Notes not linked in the text

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¹ There are a significant number of acronyms, abbreviations and other specialized terms used throughout this Report. To avoid the necessity of defining terms repeatedly, the Report will generally use them without definition; the reader should consult the Glossary attached as Appendix 2. Except where the specific identity of an entity is relevant and set out, this Report will use "Lehman" to refer collectively to Lehman Brothers Holdings Inc. ("LBHI") and all of its affiliates and subsidiaries.
¹ Table includes all deals from August 2006 to July 2007 that are in excess of $900M and also have a calculated STL of > $250M under the loss calculation methodology in place July 2007 (See "Old Framework" STL column). Highlighted deals have an STL in excess of the applied limit stated in column title. Transactions in excess of the Limits would have required Executive Committee approval (LBEX‐DOCID 2170674).
² Lehman Brothers Holdings Inc. ("LBHI"), Annual Report for 2007 as of Nov. 30, 2007 (Form 10‐K) (filed Jan. 29, 2008), at p. 29 ("LBHI 2007 10‐K"). LBHI was the holding company for hundreds of individual corporate entities, twenty‐two of which are currently Chapter 11 debtors in jointly administered proceedings.
² "Original commitment" indicates earliest known date on which a deal was committed to by Lehman, as presented in the LPG Weekly Reviews.
³ Morningstar Document Research Co., LBHI Historic Stock Prices, Jan. 1, 2008 through Sept. 15, 2008, [LBEX‐EXM 000001‐14] (printed from www.10kwizard.com) (last visited Feb. 3, 2010).
³ All deal data is from an Excel spreadsheet (LBEX‐DOCID 2506463) attached to a July 25, 2007 Joe Li email (LBEX‐DOCID 2563148) stating: "Previously we have used a loss limit of 250mm to 350mm. We would like to propose a 400mm as the Firm's revenue has increased." In addition to changing the limit, it was proposed that risk factors be adjusted to exclude default risk, leaving only systematic risk as the Single Transaction Loss. This proposed change had the effect of halving the STL (calculated risk of the position), and simultaneously increasing the limit. Items highlighted in the "Old Framework" column are STL numbers calculated under the methodology in place in July 2007 that exceed the $250M loss limit in place at the time. Highlighted items in the "New Framework" column represent STL numbers calculated under the proposed methodology (which halved the STL amount) that exceed the proposed $400M Limit. Please note that a September 2007 presentation on STL (LBEX‐DOCID 194075) stated that the current limit was $250 and proposed that the limit be increased to $300M. A leveraged finance risk presentation to the Executive Committee one month later recommended that the limit be increased to $400M (LBEX‐DOCID 569902).
⁴ LBHI, Quarterly Report as of Feb. 29, 2008 (Form 10‐Q) (filed on Apr. 9, 2008), at p. 1 ("LBHI 10‐Q Apr. 9, 2008") (554 million common equity shares outstanding times $55 = approximately $30 billion).
⁵ Morningstar Document Research Co., LBHI Historic Stock Prices (Jan. 1, 2008 through Sept. 15, , 2008) [LBEX‐EXM 000001‐14] (printed from www.10kwizard.com) (last visited Feb. 3, 2010).
⁶ Voluntary Petition (Chapter 11), Docket No. 1, Lehman Brothers Holdings Inc., No. 08‐13555 (Bankr. S.D.N.Y. Sept. 15, 2008).
⁷ Yalman Onaran & John Helyar, Fuld Sought Buffet Offer He Refused as Lehman Sank (Update 1), Bloomberg.com (Nov. 10, 2008), at p. 2.
⁸ LBHI 2007 10‐K, at p. 29; LBHI 10‐Q Apr. 9, 2008, at pp. 5‐6.
⁹ Examiner's Interview of Paolo R. Tonucci, Sept. 16, 2009, at p. 8.
¹⁰ Examiner's Interview of Paolo R. Tonucci, Sept. 16, 2009, at pp. 4, 8 (Lehman financed the majority of its balance sheet in the short‐term repo market, more than $200 billion a day in 2008; Lehman was reliant on short‐term secured financing to conduct its daily operations); Examiner's Interview of Raymond Abary, Mar. 12, 2009.
¹¹ Bank of America, Press Release, Bank of America Buys Merrill Lynch Creating Unique Financial Services Firm (Sept. 15, 2008) (announcing its acquisition of Merrill Lynch); Morgan Stanley, Press Release, Morgan Stanley and Citi to Form Industry‐Leading Wealth Management Business Through Joint Venture (Jan. 13, 2009) (announcing joint venture with Citi's Smith Barney Group to form Morgan Stanley Smith Barney); Federal Reserve, Press Release, Sept. 21, 2008 (announcing that the Federal Reserve granted the applications by Goldman Sachs and Morgan Stanley, the last two major investment banks, to become bank holding companies); Goldman Sachs, Press Release, Sept. 21, 2008 (announcing that Goldman Sachs will become a bank holding company and will be regulated by the Federal Reserve).
¹² See David Goldfarb, Lehman, Global Strategy Offsite (Mar. 2006) [LBEX‐DOCID 2489987].
¹³ Examiner's Interview of Dr. Henry Kaufman, May 19, 2009, at p. 9 (at a March 20, 2007 Board meeting, management advised that "virtually all subprime originators have cut back on their operations or gone out of business," but, despite that fact, it was management's view that "the current distressed environment provides substantial opportunities as in the late 1990s").
¹⁴ Duff & Phelps, High Yield Total ‐ Usage Versus Limits (Nov. 19, 2009), at pp. 4‐9 (showing that Lehman's monthly average risk appetite exceeded its limit by $41 million in July 2007, $62 million in August 2007, $608 million in September 2007, $670 million in October 2007, $508 million in November 2007, $562 million in December 2007, $708 million in January 2008, and $578 million in February 2008).
¹⁵ Examiner's Interview of Henry M. Paulson, Jr., June 25, 2009, at p. 11 (former Secretary of the Treasury Paulson stated that after Bear Stearns' near‐collapse he was less optimistic about Lehman's chances than Fuld, and he informed Fuld that Lehman needed to raise capital, find a strategic partner or sell the firm).
¹⁶ Examiner's Interview of Timothy F. Geithner, Nov. 24, 2009, at p. 2 (former President of the FRBNY and current Treasury Secretary Geithner believed that after Bear Stearns' near‐collapse, Lehman was the most vulnerable investment bank); Examiner's Interview of Ben S. Bernanke, Dec. 22, 2009, at p. 3 (Chairman of the Federal Reserve Bernanke believed that, after Bear Stearns, Lehman was the next most vulnerable bank); Examiner's Interview of Henry M. Paulson, Jr., June 25, 2009, at p. 2 (Paulson thought Lehman could be next to fail after Bear Stearns); Examiner's Interview of Christopher Cox, Jan. 8, 2010, at p. 8 (former Chairman of the SEC Cox said that after Bear Stearns collapsed Lehman was the SEC's "number one focus." Lehman had suffered "diminution of value" and had "troubled assets").
¹⁷ Erin M. Callan, Lehman Brothers Leverage Analysis (Apr. 7, 2008), at p. 1 [LBEX‐DOCID 1401225] ("Reducing leverage [i]s necessary to remove refinancing risk and win back the confidence of the market, lenders, and investors."); Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 8 (rating agencies looked at net leverage); Examiner's Interview of Michael McGarvey, Sept. 11, 2009, at p. 5 (senior management made a "concerted effort" to manage and reduce the balance sheet with a view towards the rating agencies); Examiner's Interview of Eileen A. Fahey, Fitch, Sept. 17, 2009, at p. 6; Standard & Poor's RatingsDirect, Liquidity Management In Times Of Stress: How The Major Broker‐Dealers Fare (Nov. 8, 2007), at p. 3 [LBHI_SEC07940_439424].
¹⁸ Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 7.
¹⁹ Final Transcript of Lehman Brothers Holdings Inc. Second Quarter Preliminary Earnings Call (June 9, 2008), at pp. 7‐8.
²⁰ LBHI 2007 10‐K, at p. 63; LBHI 10‐Q Apr. 9, 2008, at p. 72; Lehman Brothers Holdings Inc., Quarterly Report as of May 31, 2008 (Form 10‐Q) (filed on July 10, 2008), at p. 88 ("LBHI 10‐Q July 10, 2008"); Examiner's Interview of Martin Kelly, Oct. 1, 2009; Examiner's Interview of Ed Grieb, Oct. 2, 2009.
²¹ See Section III.A.4 (discussing Repo 105).
²² LBHI 10‐Q July 10, 2008, at p. 89; Duff & Phelps, Repo 105 Balance Sheet Accounting Entry and Leverage Ratios Summary (Oct. 2, 2009), at p. 7. See also Section I.A of this Report, which discusses net leverage.
²³ E‐mail from Anthony Jawad, Lehman, to Andrea Leonardelli, Lehman (Feb. 29, 2008) [LBEX‐DOCID 224902].
²⁴ E‐mail from Raymond Chan, Lehman, to Paul Mitrokostas, Lehman, et al. (Jul. 15, 2008) [LBEX‐DOCID 3384937].
²⁵ Joseph Gentile, Lehman, Proposed Repo 105/108 Target Increase for 2007 (Feb. 10, 2007), at p. 1 [LBEX‐ DOCID 2489498], attached to e‐mail from Joseph Gentile, Lehman, to Ed Grieb, Lehman (Feb. 10, 2007) [LBEX‐DOCID 2600714].
²⁶ Examiner's Interview of Martin Kelly, Oct. 1, 2009, at p. 9.
²⁷ Lehman did not disclose its use of Repo 105 in public filings. Examiner's Interview of Ed Grieb, Oct. 2, 2009, at p. 14; Examiner's Interview of Marie Stewart, Sept. 2, 2009, at p. 15; Examiner's Interview of Matthew Lee, July 1, 2009, at p. 16. Lehman did not disclose its use of Repo 105 to rating agencies. See Lehman, S&P Ratings Q2 2008 Update (June 5, 2008) [S&P‐Examiner 000946] (Lehman did not disclose its use of Repo 105 to Standard & Poor's in its ratings presentation); Lehman, Fitch Ratings Q2 2008 Update (June 3, 2008) [LBHI_SEC07940_513239] (Lehman similarly did not disclose its use of Repo 105 to Fitch as part of its presentation where Lehman touted its balance sheet reduction). The Examiner interviewed representatives from the three leading ratings agencies, Fitch, S&P and Moody's, and none had knowledge of Lehman's use of Repo 105/108 transactions, either by name or by description. Examiner's Interview of Eileen A. Fahey, Sept. 17, 2009, at p. 7; Examiner's Interview of Diane Hinton, Sept. 22, 2009, at p. 6; Examiner's Interview of Peter E. Nerby, Oct. 8, 2009, at p. 5. Lehman did not disclose its use of Repo 105 to Government regulators. Examiner's Interview of Ronald S. Marcus, Nov. 4, 2009, at p. 11; Examiner's Interview of Timothy F. Geithner, Nov. 24, 2009, at p. 5; Examiner's Interview of Jan H. Voigts, Oct. 1, 2009. Lehman did not disclose its use of Repo 105 to its Board of Directors. Examiner's Interview of Dr. Henry Kaufman, Sept. 2, 2009, at p. 21; Examiner's Interview of Jerry A. Grundhofer, Sept. 16, 2009, at p. 10; Examiner's Interview of Roland Hernandez, Oct. 2, 2009; Examiner's Interview of Sir Christopher Gent, Oct. 21, 2009, at p. 22; Examiner's Interview of Roger Berlind, Dec. 18, 2009, at p. 4.
²⁸ Examiner's Interview of Ernst & Young, Repo 105 session, Oct. 16, 2009, at pp. 8‐9 (statement of William Schlich); Examiner's Interview of Ernst & Young, Nov. 3, 2009, at pp. 14‐15 (statement of Hillary Hansen).
²⁹ Examiner's Interview of Matthew Eichner, Nov. 23, 2009, at p. 5 (Eichner told the Examiner that after Bear Stearns nearly collapsed, the SEC had monitors on‐site at Lehman "almost all the time." Eichner also told the Examiner that the FRBNY had people "in residence" with actual offices at Lehman); Examiner's Interview of Jan H. Voigts, Aug. 25, 2009, at p. 1 (Voigts monitored Lehman's liquidity position, embedded on‐site with the firm, from March 16, 2008 through mid‐September, 2008).
³⁰ Examiner's Interview of Timothy F. Geithner, Nov. 24, 2009, at p. 4 (after Bear Stearns nearly collapsed, Geithner met with Lehman and other investment banks about moving the banks to a "more conservative place" regarding capital and liquidity. Geithner indicated that his primary concern was Lehman's funding structure. He told the Examiner that he was "consumed" with figuring out how to make Lehman "get more conservatively funded").
³¹ Final Transcript of Lehman Brothers Holdings Inc. Second Quarter 2008 Preliminary Earnings Call (June, 9, 2008), at p. 8 (Lehman's liquidity pool reported at $45 billion); Final Transcript of Lehman Brothers Holdings Inc. Second Quarter 2008 Earnings Call (June 16, 2008), at p. 6 (Lehman's liquidity pool reported at $45 billion); Final Transcript of Lehman Brothers Holdings Inc. Third Quarter 2008 Preliminary Earnings Call (Sept. 10, 2008), at p. 10 (Lehman's liquidity pool reported at $42 billion).
³² Lehman, Liquidity Pool Table Listing Collateral and Ability to Monetize (Sept. 12, 2008) [LBEX‐WGM 784607] (listing $30.1 billion of assets as "low ability to monetize").
³³ Final Transcript of Lehman Brothers Holdings Inc. Third Quarter 2008 Preliminary Earnings Call (Sept. 10, 2008), at p. 10.
³⁴ Examiner's Interview of Paolo R. Tonucci, Sept. 16, 2009, at p. 19 (Lehman included $2 billion that it pledged to Citibank as a comfort deposit in its liquidity pool); Security Agreement between LBHI and Bank of America, N.A. (Aug. 25, 2008) [LBEX‐DOCID 000584] (providing for a $500 million security deposit from Lehman to BofA); Lehman, Liquidity Pool Table Listing Collateral and Ability to Monetize (Sept. 9, 2008), at p. 2 [LBHI_SEC07940_557815] (showing the $500 million BofA deposit in the liquidity pool); Lehman, Liquidity Update (Sept. 10, 2008), at p. 3 ($1 billion in Lehman's liquidity pool was earmarked to HSBC and listed as "Low ability to monetize.").
³⁵ See Section III.A.5 (discussing potential claims against secured lenders).
³⁶ Id.
³⁷ See Lehman, Liquidity Pool Table Listing Collateral and Ability to Monetize (Sept. 12, 2008) [LBEX‐ WGM 784607] (listing $1.4 billion of assets as "high ability to monetize" and $934 million of assets as "mid ability to monetize").
³⁸ Lehman Brothers Holdings Inc., Press Releases (Mar. 14, 2007, June 12, 2007, Sept. 18, 2007, Dec. 13, 2007, Mar. 18, 2008 and June 9, 2008).
³⁹ Lehman Brothers Holdings Inc., Press Release (June 12, 2008); Lehman Brothers Holdings Inc., Press Release (June 16, 2008).
⁴⁰ Fuld does not recall that warning. Examiner's Interview of Richard S. Fuld, Jr., Sept. 30, 2009, at p. 3, but Paulson told the Examiner that he consistently communicated to Fuld how dire Lehman's situation was and that he pointedly urged Fuld to find a buyer after Lehman announced a $2.8 billion loss for the second quarter of 2008, Examiner's Interview of Henry M. Paulson, June 25, 2009, at pp. 11‐15.
⁴¹ Final Transcript of Lehman Brothers Holdings Inc. Third Quarter 2008 Preliminary Earnings Call (Sept. 10, 2008), at p. 8; Lehman Brothers Holdings Inc., Press Release (Sept. 10, 2008), at p. 1 [LBHI_SEC07940_042866].
⁴² Morningstar Document Research Co., LBHI Historic Stock Prices (Jan. 1, 2008 through Sept. 15, 2008) [LBEX‐EXM 000001‐14] (printed from www.10kwizard.com) (last visited on Feb. 3, 2010).
⁴³ Examiner's Interview of Henry M. Paulson, Jr., June 25, 2009, at p. 15; Examiner's Interview of Christopher Cox, Jan. 8, 2010, at pp. 15‐17; Examiner's Interview of Thomas C. Baxter, Jr., May 20, 2009 at p. 9.
⁴⁴ Examiner's Interview of Henry M. Paulson, Jr., June 25, 2009, at pp. 15‐16 (Paulson told the Examiner that these meetings were part of the Government's attempt to "pull a rabbit out of a hat" and save Lehman); Examiner's Interview of Thomas C. Baxter, Jr., May 20, 2009 at pp. 9‐10 (FRBNY General Counsel Baxter told the Examiner that Paulson explained to the group that the purpose of the meeting was twofold ‐ (1) to attempt to facilitate the acquisition of Lehman; and (2) in the alternative, to resolve the consequences of Lehman's failure).
⁴⁵ Examiner's Interview of Henry M. Paulson, Jr., June 25, 2009, at pp. 16‐17 (Paulson told the Examiner that he concluded that the Federal Government lacked authority to inject capital into Lehman, even via an "exigent circumstances" loan from the Federal Reserve, because Lehman was not an institution "perceived to have capital and able to provide a guarantee."); Chairman of the Federal Reserve Ben S. Bernanke, Speech at the Kansas City Federal Bank Conference in Jackson Hole, Wyoming (Aug. 21, 2009) ("[T]he company's available collateral fell well short of the amount needed to secure a Federal Reserve loan of sufficient size to meet its funding needs."); Examiner's Interview of Ben S. Bernanke, Dec. 22, 2009, at p. 2 (Lehman's assets and securities fell "considerably short of the obligations that would become due").
⁴⁶ Examiner's Interview of Richard S. Fuld, Jr., Apr. 28, 2009, at p. 9 (Fuld told the Examiner that on the morning of September 14, 2008, he woke up thinking he had a transaction in place with Barclays); Lehman Brothers Holdings Inc., Minutes of Meeting of Board of Directors (Sept. 13, 2008), at p. 1 [LBEX‐ AM 003927‐003931] (The Lehman Board met at 5:00 p.m. to discuss a potential deal with Barclays).
⁴⁷ Examiner's Interview of Henry M. Paulson, Jr., June 25, 2009, at pp. 19‐20; Examiner's Interview of Richard Fuld, Jr., Apr. 28, 2009, at 9. In a written statement to the Examiner, the FSA said that it never received a formal request to waive the shareholder‐approval requirement. According to the FSA's statement, the FSA had serious concerns about the lack of precedent for such waivers. The FSA was also concerned about Lehman's liquidity and funding. FSA, Statement of the Financial Services Authority to the Examiner (Jan. 20, 2010), at pp. 8, 10.
⁴⁸ Lehman, Liquidity of Lehman Brothers [Draft] (Oct. 7, 2008), at p. 9 [LBHI_SEC07940_844701] (LBIE faced a cash shortage of $4.5 billion on September 15, 2008).
⁴⁹ Examiner's Interview of Christopher Cox, Jan. 8, 2010, at pp. 16‐17 (Cox called Lehman's Board to urge that Lehman take whatever action it decided upon as soon as possible, before the markets opened. During the call, Cox related, FRBNY General Counsel Thomas C. Baxter, Jr., added that it had been made clear in the meetings earlier that day that the "action" should be that Lehman declare bankruptcy. Cox told the Examiner that the SEC was not "offering guidance or trying to influence the fiduciary responsibilities of [Lehman's] directors.").
⁵⁰ Voluntary Petition (Chapter 11), Docket No. 1, Lehman Brothers Holdings Inc., Case No. 08‐13555 (Bankr. S.D.N.Y. Sept. 15, 2008); Docket Activity Report, Lehman Brothers Holdings Inc., Case No. 08‐13555 (Bankr. S.D.N.Y. Sept. 15, 2008).
⁵¹ Alexandra Twin, Stocks Get Pummeled, CNNMoney.com, Sept. 21, 2008, at p. 1 (stating "Wall Street sees worst day in 7 years with Dow down 504 points . . . "), available at http://money.cnn.com/2008/09/15/markets/markets_newyork2/index.htm (last visited Jan. 28, 2010).
⁵² Sewell Chan, Bernanke Wants an Audit of Fed's Bailout of AIG, N.Y. Times, Jan. 19, 2010 (stating that the FRBNY and Treasury Department made about $182 billion available to AIG).
⁵³ See Markus K. Brunnermeier, Deciphering the Liquidity and Credit Crunch 2007‐2008, 23 J. Econ. Perspectives, Winter 2009, at 87 (2009); NewYorkFed.org, Financial Turmoil Timeline, http://www.newyorkfed.org/research/global_economy/Crisis_Timeline.pdf (last visited Jan. 26, 2010).
⁵⁴ David M. Herszenhorn, A Curious Coalition Opposed Bailout Bill, N.Y. Times, Oct. 3, 2008, at p. 1.
⁵⁵ Edmund L. Andrews, Bernanke Says Fed "Should Have Done More," N.Y. Times, Dec. 4, 2009, at p. 1. The official transcript of Chairman Ben S. Bernanke's Confirmation Hearing Before the Senate Committee on Banking, Housing, and Urban Affairs, Dec. 3, 2009, was not available at the time this Report was released.
⁵⁷ See Lehman Brothers Holdings Inc., Minutes of Meeting of the Board of Directors (Mar. 31, 2008) (Lehman approached Warren E. Buffett about a potential $3.5 billion private investment, but discussions were preliminary and did not result in any agreement on terms) [LBEX‐AM 003597‐604]; Examiner's Interview of Richard S. Fuld, Jr., May 6, 2009, at p. 11 (Fuld told the Examiner that KDB's press release on Sept. 9, 2008, announcing that negotiations between KDB and Lehman about a strategic partnership had ended, triggered Lehman's decision to announce third quarter earnings early. According to Fuld, Lehman's stock dropped significantly after KDB's announcement and short‐sellers were "kicking the daylights" out of Lehman); Morningstar Document Research Co., LBHI Historic Stock Prices (Jan. 1, 2008 through Sept. 15, 2008) [LBEX‐EXM 000001] (printed from www.10kwizard.com) (last visited on Feb. 3, 2010 (Lehman's stock fell 45% after KDB's announcement).
⁵⁸ Lehman Brothers Holdings Inc., Press Release (June 9, 2008).
⁵⁹ Lehman Brothers Holdings Inc., Press Release (Sept. 10, 2008).
⁶⁰ In re STN Enters., 779 F.2d 901, 905 (2d Cir. 1985).
⁶¹ In re KDI Holdings, Inc., 277 B.R. 493, 508 (Bankr. S.D.N.Y. 1999) (quoting In re America's Hobby Center, 223 B.R. 275, 281 (Bankr. S.D.N.Y. 1998)), accord In re Adelphia Commc'ns Corp., 330 B.R. 364, 376 (Bankr. S.D.N.Y. 2005).
⁶² For a more complete analysis of the law relating to the colorable claim standard, see Appendix 1. The Examiner is not the ultimate decision‐maker on any colorable claim; he simply is directed to identify the existence of such claims. While the Examiner has evaluated the at‐times conflicting evidence to make his determinations as to potential colorable claims, it is neither necessary nor appropriate for the Examiner to make credibility assessments or resolve conflicting evidence; that will be the responsibility of a trier of fact when and if those claims are litigated.
⁶³ Examiner's Interview of Murtaza Bhallo, Sept. 14, 2009, at p. 3.
⁶⁴ Examiner's Interview of Marie Stewart, Sept. 2, 2009, at p. 7.
⁶⁵ E‐mail from Raymond Chan, Lehman, to Paul Mitrokostas, Lehman, et al. (July 15, 2008) [LBEX‐DOCID 3384937].
⁶⁶ Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 8 (rating agencies looked at net leverage); Examiner's Interview of Michael McGarvey, Sept. 11, 2009, at p. 2; Examiner's Interview of Anuraj Bismal, Sept. 16, 2009, at pp. 5‐6 (Bismal told the Examiner that meeting leverage ratio targets was the most critical issue ("a very hot topic") for senior management by the end of 2007).
⁶⁷ Examiner's Interview of Timothy F. Geithner, Nov. 24, 2009, at pp. 7‐8 (Starting in mid 2007, many of Lehman's inventory positions had grown increasingly "sticky" – i.e., difficult to sell without incurring substantial losses. Moreover, selling sticky inventory at reduced prices could also have led to loss of market confidence in Lehman's valuations for inventory remaining on the firm's balance sheet).
⁶⁸ Lehman, Spreadsheet Summarizing Total Repo 105 & Repo 108 (May 30, 2008) [LBEX‐DOCID 2078195] (total Repo 105 firm‐wide on Feb. 29, 2008 was $49.102 billion and on May 30, 2008 was $50.383 billion).
⁶⁹ Examiner's Interview of Martin Kelly, Oct. 1, 2009, at p. 8 (Kelly told the Examiner that Lehman was the last of the CSE firms to continue using Repo 105‐type transactions to manage its balance sheet by late 2007); Examiner's Interview of Marie Stewart, Sept. 2, 2009, at p. 4 (Stewart believed that Lehman was the last of its peer group using Repo 105 transactions by December 2007).
