20442 1 UNITED STATES OF AMERICA BEFORE THE 2 OFFICE OF THRIFT SUPERVISION DEPARTMENT OF THE TREASURY 3 In the Matter of: ) 4 ) UNITED SAVINGS ASSOCIATION OF ) 5 TEXAS, Houston, Texas, and ) ) 6 UNITED FINANCIAL GROUP, INC., ) Houston, Texas, a Savings ) 7 and Loan Holding Company ) ) OTS Order 8 MAXXAM, INC., Houston, Texas, ) No. AP 95-40 a Diversified Savings and ) Date: 9 Loan Holding Company ) Dec. 26, 1995 ) 10 FEDERATED DEVELOPMENT CO., ) a New York Business Trust, ) 11 ) CHARLES E. HURWITZ, ) 12 Institution-Affiliated Party ) and Present and Former Director ) 13 of United Savings Association ) of Texas, United Financial Group,) 14 and/or MAXXAM, Inc.; and ) ) 15 BARRY A. MUNITZ, JENARD M. GROSS,) ARTHUR S. BERNER, RONALD HUEBSCH,) 16 and MICHAEL CROW, Present and ) Former Directors and/or Officers ) 17 of United Savings Association of ) Texas, United Financial Group, ) 18 and/or MAXXAM, Inc., ) ) 19 Respondents. ) 20 21 TRIAL PROCEEDINGS FOR AUGUST 24, 1998 22 20443 1 A-P-P-E-A-R-A-N-C-E-S 2 ON BEHALF OF THE AGENCY: 3 KENNETH J. GUIDO, Esquire Special Enforcement Counsel 4 PAUL LEIMAN, Esquire SCOTT SCHWARTZ, Esquire 5 BRUCE RINALDI, Esquire RICHARD STEARNS, Esquire 6 and BRYAN VEIS, Esquire of: Office of Thrift Supervision 7 Department of the Treasury 1700 G Street, N.W. 8 Washington, D.C. 20552 (202) 906-7395 9 ON BEHALF OF RESPONDENT MAXXAM, INC.: 10 FRANK J. EISENHART, Esquire 11 of: Dechert, Price & Rhoads 1500 K Street, N.W. 12 Washington, D.C. 20005-1208 (202) 626-3306 13 DALE A. HEAD (in-house) 14 Managing Counsel MAXXAM, Inc. 15 5847 San Felipe, Suite 2600 Houston, Texas 77057 16 (713) 267-3668 17 ON BEHALF OF RESPONDENT FEDERATED DEVELOPMENT CO. AND CHARLES HURWITZ: 18 RICHARD P. KEETON, Esquire 19 KATHLEEN KOPP, Esquire of: Mayor, Day, Caldwell & Keeton 20 1900 NationsBank Center, 700 Louisiana Houston, Texas 77002 21 (713) 225-7013 22 20444 1 ON BEHALF OF RESPONDENT FEDERATED DEVELOPMENT CO., CHARLES HURWITZ, AND MAXXAM, INC.: 2 JACKS C. NICKENS, Esquire 3 of: Clements, O'Neill, Pierce & Nickens 1000 Louisiana Street, Suite 1800 4 Houston, Texas 77002 (713) 654-7608 5 ON BEHALF OF JENARD M. GROSS: 6 PAUL BLANKENSTEIN, Esquire 7 MARK A. PERRY, Esquire of: Gibson, Dunn & Crutcher 8 1050 Connecticut Avenue, N.W. Washington, D.C. 20036-5303 9 (202) 955-8500 10 ON BEHALF OF BERNER, CROW, MUNITZ AND HUEBSCH: 11 JOHN K. VILLA, Esquire MARY CLARK, Esquire 12 PAUL DUEFFERT, Esquire of: Williams & Connolly 13 725 Twelfth Street, N.W. Washington, D.C. 20005 14 (202) 434-5000 15 OTS COURT: 16 HONORABLE ARTHUR L. SHIPE Administrative Law Judge 17 Office of Financial Institutions Adjudication 1700 G Street, N.W., 6th Floor 18 Washington, D.C. 20552 Jerry Langdon, Judge Shipe's Clerk 19 REPORTED BY: 20 Ms. Marcy Clark, CSR 21 Ms. Shauna Foreman, CSR 22 20445 1 2 INDEX OF PROCEEDINGS 3 Page 4 JENARD GROSS 5 Examination by Mr. Leiman...............20447 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 20446 1 P-R-O-C-E-E-D-I-N-G-S 2 (9:00 a.m.) 3 THE COURT: Be seated, please. The 4 hearing will come to order. 5 Mr. Leiman, are you representing the 6 OTS this morning? 7 MR. LEIMAN: Yes, I am, Your Honor. 8 THE COURT: All right. Proceed. 9 MR. LEIMAN: OTS would like to call its 10 next witness, Jenard Gross. 11 12 JENARD GROSS, 13 14 called as a witness and having been first duly 15 sworn, testified as follows: 16 17 THE COURT: Be seated, please. 18 19 20 21 22 20447 1 2 EXAMINATION 3 4 Q. (BY MR. LEIMAN) Good morning, 5 Mr. Gross. 6 A. Good morning. 7 Q. We've met before in Washington, D.C. 8 when I took your deposition on June -- in June of 9 1995. 10 Would you please spell your first and 11 last name? 12 A. Jenard, J-E-N-A-R-D, Gross, G-R-O-S-S. 13 Q. And Mr. Gross, where do you live? 14 A. In Houston. 15 Q. And are you presently employed? 16 A. Yes, I am. 17 Q. And where do you work? 18 A. I'm self-employed. Gross Builders. 19 Q. What does Gross Builders do? 20 A. We build, own, operate apartment 21 projects, and other real estate. 