Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 1 of 35 Page ID #:16590 EXHIBIT 1

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1 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 1 of 35 Page ID #:16590 EXHIBIT 1

2 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 2 of 35 Page ID #:16591 Deposition Testimony of Christopher J. Swift March 21, 2013 Christopher Swift was the lead businessperson acting for AIG on Maiden Lane II. A. In the fall of 2008, I was the CFO of the Life and Retirement Services Business Unit. 10:3 5. Q. You were involved with the Maiden Lane II transaction, correct? A. Yes. Q. Could you describe for me your role in connection with that transaction? A. I was, I would say, the principal business person quarterback to find the solution. Q. A solution to the securities lending program? A. Yes. The mission was to wind it down. 35: Q. So, you were involved in negotiations over Maiden Lane II with the Fed, correct? A. Correct. 42:4 7. Q. So, you said that in response to one of Mr. Fry s questions, that you were the principal business person, the quarterback to find a solution to securities lending. Do you recall that? A. Yes. Q. Were you also the principal business person, the quarterback, in negotiating the Maiden Lane II transaction? A. Yes. 74: Q. And from your perspective as the chief negotiator for AIG, who were the primary negotiators on the Fed side of the table? A. I would say I interacted with two on a principal basis: Jim Mahoney on a daily basis, and Steve Manzari on a two-, threetimes-a-week basis during this time. So, those would be the two principal ones. 75:7 15. Swift testified that he had no discussions with anyone about transferring AIG s fraud claims. Q. During that time period, did you ever discuss with anyone the question whether or not AIG would be transferring litigation claims to Maiden Lane II? A. No, I did not discuss it with anyone. Q. You didn t discuss it with anyone at AIG? A. True. Q. You didn t discuss it with anyone from the Fed? A. True. Q. You didn t discuss it with any lawyers for the Fed? A. Correct. Q. You didn t discuss it with any lawyers for AIG? A. Correct. 58:6 23. Q. During the time period from when you first heard of what became the Maiden Lane II solution, until the time that the Asset Purchase Agreement was signed, did you have any written communications with anyone concerning the question whether AIG would be transferring litigation claims to Maiden Lane II? A. I don t I don t recall having written communication dealing with claims in litigation at all. Q. And would your answer to that question be the same if I referred to transferring litigation claims to the Federal Reserve? A. Yes. 59:4 19. Q. And with respect to discussions, is it correct that you did not have any discussions with anyone during that period concerning the question whether AIG would be transferring litigation claims to the Federal Reserve Bank of New York? A. Correct. I don t recall talking about claims in litigation and at all with the Fed. 59:20 60:4. Q. What was the asset that comprised the bulk sale, from your perspective as the lead negotiator for AIG? A. $40 billion of par value of RMBS securities. Q. Did you believe that that asset included fraud claims? A. No. As we said, we ve talked about a EXHIBIT 1 1

3 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 3 of 35 Page ID #:16592 lot of things, we negotiated a lot of things; we did not negotiate a transfer price of terms and conditions for transferring fraud claims. 76:25 77:12. Q. Now, I want to take you back to your interactions with Mr. Manzari and Mr. Mahoney. You said you spoke with them. [Y]ou spoke with Mr. Mahoney on almost a daily basis during the negotiations of the ML II transaction, correct? A. Yes. Q. And with Mr. Manzari less frequently than that, but frequently? A. At least a couple of times a week. Q. [] Did Mr. Mahoney ever tell you that the Fed or Maiden Lane II wanted to acquire AIG s fraud claims? A. No. 81:13 82:3. Q. Now, did Mr. Mahoney ever tell you and I m going to quote from him directly that the FRBNY and ML II intended to receive all transferrable or assignable benefits associated with the securities and related instruments, including litigation claims associated with those securities or their acquisition by AIG? A. I never talked to him about litigation claims during this process. Q. And did he ever tell you he wanted to have an assignment, or the Fed wanted to have an assignment, of those tort claims of those fraud claims? A. No. We never talked about claims, you know, of any types. Q.... [D]id he ever even mention the word fraud claims? A. No, he did not. Q. Did he ever say anything that suggested to you that the Fed wanted to acquire, or ML II wanted to acquire fraud claims? A. No, he did not. Q. Did he ever say anything that suggested to you the Fed needed to acquire all litigation claims to protect the Fed from downside risk? A. No. The downside risk was proved with the collateral performance in ML II. Q. And when you re talking about collateral performance, are you speaking about the residential mortgage-backed securities? A. Yes. 82:21 84:9. Q. Mr. Manzari, did he ever tell you that the Fed or ML II wanted to acquire fraud claims? A. No. Q. Did he ever mention fraud claims? A. No. Q. Did he ever say anything to suggest that the Fed or ML II wanted AIG s fraud claims? A. No. 84: Q. Did anyone at the Fed say or suggest that the Fed or ML II wanted to acquire AIG s fraud claims? A. No. Q. Did anyone representing the Fed, including its attorneys, say or suggest that the Fed or ML II wanted to acquire AIG s fraud claims? A. No. 84:20 85:4. Q. Did anyone at AIG or representing AIG suggest, say anything to suggest that the Fed wanted to acquire AIG s fraud claims? [Objection] Q. Were you told that by anyone at AIG? A. No. 85:5 12. Q. During the negotiations of the ML II transaction, were you aware of any document suggesting an intent by the Fed or ML II to acquire AIG s fraud claims? A. No. 85: Q. If the fraud claims, the issue of assignment of fraud claims had been raised, is that something you would have expected to be brought to your attention? A. Yeah. I mean, we talked about, and presented to the Board, you know, what we thought the deal was; we presented to regulators, you know, what the deal was. And if it was a term and condition, I would have known about it. 85:18 86:3. EXHIBIT 1 2