⁷⁰ Ernst & Young, Walkthrough Template: Balance Sheet Close Process (Nov. 30, 2007), at p. 14 [EY‐SEC‐ LBHI‐CORP‐GAMX‐07‐033384].
⁷¹ Lehman, Spreadsheet of Total Repo 105/108 Trend [LBHI_SEC07940_1957956] (listing total use of Repo 105/108 for the fourth quarter of 2007 as $38.634 billion).
⁷² See LBHI 2007 10‐K, at p.29.
⁷³ See Section III.A.4 (discussing Repo 105/108); Duff & Phelps, Repo 105 Balance Sheet Accounting Entry and Leverage Ratios Summary (Oct. 2, 2009), at p. 8.
⁷⁴ Lehman, Spreadsheet of Total Repo 105/108 Trend [LBHI_SEC07940_1658543].
⁷⁵ LBHI 10‐Q Apr. 9, 2008, at p. 72.
⁷⁶ See Section III.A.4 (discussing Repo 105/108); Duff & Phelps, Repo 105 Balance Sheet Accounting Entry and Leverage Ratios Summary (Oct. 2, 2009), at p. 8.
⁷⁷ Lehman, Spreadsheet of Total Repo 105/108 Trend [LBHI_SEC07940_1658543].
⁷⁸ LBHI 10‐Q July 10, 2008, at p. 89.
⁷⁹ See Section III.A.4 (discussing Repo 105/108); Duff & Phelps, Repo 105 Balance Sheet Accounting Entry and Leverage Ratios Summary (Oct. 2, 2009), at p. 8.
⁸⁰ Examiner's Interview of Matthew Lee, July 1, 2009, at p. 15 ("[Lehman] was telling the public they reduced the balance sheet, but not telling them they were doing so by unartful means." – Lehman "had way more leverage than people thought; it was just out of [the public's] sight").
⁸¹ See Section III.A.4 (discussing Repo 105/108).
⁸² Letter from Matthew Lee, Senior Vice President, Lehman, to Martin Kelly, Controller, Lehman, et al., re: possible accounting improprieties (May 16, 2008), at pp. 1‐3 [EY‐LE‐LBHI‐KEYPERS 5826885].
⁸³ Examiner's Interview of Ernst & Young's Hillary Hansen, Nov. 3, 2009 at p. 14; e‐mail from Beth Rudofker, Lehman, to William Schlich, Ernst & Young (June 5, 2008) [EY‐SEC‐LBHI‐ML 000001‐000142], forwarding May 21, 2008 e‐mail from Matthew Lee regarding second request for balance sheet substantiation.
⁸⁴ Examiner's Interview of Roger Berlind, Dec. 18, 2009, at p. 2; Examiner's Interview of Michael L. Ainslie, Dec. 22, 2009, at pp. 2‐3; Examiner's Interview of Sir Christopher Gent, Jan. 20, 2010, at p. 2; Examiner's Interview of Thomas Cruikshank, Jan. 20, 2010, at p. 3; Examiner's Interview of Beth Rudofker, Dec. 15, 2009, at pp. 6‐7; see also Lehman Brothers Holdings Inc., Minutes of the Audit Committee (June 13, 2008) [LBEX‐AM 003759‐60].
⁸⁵ Examiner's Interview of Ernst & Young's Hillary Hansen, Nov. 3, 2009, at p. 15 (Hansen told the Examiner that she did no further follow up specifically on Repo 105/108 because E&Y was in the midst of collecting all the data, and its investigation was not finalized).
⁸⁶ See Section III.A.4 (discussing Repo 105/108).
⁸⁷ See Section III.A.1 (discussing Lehman's risk management).
⁸⁸ See Section III.A.2 (discussing Lehman's valuation).
⁸⁹ See Section III.A.3 (discussing Lehman's survival).
⁹⁰ See Section III.A.4 (discussing Repo 105/108). After reaching the tentative conclusion that these claims existed, the Examiner contacted counsel for each, advised them of the basis for the potential finding, and invited each of them to present any additional facts or materials that might bear on the final conclusion. The Examiner had individual, face‐to‐face meetings with each and carefully considered the materials raised by each. While the Examiner was directed to credible facts and arguments that might form the basis for successful defenses, the Examiner concluded in all cases that these possible defenses do not change his now final conclusion that there is sufficient credible evidence from which a trier of fact could find a breach of duty after weighing the credible evidence on both sides of the issue.
⁹¹ See Section III.A.5 (discussing potential claims against Lehman's secured lenders).
⁹² See Section III.A.6(discussing the government's role).
⁹³ See Section III.B.2 (discussing possible administrative claims).
⁹⁴ See Section III.B.3 (discussing possible avoidance actions).
⁹⁵ The Examiner notified counsel for JPMorgan of his tentative conclusion and counsel made a presentation in response. The Examiner carefully considered that presentation but concludes that a colorable claim exists.
⁹⁶ See Section III.B.3 (discussing possible avoidance actions).
⁹⁷ See Section III.C (discussing the Barclays sale transaction).
⁹⁸ See Section III.C (discussing the Barclays sale transaction).
⁹⁹ See Section III.C (discussing the Examiner's conclusions regarding the Lehman ALI transaction).
¹⁰⁰ Order Directing Appointment of an Examiner Pursuant to Section 1104(c)(2) of the Bankruptcy Code, at pp. 3‐5, Docket No. 2569, In re Lehman Brothers Holding Inc., et al., Case No. 08‐13555 (Bankr. S.D.N.Y. Jan. 16, 2009).
¹⁰¹ Id. at p. 5.
¹⁰² Notice of Appointment of Examiner, Docket No. 2570, In re Lehman Brothers Holdings Inc.,Case No. 08‐ 13555 (Bankr. S.D.N.Y. Jan. 19, 2009).
¹⁰³ Order Approving Appointment of Examiner, Docket No. 2583, In re Lehman Brothers Holdings Inc., Case No. 08‐13555 (Bankr. S.D.N.Y. Jan. 20, 2009).
¹⁰⁴ Order Authorizing the Examiner to Retain and Employ Jenner & Block LLP as His Counsel Nunc Pro Tunc as of January 19, 2009, Docket No. 2803, In re Lehman Brothers Holdings Inc., Case No. 08‐13555 (Bankr. S.D.N.Y. Feb. 11, 2009); and Order Granting Examiner's Motion Directing the Production of Documents and Authorizing the Examinations of the Debtors' Current and Former Officers, Directors and Employees, and Other Persons and Entities, Docket No. 2804, In re Lehman Brothers Holdings Inc., Case No. 08‐13555 (Bankr. S.D.N.Y. Feb. 11, 2009).
¹⁰⁵ Order Approving the Preliminary Work Plan of Anton R. Valukas, Examiner, Docket No. 2855, In re Lehman Brothers Holdings Inc., Case No. 08‐13555 (Bankr. S.D.N.Y. Feb. 17, 2009).
¹⁰⁶ Order Authorizing the Examiner to Retain and Employ Duff & Phelps LLC as His Financial Advisors Nunc Pro Tunc as of February 6, 2009, Docket No. 2924, In re Lehman Brothers Holdings Inc., Case No. 08‐ 13555 (Bankr. S.D.N.Y. Feb. 17, 2009).
¹⁰⁷ Order Granting Debtors' Motion, Pursuant to Section 1121(d) of the Bankruptcy Code, Requesting Second Extension of Exclusive Periods for the Filing of and Solicitation of Acceptances for Chapter 11 Plans, Docket No. 4449, In re Lehman Brothers Holdings Inc., Case No. 08‐13555 (Bankr. S.D.N.Y. July 20, 2009).
¹⁰⁸ See Appendix 5 for full details of custodians, search request, search terms and related document metrics. Although a handful of subpoenas were threatened and in a few cases served, ultimately the Examiner received nearly all requested documents voluntarily. In the interest of time and efficiency, the Examiner did not, except where significant deficiencies were apparent, challenge the completeness of production or the withholding of documents upon claims of privilege.
¹⁰⁹ Order Authorizing the Examiner to Retain Certain Contract Attorneys to Perform Specific Document Review Tasks Nunc Pro Tunc as of April 15, 2009, Docket No. 3577, In re Lehman Brothers Holdings Inc., Case No. 08‐13555 (Bankr. S.D.N.Y. May 15, 2009); Order Authorizing the Examiner to Retain Additional Contract Attorneys to Perform Specific Document Review Tasks Nunc Pro Tunc as of May 11, 2009, Docket No. 3750, In re Lehman Brothers Holdings Inc., Case No. 08‐13555 (Bankr. S.D.N.Y. June 3, 2009); and Order Authorizing the Examiner to Retain Additional Contract Attorneys to Perform Specific Document Review Tasks Nunc Pro Tunc as of June 11, 2009, Docket No. 4428, In re Lehman Brothers Holdings Inc., Case No. 08‐13555 (Bankr. S.D.N.Y. July 16, 2009).
¹¹⁰ On January 30, 2010, the Examiner received about 55,500 unique e‐mails from the Debtors responsive to long‐outstanding requests that had not earlier been produced due to a data transfer issue. Earlier that week, the Examiner received 30,000 pages of documents from Ernst & Young responsive to long‐ outstanding requests that had not earlier been produced because a single custodian's files had inadvertently not been included. Despite the lateness of the receipt of these documents, the Examiner was able to complete review of them by deploying a team of lawyers to the task.
¹¹¹ The Examiner is able to count documents loaded in the two databases with precision, but page numbers are estimates. On average, the e‐mail and attachments in the Stratify database are six pages per document; the documents in the CaseLogistix database tend to be larger, averaging 23 pages per document.
¹¹² A substantial number of additional documents were produced in the pending Barclays sale litigation in the weeks before this Report was due. Given the ongoing nature of that litigation and the Court's concurrence that the Examiner need not express conclusions on these still‐in‐active‐litigation issues, those documents have not been reviewed except on a limited, focused basis.
¹¹³ See Appendix 6.
¹¹⁴ See Tobias Adrian, Federal Reserve Bank of New York, and Hyun Song Shin, Princeton University, Financial Intermediaries, Financial Stability and Monetary Policy (Aug. 5, 2008), at p. 13.
¹¹⁵ See Section III.A.1.b of this Report.
¹¹⁶ See Section III.A.1.b of this Report.
¹¹⁷ Lehman, Update on Lehman Brothers' Subprime Mortgage Origination Business Presentation to Lehman Board of Directors (Mar. 20, 2007), at p. 5 [LBHI_SEC07940_025839].
¹¹⁸ Lehman, Securitized Products, MBS: Non Investment Grade Retained Interests (Jan. 16, 2007), at p. 1 [LBEX‐DOCID 839039]; Lehman, Update on Lehman Brothers' Subprime Mortgage Origination Business Presentation to Lehman Board of Directors [Draft] (Mar. 18, 2007), at p. 14 [LBEX‐DOCID 610173] ("Limited ability to sell below Investment Grade risk profitably in current environment"); Examiner's Interview of Matthew Miller, Sept. 24, 2009, at p. 2.
¹¹⁹ E.g., Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at pp. 16, 24; Examiner's Interview of Joseph Gregory, Nov. 13, 2009, at p. 7; Examiner's Interview of Treasury Secretary Timothy F. Geithner, Nov. 24, 2009, at p. 3.
¹²⁰ See Section III.A.1.b of this Report.
¹²¹ Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at pp. 16, 24; Examiner's Interview of Richard McKinney, Aug. 27, 2009, at pp. 2, 9; Richard S. Fuld, Jr., Lehman, Notes for Senior Management Speech (June 16, 2008), at pp. 5‐6 [LBEX‐DOCID 529241], attached to e‐mail from Taimur Hyat, Lehman, to Herbert H. (Bart) McDade III, Lehman, et al. (June 25, 2008) [LBEX‐DOCID 556064].
¹²² See, e.g., e‐mail from Kentaro Umezaki, Lehman, to Herbert H. (Bart) McDade III, Lehman, et al. (Sept. 10, 2008) [LBEX‐DOCID 1718043] (noting "history of `end arounds' on risk decisions," risk management's lack of authority and lack of authority over balance sheet and inability to enforce risk limits); e‐mail from Vincent DiMassimo, Lehman, to Christopher M. O'Meara, Lehman (Sept. 1, 2008) [LBEX‐DOCID 203219] ("whatever risk governance process we had in place was ultimately not effective in protecting the firm [.] Risk Appetite measures were not effective in establishing clear enough warning signals that the Firm was taking on too much risk relative to capital. . . . The [Risk Management] function lacked sufficient authority within the Firm. Decision‐making was dominated by the business. . . ."); e‐mail from Satu Parikh, Lehman, to Michael Gelband, Lehman, Sept. 15, 2008 [LBEX‐DOCID 882447] ("I am shocked at the poor risk mgmt at the highest levels, and I don't think it started with Archstone. It is all unbelievable and I think there needs to be an investigation into the broader issue of malfeasance. Mgmt gambled recklessly with thousands of jobs and shareholder wealth. . . .").
¹²³ See, e.g., Yalman Onaran, Lehman Fault‐Finding Points to Last Man Fuld as Shares Languish, Bloomberg.com, July 22, 2008.
¹²⁴ See Office of Thrift Supervision, Report of Examination, Lehman Brothers Holdings Inc. (as of May 31, 2008), at p. 2 [LBEX‐OTS 000392] (finding that Lehman did not employ sound risk management practices in its commercial real estate business); e‐mail from Stephen Lax, Lehman, to Erin M. Callan, Lehman, et al. (June 9, 2008) [LBEX‐DOCID 017840] (forwarding text of Moody's release announcing downgrade of Lehman ratings outlook: "The rating action also reflects Moody's concerns over risk management decisions that resulted in elevated real estate exposures and the subsequent ineffectiveness of hedges to mitigate these exposures").
¹²⁵ References to the "Board" in this Section of the Report refer to Lehman's outside directors, not to Fuld, who was CEO and Chairman of the Board.
¹²⁶ For a detailed discussion of Delaware corporate fiduciary law, see Appendix 1.
¹²⁷ McPadden v. Sidhu, 964 A.2d 1262, 1274 (Del. Ch. 2008) (quoting Benihana of Tokyo, Inc. v. Benihana, Inc., 891 A.2d 150, 192 (Del. Ch. 2005)).
¹²⁸ See In re Citigroup Inc. S'holder Derivative Litig., 964 A.2d 106, 126 (Del. Ch. 2009).
¹²⁹ See id.
¹³⁰ See Appendix 1, Legal Issues.
¹³¹ See generally Appendix 1, Legal Issues.
¹³² Appendix No. 8, Risk Management Organization and Controls.
¹³³ Id.
¹³⁴ Id.
¹³⁵ See id.
¹³⁶ Id.
¹³⁷ See id.
¹³⁸ Appendix No. 9, comparing risk appetite and VaR usage versus limits.
¹³⁹ See Section III.A.1.b of this Report.
¹⁴⁰ See id.
¹⁴¹ E.g., SEC, Lehman Monthly Risk Review Meeting Notes (July 19, 2007), at p. 5 [LBEX‐SEC 007363] ("Jeff [Goodman] told us that . . . VaR is just one measure that Lehman uses, and is more of a speed bump/warning sign that a true, hard limit ‐‐ that role falls to RA [(i.e. risk appetite)]. [….] He said that Madelyn [Antoncic], Dave [Goldfarb], and the executive committee tend to look more at RA. As an aside, Madelyn came in after Jeff's explanation and gave virtually the same speech"); see also Section III.A.1.b of this Report.
¹⁴² See Section III.A.1.b of this Report.
¹⁴³ See id.
¹⁴⁴ See id.
¹⁴⁵ See Section III.A.1.c of this Report.
¹⁴⁶ Appendix No. 1, Legal Issues; In re Amer. Int'l Group, Inc., 965 A.2d 763, 806‐07 (Del. Ch. 2009) ("In colloquial terms, a fraud on the board has long been a fiduciary violation under our law and typically involves the failure of insiders to come clean to the independent directors about . . . information that the insiders fear will be used by the independent directors to take actions contrary to the insidersʹ wishes").
¹⁴⁷ Examiner's Interview of Roger S. Berlind, May 8, 2009, at p. 4; Examiner's Interview of Marsha Johnson Evans, May 22, 2009, at p. 6; Examiner's Interview of Roland A. Hernandez, Oct. 2, 2009, at p. 10; Examiner's Interview of John D. Macomber, Sept. 25, 2009, at p. 17; Examiner's Interview of Henry Kaufman, May 19, 2009, at p. 17; Examiner's Interview of Sir Christopher Gent, Oct. 21, 2009, at pp. 14‐16; Examiner's Interview of Michael Ainslie, Sept. 22, 2009, at pp. 3‐4. For information concerning the Board meetings where these general topics were discussed, the directors' statements to the Examiner about those meetings, and the directors' statements about the materiality of these facts, see Section III.A.1.b of this Report.
¹⁴⁸ Sections III.A.1.b of this Report.
¹⁴⁹ Section III.A.1.b of this Report.
¹⁵⁰ See Appendix No. 8, Risk Management Organization and Controls.
¹⁵² In re Caremark Int'l Inc. Derivative Litig., 698 A.2d 959, 967 (Del. Ch. 1996).
¹⁵³ In re Citigroup Inc. S'holder Litig., 964 A.2d 106, 126 (Del. Ch. 2009).
¹⁵⁴ See, e.g., Lehman Brothers Holdings Inc., Minutes of Meeting of the Board of Directors (June 19, 2007) [LBHI_SEC07940_026267]; Lehman, Lehman Board of Directors Materials for June 19, 2007 Board Meeting (June 19, 2007) [LBHI_SEC07940_026214]; Lehman Brothers Holdings Inc., Minutes of Meeting of Board of Directors (Sept. 11, 2007) [LBHI_SEC07940_026364]; Lehman, Lehman Board of Directors Materials for Sept. 11, 2007 Board Meeting (Sept. 7, 2007) [LBHI_SEC07940_026282]; Lehman Brothers Holdings Inc., Minutes of Meeting of Board of Directors (Oct. 15, 2007), at p. 6 [LBHI_SEC07940_026407]; Lehman, Lehman Board of Directors Materials for Oct. 15, 2007 Board Meeting (Oct. 11, 2007) [LBHI_SEC07940_026371].
¹⁵⁵ See DEL. CODE ANN. tit. 8, § 141(e) (2009).
¹⁵⁶ Lehman defined net assets as total assets excluding: (1) cash and securities segregated and on deposit for regulatory and other purposes; (2) securities received as collateral; (3) securities purchases under agreements to resell; (4) securities borrowed; and (5) identifiable intangible assets and goodwill. Lehman Brothers Holdings Inc., Annual Report for 2007 10‐K as of Nov. 30, 2007 (Form 10‐K) (filed on Jan. 29, 2008), at p. 63.
¹⁵⁷ Lehman Brothers Holdings Inc., Lehman Brothers Fact Book Q2 2008 (June 13, 2009), at p. 16 [LBHI_SEC07940_593047]. Lehman's public filings include a different quantification of Lehman's less liquid assets. According to these sources, Lehman's less liquid asset holdings almost quadrupled from the third quarter of 2006 until the first quarter of 2008, with a particularly sudden spike in the fourth quarter of 2007. Lehman Brothers Holdings Inc., Quarterly Report as of Aug. 31, 2006 (Form 10‐Q) (filed on Oct. 10, 2006), at pp. 16, 71‐72 ("LBHI 10‐Q (filed Oct 10, 2006)"); Lehman Brothers Holdings Inc.,
¹⁵⁸ Examiner's Interview of Paul Shotton, June 5, 2009, at p. 12.
¹⁵⁹ Id. at p. 2.
¹⁶⁰ Examiner's Interview of Richard S. Fuld Jr., Sept. 25, 2009, at pp. 10‐12 (Fuld said that Lehman expanded into the leveraged lending, bridge equity and principal investing to gain "wallet share." Fuld wanted to use the "80‐20 rule" to get the wallet share of Lehman's top clients. The 80‐20 rule says that the top 20% of the firm's clients will provide 80% of the firm's earnings.); Examiner's Interview of Jeremy M. Isaacs, Oct. 1, 2009, at p. 6.
¹⁶¹ Examiner's Interview of Paul A. Hughson, Oct. 28, 2009, at p. 3.
¹⁶² Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 14; Examiner's Interview of Mark Walsh, Oct. 21, 2009, at pp. 4‐5; e‐mail from Jeffrey Goodman, Lehman, to Mark A. Walsh, Lehman (Sept. 19, 2006) [LBEX‐DOCID 1368068].
¹⁶³ Examiner's Interview of Mark A. Walsh, Oct. 21, 2009, at p. 6.
¹⁶⁴ Lehman, FID Offsite Presentation and Notes (Sept. 28, 2006), at p. 10 [LBEX‐DOCID 2042292, 2068495], attached to e‐mail from Michael Gelband, Lehman, to Richard S. Fuld, Jr., Lehman, et al. (Sept. 26, 2006) [LBEX‐DOCID 2384245].
¹⁶⁵ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at pp. 10, 13; Examiner's Interview of Michael Gelband, Aug. 12, 2009, at p. 6; Examiner's Interview of Alex Kirk, Jan. 12, 2010, at p. 6.
¹⁶⁶ Examiner's Interview of Hugh E (Skip) McGee III, Aug. 12, 2009, at pp. 7‐8; Examiner's Interview of Joseph Gregory, Nov. 13, 2009, at p. 3; accord Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 12.
¹⁶⁷ Examiner's Interview of Joseph Gregory, Nov. 13, 2009, at p. 3; Examiner's Interview of Alex Kirk, Jan. 12, 2010, at p. 7.
¹⁶⁸ David Goldfarb, Lehman, Global Strategy Offsite Presentation (Mar. 2006), at pp. 30‐31 [LBEX‐DOCID 1342496], attached to e‐mail from Christopher M. O'Meara, Lehman, to Jacqueline Roncagliolo, Lehman (Apr. 3, 2006) [LBEX‐DOCID 1357100].
¹⁶⁹ Id. at p. 10.
¹⁷⁰ Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 11; Lehman, FID Offsite Presentation and Notes (Sept. 28, 2006) [LBEX‐DOCID 2042292, 2068495], attached to e‐mail from Michael Gelband, Lehman, to Richard S. Fuld, Jr., Lehman, et al. (Sept. 26, 2006) [LBEX‐DOCID 2384245].
¹⁷¹ Less liquid investments were "Level 3." Level 1 assets have readily available markets to provide prices and liquidity, such as exchange‐traded equities. Level 2 assets have observable events to provide pricing, such as comparable sales. Level 3 assets have no readily available pricing mechanism and therefore are less liquid than Level 1 and 2 assets.
¹⁷² See Lehman, Capital Adequacy Review (Sept. 11, 2008), at p. 1 [LBEX‐DOCID 012124].
¹⁷³ See Tobias Adrian, Federal Reserve Bank of New York, and Hyun Song Shin, Princeton University, Financial Intermediaries, Financial Stability and Monetary Policy (Aug. 5, 2008), at p. 13.
¹⁷⁴ Martin Oehmke, Putting the Brakes on Collateral Liquidations, Columbia Business School Ideas at Work, July 28, 2009, http://www4.gsb.columbia.edu/ideasatwork/feature/731624/Putting+the+Brakes+on+Collateral+Liquidati ons (last visited on Feb. 1, 2010).
¹⁷⁵ Id.; see also Moody's Investor Services, Press Release: Moody's Text: Changes Lehman Outlook From Stable To Negative (June 9, 2008).
¹⁷⁶ Examiner's Interview of Anuraj Bismal, Sept. 16, 2009, at p. 10; Lehman, Accounting Policy Manual (Sept. 9, 2006) [LBEX‐DOCID 3213287], attached to e‐mail from Marie Stewart, Lehman, to Martin Kelly, Lehman, et al. (Dec. 5, 2007) [LBEX‐DOCID 3223385].
¹⁷⁷ See Lehman, Update on Risk, Liquidity and Capital Adequacy Presentation (Aug. 17, 2007), at p. 48 [LBEX‐DOCID 2031705] (Lehman's funding framework took account of the inability to fund illiquid assets through the repo market; therefore the firm always funded illiquid holdings with long‐term assets and liabilities).
¹⁷⁸ Cf. Examiner's Interview of Alex Kirk, Jan. 12, 2010, at p. 9; Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 3, 13.
¹⁷⁹ Cf. Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 3, 13.
