted by LBI pursuant to the Fed Repurchase
Agreement was ultimately transferred to Barclays. The value of the haircut under the Barclays
Repurchase Agreement is believed to be between $5 to $7.2 billion.
42. As a direct effect of the above-described change to the terms and structure of the
Sale Transaction between Lehman and Barclays, as obliquely outlined in the Clarification Letter,
the net profit to Barclays (and net loss to the estate) for the transaction was several billion dollars
more than it would have been pursuant to the terms of the APA as described to the Bankruptcy
Court at the Sale Hearing and ultimately approved by the Bankruptcy Court in the Sale Order.
43. Although the Debtors identified the existence of the Repo financing by Barclays
to the Bankruptcy Court at the Sale Hearing, they provided the Court with no indication that any
Lehman assets (including the haircut) would be permanently transferred to Barclays in
connection with the Repo financing arrangement or that the Barclays Repurchase Agreement
03690.61377/3097014.6 11
DRAFT
would be the vehicle for the parties consummating the Sale Transaction and of Lehman assets to
Barclays.
44. Significantly, because the new transaction set out in the Clarification Letter did
not involve the sale of Lehman's assets, but the execution on collateral pledged by LBI in
connection with the Barclays Repurchase Agreement, pursuant to Section 559 of the Bankruptcy
Code, all of the excess value of the collateral not used to satisfy the debt owed to Barclays
pursuant to the Barclays Repurchase Agreement—totaling between approximately $5 and $7.2
billion—is property of the Lehman estates.
45. Section 559 provides that "[i]n the event that a repo participant or financial
participant liquidates one or more repurchase agreements with a debtor and under the terms of
one or more such agreements has agreed to deliver assets subject to repurchase agreements to the
debtor, any excess of the market prices received on liquidation of such assets . . . over the sum of
the stated repurchase prices . . . shall be deemed property of the estate . . . ."
46. Second, in addition to the change in the structure of the Sale Transaction and the
transfer to Barclays of the implied discount or haircut under the Barclays Repurchase
Agreement, the Clarification Letter expanded the scope of the assets to be transferred to Barclays
to include assets held in "clearance boxes" belonging to LBI that were listed on a Schedule B that
was attached to the Clarification Letter. At the time of the execution of the Clarification Letter,
these assets were not providing security for any debt owed by Lehman to any creditor. Thus,
they could be freely (and secretly) transferred from Lehman to Barclays without protest from any
secured creditor.
47. The value of these assets is estimated to be between $1.9 and $2.3 billion.
03690.61377/3097014.6 12
DRAFT
48. Third, the Clarification Letter expanded the scope of the assets to be transferred
to Barclays to include certain excess reserves, including certain "15-c3-3 assets," to Barclays.
49. Under Rule 15-c3-3, promulgated by the SEC pursuant to the Securities Exchange
Act of 1934, brokerages are required to keep on-hand assets sufficient to cover a specified
percentage of their customer portfolio, much like a depository requirement for banks. Because
of the unwinding of some customer positions in and around September 2008, LBI had excess
reserves totaling approximately $1 billion.
50. Most of these securities—totaling as much as $800 million in value—were
transferred to Barclays.
51. Fourth, the Clarification Letter expanded the scope of the assets to be transferred
to Barclays to include certain property supporting exchanged-traded derivatives from Lehman to
Barclays. This included assets held in certain Lehman accounts at the Options Clearing
Corporation (the "OCC Assets").
52. Lehman and Barclays agreed to transfer at least $2.3 billion of OCC Assets to
Barclays pursuant to the terms of the Clarification Letter. Ultimately, billion of dollars in OCC
Assets were transferred to Barclays.
53. In total, pursuant to the terms of the Clarification Letter, Lehman transferred
several billion dollars in assets to Barclays without consideration by or approval from the
Bankruptcy Court.
54. Until recently, and only through Court-ordered discovery, the Committee was not
aware of the above-described material modifications to the terms of the APA through the
Clarification Letter, or of the extra-judicial transfer of assets from Lehman to Barclays. The
03690.61377/3097014.6 13
DRAFT
Committee also never knowingly approved these modifications of the terms of the APA or the
extra-judicial asset transfers.
C. The Terms of the Executed Clarification Letter and the Transfer of Additional
Assets from Lehman to Barclays Were Never Approved by the Bankruptcy Court
and are Prohibited by the Bankruptcy Code
55. As Lehman's former Chief Financial Officer Ian Lowitt put it in a deposition: "the
deal that was consummated and approved by the judge was a completely different deal than the
deal that was worked through" after the Sale Order was signed. As he further explained," I don't
know what was disclosed to the Court, but I also would say the transaction that was presented to
the Court was not the transaction that was the one agreed to on the Tuesday."
56. These sentiments were echoed by Alex Kirk, the Head of Principal Investing for
Lehman, who testified in a deposition that "[t]his transaction was very different than what had
been previewed [to the Court] two days before, and it would have to be explained why it came
up."
57. As the Sale Order makes clear, any amendments to the APA or "related
agreements" that would "have a material adverse effect on the Debtors' estates" could not be
made without Court approval. Non-material changes could only be made with the approval of
"the Committee, the Debtors and the Purchaser."
58. All the key terms of the Clarification Letter described above were inserted into
the letter or finalized after Sale Order was signed and issued in the early hours of September 20,
2008.
59. Because the Bankruptcy Court was not aware of and never approved the material
changes to the APA effectuated by the terms of the Clarification Letter as described above, any
post-petition transfer of assets from Lehman to Barclays made pursuant to the Clarification
03690.61377/3097014.6 14
DRAFT
Letter were not authorized by the Sale Order or any other order of the Bankruptcy Court, and are
recoverable by the Lehman estates under §549 of the Bankruptcy Code.
60. Moreover, because the Committee never approved the terms of the Clarification
Letter described above, to the extent they can be considered to be non-material changes to the
Sale Transaction, they are void pursuant to the terms of the Sale Order.
61. Accordingly, the Committee seeks a declaration that the Court never approved the
Clarification Letter and the transaction consummated thereunder. Based on this, the Committee
submits that billions of dollars in securities and other assets transferred post-petition from
Lehman to Barclays were not authorized by the Sale Order or any other order of the Bankruptcy
Court.
Count I
(Declaratory Judgment as to Clarification Letter
pursuant to 28 U.S.C. §§ 2201, 2202)
62. The Committee repeats and realleges all the allegations contained in this
Complaint.
63. On September 19, 2008, based on representations made by the Debtors as to the
terms of the APA and the Clarification Letter at the Sale Hearing, the Bankruptcy Court
approved the sale of the majority of the assets of the North American operations of LBI to
Barclays as outlined in the APA and the Clarification Letter.
64. Pursuant to the terms of the Sale Order, any amendments to the APA or "related
agreements" that would "have a material adverse effect on the Debtors' estates" could not be
made without Court approval. Non-material changes could only be made with the approval of
"the Committee, the Debtors and the Purchaser."
03690.61377/3097014.6 15
DRAFT
65. Because the Clarification Letter had not been finalized or executed at the time the
Sale Order was issued, and was never presented to the Court for its review and consideration, the
Court could not have—and did not—approve or authorize the terms of the Clarification Letter
through the Sale Order or any other order of the Bankruptcy Court.
66. Accordingly, all terms of the Clarification Letter—including Section 1(a)(ii),
Section 8, and Section 13, which explicitly or in effect authorized 1) the retention by Barclays of
as much as $7.2 billion of excess collateral posted by LBI to Barclays under the Barclays
Repurchase Agreement, 2) the transfer from Lehman to Barclays of assets held in "clearance
boxes" belonging to Lehman, 3) the transfer from Lehman to Barclays of the 15-c3-3 assets, and
4) the transfer from Lehman to Barclays of the property supporting the OCC Assets—were not
approved by the September 19, 2008 Sale Order or any other order of the Bankruptcy Court.
67. Pursuant to the terms of the Clarification Letter, Lehman transferred billions in
assets to Barclays, which transfers were not disclosed to the Bankruptcy Court. These transfers
were not authorized by the Sales Order or any other order of the Bankruptcy Court.
68. Because the parties disagree as to whether the Clarification Letter was approved
by the Court, there is an actual controversy between the parties.
69. Accordingly, the Committee seeks a declaration that all terms of the Clarification
Letter that were not disclosed to the Court at the Sale Hearing, including Section 1(a)(ii), Section
8, and Section 13, were not approved by the Bankruptcy Court pursuant to the Sale Order or any
other order of the Bankruptcy Court.
70. The Committee further seeks a declaration that any and all post-petition transfer
of assets from Lehman to Barclays (or retention of Lehman assets by Barclays) pursuant to the
03690.61377/3097014.6 16
DRAFT
Clarification Letter were not authorized by the Sale Order or any other order of the Bankruptcy
Court and thus are prohibited by the Bankruptcy Code.
Count II
(Attorneys’ Fees, 28 U.S.C. § 2202)
71. The Committee repeats and realleges all the allegations contained in this
Complaint.
72. Section 2202 of the Declaratory Judgment Act provides that the Court may grant
"further necessary and proper relief based on a declaratory judgment . . . against any adverse party
whose rights have been determined by such judgment." 28 U.S.C. § 2202.
73. As a result of the positions taken by Barclays, the Committee was forced to obtain
additional services from the undersigned attorneys to protect the rights of all parties in interest to
the Debtors’ chapter 11 cases. The Committee therefore seeks a judgment against Barclays for all
the Committee’s reasonable and necessary attorneys' fees incurred in recovering the assets
secreted from the estate by Barclays.
74. The Committee’s attorneys’ fees are recoverable from Barclays if the Committee
prevails on its request for a declaratory judgment.
03690.61377/3097014.6 17
DRAFT
PRAYER FOR RELIEF
WHEREFORE, the Committee respectfully seeks an Order from this Court:
• declaring that the Court did not approve the Clarification Letter and the transactions
consummated thereunder pursuant to the Sale Order, any other order of the
Bankruptcy Court and the Bankruptcy Code;
• awarding attorneys fees;
• awarding any and all other relief the Court deems appropriate.
DATED: New York, New York
September 15, 2009
QUINN EMANUEL URQUHART OLIVER &