4 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 4 of 35 Page ID #:16593 Q. Based on your experience in the business world and your role as lead negotiator for AIG, did you believe that AIG was transferring its rights to bring fraud, or fraud claims its rights to bring fraud claims to ML II? A. Absolutely not. I mean, it s we were working collaboratively, and those issues just weren t discussed and/or transferred as far as our final document and final agreement. 86:4 14. Q. Mr. Swift, based on all of the facts that you are aware of and your experience both as a businessman and lead negotiator for AIG, are you firm in your conviction that AIG did not transfer fraud claims to ML II? A. Absolutely. [Objections] A. We did not negotiate it; we did not intend to transfer it. And we were working, you know, collaboratively with the Fed and we talked about everything that was significant, we had a transparent discussion, they had their interest, we had ours. But this was never, ever discussed. 127:4 21. Swift testified that he did not believe AIG transferred any fraud claims to ML II. Q. What is your understanding regarding whether or not the Asset Purchase Agreement transferred litigation claims from AIG to Maiden Lane II? [Objection] A. Again, as we as we negotiated the tax points, as you mentioned before, or the residual equity interest, you know, that the five-sixth, one-sixth split, as we talked with, you know, the Finance Committee, the regulators, we did not talk about, you know, litigation because it really wasn t a negotiated point. We didn t believe we were transferring; we didn t negotiate a transfer price. We didn t talk about it because it just wasn t wasn t part of, you know, the deal terms and conditions that we we were trying to solve for. 60:21 61:15. A. RMBS s [are] generally made up of multiple of individual mortgages that go that are pooled. So, I believe what we were transferring was, you know, the securities and all the rights, stuff that back-up the mortgages that make up the RMBS security. Q. Is it your understanding that AIG was transferring something more than the securities? [Objection] A. No. I what I believe we we negotiated on the Term Sheet and that we were primarily responsible for was the sale of securities. Q. Was there anything else besides the securities that AIG was transferring as part of the Maiden Lane II Asset Purchase Agreement? [Objection] A. It was transferring the securities and the rights of those securities. I mean, we were conveying to the Fed, in exchange, you know, for cash, the securities and the rights that securities have with with those securities. 64:2 65:4. A. [W]hen you trade a security, you re giving up, you know, the economic rights to the underlying cash flows of it. So, whether it be in a market trade or the trade we did with the Fed, you know, the the economics that back up the certificates, you know, the fees that you had to pay from a mortgage servicing side, the interests, the principal collections, all that is part of that security that we were selling. Q. And were there any other rights, besides that collection of rights, that you understood AIG was selling to Maiden Lane II? A. No, I m not aware of anything else, and I probably should have been since, I mean, I was principally responsible for the Term Sheet. 68:14 69:7. EXHIBIT 1 3

5 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 5 of 35 Page ID #:16594 Q. Did you intend, as lead negotiator, to assign AIG s fraud claims to ML II? A. No. Q. Did AIG [] intend to assign its fraud claims to ML II? A. No. Q. What did AIG believe it was selling and intend to sell to ML II? A. The underlying securities. 86: Swift testified that Related Instruments meant the documents and rights included in the securities. Q. At the time that this Agreement was signed, December 12, 2008, did you have an understanding of what was meant by the words together with all right, title and interest in and to all Related Instruments? A. As we were negotiating, you know, the deal, I had the understanding that we were transferring the security right and interest in all the underlying mortgages that were part of an RMBS package. 63:5 15. Q. Did you understand the term Related Instruments to include an assignment of AIG s fraud claims to the Fed? A. No, I did not. Q. Why not? A. One, the word fraud is not mentioned in this paragraph; and two, I interpreted this to mean the activities, the documents, the stuff that goes with servicing mortgages. 80:2 11. Q. Okay. I believe you said you re not a lawyer, correct? A. Yes. Q. You re a CPA and a businessman? A. Yes. Q. And from your perspective as a CPA and a businessman, when it lists the documents under the definition of Related Instruments, what s your thinking about what that means? [Objection] A. I believe it means... this is what people understood and they would have been clear if there was other things that would have included that could have been, can be significant. Q. And when you say they would have been clear if other things are included, are fraud claims within those other things that would have needed to be spelled out specifically? [Objection] A. That would be my understanding. 80:12 81:10. Q. Okay. At the time that the Asset Purchase Agreement was being negotiated, did you discuss with anyone the meaning of the term RMBS Issue in the contract? A. I personally did not. Q. Did you discuss with anyone the meaning of the term Related Instruments in the contract? A. I personally did not. 128:21 129:5. Swift testified that the sale price did not include any valuation of the ability to pursue fraud claims for losses already suffered. Q. Do you recall how the price paid by Maiden Lane for the assets that it bought was calculated? A. Market value. Q. Do you know how that number was calculated? A. Market value is determined in a number of different means: sometimes observable third-party trades, sometimes mark-to-model trades, sometimes, I ll call it cost is used as a basis of market value. So, the intent of the transaction was supposed to be based on the market value of the securities. 46:13 47:2. Q. And can you explain in a little more detail, please, the role of BlackRock? [Objection] A. I think BlackRock s role in this transaction, you know, they were viewed as, you know, the leading industry expert on residential mortgage-backed securities and other structured product and had very sophisticated models that would predict ultimate cash flows coming off of, you know, mortgages for ultimate valuation purposes. 115:22 116:8. EXHIBIT 1 4