¹⁸⁰ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 3, 13; Examiner's Interview of Roger Berlind, May 8, 2009, at p. 7; Examiner's Interview of Fred S. Orlan, Sept. 21, 2009, at p. 6; Examiner's Interview of Paul Shotton, June 5, 2009, at pp. 7‐8; Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 17; Lehman, 2nd Quarter 2007 Review: Credit Facilitation Group (June 2007), at pp. 1‐2 [LBEX‐ DOCID 514908]; Lehman, Leveraged Finance Risk Presentation (June 2007), at p. 12 [LBEX‐DOCID 3283752]; e‐mail from Christopher M. O'Meara, Lehman, to Ian T. Lowitt, Lehman (Sept. 27, 2007) [LBEX‐ DOCID 193218]; e‐mail from Jeffrey Goodman, Lehman, to Christopher M. O'Meara, Lehman (Oct. 1, 2007) [LBEX‐DOCID 201866]; e‐mail from Jeffrey Goodman, Lehman, to Paul Shotton, Lehman, et al. (Mar. 19, 2008) [LBEX‐DOCID 335666]; Andrew J. Morton, Lehman, Hedging Fixed Income's Portfolio Presentation (Aug. 8, 2008), at pp. 2, 3, 8, 11 [LBEX‐DOCID 011869], attached to e‐mail from Thomas Odenthal, Lehman, to Andrew J. Morton, Lehman, et al. (Aug. 6, 2008) [LBEX‐DOCID 069824].
¹⁸¹ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 3, 13; Examiner's Interview of Paul Shotton, June 5, 2009, at pp. 7‐8.
¹⁸² Cf. Examiner's Interview of Treasury Secretary Timothy F. Geithner, Nov. 24, 2009, at pp. 7‐8.
¹⁸³ Id.; see Moody's Investor Services, Press Release: Moody's Text: Changes Lehman Outlook From Stable To Negative (June 9, 2008).
¹⁸⁴ See Section III.A.4 of this Report.
¹⁸⁵ Madelyn Antoncic, Risk Management Presentation to Standard & Poor's [Draft] (Aug. 17, 2007), at p. 5 [LBEX‐DOCID 342851] ("Global Risk Management Division is independent of the trading areas"), attached to e‐mail from Lisa Rathgeber, Lehman, to Jeffrey Goodman, Lehman, et al. (Aug. 15, 2007) [LBEX‐DOCID 305205]; SEC Division of Market Regulation, Lehman Brothers ‐ Consolidated Supervised Entity Market and Credit Risk Review (June 2005), at pp. 3‐4 [LBEX‐DOCID 2125011] (saying Risk Management was "independent of Lehman's business units"), attached to e‐mail from Michelle Danis, SEC, to David Oman, Lehman, et al. (Apr. 21, 2006) [LBEX‐DOCID 2068428]; Lehman, Risk Update Presentation to Lehman Board of Directors (July 18, 2006), at pp. 5, 8 [LBEX‐DOCID 2125293] (saying Lehmanʹs risk approach "applie[d] analytical rigor overlaid with sound practical judgment"; Lehman, Risk Management Update Presentation to Lehman Board of Directors (Apr. 15, 2008), at pp. 1‐2 [LBHI_SEC07940_027909‐29] (saying Lehman "provided an independent view of risk").
¹⁸⁶ Examiner's Interview of Paul Shotton, Oct. 16, 2009, at p. 2.
¹⁸⁷ See infra, Section III.A.6.
¹⁸⁸ Examiner's Interview of the Securities and Exchange Commission, Aug. 24, 2009, at p. 13.
¹⁸⁹ See, e.g., Lehman, Stress Test Report for March 31, 2006 [LBEX‐DOCID 2078161], attached to e‐mail from Sandeep Garg, Lehman, to Patrick Whalen, Lehman, et al. (Apr. 24, 2006) [LBEX‐DOCID 2118206]; Lehman, Stress Test Report for February 28, 2007 [LBEX‐DOCID 632363], attached to e‐mail from Melda Elagoz, Lehman, to Paul Shotton, Lehman, et al. (Mar. 9, 2007) [LBEX‐DOCID 630356]; Stress Test Report for October 31, 2007 [LBEX‐DOCID 632432], attached to e‐mail from Jeffrey Goodman, Lehman, to Cherie Gooley, Lehman (Dec. 19, 2007) [LBEX‐DOCID 665513]; Stress Test Report for Apr. 30, 2008 [LBEX‐ DOCID 3296803], attached to e‐mail from Mark Weber, Lehman, to Cherie Gooley, Lehman, et al. (May 28, 2008) [LBEX‐DOCID 3302270].
¹⁹⁰ Lehman, Risk Management Presentation to Fitch (Apr. 7, 2006), at p. 47 [LBEX‐DOCID 691768]; Lehman, Risk, Liquidity, Capital, and Balance Sheet Update Presentation to Finance and Risk Committee of Lehman Board of Directors (Sept. 11, 2007), at p. 28 [LBEX‐AM 067167].
¹⁹¹ E.g., Madelyn Antoncic, Lehman, Risk Management Presentation to Standard & Poor's [Draft] (Aug. 17, 2007), at pp. 38‐39 [LBEX‐DOCID 342851], attached to e‐mail from Lisa Rathgeber, Lehman, to Jeffrey Goodman, Lehman, et al. (Aug. 15, 2007) [LBEX‐DOCID 305205].
¹⁹² Examiner's Interview of Paul Shotton, Oct. 16, 2009, at pp. 5‐6; Examiner's Interview of Jeffrey Goodman, Aug. 28, 2009.
¹⁹³ Examiner's Interview of Jeffrey Goodman, Aug. 28, 2009.
¹⁹⁴ Examiner's Interview of Paul Shotton, Oct. 16, 2009, at pp. 5‐6.
¹⁹⁵ Examiner's Interview of Matthew Eichner, Nov. 23, 2009, at p. 12; Examiner's Interview of Paul Shotton, Oct. 16, 2009, at p. 6.
¹⁹⁶ E‐mail from Marc Henn, Lehman, to Maria Turner, Lehman, (Mar. 2, 2007) [LBEX‐DOCID 264992]; e‐ mail from Melda Elagoz, Lehman, to Jeffrey Goodman, Lehman, et al. (June 11, 2007) [LBEX‐DOCID 384503]; Lehman, 2006 Competitor Analysis ‐ Key Considerations (Dec. 1, 2006) [LBEX‐DOCID 2110930], attached to e‐mail from Mirey Nadler, Lehman, to Fred Steinberg, Lehman (Dec. 1, 2006) [LBEX‐DOCID 2042308]; e‐mail from Gerard Reilly, Lehman, to Christopher M. O'Meara, Lehman (May 17, 2006) [LBEX‐ DOCID 1342418]; e‐mail from James Ballentine, Lehman, to Michael Gelband, Lehman, et al. (Jan. 4, 2007) [LBEX‐DOCID 384818].
¹⁹⁷ Lehman, Internal VaR Audit Report [Draft] (Feb. 26, 2007), at p. 3 [LBEX‐DOCID 232917], attached to e‐mail from Lisa Rathgeber, Lehman, to Paul Shotton, Lehman (Feb. 26, 2007) [LBEX‐DOCID 232916].
¹⁹⁸ Examiner's Interview of Christopher M. O'Meara, Aug. 14, 2009, at p. 25.
¹⁹⁹ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 10‐11; Examiner's Interview of Paul Shotton, Oct. 16, 2009, at p. 4; e‐mail from Melda Elagoz, Lehman, to Jeffery Goodman, Lehman (July 16, 2007) [LBEX‐DOCID 385103]; e‐mail from Jeffery Goodman, Lehman, to Stephen Lax, Lehman, et al. (Nov. 14, 2007) [LBEX‐DOCID 297400].
²⁰⁰ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 10‐11; Examiner's Interview of Paul Shotton, Oct. 16, 2009, at p. 4.
²⁰¹ See Section III.A.1.b of this Report.
²⁰² Lehman, Stress Test Report (June 30, 2008), at p. 3 [LBEX‐DOCID 3326829], attached to e‐mail from Nancy Malik, Lehman, to Paul Shotton, Lehman, et al. (June 30, 2008) [LBEX‐DOCID 3301915]; Lehman, Private Equity and Real Estate Stresses, Global Market Risk Management presentation (June 30, 2008), at pp. 3‐4 [LBEX‐DOCID 3301916] attached to e‐mail from Nancy Malik, Lehman, to Paul Shotton, Lehman, et al. (June 30, 2008) [LBEX‐DOCID 3301915].
²⁰³ Lehman, Stress Test Report (June 30, 2008), at p. 1 [LBEX‐DOCID 384227] attached to e‐mail from Nancy Malik, Lehman, to Paul Shotton, Lehman, et al. (Sept. 2, 2008) [LBEX‐DOCID 385413].
²⁰⁴ Examiner's Interview of Mark Weber, Aug. 11, 2009, at p. 14; Examiner's Interview of Christopher M. O'Meara, Sept. 23, 2009, at p. 19.
²⁰⁵ See, e.g., Jared Pedowitz, BMRM‐Market Risk Management Walkthrough Template (Nov. 30, 2007), at p. 9 [EY‐LE‐LBHI‐KEYPERS 1015089]; Madelyn Antoncic, Lehman, Risk Management Presentation to Standard & Poor's [Draft] (Aug. 17, 2007), at p. 23 [LBEX‐DOCID 342851], attached to e‐mail from Lisa Rathgeber, Lehman, to Jeffrey Goodman, Lehman, et al. (Aug. 15, 2007) [LBEX‐DOCID 305205].
²⁰⁶ Madelyn Antoncic, Lehman, Risk Management Presentation to Standard & Poor's [Draft] (Aug. 17, 2007), at p. 21 [LBEX‐DOCID 342851], attached to e‐mail from Lisa Rathgeber, Lehman, to Jeffrey Goodman, Lehman, et al. (Aug. 15, 2007) [LBEX‐DOCID 305205].
²⁰⁷ SEC Division of Market Regulation, Lehman Brothers ‐ Consolidated Supervised Entity Market and Credit Risk Review (2005), at pp. 4‐5 [LBEX‐DOCID 2125011].
²⁰⁸ See, e.g., e‐mail from Jenny Peng, Lehman, to David Goldfarb, Lehman, et al. (Oct. 12, 2007) [LBEX‐ DOCID 152049] (containing summary "Daily Risk Appetite and VaR Report" for Oct. 10, 2007), and attached spreadsheet (Oct. 12, 2007) [LBEX‐DOCID 150128] (containing daily risk appetite report, global risk appetite report organized by risk type, and daily VaR report).
²⁰⁹ SEC Division of Market Regulation, Lehman Brothers ‐ Consolidated Supervised Entity Market and Credit Risk Review (2005), at pp. 4‐5 [LBEX‐DOCID 2125011]. See Appendix 8, Risk Management Organization and Controls (discussing risk appetite limits). Risk appetite measured the amount Lehman could lose in a give year and still achieve an acceptable level of net profit.
²¹⁰ It is not clear whether the presentation was for ratification and approval or simply for information. See e.g., Lehman, 2008 Financial Plan Summary Presentation to Lehman Board of Directors (June 29, 2008), at p. 11 [LBHI_SEC07940_027374].
²¹¹ Lehman, Market Risk Management Limit Policy Manual (Oct. 2006), at p. 2 [LBHI_SEC07940_767665), attached to e‐mail from Christopher M. O'Meara to Kristi Michelle Reynolds (Apr. 7, 2008) [LBHI_SEC07940_767661].
²¹² Lehman Brothers Global Risk Management, Second Quarter 2008 Report (July 21, 2008), at p. 29 [LBEX‐DOCID 738522], attached to e‐mail from Elizabeth Agosto, Lehman, to Jeffrey Goodman, Lehman, et al. (July 21, 2008) [LBEX‐DOCID 670132].
²¹³ E.g., SEC, Lehman Monthly Risk Review Meeting Notes (July 19, 2007), at p. 5 [LBEX‐SEC 007363]; SEC Division of Market Regulation, Lehman Brothers ‐ Consolidated Supervised Entity Market and Credit Risk Review (2005), at p. 6 [LBEX‐DOCID 2125011].
²¹⁴ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 5.
²¹⁵ E.g., Examiner's Interview of Madelyn Antoncic, Oct. 6, 2009, at p. 7; Examiner's Interview with David Goldfarb, Sept. 21, 2009, at p. 5; Examiner's Interview of Paul Shotton, June 5, 2009, at pp. 10‐11 (saying that the firm‐wide risk appetite limit was a "hard" limit, the breach of which had to be cured by either reducing the firm's overall risk or raising the limit).
²¹⁶ Madelyn Antoncic, Risk Management Presentation to Standard & Poor's [Draft] (Aug. 17, 2007), at p. 23 [LBEX‐DOCID 342851], attached to e‐mail from Lisa Rathgeber, Lehman, to Jeffrey Goodman, Lehman, et al. (Aug. 15, 2007) [LBEX‐DOCID 305205]; SEC Division of Market Regulation, Lehman Brothers ‐ Consolidated Supervised Entity Market and Credit Risk Review (June 2005), at pp. 4‐5 [LBEX‐ DOCID 2125011], attached to e‐mail from Michelle Danis, SEC, to David Oman, Lehman, et al. (Apr. 21, 2006) [LBEX‐DOCID 2068428]; Lehman, Risk Update Presentation to Lehman Board of Directors (July 18, 2007), at pp. 11‐12 [LBEX‐DOCID 2125293].
²¹⁷ Lehman Brothers, 2007 Risk Appetite Limit (Jan. 7, 2007), at p. 1 [LBEX‐DOCID 158938], attachment to e‐mail from Robert Azerad, Lehman, to Madelyn Antoncic, Lehman (Jan. 11, 2007) [LBEX‐DOCID 158331].
²¹⁸ Examiner's Interview of Madelyn Antoncic, Mar. 27, 2009, at p. 13; e‐mail from David Goldfarb, Lehman, to Madelyn Antoncic, Lehman, et al. (Nov. 2, 2006) [LBEX‐DOCID 2125677]; e‐mail from Madelyn Antoncic, Lehman, to Christopher M. O'Meara, Lehman (Nov. 2, 2006) [LBEX‐DOCID 2125679]; e‐mail from Christopher M. O'Meara, Lehman, to Madelyn Antoncic, Lehman (Nov. 2, 2006) [LBEX‐ DOCID 2125680].
²¹⁹ Lehman, 2007 Financial Plan Presentation to Finance and Risk Committee of the Board of Directors (Jan. 30, 2007), at pp. 21‐22 [LBEX‐AM 067099].
²²⁰ Examiner's Interview of Alex Kirk, Jan. 12, 2010, at pp. 7‐8.
²²¹ Appendix 8, Risk Management Organization and Controls.
²²² Madelyn Antoncic, Lehman, "Standard" Risk Management Presentation (Undated), at p. 21 [LBEX‐ DOCID 194031], attached to e‐mail from Paul Shotton, Lehman, to Christopher M. O'Meara, Lehman (Feb. 20, 2008) [LBEX‐DOCID 214223]; Madelyn Antoncic, Lehman, "Standard" Risk Management Presentation, at p. 21 [LBEX‐DOCID 194031].
²²³ Examiner's Interview of Alex Kirk, Jan. 12, 2010, at pp. 7‐8; Lehman, Appendix to Financial Sponsors Strategies (Including Lending Capacity Solutions) Presentation to the Executive Committee (Aug. 3, 2006), at p. 6 [LBEX‐DOCID 1343776], attached to e‐mail from Blair Sieff, Lehman, to Madelyn Antoncic, Lehman, et al. (Aug. 2, 2006) [LBEX‐DOCID 1360977].
²²⁴ Lehman, Appendix to Financial Sponsors Strategies (including Lending Capacity Solutions) Presentation to the Executive Committee (Aug. 3, 2006), at pp. 3, 6 [LBEX‐DOCID 1343776], attached to e‐ mail from Blair Sieff, Lehman, to Madelyn Antoncic, Lehman, et al. (Aug. 2, 2006) [LBEX‐DOCID 1360977]; Lehman, Financial Sponsors Strategies (including Lending Capacity Solutions) Presentation to the Executive Committee (Aug. 3, 2006), at pp. 10‐11 (LBEX‐DOCID 1343775], attached to e‐mail from Blair Sieff, Lehman, to Madelyn Antoncic, Lehman, et al. (Aug. 2, 2006) ([LBEX‐DOICD 1360977].
²²⁵ E‐mail from Joe Li, Lehman, to Paul Mitrokostas, Lehman (Aug. 30, 2007) [LBEX‐DOCID 2547330]; Joe Li, Lehman, STL Backtesting Excel Spreadsheet (July 25, 2007) [LBEX‐DOCID 2506462], attached to e‐mail from Joe Li, Lehman, to Fred S. Orlan, Lehman, et al. (July 25, 2007) [LBEX‐DOCID 2563167]; accord Examiner's Interview of Alex Kirk, Jan. 12, 2010, at pp. 7‐8.
²²⁶ Cf. Examiner's Interview of Madelyn Antoncic, Oct. 6, 2009, at p. 12; e‐mail from Jeffrey Goodman, Lehman, to Zev Klasewitz, Lehman (Jan. 17, 2007) [LBEX‐DOCID 794864]; e‐mail from Jeffrey Goodman, Lehman, to Zev Klasewitz, Lehman (Feb. 12, 2007) [LBEX‐DOCID 794879].
²²⁷ Examiner's Interview of Alex Kirk, Jan. 12, 2010, at pp. 7‐8.
²²⁸ Examiner's Interview of Madelyn Antoncic, Mar. 27, 2009, at p. 9.
²²⁹ Id.; Examiner's Interview of Alex Kirk, Jan. 12, 2010, at pp. 6‐8.
²³⁰ Examiner's Interview of Alex Kirk, Jan. 12, 2010, at pp. 7‐8; Examiner's Interview of Madelyn Antoncic, Mar. 27, 2009, at p. 9.
²³¹ Examiner's Interview of Sir. Christopher Gent, Oct. 21, 2009, at pp. 7‐8; Examiner's Interview of Thomas Cruikshank, Oct. 8, 2009, at pp. 2‐3; Examiner's Interview of Roland A. Hernandez, Oct. 2, 2009; Examiner's Interview of John D. Macomber, Sept. 28, 2009, at p. 12; Examiner's Interview of Michael L. Ainslie, Sept. 22, 2009, at p. 8; Examiner's Interview of Marsha Johnson Evans, May 22, 2009, at p. 12; Examiner's Interview of Dr. Henry Kaufman, May 19, 2009, at pp. 7‐8, 14; Examiner's Interview of Roger Berlind, May 8, 2009, at pp. 6‐7; Examiner's Interview of John F. Akers, Apr. 22, 2009, at p. 9.
²³² Id.
²³³ The Board had a Finance and Risk Committee that generally met twice a year and received more detailed information than the full Board on these topics. Dr. Henry Kaufman, former managing director of Salmon Brothers, was the head of the Finance and Risk Committee.
²³⁴ Lehman Brothers Holdings Inc., Risk, Liquidity, Capital and Balance Sheet Update Presentation to Finance and Risk Committee of Lehman Board of Directors (Sept. 11, 2007), at p. 28 [LBEX‐AM 067167‐ 233].
²³⁵ Examiner's Interview of Paul Shotton, Oct. 16, 2009, at p. 5; see also Lehman Brothers Holdings Inc., Risk, Liquidity, Capital and Balance Sheet Update Presentation to Finance and Risk Committee of Lehman Board of Directors (Sept. 11, 2007), at p. 29 [LBEX‐AM 067167‐233].
²³⁶ Lehman, 2008 Financial Plan Presentation to Lehman Finance and Risk Committee of the Board of Directors (Jan. 29, 2008), at p. 19 [LBHI_SEC 07940_068559].
²³⁷ Cf. Examiner's Interview of Jerry A. Grundhofer, Sept. 16, 2009, at p. 7; Examiner's Interview of Roland A. Hernandez, Oct. 2, 2009; Examiner's Interview of John D. Macomber, Sept. 25, 2009, at p. 4; Examiner's Interview of Dr. Henry Kaufman, Sept. 2, 2009, at p. 11; contra Examiner's Interview of Christopher M. O'Meara, Sept. 23, 2009, at p. 18.
²³⁸ Examiner's Interview of Dr. Henry Kaufman, Sept. 2, 2009, at pp. 2‐3, 10‐11 ("Despite [these] exclusions, [Kaufman] was not concerned with the result to the stress tests."); Examiner's Interview of Jerry A. Grundhofer, Sept. 16, 2009, at p. 7 (saying the exclusion "looked reasonable and that it would be hard for [Grundhofer] to believe Lehman was not following the standard for conducting stress tests."); see Examiner's Interview of Sir Christopher Gent, Oct. 21, 2009, at pp. 13‐14 (saying he did not find stress tests helpful and thought some assets might be excluded).
²³⁹ Examiner's Interview of John D. Macomber, Sept. 25, 2009, at p. 11.
²⁴⁰ See, e.g., Lehman, Risk Update Presentation to Lehman Board of Directors (July 18, 2006) [LBEX‐WGM 986315] (not mentioning single transaction limit); but see Lehman, Risk Management Update Presentation to Lehman Board of Directors (Apr. 15, 2008), at p. 1 [LBHI_SEC07940_027909] ("We have an overall Risk Appetite limit which is supplemented by . . . single transaction, country and other concentration limits.").
²⁴² Bank for International Settlements, 77th Annual Report (June 24, 2007), at p. 109.
²⁴³ Id.
²⁴⁴ Standard & Poor's, Press Release: Home Price Declines Worsen As We Enter the Fourth Quarter of 2008 According to the S&P/Case‐Shiller Home Price Indices (Dec. 30, 2008), at p. 1 (available at http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_123062.pdf); see also Vikas Bajaj, Home Prices Fall in More Than Half of Nation's Biggest Markets, N.Y. Times, Feb. 16, 2007, at p. C1.
²⁴⁵ Gary Gorton, Information, Liquidity and the (Ongoing) Panic of 2007 2 (NIBR Working Paper No. w14649, 2009); see also Gary Gorton & Andrew Metrick, Securitized Banking and the Run on Repo 5 (Yale Int'l Center for Finance, Working Paper No. 09‐14, 2009).
²⁴⁶ Bank for International Settlements, 77th Annual Report (June 24, 2007), at p. 109.
²⁴⁷ Id. at pp. 109‐10.
²⁴⁸ Lehman, 2008 Financial Plan Summary Presentation to Lehman Board of Directors (Jan. 24, 2008), at p. 5 [LBHI_SEC07940_027374] ("Current environment presents a unique long‐term growth opportunity for the Firm. . . . The Firm's competitors, with the notable exceptions of Goldman Sachs and JP Morgan Chase, have sustained large losses, weakening their competitive positions. . . . This presents an opportunity for the Firm to pursue a countercyclical growth strategy, similar to what it did during the 2001‐2002 downturn, to improve its competitive position and, over time, generate superior returns for our shareholders."); see also Lehman, Update on Lehman Brothers' Subprime Mortgage Origination Business Presentation to Lehman Board of Directors (Mar. 20, 2007), at p. 10 [LBHI_SEC07940_025834] ("Most of large subprime independents have gone out of business, have been sold or are selling. . . . Current distressed environment provides substantial opportunities, as in late 1990's"); Lehman, Notes for Presentation for the Fixed Income Division Offsite Meeting (Sept. 26, 2006), at pp. 10‐12 [LBEX‐DOCID 1715601] (stating that Lehman viewed the 2006 growth strategy as a countercyclical opportunity to grow business), attached to e‐mail from Lesley Oramas‐Scala, Lehman, to Michael Gelband, Lehman (Sept. 26, 2006) [LBEX‐DOCID 1945744].
²⁴⁹ Id.
²⁵⁰ Id.
²⁵¹ Id.
²⁵² Lehman, Update on Lehman Brothers' Subprime Mortgage Origination Business Presentation to Lehman Board of Directors (Mar. 20, 2007), at pp. 5, 10 [LBHI_SEC07940_025834]; e‐mail from Dimitrios Kritikos, Lehman, to Jeffrey Goodman, Lehman (Feb. 2, 2007) [LBEX‐DOCID 566140] ("While the rest of the industry is tightening credit and increasing prices in these areas, we are moving in the opposite direction.").
²⁵³ Examiner's Interview of Treasury Secretary Timothy F. Geithner, Nov. 24, 2009, at p. 3; Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at pp. 16, 24; Examiner's Interview of Richard McKinney, Aug. 27, 2009, at pp. 2, 9; Richard S. Fuld, Jr., Lehman, Notes for Senior Management Speech (June 16, 2008), at pp. 5‐6 [LBEX‐DOCID 529241], attached to e‐mail from Taimur Hyat, Lehman, to Herbert H. McDade III, Lehman, et al. (June 25, 2008) [LBEX‐DOCID 556064].
²⁵⁴ Lehman, Securitized Products, MBS: Non Investment Grade Retained Interests (Jan. 16, 2007), at pp. 1, 3 [LBEX‐DOCID 839039], attached to e‐mail from James Guarino, Lehman, to Richard McKinney, Lehman, et al. (Jan. 16, 2007) [LBEX‐DOCID 865925].
²⁵⁵ See Section III.A.1.b.1 of this Report.
²⁵⁶ See Section III.A.1.b.2.d of this Report.