22 Q. When did you start Gross Builders? 20448 1 A. 1955, I believe. 2 Q. Have you always been involved in the 3 building -- building apartment buildings, or have 4 you done other kinds of building? 5 A. Done other kind of buildings, also. 6 Q. Would you please tell me what those 7 are? 8 A. I've been involved in small shopping 9 centers, mini warehouse, homes, done some 10 subdivisions. 11 Q. And where have you done your work? 12 A. In, let's see, Texas, Louisiana, 13 Arkansas, Florida, and Colorado. 14 Q. Did you go to college? 15 A. Yes, I did. 16 Q. And -- 17 A. Oh, and Georgia. I forgot Georgia. 18 I'm sorry. 19 Q. You went to college? 20 A. Yes, sir. 21 Q. You got a BA in psychology from 22 Vanderbilt? 20449 1 A. Yes, sir. 2 Q. Okay. What year? 3 A. 1950. 4 Q. And what post-graduate work did you do? 5 A. I did a little post-graduate work at 6 Vanderbilt and University of Houston, but I didn't 7 get a degree. 8 Q. What was the post-graduate work in? 9 A. Vanderbilt, it was in psychology; and 10 at University of Houston, it was in petroleum 11 engineering. 12 Q. Have you ever been on a board of 13 directors of a savings and loan institution? 14 A. Yes, I have. 15 Q. Would you please tell me all of the 16 savings and loans boards that you've been on? 17 A. I was on the board of Robstown Savings 18 and Loan Association during the 1960s. That might 19 have spilled over into the Seventies. I'm not 20 sure. But it started in about 1965, somewhere in 21 that vicinity. And then Gulf Coast Savings 22 Association sometime in the mid-Seventies and 20450 1 probably till the early Eighties. 2 Q. Any others? 3 A. No, sir. 4 Q. Were you ever on the board of directors 5 of United Savings? 6 A. Oh, I'm sorry. I thought you meant in 7 addition to United. Well, certainly I was on the 8 board of United Savings. 9 Q. Okay. Where is Robstown Savings and 10 Loan? 11 A. It's a huge metropolis just outside of 12 Corpus Christi, Texas. 13 Q. I detect a note of sarcasm. 14 How big was the Robstown Savings and 15 Loan? 16 A. I don't remember. 17 Q. Do you know if it was half a million 18 dollars in assets, 500 million? 19 A. It was small, but it certainly wasn't 20 500 million. But that goes back 25, 30 years ago. 21 It was -- could have been in the 50 -- 25, 22 50-million-dollar range, somewhere in there. I 20451 1 just really don't remember. 2 Q. How did you take that position? 3 A. I was in a group that bought control of 4 Robstown and went on the board. 5 Q. What -- were you on any committees at 6 the Robstown Savings and Loan? 7 A. Not that I recall. 8 Q. Were you ever involved in loan 9 approvals at the Robstown Savings and Loan? 10 A. We reviewed the loans at the board, but 11 I don't recall being on the loan committee there. 12 Q. Any loans stand out in your mind that 13 you reviewed? 14 A. No, sir. 15 Q. Let's talk about Gulf Coast Savings and 16 Loan. Where was that? 17 A. That's in Richmond, Texas, which is a 18 suburb of Houston. 19 Q. And what's the size of Gulf Coast 20 Savings and Loan? 21 A. I believe it was in the hundred plus 22 million range. I'm not -- I don't recall. 20452 1 Q. That would have been in the 2 mid-Seventies? 3 A. Yes. 4 Q. Oh. What happened to Robstown Savings 5 and Loan? 6 A. We sold it in that period of time. 7 Q. Back in the Sixties? 8 A. Either the late Sixties or early 9 Seventies. 10 Q. You had an equity interest in the 11 institution? 12 A. Yes, I did. 13 Q. How much of the institution did you 14 own? 15 A. I don't recall. 16 Q. Do you have any idea? I mean, was it 17 half, three quarters? 18 A. No. I was just -- I might have owned 5 19 or 10 percent. I don't really remember. 20 Q. Did you have an ownership interest in 21 Gulf Coast Savings and Loan? 22 A. Yes, sir. 20453 1 Q. How much did you own there? 2 A. I believe I owned -- I may have 3 owned -- well, I don't recall specifically, but it 4 was more substantial because I was chairman of the 5 board there. I put together the group that bought 6 it. 7 Q. Would you say you had a controlling 8 interest of Gulf Coast? 