HEDGES, LLP
By:
Susheel Kirpalani
James Tecce
51 Madison Avenue, 22nd Floor,

New York, New York 10010-1601
(212) 849-7000
Erica Taggart
865 South Figueroa Street, 10th Floor

Los Angeles, California 90017-2543
(213) 443-3000
Special Counsel for the Official Committee
of Unsecured Creditors of Lehman Brothers
Holdings, Inc., et al.
03690.61377/3097014.6 18
Page 1
HIGHLY CONFIDENTIAL - S. BERKENFELD
2 UNITED STATES BANKRUPTCY COURT
3 SOUTHERN DISTRICT OF NEW YORK
4
5 In Re:
6 Chapter 11
7 LEHMAN BROTHERS Case No. 08-13555(JMP)
S HOLDINGS, INC., et al., (Jointly Administered)
9
Debtors.
10
11
12 * * * HIGHLY CONFIDENTIAL* * *
13 DEPOSITION OF STEVEN BERKENFELD
14 New York, New York
15 August 6, 2009
16
17
18
19
20
21
22
23 Reported by:
24 KATHY S. KLEPFER, RMR, RPR, CRR, CLR
25 JOB NO. 24035
TSG Reporting - Worldwide (877) 702-9580

Page 2
1 HIGHLY CONFIDENTIAL - S. BERKENFELD
2
August 6, 2009
3
9:30 a.m.
4
5
HIGHLY CONFIDENTIAL deposition
6 of STEVEN BERKENFELD, held at Jones
7 Day, LLP, 222 East 41st Street, LLP,
S New York, New York, before Kathy S.
9 Klepfer, a Registered Professional
10
Reporter, Registered Merit Reporter,
11
Certified Realtime Reporter, Certified
12
Livenote Reporter, and Notary Public
13
of the State of New York.
14
15
16
17
18
19
20
21
22
23
24
25

Page 20
2
3
4 1111111111111111111111111111111111.111MOIMMIS
6
4111111111111111111111111111"
7 Q. What's your title at Barclays Capital?
8 A. Managing director.
9 Q. And what's your area of
10 responsibility?
11 A. I'm in the Investment Banking
12 Division.
13 Q. What's your job there? What do you
14 do?
15 A. I chair a few committees to approve
16 equity transactions, fairness opinions, and I'm
17 involved in various different capacities in
18 investment banking transaction development.
19
20
21
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Page 55
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Page 58
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4
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9 Q. Now, you started -- we talked about
10
the exact date, and I don't care -- you started
,11 sometime in September of 2008, correct?
12 A. The agreement actually says the
13 employment commences on or before October 31.
14 Q. Okay. A date -- so we haven't hit
15 your first anniversary yet?
16 A. That's correct.
17 Q.
18
19
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Page 59
1 HIGHLY CONFIDENTIAL - S BERKENFELD
2
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Page 65
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9
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12
4 Q. Anyone else you think would have

15
knowledge of that fact, whether the business
16 terms included a $5 billion discount to
17
Barclays?
18 A. I would ask the principal negotiators
19 of the deal.
20
Q And that would be Dave Shafir and
21 McGee?
22
MR.. STERN: Objection to the form.
23 A. That's probably where I would start.
24 Q. Who would you ask on the Barclays side
25 of the table?

Page 66
2 A. I would ask Rich Ricci.
Q. Anyone else?
4 A. I would 6:6k Gerard LaRocco, I would
5 ask Archie Cox, and I would ask Michael Klein,
who was not a Barclays employee, but who was
7 acting as an advisor.
Q. Now, are Mr. Ricci, LaRocco, Cox and
9 Klein, would you describe them as the chief
10 negotiators for Barclays?
11 A. I would describe the chief negotiators
12 as Ricci, Cox and Klein.
13
14
15
16
17
18
19
20
21
22
23
24
25

Page 118
2
3 Q. So when you add those comp and cure

4 assumed liabilities on top of the elements I
5 just gave you, there's certainly no gain on
6 acquisition for Barclays, if those numbers are
7 real?
a MR. STERN: Objection to the form.
9 A. Well, again, no one was actually --
10 I'm repeating my answer a little bit. No one
was saying this schedule, Exhibit 19, is the

12 deal and see how all these numbers add up. The

13 deal was the Asset Purchase Agreement. This was
14 meant as some guidance for that as what we meant
15 as 70 billion of assets. For instance, 70

16 billion of assets could have been 69 billion of
17 governments --
18 Q. Okay.
A. -- and 1 billion of other stuff, or it
20 could have been 69 billion of corporate equity
21 and 1 billion of governments, right? So we
22 needed to -- because we didn't specify any of
23 that in the text. It was just 70 billion of all
24 this stuff. And this gives you a little bit

25 better sense of what that stuff is.
TSG Reporting . Worldwide (877) 702-9580

Page 122
2
1111111111111111111111.1111MEM111.

3
4

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5
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17 Q. And nobody looking at that agreement,
18 at least from the point of view of the man who
19 signed it, would read that to say there was a
20 discount being given to Barclays for what it was
21 buying?
22 MR. STERN: Objection to the form.
23 A. I didn't believe at the time when I
24 signed this agreement that the intent of the
25 agreement was to deliver assets with a material

Page 123
2 embedded gain to them, to Barclays.
3
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Page 162
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21 Q. You know, with respect to both the
22 actually, all three of the Asset Purchase
23 Agreement, the First Amendment, which we marked
24 as Exhibit 24, and the clarification letter,
25 which is marked as Exhibit 25, why did you sign

Page 163
2 them? Why are you the guy who signs them?
A. I signed the Asset Purchase Agreement
4
because at the time there was nobody else who
5 was an authorized officer of Lehman Brothers
6 Holdings available to sign it there present who
7
could sign it, and to some extent, I think the
8
amendments and the clarification letter were
brought to me by the counsel just for
10 consistency after that.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

Page 164
HIGHLY CONFIDENTIAL - S. BERKENFELD
2
6
A111111111
7 The negotiators included Mr. McDade.
8 Was he not authorized to sign on behalf of LBHI?
9 A. He was.
10 Q. Was he not present?
11 A. He wasn't present at the time the
12 document was ready to be signed.
17
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23
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11111111111111111
Page 1
1 HIGHLY CONFIDENTIAL - B. McDADE
2
3
4
5 In Re:
6
Chapter 11
8
HOLDINGS, INC., et al., (Jointly Administered)
9
Debtors.
10
11
12
* * *HIGHLY CONFIDENTIAL* * *
13
DEPOSITION OF BART McDADE
14
New York, New York
15
September 2, 2009
16
17
18
19
20
21
22
23 Reported by:
24
KATHY S. KLEPPER, RMR, RPR, CRR, CLR
25 JOB NO. 24045
TSG Reporting - Worldwide 877-702-9580

Page 2
2
September 2, 2009
3
9:57 a.m.
4

6
of BART McDADE, held at Jones Day, LLP,
7
222 East 41st Street, New York,
8 New York, before Kathy S. Klepfer, a
9
Registered Professional Reporter,
10
Registered Merit Reporter, Certified
11
Realtime Reporter, Certified Livenote
12
Reporter, and Notary Public of the State
13 of New York.
14
15
16
17
18
19
20
21
22
23 •
24
25

Page 18
2
5
6
a
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9
10
11
12
13
14
15
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16
17
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19
20
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22
Q. Who were the Lehmanites who were again
23
heading up the discussions? I know there were a
24
lot of people involved, but who would you
25
describe as the primary negotiators?

Page 19
2 A. Bart McDade, Skip McGee, Mark Shafir,
3
clearly Dick Fuld was an informed party but not
4
in the room in terms of those discussions, would
5
be how I would describe the main, the main
6
Lehman principals.
7
Q. And who were the principals for
8 BarCap?
9
A. Rich Ricci, Jerry del Missier, and
10
their advisor, Michael Klein. And sorry,
11
Archibald Cox, the CEO of the Americas.
12 Q. Was Diamond involved?
13 A. In and out.
14
15
16
17
18
19
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21
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23
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25

Page 60
2
9 Q. With whom were those -- which Lehman,

10 which senior Lehman personnel were the subject
11 of those discussions or involved in them?
A. There was an established group of
13 eight individuals. That would have been the
14 group.
15 Q. And who were they?
16 A. McGee, Nagpal, Humphrey, Felder,
17 Donini, Gelband, Lee, and I apologize, I forget.
18 the last.
19
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TSG Reporting Worldwide 877-702-9580
Page 197
2
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9
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Page 242
2
4
1111111111111.111.1111111111111111111111111111
5
6 411111111111
7
8
9 Q. Do you know if any residential real
10 estate mortgage securities ultimately were
11 transferred to Barclays at the end of the deal?
12 A. It's my understanding, yes.
13 Q. What's that understanding based on?
14 A. My understanding is based -- my
15 understanding is based on our inability to
16 transact much in the way of those assets over
17 that period of week in terms of what market
18 activity. So those balance -- those balances
19 and those assets would have been there and those
20 balances were part of the transaction.
21
411111111111.111111111•1111MMI
22
23
24 11111.11111111111111111111111.11111111111111111111•
25

Page 275
2
10
"
12
14 Q. Did anyone tell you that you -- that

15 Lehman had an excess of those assets at OCC?
16 A. Not specifically, no.
17 Do you recall whether at any time
Q.
18 anyone told you that Lehman had an excess of
19 $1.3 billion of cash deposited at the OCC?
20 A. No one told me that specifically, no.
21 Q. Did anyone tell you that Lehman had an
22 excess of $900 million in additional assets
23 beyond the cash deposited at the OCC?
24 A. No one told me that.
25 Did you ever have any discussion with
Q.