6 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 6 of 35 Page ID #:16595 Q. Now, does the market value include a valuation for potential fraud claims? [Objection] A. I don t believe so. Q. Why not? A. The best way I can explain it is, is that this, it s a security value and representing the economics on the underlying investments in the securities. And again, I m not a lawyer, but I just viewed fraud, fraud claims as separate and are usually, you know, contingent upon outcomes, and highly highly unpredictable from a value side. So, I don t I don t think the street values fraud claims, tries to put a value on these, a fraud claim into a security. 113:14 114:8. Swift testified that during the negotiation and sale of securities to ML II, he had general knowledge that AIG may have fraud claims. Q. So, are you saying that you were thinking about fraud but you didn t have a strategy? Or are you saying that you weren t thinking about fraud claims? [Objection] A. We had not developed, you know, the the strategy to go after. We had not discussed it in any, you know, I ll call it great length or details at all as it relates to, you know, the securities that we were transferring at this point in time. Q. So, you had the idea but you hadn t discussed it at any length? A. That s fair to say. I mean, we had an awareness; I had a general awareness. But it wasn t brought forward into a coherent strategy of how we were going to approach it. 131: Swift testified that had AIG been transferring fraud claims to ML II, he would have wanted to include that in the Term Sheet that was presented to the AIG Board of Directors. Q. What was your role in the preparation of the Term Sheet setting forth the deal terms for the Maiden Lane II transaction? A. I would have been working with the lawyers that would have prepared it to document the key components. 90: Q. [W]hen the Term Sheet refers to a certain pool of RMBS, what did you understand that to mean? A. The asset, the RMBS assets that were backing the securities lending obligations. Q. Is there anything in that definition that suggests to you that fraud claims are included in the asset being transferred? A. No. Q. Is the term fraud used? A. No. 93:9 21. Q. There is a definition of RMBS Assets. Do you see that? A. Yes. Q. Could you read that definition into the record, please? A. Collectively, the RMBS Issues listed in Schedule A hereto for each Seller and rights to the outstanding principal thereof and accrued interest thereon as of October 31, 2008 (for each Seller, an Indicative RMBS Pool ) less the dispositions thereof and the collections of principal and interest thereon plus accrued interest thereon between October 31 and the Closing Date. Q. In your opinion as the chief negotiator for AIG, is that a fair description of the asset that was being sold to Maiden Lane II? A. Yes. Q. Is that what you understood the asset to be? A. Yes. Q. Do you see anything in that definition of the Asset that suggests fraud claims are being transferred? A. No. Q. Do you believe that definition in any way includes fraud claims? A. No. Q. Why not? A. It doesn t say so. 93:24 95:7. Q. Let s turn to Schedule A, which is referred to under the definitions.... [I]t includes a bracketed statement that says, List of RMBS Issues in RMBS pool to come. Do you see that? A. Yes. Q. What did you understand the list of RMBS Issues to mean? A. The EXHIBIT 1 5

7 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 7 of 35 Page ID #:16596 securities that were going to be sold. Q. Did you understand anything in the words list of RMBS Issues to include fraud claims? A. No. 95:8 96:10. Q. If the ML II deal had included an assignment of fraud claims, would you have expected that to be listed in the Term Sheet? A. Yes. Q. Why? A. I think it would have been a significant, you know, deal point that we would have, you know, negotiated, discussed, tried to value and would have been, you know, sort of the completeness of, you know, dealing with if we wanted a transfer. It would have been self-evident that was the intent and we would have documented it and talked through the terms and conditions of how we would transfer it. 96:17 97:7. Swift testified that had AIG been transferring fraud claims to ML II, he would have wanted to present that to the Finance Committee of the AIG Board of Directors. Q. What was the AIG[] Finance Committee s role in reviewing the ML II transaction at this point in time? A. My understanding was it was the Committee that was responsible for major transactions, restructuring activities at the time for the full Board. Q. And do you recall that it whether it had been delegated authority from the Board to address the ML II transaction at this point in time? A. I seem to recall they were responsible, so :24 104:12. Q. In your presentation to the Finance Committee, how did you describe the assets that were being sold to Maiden Lane II? A. As securities that were being transferred. Q. Did you mention fraud claims in your presentation? A. No, I did not. Q. Why not? A. Because it wasn t a deal point where we transferred fraud claims. 106:2 13. Q. And if you had thought fraud claims had been assigned, what, if anything, would you have done differently? A. I would have mentioned it. Q. And why would you have mentioned it? A. As a significant deal point and an item that people would have and should have known that we were giving up, you know, rights to, to those future fraud claims. 106: Q. Did Sarah Dahlgren or Davis Polk say anything to suggest that your description of the assets transfer was inaccurate? A. No. Q. Did Sarah Dahlgren or anyone from Davis Polk make any mention of fraud claims? A. No. 106:24 107:6. Q. Do you see that the document, starting on page 2323, is a memorandum to the AIG Finance Committee? A. Yes. Q. And it is from David Herzog and Christopher Swift, correct? A. Correct.... Q. The first sentence of that bullet point says, The LLC would immediately use the proceeds of the senior loan from the FRBNY described above to purchase the RMBS from the AIG insurance companies, correct? A. Yes. Q. What did you understand RMBS to mean? A. The individual securities that were being sold. Q. Did you understand it to include fraud claims? A. No. Q. Does the memo anyplace mention fraud claims? A. No.... Q. And the last sentence is, The RMBS will be the only assets of the LLC. Do you see that? A. Yes. Q. Again, in that sentence, what do you understand RMBS to mean? A. The individual securities. 107:12 109:15. EXHIBIT 1 6