9 A. Yes, sir. 10 Q. Is Gulf Coast in existence today? 11 A. No, sir. 12 Q. What happened to it? 13 A. I don't know, but I know -- as far as I 14 know, it's not. 15 Q. When did you leave? 16 A. In about -- right around '80 or '81, 17 but I'm not sure. 18 Q. During this time frame when you were on 19 the boards of directors of Gulf Coast and 20 Robstown, were you also involved in your building 21 business? 22 A. Yes, I was. 20454 1 Can I go back to that question you 2 asked me what happened to Gulf Coast? 3 Q. Yes. 4 A. We sold out to another savings and 5 loan, and they merged it in. 6 Q. What savings and loan did you sell it 7 to? 8 A. I don't recall right now. 9 Q. Well, if it comes to you -- 10 A. Yes, sir, I will. 11 Q. -- just tell me, please. 12 We're talking about whether you had a 13 continuing interest as a builder at the time you 14 were on the boards of directors of Robstown and 15 Gulf Coast. 16 A. Yes, I did. 17 Q. Okay. Let's first -- I want to ask you 18 about Robstown because it was earlier in time. 19 Did any interest of yours as a builder 20 ever get a loan from Robstown? 21 A. No, sir. 22 Q. All right. Let's talk about Gulf 20455 1 Coast. 2 A. Okay. 3 Q. Same question. Did you ever get -- as 4 a builder, did you ever get a loan from Gulf 5 Coast? 6 A. No. 7 Q. And dealing with both Robstown and Gulf 8 Coast, were you ever an officer in addition to 9 being a board member at either of those 10 institutions? 11 A. Well, I was chairman of Gulf Coast. 12 Q. Did you hold any committee positions? 13 A. I was on the loan committee and 14 executive committee. 15 Q. At Gulf Coast? 16 A. Yes. 17 Q. What did the loan committee do at Gulf 18 Coast? 19 A. We looked at the loans and approved 20 them. 21 Q. Were you the first layer of review or 22 the second or final or -- 20456 1 A. The loan committee would be the final 2 review. You have board ratification. 3 Q. What about the executive committee? 4 What was its purpose? 5 A. Well, it was a small association. It 6 was a small committee. But we would meet to deal 7 with the basic planning of the institution. 8 Q. Could you explain what you mean by 9 "basic planning of the institution"? 10 A. Well, this goes back 15 years ago; and 11 I guess we just -- I don't really recall that much 12 about it. Actually, 20 years ago. And we just -- 13 we just pretty well decided -- discussed the 14 program, the types of loans that the institution 15 would make, and what we would do as far as deposit 16 gathering was concerned. 17 Q. Did you deal with issues of 18 compensation? 19 A. Yes, we did. 20 Q. On the executive committee? 21 A. Yes. 22 Q. Okay. Did you deal with -- you dealt 20457 1 with loan issues, you said? 2 A. Yes. 3 Q. All right. Did you deal with branches? 4 Were there any branches? 5 A. Yes, we had some branches. 6 Q. Did you deal with that at the executive 7 committee level? 8 A. Yes, we did. 9 Q. All right. What kinds of decisions -- 10 what was the decision-making process about at the 11 executive committee level? 12 A. I don't really recall. 13 Q. Well, did you formulate ideas that were 14 then brought before the board of directors for 15 ultimate decision making? 16 A. Yes. 17 Q. Do you recollect whether or not Gulf 18 Coast Savings and Loan ever made a loan to any 19 interest in which Charles Hurwitz had an ownership 20 interest? 21 A. It did not. 22 Q. Do you know who Charles Hurwitz is? 20458 1 A. Yes, I do. 2 Q. Okay. Tell me who you understand him 3 to be. 4 A. Charles Hurwitz is a -- was the 5 chairman -- first, at one time, he was president 6 of and then later chairman of, I believe, 7 United Financial Group. 8 Q. How did you come to meet Mr. Hurwitz? 9 A. I think -- I think he was related to a 10 friend of mine. I met him through -- I think he 11 was a nephew to this friend of mine. I met him 12 through him. 13 Q. When was that? 14 A. Sometime back in the late 1960s. 15 Q. Did you develop a personal friendship? 