Page 276
2 Barclays about Barclays acquiring the $2.2
3 billion of excess cash and assets margin at OCC?
4 MR. HOME: Objection. Lacks
5 foundation.
6 A. I specifically did not.
7 Q. Are you aware whether Barclays ever
8 asked anyone at Lehman to include any of those
9 assets in the sale?
10 A. I'm not specifically aware of any
11 specific dialogue with respect to those options,
12 the collateral, BarCap and Lehman.
13 And to your knowledge, was there ever
Q.
14 any intent on the part of Lehman to transfer any
15 of those excess cash, that 1.3 billion or any
16 additional assets, that was clearing in margin
17 at OCC to Barclays as part of the sale?
18 A. My recollection is the original
19 contemplation of those positions would have
20 been, to your point, the actual positions
21 themselves. Collateral would have been a
22 secondary consideration. We were concerned
23 about our collateral positions.
24 However, I think over the course of
25 the week, that became -- that became, to my

Page 277
2 recollection, over the course of time, that
3 became something that ended up, I believe, in
4 the clarifying document.
Q. Did anyone tell you that the, under
6 the clarifying document, there had been some
7 agreement where Barclays to transfer to Barclays
a an additional $2.2 billion of cash and
9 securities representing margin, excess margin
10 and other assets at OCC?
11 A. No.
12 MR. HOME: Objection. Vague and
13 ambiguous. Lacks foundation.
14 Q. To your knowledge, was there ever any
15 intent on the part of Lehman that the clarifying
16 letter would provide Barclays an additional $2.2
17 billion in margin at OCC?
18 A. No.
19 Q. What about margin, additional margin
20 that Lehman had at any other clearing
21 corporations, and I want to specifically include
22 any foreign clearing corporations, counterparts
23 to the OCC, were you aware, was there ever any
24 negotiations or intent on the part of Lehman to
25 transfer any such margin, cash or additional

Page 278
HIGHLY CONFIDENTIAL - B. McDADE
2 assets, at foreign clearing corporations to
3 Barclays?
4 A. I'm not aware of those.
6
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ISO Reporting - Worldwide V7-702-9580
Page 1
1
2
3
4
In Re: Chapter 11
s LEHMAN BROTHERS Case No. 08-13555 (JMP)
6
* * * HIGHLY CONFIDENTIAL * * *
9
DEPOSITION OF HUGH McGEE
10
New York, New York
Monday, August 10, 2009
12
13
14
15
16
17
18
19
20 Reported by:
FRANCIS X. FREDERICK, CSR, RPR, RMR
21 JOB NO. 24038
22
23
24
25

Page 2
1
2
5 August 10, 2009

6 10:00 a.m.
7
9 HIGHLY CONFIDENTIAL deposition of

10 HUGH McGEE, held at the offices of Jones
11 Day, 222 East 41st Street, New York, New
12 York, pursuant to Notice, before Francis
13 X. Frederick, a Certified Shorthand
14 Reporter, Registered Merit Reporter and
15 Notary Public of the States of New York
16 and New Jersey.
17
18
19
20
21
22
23
24
25

Page 13
H. McGEE - HIGHLY CONFIDENTIAL
2
all.1111111111111111111111111111
3
011111111111111111111111111111111MIS
4
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5
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6 Q. Stay up at the top of the chain if
7 we could for a moment because I know there's a
a lot of people who do something in connection
9 with it. I'm looking at the senior activities
lo either at the table or near the table. Who's
11 involved in getting the transaction done?
12 A. Well, certainly Mike Gelband was
13 there as well.
14 Was Paolo Tonucci involved?
Q.
15 A. Yes.
16 Q. What was his role?
17 A. Well, Paolo and Ian Lowitt were
18 both involved around some of the balance sheet
19 type items.
20
21
22
1111111111111111111111111111111111111111111111.
23
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24
1111111.11■1111i
25

Highly Confidential
Page 1
1 M. Shapiro
4
5 In Re:
6
Chapter 11
9
Debtors.
10
11
13
DEPOSITION OF MARK J. SHAPIRO
14
New York, New York
15
August 7, 2009
16
17
18
19
20
21
22
23
Reported by:
24
KATHY S. KLEPFER, RMR, RPR, •CRR, CLR
25 JOB NO. 24036
...
Highly Confidential
Page 2
1 M. Shapiro
2 August 7, 2009
3 9:30 a.m.
4
5 HIGHLY CONFIDENTIAL deposition

6 of MARK J. SHAPIRO, held at Jones
8 New York, New York, before Kathy S.
10 Reporter, Registered Merit Reporter,
Certified Realtime Reporter, Certified
12 Livenote Reporter, and Notary Public
13 of the State of New York.
14
15
16
17
18
19
20
21
22
23
24
25

Highly Confidential
Page 7
M. Shapiro
2
3
ffMN■M
4
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6
8
9
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10
11
12
13
14
Q. By whom are you presently employed?
15 A. Barclays Capital.
16 Q. And what's your position there?
17 A. am the head of Restructuring and
18 Finance within the Investment Banking Division.
19
20
21
22
23
24
25

Highly Confidential
Page 49
1 M. Shapiro
2
10
immomal
11
12
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13
14
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19
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20 Q. Was Steve Berkenfeld involved in the
21 negotiations on that Monday and Tuesday?
22 A. Yes.
23 Q. Would he have been one of the people
24 negotiating what you call in the trenches?
25 A. He was more involved in some of the

Highly Confidential
Page 50
1 M. Shapiro
2 legal negotiations. He was definitely at the
3 table from time to time with the lawyers. He
4 was not, to the best of my recollection, in the
5 meetings that took place between myself, Mark
Shafir, Archie and Michael Klein.
7
13
14
15
16
17
18
19
20
21
22
23
24
25

Highly Confidential
Page 63
1 M. Shapiro
2
5
0=====.1.
6
8
WAIINAMP
9 Q. And how did you go about trying to
10 identify what I'll call the quantum? How big is
11 this number?
12 A. So I think I first asked George Mack,
13 again, as part of this, to figure out like what
14 were the outstandings that were unpaid under
15 these contracts. And I think he went to
16 somebody and the answer came back we can't
17 possibly figure that out in this time
18 specifically to each contract. It was just, you
19 know, there was no ability, functionally, to do
20 that in the time we had. That's just not -- I
21 was not humanly possible.
22 So but Barclays obviously wanted that
23 information from us, so we started thinking
24 about, well, how could we approximate that
25 amount. And so a group of us, we were talking

Highly Confidential
Page 64
1 M. Shapiro
2 about it on the Lehman side, and we said, well,
3 one way that we could estimate this was by
4 having somebody look at the payables run, the
normal payables run in the ordinary course,
6 exclude comp, right, whatever is normally paid
7 for compensation on a weekly or monthly basis,
take a snapshot of a normal payable cycle, all
9 right, so at any given time you have a certainly
lo amount of payables outstanding, not knowing when
11 under every contract a payment was going to be
12 made, and not knowing they were all monthly,
13 necessarily, but we assumed that a lot of them
14 would be paid normally, you know, on a monthly
15 cycle, and provide us with an overall number
16 that would be a proxy for what the payments
17 under, you know, if you were assuming many of
18 those contracts, what those payments estimated
19 could be.
20 So that this was an intent. And we
21 told Barclays we couldn't provide them with the
22 specifics that they were looking for, but we
23 would try to get them an estimate of, for them
24 and ourselves, obviously, an estimate of what we
25 thought the amount would be that could be paid

Highly Confidential
Page 65
1 M. Shapiro
2 if they were going to have to assume all of
3 these contracts.
4 Who did that work?
Q.
5 A. I don't know. George -- George went
6 off and started talking to people in the finance
7 area. And there were many people that were
8 working around, obviously around the clock on
9 these things trying to pull this information
10 together for us. I don't know who actually did
11 the work.
12 Q. Is George the person that you tasked
13 to get the number?
14 A. George is the person who I tasked to,
15 you know, to get people to provide us with those
16 numbers.
17
18
19
20
4111111111111111111111.11111
21
22
23
24
25
0111111111/1111111111111
Highly Confidential
Page 142
1 M. Shapiro
2
3
11111111111111111111110
4
Q. You testified previously that on,
maybe it was Thursday evening or at some point
6 later in the week, that you thought that there
7 was some concern about Barclays going through
8 with the deal, okay? I don't know what language
you used. Tell me what the -- was there
10 anything that Barclays said to anyone at Lehman
11 that caused that concern, or was it just a
12 general anxiety about wanting to get something
13 done?
14 A. No, it was really a comment that was
15 made to me by Jim Seery, who said something like
16 there's a big, I think his words were "shit
17 show" going on between JPMorgan and Barclays
18 around the repo and that, you know, JPMorgan was
19 screwing around doing something that Jim
20 characterized, as I said, as something that was
21 not positive, and that, you know, that was
22 putting the deal potentially at risk. That was,
23 would say, the nature of what concerned me.
24 So that was it.
25

Highly Confidential
Page 148
1 M. Shapiro
2
10
11
MMMRWNM
12 Q. Let me show you again what has been
13 marked as Exhibit 19 and draw your attention to
14 the cure amount about which you testified
15 previously --
16 A. Yes.
17 Q. reflected on this schedule as
18 being, as I read it, 2.25 billion. Do you see
19 that?
20 A. Yeah, I do see that.
21 Q. Do you recall that number ever
22 changing in the course of the week?
23 A. I don't remember -- I don't really
24 remember how that 2.25 got in there. I
25 personally have a better recollection of a $1.5