8 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 8 of 35 Page ID #:16597 Swift testified that had AIG been transferring fraud claims to ML II, he would have wanted to present that to the state insurance regulators. Q. What was your role in making presentations to insurance regulators about the ML II transaction? A. Yeah, I was the lead spokesperson for AIG s Life and P[&]C companies on the securities lending matter. Q. And what type of oversight, what type of information did the regulators want to hear from you as the principal presenter? [Objection ] A. They want they wanted, and expected, transparency on anything significant. 99:13 100:2. Q. [Discussing presentation to insurance regulators] Is there any reference to the assignment of fraud claims to ML II in Exhibit 77? A. No. Q. In making your presentations to insurance regulators, how did you describe the assets that AIG was selling to ML II? A. Throughout the various pages in here, you can see that we were we we were referring to the assets,... either as the RMBS assets or the non-rmbs assets.... [T]he RMBS assets, as it related to the ML II transaction, were described as residential mortgage-backed securities. Q. And did you say anything to the regulators that might suggest fraud claims were being assigned? A. No. 101:3 102:2. Q. If you had believed that fraud claims were assigned to ML II, what, if anything, would you have done differently in your presentations to insurance regulators? A. At minimum, I probably would have had a bullet point just talking through it as as a deal point. Q. Why? A. I think, again, if if you really understand the nature of the securities lending pool, these were the assets and obligations of the underlying insurance company s balance sheets. And if AIG gave up that right and obligation, the insurance commissioners will want to know about a future monetizable asset, or future recovery that was also, you know, given up. So, anyway, it would have just been a significant part of the overall transaction we would have talked about. 102:3 23. Swift testified that ML II was intended to stabilize AIG while ensuring the FRBNY would be repaid. Q. In structuring this Maiden Lane II transaction, what was your understanding of the objective as to AIG going forward? [Objection] A. I mean, the objective of AIG was to stabilize, continue to stabilize, you know, the organization with a solution to a program that that created large credit losses and some inherent volatility in its equity position. Q. So, to put it in more simple terms: Was the transaction part of a solution to help AIG recover from the financial crisis? A. I believe so. 120:14 121:4. A. The Fed made it very clear that it was a lender. It was intent on having its loan repaid, and it used BlackRock and us to give them comfort that, under various economic conditions and scenarios, their loan would be repaid. They made it very clear that they had never had a loss on a loan they made, and they never intend to have a loss on a loan that they made. 82:7 16. A. That was the Fed s primary objective, was to always be viewed as the lender, and they never were going to be allowed/permitted to incur a loss. Q. Did you understand why this transaction resulted in a very low likelihood of failing to repay the EXHIBIT 1 7

9 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 9 of 35 Page ID #:16598 senior debt? A. Because of the structure. Q. And with respect to the securities themselves, the RMBS that were being sold, how did that contribute to a low likelihood of failing to repay senior debt? A. The 24 billion [price] was viewed, at least by me and AIG, as a as a depressed value due to the market conditions at that time. And that if you looked to different, you know, I ll call it, conditions of how the cash flows would perform, not how the market, you know, was, you know, marking these securities to market at the time, there would be adequate cash to pay off the debt... and then be able to share any upside potential in the residual cash flows.... A. I think later in the document we show various scenarios that, you know, the Fed would still make money on this transaction. 117:12 119:3. Q. Do you believe that further decline had any impact on the Fed s likelihood of full recovery? [Objection] A. Not not from what they ultimately funded. So, I don t recall with specificity what they exactly funded in the final, final deal. But if we were modelling the 23, 23 and a half billion, I think they funded something less, so they put less principal at risk. And ultimately, AIG and its subsidiaries sort of bore the difference in value. Q. And the reason, again, that this further decline would not affect the likelihood of full recovery is what? [Objection] A. My belief was that the ultimate, you know, cash flows were still sufficient to pay off the Feds, you know, primary investment. 125:19 126:16. Q. Did you believe at the time you were negotiating the ML II transaction, that the Fed was going to make money on the transaction? A. I did. Q. Do you know if the Fed, in fact, did make money? A. I ve read press reports that they did make money. Q. Do you know about how much? A. About $2 billion. 126:17 127:3. Swift testified that ML II was beneficial to many different groups. Q. Was the Maiden Lane II transaction viewed as beneficial to AIG? A. I would view it as, yes, beneficial to a lot of different constituencies. I would view it as beneficial to AIG and its shareholders; I would view it be beneficial to policyholders of the Life Company that had, you know, significant credit exposure. I viewed it as positive to the regulators that had more security. I viewed it as a good for the American taxpayers, because a lot of this money then went to others that were able to use it for their liquidity purposes and not have a continued meltdown on the financial system. So, it was beneficial to a lot of different groups, and primarily AIG. 72:10 73:3. EXHIBIT 1 8