16 A. We had a social relationship over the 17 years. I can't say -- it wasn't a close personal 18 friendship, but it was a casual social 19 relationship. 20 Q. Before joining -- strike that. 21 Did you ever have any business dealings 22 with Mr. Hurwitz apart from those that relate in 20459 1 any way to United Financial Group or USAT? 2 A. No, sir. 3 Q. Mr. Gross, I'd like you to tell me a 4 little bit about -- a little bit more about your 5 building business. All right? 6 When did you start that? 7 A. I started the preliminaries in 1954 and 8 actually started the first -- broke ground on the 9 first project in 1955. 10 Q. What was the nature of that project? 11 MR. BLANKENSTEIN: I'm sorry, Your 12 Honor. I couldn't hear Mr. Leiman's question. 13 Q. (BY MR. LEIMAN) What was the nature 14 of the project? 15 A. The first one was an eight-unit 16 apartment building. 17 Q. And thereafter, what was -- did your 18 building business begin to grow? Is that what 19 happened? 20 A. Yes, sir. 21 Q. All right. And would it be fair to say 22 that your business was primarily involved with 20460 1 building income-producing properties; is that 2 right? 3 A. Primarily. 4 Q. What other kind of properties are there 5 other than income-producing, Mr. Gross? 6 A. Well, there are just straight 7 investment properties. There are development 8 properties. For instance, we put on a 9 subdivision. I guess that's pretty much the 10 gamut. 11 Q. Out of all of the building work that 12 you did with your firm, what percentage of it 13 related to investment properties? 14 A. I would say in excess of 90 percent. 15 Q. Tell me what an investment property is, 16 Mr. Gross. 17 A. Well, what I would think of as an 18 investment property would be a property that you 19 would build and anticipate getting a return on 20 your assets. 21 Q. Can you be more specific than that? 22 A. I don't know what you're asking for. 20461 1 I'm sorry. 2 Q. Well, in that case, Mr. Gross, is every 3 property an investment property? 4 A. I think the distinction is if I'm a 5 home builder, I build a home and I sell it and I 6 recognize a profit. If I build an apartment, I 7 operate it and get a stream of income from the 8 rental income. And I guess that's the sort of 9 distinction I would make between an investment as 10 opposed to a built-for-sale type thing. 11 Q. I see. So, you then in your firm built 12 apartments; is that right? 13 A. Yes, sir. 14 Q. You didn't manage them? 15 A. Yes. We have our own management 16 company. 17 Q. Okay. What's the name of that 18 management company? 19 A. JMG Managers, Ltd. 20 Q. Maybe I should ask this question. 21 Would you please list for me all of the companies 22 in which you have an interest greater than 20462 1 10 percent? 2 A. I could get a list of them. It's -- 3 Q. Why don't you tell me about the ones 4 you remember right now. 5 A. Okay. All right. I said JMG Managers, 6 Ltd. We've got JMG Developers, Ltd.; JMG 7 Builders, Ltd. We have Gross Builders. We have 8 JMG Managers, Inc. We have JMG Developers, Inc., 9 which would be the general partners of each of 10 these partnerships. I've forgotten. 11 Would you restate the question? I've 12 gotten mired down in thinking about those. I'm 13 sorry. 14 You're asking for all -- 15 Q. All of the companies in which you have 16 a 10 percent or greater interest in. 17 A. 10 percent or greater. Do you want 18 the -- for instance, the apartment projects, as 19 well? 20 Q. Yes. 21 A. Okay. We have one -- a partnership 22 called JMG Beauregard, Ltd.; and it's got -- I 20463 1 think Gross Builders is probably the general 2 partner of that, but I'm not sure. I'd have to go 3 back and look at the -- we have one called Mall 4 Drive, Ltd. We have -- 5 Q. What is Mall Drive, Ltd.? 6 A. That's a partnership in which we have 7 bought some land. It has not start development 8 yet, but we are going to build some apartments. 