Federal Home Loan Bank of Pittsburgh,
Plaintiff,
V.
No. GD-09-016892
J.P. Morgan Securities LLC, J.P. Morgan
Mortgage Acquisition Corp., J.P. Morgan
Mortgage Acceptance Corporation I,
Chase Home Finance L.L.C., Chase
Mortgage Finance Corporation, JPMorgan
Chase & Co., Moody's Corporation,
Moody's Investors Service, Inc., The
McGraw-Hill Companies, Inc., and Fitch,
Inc.,
Defendants.
Plaintiff's Motion to Compel Compliance
Page 1
FPCFromClipboardUntitled
with the Court's October 17, 2013 Order
REDACTED VERSION
Federal Home Loan Bank of Pittsburgh,
Plaintiff,
V.
J.P. Morgan Securities LLC, JPMorgan
Chase & Co., Moody's Corporation,
Moody's Investors Service, Inc., and The
McGraw-Hill Companies, Inc.,
Defendants.
Federal Home Loan Bank of Pittsburgh,
Plaintiff,
V.
No. GD-09-016892
J.P. Morgan Securities LLC, J.P. Morgan
Mortgage Acquisition Corp., J.P. Morgan
Mortgage Acceptance Corporation I,
Chase Home Finance L.L.C., Chase
Mortgage Finance Corporation, JPMorgan
Chase & Co., Moody's Corporation,
Moody's Investors Service, Inc., The
McGraw-Hill Companies, Inc., and Fitch,
Inc.,
Defendants.
Plaintiff's Motion to Compel Compliance
Page 1
FPCFromClipboardUntitled
with the Court's October 17, 2013 Order
REDACTED VERSION
Federal Home Loan Bank of Pittsburgh,
Plaintiff,
V.
J.P. Morgan Securities LLC, JPMorgan
Chase & Co., Moody's Corporation,
Moody's Investors Service, Inc., and The
McGraw-Hill Companies, Inc.,
Defendants.
Federal Home Loan Bank of Pittsburgh,
Plaintiff,
V.
No. GD-09-016892
J.P. Morgan Securities LLC, J.P. Morgan
Mortgage Acquisition Corp., J.P. Morgan
Mortgage Acceptance Corporation I,
Chase Home Finance L.L.C., Chase
Mortgage Finance Corporation, JPMorgan
Chase & Co., Moody's Corporation,
Moody's Investors Service, Inc., The
McGraw-Hill Companies, Inc., and Fitch,
Inc.,
Defendants.
Plaintiff's Motion to Compel Compliance
Page 1
FPCFromClipboardUntitled
with the Court's October 17, 2013 Order
REDACTED VERSION
Federal Home Loan Bank of Pittsburgh,
Plaintiff,
V.
J.P. Morgan Securities LLC, JPMorgan
Chase & Co., Moody's Corporation,
Moody's Investors Service, Inc., and The
McGraw-Hill Companies, Inc.,
Defendants.
https://dcr.alleghenycounty.us/WebMomCacheDir/vol1319000 004F3.pdf. Google automatically generates html versions of documents as we crawl the web. Page 1 IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA CIVIL DIVISION - Commerce and Complex Litigation Center Judge R. Stanton Wettick, Jr. Federal Home Loan Bank of Pittsburgh, Plaintiff, V. No. GD-09-016892 J.P. Morgan Securities LLC, J.P. Morgan Mortgage Acquisition Corp., J.P. Morgan Mortgage Acceptance Corporation I, Chase Home Finance L.L.C., Chase Mortgage Finance Corporation, JPMorgan Chase & Co., Moody's Corporation, Moody's Investors Service, Inc., The McGraw-Hill Companies, Inc., and Fitch, Inc., Defendants. Plaintiff's Motion to Compel Compliance Page 1 FPCFromClipboardUntitled with the Court's October 17, 2013 Order REDACTED VERSION Federal Home Loan Bank of Pittsburgh, Plaintiff, V. J.P. Morgan Securities LLC, JPMorgan Chase & Co., Moody's Corporation, Moody's Investors Service, Inc., and The McGraw-Hill Companies, Inc., Defendants. CIVIL DIVISION - Commerce and Complex Litigation Center Judge R. Stanton Wettick, Jr. No. GD-09-016893 Served on behalf of Plaintiff. Counsel of record for this Party: Arthur H. Stroyd, Jr. (PA ID No. 15910) Justin T. Romano (PA ID No. 307879) Del Sole Cavanaugh Stroyd LLC The Waterfront Building 200 First Avenue, Suite 300 Pittsburgh, PA 15222 Tel: (412) 261-2393 Fax: (412) 261-2110 David W. Beehler (pro hac vice) Janet C. Evans (pro hac vice) Page 2 FPCFromClipboardUntitled Randall Tietjen (pro hac vice) Stacey P. Slaughter (pro hac vice) Page 2 Bruce D. Manning (pro hac vice) Robins, Kaplan, Miller & Ciresi L.L.P. 2800 LaSalle Plaza 800 LaSalle Avenue Minneapolis, MN 55402 Tel: (612) 349-8500 Fax: (612) 339-4181 Page 3 Federal Home Loan Bank of Pittsburgh, Plaintiff, V. No. GD-09-016892 CIVIL DIVISION - Commerce and Complex Litigation Center Judge R. Stanton Wettick, Jr. J.P. Morgan Securities LLC, J.P. Morgan Mortgage Acquisition Corp., J.P. Morgan Mortgage Acceptance Corporation I, Chase Home Finance L.L.C., Chase Mortgage Finance Corporation, JPMorgan Chase & Co., Moody's Corporation, Moody's Investors Service, Inc., The McGraw-Hill Companies, Inc., and Fitch, Page 3 FPCFromClipboardUntitled Inc., Defendants. Federal Home Loan Bank of Pittsburgh, Plaintiff, V: J.P. Morgan Securities LLC, JPMorgan Chase & Co., Moody's Corporation, Moody's Investors Service, Inc., and The McGraw-Hill Companies, Inc., Defendants. CIVIL DIVISION - Commerce and Complex Litigation Center Judge R. Stanton Wettick, Jr. No. GD-09-016893 IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA NOTICE OF PRESENTATION TO: All Defendants. PLEASE TAKE NOTICE that the within Plaintiff's Motion to Compel Compliance with the Court's October 17, 2013 Order [and response to JPMorgan's motion to vacate or amend the October 17, 2013 Order and for a Protective Order] against JPMorgan Securities L.L.C., and JPMorgan Chase & Co. will be presented to Page 4 FPCFromClipboardUntitled Page 4 Judge R. Stanton Wettick, Jr. on December 6, 2013 during the 2:00 p.m. add-on list in Courtroom 818 of the City-County Building, Pittsburgh, Pennsylvania 15219, or as soon thereafter as meets the convenience of the Court. Respectfully submitted, Dated: ii/OPI44r 2 2CV3 ROBINS, KAPLAN, MILLER & CREST L.L.P. David W. Beehler (pro hac vice) Janet C. Evans (pro hac vice) Randall Tietjen (pro hac vice) Stacey P. Slaughter (pro hac vice) Bruce D. Manning (pro hac vice) 2800 LaSalle Plaza 800 LaSalle Avenue Minneapolis, MN 55402 Tel: (612) 349-8500 Fax: (612) 339-4181 DEL SOLE CAVANAUGH STROYD LLC Arthur H. Stroyd, Jr. (PA ID No. 15910) Justin T. Romano (PA ID No. 307879) The Waterfront Building 200 First Avenue, Suite 300 Pittsburgh, PA 15222 Tel: (412) 261-2393 Page 5 FPCFromClipboardUntitled Fax: (412) 261-2110 Counsel of Record for Plaintiff 2 Page 5 CIVIL DIVISION - Commerce and Complex Litigation Center Judge R. Stanton Wettick, Jr. No. GD-09-016892 Federal Home Loan Bank of Pittsburgh, Plaintiff, V. J.P. Morgan Securities LLC, J.P. Morgan Mortgage Acquisition Corp., J.P. Morgan Mortgage Acceptance Corporation I, Chase Home Finance L.L.C., Chase Mortgage Finance Corporation, JPMorgan Chase & Co., Moody's Corporation, Moody's Investors Service, Inc., The McGraw-Hill Companies, Inc., and Fitch, Inc., Defendants. Federal Home Loan Bank of Pittsburgh, Plaintiff, v. J.P. Morgan Securities LLC, JPMorgan Chase & Co., Moody's Corporation, Page 6 FPCFromClipboardUntitled Moody's Investors Service, Inc., and The McGraw-Hill Companies, Inc., Defendants. CIVIL DIVISION - Commerce and Complex Litigation Center Judge R. Stanton Wettick, Jr. No. GD-09-016893 IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA Plaintiff's REDACTED Motion to Compel Compliance with the Court's October 17, 2013 Order [and response to JPMorgan's motion to vacate or amend the October 17, 2013 Order and for a Protective Order] Plaintiff, Federal Home Loan Bank of Pittsburgh ("Pittsburgh FHLB"), by and through its undersigned counsel, will present the within Motion to Compel Compliance with the Court's October 17, 2013 Order: 3 Page 6 Introduction 1. JPMorgan has refused to comply with this Court's October 17, 2013 Order, which required JPMorgan to produce the draft complaint it Page 7 FPCFromClipboardUntitled received from the Department of Justice. JPMorgan wants to revisit the arguments that it previously made as to whether the draft complaint is reasonably calculated to lead to the discovery of admissible evidence arguments that this Court has already rejected. JPMorgan also now attempts to stand in the shoes of the U.S. government and argues that the policy favoring settlements should hide the draft complaint from view. But the Department of Justice, which authored the draft complaint and provided it to JPMorgan, has explicitly stated to Pittsburgh FHLB's General Counsel, Dana Yealy, that it will not intervene in this motion to argue that the draft complaint should not be disclosed. (Mr. Yealy has submitted an affidavit to that effect with this motion). Public policy the interests of full disclosure and transparency demands just the opposite of what JPMorgan seeks. The circumstances of this motion therefore lead to one obvious question what is JPMorgan trying to hide? Pittsburgh FHLB granted an extension of time for the production of the draft Page 8 FPCFromClipboardUntitled complaint to accommodate the DOJ's interest in resolving its claims with JPMorgan. 