²⁵⁷ Lehman, Fixed Income Division Balance Sheet Management (Apr. 2007), at p. 2 [LBEX‐DOCID 787297], attached to e‐mail from Kieron Keating, Lehman, to David N. Sherr, Lehman, et al. (June 6, 2007) [LBEX‐ DOCID 808850]; Lehman Balance Sheet and Disclosure Scorecard For Trade Date Apr. 21, 2008 (Apr. 22, 2008), at p. 3 [LBEX‐DOCID 3187588], attached to e‐mail from Tal Litvin, Lehman, to Herbert H. McDade III, Lehman, et al. (Apr. 22, 2008) [LBEX‐DOCID 3187333].
²⁵⁸ E‐mail from Joseph Gentile, Lehman, to Michael Gelband, Lehman, et al. (Feb. 21, 2007) [LBEX‐DOCID 810934].
²⁵⁹ Examiner's Interview of Thomas L. Wind, Apr. 21, 2009, at p. 8; Examiner's Interview of Susan Harrison, Apr. 28, 2009, at pp. 2, 5; Examinerʹs Interview of Marie Jean Burruel, Apr. 28, 2009, at p. 5; Dimitrios Kritikos, Lehman, BNC Risk Review December 2006 (Jan. 20, 2007), at p. 50 [LBEX‐DOCID 251077]; Dimitrios Kritikos, Lehman, Risk Review: Aurora and BNC February 2007 (Mar. 19, 2007), at p. 10 [LBEX‐DOCID 188325].
²⁶⁰ Dimitrios Kritikos, Lehman, BNC Risk Review December 2006 (Jan. 20, 2007), at p. 6 [LBEX‐DOCID 251077]; Lehman, Materials Prepared for Office of Thrift Supervision Safety and Soundness/Compliance Examination 2007 (Aug. 13, 2007), at pp. 13‐15 [LBEX‐DOCID 538654]; Lehman, Presentation to Moody's [Draft] (Oct. 16, 2007), at pp. 12‐15 [LEH‐FINRA‐E‐MAIL00088455]; Lehman, Presentation to Radian: Mortgage Operations Review (July 24, 2007), at pp. 15‐17 [LBEX‐DOCID 839141]; Examiner's Interview of Marie Jean Burruel, Apr. 28, 2009, at pp. 8‐10; Examiner's Interview of Dimitrios Kritikos, Apr. 16, 2009, at p. 8.
²⁶¹ Dimitrios Kritikos, Lehman, Aurora Loan Services Risk Review January 2008 (Feb. 7, 2008), at pp. 10, 12 [LBEX‐DOCID 394711].
²⁶² Saundra F. Braunstein, Director of Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve, Testimony Before U.S. House of Representatives Committee on Financial Services, Subcommittee on Financial Institutions and Consumer Credit (Mar. 27, 2007); see also Lehman, Product Definitions of Alt‐A, Mortgage Maker, and Subprime (Oct. 17, 2007), at p. 1 [LBEX‐DOCID 537902]; Cynthia Angell & Clare D. Rowley, Federal Deposit Insurance Corp., FDIC Outlook (Second Quarter 2006) (last updated Mar. 21, 2007) (http://www.fdic.gov/bank/analytical/regional/ro20062q/na/2006_summer04.html)
²⁶³ E‐mail from Dimitrios Kritikos, Lehman, to Jeffrey Goodman, Lehman (Jan. 31, 2007) [LBEX‐DOCID 380035]; Dimitrios Kritikos, Lehman, Selected trends from Aurora Risk Review (Feb. 2, 2007), at p. 2 [LBEX‐DOCID 537846]; Examiner's Interview of Dimitrios Kritikos, July 29 & 30, 2009, at pp. 12, 14‐15.
²⁶⁴ Madelyn Antoncic, Lehman, 2007 Bondholder Meeting Presentation (Oct. 18, 2007), at p. 6 [LBEX‐ DOCID 244792]; Lehman, Presentation to Standard and Poor's, Lehman Brothers Securitized Products Business (Oct. 7, 2005), at p. 2 [LBEX‐DOCID 095356]; Lehman, Strategic and Financial Review (Jan. 18, 2008), at p. 9 [LBEX‐DOCID 1412341]; Examiner's Interview of Richard McKinney, Aug. 27, 2009, at p. 5.
²⁶⁵ Vikas Shilpiekandula, Lehman, An Overview of the Residential Mortgage Market (Oct. 25, 2007), at p. 2 [LBEX‐DOCID 894664].
²⁶⁶ Examiner's Interview of David N. Sherr, May 6, 2009, at p. 4.
²⁶⁷ Lehman, Securitized Products, MBS: Non Investment Grade Retained Interests (Jan. 16, 2007), at p. 1 [LBEX‐DOCID 839039].
²⁶⁸ Id.; Lehman, Presentation to Standard and Poor's, Lehman Brothers Securitized Products Business (Oct. 7, 2005), at pp. 9, 10 [LBEX‐DOCID 095356].
²⁶⁹ Lehman, Securitized Products, MBS: Non Investment Grade Retained Interests (Jan. 16, 2007), at p. 25 [LBEX‐DOCID 839039]; see also LBHI_SEC07940_581174 10‐Q (filed Apr. 9, 2008), at pp. 20, 55.
²⁷⁰ Lehman, Securitized Products, MBS: Non Investment Grade Retained Interests (Jan. 16, 2007), at p. 13 [LBEX‐DOCID 839039].
²⁷¹ Id. at p. 1.
²⁷² Examiner's Interview of Susan Harrison, Apr. 28, 2009, at pp. 2, 5; Dimitrios Kritikos, Lehman, BNC Risk Review December 2006 (Jan. 20, 2007), at p. 50 [LBEX‐DOCID 251077]; Dimitrios Kritikos, Lehman, Risk Review: Aurora and BNC February 2007 (Mar. 19, 2007), at p. 10 [LBEX‐DOCID 188325].
²⁷³ Srinivas Modukuri, Lehman, Securitized Products Outlook for 2007: Bracing for a Credit Downturn (Dec. 2006), at pp. 8, 19 [LBEX‐DOCID 245013].
²⁷⁴ Examiner's Interview of Thomas L. Wind, Apr. 21, 2009, at pp. 3, 8; Examiner's Interview of Dimitrios Kritikos, July 29‐30, 2009, at pp. 8‐9; Examiner's Interview of Richard McKinney, Aug. 27, 2009, at pp. 5‐6; Examiner's Interview of Lana Franks Harber, Sept. 23, 2009, at p. 6; Lehman, Presentation to the Office of Thrift Supervision, Lehman Brothers Bank, FSB: Safety & Soundness/Compliance Examination 2007 (Aug. 7, 2007), at p. 5 [LBEX‐DOCID 1693347]; Lehman, Update on Lehman Brothers' Subprime Mortgage Origination Business Presentation to Lehman Board of Directors (Mar. 20, 2007), at p. 6 [LBHI_SEC07940_025834].
²⁷⁵ Examiner's Interview of Thomas L. Wind, Apr. 21, 2009, at pp. 6, 7‐8.
²⁷⁶ Dimitrios Kritikos, Lehman, BNC Risk Review December 2006 (Jan. 20, 2007), at p. 6 [LBEX‐DOCID 251077]; Examiner's Interview of Marie Jean Burruel, Apr. 28, 2009, at pp. 8‐10.
²⁷⁷ Lehman, Materials Prepared for Office of Thrift Supervision Safety and Soundness/Compliance Examination 2007 (Aug. 13, 2007), at p. 13 [LBEX‐DOCID 538654]; Lehman, Presentation to Moody's [Draft] (Oct. 16, 2007), at p. 12 [LEH‐FINRA‐E‐MAIL00088444]; Lehman, Presentation to Radian: Mortgage Operations Review (July 24, 2007), at p. 14 [LBEX‐DOCID 839141]; Examiner's Interview of Marie Jean Burruel, Apr. 28, 2009, at pp. 8‐10; Examiner's Interview of Dimitrios Kritikos, Apr. 16, 2009, at p. 8.
²⁷⁸ Dimitrios Kritikos, Lehman, Risk Review: Aurora and BNC February 2007 (Mar. 19, 2007), at p. 6 [LBEX‐DOCID 188325].
²⁷⁹ Examiner's Interview of Lana Franks Harber, Sept. 23, 2009, at p. 12; Examiner's Interview of Theodore P. Janulis, Sept. 25, 2009, at p. 3; Examiner's Interview of Marie Jean Burruel, Apr. 28, 2009, at p. 10; Lehman Brothers Holdings Inc., Press Release: Lehman Brothers Announces Closure of BNC Mortgage (Aug. 22, 2007) [LBEX‐DOCID 880148]; Lehman, Subprime(r) (Sept. 4, 2007), at p. 14 [LBEX‐DOCID 894656]; e‐mail from Edward Grieb, Lehman, to Christopher M. O'Meara, Lehman (Aug. 22, 2007) [LBEX‐ DOCID 197143]; e‐mail from Tasha Pelio, Lehman, to Jasjit (Jesse) Bhattal, Lehman, et al. (Aug. 22, 2007) [LBEX‐DOCID 176893].
²⁸⁰ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at pp. 2, 15; Examiner's Interview of Michael Gelband, Aug. 12, 2009, at pp. 2, 10‐12; Examiner's Interview of Lana Franks Harber, Sept. 23, 2009, at pp. 4, 6; Examiner's Interview of Theodore P. Janulis, Sept. 25, 2009, at pp. 3, 5.
²⁸¹ Compare Examiner's Interview of Kentaro Umezaki, June 25, 2009, at pp. 2, 15 (stating that he, Gelband and Sherr, wanted to scale back originations while Janulis did not); Examiner's Interview of Michael Gelband, Aug. 12, 2009, at p. 11; (recalling that as late as 2007, he recommended managing the residential real estate business more conservatively, and that in general, MCD had an incentive to continue to push for originations because it was rewarded when its origination volumes were high and the risk was shifted to the Securitized Products Group after the mortgages were originated.), with Examiner's Interview of David N. Sherr, Sept. 25, 2009, at pp. 2‐3, 4‐5 (stating that he did not recall a dispute between MCD and FID over any proposed scaling back of originations, but that there was tension between FID and MCD over the control of the residential mortgage origination business,); Examiner's Interview of Theodore P. Janulis, Sept. 25, 2009, at pp. 3, 5 (stating that he did not recall a disagreement about whether originations should be slowed and that FID could have slowed origination volumes if it wished to do so); Examiner's Interview of Lana Franks Harber, Sept. 23, 2009, at p. 6. (stating that she did not recall internal presentations by Gelband questioning the continued viability of subprime residential lending); see also Examiner's Interview of Joseph Gregory, Nov. 13, 2009, at p. 10 (suggesting that he agreed with MCD's view and approved a strategy of continuing to originate residential mortgages aggressively).
²⁸² Examiner's Interview of Carl Peterson, May 27, 2009, at pp. 6‐8.
²⁸³ Id. at pp. 5‐7.
²⁸⁴ Id. at p. 5; Examiner's Interview of Diane May, Apr. 16, 2009, at p. 5; Aurora Loan Services, Presentation to Securities and Exchange Commission (Feb. 6‐7, 2007), at p. 2 [LBEX‐DOCID 357348].
²⁸⁵ Examiner's Interview of David N. Sherr, May 6, 2009, at p. 8; Examiner's Interview of John Vedra, Apr. 15, 2009, at p. 8; Examiner's Interview of Diane May, Apr. 16, 2009, at p. 5; Dimitrios Kritikos, Lehman, Risk Review: Aurora and BNC February 2007 (Mar. 19, 2007), at p. 4 [LBEX‐DOCID 188325]; see also e‐ mail from Dimitrios Kritikos, Lehman, to Ken Linton, Lehman, et al. (Mar. 30, 2007) [LBEX‐DOCID 286265] (noting that the riskier segments of Mortgage Maker performed three to five times worse than the rest of Auroraʹs loans); Russell V. Brady, Aurora, Response to LXS Performance Issues (Jan. 24, 2007), at p. 1 [LBEX‐DOCID 885450] (suggesting that Aurora needed to "[d]etermine whether a segment of the [Mortgage] Maker population should be serviced similar to subprime"); e‐mail from Richard McKinney, Lehman, to Thomas L. Wind, Aurora, et al. (Feb. 12, 2007) [LBEX‐DOCID 1369758] (noting that the performance of Lehman's LXS securitizations that consisted mostly of Mortgage Maker had worsened versus its largest competitor for 2006 production, and stating "Expected subordination levels are 11.7% to AAA loss coverage. This compares with 20‐25% for a typical subprime deal. That is, we are creating worse performance than subprime, while the rating agencies assume our performance should be substantially better").
²⁸⁶ E‐mail from Dimitrios Kritikos, Lehman, to Jeffrey Goodman, Lehman (Jan. 31, 2007) [LBEX‐DOCID 380035].
²⁸⁷ Dimitrios Kritikos, Lehman, Risk Review: Aurora and BNC February 2007 [Draft] (Mar. 9, 2007), at p. 1 [LBEX‐DOCID 538518].
²⁸⁸ E‐mail from Dimitrios Kritikos, Lehman, to Jeffery Goodman, Lehman (Mar. 12, 2007) [LBEX‐DOCID 307101] ("Aurora's product is far from Alt‐A anymore. The traditional Alt‐A program is only 40% of Aurora's production"); e‐mail from Dimitrios Kritikos, Lehman, to Charlie Lu, Lehman (Apr. 12, 2007) [LBEX‐DOCID 566105] ("MortgageMaker is NOT Alt‐A"); Dimitrios Kritikos, Lehman, Selected trends from Aurora Risk Review February 2007 (Feb. 2, 2007), at p. 2 [LBEX‐DOCID 537846] ("The product mix of Aurora production has shifted substantially in the last 6 months from Alt‐A to MortgageMaker (Alt‐ B)").
²⁸⁹ Dimitrios Kritikos, Lehman, Selected trends from Aurora Risk Review February 2007 (Feb. 2, 2007), at p. 2 [LBEX‐DOCID 537846]; Examiner's Interview of Dimitrios Kritikos, July 29‐30, 2009, at pp. 3, 18 (stating that Mortgage Maker loans were neither Alt‐A nor subprime).
²⁹⁰ Lehman, Securitized Products, MBS: Non Investment Grade Retained Interests (Jan. 16, 2007), at p. 3 [LBEX‐DOCID 839039].
²⁹¹ Lehman, Mortgage Update 1Q 07, at p. 9 [LBHI_SEC07940_845984].
²⁹² See, e.g.,George Hansman, Lehman, Securitized Products Risk Appetite and VaR limit and overage graphs (May 17, 2007) [LBEX‐DOCID 861260]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐ mail group (Mar. 8, 2007) [LBEX‐DOCID 229930]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (Mar. 19, 2007) [LBEX‐DOCID 229944]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (Mar. 22, 2007) [LBEX‐DOCID 229954]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (Apr. 9, 2007) [LBEX‐DOCID 790039]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (Apr.16, 2007) [LBEX‐DOCID 790029]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (May 29, 2007) [LBEX‐DOCID 790059]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (May 30, 2007) [LBEX‐DOCID 790060]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (Sept. 5, 2007) [LBEX‐DOCID 230188]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (Oct. 12, 2007) [LBEX‐DOCID 230789903]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (Oct. 17, 2007) [LBEX‐DOCID 789908]; e‐ mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (Oct. 18, 2007) [LBEX‐DOCID 789910]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (Oct. 19, 2007) [LBEX‐DOCID 789909]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (Oct. 22, 2007) [LBEX‐ DOCID 790089]; e‐mail from Lehman Risk, to Lehman Risk Limit Excess e‐mail group (Oct. 30, 2007) [LBEX‐DOCID 789916].
²⁹³ Dimitrios Kritikos, Lehman, Risk Review: Aurora and BNC February 2007 (Mar. 19, 2007), at p. 3 [LBEX‐DOCID 188325] (summarizing underwriting guideline changes at BNC and Aurora).
²⁹⁴ Dimitrios Kritikos, Lehman, Aurora Loan Services Risk Review January 2008 (Feb. 7, 2008), at p. 12 [LBEX‐DOCID 394711].
²⁹⁵ Lehman Brothers Holdings Inc., Minutes of Meeting of Board of Directors (Mar. 20, 2007), at pp. 6‐7 [LBHI_SEC07940_025779]; Lehman, Update on Lehman Brothers' Subprime Mortgage Origination Business Presentation to Lehman Board of Directors (Mar. 20, 2007) [LBHI_SEC07940_025834].
²⁹⁶ Lehman, Update on Lehman Brothers' Subprime Mortgage Origination Business Presentation to Lehman Board of Directors (Mar. 20, 2007) [LBHI_SEC07940_025834]; Examiner's Interview of Lana Franks Harber, Sept. 23, 2009, at p. 2; Examiner's Interview of Theodore P. Janulis, Sept. 25, 2009, at p. 2; Examiner's Interview of David N. Sherr, Sept. 25, 2009, at p. 9.
²⁹⁷ E‐mail from Lana Franks Harber, Lehman, to Steven Skolnik, BNC Mortgage, et al. (Mar. 9, 2007) [LBEX‐DOCID 306198]; accord Examiner's Interview of Lana Franks Harber, Sept. 23, 2009, at pp. 9‐10; Examiner's Interview of Theodore P. Janulis, Sept. 25, 2009, at p. 6.
²⁹⁸ Lehman, Update on Lehman Brothers' Subprime Mortgage Origination Business Presentation to Lehman Board of Directors (Mar. 20, 2007), at pp. 1, 10 [LBHI_SEC07940_025834].
²⁹⁹ Id. at pp. 4‐5.
³⁰⁰ Id. at pp. 6‐7.
³⁰¹ Id. at p. 10.
³⁰² Id. at p. 9.
³⁰³ Id. at p. 10.
³⁰⁴ Examiner's Interview of Lana Franks Harber, Sept. 23, 2009, at p. 2; Examiner's Interview of Theodore P. Janulis, Sept. 25, 2009, at p. 8; Examiner's Interview of David N. Sherr, Sept. 25, 2009, at p. 6.
³⁰⁵ Lehman, Update on Lehman Brothers' Subprime Origination Business Presentation to Lehman Board of Directors (Mar. 20, 2007), at pp. 1, 10 [LBHI_SEC07940_025834].
³⁰⁶ Id. at pp. 1‐10.
³⁰⁷ Id. at p. 9.
³⁰⁸ Lehman, State of Lehman Brothers' Subprime Mortgage Origination Business Presentation to Lehman Board of Directors [Draft] (Mar. 15, 2007), at p. 12 [LBEX‐DOCID 2485576].
³⁰⁹ Lehman, Update on Lehman Brothers' Subprime Origination Business Presentation to Lehman Board of Directors (Mar. 20, 2007), at p. 9 [LBHI_SEC07940_025834].
³¹⁰ Examiner's Interview of Lana Franks Harber, Sept. 23, 2009, at p. 3; Examiner's Interview of Theodore P. Janulis, Sept. 25, 2009, at pp. 2, 7; Examiner's Interview of David N. Sherr, Sept. 25, 2009, at p. 7.
³¹¹ Examiner's Interview of Dimitrios Kritikos, July 29‐30, 2009, at p. 19.
³¹² Lehman, Mortgage Update ‐ 1Q 07 (Apr. 9, 2007) [LBEX‐DOCID 540069]; Lehman, Mortgage Update ‐ 2Q 07 (June 8, 2007) [LBEX‐DOCID 505835]; Lehman, Mortgage Update ‐ June 07 (Aug. 9, 2007) [LBEX‐ DOCID 611902]; Lehman, Mortgage Update ‐ August 07 (Sept. 25, 2007) [LBEX‐DOCID 505889]; Lehman, Flash ‐ Mortgage Update ‐ November 07 (Dec. 21, 2007) [LBEX‐DOCID 505890]; Lehman, Flash ‐ Mortgage Update ‐ January 07 (Feb. 15, 2008) [LBEX‐DOCID 3237972]; Lehman, Flash ‐ Mortgage Update ‐ March 07 (Apr. 23, 2008) [LBEX‐DOCID 2432630]; Lehman, Flash ‐ Mortgage Update ‐ Apr. 07 (May 15, 2008) [LBEX‐DOCID 1362958]; Lehman, Flash ‐ Mortgage Update ‐ May 07 (June 11, 2008) [LBEX‐ DOCID 3238001]; Lehman, Securitized Products P&L ‐ June 2008 (July 11, 2008) [LBEX‐DOCID 505776]; Lehman, Securitized Products P&L ‐ July 2008 (Aug. 14, 2008) [LBEX‐DOCID 505778].
³¹³ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 17; Lehman, Minutes of Meeting of the Board of Directors (Sept. 11. 2007), at p. 6 [LBHI_SEC07940_263264].
³¹⁴ Lehman, Mortgage Update ‐ 1Q 07 (Apr. 9, 2007) [LBEX‐DOCID 540069]; Lehman, Mortgage Update ‐ 2Q 07 (June 8, 2007) [LBEX‐DOCID 505835]; Lehman, Mortgage Update ‐ June 07 (Aug. 9, 2007) [LBEX‐ DOCID 611902]; Lehman, Mortgage Update ‐ August 07 (Sept. 25, 2007) [LBEX‐DOCID 505889]; Lehman, Flash ‐ Mortgage Update ‐ November 07 (Dec. 21, 2007) [LBEX‐DOCID 505890]; Lehman, Flash ‐ Mortgage Update ‐ January 07 (Feb. 15, 2008) [LBEX‐DOCID 3237972]; Lehman, Flash ‐ Mortgage Update ‐ March 07 (Apr. 23, 2008) [LBEX‐DOCID 2432630]; Lehman, Flash ‐ Mortgage Update ‐ Apr. 07 (May 15, 2008) [LBEX‐DOCID 1362958]; Lehman, Flash ‐ Mortgage Update ‐ May 07 (June 11, 2008) [LBEX‐ DOCID 3238001]; Lehman, Securitized Products P&L ‐ June 2008 (July 11, 2008) [LBEX‐DOCID 505776]; Lehman, Securitized Products P&L ‐ July 2008 (Aug. 14, 2008) [LBEX‐DOCID 505778].
³¹⁵ Id.
³¹⁶ LBHI 10‐Q (July 10, 2008), at p. 67.
³¹⁷ The Examiner's financial advisors estimate that Lehman's secured losses from residential mortgages exceeded $1 billion in the second quarter and in excess of $3.5 billion in the third quarter of 2008.
³¹⁸ E‐mail from Roopali Hall, Lehman (Jan. 4, 2008) [LBHI_SEC07940_066187]; Lehman Loan Syndicate, Year‐End Recap (Jan. 7, 2008), at p. 1 [LBHI_SEC07940_066190].
³¹⁹ E‐mail from Evette Saldana, Lehman, to HYCC members, Lehman, et al. (June 15, 2007) [LBEX‐DOCID 494525]; Lehman Credit Facilitation Group, 2nd Quarter 2007 Review (June 2007), at p. 1 [LBEX‐DOCID 514908], attachment to e‐mail from Evette Saldana, Lehman, to HYCC members, Lehman, et al. (June 15, 2007) [LBEX‐DOCID 494525].
³²⁰ E‐mail from Evette Saldana, Lehman, to HYCC members, Lehman, et al. (June 15, 2007) [LBEX‐DOCID 494525]; Lehman Credit Facilitation Group, 2nd Quarter 2007 Review (June 2007), at p. 6 [LBEX‐DOCID 514908], attached to e‐mail from Evette Saldana, Lehman, to HYCC members, Lehman, et al. (June 15, 2007) [LBEX‐DOCID 494525].
³²¹ Eric Felder, Lehman, Credit Outlook Presentation (Apr. 16, 2008), at p. 48 [LBHI_SEC07940_393578], attached to e‐mail from Christopher Wichenbaugn, Lehman, to DCMNY, Lehman (Apr. 16, 2008) [LBHI_SEC07940_393578]; Standard & Poor's and LSTA, Leveraged Loan Index, August 2008 Review (Sept. 3, 2008), at p. 84 [LBEX‐DOCID 4404712], attached to e‐mail from Kristen Vigletta, Lehman (Sept. 3, 2008) [LBEX‐DOCID 4326914].
³²² Examiner's Interview of Madelyn Antoncic, Feb. 25, 2009, at p. 4.
³²³ Id.
³²⁴ Lehman, Credit Ratings Strategy Presentation (Mar. 1, 2007), at p. 13 [LBEX‐DOCID 618355]; e‐mail from Stephen Lax, Lehman, to James P. Seery, Jr. Lehman, et al. (Apr. 11, 2008) [LBEX‐DOCID 444768].
³²⁵ E‐mail from Miriam Oh, Lehman, to Paul Parker, Lehman, et al. (July 5, 2007) [LBEX‐DOCID 3197652]; Lehman, Big LBO Update (July 3, 2007), at p. 2 [LBEX‐DOCID 3183564].
³²⁶ E‐mail from Stephen Lax, Lehman, to Alex Kirk, Lehman, et al. (Apr. 26, 2007) [LBEX‐DOCID 259369].
³²⁷ Lehman Credit Facilitation Group, 2nd Quarter 2007 Review (June 2007), at p. 13 [LBEX‐DOCID 514908], attached to e‐mail from Evette Saldana, Lehman, to HYCC members, Lehman, et al. (June 15, 2007) [LBEX‐DOCID 494525].