9 This is going to get into about 30 or 40 -- I'll 10 just go as far as I can. And as I say, maybe -- 11 Q. That would be fine. 12 A. Dymaxion Apartments, Ltd. Colorado 13 Aces, Ltd. 14 Q. Is that an apartment, also? 15 A. That's an apartment project in Colorado 16 Springs. We've got one called Seabrook Pirates 17 Landing Associates, and that's an apartment down 18 in Seabrook. And there is a general partner to 19 that. I think it's Seabrook -- well, I can't 20 distinguish right now between the name of the 21 general partner and the name of the partnership. 22 One of them is Seabrook Pirates Landing. One of 20464 1 them is Pirates Landing, and I'm not sure which is 2 which. We have one called Cinco Ranch, Ltd. We 3 have one called Beauport, Ltd. And these all have 4 corporate general partners. 5 Q. These are all apartment projects. 6 Right? 7 A. They are either apartment projects -- 8 they are one of three things. They are either 9 apartment projects that exist, apartment projects 10 that are either under construction or land, or 11 they may be a partnership that still exists but we 12 might have sold an apartment project. And we have 13 another one, McCrary -- the corporate partner is 14 one -- the GP is 144 McCrary, Inc. and that's just 15 a subdivision of land and some land holdings. I 16 think McCrary Partnership, Inc. is its name. 17 Q. Before you go too much farther, 18 Mr. Gross, let me ask you this: I detect from 19 what you've been describing that the majority of 20 your work in the building business has been with 21 regard to apartment projects; is that right? 22 A. Yes, sir. 20465 1 Q. Okay. Would it be fair to say that the 2 percentage is somewhere around -- at least 3 75 percent of your work has been in apartment 4 projects? 5 A. I think it's more than that. 6 Q. More than 75 percent? 7 A. Yes. 8 Q. Smaller number of projects devoted to 9 shopping centers. Right? 10 A. Yes, sir. 11 Q. And so, that's also true regarding 12 office buildings and warehouses. Right? 13 A. Yes, sir. 14 Q. Okay. 15 A. And we've done some land development. 16 Q. Well, maybe you should tell me what you 17 mean by "land development." 18 A. Well, we've put on some residential 19 subdivisions. We've -- we did one in Beaumont. 20 McCrary is a land development where we have taken 21 some land and put the roads in and then sold the 22 lots. And the same is true of a subdivision we've 20466 1 done over in Beaumont. 2 Q. That's a residential subdivision. 3 Right? 4 A. Yes, sir. 5 Q. You've been involved with two of those? 6 A. Yes, sir. 7 Q. Now, I'm talking now since you began 8 your company in the Fifties, as best you remember. 9 A. As prime mover, yes, we've been in -- 10 Q. All right. How many office buildings 11 have you built? 12 A. None. 13 Q. Okay. What about warehouses? 14 A. I've invested in one. I haven't built 15 one. 16 Q. Okay. At some point in the Eighties, 17 you became a consultant to United Savings 18 Association of Texas. Right? 19 A. Yes, sir. 20 Q. Okay. Do you remember when that was? 21 A. Sometime in 1984. 22 Q. All right. Would it have been April or 20467 1 May of 1984? 2 A. I think so. 3 Q. Okay. And how did you come to take 4 that position as a consultant at United Savings? 5 A. Barry Munitz approached me and asked me 6 if I would take that position. 7 Q. How did Mr. Munitz come to approach 8 you? 9 A. Well, I think -- I had known Barry for 10 a period of time, and he was aware of the fact 11 that I had a lot of experience and expertise in 12 real estate. And I think United was having -- had 13 just recently merged, and they were having some 14 problems with their real estate department and 15 wanted to know if I would come over and see if I 16 could help them look at some of their problems. 17 Q. Do you know how Mr. Munitz got your 18 name? 19 A. We had known each other for a number of 20 years. 21 Q. Oh, really? In what context? 