2. At the status conference on October 17, 2013, arguments were held on the motion of Pittsburgh FHLB to compel the production of the documents that JPMorgan produced to the DOJ. Counsel for JPMorgan argued that the negotiations with the DOJ involved unrelated trusts. To determine whether the documents produced to the DOJ might be relevant, the Court ordered, as an interim step, that JPMorgan produce the draft complaint that had been mentioned in the press. Counsel for JPMorgan stated that they were not aware of the existence of any such draft complaint, but the Court ordered JPMorgan to produce it by November 6, or advise that it did not exist. 4 Page 7 3. On November 1, Pittsburgh FHLB's general counsel, Dana Yealy, received a call from a DOJ attorney involved in the DOJ's investigation Page 9 FPCFromClipboardUntitled and potential action against JPMorgan. (Yealy Affidavit 411 2.) The DOJ attorney cautioned Mr. Yealy not to reveal the content of the call to anyone. (Yealy Affidavit if 3.) 4. Following that call, that same day, Mr. Yealy received a phone call from JPMorgan's in-house counsel, Alyssa Kelman, indicating that she understood that Pittsburgh FHLB would agree to an extension of time for the production of the draft complaint until November 15, 2013. (Yealy Affidavit 11 4.) 5. Then, on November 14, Mr. Yealy received another call this time from a DOJ attorney in Washington D.C. in charge of the negotiations with JPMorgan, and the person who ultimately signed the settlement agreement with JPMorgan on behalf of the United States. That attorney explained that the DOJ and JPMorgan were very close to finalizing their settlement negotiations, and it would mean everything to him if Pittsburgh FHLB granted another week extension for the production of the draft complaint. The DOJ attorney stated explicitly that if Pittsburgh Page 10 FPCFromClipboardUntitled FHLB would grant this additional extension, the DOJ would not intervene to urge this Court to vacate its order. Pittsburgh FHLB agreed to grant the DOJ this accommodation, by extending the time for production of the draft complaint to November 22, 2013. (Yealy Affidavit If 5.) 6. On Tuesday, November 19, the settlement with JPMorgan was publicly announced. (Yealy Affidavit 411 6.) 7. Nevertheless, JPMorgan did not produce the draft complaint and on Friday, November 22, requested another extension of time for its production. Pittsburgh FHLB declined to grant an additional extension, and later that day, at about 9:00 p.m., JPMorgan served a motion to vacate or amend the October 17, 2013 order and set a hearing date for January 10, 2014. (Yealy Affidavit If 7.) 8. Pittsburgh FHLB has brought its own motion to compel compliance with the Court's order because it cannot wait until January 10, 2014 (the date set by Page 11 FPCFromClipboardUntitled 5 Page 8 JPMorgan for its motion to vacate) to have this issue resolved. The Court has established the end of February 2014 as the deadline for the completion of depositions and Pittsburgh FHLB has been working to meet that deadline. If the draft complaint reveals that there are relevant documents produced by JPMorgan to the DOJ or witnesses whose testimony may be relevant in this case, then those documents need to be produced and the witnesses identified sooner, rather than later, so that the parties can meet the end-of-February deadline. Resolution of this issue in January 2014 is too late to allow meaningful production and review of any additional documents. Production of the draft complaint is reasonably calculated to lead to the discovery of admissible evidence. 9. JPMorgan makes two contradictory arguments about what the draft complaint might show. On the one hand, it argues that the DOJ's claims are not Page 12 FPCFromClipboardUntitled relevant to these proceedings and then on the other hand it argues that the Statement of Facts accompanying the DOJ's Settlement Agreementfacts to which JPMorgan has admittedmake the production of the draft complaint unnecessary. The first argument merely repeats what JPMorgan argued on October 17, 2013, and neither the first nor the second argument is persuasive. In fact, the DOJ's Settlement Agreement and Statement of Facts give even more reason to believe that the draft complaint will lead to the discovery of admissible evidence. 10. The Settlement Agreement makes plain that the claims of the United States (and the other settling parties) against JPMorgan do relate to the trusts at issue before this Court. The Settlement Agreement provides for releases of claims by the settling parties arising out of "Covered Conduct." "Covered Conduct" is defined as the // creation, pooling, structuring, packaging, marketing, underwriting, sale or issuance by JPMorgan . . of the RMBS . . . identified in Annex 3." (Yealy Affidavit Ex. A.) In Annex 3, each of the JPMorgan deals at issue in the litigation before Page 13 FPCFromClipboardUntitled this Court is identified: 6 Page 9 JPMMT 2006-A4, JPMMT 2006-S2, JPMMT 2007-A5, JPMMT 2007-A6, CMFT 2007-A3, and INDX 2006-AR29. (Yealy Affidavit Ex. C.) In other words, the conduct and the deals that are at issue in the cases before this Court are covered by the DOJ's settlement with JPMorgan. 11. In her affidavit, Alyssa Kelman, JPMorgan's Assistant General Counsel, does not provide the Court with the entire Settlement Agreement which reflects this fact nor does she mention this fact, much less attach Annex 3. Similarly, nowhere in the 19- page motion filed by JPMorgan does it mention this fact. Instead, JPMorgan and Ms. Kelman suggest that the settlement involved only 10 unrelated trusts. That is simply not true. JPMorgan's conduct with respect to the trusts at issue here is expressly identified as "Covered Conduct." (Although the settling parties to the DOJ's settlement apparently will or have received compensation from JPMorgan Page 14 FPCFromClipboardUntitled for the "Covered Conduct," Pittsburgh FHLB has not.) 12. The DOJ's Statement of Facts also makes it plain that the draft complaint is reasonably calculated to lead to the discovery of admissible evidence. The Statement of Facts is remarkably consistent with the facts that Pittsburgh FHLB has discovered in this litigation. The Statement of Facts recites that between 2005 and 2007, JPMorgan securitized mortgage loans and sold the resulting RMBS to investors, and failed to disclose to investors that the loans were not issued in accordance with the originator's underwriting standards. (Yealy Affidavit Ex. B.) This is exactly what Pittsburgh FHLB alleges in its complaints against JPMorgan. 