Highly Confidential
Page 149
1 M. Shapiro
2
billion number that we were using for -- and
3 obviously it was an estimate, right?
4 So these were all, at the end of the
5 day, as I explained to you earlier, we were
6 trying to do our best at the time to provide
7 Barclays, principally, with a perspective on
8 what it might cost them to take over all of the
9 contracts that could be subject to the
lo assumption of the assignment. And so, as I said
11 earlier, we were trying to come up with an
12
estimate of what that number was.
13
My recollection was we -- I used, in
14
my own head, a billion-five, and the reason I
15 remember that is that when we were negotiating
16
the breakup fee, we were -- I was thinking
17
about -- and I had negotiated the breakup fee in
18 the transaction relating to the stalking horse
19
bid -- I remember thinking, okay, we can do 3,
20
typically 3 percent of the deal. Barclays asked
21
for a lot more going in. They asked -- I think
22
Victor Lewkow told me something like $250
23 million or something like that. It was big
24
number. And I told him we weren't going to do
25 that, that in my mind that, you know, there

Highly Confidential
Page 150
1 M. Shapiro
2 was -- that that could be perceived as, you
know, chilling the bidding. I didn't want any
4 perception of anybody feeling that they couldn't
5 make a bid.
6 Obviously, you know, I said that 3
percent was a normal -- he was not a bankruptcy
lawyer, by the way. So I was -- I wouldn't say
9 I was educating him because he obviously was a
10 smart guy, but I was explaining to him in my
11 experience what an acceptable number would be
12 from the court's perspective, and at the time my
13 recollection is we were looking at $250 million
14 for goodwill, it was around a million to a
15 million-450 for the buildings, which ultimately,
16 you know, that was our estimate, we didn't have
17
our desktop appraisals yet --
18 MR. STERN: Billion.
19 A. Billion, yeah, sorry.
20 1.45 billion. That was a
21 billion-seven. We added this estimate for cure
22 costs of a billion and a half, that got us to
23 3.2 billion, and we told them that the $100
24 million breakup fee would be approximately 3
25 percent and that's what we would be willing to

Highly Confidential
Page 151
1 M. Shapiro
2 do, plus some expense reimbursement, I think
3 maybe 25 million.
4
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Highly Confidential
Page 153
1 M. Shapiro
2
10
11
12 .
13
14
15
16
17
18
19
20
Q Now, in that conversation on late
21 Monday night or early Tuesday morning, you say
22 you used a number for cure of 1.5?
23 A. Yes. My recollection for the purposes
24 of calculating this $100 million.
25 Q. I understand. Do you have any

Highly Confidential
Page 154
1 M. Shapiro
2 recollection where you got that number and why
3 it's different than number that's in Exhibit 19?
4 A. The only recollection I have is that,
as I said, I had asked people to go back and get
6 me a proxy for what that month, you know, call
7 it snapshot of a monthly payables number would
8 be off of let's call them trade payables, which
9 would really cover contracts that you're paying
lo under, excluding employee liabilities and things
11 like that.
12 Somebody probably in my team who was
13 tasked with that -- it could have been George
14 Mack, it could have been somebody else, Dan
15 Flores -- I'm sure came back to me and said, I'm
16 being told that rough cut around a billion-five,
17 but it was a true estimate, we never told
18 Barclays it was anything other than an estimate,
19 and we told them it could be higher, it could be
20 lower. And it was, at the end of the day, it
21 was always going to be based on what contracts
22 they ultimately assumed. So, you know, which we
23 didn't have any clear view on other than the
24 fact that we thought they were going to need a
25 good chunk of the contracts to operate the firm.

Page 1
1 HIGHLY CONFIDENTIAL - A. KIRK
2
3
4
5 In Re:
6
Chapter 11
a HOLDINGS, INC., et al., (Jointly Administered)
9
Debtors.
10
11
12 * * * HIGHLY CONFIDENTIAL * * *
13
DEPOSITION OF ALEX KIRK
14
New York, New York
15
August 31, 2009
16
17
18
19
20
21
22
23 Reported by:
24
KATHY S. KLEPFER, RMR, RPR, CRR, CLR
25
JOB NO. 24545
Page 2
2 August 31, 2009
3 9:30 a.m.
4

6 of ALEX KIRK, held at Jones Day, LLP,
7 222 East 41st Street, LLP, New York,
New York, before Kathy S. Klepfer, a
9 Registered Professional Reporter,
10 Registered Merit Reporter, Certified
11 Realtime Reporter, Certified Livenote
12 Reporter, and Notary Public of the State
13 of New York.
14
15
16
17
18
19
20
21
22
23
24
25
Page 11
2
3
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25 A. Yes. Several of my colleagues were

Page 15
2 who had signed employment agreements were
3 resigning from the firmillOMMIIIMIS
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11 sorts of issues with Barclays.
12
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Page 28
2
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AMMS
6 Q. During the period from Friday, the
7 12th, through Sunday, the 14th, were you dealing
8 with any particular people at Barclays who you
9 could name?
10 A. Archibald Cox. Bob Diamond. Rich
11 Ricci. Michael Klein, as their agent.
12
?
13 .
14
15
16
17
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18
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Page 54
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15
16 Q. Now, you referred to -- you said they
17 broadly outlined the first transaction. By the
18 Friday morning, is it your understanding there's
19 a second transaction, a subsequent transaction?
20 A. By the time we had this meeting --
21. Q. Uh-huh.
22 A. -- it was my view, my opinion, that
23 there would have to be a reworking of the
24 transaction because a vast majority of those
25 securities that had been planned for transfer
Page 55
2 were held at JPMorgan. There was a -- and
3 JPMorgan had a dispute of some sort about the
4 transfer of the repo with Barclays, which was
5 described to me by Mike Keegan, and in addition
6 to that, they shut down Lehman's -- they closed
7 down Lehman's DTC account, which led me to
8 believe that JPMorgan would not cooperate and
9 transfer the aforementioned securities to
10 Barclays on that Friday.
11
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12
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Page 66
2
4
ANIMMEMINK
5 Describe that for me. What was your
Q.
6 understanding?
7 A. So, to be clear, I'm not an expert,
8 was not an expert on repo, so I was learning
9 things for the first time that day that I didn't
10 understand how they actually worked prior to
11 that. So I got what was a cursory as opposed to
12 a detailed explanation of the issue, but as
13 understood it from the way that Mike Keegan
14 explained it to me was that the Fed had been
15 providing a repo for Lehman Brothers earlier in
16 the week of approximately $50 billion, that the
17 Fed had made it known that they wanted to be
18 repaid on that repo, and that Barclays had
19 agreed to assume that repo obligation from the
20 Fed. Without that financing the firm would have
21 collapsed the next morning.
22 So the way it was explained to me was,
23 during the transfer of those -- that loan and
24 the collateral associated with that loan, there
25 were many pieces of collateral that Barclays
Page 67
2 could not value, so they did not accept them in
3 transfer from the Fed. And mechanically, it was
4 explained to me the way that worked was, in a
tri-party repo, the Fed transferred all of the
positions to JPMorgan and then JPMorgan began
7 transferring those positions upon the receipt of
8 money from Barclays transferred money, and then
they would transfer the positions that secured
10 that repo.
11 And at some point during that process,
12 Barclays became very uncertain as to some
13 percentage of that collateral, I don't recall
14 the exact amount, but it was a large number,
15 maybe as much as, you know, 20 percent of the
16 collateral, and when Barclays didn't accept
17 those positions, they, by definition, just got
18 left at JPMorgan.
19 They -- so JPMorgan was left with
20 collateral that they were not comfortable with
21 but Barclays would not accept, so -- and
22 JPMorgan, I guess they attempted to negotiate
23 but couldn't get that negotiation done.
24
25
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Page 72
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23
Q. And how did Klein, Ricci and Keegan or
24 any combination of those three men react to that
25 news?
Page 73
2 A. There was some question as to, well,
3 what do we do now? I suggested that the only
4 reasonable course of action would be to proceed
5 with the transaction substituting the repo
6 assets, the assets that Barclays had lent
7 against, for all the other securities that had
been contemplated in the transaction and leave
9 the rest of the transaction as was.
10
11
12
13
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18
19 turn it over, or was it to find some, some

20 identifiable bucket of value until Barclays
21
22
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Page 122
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17 Martin -- somebody who worked for Martin Kelly
18 had prepared it.
19 Q. And within the balance sheet, sir, the
20 fifth column that's entitled Transaction
21 Adjustments, do you see that?
22 A. Yes.
23 Q. Do you know what that column
24 represents, what the entries in that column are
25 10111111111M111111111P
Page 1
1
4
5 In Re:
6 Chapter 11
8 HOLDINGS, INC., et al, (Jointly Administered)
9 Debtors.
10
11
13 DEPOSITION OF ERIC JONATHAN FELDER
15 July 31, 2009
16
17 Reported by:
18 MARY F. BOWMAN, RPR, CRR
19 JOB NO. 24018
20
21
22
23
24
25

Page 2
1
5 July 31, 2009

6 9:35 a.m.
9 Deposition of ERIC JONATHAN FELDER,

10 held at the offices of Jones Day, LLP, 222 East
11 41st Street, New York, New York, before Mary F.
12 Bowman, a Registered Professional Reporter,
13 Certified Realtime Reporter, and Notary Public
15
16
17
18
19
20
21
22
23
24
25

Page 39
FELDER - HIGHLY CONFIDENTIAL
2 /41111.1NOMOMMOMMINIMIN
3
101061.001111M111.1.MINOMMUIONSWIMI
4
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15 C
16
17
18
19
20
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21
22
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23
24
25
411111111110Mbaismilmilmmumisinlegoalmifts
TSG Reporting - Worldwide (877)702-9580
TSO Reporting - Worldwide (877) 702-9580
Page 1
HIGHLY CONFIDENTIAL - PAOLO TONUCCI 1
4
In Re:
Chapter 11
6
LEHMAN BROTHERS Case No. 08-13555(JMP)