³²⁸ Alex Kirk, Lehman, Leveraged Finance Risk Presentation (June 2007) [LBEX‐DOCID 158975], attached to e‐mail from Olivia Lua, Lehman, to Christopher M. O'Meara, Lehman (June 21, 2007) [LBEX‐DOCID 158975].
³²⁹ Lehman Brothers, Balance Sheet Trend Presentation (Apr. 2007), at pp. 4‐6 [LBEX‐DOCID 251418], attached to e‐mail from Kentaro Umezaki, Lehman, to Rebecca Miller, Lehman (May 3, 2007) [LBEX‐ DOCID 346520].
³³⁰ E‐mail from Joe Li, Lehman, to Paul Mitrokostas, Lehman (Aug. 30, 2007) [LBEX‐DOCID 2547330].
³³¹ Joe Li, Lehman, STL Backtesting Excel Spreadsheet (July 25, 2007) [LBEX‐DOCID 2506462], attached to e‐mail from Joe Li, Lehman, to Fred S. Orlan, Lehman, et al. (July 25, 2007) [LBEX‐DOCID 2563167].
³³² Id.
³³³ Id.
³³⁴ Lehman, Fixed Income Business Strategy, Single Transaction Limit Policy Proposed Improvements (Sept. 2007), at p. 3 [LBEX‐DOCID 2563444].
³³⁵ Lehman, Presentation to Lehman Executive Committee on Leveraged Finance Risk (Oct. 16, 2007), at p. 12 [LBEX‐DOCID 506033], attached to e‐mail from Blair Sieff, Lehman, to Steven Berkenfeld, Lehman, et al. (Oct. 16, 2007) [LBEX‐DOCID 569915].
³³⁶ Appendix: 9, comparing risk appetite and VaR usage versus limits.
³³⁷ Id. at p. 3.
³³⁸ Id. at p. 4.
³³⁹ Id. at p. 4‐9.
³⁴⁰ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 13; Examiner's Interview of Jeffrey Goodman, Aug. 28, 2009.
³⁴¹ Examiner's Interview of Madelyn Antoncic, Mar. 27, 2009, at p. 12; Examiner's Interview of Madelyn Antoncic, Oct. 6, 2009, at p. 7.
³⁴² E‐mail from Kentaro Umezaki, Lehman, to Scott J. Freidheim, Lehman, et al. (Apr. 19, 2007) [LBEX‐ DOCID 210193].
³⁴³ Id. (emphasis added); e‐mail from Kentaro Umezaki, Lehman, to Ian T. Lowitt, Lehman (Apr. 18, 2007) [LBEX‐DOCID 743931].
³⁴⁴ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 10; Examiner's Interview of Michael Gelband, Aug. 12, 2009, at pp. 6‐9; Examiner's Interview of Alex Kirk, Jan. 12, 2010, at p. 2; e‐mail from Eric Felder, Lehman, to Michael Gelband, Lehman, et al. (Aug. 28, 2008) [LBEX‐DOCID 822513]; see also e‐ mail from Steven Berkenfeld, Lehman, to Scott J. Freidheim, Lehman (May 11, 2007) [LBEX‐DOCID 1379290]; e‐mail from Bertrand Kan, Lehman, to Richard Atterbury, Lehman (Jan. 30, 2008) [LBEX‐ DOCID 1379129].
³⁴⁵ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 3; Examiner's Interview of Michael Gelband, Aug. 12, 2009, at pp. 7‐9; Examiner's Interview of Alex Kirk, Jan. 12, 2010, at pp. 2, 7; Examiner's Interview of Paul Shotton, June 5, 2009, at pp. 2, 6‐7; Examiner's Interview of Hugh E. (Skip) McGee III, Aug. 12, 2009, at p. 9; Examiner's Interview of Fred S. Orlan, Sept. 21, 2009, at p. 4; e‐mail from Eric Felder, Lehman, to Michael Gelband, Lehman, et al. (Aug. 28, 2008) [LBEX‐DOCID 822513]; see also e‐mail from Steven Berkenfeld, Lehman, to LBEC Member, Lehman, et al. (May 11, 2007) [LBEX‐DOCID 1379290]; e‐mail from Larry Wieseneck, Lehman, to Alex Kirk, Lehman (Jan. 30, 2008) [LBEX‐DOCID 1379129].
³⁴⁶ E‐mail from Roger Nagioff, Lehman, to Madelyn Antoncic, Lehman, et al. (June 29, 2007) [LBEX‐ DOCID 1467654); Examiner's Interview of Fred S. Orlan, Sept. 21, 2009, at p. 7.
³⁴⁷ E‐mail from Roger Nagioff, Lehman, to David Goldfarb, Lehman (June 1, 2007) [LBEX‐DOCID 1581523]; e‐mail from Madelyn Antoncic, Lehman, to David Goldfarb, Lehman, et al. (June 1, 2007).
³⁴⁸ E‐mail from Steven Berkenfeld, Lehman, to Robert D. Redmond, Lehman (Sept. 23, 2007) [LBEX‐ DOCID 1387569]; e‐mail from Alex Kirk, Lehman, to [xxxxxxx]@archwireless.net (May 15, 2007) [LBEX‐ DOCID 1379297] (phone number redacted); e‐mail from Steven Berkenfeld, Lehman, to LBEC Member, Lehman, et al. (May 11, 2007) [LBEX‐DOCID 1379291].
³⁴⁹ Examiner's Interview of Fred S. Orlan, Sept. 21, 2009, at p. 7.
³⁵¹ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 10.
³⁵² E‐mail from Alex Kirk, Lehman, to Michael Gelband, Lehman (Apr. 20, 2007) [LBEX‐DOCID 2763976].
³⁵³ E‐mail from Steven Berkenfeld, Lehman, to Jean‐Francois Astier, Lehman, et. al. (Mar. 30, 2007) [LBEX‐ DOCID 351370].
³⁵⁴ Examiner's Interview of Madelyn Antoncic, Mar. 27, 2009, at p. 10.
³⁵⁵ Id.
³⁵⁶ Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at pp. 5, 12, 13.
³⁵⁷ Id. at p. 19.
³⁵⁸ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 10.
³⁵⁹ Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 19.
³⁶⁰ Lehman, FID‐Balance Sheet Management Presentation (Sept. 2007), at p. 3 [LBEX‐DOCID 4553137], attached to e‐mail from Janet Marrero, Lehman, to Gerard Reilly, Lehman (Oct. 8, 2007) [LBEX‐DOCID 4552976]; Lehman, FID‐Balance Sheet Presentation (Jan. 17, 2008), at p. 3 [LBEX‐DOCID 3363221], attached to e‐mail from Sigrid Stabenow, Lehman, to Erik Addington, Lehman (Jan. 31, 2008) [LBEX‐ DOCID 3384762]; Lehman, Fixed Income Q3 Balance Sheet Targets [LBEX‐DOCID 1742006], attached to e‐ mail from Kevin Horan, Lehman, to Clement Bernard, Lehman (June 27, 2009) [LBEX‐DOCID 1698861].
³⁶¹ Id.
³⁶² Ari Koutouvides, Lehman, Global Real Estate Group America's Portfolio Summary re the Second Quarter of 2007 (Oct. 24, 2007), at p. 2 [LBEX‐DOCID 2501404], attached to e‐mail from Jonathan Cohen, Lehman, to Paul Higham, Lehman (Oct. 24, 2007) [LBEX‐DOCID 2558146]; Global Real Estate Group Americas Portfolio as of June 30, 2008, at p. 15 [LBEX‐DOCID 1419825].
³⁶³ The amounts listed were labeled as "[m]ovements onto the balance sheet" for the respective months. Unless otherwise noted in the source, these amounts are presumed to be amounts funded in that period. See Quarterly Real Estate Recap Third Quarter and Year‐To‐Date Presentation (Nov. 29, 2007), at pp. 118‐ 25 [LBEX‐DOCID 3504242], attached to e‐mail from Paul Higham, Lehman, to Donald E. Petrow, Lehman (Nov. 29, 2007) [LBEX‐DOCID 3625043].
³⁶⁴ Id.
³⁶⁵ Id.
³⁶⁶ Id.
³⁶⁷ Id.
³⁶⁸ Id.
³⁶⁹ Id.
³⁷⁰ Id.
³⁷¹ Id.
³⁷² Lehman, Commercial mortgages – Q2 2008 (Aug. 6, 2008), at pp. 5‐14 [LBEX‐DOCID 018868], attached to e‐mail from Gerard Reilly, Lehman, to Ian T. Lowitt, Lehman (Aug. 7, 2008) [LBEX‐DOCID 011867].
³⁷³ Id.
³⁷⁴ Lehman, Global Real Estate Group Update, at pp. 2‐11 [LBEX‐DOCID 019080] (listing top 10 risks as of May 31, 2008).
³⁷⁵ E‐mail from Kentaro Umezaki, Lehman, to Paul A. Hughson, Lehman (May 9, 2006) [LBEX‐DOCID 1776281].
³⁷⁶ E‐mail from Jeffrey Goodman, Lehman, to Mark A. Walsh, Lehman (Sept. 19, 2006) [LBEX‐DOCID 1368068].
³⁷⁷ E‐mail from Paul A. Hughson, Lehman, to Thomas Pearson, Lehman, et al. (May 23, 2006) [LBEX‐ DOCID 1776282]; Lehman, Real Estate >> Risk Appetite / VaR >> Summary ‐ COB 27 Aug 2007 Monday [LBEX‐DOCID 2912096], attached to e‐mail from Patricia Luken, Lehman, to Paul Higham, Lehman, et al. [LBEX‐DOCID 2880146].
³⁷⁸ E‐mail from Jeffrey Goodman, Lehman, to Madelyn Antoncic, Lehman (June 29, 2007) [LBEX‐DOCID 155724].
³⁷⁹ Id.
³⁸⁰ Examiner's Interview of Mark Walsh, Oct. 21, 2009, at pp. 4‐5. Walsh told the Examiner that he was told to double the commercial real estate risk. Id. at p. 5.
³⁸¹ Examiner's Interview of Paul A. Hughson, Oct. 28, 2009, at p. 3.
³⁸² E‐mail from Jeffrey Goodman, Lehman, to Madelyn Antoncic, Lehman (May 7, 2007) [LBEX‐DOCID 154953].
³⁸³ Id.; Examiner's Interview of Madelyn Antoncic, Mar. 27, 2009, at pp. 8‐9; e‐mail from Madelyn Antoncic, Lehman, to Roger Nagioff, Lehman, et al. (June 29 , 2007) [LBEX‐DOCID 1478403]; e‐mail from Paul A. Hughson, Lehman, to Thomas Pearson, Lehman, et al. (May 23, 2006) [LBEX‐DOCID 1776282].
³⁸⁴ Examiner's Interview of Madelyn Antoncic, Mar. 27, 2009, at pp. 8‐9.
³⁸⁵ Global Real Estate Group, Lehman, Updated Commitment Committee Memorandum for Archstone (May 22, 2007) [LBEX‐DOCID 1350952]; Lehman, Lehman Brothers Bridge Equity Pipeline (July 3, 2007) [LBEX‐DOCID 638275], attached to e‐mail from Jeffrey Goodman, Lehman, to Donald E. Petrow, Lehman, et al. (July 11, 2007) [LBEX‐DOCID 670845].
³⁸⁶ Lehman, Top Real Estate Risk Summary (Dec. 12, 2007), at p. 2 [LBEX‐DOCID 789172].
³⁸⁷ Id.; Quarterly Real Estate Recap Third Quarter and Year‐To‐Date Presentation (Nov. 29, 2007), at p. 124 [LBEX‐DOCID 3504242], attached to e‐mail from Paul Higham, Lehman, to Donald E. Petrow, Lehman (Nov. 29, 2007) [LBEX‐DOCID 3625043].
³⁸⁸ Id. at p. 3.
³⁸⁹ Id. at p. 4.
³⁹⁰ Lehman, Archstone Q2 2008 Update, at p. 14 [LBEX‐DOCID 2929329], attached to e‐mail from Leonard Cohen, Lehman, to Paul A. Hughson, Lehman (June 12, 2008) [LBEX‐DOCID 2820780].
³⁹¹ Archstone‐Smith Operating Trust, Annual Report for 2006 as of December 31, 2006 (Form 10‐K) (filed on Mar. 1, 2007), at p. 6.
³⁹² Examiner's Interview of Mark A. Walsh, Oct. 21, 2009, at pp. 8‐10; Examiner's Interview of Joseph Gregory, Nov. 13, 2009, at pp. 7‐8; Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at pp. 3‐4.
³⁹³ James L. Dixson, Lehman, Archstone Transaction Timeline (June 20, 2007), at. p. 2 [LBEX‐DOCID 2139993], attached to e‐mail from James L. Dixson, Lehman, to Robert Ashmun, Lehman, et al. (June 20, 2007) [LBEX‐DOCID 2139994].
³⁹⁴ Id. at p. 5; Agreement and Plan of Merger Among Archstone‐Smith Trust, Archstone‐Smith Operating Trust, River Holding, LP, River Acquisition (MD), LP, and River Trust Acquisition, LP (May 28, 2007) [TSREV00000460‐554].
³⁹⁵ James L. Dixson, Lehman, Archstone Transaction Timeline (June 20, 2007), at. pp. 5, 6 [LBEX‐DOCID 2139993], attached to e‐mail from James L. Dixson, Lehman, to Robert Ashmun, Lehman, et al. (June 20, 2007) [LBEX‐DOCID 2139994]; Agreement and Plan of Merger for Archstone‐Smith and River Holding (May 28, 2007) [LBEX‐DOCID 1759937], attached to e‐mail from Kyle Krpata, Weil, Gotshal & Manges LLP, to David E. Shapiro, Wachtell, Lipton, Rosen & Katz, et al. (May 29, 2007) [LBEX‐DOCID 1870993].
³⁹⁶ E‐mail from Chip Heflin, Lehman, to Loan Sales, Lehman (May 29, 2007) [LBEX‐DOCID 1488757].
³⁹⁷ Compare Memorandum from Mark A. Walsh, Lehman, to Executive Committee of Lehman Board of Directors, Re: Project Easy Living (May 22, 2007) [LBEX‐DOCID 1350952], attached to e‐mail from Julia Atwood, Lehman, to HYCC Members, Lehman, et al. [LBEX‐DOCID 1341648] with Memorandum from Mark A. Walsh, Lehman, to Exec. Committee of LBHI Board of Directors, re: Project Easy Living (May 7, 2007), at pp. 1, 3 [LBEX‐DOCID 147230], attached to e‐mail from Mark A. Walsh, Lehman, to Steven Berkenfeld, Lehman, et al. (May 8, 2007) [LBEX‐DOCID 141217]; Letter from Scott M. Weiner, Barclays Investment Holdings, Inc., to Lehman, et al., Red‐line Commitment Letter for Archstone (June 11, 2007) [LBEX‐DOCID 2073685]; Letter from Scott M. Weiner, Barclays Investment Holdings, Inc., to Lehman, et al., Execution Copy of Commitment Letter for Archstone (June 11, 2007) [LBEX‐DOCID 1451573].
³⁹⁸ Id.
³⁹⁹ Examiner's Interview of Mark A. Walsh, Oct. 21, 2009.
⁴⁰⁰ Project Easy Living, Term Sheet (Sponsor) (May 28, 2007), at p. 1 [LBEX‐DOCID 1624529], attached to e‐mail from David Herman, Weil, Gotshal & Manges LLP, to Andrew Dady, Schulte Roth & Zabel LLP, et al. [LBEX‐DOCID 1383842]; Project Easy Living, Term Sheet (Bridge Equity) (May 28, 2007), at p. 1 [LBEX‐ DOCID 1324526], attached to e‐mail from David Herman, Weil, Gotshal & Manges LLP, to Andrew Dady, Schulte Roth & Zabel LLP, et al. [LBEX‐DOCID 1383842]; River Holdings LP Senior Secured Facilities Commitment Letter (May 28, 2007), at p. 1 [LBEX‐DOCID 2395952], attached to e‐mail from Julian Chung, Cadwalader, Wickersham & Taft LLP, et al. (May 29, 2007) [LBEX‐DOCID 2268458].
⁴⁰¹ Lehman, Easy Living Talking Points for Executive Committee and Rating Agencies (May 18, 2007), at p. 2 [LBEX‐DOCID 200792], attached to e‐mail from Paolo R. Tonucci, Lehman, to Christopher M. O'Meara, Lehman, et al. (May 18, 2007) [LBEX‐DOCID 215761].
⁴⁰² Id. 403 Standard & Poor's, Guide to the Loan Market (Sept. 2009), at p. 8, http://www2.standardandpoors.com/spf/pdf/fixedincome/LoanMarketGuide_2009_Final.pdf (last visited (last visited on Feb. 1, 2010); Alicia Taylor & Alicia Sansone, THE HANDBOOK OF LOAN SYNDICATIONS AND TRADING 175 (McGraw‐Hill 2007); Steven M. Vavaria, Standard & Poor's, Syndicated Loans‐‐A Rated Market, at Last! (Feb. 12, 2002), http://leeds‐ faculty.colorado.edu/madigan/3020/Readings/Syndicated_Loans‐‐A_Rated_Market_At_Last.pdf (last visited on Feb. 1, 2010).
⁴⁰⁴ Id.
⁴⁰⁵ Lehman, Easy Living Talking Points for Executive Committee and Rating Agencies (May 18, 2007), at p. 2 [LBEX‐DOCID 200792], attached to e‐mail from Paolo R. Tonucci, Lehman, to Christopher M. O'Meara, Lehman, et al. (May 18, 2007) [LBEX‐DOCID 215761].
⁴⁰⁶ Memorandum from Mark A. Walsh, Lehman, to Executive Committee, Lehman, re Project Easy Living (May 7, 2007), at p. 3 [LBEX‐DOCID 147230], attached to e‐mail from Mark A. Walsh, Lehman, to Steven Berkenfeld, Lehman, et al. (May 8, 2007) [LBEX‐DOCID 141217].
⁴⁰⁷ Examiner's Interview of David S. Lazarus, Nov. 18, 2009, at pp. 6‐7; Examiner's Interview of Paul A. Hughson, Oct. 28, 2009, at p. 2; Examiner's Interview of Lisa Beeson, Oct. 23, 2009, at p. 4; Examiner's Interview of Kenneth Cohen, Oct. 20, 2009, at pp. 5‐6.
⁴⁰⁸ Examiner's Interview of Steven Berkenfeld, Oct. 5 & 7, 2009, at pp. 14‐15; Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at pp. 22‐23.
⁴⁰⁹ Examiner's Interview of Jeffrey Goodman, Aug. 28, 2009; Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 17; Examiner's Interview of Madelyn Antoncic, Feb. 25, 2009, at p. 5.
⁴¹⁰ Examiner's Interview of Jeffrey Goodman, Aug. 28, 2009; Examiner's Interview of Madelyn Antoncic, Mar. 27, 2009, at p. 11.
⁴¹¹ Examiner's Interview of Jeffrey Goodman, Aug. 28, 2009.
⁴¹² Office of Thrift Supervision, Report of Examination, Lehman Brothers Holdings Inc. (Exam starting July 7, 2008), at p. 2 [LBEX‐OTS 000392].
⁴¹³ Examiner's Interview of Ronald Marcus, Nov. 4, 2009, at pp. 7‐8.
⁴¹⁴ Examiner's Interview of Ronald S. Marcus, Nov. 4, 2009, at pp. 7‐8; accord Office of Thrift Supervision, Report of Examination, Lehman Brothers Holdings Inc. (Exam starting July 7, 2008), at p. 2 [LBEX‐OTS 000392].
⁴¹⁵ Office of Thrift Supervision, Report of Examination, Lehman Brothers Holdings Inc. (Exam starting July 7, 2008), at p. 2 [LBEX‐OTS 000392].
⁴¹⁶ Examiner's Interview of the Securities and Exchange Commission, Aug. 24, 2009, at p. 8.
⁴¹⁷ Lehman Brothers Holdings Inc., Press Release: Lehman Brothers Names Roger B. Nagioff Global Head of Fixed Income (May 2, 2007), at p. 1 [LBEX‐DOCID 1470086], attached to e‐mail from Monique Wise, Lehman, to Jasjit (Jesse) Bhattal, Lehman, et al. (May 1, 2007) [LBEX‐DOCID 1605828].
⁴¹⁸ Lehman Brothers, Talking Points & FAQs (May 1, 2007) [LBEX‐DOCID 1470087], attached to e‐mail from Monique Wise, Lehman, to Jasjit (Jesse) Bhattal, Lehman, et al. (May 1, 2007) [LBEX‐DOCID 1605828].
⁴¹⁹ Examiner's Interview of Joseph Gregory, Nov. 5, 2009; Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 5‐6 (stating that Gregory informed him that Gelband was forced out because he was not willing to think creatively about growing Lehman's business and sharing his belief that Gelband's opposition to the Eagle Energy deal was the "last straw"); Examiner's Interview of Michael Gelband, Aug. 12, 2009, at pp. 15‐16; contra Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 18; Examiner's Interview of Herbert H. (Bart) McDade III, Jan. 28, 2010, at p. 9.
⁴²⁰ Examiner's Interview of Michael Gelband, Aug. 12, 2009, at pp. 2, 7, 15‐16; Examiner's Interview of Joseph Gregory, Nov. 5, 2009; Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 5‐6; Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 18; e‐mail from Michael Gelband, Lehman to Richard S. Fuld, Jr., Lehman (Mar. 6, 2007) [LBEX‐DOCID 2762454] ("[R]isk/reward is not good here so I'm trying to get out of as much illiquid risk as possible. . . . That is the strategy at the moment that all my managers are following. I need to have them be in a position to be able to operate and capitalize if we go through a period of stress.").
⁴²¹ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 5‐6; Examiner's Interview of Hugh E. (Skip) McGee, Aug. 12, 2009, at p. 27 (McGee indicated that replacing Gelband with Nagioff was an unusual idea because Nagioff's experience was with European equities and McDade would have been a more logical choice to replace Gelband.); Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 15 (Umezaki stated that many people, himself included, were surprised at Nagioff's promotion because Nagioff had no background in fixed income and was not located in the United States at a time when Lehman was dealing with an economic crisis located primarily within the United States and further that Alex Kirk or Andrew J. Morton would have been more logical selections but that Gregory had indicated that Nagioff would be good for the job because of his abundance of business experience and a willingness to take risks.).
⁴²² Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 6 (Nagioff's commute would ultimately prove to be an unsustainable arrangement, as the strain it created on Nagioff's family caused him to leave the company in February 2008.).
⁴²³ Lehman Brothers Holdings Inc., Minutes of Meeting of Board of Directors (June 19, 2007), at p. 3 [LBHI_SEC07940_026267].
⁴²⁴ Id.; Lehman, Second Quarter 2007 Financial Information Presentation to Lehman Board of Directors (June 19, 2007), at p. 6 [LBHI_SEC07940_026226].
⁴²⁵ Lehman, Second Quarter 2007 Financial Information Presentation to Lehman Board of Directors with Welikson's notes (June 19, 2007), at p. 6 [WGM_LBEX_01165].
⁴²⁶ See, e.g., Lehman, Daily Risk Appetite Report (June 19, 2007), at p. 1 [LBEX‐DOCID 3296221], attached to e‐mail from Rui Li, Lehman, to Manhua Leng, Lehman, et al. (June 19, 2007) [LBEX‐DOCID 3295251].
⁴²⁷ See, e.g., id.; Mark Weber, Lehman, Chart Showing Risk Appetite Adjustment for Archstone (July 24, 2008) [LBEX‐DOCID 425705], attached to e‐mail from Mark Weber, Lehman, to PortfolioRisk Support, Lehman, et al. (July 24, 2008) [LBEX‐DOCID 265567].
⁴²⁸ Lehman's Board did not consider or approve the Archstone transaction in advance of the commitment. Examiner's Interview of Sir Christopher Gent, Oct. 22, 2009, at p. 3; but cf. Examiner's Interview of Michael L. Ainslie, Sept. 22, 2009, at p. 8 (stating that the Board never formally approved the Archstone acquisition or even discussed the transaction prior to Lehman's commitment to the deal); Examiner's Interview of John F. Akers, Apr. 22, 2009 (same); Examiner's Interview of Roger Berlind, May 8, 2009, at p. 10 (same); Examiner's Interview of Thomas Cruikshank, Oct. 8, 2009, at p. 3 (same); Examiner's Interview of Marsha Johnson Evans, May 22, 2009, at p. 14 (same); Examiner's Interview of Sir Christopher Gent, Oct. 22, 2009, at pp. 12‐13 (same); Examiner's Interview of Roland A. Hernandez, Oct. 2, 2009 (same); Examiner's Interview of Dr. Henry Kaufman, May 19, 2009, at p. 15 (same); Examiner's Interview of John D. Macomber, Sept. 25, 2009, at p. 13 (same).
⁴²⁹ Mark Pittman, Bear Stearns Mortgage Fund Collapse Sends Shock Through CDOs (Update 2), Bloomberg, June 21, 2007.
⁴³⁰ Id.
⁴³¹ Bank for International Settlements, 78th Annual Report (June 30, 2008), at p. 95.