13. In addition, the Statement of Facts describes JPMorgan's "due diligence" process for deals backed by subprime and Alt-A loans, which is the same process that JPMorgan used on the deals that are at issue in this case. JPMorgan admits to the following: Page 15 FPCFromClipboardUntitled Through that due diligence process, JPMorgan employees were informed by due diligence vendors that a number of the loans included in at least 7 Page 10 some of the loan pools that it purchased and subsequently securitized did not comply with the originators' underwriting guidelines, and, in the vendors' judgment, did not have sufficient compensating factors, and that a number of the properties securing the loans had appraised values that were higher than the values derived in due diligence testing from automated valuation models, broker price opinions or other valuation due diligence methods. (Yealy Affidavit Ex. B.) While it is certainly helpful that JPMorgan has admitted to this conduct, the Statement of Facts is quite general and does not refer to any particular employees, documents, or events that support this factual statement. The draft complaint likely does so. Page 16 FPCFromClipboardUntitled 14. The Statement of Facts also includes this description of a deal involving many "stated-income" loans: In one instance, JPMorgan's due diligence revealed that several pools from a single third-party originator contained numerous stated income loans (i.e., loans originated without written proof of the borrower's income) where the vendor had concluded that borrowers had overstated their incomes. Initially, due diligence employees and at least two JPMorgan managers decided that these pools should be reviewed in their entirety, and all unreasonable stated income loans eliminated before the pools were purchased. After the originator of the loan pools objected, JPMorgan Managing Directors in due diligence, trading, and sales met with representatives of the originator to discuss the loans, then agreed to purchase two loan pools without reviewing those loan pools in their Page 17 FPCFromClipboardUntitled entirety as JPMorgan due diligence employees and managers had previously decided; waived a number of the stated income loans into the pools; purchased the pools; and subsequently securitized hundreds of millions of dollars of loans from those pools into one security. In addition, JPMorgan obtained an agreement from the originator to extend contractual repurchase rights for early payment defaults for an additional three months. (Yealy Affidavit Ex. B.) 15. All of the JPMorgan trusts at issue here also contained many "stated- income" loans, and Pittsburgh FHLB has discovered facts which show significant concern on the part of JPMorgan employees about material misrepresentations 8 Page 11 regarding borrowers' reported income levels, and about the performance of certain stated income loan programs. The Statement of Facts does not provide any details about Page 18 FPCFromClipboardUntitled the originator, the vendor, the loan program, or the employees involved. The draft complaint may do so. And even if those facts relate to a different trust or a different program, the knowledge of the employees would certainly be relevant to Pittsburgh FHLB's claim of fraud, and would support Pittsburgh FHLB's position that JPMorgan's conduct with respect to the trusts at issue in this case was not unique, but rather was part of a pattern of fraudulent conduct, involving its entire mortgage platform and related companies, which should be deterred by an award of punitive damages. 16. The lack of specificity in the Statement of Facts has led others to question what it was the DOJ actually found in its investigation that caused JPMorgan to pay $13 billion. Gretchen Morgenson, writing in the New York Times on November 23, 2013 found the Statement of Facts unsatisfying: Eager to see what the Justice investigation had found, I consulted the statement of facts that accompanied the settlement and that JPMorgan had Page 19 FPCFromClipboardUntitled to acknowledge. There, I reckoned, would be some juicy, new evidence of the bank's mortgage misdeeds "uncovered" by assiduous investigators armed with subpoena power and other government might. Perusing the 11-page document, I quickly saw that I'd reckoned wrong. Much of it was the same-old-same-old, a not-very-lively description of a corrupted Wall Street mortgage factory, based largely on some facts that have been in the public domain for years. In other words, although it took the Justice Department more than five years to pursue a major bank for its role in the mortgage mania, the investigation seems to have unearthed material that, by and large, could have been dug up with a spoon. (Ex. A, attached.) 17. Given the DOJ's desire not to have the draft complaint become public until after the settlement was reached, and given JPMorgan's apparent deep desire to prevent it from ever seeing the light of day, it would not be at Page 20 FPCFromClipboardUntitled all surprising if the draft 9 Page 12 complaint is a much more detailed account of JPMorgan's fraudulent conduct, and as such, far more enlightening than the Statement of Facts. JPMorgan cannot make the policy arguments that belong to the U.S. government, and in any event, the public policy of promoting settlements will not be harmed by the production of the draft complaint. 18. Pittsburgh FHLB has plainly shown that the draft complaint is reasonably likely to lead to the discovery of admissible evidence, and that the DOJ's Statement of Facts does not serve as a substitute for the draft complaint. But JPMorgan still argues that the production of the draft complaint would offend the policy of promoting settlements, and resorts to the laws of other states in support of this argument. The laws of other states are not controlling regarding this specific discovery dispute in Pennsylvania state court nor, in this context, is federal law. For this issue, the only law Page 21 FPCFromClipboardUntitled that is relevant is Pennsylvania law, and particularly the rule of civil procedure that allows discovery of materials that are reasonably calculated to lead to the discovery of admissible evidence. Pa.R.C.P. 4003.1(b)("It is not ground for objection that the information sought [in discovery] will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence."). In addition, a substantial body of persuasive authority holds that "neither public policy concerns over the confidentiality of settlement agreements nor limits on the admissibility of settlement materials at trial necessarily prohibits the disclosure of settlement documents during the discovery process." 6-26 Moore's Federal Practice - Civil 26.42. But even if the laws of other states were controlling on this Court, the production of the draft complaint would not make settlements in this case, or in other cases, less likely. 19. Several important facts make this situation different than the fact patterns in virtually every case cited by JPMorgan: Page 22 FPCFromClipboardUntitled 10 Page 13 a. First, the settlement between the DOJ and JPMorgan has been completed. Pittsburgh FHLB granted the extensions on the production of the draft complaint to accommodate the DOrs concerns that disclosure of the draft complaint may interfere with its negotiations. But now that the settlement is completed, those concerns are gone. This is not like a situation where one party is attempting to use information it learned in settlement negotiations to its advantage at trial. The DOJ and JPMorgan have settled; there will be no trial of the United States' claims. b. Second, the draft complaint is not a statement of compromise or confession by JPMorgan made during settlement negotiations that is now going to be used against it. The draft complaint is the work of the DOJ, and presumably is based on its review of the thousands of documents that JPMorgan produced to it, the witnesses it interviewed, and experts it Page 23 FPCFromClipboardUntitled consulted. Pittsburgh FHLB fully expects JPMorgan to deny the allegations of the draft complaint. c. Third, the draft complaint may have been work product at one time, but that work product privilege was waived when the document was produced to JPMorgan. See Commonwealth v. Kennedy, 583 Pa. 208, 219 (Pa. 2005) ("[T]he work product doctrine is not absolute but, rather, is a qualified privilege that may be waived."). d. Fourth, the confidentiality agreement under which JPMorgan received the document was an agreement made for the benefit of the DOJ. The DOJ wanted JPMorgan to use the draft complaint solely to evaluate settlement. The settlement has been completed and the DOJ has now advised Pittsburgh FHLB that it will not intervene and will not urge the Court to prohibit disclosure of the document. 