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11 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 11 of 35 Page ID #:16600 Deposition Testimony of R. Edward Holmes, Jr. March 19, 2013 Edward Holmes was the lead internal counsel representing AIG on Maiden Lane II. Q. You said you were involved in Maiden Lane II, correct? A. Yes. Q. And what was your involvement? A. I was the lead internal counsel representing AIG. Q. What did you do in that capacity? A. I oversaw external lawyers representing AIG; I spoke with and represented the business people within AIG; I interacted directly with the Fed, Davis Polk, and representatives of the Fed, for instance, Ernst & Young; and I coordinated with lawyers within AIG with regard to, for instance, insurance-specific issues. 27:18 28:8. Q. Who did you consider your internal client in Maiden Lane II? A. There were a number of business people involved, but by that point in the deal, Chris Swift was really taking the lead among the business people. 28: Q. And with respect to the terms of [] AIG s agreement with the New York Federal Reserve Bank, who did you deal with internally on what those terms would be as opposed to operational issues? A. Mainly Chris Swift. 30:3 8. Q. Were you involved in the documentation of the Maiden Lane II transaction? A. Yes. 35: Q. Were you involved in negotiations concerning the Asset Purchase Agreement that was signed in connection with Maiden Lane II? A. Yes. Q. [] What was your role in connection with the negotiation of the Asset Purchase Agreement? A. I was lead internal counsel representing AIG companies. Q. And could you describe what you did as the lead internal counsel concerning the negotiation of the Asset Purchase Agreement? A. Sure. I went to I reviewed documents; I interacted with our outside counsel; I interacted with the Fed; I interacted with Davis Polk; I interacted with internal counsel on insurance issues; I interacted with business people, our own business people; I was in meetings relating to, you know, putting putting the Asset Purchase Agreement in place, including the operational type of meetings that we ve already talked about. 35:24 36:23. Q. You mentioned that you reviewed documents. Did you review drafts of the various agreements that were put in place as part of Maiden Lane II? A. Yes. Both the Term Sheets and Asset Purchase Agreement. Q. Did you provide feedback on those drafts? A. Yes. Q. Did you provide that feedback directly to people at the Fed or representing the Fed? Or did you provide that feedback to someone representing AIG? [Clarification] A. I think I think all. I think I provided feedback to our own business people, our outside attorneys, and on occasion, directly to people at Davis Polk. 36:24 37:17. Q. Now, describe for us, if you would, your role, if any, in creating the Term Sheet on this deal? A. The Term Sheet itself, I believe, was drafted by Davis Polk. But I would have been involved in reviewing in detail the Term Sheet. Q. Did you play any part in negotiating the Term Sheet? A. Yes. I would have given comments to both my business people and to Sullivan & Cromwell, and those comments would have been passed on to Davis Polk and the Fed. Q. Did you deal directly with anybody at the Fed or any of their representatives in negotiating the Term Sheet? A. On at least on at least EXHIBIT 2 1

12 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 12 of 35 Page ID #:16601 one occasion, I was dealing directly with Mr. Heckart. Q. [] What level of familiarity would you describe yourself as having with respect to the Term Sheet? [Objection] A. I reviewed the Term Sheet thoroughly. 132:21 133:21. Holmes testified that he had no discussions with anyone about transferring AIG s fraud claims. Q. I d like to ask you some questions about the period from whenever you learned about it in October until when [the APA] was executed... in December of During that time period, did you have did you discuss with anyone the question whether AIG would be transferring legal claims to Maiden Lane II as part of the transaction?... A. There was there was no discussion about transferring tort claims, we ll call them I ll call them, during, during the course of those discussions and I ll end there. 53:3 23. Q. Do you recall any discussion with anyone about whether AIG would be transferring legal claims that can be asserted in a lawsuit to Maiden Lane II as part of the transaction? [Objection] A. Yeah, so, as I think you know, we ll just say, there are different rights that you have with to pursue. So, as you know, the rights to get the cause the trustee to go get securities, mortgages back whenever the mortgages don t meet certain standards as set out in the documents is a right that goes with the documents. To the extent you re asking me and I think you are about rights associated with AIG s losses at the time AIG owned the securities, and that were arose as a result of communications relating to the securities in connection with AIG buying them, those claims, those second set of claims, we never, ever discussed transferring those. 58:23 59:24. Q. Mr. Holmes, I think you testified earlier that during the time frame we were discussing, between when you first learned of Maiden Lane II and when the con the Asset Purchase Agreement was signed, you had no discussions with anyone about whether tort claims would be assigned by AIG to Maiden Lane II; is that correct? A. That s correct. 61:20 62:3. Q. Do you recall any discussions about whether any causes of action that AIG possessed would be transferred to Maiden Lane II? A. Other than enforcement rights in the documents, which we ve talked about, AIG s rights were not going to transfer and there were no discussions about that. 62:25 63:8. Q. Do you recall any written communications that you had with anyone regarding whether or not AIG would be transferring any tort claims to Maiden Lane II? A. I don t recall any communications on transferring tort claims. 68:22 69:4. Q. And do you recall any written communications about whether or not AIG would be transferring the right to bring statutory claims relating to the RMBS to Maiden Lane II? A.... [T]here was no discussion of those types of claims. Q. And no written communications on the subject? A. No. No written, no oral. No. Nothing. 69:12 70:4. Q. Do you recall any written communication concerning whether or not AIG would be transferring causes of action to Maiden Lane II? A. No, I would lump that in with the same general category of the previous two we talked about. 70:5 11. EXHIBIT 2 2