⁴³² Id.
⁴³³ Lehman, Business and Financial Review Q2 2008 (Aug. 5, 2008), at p. 14 [LBHI_SEC07940_659768]; Lehman, Loan Portfolio Group Weekly Review (June 8, 2007), at pp. 3‐8 [LBEX‐DOCID 146379]; Lehman, Loan Portfolio Group Weekly Review (June 15, 2007), at pp. 3‐8 [LBEX‐DOCID 146375]; Lehman, Loan Portfolio Group Weekly Review (June 22, 2007), at pp. 3‐8 [LBEX‐DOCID 146376]; Lehman, Loan Portfolio Group Weekly Review (June 29, 2007), at pp. 3‐8 [LBEX‐DOCID 146377]; Lehman, Loan Portfolio Group Weekly Review (July 6, 2007), at pp. 3‐8 [LBEX‐DOCID 146348]; Lehman, Loan Portfolio Group Weekly Review (July 13, 2007), at pp. 3‐8 [LBEX‐DOCID 146358]; Lehman, Loan Portfolio Group Weekly Review (July 20, 2007), at p. 7 [LBEX‐DOCID 146339]; Lehman, Loan Portfolio Group Weekly Review (July 27, 2007), at pp. 3‐8 [LBEX‐DOCID 146350]; Lehman, Loan Portfolio Group Weekly Review (Aug. 10, 2007), at pp. 3‐8 [LBEX‐DOCID 146341]; e‐mail from Jeffrey Goodman, Lehman, to David N. Sherr, Lehman, et al. (June 22, 2007) [LBEX‐DOCID 237094]. There is some evidence of inaccuracies in the LPG reports. See, e.g., Gary J. Fox, Lehman, Lehman Brothers Top Exposure Report Lehman Papers Compared to LPG Data (June 25, 2007) [LBEX‐DOCID 2461202], attached to e‐mail from Gary J. Fox, Lehman, to Greg L. Smith, Lehman, et al. (June 26, 2009) [LBEX‐DOCID 2461203]. The calculation excludes the commitment to TXU.
⁴³⁴ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 8.
⁴³⁵ Id. at p. 7.
⁴³⁶ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 7.
⁴³⁷ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 8; e‐mail from Gary Mandelblatt, Lehman, to Roger Nagioff, Lehman, et al. (Nov. 27, 2007) [LBEX‐DOCID 156264].
⁴³⁸ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 10.
⁴³⁹ E‐mail from Steven Berkenfeld, Lehman, to Roger Nagioff, Lehman (May 10, 2007) [LBEX‐DOCID 140669]; e‐mail from Roger Nagioff, Lehman, to Ian T. Lowitt, Lehman (May 10, 2007) [LBEX‐DOCID 140666]; e‐mail from Christopher M. O'Meara, Lehman, to Paulo R. Tonucci, Lehman (Apr. 6, 2007) [LBEX‐DOCID 1349076]; e‐mail from Christopher M. O'Meara, Lehman, to Ian T. Lowitt, Lehman (July 21, 2007) [LBEX‐DOCID 211149].
⁴⁴⁰ E‐mail from Madelyn Antoncic, Lehman, to Jack Malvey, Lehman (Apr. 8, 2008) [LBHI_SEC07940_212356].
⁴⁴¹ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 10.
⁴⁴² Id.
⁴⁴³ E‐mail from Roger Nagioff, Lehman, to Alex Kirk, Lehman (May 31, 2007) [LBEX‐DOCID 173414]; Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 11; Examiner's Interview of Alex Kirk, Jan. 12, 2010, at p. 11 (Kirk stated that Nagioff thought that Gelband had been fired in part for opposing the leveraged loans business; thus, they had to move very slowly in obtaining authority to halt the business).
⁴⁴⁴ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 11; e‐mail from Jormen Vallecillo, Lehman, to Roger Nagioff, Lehman, et al. (June 8, 2007) [LBEX‐DOCID 1620669]; Alex Kirk, Lehman, Leveraged Finance Risk Presentation (June 8, 2007) [LBEX‐DOCID 1416503].
⁴⁴⁵ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 11‐12; e‐mail from Jormen Vallecillo, Lehman, to Roger Nagioff, Lehman, et al. (June 8, 2007) [LBEX‐DOCID 1620669]; Alex Kirk, Lehman, Leveraged Finance Risk Presentation (June 8, 2007), at p. 10 [LBEX‐DOCID 1416503].
⁴⁴⁶ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 12.
⁴⁴⁷ Id.
⁴⁴⁸ E‐mail from Steven Berkenfeld, Lehman, to Scott J. Freidheim, Lehman (June 26, 2007) [LBEX‐DOCID 1819424]; Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 13.
⁴⁴⁹ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 13.
⁴⁵⁰ Lehman, Loan Portfolio Group Weekly Review (June 8, 2007), at pp. 3‐8 [LBEX‐DOCID 146379]; Lehman, Loan Portfolio Group Weekly Review (June 15, 2007), at pp. 3‐8 [LBEX‐DOCID 146375]; Lehman, Loan Portfolio Group Weekly Review (June 22, 2007), at pp. 3‐8 [LBEX‐DOCID 146376]; Lehman, Loan Portfolio Group Weekly Review (July 6, 2007), at pp. 3‐8 [LBEX‐DOCID 146348]; Lehman, Loan Portfolio Group Weekly Review (July 13, 2007), at pp. 3‐8 [LBEX‐DOCID 146358]; Lehman, Loan Portfolio Group Weekly Review (July 27, 2007), at pp. 3‐8 [LBEX‐DOCID 146350]; Lehman, Loan Portfolio Group Weekly Review (Aug. 10, 2007), at pp. 3‐8 [LBEX‐DOCID 146341]. The calculation excludes Lehman's commitment to TXU.
⁴⁵¹ E‐mail from Lehman Risk, Lehman, to Risk Limit Excess, Lehman (July 16, 2007) [LBEX‐DOCID 230109]; Lehman, Loan Portfolio Group Weekly Review (July 20, 2007), at p. 7 [LBEX‐DOCID 146339]; Lehman, Loan Portfolio Group Weekly Review (July 27, 2007), at pp. 6‐7 [LBEX‐DOCID 146350]; Appendix: 9, comparing risk appetite and VaR usage versus limits.
⁴⁵² Lehman, 2007 Balance Sheet Targets and Usage ‐ Global (Oct. 17, 2007) [LBEX‐DOCID 278229].
⁴⁵³ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 10; Examiner's Interview of Alex Kirk, Jan. 12, 2009, at pp. 2‐3; accord Examiner's Interview of Richard S. Fuld, Jr., Dec. 9, 2009, at pp. 10‐11, 16‐17.
⁴⁵⁴ E‐mail from Roger Nagioff, Lehman, to David Goldfarb, Lehman (June 26, 2007) [LBEX‐DOCID 1585157]. For a fuller discussion of the effort to reduce the firm's high yield exposure, see Sections III.A.1.b.3 and III.A.1.b.4 of this Report.
⁴⁵⁵ E‐mail from Roger Nagioff, Lehman, to David Goldfarb, Lehman (June 28, 2007) [LBEX‐DOCID 1585167].
⁴⁵⁶ See, e.g., e‐mail from Paolo R. Tonucci, Lehman, to Sigrid M. Stabenow, Lehman (Mar. 14, 2007) [LBEX‐ DOCID 1342697]; e‐mail from Christopher M. O'Meara, Lehman, to Paolo R. Tonucci, Lehman (Apr. 6, 2007) [LBEX‐DOCID 1349076]; Lehman, Chart Showing High Grade and High Yield Loan Commitments (July 19, 2007) [LBEX‐DOCID 375444], attached to e‐mail from Nahill Younis, Lehman, to Kentaro Umezaki, Lehman (July 19, 2007) [LBEX‐DOCID 297877]; e‐mail from Kentaro Umezaki, Lehman, to Ian Lowitt, Lehman (July 20, 2007) [LBEX‐DOCID 717108]; e‐mail from Ian T. Lowitt, Lehman, to Kentaro Umezaki, Lehman (July 20, 2007) [LBEX‐DOCID 717108]; e‐mail from Ian T. Lowitt, Lehman, to Paolo Tonucci, Lehman, et al. (July 11, 2007) [LBEX‐DOCID 1901826].
⁴⁵⁷ Lehman, Liquidity Management At Lehman Brothers (July 2008), at p. 13 [LBEX‐DOCID 009007], attached to e‐mail from Rowena T. Carreon, Lehman, to Robert Azerad, Lehman, et. al. (July 31, 2008) [LBEX‐DOCID 067762]. 458 3rd Quarter‐to‐Date MCO and Cumulative Outflow Analysis (July 11, 2007), at p. 1 [LBEX‐DOCID 1681748], attached to e‐mail from Nahill Younis, Lehman, to Paolo R. Tonucci, Lehman (July 11, 2007) [LBEX‐DOCID 1901826].
⁴⁵⁹ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 16; Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 9; Examiner's Interview of Alex Kirk, Jan. 12, 2010, at p. 12.
⁴⁶⁰ E‐mail from Nahill Younis, Lehman, to Paolo R. Tonucci, Lehman (July 11, 2007) [LBEX‐DOCID 1901826].
⁴⁶¹ E‐mail from Roger Nagioff, Lehman, to Ian T. Lowitt, Lehman (July 20, 2007) [LBEX‐DOCID 175649].
⁴⁶² E‐mail from Ian T. Lowitt, Lehman, to Roger Nagioff, Lehman (July 20, 2007) [LBEX‐DOCID 175646] (emphasis supplied).
⁴⁶³ E‐mail from Roger Nagioff, Lehman, to Ian T. Lowitt, Lehman (July 20, 2007) [LBEX‐DOCID 175646].
⁴⁶⁴ E‐mail from Ian Lowitt, Lehman, to Christopher M. O'Meara, Lehman (July 20, 2007) [LBEX‐DOCID 194066].
⁴⁶⁵ E‐mail from Ian Lowitt, Lehman, to Roger Nagioff, Lehman (July 20, 2007) [LBEX‐DOCID 175646]; e‐ mail from Ian Lowitt, Lehman, to Herbert H. McDade III, Lehman, et al. (July 20, 2007) [LBEX‐DOCID 175646].
⁴⁶⁶ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 9.
⁴⁶⁷ See e.g., Lehman, LBHI CC Projections (July 30, 2007) [LBEX‐DOCID 214312], attached to e‐mail from Paolo R. Tonucci, Lehman, to Christopher M. O'Meara, Lehman (July 30, 2007) [LBEX‐DOCID 187182]; ALCO Summary Package (Aug. 2, 2007) [LBEX‐DOCID 514844]; ALCO Summary Package (Aug. 7, 2007) [LBEX‐DOCID 514847]; ALCO Summary Package (Aug. 16, 2007) [LBEX‐DOCID 514851]; ALCO Summary Package (Sept. 4, 2007) [LBEX‐DOCID 514862]; ALCO Summary Package (Sept. 5, 2007) [LBEX‐ DOCID 514863]; ALCO Summary Package (Sept. 6, 2007) [LBEX‐DOCID 514865]; ALCO Summary Package (Sept. 7, 2007) [LBEX‐DOCID 514866]; ALCO Summary Package (Sept. 10, 2007) [LBEX‐DOCID 514867]; ALCO Summary Package (Sept. 12, 2007) [LBEX‐DOCID 514869]; ALCO Summary Package (Sept. 13, 2007) [LBEX‐DOCID 514870]; ALCO Summary Package (Sept. 14, 2007) [LBEX‐DOCID 514871]; ALCO Summary Package (Sept. 18, 2007) [LBEX‐DOCID 514873]; ALCO Summary Package (Sept. 21, 2007) [LBEX‐DOCID 514875]; ALCO Summary Package (Oct. 25, 2007) [LBEX‐DOCID 514887]; ALCO Summary Package (Dec. 4, 2007) [LBEX‐DOCID 104102]; ALCO Summary Package (Feb. 12, 2008) [LBEX‐ DOCID 104040].
⁴⁶⁸ Lehman, Implications for the Funding Framework (Aug. 6, 2007), at p. 2 [LBEX‐DOCID 601971], attached to e‐mail from Angelo Bello, Lehman, to Kentaro Umezaki, Lehman (Aug. 6, 2007) [LBEX‐ DOCID 720559].
⁴⁶⁹ Lehman, Update on Risk, Liquidity, and Capital Adequacy Presentation to Standard and Poor's (Aug. 17, 2007), at p. 72 [LBEX‐DOCID 2031705], attached to e‐mail from Shaun K. Butler, Lehman, to Elizabeth R. Besen, Lehman (Aug. 28, 2007) [LBEX‐DOCID 2374876].
⁴⁷⁰ Id. at p. 67.
⁴⁷¹ Id.
⁴⁷² Lehman, Risk, Liquidity, Capital and Balance Sheet Update Presentation to the Finance and Risk Committee of Lehman Board of Directors on (Sept. 11, 2007), at p. 31 [LBEX‐DOCID 505941], attached to e‐mail from Paolo R. Tonucci, Lehman, to Christopher M. O'Meara, Lehman, et al. (Sept. 9, 2007) [LBEX‐ DOCID 552383].
⁴⁷³ LBHI CC Projections (July 30, 2007), at p. 2 [LBEX‐DOCID 214312], attached to e‐mail from Paolo Tonucci, Lehman, to Christopher M. O'Meara, Lehman (July 30, 2007) [LBEX‐DOCID 187182].
⁴⁷⁴ Id.
⁴⁷⁵ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 10.
⁴⁷⁶ E‐mail from Roger Nagioff, Lehman, to Alex Kirk, Lehman (Aug. 7, 2007) [LBEX‐DOCID 173496].
⁴⁷⁷ E‐mail from Alex Kirk, Lehman, to Roger Nagioff, Lehman (Aug. 7, 2007) [LBEX‐DOCID 173496].
⁴⁷⁸ Lehman, Loan Syndicate/Year‐End Recap (Jan. 4, 2008), at p. 5. [LBHI_SEC07940_066190].
⁴⁷⁹ E‐mail from Randall B. Whitestone, Lehman, to Steven Berkenfeld, Lehman, et al. (Aug. 5, 2007) [LBEX‐ DOCID 988270]; Archstone‐Smith Trust, Press Release: Archstone‐Smith Amends Merger Agreement With Tishman Speyer Partnership (Aug. 6, 2007) [LBEX‐DOCID 2140354]; e‐mail from Chip Heflin, Lehman, to Loan Sales ‐ 4th Floor, Lehman (May 29, 2007) [LBEX‐DOCID 1488757].
⁴⁸⁰ E‐mail from Mark Walsh, Lehman, to Alex Kirk, Lehman, et al. (July 27, 2007) [LBEX‐DOCID 174304].
⁴⁸¹ See Appendix generally e‐mail from Paul A. Hughson, Lehman, to Mark A. Walsh, Lehman, et al., (July 27, 2007) [LBEX‐DOCID 155079] (reflecting the fact that on July 27, 2007, D.E. Shaw informed Lehman that "given the sell‐off in the reit market and the volatility of the credit markets" its Risk Committee had rejected the deal); e‐mail from Jonathan Cohen, Lehman, to Christopher M. O'Meara, Lehman, et al. (July 27, 2007) [LBEX‐DOCID 1904232] (showing that by July 2007, Lehman began to worry that the market "implosion" might force Lehman to provide $9 billion in funding for the Archstone transaction, rather than the $6.8 billion it had previously assumed would be necessary.).
⁴⁸² Jonathan Litt, Citigroup Global Markets Inc., Archstone Smith Trust (ASN): Could the Buyers Cut Their Losses and Walk Away? (July 26, 2007) [LBEX‐DOCID 1714588].
⁴⁸³ Id. at pp. 1‐2.
⁴⁸⁴ See e.g., e‐mail from Webster Neighbor, Lehman, to Paul A. Hughson, Lehman (July 31, 2007) [LBEX‐ DOCID 2500559]; e‐mail from Gerard Reilly, Lehman, to Christopher M. O'Meara, Lehman (Aug. 1, 2007) [LBEX‐DOCID 210156]; e‐mail from Stephen F. Rossi, Lehman, to Anna Yu, Lehman, et al. (Aug. 1, 2007) [LBEX‐DOCID 3271158].
⁴⁸⁵ Examiner's Interview of Lisa Beeson, Oct. 23, 2009, at p. 5; Examiner's Interview of Mark A. Walsh, Oct. 21, 2009, at p. 9; Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 4; Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 3; Examiner's Interview of Sir Christopher Gent, Oct. 21, 2009, at p. 3; Examiner's Interview of John D. Macomber, Sept. 25, 2009, at pp. 13‐14.
⁴⁸⁶ Freddie Mac, Holdco Term Sheet (Sept. 5, 2007) [LBEX‐DOCID 4452813]; Freddie Mac, Sellco Term Sheet (Sept. 5, 2007) [LBEX‐DOCID 4452811]; Lehman, Project Easy Living Debt Funding Detail (Oct. 5, 2007), at p. 1 [LBEX‐DOCID 598184].
⁴⁸⁷ Examiner's Interview of Mark A. Walsh, Oct. 22, 2009, at p. 9; Examiner's Interview of Lisa Beeson, Oct. 23, 2009, at p. 8; Letter from Lehman Brothers Holdings Inc. to Fannie Mae re: Rate Lock Terms (Sept. 17, 2007), at p. 1. [LBEX‐DOCID 2704241].
⁴⁸⁸ Lehman, Archstone Smith Multifamily JV Debt and Equity Redemption Schedule (Jan. 3, 2008), at p. 1 [LBEX‐DOCID 2502413], attached to e‐mail from Keith Cyrus, Lehman, to Paul A. Hughson, Lehman, et al. (Jan. 1, 2008) [LBEX‐DOCID 2646616].
⁴⁸⁹ Lehman, Acquisition of Archstone‐Smith Trust Corporate Closing Documents Table of Contents (Oct. 5, 2007), at p. 2 [LBEX‐WGM 960404].
⁴⁹⁰ Lehman, Lehman Expected Share of Real Estate Commitments (Oct. 17, 2007), at p. 2 [LBEX‐DOCID 624620].
⁴⁹¹ Examiner's Interview of Henry Paulson, June 25, 2009, at p. 9.
⁴⁹² Some of the increase in risk usage, of course, was the result of market volatility and its effect upon existing assets; some was the result of decisions to close new deals. In any event, usage increased dramatically in 2007 and limits were raised accordingly, from $3.3 billion to $3.5 billion to $4.0 billion. See e‐mail from Manhua Leng, Lehman, to Mynor Gonzalez, Lehman, et al. (Sept. 10, 2007) [LBEX‐DOCID 262797]; e‐mail from Christopher M. O'Meara, Lehman, to David Goldfarb, Lehman (Aug. 15, 2007) [LBEX‐DOCID 211183]; Lehman, Material for Market Risk Control Committee Meeting (Jan. 14, 2008), at p. 33 [LBEX‐DOCID 271352], attached to e‐mail from Mark Weber, Lehman, to Paul Shotton, Lehman, et al. (Jan. 14, 2008) [LBEX‐DOCID 223263]. As revenues increased, the capacity for risk increased; management calculated, albeit sometimes by adjusting the formula, that each increase was justified by anticipated revenues. See e‐mail from Madelyn Antoncic, Lehman, to David Goldfarb, Lehman, et al. (Aug. 28, 2007) [LBEX‐DOCID 193203]; see Appendix 10, showing the calculation of Lehman's increased $4.0 billion risk appetite limit.
⁴⁹³ See e‐mail from Mark Weber, Lehman, to Jeffrey Goodman, Lehman (June 4, 2007) [LBEX‐DOCID 247960]; Mark Weber, Lehman, Chart Showing Risk Appetite Adjustment for Archstone (July 24, 2008) [LBEX‐DOCID 425705], attached to e‐mail from Mark Weber, Lehman, to PortfolioRisk Support, Lehman, et al. (July 24, 2008) [LBEX‐DOCID 265567]; see also e‐mail from Mark Weber, Lehman, to Laura M. Vecchio, Lehman (July 31, 2008) [LBEX‐DOCID 264849].
⁴⁹⁴ Lehman, VaR / Risk Appetite Restatements, (Nov. 12, 2007) at p. 17 [LBEX‐DOCID 271334].
⁴⁹⁵ Id.
⁴⁹⁶ Id.
⁴⁹⁷ E‐mail from Jeffrey Goodman, Lehman, to Christopher M. O'Meara, Lehman, et al. (Dec. 4, 2007) [LBEX‐DOCID 251204]; e‐mail from Paul Shotton, Lehman, to Christopher M. O'Meara, Lehman et al. (Dec. 6, 2007) [LBEX‐DOCID 251204]; Examiner's Interview of Mark Weber, Aug. 11, 2009, at p. 9; Examiner's Interview of David Goldfarb, Sept. 21, 2009, at p. 8; Examiner's Interview of Madelyn Antoncic, Oct. 6, 2009, at p. 7; Examiner's Interview of Richard S. Fuld, Jr., Nov. 19, 2009, at p. 13; but see Lehman, September 2007 Financial Information Presentation to Lehman Board of Directors with Christopher M. O'Meara's handwritten notes (Oct. 15, 2007), at p. 6 [LEH_CMO_0000001] (attributing the increase in risk appetite to increased market volatility as well as increased leveraged finance and commercial real estate positions, particularly since the market environment had prevented the firm from selling those assets); e‐mail from Joe Li, Lehman, to Madelyn Antoncic, Lehman (Sept. 11, 2007) [LBEX‐ DOCID 157247] (stating that 50% of the recent VaR increase for Global Capital Products was due to volatility and 50% was from the origination book); see also Lehman, Firm‐wide Risk Driver (Oct. 22, 2007) [LBEX‐DOCID 190147] (attributing the firm's rising risk appetite and VaR usage figures primarily to increased correlation across divisions).
⁴⁹⁸ Examiner's Interview of Jeffrey Goodman, Aug. 28, 2009; Examiner's Interview of Mark Weber, Aug. 11, 2009, at p. 4; but cf. Examiner's Interview of Madelyn Antoncic, Oct. 6, 2009, at p. 11 (reflecting statements that she was unaware that the bridge equity portion of the Archstone deal had been excluded from the firm's risk measurements and that she "hit the roof" when Jeffrey Goodman told her that the bridge equity had not been included in the firm's metrics).
⁴⁹⁹ Examiner's Interview of Jeffrey Goodman, Aug. 28, 2009; Examiner's Interview of Paul Shotton, June 5, 2009, at p. 19; Appendix No. 9, comparing risk appetite and VaR usage versus limits; e‐mail from Mark Weber, Lehman, to Laura M. Vecchio, Lehman (July 31, 2008) [LBEX‐DOCID 264849]; Mark Weber, Lehman, Chart Showing Risk Appetite Adjustment for Archstone (July 24, 2008) [LBEX‐DOCID 425705], attached to e‐mail from Mark Weber, Lehman, to Portfolio Risk Support, Lehman, et al. (July 24, 2008) [LBEX‐DOCID 265567]; e‐mail from Madelyn Antoncic, Lehman, to David Goldfarb, Lehman, et al. (Aug. 14, 2007) [LBEX‐DOCID 211183].
⁵⁰⁰ See Lehman, September 2007 Financial Information Presentation to Lehman Board of Directors (Oct. 15, 2007), at p. 6 [LBHI_SEC07940_026377]; Lehman Brothers Holdings Inc., Minutes of Meeting of the Finance and Risk Committee of the Board of Directors (Sept. 11, 2007), at p. 2 [LBEX‐AM 067018]; Lehman Brothers Holdings Inc., Minutes of Meeting of Board of Directors (Sept. 11, 2007), at p. 3 [LBHI_SEC07940_026364]; e‐mail from Madelyn Antoncic, Lehman, to David Goldfarb, Lehman, et al. (Aug. 14, 2007) [LBEX‐DOCID 211183].
⁵⁰¹ E‐mail from Manhua Leng, Lehman, to Mynor Gonzalez, Lehman, et al. (Sept. 10, 2007) [LBEX‐DOCID 262797]; e‐mail from Christopher M. O'Meara, Lehman, to David Goldfarb, Lehman (Aug. 15, 2007) [LBEX‐DOCID 211183]. But see e‐mail from Madelyn Antoncic, Lehman, to David Goldfarb, Lehman, et al. (Aug. 28, 2007) [LBEX‐DOCID 193203] (showing that Antoncic did not believe that the decision to raise the limit had been made ‐ "we did not close the loop on this. Robert worked up some numbers but I think we need to revisit the expected rev for Q4 given a slowdown").
⁵⁰² E‐mail from David Goldfarb, Lehman, to Madelyn Antoncic, Lehman, et al. (Aug. 28, 2007) [LBEX‐ DOCID 193203].
⁵⁰³ E‐mail from Madelyn Antoncic, Lehman, to David Goldfarb, Lehman, et al. (Aug. 28, 2007) [LBEX‐ DOCID 193203].
⁵⁰⁴ SEC, Notes from Lehman's Monthly Risk Review Meeting (Oct. 19, 2007), at p. 6 [LBEX‐SEC 007438].