22 A. I had known him socially. He used to 20468 1 be president of the University of Houston, and I 2 knew him then. And then he served as president of 3 the opera when I was on the board and just before 4 I became president. So, we had worked together on 5 some civic boards. And, as I say, I had known him 6 socially in addition to that. 7 Q. When did you meet Mr. Munitz, if you 8 recollect? 9 A. I would think it was probably somewhere 10 in the late Seventies, but, you know -- that 11 general area. 12 Q. Do you remember how you met him? 13 A. No. I'm sure it was just socially 14 initially. 15 Q. Mr. Munitz asked you to become a 16 consultant to United Savings. Right? 17 A. Yes, sir. 18 Q. And you took the position? 19 A. I did. 20 Q. All right. At the time you took that 21 position as consultant, were you also actively 22 involved in your own building business? 20469 1 A. By then, I had sold out my apartments. 2 I sold them -- finished selling them in 1982. So, 3 I was not active in my building business at that 4 time. 5 Q. Explain to me what you mean by you were 6 not -- you weren't active in the building 7 business. 8 A. I didn't have any construction going 9 on. 10 Q. Okay. And you had sold all of the 11 apartment buildings that you had an interest in? 12 A. Yes. 13 Q. Is that also true with all the land 14 holdings? 15 A. I probably had some land holdings left, 16 but I don't think I had any. 17 Q. What was the reason you did that? 18 A. I'm sorry. What was the reason what? 19 Q. Why did you sell out? 20 A. The reason I sold out was because I -- 21 first of all, they were paying very good prices 22 for apartments so it seemed to be a very 20470 1 propitious time to sell. And we were -- you know, 2 I just thought we were getting some extraordinary 3 yields on it. And I guess the other reason I sold 4 out was because the -- a lot of people -- that was 5 in the days of 70 percent tax bracket. And a lot 6 of people were buying apartments primarily for tax 7 shelters. And since I was in the business full 8 time, I was looking for cash flow. And I was 9 seeing that people were more interested in tax 10 shelters than they were in cash flow, and I just 11 felt it was a good time to take some profits and 12 sit on the sidelines for a while. 13 Q. Were you paid as a consultant to United 14 Savings? 15 A. Yes, I was. 16 Q. Do you remember how much you were paid? 17 A. It seems to me it was -- I'm not sure 18 exactly. 19 Q. Was it $100,000 a year, half a million? 20 A. It seemed to me it was -- I think it 21 was around $7,000 a month, but I'm not positive. 22 7500, somewhere in that range, I believe. 20471 1 Q. Were there any extraordinary financial 2 or economic events in 1982 that led you to sell 3 your apartments, your building business? 4 A. Well, there was -- I was certainly 5 involved in the Houston market, and there was a 6 dramatic downturn in the price of oil in 1982. 7 Q. Was that a factor in why you sold your 8 apartments? 9 A. It really wasn't. 10 Q. Describe for me why it was not a 11 factor. 12 A. Because I had already made the decision 13 prior to that, and it just -- it was just a timing 14 issue. 15 Q. Had you not sold them, did you ever -- 16 let me excuse the colloquial phrase -- did you 17 kick yourself ever for selling them at that time? 18 A. Yeah. I try never to look back. 19 Q. So, you haven't done any Monday morning 20 quarterbacking on this? 21 A. No. I always work on the basis that a 22 good deal is one that everybody makes money. So, 20472 1 I don't care how much the next guy makes or 2 doesn't make. 3 Q. It's not important, then, to do a 4 post-game analysis? 5 A. No. 6 Q. Okay. How long were you a consultant 7 to United Savings Association of Texas? 8 A. Several months. 9 Q. Several months? 10 A. Less than a year. 11 Q. Okay. Did you take a position -- a 12 more formal position with United Savings? 13 A. Yes, I did. 14 Q. And what would that position have been? 15 A. I became chairman and chief executive 16 officer of United Savings. 17 Q. And when would that have been? 18 A. That would have been February of 1985. 