13 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 13 of 35 Page ID #:16602 Q. Are you saying that it s not something that you thought about at the time because of what the circumstances were? Or are you saying you did think about it? [Objection] A. I m saying that I knew the law from prior experience, and that there[] simply was no discussion of transferring what we re calling the tort claims. 74:18 75:2. Q. Do you know why it was that AIG was briefing its insurance regulators about the ML II deal? [Objection] A. Yes. Because a deal of this magnitude, we would not we would not execute without having briefed the regulators. Q. And how do you know that? A. Custom and practice. It s what we do for for much, much smaller deals and points than this.... Q. [D]o you see any reference in there [the presentation to insurance regulators] to AIG assigning any tort claims to ML II as a part of the ML II transaction? A. No. 137:16 139:22. Q. Is that something you would have expected to see in this document had such an assignment been intended? [Objection] A. It would have needed to be in this document. Q. Why? A. Because of the purchase price being market, market not including those types of claims. So, we would have needed to indicate to the regulators that was something we were the insurance companies were giving up value on. And the regulator itself, one of the primary concerns of the insurance regulators is affiliate transactions which is, effectively, transfer of value from the regulated balance sheet to other affiliates. That was a particular concern during this time, and the regulators would have been looking for, you know, whether or not there was value going to other parts of the organization and being given up by the insurance companies as a result of, you know, having given those claims away for, effectively, free. 139:23 140:25. Q. At any point in the negotiation of the Asset Purchase Agreement, did anybody from the Fed or any of the Fed s representatives convey to you in words or substance that the Fed sought to acquire, through the ML II transaction, litigation claims associated with the RMBS securities or their acquisition by AIG? [Objection] A. No. I never saw, heard, was aware of any intent on the part of Maiden Lane II or the Fed to acquire the litigation claims. 145:24 146:12. Q. At any point during the negotiation of the Asset Purchase Agreement, did anybody from the Fed or any of the Fed s representatives convey to you, in words or substance, that the Fed or ML II sought to acquire, through the ML II transaction, all transferrable and assignable benefits associated with the RMBS securities and related instruments? [Objection] A. No. 146: Q. At any point during the negotiation of the Asset Purchase Agreement, did anybody from the Fed or any of the Fed s representatives convey to you that the Fed and ML II sought to receive, through the ML II transaction, litigation claims associated with the RMBS securities or their acquisition by AIG? [Objection] A. They never did. 147: Holmes testified that he did not believe AIG s fraud claims transferred. A. It was my understanding throughout the process that we were transferring title to the securities, and the other ancillary rights that went with the securities, which meant voting rights, the right to enforce documents, the right to receive principal EXHIBIT 2 3

14 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 14 of 35 Page ID #:16603 and interest; the types of claims that an owner of the documents or an owner of the securities would have. 57:19 58:3. A. If somebody had asked me, if anybody had asked me, you know, are the tort claims transferring as part of this deal? I would have told them no. 75:3 6. Q. So, you thought about whether or not there would be a legal claim that AIG could pursue to recover those losses on these RMBS? [Objection] A. I knew that there was a loss. I knew it would be realized from AIG s perspective. But whether or not it would have been actionable in the legal sense, you know, was unclear and would have required the litigators to come in, look at the facts, and figure out whether or not if it was actionable. And that analysis had not been done at that time. Q. [] So you hadn t reached some conclusion about whether or not AIG could pursue claims? A. That s correct. Q. But you thought about maybe we could pursue claims? A. Yes. 77:10 78:7. A. [Referring to ML II Term Sheet] And so, what s being stated here is that the securities that would be listed on Schedule A is is what s transferring, less principal and interest payments that accrue between October 31st and the Closing Date, which were payments that we would have collected already. So, that was being backed out of the purchase price. Q. So, according to the Term Sheet, as you understood it, what was being transferred to ML II in this deal? [Objection] A. The securities that were listed and the rights in those securities. 134:14 135:4. Q. To your understanding, did the scope of what was being transferred, as you just described it, change between the Term Sheet and the execution of this final [APA]? [Objection] A. No. 135:9 16. Q. Mr. Holmes, what is your understanding regarding whether the Asset Purchase Agreement transfers tort claims from AIG to Maiden Lane II? A. My understanding is it does not. 98: Q. And did you have an opportunity to review the Complaint in this case before it was filed by AIG? A. Yes. Q. And did you understand that that Complaint asserted tort claims against the Defendants arising out of their sale to AIG of certain of the RMBS that were later sold to ML II? [Objection] A. They were earlier sold to ML II, yes. Q. And did you have at that point any objection to AIG filing that Complaint? A. No. 148:2 17. A. My initial reaction [to BoA s argument that AIG transferred claims to ML II] and my reaction now are the same, which is that those claims were never transferred. 149:6 8. Holmes testified that he had prior experience with transferring tort claims, and that he would have taken different steps had he been aware the FRBNY intended to acquire such claims. Q. Now, you testified earlier that you were familiar with certain law relating to the transfer of tort claims at the time the Asset Purchase Agreement in ML II was negotiated and executed. A. Right. Q. What did you understand about the law on that subject back at that time? [Objection] A. It s my understanding that in order to transfer tort claims, you need to specifically address it in the in the assignment documents. Q. EXHIBIT 2 4