⁵⁰⁵ Lehman, ALCO Summary Package (Sept. 4, 2007), at p. 2 [LBEX‐DOCID 514862]; Lehman, ALCO Summary Package (Sept. 5, 2007), at p. 2 [LBEX‐DOCID 514863]; Lehman, ALCO Summary Package (Sept. 6, 2007), at p. 2 [LBEX‐DOCID 514865]; Lehman, ALCO Summary Package (Sept. 7, 2007), at p. 2 [LBEX‐DOCID 514866]; Lehman, ALCO Summary Package (Sept. 10, 2007), at p. 2 [LBEX‐DOCID 514867]; Lehman, ALCO Summary Package (Sept. 11, 2007), at p. 2 [LBEX‐DOCID 514868]; Lehman, ALCO Summary Package (Sept. 12, 2007), at p. 3 [LBEX‐DOCID 514869]; Lehman, ALCO Summary Package (Sept. 13, 2007), at p. 3 [LBEX‐DOCID 514870]; Lehman, ALCO Summary Package (Sept. 14, 2007), at p. 3 [LBEX‐DOCID 514871]; Lehman, ALCO Summary Package (Sept. 17, 2007), at p. 3 [LBEX‐DOCID 514872]; Lehman, ALCO Summary Package (Sept. 18, 2007), at p. 3 [LBEX‐DOCID 514873]; Lehman, ALCO Summary Package (Sept. 19, 2007), at p. 3 [LBEX‐DOCID 514874]; Lehman, ALCO Summary Package (Sept. 21, 2007), at p. 3 [LBEX‐DOCID 514875]; Lehman, ALCO Summary Package (Sept. 24, 2007), at p. 3 [LBEX‐DOCID 514876]; Lehman, ALCO Summary Package (Sept. 26, 2007), at p. 3 [LBEX‐DOCID 514877].
⁵⁰⁶ Id.
⁵⁰⁷ Id.
⁵⁰⁸ E‐mail from Paolo R. Tonucci, Lehman, to Christopher M. O'Meara, Lehman (Oct. 5, 2007) [LBEX‐ DOCID 1360792].
⁵⁰⁹ Lehman, ALCO Summary Package (Sept. 4, 2007), at p. 2 [LBEX‐DOCID 514881].
⁵¹⁰ Lehman, Equity Adequacy Presentation to Executive Committee [Draft] (Oct. 26, 2007) [LBEX‐DOCID 1698460], attached to e‐mail from Ari Axelrod, Lehman, to Christopher M. O'Meara, Lehman, et al. (Oct. 26, 2007) [LBEX‐DOCID 1912826].
⁵¹¹ E‐mail from Ari Axelrod, Lehman, to Christopher M. O'Meara, Lehman, et al. (Oct. 26, 2007) [LBEX‐ DOCID 1902541].
⁵¹² Ari Axelrod, Lehman, Equity Adequacy Presentation Summary Page [Draft] (Oct. 25, 2007), at p. 1 [LBEX‐DOCID 1696067], attached to e‐mail from Ari Axelrod, Lehman, to Christopher M. O'Meara, Lehman, et al. (Oct. 26, 2007) [LBEX‐DOCID 1902541].
⁵¹³ Lehman, Equity Adequacy Presentation to Executive Committee [Draft] (Oct. 26, 2007), at p. 1 [LBEX‐ DOCID 1698460], attached to e‐mail from Ari Axelrod, Lehman, to Christopher M. O'Meara, Lehman, et al. (Oct. 26, 2007) [LBEX‐DOCID 1912826].
⁵¹⁴ Id.
⁵¹⁵ Examiner's Interview of Richard S. Fuld, Jr., Dec. 9, 2009, at p. 5.
⁵¹⁶ Lehman, Monthly CSE Capital Reports for SEC (Mar. 2006), at p. 1 [LBEX‐SEC 000303]; Lehman, Equity Adequacy Presentation to Executive Committee [Draft] (Oct. 26, 2007), at p. 5 [LBEX‐DOCID 1698460], attached to e‐mail from Ari Axelrod, Lehman, to Christopher M. O'Meara, Lehman, et al. (Oct. 26, 2007) [LBEX‐DOCID 1912826].
⁵¹⁷ E‐mail from Anna Yu, Lehman, to Erin M. Callan, Lehman, et al. (Dec. 9, 2007) [LBEX‐DOCID 3761740].
⁵¹⁸ Lehman, CSE Methodology Impact Summary (Apr. 4, 2008), at p. 2 [LBEX‐DOCID 382980].
⁵¹⁹ Lehman, CSE Methodology Impact Summary (Apr. 4, 2008), at p. 2 [LBEX‐DOCID 382980].
⁵²⁰ E‐mail from Anna Yu, Lehman, to Paolo R. Tonucci, Lehman (Oct. 3, 2007) [LBEX‐DOCID 1654567]; e‐ mail from Anna Yu, Lehman, to undisclosed recipients (Nov. 26, 2007) [LBEX‐DOCID 638715]; e‐mail from Anna Yu, Lehman, to Georges Assi, Lehman, et al. (Dec. 7, 2007) [LBEX‐DOCID 307968]. 521 17 C.F.R. § 240.15c3‐1g (e) (1) (i); 17 C.F.R. § 240.17i‐8 (a) (2) (2007); The Goldman Sachs Group Inc., Quarterly Report as of May 31, 2008 (Form 10‐Q) (filed on July 7, 2008), at p. 90 ("Goldman Sachs 10‐Q (filed on July 7, 2008)") ("Goldman Sachs is required to notify the SEC in the event that the Total Capital Ratio falls below 10% or is expected to do so within the next month"); Merrill Lynch & Co., Inc., Quarterly Report as of June 27, 2008 (Form 10‐Q) (filed on Aug. 5, 2008), at p. 108 ("Merrill Lynch 10‐Q (filed on Aug. 5, 2008)") ("Merrill Lynch is required to notify the SEC in the event that the Total Capital Ratio falls or is expected to fall below 10%"); Erik R. Sirri, SEC, Testimony Concerning Lessons Learned in Risk Management Oversight at Federal Financial Regulators Before the Subcommittee on Securities, Insurance and Investment Committee on Banking, Housing and Urban Affairs, United States Senate, Mar. 19, 2009 ("CSEs were also required to file an 'early warning' notice with the SEC in the event that certain minimum thresholds, including the 10% capital ratio, were breached or were likely to be breached"); Examiner's Interview of Matthew Eichner, Nov. 23, 2009, at p. 13.
⁵²² SEC, Notes from Monthly Risk Meeting with Lehman (Nov. 15, 2007), at p. 2 [LBEX‐SEC 007467].
⁵²³ Lehman, Equity Adequacy Presentation to Executive Committee [Draft] (Oct. 26, 2007), at p. 7 [LBEX‐ DOCID 1698460], attached to e‐mail from Ari Axelrod, Lehman, to Christopher M. O'Meara, Lehman, et al. (Oct. 26, 2007) [LBEX‐DOCID 1912826].
⁵²⁴ Id. at p. 6.
⁵²⁵ E‐mail from Anna Yu, Lehman, to Martin Kelly, Lehman, et al. (Feb. 6, 2008) [LBEX‐DOCID 2799485].
⁵²⁶ Lehman, ALCO Summary Package (Jan. 31, 2008), at p. 2 [LBEX‐DOCID 527115].
⁵²⁷ Lehman Brothers Holdings Inc., Press Release: Lehman Brothers Announces Closure of BNC Mortgage (Aug. 22, 2007) [LBEX‐DOCID 880148]; Lehman, Subprime(r) (Sept. 6, 2007), at p. 14 [LBEX‐DOCID 894656]; e‐mail from Edward Grieb, Lehman, to Christopher M. O'Meara, Lehman (Aug. 22, 2007) [LBEX‐ DOCID 197143]; e‐mail from Tasha Pelio, Lehman, to Jasjit (Jesse) Bhattal, Lehman, et al. (Aug. 22, 2007) [LBEX‐DOCID 176893].
⁵²⁸ Examiner's Interview of Lana Franks Harber, Sept. 23, 2009, at pp. 2, 10, 11; Examiner's Interview of David N. Sherr, Sept. 25, 2009, at pp. 2, 6, 8.
⁵²⁹ Lehman Brothers Holdings Inc., Press Release: Lehman Brothers Suspends Wholesale and Correspondent U.S. Residential Mortgage Origination Activities (Jan. 17, 2008) [LBEX‐DOCID 156125].
⁵³⁰ Dimitrios Kritikos, Lehman, Aurora Loan Services Risk Review January 2008 (Feb. 7, 2008), at p. 12 [LBEX‐DOCID 394711].
⁵³¹ Lehman, Presentation on Risk, Liquidity, Capital and Balance Sheet Update to Finance and Risk Committee of Lehman Board of Directors (Sept. 11, 2007), at p. 2 [LBEX‐AM 067167].
⁵³² Lehman Brothers Holdings Inc., Minutes of Meeting of Finance and Risk Committee of the Board of Directors (Sept. 11, 2007), at p. 3 [LBEX‐AM 067018]; Lehman, Daily Risk Appetite Report (Sept. 6, 2007) [LBEX‐DOCID 1340197], attached to e‐mail from Christopher M. O'Meara, Lehman, to David Goldfarb, Lehman (Sept. 7, 2007) [LBEX‐DOCID 1345985].
⁵³³ Lehman, Risk, Liquidity, Capital and Balance Sheet Update Presentation to Finance and Risk Committee of Lehman Board of Directors with Welikson's handwritten notes (Sept. 11, 2007), at p. 25 [WGM_LBEX_02248].
⁵³⁴ Appendix No. 9, comparing risk appetite and VaR usage and limits.
⁵³⁵ Id.
⁵³⁶ Examiner's Interview of Christopher M. O'Meara, Aug. 14, 2009, at p. 11.
⁵³⁷ Lehman, Second Quarter Financial Information Presentation to Lehman Board of Directors (June 19, 2007), at p. 6 [LBHI_SEC07940_026226]; Lehman, Estimated Third Quarter Financial Information Presentation to Lehman Board of Directors (Sept. 11, 2007), at p. 6 [LBHI_SEC07940_026288].
⁵³⁸ Lehman, Presentation to Lehman Board of Directors on September 2007 Financial Information [Draft] (Oct. 8, 2007), at p. 6 [LBEX‐DOCID 510227]; Lehman, Final Presentation to Lehman Board of Directors on September 2007 Financial Information (Oct. 15, 2007), at p. 6 [LBHI_SEC07940_026377]; Examiner's Interview of Christopher M. O'Meara, Sept. 23, 2009, at p. 4.
⁵³⁹ Id.
⁵⁴⁰ Lehman, Presentation to Lehman Board of Directors on September 2007 Financial Information (Oct. 15, 2007), at p. 6 [LBHI_SEC07940_026377].
⁵⁴¹ Lehman, Daily Firm‐wide Risk Driver (Oct. 15, 2007) [LBEX‐DOCID 147304], attached to e‐mail from Jeffrey Goodman, Lehman, to Madelyn Antoncic, Lehman, et al. (Oct. 14, 2007) [LBEX‐DOCID 155737].
⁵⁴² Examiner's Interview of Christopher M. O'Meara, Aug. 14, 2009, at pp. 10, 12.
⁵⁴³ Examiner's Interview of Christopher M. O'Meara, Sept. 23, 2009, at pp. 14‐15; Lehman, Presentation on Risk, Liquidity, Capital and Balance Sheet Update to Finance and Risk Committee of Lehman Board of Directors (Sept. 11, 2007), at p. 2 [LBEX‐AM 067167]; Lehman Brothers Holdings Inc., Minutes of Meeting of Board of Directors (Oct. 15, 2007), at p. 6 [LBHI_SEC07940_026407].
⁵⁴⁴ Lehman, September 2007 Financial Information Presentation to Lehman Board of Directors with Christopher M. O'Meara's handwritten notes (Oct. 15, 2007), at p. 6 [LEH_CMO_0000001]; Lehman, September 2007 Financial Information Presentation to Lehman Board of Directors with Jeffrey A. Welikson's handwritten notes (Oct. 15, 2007), at p. 6 [WGM_LBEX_00540].
⁵⁴⁵ Examiner's Interview of Roger Berlind, May 8, 2009, at p. 4; Examiner's Interview of Dr. Henry Kaufman, May 19, 2009, at p. 7; Examiner's Interview of Marsha Johnson Evans, May 22, 2009, at pp. 7‐9; Examiner's Interview of John D. Macomber, Sept. 25, 2009, at p. 3; Examiner's Interview of Roland A. Hernandez, Oct. 2, 2009.
⁵⁴⁶ Examiner's Interview of Roger Berlind, May 8, 2009, at p. 4; Examiner's Interview of John D. Macomber, Sept. 25, 2009, at p. 17; Examiner's Interview of Marsha Johnson Evans, May 22, 2009, at p. 9; Examiner's Interview of Sir Christopher Gent, Oct. 21, 2009, at p. 14; Examiner's Interview of Roland A. Hernandez, Oct. 2, 2009, at p. 10.
⁵⁴⁷ Examiner'sInterview of Roger Berlind, May 8, 2009, at p. 4; Examiner's Interview of John D. Macomber, Sept. 25, 2009, at p. 13; Examiner's Interview of Marsha Johnson Evans, May 22, 2009, at p. 7; Examiner's Interview of Sir Christopher Gent, Oct. 21, 2009, at p. 15; Examiner's Interview of Roland A. Hernandez, Oct. 2, 2009, at p. 10; Examiner's Interview of Dr. Henry Kaufman, May 19, 2009, at p. 7.
⁵⁴⁸ Lehman Brothers Holdings Inc., Minutes of Meeting of Finance and Risk Committee of Lehman Board of Directors (Sept. 11, 2007), at pp. 1‐2 [LBEX‐AM 067018]; Lehman, Risk, Liquidity, Capital and Balance Sheet Update Presentation to Finance and Risk Committee of Lehman Board of Directors (Sept. 11, 2007), at p. 13 [LBEX‐AM 067167]; Lehman Brothers Holdings Inc., Minutes of Meeting of Board of Directors (Sept. 11, 2007), at p. 6 [LBHI_SEC07940_026364].
⁵⁴⁹ Lehman Brothers Holdings Inc., Minutes of Meeting of Finance and Risk Committee of the Board of Directors (Sept. 11, 2007), at pp. 2‐3 [LBEX‐AM 067018].
⁵⁵⁰ Lehman, Risk, Liquidity, Capital and Balance Sheet Update Presentation to Finance and Risk Committee of Lehman Board of Directors (Sept. 11, 2007), at p. 14 [LBEX‐AM 067167].
⁵⁵¹ Id.
⁵⁵² Examiner's Interview of Paul Shotton, June 5, 2009, at pp. 7‐8; Examiner's Interview of Kentaro Umezaki, June 25, 2009, at p. 17; Examiner's Interview of Fred Orlan, Sept. 21, 2009, at p. 6; Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 13; Examiner's Interview of Alex Kirk, Jan. 12, 2010, at p. 9; Lehman Brothers Holdings Inc., Minutes of Meeting of Finance and Risk Committee of the Board of Directors (Sept. 11, 2007), at pp. 2‐3 [LBEX‐AM 067018].
⁵⁵³ Examiner's Interview of Marsha Johnson Evans, May 22, 2009, at pp. 3, 9‐10; Examiner's Interview of Roger Berlind, May 8, 2009, at p. 7.
⁵⁵⁴ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 3, 13; Examiner's Interview of Madelyn Antoncic, Mar. 27, 2009, at p. 10.
⁵⁵⁵ Lehman Brothers Holdings Inc., Minutes of Meeting of Board of Directors (Sept. 11. 2007), at p. 6 [LBHI_SEC07940_263264]; Lehman, Update on Liquidity, Leveraged Loan Commitments and Mortgage Positions Presentation to Lehman Board of Directors with Weliksonʹs handwritten notes (Sept. 11, 2007) [LBHI_SEC07940_026355]; Mynor Gonzalez, Lehman, Daily Risk Appetite and VaR Report (Sept. 11, 2007) [LBEX‐DOCID 3296330], attached to e‐mail from Mynor Gonzalez, Lehman, to Mark Weber, Lehman (Sept. 12, 2007) [LBEX‐DOCID 3295527]; Appendix No. 9, comparing risk appetite and VaR usage versus limits.
⁵⁵⁶ Lehman, Risk, Liquidity, Capital, and Balance Sheet Update Presentation to Finance and Risk Committee of Lehman Board of Directors (Sept. 11, 2007) [LBEX‐AM 067167]; Lehman Brothers Holdings Inc., Minutes of Meeting of the Finance and Risk Committee of Board of Directors (Sept. 11, 2007) [LBEX‐ AM 067018]; e‐mail from Joe Li, Lehman, to Fred Orlan, Lehman, et al. (July 25, 2007) [LBEX‐DOCID 2563167].
⁵⁵⁷ Examiner's Interview of Dr. Henry Kaufman, Sept. 2, 2009, at p. 6 (noting importance of concentration limits); Examiner's Interview of John D. Macomber, Sept. 25, 2009, at pp. 6, 17 (stating that significant excesses ought to have been disclosed).
⁵⁵⁸ Lehman, Risk, Liquidity, Capital and Balance Sheet Update Presentation to Finance and Risk Committee of Lehman Board of Directors with Welikson's Handwritten Notes (Sept. 11, 2007), at pp. 2, 30 [WGM_LBEX_02247‐02340]; Lehman Brothers Holdings Inc., Finance and Risk Committee Minutes (Sept. 11, 2007), at pp. 2‐3 [LBEX‐AM 067018].
⁵⁵⁹ Lehman, Presentation on Risk, Liquidity, Capital and Balance Sheet Update to Finance and Risk Committee of Lehman Board of Directors (Sept. 11, 2007), at p. 50 [LBEX‐AM 067167].
⁵⁶⁰ Id. at p. 51.
⁵⁶¹ Examiner's Interview of Roger Berlind, Dec. 18, 2009, at p. 4; Examiner's Interview of Roland A. Hernandez, Oct. 2, 2009, at p. 22; Examiner's Interview of John D. Macomber, Sept. 25, 2009, at p. 20; Examiner's Interview of Dr. Henry Kaufman, Sept. 2, 2009, at p. 21; Examiner's Interview of Michael L. Ainslie, Dec. 22, 2009, at p. 4; Examiner's Interview of Thomas Cruikshank, Oct. 8, 2009, at p. 2; Examiner's Interview of Sir. Christopher Gent, Jan. 20, 2010, at p. 4; Examiner's Interview of Jerry A. Grundhofer, Sept. 16, 2009, at p. 10; Lehman Brothers Holdings Inc., Minutes of the Board of Directors (Sept. 11, 2007), at p. 3 [LBHI_SEC07940_026364]; Lehman, Board of Directors Materials for Sept. 11, 2007 Board Meeting (Sept. 7, 2007) [LBHI_SEC07940‐026282]; Lehman Brothers Holdings Inc., Minutes of the Board of Directors (Oct. 15, 2007), at p. 6 [LBHI_SEC07940_026407]; Lehman, Board of Directors Materials for Oct. 15, 2007 Board Meeting (Oct. 11, 2007) [LBHI_SEC07940‐026371]; Lehman Brothers Holdings Inc., Minutes of the Board of Directors (Nov. 8, 2007), at p. 6 [LBHI_SEC07940_026650]; Lehman, Board of Directors Materials for Nov. 8, 2007 Board Meeting (Nov. 2, 2007) [LBHI_SEC07940‐026520]; see also Section III.A.4 of this Report.
⁵⁶² Lehman Brothers Holdings Inc., Minutes of Meeting of Finance and Risk Committee of the Board of Directors (Sept. 11, 2007), at p. 3 [LBEX‐AM 067018].
⁵⁶³ Id.
⁵⁶⁴ Lehman, Update on Liquidity, Leveraged Loan Commitments and Mortgage Positions Presentation to Lehman Board of Directors with Welikson's handwritten notes (Sept. 11, 2007), at p. 1 [LBHI_SEC07940_026355]; Lehman, Risk, Liquidity, Capital and Balance Sheet Update Presentation to Finance and Risk Committee of Lehman Board of Directors (Sept. 11, 2007), at p. 31 [LBEX‐AM 067167].
⁵⁶⁵ Id.
⁵⁶⁶ Lehman Brothers Holdings Inc., Minutes of Meeting of Board of Directors (Sept. 11, 2007), at p. 5 [LBHI_SEC07940_026364].
⁵⁶⁷ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at pp. 16‐17; Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at pp. 9‐10; e‐mail from Roger Nagioff, Lehman, to Ian T. Lowitt, Lehman (July 20, 2009) [LBEX‐DOCID 175646]; e‐mail from Alex Kirk, Lehman, to Roger Nagioff, Lehman (Aug. 6, 2007) [LBEX‐DOCID 173492]; e‐mail from Alex Kirk, Lehman, to Roger Nagioff, Lehman (Aug. 7, 2007) [LBEX‐ DOCID 173496].
⁵⁶⁸ Examiner's Interview of John D. Macomber, Sept. 28, 2009, at p. 16; Examiner's Interview of Dr. Henry Kaufman, Dec. 22, 2009 (saying it might have been appropriate to disclose liquidity concerns if they were more than short‐lived).
⁵⁶⁹ Lehman Brothers Holdings Inc., Press Release: Lehman Brothers Announces Management Changes (Sept. 20, 2007) [LBEX‐DOCID 533362].
⁵⁷⁰ SEC, Notes from Lehman's Monthly Risk Review meeting (Oct. 11, 2007), at p. 6 [LBEX‐SEC 007438].
⁵⁷¹ Lehman, 2008 Financial Plan Presentation to Finance and Risk Committee of Board of Directors (Jan. 29, 2008), at p. 8 [LBHI_SEC07940_068559].
⁵⁷² Examiner's Interview of Herbert H. (Bart) McDade III, Sept. 16, 2009, at p. 3; Examiner's Interview of Treasury Secretary Timothy F. Geithner, Nov. 24, 2009, at p. 7.
⁵⁷³ Andrew J. Morton, Notes: First Sixty Days (Apr. 7, 2008), at p. 6 [LBEX‐DOCID 1734462].
⁵⁷⁴ Appendix No. 9, comparing risk appetite and VaR usage versus limits.
⁵⁷⁵ LBHI 10‐Q (filed on Apr. 9, 2008), at p. 70.
⁵⁷⁶ Lehman, 2008 Financial Plan Presentation to Finance and Risk Committee of Board of Directors (Jan. 29, 2008), at p. 16 [LBHI_SEC07940_068559]; Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at pp. 25‐27.
⁵⁷⁷ See Lehman, 2008 Financial Plan Presentation to Finance and Risk Committee of Board of Directors (Jan. 29, 2008), at p. 6 [LBHI_SEC07940_068559].
⁵⁷⁸ Id.
⁵⁷⁹ Examiner's Interview of Richard S. Fuld, Jr., Nov. 19, 2009, at p. 2.
⁵⁸⁰ Lehman, Commercial Real Estate Update (Mar. 25, 2008), at p. 3 [LBHI_SEC07940_127250]; Lehman, Balance Sheet and Disclosure Scorecard For Trade Date April 21, 2008 (Apr. 22, 2008), at p. 3 [LBEX‐ DOCID 3187588], attached to e‐mail from Tal Litvin, Lehman, to Herbert H. (Bart) McDade III, Lehman, et al. (Apr. 22, 2008) [LBEX‐DOCID 3187333]; e‐mail from Gary Mandelblatt, Lehman, to Alex Kirk, Lehman (Jan. 15, 2008) [LBEX‐DOCID 1600235]; e‐mail from Erin M. Callan, Lehman, to Herbert H. (Bart) McDade III, Lehman, et al. (Apr. 3, 2008) [LBEX‐DOCID 1538729]; e‐mail from Paul A. Hughson, Lehman, to Mark Walsh, Lehman (Apr. 1, 2008) [LBEX‐DOCID 1866761]; Lehman, Balance Sheet and Disclosure Scorecard For Trade Date August 12, 2008 (Aug. 13, 2008), at p. 7 [LBEX‐SIPA 006539].
⁵⁸¹ Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 8; Examiner's Interview of Jeremy Isaacs, Oct. 1, 2009, at p. 3.
⁵⁸² See, e.g., Merrill Lynch & Co., Inc., Annual Report for 2007 as of Dec. 28, 2007 (Form 10‐K) (filed on Feb. 25, 2008), at p. 23 ("Merrill Lynch 2007 10‐K") (stating that Merrill Lynch issued $6.2 billion in common stock during the fourth quarter of 2007, and $6.6 billion of mandatory convertible preferred stock during the first quarter of 2008); Morgan Stanley, Annual Report for 2007 as of Nov. 30, 2007 (Form 10‐K) (filed on Jan. 29, 2008), at pp. 178‐79 ("Morgan Stanley 2007 10‐K") (stating that Morgan Stanley sold equity units to the Chinese Investment Corporation for approximately $5.579 billion in December 2007); Citigroup Inc., Annual Report for 2007 as of Dec. 31, 2007 (Form 10‐K) (filed on Feb. 22, 2008), at p. 77 ("Citigroup 2007 10‐K") (stating that Citigroup sold $7.5 billion of equity units to the Abu Dhabi Investment Authority on December 3, 2007); UBS AG, Annual Report for 2007 as of Dec. 31, 2007 (Form 20‐F) (filed on Mar. 18, 2008), at pp. 276‐77 ("UBS AG 2007 20‐F") (stating that UBS issued shares corresponding to approximately 13.4% of the then current share capital on February 27, 2008); see Section III.A.3 of this Report.