11 Page 14 e. Fifth, a confidentiality agreement between parties does not Page 24 FPCFromClipboardUntitled prevent a court from ordering production of a document that is reasonably likely to lead to the production of admissible evidence. See, e.g., Thermal Design, Inc. v. Guardian Bid. Prods., Inc., 270 F.R.D. 437, 438-39 (E.D. Wis. 2010) ("the Court agrees with the cases which find that there is no federal privilege preventing the discovery of settlement agreements and related documents"). The court is not bound by the parties' private agreements. f. Sixth, although the draft complaint was part of the negotiations between the DOJ and JPMorgan, Rule 408 deals only with the admissibility of evidence at trial, and does not prohibit the discovery of settlement communications that may lead to the discovery of admissible evidence. See, e.g., Small v. Nobel Biocare USA, LLC, 808 F. Supp. 2d 584, 586-87 (S.D.N.Y. 2011) (holding that a settlement agreement was discoverable, rejecting a heightened showing of relevance, and ordering its production). Pittsburgh FHLB has no intention of attempting to offer Page 25 FPCFromClipboardUntitled the draft complaint into evidence at trial. It wants the draft complaint to determine whether there are witnesses or documents that are relevant to the proof of its claims. Public policy demands that the draft complaint be produced without any confidentiality restrictions. 20. The most important public policy at issue here is transparency what did the DOJ actually learn about JPMorgan's conduct which caused JPMorgan to pay $13 billion? The Statement of Facts does not answer this question. As the New York Times article states, these facts have been known for some time. The draft complaint most likely provides a rich source of detailed facts about JPMorgan's conduct that have not yet been made public. And those facts should be made public, not only to aid private litigants such as Pittsburgh FHLB in the pursuit of their claims, but also to inform the 12 Page 15 public of the basis for the DOJ's settlement. The government Page 26 FPCFromClipboardUntitled has made it clear that it supports transparency. A DOJ attorney explicitly stated to Mr. Yealy that the DOJ would not intervene here to prevent the production of the draft complaint. Moreover, just recently President Obama and Attorney General Holder directed federal agencies to apply a presumption of openness and not to withhold information requested under the Freedom Of Information Act. See http: / webcache.googleusercontent.com/ search?q=cache:iB0 9kILb9UJ:www.foia.gov /faq.html+&cd=6&h1=en&ct=c1nk&gl=us. In addition, it is common for a federal agency to disclose its draft complaint in connection with a settlement or consent decree, to allow the public to understand the basis for the settlement. See e.g. Nielsen Holdings N. V., a Corporation and Aribtron Inc., a Corporation; Analysis of Agreement Containing Consent Order To Aid Public Comment, a proceeding before the Federal Trade Commission. 78 FR 59690 (September 13, 2013). 21. For public policy reasons, the draft complaint should be produced Page 27 FPCFromClipboardUntitled without any confidentiality restrictions. It should be a public document. JPMor an has also not corn 'lied with the Court's order 22. Finally, pursuant to this Court's October 17 order, JPMorgan informed Pittsburgh FHLB on October 24, 2013: 13 Page 16 ROBINS, KAPLAN, MILT ER 8.r CIRESI L.L.P. ( 23. On the same date and in response to JPMorgan's communication, Pittsburgh FHLB responded: As of this writing, JPMorgan has not responded. JPMorgan is substantially in non-compliance with this portion of the Court's October 17 Order with respect to Conclusion The draft complaint is reasonably calculated to lead to the discovery of admissible evidence and public policy demands that the draft complaint be produced, without any confidentiality restriction. Accordingly, Pittsburgh FHLB respectfully Page 28 FPCFromClipboardUntitled requests that this Court issue an order that compels JPMorgan to act in compliance with its October 17 Order regarding the DOJ's draft complaint and Respectfully submitted, Dated: trGUO-kbat 26? 201S David W. Beehler (pro hac vice) Janet C. Evans (pro hac vice) Randall Tietjen (pro hac vice) Stacey P. Slaughter (pro hac vice) Bruce D. Manning (pro hac vice) 2800 LaSalle Plaza 800 LaSalle Avenue Minneapolis, MN 55402 Tel: (612) 349-8500 Fax: (612) 339-4181 14 Page 17 DEL SOLE CAVANAUGH STROYD LLC Arthur H. Stroyd, Jr. (PA ID No. 15910) Justin T. Romano (PA ID No. 307879) The Waterfront Building 200 First Avenue, Suite 300 Pittsburgh, PA 15222 Tel: (412) 261-2393 Fax: (412) 261-2110 Counsel of Record for Plaintiff Page 29 FPCFromClipboardUntitled 15 Page 18 84379782.1 IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA Federal Home Loan Bank of Pittsburgh, Plaintiff, v. J.P. Morgan Securities LLC, J.P. Morgan Mortgage Acquisition Corp., J.P. Morgan Mortgage Acceptance Corporation I, Chase Home Finance L.L.C., Chase Mortgage Finance Corporation, JPMorgan Chase & Co., Moodys Corporation, Moodys Investors Service, Inc., The McGraw-Hill Companies, Inc., and Fitch, Inc., Defendants. _____________________________________ Federal Home Loan Bank of Pittsburgh, Plaintiff, v. J.P. Morgan Securities LLC, JPMorgan Chase & Co., Moodys Corporation, Moodys Investors Service, Inc., and The McGraw-Hill Companies, Inc., Page 30 FPCFromClipboardUntitled Defendants. CIVIL DIVISION Commerce and Complex Litigation Center Judge R. Stanton Wettick, Jr. No. GD-09-016892 CIVIL DIVISION Commerce and Complex Litigation Center Judge R. Stanton Wettick, Jr. No. GD-09-016893 ORDER AND NOW, this 6th day of December, upon consideration of Plaintiff Federal Home Loan Bank of Pittsburghs Motion to Compel Compliance with the Courts October 17, 2013 Order, it is hereby ORDERED, ADJUDGED and DECREED that Page 19 84379782.1 Defendants JPMorgan Chase & Co. and JPMorgan Securities, Inc. shall comply with this Courts ruling of October 17, 2013 by producing the draft complaint by the Department of Justice and the name of the confidential informant referenced by the Department of Justice no later than Monday, December 9, 2013. BY THE COURT: Page 31 FPCFromClipboardUntitled ___________________, J Page 20 CERTIFICATE OF SERVICE I hereby certify that on WO V 24' ,2013, the undersigned caused to be served a true and correct copy of the foregoing Plaintiff's REDACTED Motion to Compel Compliance with the Court's October 17, 2013 Order via electronic mail on: * Samuel W. Braver, Esq. [email protected] * Deborah A. Little, Esq. [email protected] Counsel for Defendants J.P. Morgan Securities LLC, J.P. Morgan Mortgage Acquisition Corp., J.P. Morgan Mortgage Acceptance Corporation I, Chase Home Finance L.L.C., Chase Mortgage Finance Corporation, and JP Morgan Chase & Co. in GD-09-16892 and GD-09-16893 A. Robert Pietrzak, Esq. [email protected] Dorothy J. Spenner, Esq. [email protected] Joseph Karim Aoun, Esq. [email protected] Page 32 FPCFromClipboardUntitled Tom A. Paskowitz, Esq. [email protected] Kenneth B. Meyer, Esq. [email protected] Counsel for Defendants J.P. Morgan Securities LLC, J.P. Morgan Mortgage Acquisition Corp., J.P. Morgan Mortgage Acceptance Corporation I, Chase Home Finance L.L.C., Chase Mortgage Finance Corporation, and JP Morgan Chase & Co. in GD-09-16892 Robert F. Serb, Esq. [email protected] Jeremy Stamelman, Esq. [email protected] Lauren M. Sager, Esq. [email protected] Counsel