HOLDINGS, INC. et al., (Jointly Administered)
8
9 Debtors.
10
11 HIGHLY CONFIDENTIAL
12 DEPOSITION OF PAOLO TONUCCI
13 Friday 14 August 2009
14 At: 7:00 am
15 Taken at:
16 Jones Day
21 Tudor Street
17 London
United Kingdom
18
19 Reported by: AILSA WILLIAMS

Certified LiveNote Reporter
20
21
22
23
24
25
Page 2
2 APPEARANCES
3 JONES DAY, LLP
Attorneys for Lehman Brothers, Inc.
4 222 East 41st Street
New York, NY 10017-6702
BY: JAYANT W. TAMBE, ESQ
BRIDGET CRAWFORD, ESQ
6
BOIES, SCHILLER & FLEXNER, LLP
7 Attorneys for Barclays Capital and the
Witness
8 5301 Wisconsin Avenue, NW
Washington, DC 20015
9 BY: HAMISH HUME, ESQ.
10 QUINN, EMANUEL, URQUHART, OLIVER & HEDGES,
LLP
11 Attorneys for the Creditors Committee
865 S. Figueroa Street, 10th Floor
12 Los Angeles, California 90017
BY: MATTHEW BUNTING, ESQ.
13 ERICA TAGGART, ESQ. (By Phone)
14 SIMPSON THACHER & BARTLETT LLP
Attorneys for the Witness
15 425 Lexington Avenue
New York, NY 10017-3954
16 BY: CHRISTOPHER J. LUCHT
17
18 HUGHES, HUBBARD & REED, LLP
Attorneys for the SIPA Trustee
19 One Battery Park Plaza
New York, NY 10004-1482
20 BY: WILLIAM R. MAGUIRE, ESQ.
21 Also Present:
22 PHILIP E. KRUSE, Alvarez & Marsal
23
24
25
Page 5
1 HIGHLY CONFIDENTIAL - PAOLO TONUCCI 5
2 PAOLO TONUCCI
3 Having been sworn,
4 Testified as follows
5 DIRECT EXAMINATION BY MR. TAMBE:
6 MR. TAMBE : Morning, Mr. Tonucci. We
7 met this morning. My name is Jay Tambe with Jones
B Day, representing the Lehman Brothers Holdings
9 Estate. I will have counsel introduce themselves
10 to you and then we will get started.
11 MS CRAWFORD: Bridget Crawford from
12 Jones Day.
13 MR. MAGUIRE: Bill Maguire, Hughes,
14 Hubbard & Reed for the Trustee.
15 MR. BUNTING: Matthew Bunting, Quinn,
16 Emanuel, Urquhart, Oliver & Hedges for the
17 Creditors Committee and on the phone Erica

18 Taggart, also Quinn, Emanuel, Urquhart, Oliver &
19 Hedges.
20 MR. KRUSE: Phil Kruse with Alvarez &
21 Marsal on behalf of the LBHI Estate.

22 MR. LUCHT: Christopher Lucht, Simpson
23 Thacher & Bartlett, on behalf of the witness in

24 his individual capacity.
25 MR. HUME: Hamish Hume from Boies,
Page 6
2 Schiller & Flexner representing Barclays.

3 MR. TAMBE: Erica, can you hear us?
4 MS TAGGART: Yes, thank you.
5 MR. TAMBE: Morning, Mr. Tonucci. By
6 whom are you currently employed?
7 A. Barclays.
8 Q. In what capacity?
9 A. I work in the treasury area.
10 Q. What is your position?
11 A. Head of group balance sheet.
12 Q. And is that head of group balance sheet
13 for global operations?
14 A. That is right, for global operations.
15 Q. How long have you held that position?
16 A. Since February of this year.
17 Q. How long have you been employed by
18 Barclays?
19 A. Since September, 26 September 2008.
20 Q. What was your position at Barclays when
21 you first joined Barclays in September 2008?
22 A. US treasurer for Barclays Capital.
23
24
25
Page 17
4 ammilmlimo
5 Q. You used a phrase, "There were changes
6 in secured funding haircuts", is that right? I
7 want to understand what you mean by "haircuts"?
A. The difference between the market value
9 and the cash received is known as the haircut in
10 a secured funding arrangement, the market value of
11 the securities I should say.
12 t
13
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Page 29
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22 Q. Let me rephrase. You understood the
23 5 billion dollars all in economic loss versus our
24 marks to be a reference to a discount off the
25 marks, correct?
Page 30
2 A. Yes.
3 Q. The deal that was ultimately done and
4 closed on September 22, that too included
a discount off of Lehman's marks, correct?
6 A. That is correct.
7 Q. Okay, and the amount of that discount
8 off of Lehman's marks was about $5 billion, is
9 that right?
lo MR. HUME: Objection, lacks foundation.
11 A. It is uncertain, because obviously there
12 were a lot of valuation movements and so
13 I couldn't say with certainty, but certainly what
14 I can say is versus the valuations that I recall
15 seeing from our analysis it was about that number.
16 Q. About $5 billion?
A. About $5 billion.
emoselaMMINIIIIIIIIIMINNMErsu•
23
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25 010.1.1111111101.111.11111111101111111.11111.111010
Page 32
3 /111.111111.11111.11111111111.1011011111.11111160
4 Q. How did Barclays get the
5 5 billion-dollar discount?
6 A. Right. I think what was contemplated in
7 the negotiation, and what was executed in terms of
the settlement probably differed slightly, you
9 know, and involved over the week the settlement of

10 the transaction, meaning the actual transfer of
11 securities and cash was through the repo
12 agreements, and essentially the termination of
13 those repo agreements.
14 Q. Was the discount given to Barclays by
15 defaulting on the repo?
16 MR. HUME: Objection. You are asking
17 the witness very general questions about
18 a complicated transaction without walking him
19 through any of the details of that transaction. I
20 think the line of questioning lacks foundation.

21 MR. TAMBE: You have an objection to
22 form, right, Hamish? So noted. Answer the
23 question, please.
24 MR. HUME: I think the line of
25 questioning is calling for speculation and lacks
Page 33
2 foundation.
3 MR. TAMBE: Do you remember my question?
4 Probably not. Do you want it read back?
5 A. Yes, please.
6 (Read back)
7 A. Yes, I would say that was the way in
8 which the transaction was settled, so that is
9 fair.
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Page 36
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23 Q. Tell me briefly what the changes were,

24 if any, in the size of the Fed repo from Monday to
25 Tuesday to later in the week?
Page 37
A. I can't recall the exact details. I

recall that the Barclays repo on the -- again, I
am not certain about this but the Barclays repo on
the 16th, I believe, was for $5 billion. On the
17th I believe it was for $8 billion and then on
the Thursday there was obviously a much bigger,
transaction and so that changed the Fed repo,
which became zero.
Q. Let's talk about that bigger transaction
on Thursday, okay. Describe for me how the Fed
repo went to zero and what happened with the
Barclays repo on Thursday?

A. It is difficult for me to talk about the
mechanics because I am not that close to the
operational mechanics of the repo being unwound,
but my understanding was that the repo unwound on
the Thursday morning, which would be typical in
a tri-party repo, that an overnight repo would
unwind, you would return the collateral and the
cash and the transactions would then settle with
that collateral that was released, and at the end
of the day a new financing transaction would be
settled.
In this instance there was complexity because

Page 38
JP Morgan was the tri-party agent for Lehman and had been
the tri-party agent in the transaction with the Fed. BONY
was the tri-party agent for Barclays and so there was a need
to transfer collateral from JP Morgan to Bank of New York
tri-party system, and I am not sure about the mechanics
involved in that transfer but it was clearly a more
complicated transaction than if the financing had just been
through the JP Morgan tri-party system.
Q. Is it your understanding that on
Thursday, in this bigger transaction on Thursday,
Barclays effectively replaced the Fed and the Fed
funding transaction?
A. I was not involved in the discussions
with Barclays or with the Fed on the removal or
replacement of the Fed in that transaction, so I
can't really talk to the specifics, but my
understanding was that the Fed transaction was
going to mature on the Thursday and they were not
really providing any financing subsequently.
Q. Wednesday night into Thursday, do you
recall the size of the Fed funding being
approximately $45 billion?
A. Yes, that sounds about right.
Q. And the Fed was holding approximately

Page 39

2 $50 billion in collateral against that financing?
3 A. That sounds right.
4 Q. And the big transaction that you

5 described on Thursday effectively had Barclays
6 coming in and putting in $45 billion to pay off
7 the Fed repo, correct?

8 A. I understood that they were going to be
9 putting in 45, that it was going to be

10 a 45 billion-dollar transaction, yes.
11 Q. And all the collateral that was being
12 held by the Fed was then going to be transfeired
13 to Barclays, correct?
14 MR. HUME: Objection, asked and
15 answered. He has already explained.
16 A. To be honest, I was not close enough to
17 the actual transaction that was being booked to
18 know exactly where all the collateral was going to
19 end up, nor was I close enough to any agreements
20 with Barclays or with the Fed as to where all of
21 the collateral was going to end up.
22 Q. So effectively on Thursday the Fed
23 funding goes down to zero, correct?
And they exit the financing picture at

Page 40
2 that point?
4 Q. And what you have left is the Barclays
repo, correct?
Q. Describe for me what happens with the
Barclays repo over the next few business dates?