15 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 15 of 35 Page ID #:16604 And to your understanding, did that occur in the Asset Purchase Agreement? [Objection] A. No, it didn t. 143:5 24. A. I knew from work I [had] done, I felt the law was that to transfer tort claims, they have to be specifically addressed. And there are types of form documents out there that specifically addressed transferring tort claims. 71:9 14. A. We had specific experiences where we had done that [transferred tort claims], and due to the misalignment of interest between the people that ultimately held them and our witnesses, and other data, we we hassled. But really it was, you know, we would have to provide data, depositions and things whenever we had never and we didn t have an interest in the outcome of the case anymore. And so, you know, had had I known, had I known that, you know, the Fed might have wanted those claims, that would have been one of the things we would have needed to talk about. We would have needed to talk about price, enforcement, whether you know, how we stop it whenever, whenever it s getting out of hand for us, because of the potential misalignment of interest in previous work I d done in that in that regard. 71:15 72:11. A. [M]y own experience and AIG s experience in transferring those types of claims, which we had done in other context, was that you needed to deal with additional issues like the potential misalignment of interest between the party that has the claims then and can for lack of a better way to say it, pursue, pursue those claims without regard to the cost to AIG in providing data, depositions and other materials necessary in order to pursue those claims. 144:7 18. A. So, you can be put in a position where you re doing a whole lot of work to support the claims and, yet, at the same time, you re not getting any of the value out and you can t stop the other party from continuing to pursue them. We had had a problem with that, you know, previously that I was involved in. Q. And are there any provisions in the final version of the Asset Purchase Agreement that deal with that potential problem that can arise when tort claims are assigned? [Objection] A. No... [there are] not. 144:19 145:11. A. I knew at the time, under New York law, that you needed to specifically refer to them [tort claims]. I knew that we would have needed to deal with making data available to the Fed to allow them to pursue those claims if they were to have received them. We needed to think about limiting the scope of data. If we wanted to, we needed to think about if the price being paid made sense. If there is no additional compensation in terms of the security, we needed to think about whether or not the one-sixth remainder would justify some of the potential lawsuits that might have been filed. There were a number of things that needed to be thought through and dealt with in order to to transfer those claims in a meaningful way. 149:9 150:3. Q. And was that your only other prior experience with the transfer of litigation claims that you were referencing in your earlier testimony? A. No.... There were others, both in the context of of an assignment, and then separately having to deal with the misalignment of interests that occurred in one case whenever we transferred the EXHIBIT 2 5

16 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 16 of 35 Page ID #:16605 litigation claims, and didn t retain any rights to the proceeds as a result of the litigation. So so, there were multiple times that I dealt with transferring litigation rights :17 158:12. Holmes testified that the Related Instruments language was meant to clarify what ML II was acquiring from AIG. A. I don t recall any specific discussion on Related Instruments. Q. Did you have any written communication with anyone regarding the definition of Related Instruments? A. I don t think so. Q.... I want you to focus on specifically the phrase all right, title, interest in and to all Related Instruments. Do you see that language? A. Yes. Q. Prior to the execution of the Asset Purchase Agreement, do you recall discussing that language with anyone? A. No. Q. Prior to the execution of the Asset Purchase Agreement, do you recall any written communications with anyone regarding that language in this definition? A. No. 85:10 86:13. Q. Did you have any discussions about whether breach of contract claims would be transferred from AIG to Maiden Lane II? A. I don t remember that specifically. What was clear to me was that the Fed wanted to control the securities, and and so they were interested in making sure that they got the right to have full control of the securities, you know, while they were owned by Maiden Lane II. 62:5 14. A. [T]he point of the sections that we talked about [definitions of Related Instruments and RMBS Issue ] is to ensure or to clarify exactly what s being assigned. And the Related Instruments definition adds to or creates additional clarity around exactly what it is RMBS Issue includes. So, you got the main main securities listed on Schedule A, and then, you know, together with ancillary rights in the related instruments; and then you ve got you ve got the other types of deal documents here listed that you might have in a mortgage-backed security. 107:9 22. Q. So, in your understanding, the what the language together with all right, title and interest in and to all Related Instruments does, is to say that you get all the rights you would have gotten in a market sale of these securities? A. Basically. Q. Is there anything else that that language does? A. No. 108:22 109:7. Q. Is it your understanding that the Maiden Lane II received exactly the same rights it would have received if it purchased the securities in the open market? A. Yes. 109:8 12. Q. Okay. And so, in your understanding, there were contract rights that were transferred to Maiden Lane II? A. That s correct. Q. But if AIG was harmed while it owned the security and had a legal cause of action it could pursue regarding that harm, that was not transferred? A. That s correct. Q. And that doesn t matter whether it s a tort claim or a breach of contract claim or a statutory claim? A. That s correct. 120:7 19. Q. And in this instance, why was it why was an Asset Purchase Agreement necessary? Why not simply transfer all these securities electronically? [Objection] A. Among other things, the so so, the exhibit to the Asset Purchase Agreement, which lists out all the securities and the pricing, needed to be agreed ahead of time; we needed to know how much money would go from Maiden Lane II to the AIG companies; the Fed EXHIBIT 2 6