for Defendants J.P. Morgan Securities LLC and JPMorgan Chase & Co. in GD-09-16893 Mark A. Willard, Esq. [email protected] Joshua M. Rubins, Esq. [email protected] James J. Coster, Esq. [email protected] Page 33 FPCFromClipboardUntitled James Regan, Esq. [email protected] Nathan Berkebile, Esq. [email protected] M. J. Williams, Esq. [email protected] Mario Aieta, Esq. [email protected] Jennifer P. McArdle, Esq. [email protected] Counsel for Defendants Moody's Corporation and Moody's Investors Service, Inc. in GD-09-16892, GD-09-16893 * Walter P. DeForest, Esq. [email protected] Floyd Abrams, Esq. [email protected] Susan Buckley, Esq. [email protected] Tammy L. Roy, Esq. [email protected] 16 Page 21 Whitney Morgan Smith, Esq. S. Penny Windle, Esq. Etienne Barg-Townsend, Esq. Page 34 FPCFromClipboardUntitled Elizabeth Cusack, Esq. David R. Owen, Esq. Philip V. Tisne, Esq. [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] Counsel for Defendant The McGraw-Hill Companies, Inc. in GD-09-16892, GD-09-16893 * Elizabeth Collura, Esq. Martin Flumenbaum, Esq. Roberta A. Kaplan, Esq. Andrew J. Ehrlich, Esq. Julia Tarver-Mason Wood, Esq. Timothy J. Holland, Esq. Christopher L. Filburn, Esq. Erin E. White, Esq. Luke X. Flynn-Fitzsimmons, Esq. Donna Ioffredo, Esq. Mark S. Silver, Esq. Katherine H. Stella, Esq. [email protected] [email protected] [email protected] Page 35 FPCFromClipboardUntitled [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] Counsel for Defendant Fitch, Inc. in GD-09-16892 * indicates local counsel dill,hte_-. tfifde/if By: 84386031.1 17 Page 22 EXHIBIT A Page 23 November 23, 2013 $13 Billion, Yes, but What Took So Long? By GRETCHEN MORGENSON After weeks of pre-deal chatter about its $13 billion settlement with JPMorgan Chase, the Justice Department finally nailed it down last week. And for the first time, the department provided a Page 36 FPCFromClipboardUntitled glimpse of the investigatory findings upon which the settlement was based. Without a doubt, Eric H. Holder Jr., the attorney general, said in a statement, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown. Eager to see what the Justice investigation had found, I consulted the statement of facts that accompanied the settlement and that JPMorgan had to acknowledge. There, I reckoned, would be some juicy, new evidence of the banks mortgage misdeeds uncovered by assiduous investigators armed with subpoena power and other government might. Perusing the 11-page document, I quickly saw that Id reckoned wrong. Much of it was the same- old-same-old, a not-very-lively description of a corrupted Wall Street mortgage factory, based largely on some facts that have been in the public domain for years. In other words, although it took the Justice Department more than five years to pursue a major bank for its role in the mortgage mania, the investigation seems to have unearthed material that, by and large, could have been dug up with a spoon. The facts here are all stuff we knew years ago, said Kurt Page 37 FPCFromClipboardUntitled Eggert, a professor at the Chapman University law school who testified about mortgage woes before the Financial Crisis Inquiry Commission in 2010. So you have to ask, Why has it taken so long to hold a bank accountable? A good question. A spokeswoman for the Justice Department did not return a phone call seeking comment. Of course, the government is to be commended for taking action. Expectations had gotten so low for the Justice Department that I cant help but be a little pleased that theyve done something, said Jeff Connaughton, author of The Payoff: Why Wall Street Always Wins, who was chief of staff to Ted Kaufman, a former Democratic senator from Delaware. Yes, its thin and weak, but its also the first time in five years they havent completely rolled over. Still, the meager set of facts cited by the government is surprising. And when you compare the Justice Departments statement with some of the meaty lawsuits that have been filed against banks by investors and some state securities regulators, its thin gruel indeed. Page 1 of 3 $13 Billion, Yes, but What Took So Long? - NYTimes.com Page 38 FPCFromClipboardUntitled 11/25/2013 http://www.nytimes.com/2013/11/24/business/13-billion-from- jpmorgan-chase-yes-but-w... Page 24 The earlier suits, for example, are brimming with facts, figures and telling accounts from former bank insiders turned confidential witnesses. A case brought against Morgan Stanley more than three years ago by Martha Coakley, the Massachusetts attorney general, was especially revelatory and damning in its details. For example, when a mortgage originator threatened to take its business elsewhere after Morgan Stanley questioned the quality of its loans, the bank quickly capitulated and accepted the loans. Morgan Stanley paid $102 million to settle that one state complaint in June 2010. Among the many private lawsuits is one filed in January 2012 by Dexia, a European bank that lost money on mortgage securities. That case, like the Justice Department matter, was aimed at JPMorgan as well as its Bear Stearns and Washington Mutual units. Reading the Dexia suit alongside the Justice Departments fact statement is an interesting exercise. For example, lawyers for Dexia cited 23 confidential Page 39 FPCFromClipboardUntitled witnesses in their complaint. By contrast, the Justice Department cited one unnamed former employee in its account. Then theres the surprisingly narrow breadth of the securities scrutinized by the Justice Department. While the Dexia case reviewed 53 different securitizations underwritten and sold by JPMorgan, Bear Stearns and WaMu, the government examined only 10. By the way, six of the 10 troubled mortgage pools cited by Justice also figured in the Dexia case. The 10 securities examined by the Justice Department totaled $10.28 billion. That might sound like a lot, but its a drop in the $325 billion flood of mortgage securities packaged and sold by Bear Stearns, WaMu and JPMorgan Chase from 2005 to 2007. Among the few figures cited by the Justice Department were those from due-diligence reports provided to JPMorgan by outside firms examining mortgages that were destined for securitization. These reports were supposed to be a quality-control mechanism so underwriters could be assured that they were selling investors the kinds of loans they expected. But in actuality, banks often ignored the analyses. In its statement of facts, the Justice Department highlighted Page 40 FPCFromClipboardUntitled one such report covering all of 2006 and the first half of 2007. It said the report showed that more than 6,000 of the loans purchased by JPMorgan in that period had not met the underwriting standards promised to investors. Yet, the department said, the bank accepted 3,238 of those loans for use in its pools. These are disturbing figures, but they arent new. Although the Justice Department doesnt identify where it got them, they appear to have come from a report provided to the crisis inquiry commission more than three years ago. The report has been available on the Internet since then. Page 2 of 3 $13 Billion, Yes, but What Took So Long? - NYTimes.com 11/25/2013 http://www.nytimes.com/2013/11/24/business/13-billion-from- jpmorgan-chase-yes-but-w... Page 25 The facts emerged at a commission hearing in Sacramento on Sept. 23, 2010, in testimony by two officials from Clayton Holdings, a major due-diligence firm. D. Keith Johnson, a former president of the firm, was one of them, and his presentation was explosive. Providing private data from a Clayton report, he showed how Page 41 FPCFromClipboardUntitled over a dozen institutions disregarded the problems identified by the due-diligence firm. The institutions accepted thousands of loans that should have been rejected for use in the securities sold to investors. Its hard to analyze whether the $13 billion is a good deal for the government or for JPMorgan. Theres nothing wrong, of course, with the government recycling well-known facts to drag a bank that behaved badly to the negotiating table. Had the Justice Department aggressively investigated the banks practices using its full array of powers, who knows how much more it could have generated? Byron S. Georgiou, a lawyer and former member of the crisis commission who runs Georgiou Enterprises, said he was glad the commissions findings helped the Justice Department pursue JPMorgan. It is much better late than never that the Justice Department has extracted from JPMorgan Chase the largest financial penalty ever paid by any private-sector entity to any government anywhere in the world, Mr. Georgiou said. I look forward to the conclusion of more such prosecutions of the many other financial institutions that Page 42 FPCFromClipboardUntitled remain at large, and are just as deserving to be held accountable to the American people for their knowing, deliberate deceptions. Page 3 of 3 $13 Billion, Yes, but What Took So Long? - NYTimes.com 11/25/2013 http://www.nytimes.com/2013/11/24/business/13-billion-from- jpmorgan-chase-yes-but-w... Page 26 EXHIBIT B Page 27 Filed under Seal: Portions of this transcript are redacted pursuant to Protective Order Page 28 From: Sntnnw. Domihv I. To: Fvms Ian* f Cc: -.:-..- ' - '.: .- _ Page 43 FPCFromClipboardUntitled Subject: FMLB Pittsburgh v. If Morgan et al,Ca* No. GD-09-16S92 and FHLB Pittsburgh v. J? Morgan al, CaseNo. GD-M-16S93 Date: Thursday, October 24. 2013 12:46:12 PM Jan: Best regards, Dorothy Doiolhy J. Spenner Sidlcy Austin LLP 787 Seventh Avenue New York. NY 10019 Phone: (212) 839-7375 Fa*. (212)839-5599 ([email protected] IRS Circular 230 Disclosure: To comply with certain U.S. Treasury regulations, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this communication, including attachments, was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding any penalties that may be imposed on such taxpayer by the Internal Revenue Service. In addition, ifany such tax advice is used or referred Page 44 FPCFromClipboardUntitled to by other partiesin promoting, marketing or recommending any partnership or other entity, investment plan or arrangement, then (i) the advice should be construed as written in connection with the promotion or marketing by others of the transaction(s) or matter(s) addressed in this communication and (ii) the taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. ******x*************************************** **************** a******************************* This e-mail is sent by a law firm and may contain information that is privileged or confidential. If you are notthe intended recipient, please delete the e-mail and anyattachments and notify us immediately. Page 29 EXHIBIT C Page 30 Filed under Seal: Portions of this transcript are redacted pursuant to Protective Order Page 31 1 2 Page 45 FPCFromClipboardUntitled 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 1 IN THE COURT OF COMMON PLEAS OF Page 46 FPCFromClipboardUntitled ALLEGHENY COUNTY, PENNSYLVANIA ----- FEDERAL HOME LOAN BANK OF PITTSBURGH, Plaintiff, Vs. JPMORGAN SECURITIES INC., JPMORGAN MORTGAGE ACQUISITION CORP., JPMORGAN MORTGAGE ACCEPTANCE CORPORATION I, CHASE HOME FINANCE LLC, JPMORGAN CHASE & CO., MOODY'S CORPORATION, MOODY'S INVESTORS SERVICE, INC., THE MCGRAW-HILL COMPANIES, INC., and FITCH, INC., Defendants. ------------------ FEDERAL HOME LOAN BANK OF PITTSBURGH, Plaintiff, Vs. JPMORGAN SECURITIES Page 47 FPCFromClipboardUntitled INC., JPMORGAN CHASE & CO., MOODY'S CORPORATION, MOODY'S INVESTORS SERVICE, INC., AND THE MCGRAW-HILL COMPANIES, INC., Defendants. ------------------ CIVIL DIVISION PROCEEDING: MOTIONS & STATUS CONFERENCE DATE: OCTOBER 17, 2013 ------------------ GD NO. 2009-016892 ------------------ GD NO. 2009-016893 ------------------- Page 32 1 2 3 4 5 6 Page 48 FPCFromClipboardUntitled 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 2 FEDERAL HOME LOAN BANK OF PITTSBURGH, Plaintiff, Vs. THE MCGRAW-HILL Page 49 FPCFromClipboardUntitled COMPANIES, INC., FITCH, INC., MOODY'S CORPORATION, and MOODY'S INVESTORS SERVICE, INC., Defendants. ------------------ FEDERAL HOME LOAN BANK OF PITTSBURGH, Plaintiff, Vs. COUNTRYWIDE SECURITIES CORPORATION, COUNTRYWIDE HOME LOANS, INC., CWALT, INC., CWMBS, INC., COUNTRYWIDE FINANCIAL CORPORATION, MOODY'S CORPORATION, MOODY'S INVESTORS SERVICE, INC., THE McGRAW-HILL COMPANIES, INC., and FITCH, INC., Defendants. GD NO. 2009-017818 ------------------ GD NO. 2009-018482 ----- Page 50 FPCFromClipboardUntitled BEFORE: HONORABLE R. STANTON WETTICK, JR. ----- Reproduction of this transcript, in whole or in part, is governed by the PA Rules of Judicial Administration and applicable local rules, and shall not be employed for any official capacity. Page 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Page 51 FPCFromClipboardUntitled 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 3 APPEARANCES: For Plaintiff, FHLB: Janet C. Evans, Esq. Randall Tietjen, Esq. Justin T. Romano, Esq. William H. Manning, Esq. Damien A. Riehl, Esq. For Defendant, JPMorgan: Dorothy J. Spenner, Esq. Tom Paskowitz, Esq. Jeremy Stamelman, Esq. Deborah A. Little, Esq. Samuel W. Braver, Esq. For Defendant, Fitch: Christopher L. Filburn, Esq. Julia Mason Wood, Esq. Elizabeth F. Collura, Esq. For Defendant, McGraw-Hill: Tammy L. Roy, Esq. Page 52 FPCFromClipboardUntitled Jacqueline A. Koscelnik, Esq. For Defendant, Moody's: James Regan, Esq. James J. Coster, Esq. For Defendant, Countrywide: John J. Falvey, Jr., Esq. Sharon L. Rusnak, Esq. Aleksandra Sasha Williams, Esq. ----- Page 34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Page 53 FPCFromClipboardUntitled 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 4 P R O C E E D I N G (12:24 p.m., Counsel present before the Court.) - - - THE COURT: I do believe I brought another file, so I will be back, because we're not dealing with whether silicon can cause cancer. (Discussion held off the record.) (Brief pause in proceedings.) (12:28 p.m.) THE COURT: Okay. We'll try again. Be seated. Now, we're starting with the rating agency's motion, and there's some 10,000 documents; is that right? MS. WOOD: Yes, Your Honor. THE COURT: Okay. And they're all Page 54 FPCFromClipboardUntitled protected -- they're all SARs reports? MS. WOOD: They're all -- they are on a log that Plaintiff has prepared of all documents that are subject to the bank examiner privilege. THE COURT: Okay. That's what I meant. Yes, I'm sorry. MS. WOOD: Yes. THE COURT: So the Plaintiffs want to take the position that there's no cause shown for any Page 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Page 55 FPCFromClipboardUntitled 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 90 There are some letters rogatory, I think, both from Countrywide and the rating agencies. MS. ROY: Standard & Poor's, yes. MS. EVANS: So if we could proceed, I'd like to talk through the couple of motions to compel that were on today. THE COURT: Okay. MS. EVANS: Are you all right with that? Okay. This is the original that I am filing on the motion to compel for receipt of documents produced to the Department of Justice. (Counsel and the Court exchange documents.) This is against JPMorgan. In August, Your Honor, of this year, Page 56 FPCFromClipboardUntitled JPMorgan announced that, in an SEC filing, that the Department of Justice was conducting civil and criminal investigations relating to its MBS matters activities. Appended to that motion at Tab B is Page 204 of that disclosure, which discloses -- JPMorgan discloses that there are parallel investigations. This is up on the right-hand top. THE COURT: Okay. And what's the discovery issue? MS. EVANS: What we would like is all of Page 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Page 