9 We are now into Thursday on to Friday the 19th.
10 MR. HUME: Again, objection to the form
11 of the question and the lack of foundation.
12 A. That transaction happened on Thursday.
13 That was essentially the last of that transaction
14 in the way that I think about it. It was executed
15 on Thursday night and settled Thursday night into
16 Friday morning and that was the end of that
17 transaction. After that it was just a matter of
18 that transaction terminating and the collateral
19 being rebooked as a purchase by Barclays and as
20 a sale by Lehman.
21
22 1/11111111101.1PMPPPRIMMIS
23 111111■11111110111111.1111
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Page 54
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7
9
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10
11
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12
13
14
15
16 14.1.10=110111111111.111MIMPLINIMINiumummagm
17
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18 OMMUOIMMONIONIMINM
19
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20
21
22
23
24 Q. And do you recall there being an effort

25 on September 19 to find additional collateral for
Page 55
2 Barclays?
3 A. I do.
4 Q. What can you tell us about the efforts
to find additional collateral for Barclays?
6 A. That we were asked on the morning of the
7 19th to find if there was additional collateral to
8 include in the transaction.

9 Q. Asked by whom?
10 A. I believe I was asked by Ian Lowitt.
11 Q. Did Ian Lowitt tell you why he was

12 asking you to find additional collateral?
13 A. He said that it was necessary for the
14 transaction to close and he reiterated that
15 through the day.
16
17 SIMPI.OffirMnrifflill.g.....INMIIMOIMIMMEMIlis.
18
19
20
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Page 125
2
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11 Q. You have a second item: "Their opening
12 balance sheet should also include 1.9 billion of
13 box assets". Correct?
14 A. Correct.
15 Q. What is that a reference to?

16 A. The unencumbered collateral.
17 Q. Schedule B?
18 A. Which became Schedule B.
19
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20
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22 41011=111111111111
23 emarammisimmip
24
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25 41111•11111■=mmanumir
Page 132
2 INIIMINIIMINI■•••=101■1
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14 pauliwow
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16
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18 IRIMIMIMMs
19 a•MIM
20
23 Q. The third item reads: "Not clear on the

24 amount of blocked discount or how we make it
25 happen." Do you see that?
Page 133
2 A. Yes.
3 Q. And you understand that to be
4 a reference to the 5 billion-dollar discount that

5 we talked about earlier?
6 MR. HUME: Objection, lacks foundation.
7 A. I understand it to be a reference to the
8 discount on purchase, so I would have linked it to
9 that $5 billion.
10 Q. Then the next sentence reads:

11 "Defaulting on repo could be the best as
12 discounts could be taken from the haircut."
13 Do you see that?
14 A. Yes.
15 Q. Do you remember discussing with anyone
16 at Lehman defaulting on the repo as a way of
17 providing the discount to Barclays?
18 A. Yes.
19 Q. With whom did you discuss that?

20 A. I think it was with Ian and with Gerry,
21 perhaps Martin Kelly as well.
22
23
aMOMMIIIIM=Millumwm=lsouress
24
25 461.1.MONIMMINNIIMMIN.M.IMINEMINII
Page 142
HIGHLY CONFIDENTIAL - PAULO TONUCCI 142
armiall1111•111111111111111111111■
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11111011111111011.11111111111111.11111111■1101
■11■1•10■11m.
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àí
Q. And your understanding was that
a default on the repo really converted what was a
two-leg transaction; the repurchase leg would go

Page 143
2 away and there would effectively be a sale of the
3 asset?
4 MR. HUME: Objection.
5 A. That is correct. It would become
6 a sale.
8
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Page 146

2 1111111111111011.110111.11.1.111111111111.111.111.11111111.
3 11111111.111.11.1111111.
4 11111111111111=
5
10
11 Q. I have talked about the components at
12 least that you have in your e-mail, where you
13 recap the opening balance sheet, right, you have
14 the repo component and then you have 1.9 billion
15 for what we have talked about, became Schedule B,
16 and then you had another billion dollars of the
17 15c3 receivables?
19 Q. And the 1.9 and the 1 is about
20 $2.9 billion, right?

22 Q. And that was additional value over and
23 above the repo, correct?
24 MR. HUME; Objection.
25 A. Additional assets over and above the
Page 147
2 repo assets that were transferred on the Thursday

3 night.
4
6 10M1.11.141.■
7
8 4MOIMIIMINNUMIIMIM
9 MnaMliaMM/MMORIMMMN/Man/NER/OWEel
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22 IMM1■11MENM
23
24 iiii.111.11.11111111.1.1011.1...IMMOillOMMMINMO
25
Page 1
1
HIGHLY CONFIDENTIAL - R. AZERAD
2
3
4
5 In Re:
6
Chapter 11
8 HOLDINGS, INC., et al., (Jointly Administered)
9
Debtors.
10
11
REVISED
12
13
DEPOSITION OF ROBERT AZERAD
14
New York, New York
15
August 17, 2009
16
17
18
19
20
21
22
23 Reported by:
25
JOB NO. 24041
TSG Reporting Worldwide (877) 702-9580

Page 2
1 HIGHLY CONFIDENTIAL - R. AZERAD
2 August 17, 2009
3 9:29 a.m.
4

6 of ROBERT AZERAD, held at Jones Day
LLP, 222 East 41st Street, LLP, New
8 York, New York, before Kathy S.
11 Certified Realtime Reporter, Certified
14
15
16
17
18
19
20
21
22
23
24
25

Page 6

2
11011111111110111.1.11111111111111111111111.1111111111MM
3
41011011111.1111111111111111111111110.
4
1111111111111.111MW
5 Q. Mr. Azerad, by whom are you employed
6 currently?
A. Barclays Capital.
Q. And how long have you been employed by
9 Barclays Capital?
10 A. Since September of 2008.
11 Q. In what position are you employed by
12 Barclays?
13 A. I am a director in the Treasury
14 Department of Barclays Capital.
15
16
17
18
19
111111111111111110
20
21
22
23
24
25
WIMa
Page 110
2
5
TL
6
7
OnEDMIM
8
10
4MMIMMIIMEMMMUMI
11
12
PMMUMMIMIMMObeftAMMMMEM%
13
amimonos
14
15
16
17
18
19
tw
20
21
■===mmisiMir
410.11M.NnMUMEIMMMMM
22
23
24
flTT
25
let me -- I just want to kind of define it. The
l'SG Reporting - Worldwide (877) 702-9580

Page 111
1 HIGHLY CONFIDENTIAL - R. AZERAD
2 non-actionable box is a box of assets which is
3 financed on an unsecured basis. The reason it's
4 called non-actionable is because it's -- as part
of our analysis of the box, we try to separate
6 assets which we thought were left in the box,
7 left unencumbered, but could be financed from
8 assets left in the box, but couldn't be financed
9 on a "business as usual" basis. That could be
10 the same 1.9 billion.
11
12
13
14
15
16
17
18
19
20
21
22
?3
24
VOW
25
TSG Reporting. Worldwide (877) 702-9580

Page 1

4
In re: )
) Chapter 11
6 LEHMAN BROTHERS ) Case No. 08-13555(JMP)
)
7 HOLDINGS, INC., et al., )
)
8 Debtors. )
)
9
10
11
12
13
14 HIGHLY CONFIDENTIAL DEPOSITION OF
15 ALASTAIR BLACKWELL
17 Friday, August 7, 2009
18
19
20
21
22
23 Reported by:
24 KRISTIN KOCH, RPR, RMR, CRR, CLR
25 JOB NO. 24037

Page 2
1
4 August 7, 2009
9:21 a.m.
6
8 Deposition of ALASTAIR BLACKWELL,

held at the offices of JONES DAY, LLP, 222
10 East 41st Street, New York, New York,
11 before Kristin Koch, a Registered
12 Professional Reporter, Registered Merit
13 Reporter, Certified Realtime Reporter,
14 Certified Livenote Reporter and Notary
15 Public of the State of New York.
16
17
18
19
20
21
22
23
24
25

Page 8
1 Blackwell - Highly Confidential
2
3 10011.01MMINIIIIMUNftiaangMeilaft.S
4
10
11
12
13
14
11111111111111111111"1111111111.11111MMINI
15 You are currently employed by
16 Barclays Capital; correct?
17 A. I am, yes.
18 Q. And what is your present position?
19 A. I am responsible for the Americas
20 operations department for capital markets.
21 Q. Okay. And do you have a title?
22 A. I am a managing director.
23
24
25

Page 1
1 HIGHLY CONFIDENTIAL - Cr. HRASKA
4
5 In Re:
6 Chapter 11
9
Debtors.
10
11
12 * * *HIGHLY CONFIDENTIAL* * *
13 DEPOSITION OF JAMES HRASKA
15 August 14, 2009
16
17
18
19
20
21
22
23 Reported by:
25 JOB NO. 24039
Page 2
1 HIGHLY CONFIDENTIAL - J. HRASKA
2 August 14, 2009
3 9:25 a.m.
4

6 of JAMES HRASKA, held at Jones Day
7 LLP, 222 East 41st Street, LLP, New
8 York, New York, before Kathy S.
14
15
16
17
18
19
20
21
22
23
24
25
Page 15
2 Q. Okay. Before I forget, what is your
current position at Barclays?
4 A. I am in a very similar role.
5 Corporate title-wise I'm a director, which is
6 equivalent to SVP. I manage, again, Secured
7 Financing Operations for both equities globally
8 and fixed income in North America.
9 Q. Is it fair to say your role is -- your
10 duties and responsibilities are relatively the
11 same as you had when you were at Lehman?