17 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 17 of 35 Page ID #:16606 and Maiden Lane II needed to know the CUSIPs that were transferring; we needed to deal with the purchase price mechanics and principal and interest payments afterward. So we ll call those operational reasons. And we would have needed to go through that exercise regardless. In addition to that, the Fed was, for instance, interested in receiving true sale opinions, that we talked about earlier, to ensure that that Maiden Lane II was getting the true sale of the securities. And, in addition, the Fed got some some representations from the sellers that they wouldn t have otherwise received. Q. Do you know whether all of the securities that were transferred through the ML II deal were publicly traded? A. I believe some of them were private. Q. And with respect to residential matter residential mortgage-backed securities that are not publicly traded, can those be transferred, to your understanding, without some sort of asset purchase agreement? A. Typically you d have an assignment document that goes with them. 141:13 143:4. Holmes testified that AIG did not sell its RMBS into the market in order to avoid depressing already depressed prices for those securities. Q. Why didn t AIG just sell them in the open market then? A. Because you can t sell the mark the volume in the market was such that you couldn t sell that volume of securities in any reasonable period of time. And so we didn t want to further depress the market by selling into it, and the Fed didn t want us to do that. Q. Is it your testimony that if AIG took all of these securities to market on, say, October 31, 2008, it could not have sold them? A. That s correct. 109:22 110:15. EXHIBIT 2 7

18 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 18 of 35 Page ID #:16607 EXHIBIT 3

19 Case 2:11-cv MRP-MAN Document Filed 03/28/13 Page 19 of 35 Page ID #:16608 Deposition Testimony of Steven J. Manzari March 15, 2013 Steven Manzari was the FRBNY s number two person in charge of its relationship with AIG. Q. Were you the second most senior? A. So, there were several senior vice presidents. Sarah [Dahlgren] was a senior vice president at that time, but she was the team leader of the team, and I functioned as her number two. 17:9 14. Q. You told us that Sarah Dahlgren was the most senior person and you functioned as her number two, correct? A. Yes. Q.... Was there another number two? Or did you understand your role to be the next senior person on the team below Sarah Dahlgren? A. I think that s how Sarah would have described my role. 146:19 147:7. A. So, to the extent that, for instance, one of my colleagues was assigned to the Maiden Lane III transaction, another one was assigned to the Maiden Lane II transaction, they, I think, would have been far more involved in the specific drafting of the legal agreements, etcetera. Q. And who was that... for Maiden Lane II? A. James Mahoney. 106:2 12. Q. [Y]ou certainly understood what the terms of the transactions were as between ML II and AIG, correct? A. Yes. 110:4 8. Manzari repeatedly testified he had no discussions with anyone about transferring AIG s fraud claims. Q. Do you remember any discussion leading up to the execution of the Maiden Lane II documents about AIG somehow giving up its rights to try to seek any recovery from anyone for the losses of the $17 billion? A. No. 99: Q. At any point in time, were you involved with any in any discussion? And this is either with AIG or internally at the New York Fed in which there was a discussion that in entering into Maiden Lane II, AIG would be in any way giving up its right to seek a recovery against any banks associated with that $17 billion loss? [Colloquy] A. I don t recall any discussions. 99:21 100:14. Q. You re not aware of any discussions that you participated in with anyone from AIG in which there was any discussion about AIG giving up claims that it might have to go after the banks that had sold it the RMBS to try to recover those losses, correct, sir? A. I don t recall any conversations in that regard. 100:18 101:2. Q. [T]here was no discussion between the New York Fed and AIG regarding what would happen with such legal claims, right? [Objection] A. If your question is about legal claims, I don t recall any conversations about if you re talking about things like reps and warranties, I don t recall any conversations about that. Q. With AIG? A. With AIG. Q. How about internally at the New York Fed? A. I don t I don t recall any conversations about those... specific factors. 103:17 104:13. Q. [E]arlier I asked you the question of whether you recall any discussions with anyone regarding the idea or the concept of AIG somehow giving up claims that it would have against bank counterparties with respect to its losses suffered when it initially purchased EXHIBIT 3 1