57 FPCFromClipboardUntitled 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 91 the documents that were produced in connection with the DOJ investigation. In September of this year, the Department of Justice indicated that it was ready to serve a complaint. My understanding, from public information -- whether it's accurate or not -- is the complaint did go to JPMorgan. It's not public. We don't have it. JPMorgan entered into settlement negotiations right away -- it's been in the newspaper -- for about $11 billion, is the number that was discussed. The last I know, only from public statements or publicly available information, is that Jamie Dimon was involved in the talks and Page 58 FPCFromClipboardUntitled they are stalled on some points. THE COURT: Okay. So, what are you asking for? MS. EVANS: The documents that were provided to the Department of Justice in connection with the civil and criminal investigation into the mortgage backed securities. THE COURT: Okay. MS. EVANS: It's the same time frame, too, Your Honor, and the allegations reported in the press are the same. Page 37 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Page 59 FPCFromClipboardUntitled 15 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 92 MR. PASKOWITZ: So, the motion here is asking for documents produced to the Department of Justice. THE COURT: Right. MR. PASKOWITZ: And there's no -- critically, what Ms. Evans has failed to do is create any sort of connection between any of the investigations that may or may not be going on and this case. But I think, to put the motion in context that Your Honor's aware, we have been in front of Your Honor, you know, several times in the last year since Special Master Patricia Dodge made her Page 60 FPCFromClipboardUntitled findings that recommended to Your Honor that no further electronic searches should be performed by the JPMorgan Defendants. THE COURT: No more what? MR. PASKOWITZ: Electronic searches, discovery searches should be performed by the JPMorgan Defendants. Your Honor ordered that recommendation. THE COURT: Okay. But about these changed circumstances? MR. PASKOWITZ: I don't believe there are any changed circumstances. I think that what's Page 38 1 2 3 4 5 6 7 8 9 10 11 12 13 Page 61 FPCFromClipboardUntitled 14 15 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 93 happening here is, faced with that order and unable to give any further discovery, given the position that we are in discovery, discovery's been going on since January of 2011. We're approaching the cutoff for depositions in February of 2014. They have taken our -- have noticed all but maybe one or two of the depositions they're allowed to take of us. We're sort of at the very end of discovery here. What they're trying to do with these motions -- and you can see from the agenda in front of you -- they're going to be asking for documents that were produced to the government, completely Page 62 FPCFromClipboardUntitled unrelated investigations. They're going to be asking for documents from non-custodians produced in litigations that have nothing to do with this, and they may be asking for other things; I'm not sure. But, just to finish my thought here, what they're doing is essentially trying to, you know, do an end-run. And, yes, Your Honor's order, which was back from December that, you know, electronic discovery of JPMorgan should be done, now we should be moving towards depositions. We should be moving towards the ends of this case. MS. EVANS: Your Honor -- MR. PASKOWITZ: But I'm not even nearly Page 39 1 2 3 4 5 6 7 8 9 10 11 12 Page 63 FPCFromClipboardUntitled 13 14 15 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 94 finished. If you want to let me continue -- sorry, just want to make sure we don't talk over each other for the court reporter's benefit. So now they're requesting what may or may not -- I don't think she has put it in any sort of context on what actually she's asking for here. She's attached to her motion an article from the Wall Street Journal that references some kind of investigations. She's attached a disclosure from JPMorgan in an SEC filing that says that there's a notice from the civil division, from the civil Page 64 FPCFromClipboardUntitled division of the DOJ, that there is some kind of conclusion related to nonprime loans. And I think you've probably come to understand the difference between sort of the prime mortgage business and the nonprime mortgage business, that there's a bit of a difference. The disclosure that she's attached to the motion makes it very clear that the only finding that's referenced anywhere relates to the nonprime business that JPMorgan -- not the prime business that's at issue in this case. There are five offerings, all prime, so I think it's very important. Your Honor addressed this issue earlier in Page 40 1 2 3 4 5 6 7 8 9 10 11 Page 65 FPCFromClipboardUntitled 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 95 the year, in the March order that related to S&P, and there, you ordered S&P to produce documents that had been produced to the DOJ because FHLB referenced Your Honor to a complaint filed by the government against S&P, an actual complaint that contained hundreds of specific allegations that, to quote from Your Honor, that were, quote, "very similar to the allegations in the complaint filed in this litigation." And so Your Honor's finding was based on Page 66 FPCFromClipboardUntitled the fact that those allegations appeared to be based, you know, on the very same documents that FHLB sought, so there was a very specific nexus. THE COURT: They're saying there's a linkage that doesn't exist here. MR. PASKOWITZ: It's completely lacking. MS. EVANS: Not completely lacking, Your Honor. Looking first to the Tab A in the Wall Street Journal article, in particular, dated September 30th, 2013, on the second page of that article, half the way down, "The Justice Department lawyers are emboldened by documents uncovered in the course of their investigation that point to JPMorgan knowingly pedalling mortgage backed securities whose underlying loans were of lesser quality than pitched Page 41 1 2 3 4 5 6 7 8 9 10 Page 67 FPCFromClipboardUntitled 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 96 to the investors, according to people familiar..." That is precisely -- THE COURT: But isn't that -- MS. EVANS: That's precisely our allegation. MR. PASKOWITZ: Absolutely. And -- THE COURT: There's been no complaint; is that right? MR. PASKOWITZ: Yes. Page 68 FPCFromClipboardUntitled MS. EVANS: There is a complaint. THE COURT: It hasn't been filed? MS. EVANS: That's correct, because of the settlement talks. We don't have the complaint. MR. PASKOWITZ: Whether it has been or has not been filed, I think, is completely up to speculation up to this point. You could infer that it's not been filed because there's no basis for it to be filed. MS. EVANS: I don't think that's what they're talking about. MR. PASKOWITZ: I don't think any of us knows, which is the problem. MS. EVANS: It goes on to say in the Wall Street Journal article that, "...among the documents is an e-mail from a bank employee warning her Page 42 1 2 3 4 5 6 7 8 9 Page 69 FPCFromClipboardUntitled 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 97 superiors that they were vastly overstating the quality of the mortgages being bundled into the securities." MR. PASKOWITZ: Again, hearsay. MS. EVANS: Pardon me. I was kind enough not to interrupt you. I appreciate the courtesy. What we have developed in our case is exactly -- this is exactly it. This is -- they are Page 70 FPCFromClipboardUntitled looking into the RMBS business, which means all loans; prime, subprime. THE COURT: So, what are you asking with respect to the two people? MS. EVANS: What we would like is the documents that they produced pursuant to the subpoenas from the