12 A. Responsibilities are reasonably the
13 same, not quite as extensive as they were at
14 Lehman from a global perspective.
15
16
17
18
19
20
21
22
23
24
01111011.11111MIPM11110.1111.110110.
25
Orimmillio01011111.11M1111.1111110
Page 58
2
111111111111111.16
3
6 tiosamainimariimailmigaiiiimaismosisegis
7
10
11
.11111.1.1111.1111111111111111.111111111111111111111111mma
12 --111-11-1111-1
13
14 Q. And so what was the haircut associated

15 with the September 18 repo?
16 A. There wasn't a -- there wasn't a
17
specific stated haircut. There was a total loan
18 amount, which was this $45 billion, and the
19
total collateral value that we were trying to
20 transfer over to Barclays or what we were
21
directed to transfer over to Barclays was
22
approximately $50 billion.
23 Q. And that $50 billion was comprised of
24 the approximately $42 billion in securities that
25 you mentioned earlier plus the cash?
Page 59

2 A. It turned out that that was the case.
3 It was initially intended to be all collateral,
but the market value of what we were to transfer
initially was $50 billion.
6 Q. Okay. And Barclays was, after the --
' after they received the proceeds of the loan and
a the collateral, was Barclays satisfied that it
9 had received the entire amount of collateral
10 that it was expecting with respect to that repo?
11 MR. SHAW: Objection. Foundation.
12 A. Yeah, I don't know whether they were
13 satisfied or not. I mean, we completed the
14 securities transfers until the point that we
15 couldn't make any transfers because the system
16 had been shut down, and we were requested at
17 that point to deliver an additional 7 billion in
18 cash, which we did.
19
20
41111MMOMMINIIMM4
21
emmulansgairemmis
22
11111111111111M
23
24
41111111.1111111111111111111111110111
25
Page 1
1 HIGHLY CONFIDENTIAL - M. KELLY
4
5 In. Re:
Chapter 11
9
Debtors.
10
11
12
13 DEPOSITION OF MARTIN KELLY
14
New York, New York
15
August 18, 2009
16
17
18
19
20
21
22
23 Reported by:
24
KATHY S. KLEPFER, RMR, RPR, CRR, CLR
25 JOB NO. 24042

Page 2
2 August 19, 2009
3 9:30 a.m.
4

6 of MARTIN KELLY, held at Jones
Day, LLP, 222 East 41st Street,
New York, New York, before Kathy S.
14
15
16
17
18
19
20
21
22
23
24
25
--•-•----/- ,,,, •- ••
Page 8
HIGHLY CONFIDENTIAL - M. KELLY
2 By whom are you currently employed?
3 A. By Barclays Capital.
4
Q-How long have you been employed there?
5 A. Since late September of '08.
6 Q. And what's your title at Barclays
7 Capital?
A. I'm a Managing Director and I'm the
9 Chief Financial Officer in the Americas.
10 Q. And is that the position you have held
11 since you joined Barclays in September of '08?
12 A. No, it's not. No, my --
13 Q. Go ahead.
14 A. My title has remained the same. My
15 position changed in March, and upon going into
16 Barclays from Lehman, I had three different
17 positions. The first was the Financial
18 Controller for Barclays Capital on an interim
19 basis, and that was a London-based position.
20 Second position was the head of Finance for
21 Structured Capital Markets.
22 Q. Also in London?
23 A. Also in London. The third position
24 was head of Americas Financial Decision Support.
25 Q. Financial Decision Support?

Page 9
2 A. Support, yeah.
3 Q. Was that in London or in the Americas?
4 A. That was an Americas-based role.
Q. Are you based in New York?
6 A. I am. I have remained living in New
7 York. I commuted to London for that period of
8 time between September and March..
Q. Okay.
10 A. I should also say that, in addition to
11 being CFO of the Americas now, I retained the
12 second of those three positions, so I remain
13 head of Finance for Structured Capital Markets
14 today.
15
16
17 sommusgamaamosivall.
18
19
20
21
22
23
24
25

Page 46
HIGHLY CONFIDENTIAL - M. KELLY
2
10
0110111Milsa
11 Q. When you wrote, "Approx. a 5 billion
12 all in economic loss versus our marks," what did
13 you mean by that?
14 A. I recall that the 5 billion represents
15 the difference between the negotiated price and
16 the values of those assets on Lehman's books.
17
18
19
20
21
22
sittillissallsoolansa
23
24
25

Page 108
3. HIGHLY CONFIDENTIAL - M. KELLY
2
7 As far as you know, sir, for these

0.
a asset classes, exclusive of cash, were they
9 shown on Lehman books at an amount higher than
10 $62 billion at or about the time this schedule
11 was prepared?
12 A. My understanding is yes, they were, in
13 aggregate.
14
Q. Were they $5 billion higher; is that
15
your understanding?
16 A. Approximately $5 billion higher.
17
11111111111111MINNIMMIMAIMINimi
18
19
20
111111111111.011~10111Minasmallam
21
MOM
22
23
24
25

.Page 116
2
10
11
1•111111111.11111111111111mi
12
13 1111MENNIFINIMIIIIIMam
14 1111111111111111MaimINIIIIII
15
16
summusimommimillM111.11.11.0
17
18
19 Q. Is it your understanding that the

20 entries on the liability side of this schedule
21 for cure payment for comp represent liabilities
22 that Barclays was going to assume in the
23 transaction?
24 MR. HUME: Objection. Vague.
25 A. Can you repeat the question, please?

Page 117

2 (Record read.)

3 A. My recollection is that these amounts
4 were initial estimates of liabilities that
5 Barclays was to assume.
6 4. Well, the comp number of 2 billion was
an agreed number, correct?
a A. Yes, that was my understanding.
9 Q. And it was your understanding that the
10 2 billion comp number that was agreed was a
11 billion dollars over the accrual that Lehman
12 carried on its books for comp, correct?
13 A. It was approximately a billion dollars
14 over the cash component of the accrual.
15
16
17

Page 129
2
3
waa/alissiassmaw/i/O/MA
4
5
MMEI
6 Q. What do you mean when you say there
7 was an effort to identify other assets? What
8 other assets are you talking about?
9 A. My recollection is that there was an
10 effort to identify whether there was a surplus
11 in funds segregated under the 15c3 requirement.
12 Q. Apart from the effort to find a
13 surplus in funds, the segregated funds under
14 15c3, were there other types of assets that were
15 being searched for to transfer to Barclays?
16 A. My recollection is there was a general
17 effort to identify unencumbered and pledgeable
18 assets.
19
20
21
22
23
24 qM■
25

Page 134
2
3
5 Q. Why was it reduced from 2 and a

6 quarter to $1 billion?
7 A. It was reduced after a review of the
8 schedule that Ian, Ian Lowitt, and I undertook
9 at some point during that week whereby we
10 observed that the estimated liability appeared
11 to be high relative to the expense run rate of
12 the firm.
13 Q. And was it you and Mr. Lowitt who made
14 that determination that it was high relative to
15 the expense run rate?
16 A. My recollection is that it was Ian and
17 I that made that observation.
18 Q. And at what point in the week did you
19 and Mr. Lowitt make that observation? Early in
20 the week? Late in the week?

21 A. I can't recall.
22 Q. Was it before Friday of the week?
23 A. I believe it was before Friday, but
24 I'm not certain.
25

Page 136
2 Q. Tell me what you said, what Mr. Lowitt
3 said, and what Mr. McDade said in that meeting.
4 A. My recollection is that I explained
5 the observation that we had, meaning that the
6 liability estimate appeared high relative to the
7 run rate. I don't recall what Ian said in that
meeting. And I recall Bart's reaction to that
9 as being: We just left a billion dollars on the
10 table.
11
12
13
14
15
16 WMMMMMEMainfte
17
MINIMMEN
18
19 iiriij
20
21
1.41NOMOM
22
23
24
25

Page 229
2 Q. Is it fair to say that the -- now I'm
3 back in the u Loss/Gain" column, the 5.25 loss to
4 Lehman. Did that calculate -- is it fair to say
that's primarily a function of the difference
6 between the book value of the inventory and the
7 value negotiated -- and the negotiated value in
8 the contract for the securities?
9 MR. HUME: Objection. Vague and
10 ambiguous.
11 A. It may. It may. It likely accounts
12 for the difference based on these estimates at
13 this point in time.
14
15
awaniummunaumii.001■111111111aNaft

16
17 4111.101011111MilliallIEMBOMMINIMMINIMMININ
18
19
20
21
22
23 esainallir
24
25

Page 66
2
7 Uh-huh. Did you have an

Q.
8 understanding, sir, that the agreement, the
9 pricing of the agreement was that Barclays would
10 pay Lehman 5 billion less than Lehman had
11 thought the assets were worth?
12 A. My understanding was that the
13 negotiated sales price across all those asset
14 portfolios resulted in a $5 billion,
15 approximately $5 billion loss to Lehman relative
16 to its marks at that time.
17
18
19
20
21
ME/MENINlifilIMEINIMM#1/illniasfaiisikfti
22
23
24
25 MIIIIMEMIIIMO

Page 1
1 HIGHLY CONFIDENTIAL - G. LaROCCA

4
5 In Re:
6 Chapter 11
9
Debtors.
10
11
12 * * *HIGHLY CONFIDENTIAL* * *
13 DEPOSITION OF GERARD LaROCCA
15 August 19, 2009
16
17
18
19
20
21
22
23 Reported by:
25 JOB NO. 24292
ISO Reporting - Worldwide (877) 702-9580

Page 2
HIGHLY CONFIDENTIAL - G. LaROCCA
2 August 19, 2009
3 9:30 a.m.
4

6 of GERARD LaROCCA, held at Jones
New York, New York, before Kathy S.
11 Certified Rea1time Reporter, Certified
14
15
16
17
18
19
20
21
22
23
24
25

Page 29
2
IiIIIIIIMMMIM1111101111111111
"11611111811.111"4111Mallb
3
10
11
12
13
14
15
16
17
18 Okay.
Q.
19 A. And said we needed to get on the phone
20 with the Fed, okay? And Jonathan used words
21 like if the Fed is going to support this, you
22 know, if we want the Fed to work with us and to
23 support this transaction that we want to try to
24 do, that we're going to have to step into
25 that -- we're going to have to take the Fed out

Page 30
HIGHLY CONFIDENTIAL - G. LaROCCA
2 of my -- of their financing obligation with
3 Lehman Brothers.
4 I participated in a phone call with
the Fed on that Tuesday, and -- and you're going
6 to ask me who it was with, and I don't recall,
7 and after my phone call, the urgency was evident
8 to me and I dropped what I was doing and headed
9 down to the Fed and I met with -- now, I'm not
10 sure if I -- I don't know if I went down on the
11 Tuesday night. I think so, I'm almost, I'm
12 almost positive it was Tuesday night early
13 evening and met with Lucinda Brickler and other
14 colleagues of hers from the Fed.
15 And Lucinda had explained to me that
16 the Fed was financing Lehman Brothers, had
17 provided roughly $45 billion in financing for
18 Lehman Brothers, and that they were using --
19 that Lehman was using three facilities to
20 finance collateral and the Fed had lent them $45
21 billion.
22
23
111111111.
24
25

Page 36
2
10
11
12
13
14
15
16
17
18 Q. The cash is how much? 45 billion?