⁵⁸³ E‐mail from David Goldfarb, Lehman, to Richard S. Fuld, Jr., Lehman, et al. (Jan. 9, 2008) [LBHI_SEC07940_670045].
⁵⁸⁴ Appendix No. 9, comparing risk appetite and VaR usage versus limits.
⁵⁸⁵ SEC, Notes from Lehman's Monthly Risk Review Meeting (Aug. 17, 2007), at p. 7 [LBEX‐SEC 007383]; e‐mail from Jeffrey Goodman, Lehman, to Christopher M. O'Meara, Lehman, et al. (Dec. 4, 2007) [LBEX‐ DOCID 251204].
⁵⁸⁶ Lehman, Material for Market Risk Control Committee Meeting (Jan. 14, 2008), at p. 33 [LBEX‐DOCID 271352], attached to e‐mail from Mark Weber, Lehman, to Paul Shotton, Lehman, et al. (Jan. 14, 2008) [LBEX‐DOCID 223263].
⁵⁸⁷ Appendix No. 9, comparing risk appetite and VaR usage versus limits.
⁵⁸⁸ For a more detailed explanation of the changes in the risk appetite calculation, see Appendix 10, describing calculation of increased $4.0 billion risk appetite limit.
⁵⁸⁹ Paolo R. Tonucci, Lehman, 2008 Financial Plan Presentation (Jan. 29, 2008), at p. 1 [LBHI_SEC07940_068559].
⁵⁹⁰ E.g., Douglas Sipkin, Wachovia Capital Markets, L.L.C., Tough Year Ahead ‐ Sowing Seeds for Share Gains (Jan. 15, 2008), at p. 1 [LBEX‐DOCID 095883]; Appendix 10, describing calculation of increased $4.0 billion risk appetite limit.
⁵⁹¹ Lehman, 2008 Financial Plan Summary (Jan. 29, 2009), at p. 5 [LBHI_SEC07940_027374].
⁵⁹² Id.
⁵⁹³ Lehman Brothers Holdings Inc., Minutes of Meeting of Finance and Risk Committee of the Board of Directors (Jan. 29, 2008), at pp. 2‐3 [LBEX‐AM 067022]; Lehman, Additional Materials for the Finance and Risk Committee (Jan. 29, 2008), at p. 3 [LBEX‐AM 067260].
⁵⁹⁴ Lehman Brothers Holdings Inc., Minutes of Meeting of Board of Directors (Jan. 29, 2008), at p. 3 (LBHI_SEC07940_027446].
⁵⁹⁵ Id. at p. 8; Lehman, December 2007 Presentation to Lehman Board with Welikson's handwritten notes (Jan. 29, 2008), at p. 6 [WGM_LBEX_00708].
⁵⁹⁶ Lehman, 2008 Financial Plan Presentation to Finance and Risk Committee of the Board of Directors (Jan. 29, 2008), at p. 18 [LBHI_SEC07940_068559].
⁵⁹⁷ Id. at p. 19.
⁵⁹⁸ Lehman, Monthly Risk Review Package (Oct. 11, 2007), at p. 10 [LBEX‐SEC 007438] (noting Lehman "added a new stress test, called the Credit Crunch which is essentially Summer 2007"); Lehman, 2008 Financial Plan Presentation to Lehman Board of Directors [Draft] (Jan. 2008), at p. 5 [LBEX‐DOCID 384192], attached to e‐mail from Mark Weber, Lehman, to Jennifer Bale, Lehman, et al. (Jan. 16, 2008) [LBEX‐DOCID 306708].
⁵⁹⁹ Lehman, 2008 Financial Plan Summary (Jan. 29, 2008), at p. 11 [LBHI_SEC07940_027374].
⁶⁰⁰ Examiner's Interview of Sir Christopher Gent, Oct. 21, 2009, at p. 16; Examiner's Interview of Dr. Henry Kaufman, Sept. 2, 2009, at p. 2; Examiner's Interview of Roland A. Hernandez, Oct. 2, 2009, at p. 14; Examiner's Interview of John D. Macomber, Sept. 25, 2009, at p. 18.
⁶⁰¹ Examiner's Interview of Dr. Henry Kaufman, Sept. 2, 2009, at p. 2; Examiner's Interview of John Macomber, Sept. 25, 2009, at p. 2.
⁶⁰² Jeffrey A. Welikson, Lehman, Notes from the 2008 Financial Plan Presentation (Jan. 29, 2008), at p. 1 [WGM_LBEX_03249].
⁶⁰³ Examiner's Interview of Roger Nagioff, Sept. 30, 2009, at p. 20; Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 22 (Fuld indicated that Nagioff's decision to step down was entirely voluntary and was the result of Nagioff's frustration with his commute from London); Examiner's Interview of Sir Christopher Gent, Oct. 21, 2009, at p. 5 (Gent explained that, based on conversations with Nagioff, he believed Nagioff's resignation was entirely due to the logistical disruption of Nagioff's family life on account of his commute); Examiner's Interview of Hugh E. (Skip) McGee III, Aug. 12, 2009, at p. 13 (McGee denied that Nagioff's resignation had anything to do with Lehman's cessation of residential mortgage originations, and tied Nagioff's decision to the difficulty of Nagioff's commute); Examiner's Interview of John F. Akers, Apr. 22, 2009, at p. 2 (Akers expressed the belief that Nagioff left voluntarily and that his departure was mutual between him and management, but also noted that along with the commute from London, difficulty also arose because Nagioff failed to meet Fuld's expectations); Examiner's Interview of Eric Felder, May 21, 2009, at p. 6 (Felder indicated that Nagioff left Lehman voluntarily).
⁶⁰⁴ Transcript of deposition testimony of Alex Kirk, In re Lehman Brothers Holdings Inc., Case No. 08‐13555, Bankr. S.D.N.Y., Aug. 31, 2009, at pp. 7‐8.
⁶⁰⁵ E‐mail from Christopher M. O'Meara, Lehman, to Paul Shotton, Lehman, et al. (Oct. 2, 2007) [LBEX‐ DOCID 155020].
⁶⁰⁶ E‐mail from Christopher M. O'Meara, Lehman, to Paul Shotton, Lehman, et al. (Oct. 2, 2007) [LBEX‐ DOCID 155020].
⁶⁰⁷ E‐mail from Jeffrey Goodman, Lehman, to Mark Weber, Lehman, et al. (Oct. 22, 2007) [LBEX‐DOCID 318367].
⁶⁰⁸ Id.
⁶⁰⁹ Global Real Estate Group, Lehman, Global Real Estate Update (Nov. 6, 2007), at pp. 1, 2 [LBEX DOCID 514264], attached to e‐mail from Jeffrey Goodman, Lehman, to Madelyn Antoncic, Lehman, et al. (Nov. 6, 2007) [LBEX DOCID 531492]; e‐mail from Jonathan Cohen, Lehman, to Christopher M. O'Meara, Lehman, et al. (Nov. 3, 2007) [LBEX DOCID 523669] (indicating that Fuld was the intended audience of the presentation).
⁶¹⁰ Examiner's Interview of Erin M. Callan, Oct. 23, 2009, at pp. 10‐13.
⁶¹¹ Examiner's Interview of Richard S. Fuld, Jr., Dec. 9, 2009, at p. 10.
⁶¹² Examiner's Interview of Erin M. Callan, Oct. 23, 2009, at pp. 10‐13.
⁶¹³ Lehman, Q2 2008 Update (June 18, 2008), at p. 5 [LBEX‐DOCID 1302959], attached to e‐mail from Anu Jacob, Lehman, to Dennis Rodrigues, Lehman, et al. (July 8, 2008) [LBEX‐DOCID 1326944].
⁶¹⁴ Andrew J. Morton, Notes: First Sixty Days (Apr. 7, 2008), at p. 6 [LBEX‐DOCID 1734462], attached to e‐ mail from Gary Mandelblatt, Lehman, to Andrew J. Morton, Lehman, et al. (Apr. 7, 2008) [LBEX‐DOCID 1834937].
⁶¹⁵ Id. at p. 4.
⁶¹⁶ E‐mail from Clement Bernard, Lehman, to Andrew J. Morton, Lehman, et al. (Feb. 27, 2008) [LBEX‐ DOCID 1849839].
⁶¹⁷ Id.
⁶¹⁸ E‐mail from Mark A. Walsh, Lehman, to Andrew J. Morton, Lehman (Feb. 26, 2008) [LBHI_SEC07940_115814].
⁶¹⁹ E‐mail from Paul A. Hughson, Lehman, to Mark Gabbay, Lehman, et al. (Feb. 27, 2008) [LBEX‐DOCID 1869265] (discussing the schedule for the $5 billion reduction target); e‐mail from Paul A. Hughson, Lehman, to Mark Gabbay, Lehman, et al. (Mar. 7, 2008) [LBEX‐DOCID 1723168] (Hughson gives update on sales progress and asks for updates from others on their progress towards the $5 billion reduction target).
⁶²⁰ Examiner's Interview of Erin M. Callan, Oct. 23, 2009, at pp. 10, 11.
⁶²¹ Id. at p. 12; Examiner's Interview of Andrew J. Morton, Sept. 21, 2009, at p. 11.
⁶²² Examiner's Interview of Richard S. Fuld, Jr., Sept. 25, 2009, at p. 26.
⁶²³ Examiner's Interview of Erin M. Callan, Oct. 23, 2009, at pp. 11‐12.
⁶²⁴ E‐mail from Erin M. Callan, Lehman, to Joseph Gregory, Lehman, et al. (May 13, 2008) [LBHI_SEC07940_034732].
⁶²⁵ Examiner's Interview of Paul A. Hughson, Oct. 28, 2009, at p. 5; Lehman, Balance Sheet and Disclosure Scorecard for Trade Date June 23, 2008 (June 24, 2008), at p. 10 [LBEX‐DOCID 1742000], attached to e‐mail from Michael McGarvey, Lehman, to Paul Mitrokostas, Lehman, et al. (June 25, 2008) [LBEX‐DOCID 1856557]; e‐mail from Paul A. Hughson, Lehman, to Kentaro Umezaki, Lehman, et al. (Oct. 2, 2007) [LBEX‐DOCID 1809381]; e‐mail from Paul A. Hughson, Lehman, to Jonathan Cohen, Lehman (July 20, 2007) [LBEX‐DOCID 1426881].
⁶²⁶ Examiner's Interview of Mark A. Walsh, Oct. 21, 2009, at pp. 10‐11 (stating that he and Gregory realized at the time that halting originations was not as easy as flipping a switch).
⁶²⁷ Examiner's Interview of Erin M. Callan, Oct. 23, 2009, at p. 13; Examiner's Interview of Mark Weber, Aug. 11, 2009, at pp. 8‐9.
⁶²⁸ Memorandum from Timothy Lyons, Lehman, to David Goldfarb, Lehman, Strategic Imperatives for the Firm (July 3, 2008), at p. 1 [LBEX‐DOCID 1377945].
⁶²⁹ Examiner's Interview of David O'Reilly, Oct. 26, 2009, at p. 3; Examiner's Interview of Mark A. Walsh, Oct. 21, 2009, at p. 11; Examiner's Interview of Kenneth Cohen, Oct. 20, 2009, at p. 11; Examiner's Interview of Andrew J. Morton, Sept. 21, 2009, at pp. 19‐20 (Morton notes that Walsh knew by February 2008 that he would receive only a straight salary for 2008, with no bonus, thus Walsh had no compensation‐based incentive to inflate his marks). For a more detailed discussion of the effect of Lehman's officers' compensation structure on the incentive to take risks, see Appendix 11, Compensation.
⁶³⁰ Examiner's Interview of Kentaro Umezaki, June 25, 2009, at pp. 8‐9; Lehman, Global Consolidated Balance Sheet (May 31, 2007) [LBEX‐DOCID 276740]; e‐mail from Kentaro Umezaki, Lehman, to Kaushik Amin, Lehman, et al. (July 10, 2007) [LBEX‐DOCID 252873].
⁶³¹ Lehman, 2004 Fixed Income Division Compensation Scorecard (Undated) [LBEX‐DOCID 1748807].
⁶³² Lehman, COMPMETRICS Excel Spreadsheet (Undated), at pp. 1‐9 [LBEX‐LL 1054327]; Lehman, 2007 FID Forecast Budget Support Excel Spreadsheet (Undated), at pp. 1‐11 [LBEX‐BARCMP 0000001].
⁶³³ E‐mail from Kentaro Umezaki, Lehman, to Scott J. Freidheim, Lehman, et al. (Apr. 19, 2007) [LBEX‐ DOCID 318475].
⁶³⁴ Examiner's Interview of John D. Macomber, Sept. 25, 2009, at pp. 5, 22; Examiner's Interview of James Emmert, Oct. 9, 2009, at p. 2‐3.
⁶³⁵ See Section III.A.1.b.1.2 of this Report. The Examiner finds that Lehman's assumption of ever‐ increasing business risk did not come from the bottom up but rather from the top down. Similarly
⁶³⁶ Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 954 (Del. 1985) (quoting Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984)) (internal quotation marks omitted).
⁶³⁷ Id. (quoting Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971)); see the discussion of Delaware corporate fiduciary law in Appendix 1, Legal Issues.
⁶³⁸ Gantler v. Stephens, 965 A.2d 695, 709 (Del. 2009).
⁶³⁹ Cf. id. (holding that the fiduciary duties of officers and directors are identical).
⁶⁴⁰ See, e.g., McMullin v. Beran, 765 A.2d 910, 922 (Del. 2000); see also Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985), overruled on other grounds by Gantler, 965 A.2d at 713 n.54; Aronson, 473 A.2d at 812, overruled on other grounds by Brehm v. Eisner, 746 A.2d 244, 254 (Del. 2000). Ryan v. Gifford, 918 A.2d 341, 354 (Del. Ch. 2007); Massaro v. Vernitron Corp, 559 F. Supp. 1068, 1080 (D. Mass. 1983); Omnibank of Mantee v. United S. Bank, 607 So. 2d 76, 84‐85 (Miss. 1992) Cf. Mills Acquisition Co. v. MacMillan, Inc., 559 A.2d 1261, 1279 (Del. 1989) ("[J]udicial reluctance to assess the merits of a business decision ends in the face of illicit manipulation of a board's deliberative process by self‐interested corporate fiduciaries.").
⁶⁴¹ Unlike the directors, Lehman's officers are not immunized by Lehman's articles of incorporation from personal liability for breaching the duty of care. See Lehman Brothers Holdings Inc., Certificate of Incorporation, at § 10.1, Limitation of Liability of Directors.
⁶⁴² Van Gorkom, 488 A.2d at 873.
⁶⁴³ Tomczak v. Morton Thiokol, Inc., No. 7861, 1990 WL 42607, at *12 (Del. Ch. Apr. 5, 1990).
⁶⁴⁴ In re Citigroup Inc. S'holder Derivative Litig., 964 A.2d 106, 126 (Del. Ch. 2009) ("The essence of the business judgment of managers and directors is deciding how the company will evaluate the trade‐off between risk and return. Businesses – and particularly financial institutions – make returns by taking on risk; a company or investor that is willing to take on more risk can earn a higher return.").
⁶⁴⁵ E‐mail from Vincent DiMassimo, Lehman, to Christopher M. O'Meara, Lehman (Sept. 1, 2008) [LBEX‐ DOCID 203219].
⁶⁴⁶ E.g., SEC, Lehman Monthly Risk Review Meeting Notes (July 19, 2007), at p. 5 [LBEX‐SEC 007363] ("Jeff [Goodman] told us that . . . VaR is just one measure that Lehman uses, and is more of a speed bump/warning sign than a true, hard limit ‐‐ that role falls to RA [(i.e. risk appetite)]. [….] He said that Madelyn [Antoncic], Dave [Goldfarb], and the executive committee tend to look more at RA. As an aside, Madelyn came in after Jeff's explanation and gave virtually the same speech.").
⁶⁴⁷ Examiner's Interview of Richard S. Fuld, Jr., Sept. 30, 2009, at pp. 14‐15; Examiner's Interview of Joseph Gregory, Nov. 13, 2009, at pp. 7‐8; Examiner's Interview of Mark A. Walsh, Oct. 21, 2009, at pp. 7‐9.
⁶⁴⁸ See Mark Weber, Lehman, Chart Showing Risk Appetite Adjustment for Archstone (July 24, 2008) [LBEX‐DOCID 425705], attached to e‐mail from Mark Weber, Lehman, to PortfolioRisk Support, Lehman, et al. (July 24, 2008) [LBEX‐DOCID 265567] (showing that as a result of the inclusion of the Archstone positions into the firm's risk measurements, GREG's risk appetite usage increased from $689 million to $1.233 billion); e‐mail from Madelyn Antoncic, Lehman, to Roger Nagioff, Lehman, et al. (June 29, 2007) [LBEX‐DOCID 1478403]; e‐mail from Jeffrey Goodman, Lehman, to Mark A. Walsh, Lehman, et al. (June 29, 2007) [LBEX‐DOCID 2538925] (same).
⁶⁴⁹ Examiner's Interview of Jeffrey Goodman, Aug. 28, 2009; Examiner's Interview of David S. Lazarus, Nov. 18, 2009, at p. 4; Examiner's Interview of Paul A. Hughson, Oct. 28, 2009, at p. 4; Examiner's Interview of Kenneth Cohen, Oct. 20, 2009, at p. 6; Examiner's Interview of Mark Weber, Aug. 11, 2009, at p. 3.
⁶⁵⁰ Examiner's Interview of Mark Walsh, Oct. 21, 2009, at p. 5.
⁶⁵¹ Mark Weber, Lehman, Chart Showing Risk Appetite Adjustment for Archstone (July 24, 2008) [LBEX‐ DOCID 425705], attached to e‐mail from Mark Weber, Lehman, to PortfolioRisk Support, Lehman, et al. (July 24, 2008) [LBEX‐DOCID 265567]; accord Examiner's Interview of Jeffrey Goodman, Aug. 28, 2009; e‐ mail from Mark Weber, Lehman, to Laura Vecchio, Lehman, et al. (July 31, 2008) [LBEX‐DOCID 264849]; Lehman, Market Risk Control Committee Meeting Agenda (Nov. 12, 2007), at p. 17 [LBEX‐DOCID 271334], attached to e‐mail from Mark Weber, Lehman, to Paul Shotton, Lehman, et al. (Nov. 12, 2007) [LBEX‐DOCID 265289].
⁶⁵² Mark Weber, Lehman, Chart Showing Risk Appetite Adjustment for Archstone (July 24, 2008) [LBEX‐ DOCID 425705], attached to e‐mail from Mark Weber, Lehman, to PortfolioRisk Support, Lehman, et al. (July 24, 2008) [LBEX‐DOCID 265567]; see also e‐mail from Mark Weber, Lehman, to Laura Vecchio, Lehman, et al. (July 31, 2008) [LBEX‐DOCID 264849]; Lehman, Market Risk Control Committee Meeting Agenda (Nov. 12, 2007), at p. 17 [LBEX‐DOCID 271334], attached to e‐mail from Mark Weber, Lehman, to Paul Shotton, Lehman, et al. (Nov. 12, 2007) [LBEX‐DOCID 265289].
⁶⁵³ Mark Weber, Lehman, Chart Showing Risk Appetite Adjustment for Archstone (July 24, 2008) [LBEX‐ DOCID 425705], attached to e‐mail from Mark Weber, Lehman, to PortfolioRisk Support, Lehman, et al. (July 24, 2008) [LBEX‐DOCID 265567].
⁶⁵⁴ Joe Li, Lehman, STL Backtesting Excel Spreadsheet (July 25, 2007) [LBEX‐DOCID 2506462], attached to e‐mail from Joe Li, Lehman, to Fred S. Orlan, Lehman, et al. (July 25, 2007) [LBEX‐DOCID 2563167].
⁶⁶¹ E‐mail from Melda Elagoz, Lehman, to Stephen Lax, Lehman, et al. (June 21, 2007) [LBEX‐DOCID 2546617]; Examiner's Interview of Paul Shotton, Oct. 16, 2009, at pp. 4‐5.
⁶⁶² Lehman was required to conduct certain stress testing as part of its participation in the CSE program. See 17 C.F.R. 240.15c3‐1 (2007).
⁶⁶³ Examiner's Interview of Matthew Eichner, Nov. 23, 2009, at p. 12; Examiner's Interview of Paul Shotton, Oct. 16, 2009, at pp. 4‐5; Examiner's Interview of Jeffrey Goodman, Aug. 28, 2009.
⁶⁶⁴ Trenwick Am. Litig. Trust v. Ernst & Young, L.L.P., 906 A.2d 168, 193 (Del. Ch. 2006), aff'd sub nom. Trenwick Am. Litig. Trust v. Billett, 931 A.2d 438 (Del. 2007).
⁶⁶⁵ David Goldfarb, et al, Managing the Firm Presentation to Lehman Board of Directors (May 15, 2007), at p. 20 [LBHI_SEC07940_026136]
⁶⁶⁷ Examiner's Interview of Dr. Henry Kaufman, Dec. 22, 2009.
⁶⁶⁸ Examiner's Interview of John D. Macomber, Sept. 25, 2009, at pp. 6, 17.
⁶⁶⁹ See III.A.1.b of this Report.
⁶⁷⁰ In re Citigroup Inc. S'holder Derivative Litig., 964 A.2d 106, 126 (Del. Ch. 2009).
⁶⁷¹ Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985), overruled on other grounds, Gantler v. Stephens, 965 A.2d 695, 713 n.54 (Del. 2009).
⁶⁷² In re Caremark Int'l. Inc. Derivative Litig., 698 A.2d 959, 967 (Del. Ch. 1996).
⁶⁷³ Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 954 (Del. 1985) (quoting Sinclair Oil Corp. v. Levien, 280 A.2d 717, 720 (Del. 1971)). For a more detailed discussion of Delaware law governing corporate directors' fiduciary duties, see Appendix 1, Legal Issues.
⁶⁷⁴ Lehman Brothers Holdings Inc., Certificate of Incorporation, at § 10.1, Limitation of Liability of Directors.
⁶⁷⁵ See DEL. CODE ANN. tit. 8, § 102(b)(7) (2009).
⁶⁷⁶ See Stone ex rel. AmSouth Bancorporation v. Ritter, 911 A.2d 362, 367 (Del. 2006) ("Such a provision can exculpate directors from monetary liability for a breach of the duty of care, but not for conduct that is not in good faith or a breach of the duty of loyalty.").
⁶⁷⁷ See DEL. CODE ANN. tit. 8, § 141(e) (2009); see also Brehm v. Eisner, 746 A.2d 244, 261 (Del. 2000); In re Citigroup Inc. S'holder Derivative Litig., 964 A.2d 106, 132 & n.86 (Del. Ch. 2009).
⁶⁷⁸ Lyondell Chem. Co. v. Ryan, 970 A.2d 235, 243‐44 (Del. 2009) (quoting In re Lear Corp. S'holder Litig., 967 A.2d 640, 654‐55 (Del. Ch. 2008)).
⁶⁷⁹ Cede & Co. v. Technicolor, Inc., 634 A.2d 345, 361 (Del. 1993), modified on other grounds, 636 A.2d 956 (Del. 1994).
⁶⁸⁰ Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984), overruled on other grounds, Brehm v. Eisner, 746 A.2d 244, 254 (Del. 2000).
⁶⁸¹ See id.
⁶⁸² Globis Partners, L.P. v. Plumtree Software, Inc., No. 1577‐VCP, 2007 WL 4292024, at *5 (Del. Ch. Nov. 30, 2007).
⁶⁸³ See, e.g., Emerald Partners v. Berlin, 787 A.2d 85 (Del. 2001); Tooley v. AXA Fin., Inc., No. 18414, 2005 WL 1252378, at * 5 (Del. Ch. May 13, 2005).
⁶⁸⁴ Stone, 911 A.2d at 364‐65.
⁶⁸⁵ In re Citigroup Inc. S'holder Derivative Litig., 964 A.2d 106, 123 (Del. Ch. 2009) (quoting Stone, 911 A.2d at 370).
⁶⁸⁶ Stone, 911 A.2d at 370 (internal citations omitted).
⁶⁸⁷ Citigroup, 964 A.2d at 111.
⁶⁸⁸ Id.
⁶⁸⁹ Id. at p. 128.
⁶⁹⁰ Id. at p. 126.
⁶⁹¹ Id. at 128.
⁶⁹² Id. at 130.
⁶⁹³ Citigroup, 964 A.2d at 131.
⁶⁹⁴ Id. at p. 123.
⁶⁹⁵ Id.
⁶⁹⁶ See DEL. CODE ANN. tit. 8, § 141(e) (2009).