Department of Justice. Now -- THE COURT: Well, what's that have to do with two people? MS. EVANS: That should -- if it does not include the e-mail, then we do want the identity of the individual who warned her supervisor that they were vastly overstating the quality of the mortgages they bundled into securities. THE COURT: That you believe JPMorgan can identify that employee? MS. EVANS: Yeah, I do. This has been a Page 43 1 2 3 4 5 6 7 8 Page 71 FPCFromClipboardUntitled 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 98 two-year investigation. It started out from the Obama administration. We have known that there have been these subpoenas, and now the Justice Department has decided that it is doing both civil and criminal investigation into its entire MBS activities. That's JPMorgan's own disclosure. It's not just to subprime or Alt A or different kinds of securities. Page 72 FPCFromClipboardUntitled Importantly, I don't know what Ms. Dailey has to do -- Ms. Dailey. Our Special Master; not Ms. Dailey. MS. SPENNER: Ms. Dodge. MS. EVANS: Dodge. She was deciding whether they were using any more search terms. They don't have to do anything. All they have had to do is download the documents, whatever they were, that they gave to the Department of Justice and deliver them to us. That's very similar to what S&P did. We would simply agree, as we did in the S&P DOJ documents, that we will treat them highly confidential so you don't have to go through and delay. We are getting towards the end. I am very excited about that. THE COURT: Now, there is a -- you believe there's a draft of a complaint that JPMorgan has? Page 44 1 2 3 4 5 6 7 Page 73 FPCFromClipboardUntitled 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 99 MS. EVANS: I do. All I can tell you is I read it in publications. MR. PASKOWITZ: That's our main problem with this whole motion, is that what FHLB is currently asking us is to vastly expand the record in this case when we're a couple months away from Page 74 FPCFromClipboardUntitled the close of discovery, based on a newspaper article. THE COURT: Well, I think they could ask you, if there is a draft of a complaint, to turn that over. MR. PASKOWITZ: Whether there is or is not, I do not know. THE COURT: If there is. MR. PASKOWITZ: My concern, I would put on the record, my concern there in the S&P context, whether there was a filed complaint that the government was willing to stand behind, I think you have a very different situation than a draft complaint that they may have turned over to JPMorgan as part of a negotiation. I think there's a very different factual record there that exists and different implications that can arise. THE COURT: Okay. I'm going to, for the Page 45 100 1 time being, let you get any drafts of a complaint 2 and the name of that employee, if they have it. 3 Page 75 FPCFromClipboardUntitled MR. PASKOWITZ: I -- okay. I think we 4 have to sort of explore whether there's any issues 5 turning that over from the government. I don't know 6 if there are or are not. If a complaint has been 7 shared, whether there are any concerns from the 8 government's standpoint as to turning that over, I 9 just don't know sitting here today. 10 THE COURT: Well, you have the draft? 11 MR. PASKOWITZ: I do not know that we do. 12 MS. SPENNER: Says the Wall Street 13 Journal. I have no idea. 14 THE COURT: The claim is, you have the 15 draft. 16 Page 76 FPCFromClipboardUntitled MR. PASKOWITZ: The -- 17 MS. SPENNER: Their claim. 18 THE COURT: Okay. So that, to the extent 19 that you have it, you turn it over. 20 MS. SPENNER: I can -- 21 MS. EVANS: And the name of the employee? 22 MS. SPENNER: I can tell you right now 23 that, because we have looked into this, that", 24 25 Janeen E. Ellsworth. RPR (412) 350-5414 Page 46 101 1 2 THE COURT: Well, you'll just answer it. 3 MS. SPENNER: Say that -- say exactly what 4 Page 77 FPCFromClipboardUntitled I just said? 5 THE COURT: In your answer. 6 MR. PASKOWITZ: In our answer. 7 THE COURT: 'Tell us who the employee is 8 referred to in the Wall Street Journal.' sm. 9 10 MS. EVANS: May I request the information 11 in ten days, Your Honor? 12 MR. PASKOWITZ: The complaint, again, 13 because we'll have to explore this issue -- 14 THE COURT: I'll give you twenty days. 15 MR. PASKOWITZ: Thank you. 16 MS. EVANS: Thank you, Your Honor. 17 The next motion, that is kind of a double Page 78 FPCFromClipboardUntitled 18 motion, this is for William King's documents 19 produced in another piece of litigation, and that is 20 in the FHFA case against JPMorgan. 21 He is a named Defendant. His name is 22 William King. I do want to share with you and tell 23 you something of who he is. 24 (Indicating) 25 Here's -- here is an organizational chart Janeen E. Ellsworth. RPR (412) 350-5414 Page 47 1 2 3 4 5 6 7 8 Page 79 FPCFromClipboardUntitled 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Janeen E. Ellsworth, RPR (412) 350-5414 137 C E R T I F I C A T E I, Janeen E. Ellsworth, RPR, do hereby certify that the proceedings are contained fully and accurately in the notes taken by me on the hearing of the herein cause, and that this is a true and correct transcript of the same. ________________________________ Page 80 FPCFromClipboardUntitled Janeen E. Ellsworth, RPR Official Court Reporter ________________________________ Date The foregoing record of the proceedings upon the hearing of the herein cause is hereby approved and directed to be filed. ________________________________ Page 48 EXHIBIT D Page 49 Filed under Seal: Portions ofthis transcript are redacted pursuant to Protective Order Page 50 From: To: Cc: Subject: Date: Fvar-^ lamt r Pa^nwir?. Tom A : isiamHinangilwnndiinn.fRm: Minmn/i WiIMm H : Ratrrtt Wi.fc Kalhi-nn RE: FHLB Pittsburgh v. JP Morgan et al. Case No. Page 81 FPCFromClipboardUntitled GD-09-16892 and FHLB Pittsburgh v. IP Morgan et al. Case No. GD-09-16893 Thursday, October 24, 2013 1:36:20 PM Dorothy Thank you. Regards, Jan Janet C. Evans Partner Robins, Kaplan, Miller & Ciresi L.L.P. 000 LaSallG Avenue | 2800 LaSalle Plaza | Minneapolis, MN 55402 Direct 612 349 8734 | Fax 612 339 4181 tcevfrPsigTkmc com Inywwrhmc.com From: Spenner, Dorothy J. [mailto:[email protected]] Sent: Thursday, October 24, 2013 12:46 PM To: Evans, Janet C. Cc: Paskowitz, Tom A.; [email protected] Subject: FHLB Pittsburghv. JP Morgan et al. Case No. GD-09-16892 and FHLB Pittsburgh v. JP Morgan et al, Case No.GD-09-16893 Jan: Best regards, Dorothy Dorothy J. Spenner SidleyAustinLLP 787 Seventh Avenue Page 82 FPCFromClipboardUntitled New York, NY 10019 Phone:(212)839-7375 Fax:(212)839-5599 iKl'ennei'.r-nllrvconi ^unm^wa IRSCircular 230 Disclosure: To comply with certainU.S. Treasury regulations, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this communication, including attachments, was not intended or written to be used, and cannot lo used, byany taxpayer for the purpose of avoiding any penalties that may be imposed on such taxpayer by the Internal Revenue Service. In addition, if any such tax advice is used or referred to by other parties in promoting, marketingor recommending any partnership or other entity, investment plan or arrangement, then (i) the advice should be construed as written in connection with the promotion or marketing byothers of the transaetion(s) or matter(s) addressed in this communication and (ii) the taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. This e-mail is sent by a law firm and may contain information that is privilegedor confidential. Page 83 FPCFromClipboardUntitled If you are not the intended recipient, please delete the e-mail and any attachments and notify us immediately.
KingCast, Mortgage Movies and BK Judge Ronald Sargis Say Bottom-Feeder Attorneys at Wright, Finlay & Zak Have No Retainer Agreement or Right to Represent Ocwen Et Al. in Raposo Et Al v. Ocwen, Adversary Case No. 15-2095