19 A. Originally, the -- we moved 5 billion
20 initially, and the securities did not move
21 across quickly, and as a matter of fact, we
22 actually didn't get $5 billion worth of
23 securities for the first $5 billion worth of
24 cash that moved across.
25 At that point in time, I alerted the

Page 37
2 Fed, and I would have called, I'm not sure if it
3 was Lucinda Brickler or Stephanie Heller, that
4 we had agreed a transaction, we were having a
5 great deal of difficulty because JPMorgan was
6 not cooperating, and they had gone onto the --
7 they had gotten -- I was told that they were
8 going to reach out to JPMorgan. I can't tell
9 you what they said.
10 They came back to me, the Fed, and
11 said that JPMorgan wanted to hold the excess
12 collateral in margin for the transactions to
13 satisfy, you know, their potential exposure to
14 Lehman Brothers, and I said that's a
15 non-starter, that's not the transaction that we
16 had agreed on the Wednesday.
17 We had agreed a transaction with the
18 Fed to take the Fed out of the transaction, not
19 for Barclays to satisfy or, you know, JPMorgan's
20 exposures to Lehman Brothers. That was a lively
21 discussion with me and the Fed, and at that
22 point in time, I had escalated to Rich Ricci
23 that JPMorgan was -- I don't know the words I
24 would have used. I don't know that --
25 Q. Something colorful?
..
Page 38
3. HIGHLY CONFIDENTIAL - G. LaROCCA
2 A. Something colorful, right? They
3 didn't play nice in the sandbox, okay?
4 And, you know, and several -- now
hours have passed, right? And, you know, we
6 haven't done -- we haven't moved much cash and
7 much securities.
10
11
12
13
14
15
16
17
18
19
20
23.
22
23
24
25

Page 1
1 HIGHLY CONFIDENTIAL - D. PETRIE
5 In Re:
6 Chapter 11
9
Debtors.
10
13 DEPOSITION OF DAVID PETRIE
15 August 26, 2009
16
17
18
19
20
21
22
23 Reported by:
25 JOB NO. 24293

Page 2
2 August 26, 2009
3 9:29 a.m.
4

6 of DAVID PETRIE, held at Jones Day
7 LLP, 222 East 41st Street, New York
8 New York, before Kathy S. Klepfer
9 a Registered Professional Reporter
10 Registered Merit Reporter, Certified
11 Realtime Reporter, Certified Livenote
12 Reporter, and Notary Public of the
13 State of New York.
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Page 93
2 Q. And the next line below that?
3 A. The next line below that reads,
4 "Haircut charged will be implied."
5 Q. What does that mean?
6 A. Given that the Fed had extended
7 funding for Lehman assets, the Fed employed its
8 own haircut schedule for those assets. Given
9 that Barclays had been asked by the Fed and we
10 were undertaking taking the Fed out of their
11
lending of money to Lehman Brothers for those
12 specific assets, when we would receive those
13 assets versus the cash that we were lending to
14
Lehman, the collateral that we would receive,
15 which would be at this point identical to what
16 the Fed had been funding on that Thursday, the
17
haircuts would be implied because they had
18 already been applied to the Lehman loans.
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Page 113
2 collateral that we received.
3 Q. Is that consistent with your
4 recollection of what happened that evening into
the Friday?
A. My recollection is in dollar terms.
7 We received 42.7-ish billion dollars worth of
a collateral and got $7 billion in cash to
complete the Fed repo trade. This breakdown
10 from John Haley is something I wouldn't be able
11 to comment on. I don't know if it's correct or
12 not.
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Page 1
1 HIGHLY CONFIDENTIAL - M. KLEIN
4 X
5 In Re:
6 Chapter 11
a HOLDINGS, INC., et al., (Jointly Administered)
9
Debtors.
10
11
13 DEPOSITION OF MICHAEL KLEIN
15 September 12, 2009
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23 Reported by:
25 JOB NO. 24546

Page 2
HIGHLY CONFIDENTIAL - M. KLEIN
3 10:40 a.m.
4

6 of MICHAEL KLEIN, held at Jones Day
7
LLP, 222 East 41st Street, New
York, New York, before Kathy S.
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Page 177
1 HIGHLY CONFIDENTIAL - M. KLEIN
2
5
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6
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timmommemomMOIMMMOMMOSIMMINNIIIIIIIIIII/
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21 loganammimmagaussmaimmailliMilinammapme
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MISIIIIMMOMMINallabillalleantiONNOWI •
23
Q. Do you have an understanding as to
24 whether or not Barclays received any residential
25 real estate securities in connection with the
,
Page 1
1 HIGHLY CONFIDENTIAL - A. COX
4
In Re:
6
Chapter 11
9
Debtors.
10
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13 DEPOSITION OF ARCHIBALD COX
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23 Reported by:
25 JOB NO. 24300

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3 10:19 a.m.
4

6 of ARCHIBALD COX, held at the law
7 offices of Jones Day, LLP, 222 East
a
41st Street, New York, New York, before
9 Kathy S. Klepfer, a Registered Professional
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TSG Reporting Worldwide (877) 702-9580

Page 99
2
3
fearammommoimaisimaiimmomait
4
7 Iminsimiusionamina
8
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MOM
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.10111M4111M111111111MMINIMMIONNOMINIO
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110011111611111111111111111111111.
22 Do you have an understanding as to
23 whether or not Barclays received any residential
24 mortgage securities in connection with this sale
25 transaction?

Page 100
2 A. The residential mortgages were subject
3 to a good deal of negotiation and discussion. I
4 do not recall where we came out on those.
5 Q. Okay. Do you have an understanding as
6 to whether or not they were pledged to the DTC
7 in connection with the sale transaction?

8 A. I do not know for certain, no.
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QUINN EMANUEL URQUHART OLIVER & HEDGES LLP

51 Madison Avenue, 22nd Floor

Special Counsel to the Official Committee of Unsecured

UNITED STATES BANKRUPTCY COURT

UNITED STATES BANKRUPTCY COURT

LEHMAN BROTHERS HOLDINGS INC., et Chapter 11

THE OFFICIAL COMMITTEE OF

LEHMAN BROTHERS INC.,

BARCLAYS CAPITAL INC.,

COMPLAINT FOR DECLARATORY RELIEF

TO THE HONORABLE JAMES M. PECK

The Official Committee of Unsecured Creditors of Lehman Brothers Holdings

2. The misleadingly titled Clarification Letter is anything but a "clarification" to the

accomplished the "sale" of estate assets through a termination of a repurchase agreement

constituted property of the estate.

Avenue of the Americas, 45th Floor, New York, NY 10020.

the SIPA Trustee.

JURISDICTION AND VENUE

1334. This is a core proceeding within the meaning of 28 U.S.C. § 157(b).

12. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.

necessary or proper relief pursuant to 28 U.S.C. §§ 2201, 2202.

corporations, governmental units, institutional clients and individuals worldwide. Lehman's

the SIPA proceeding.

18. Specifically, the original APA defined Purchased Assets to include:

value as of the date hereof of approximately $69 billion."2

approve the Sale Transaction identified in the APA.

transfer approximately $70 billion of securities to Barclays in exchange for Barclays's

transaction" for Barclays.

which Lehman subsidiaries would be transferred to Barclays as part of the transaction.

Brothers Uruguay SA."

terms at any time prior to the entry of the Sale Order.

this is the best deal and we're supportive actively."

opened on the following Monday (September 22, 2008).

from Lehman to Barclays as part of the deal.

the Sale Transaction:

billion" in Lehman-owned assets to Barclays in exchange for the assumption by Barclays of

"$45.5 billion" in Lehman's liabilities relating to the assets.

36. A repurchase agreement (or "Repo") is a common financing arrangement whereby

brokerage business afloat.

arrangement thereunder replaced the financing previously provided by the Fed.

Repurchase Agreement is believed to be between $5 to $7.2 billion.

Lehman assets (including the haircut) would be permanently transferred to Barclays in

pursuant to the Barclays Repurchase Agreement—totaling between approximately $5 and $7.2

billion—is property of the Lehman estates.

reserves totaling approximately $1 billion.

50. Most of these securities—totaling as much as $800 million in value—were

to Barclays to include certain property supporting exchanged-traded derivatives from Lehman to

Corporation (the "OCC Assets").

Assets were transferred to Barclays.

extra-judicial asset transfers.

"the Committee, the Debtors and the Purchaser."

recoverable by the Lehman estates under §549 of the Bankruptcy Code.

Barclays as outlined in the APA and the Clarification Letter.

"the Committee, the Debtors and the Purchaser."

66. Accordingly, all terms of the Clarification Letter—including Section 1(a)(ii),

by the Court, there is an actual controversy between the parties.

other order of the Bankruptcy Court.

Court and thus are prohibited by the Bankruptcy Code.

whose rights have been determined by such judgment." 28 U.S.C. § 2202.

secreted from the estate by Barclays.

prevails on its request for a declaratory judgment.

WHEREFORE, the Committee respectfully seeks an Order from this Court:

QUINN EMANUEL URQUHART OLIVER &