19 Q. Were you also on the board of directors 20 of United Financial Group? 21 A. Yes, I was. 22 Q. When did that begin? 20473 1 A. At the same time, I believe. 2 Q. Were you on any other boards -- 3 A. Excuse me. Let me correct that. 4 Q. Yes, sir. 5 A. I can't remember the exact mechanism. 6 It may be that the board meetings were such that I 7 might have got on the board shortly thereafter. 8 I'd have to -- I don't know if I went on the same 9 day that I went on at United or not or whether it 10 was the next board meeting or when that might have 11 been. 12 Q. But it would have been shortly after 13 you were made chairman and CEO of USAT. Right? 14 A. Yes. 15 Q. Okay. Were you on any committees at 16 United Savings Association of Texas? 17 A. A whole bunch of them. 18 Q. Okay. Do you remember what they were? 19 A. I can name some of them. 20 Q. Go ahead. 21 A. I was on the executive committee. I 22 was on the senior loan committee. I was on the 20474 1 real estate committee, and I'm sure a bunch of 2 others. 3 Q. Were you on the compensation committee? 4 A. No, sir. 5 Q. Were you on any ethics committees, any 6 other committees that you remember? 7 A. I'd have to look at the -- you know, 8 the list and just see. I don't know. 9 Q. But these are the ones that stick out 10 in your mind: The executive committee, the senior 11 loan committee, and the real estate investment 12 committee; is that right? 13 A. Yes. 14 Q. Okay. What about at United Financial 15 Group? What committees were you involved with 16 there? 17 A. I don't recall. 18 Q. Do you, in fact, remember if you were 19 involved in any committees at United Financial? 20 A. No. 21 Q. Do you remember who the chairman of the 22 board was of United Financial Group? 20475 1 A. When? 2 Q. When you took your position in 1985. 3 A. I believe it was Sonny Bentley? 4 Q. Who was the next chairman? 5 A. I believe Charles Hurwitz. 6 Q. When did he come on? 7 A. I believe it was 1986, if I remember. 8 Q. Mr. Gross, I'm going to show you a 9 number of documents now and hopefully you'll be 10 able to help me understand some of these. 11 May we have Tab 1035, which is T7571? 12 Mr. Gross, for the time being, I'd just 13 like to ask you: Did you write this? 14 A. Until I looked at a bunch of documents 15 recently, I didn't recall writing it. 16 Q. That's not my question. Let me go back 17 a second, Mr. Gross. 18 A. Okay. 19 Q. I'm not asking you if you recall it. 20 I'm asking you: Did you write it? 21 A. I think I did. 22 Q. You think you did, or you're sure you 20476 1 did? 2 A. I'm satisfied that I wrote it. 3 Q. Okay. All right. Could we have T7575, 4 please? 5 Now, let me ask you, Mr. Gross: At the 6 time that you wrote T7571, which is Tab 1035 -- 7 it's the first document you gave you -- you were a 8 consultant to USAT. Right? 9 A. Yes, sir. 10 Q. Okay. Now, let me ask you if you can 11 identify T7575. 12 A. No, sir. 13 Q. You've never seen this document before? 14 A. I don't recall. I've read it in the 15 last few days. I don't recall. 16 Q. Do you have any reason to think, 17 Mr. Gross, that you did not write this document? 18 A. I have no reason to -- I have no idea. 19 I don't -- I just do not recall writing it. 20 Q. Mr. Gross, did anyone else that -- did 21 you ever have a stamp that said "dictated but not 22 read by Jenard M. Gross"? 20477 1 A. Yes, I did. 2 Q. You did have such a stamp? 3 A. I did. 4 Q. All right. Do you remember -- do you 5 know who Mr. Gem Childress is? 6 A. Yes. It's actually Gem Childress, and 7 he was one of the two heads of the real estate 8 department at United. 9 Q. Okay. At United Savings? 10 A. Yes. 11 Q. Now, when you say it's Gem, it's -- how 12 do you spell his name? 13 A. G-E-M. 14 Q. So, you misspelled it here on this? 15 A. Yes. 16 Q. Okay. 17 MR. LEIMAN: Your Honor, I move T7575 18 into evidence. 19 MR. BLANKENSTEIN: No objection. 20 THE COURT: Received. 21 Q. (BY MR. LEIMAN) Let's look for a 22 minute at T7575. 20478 1 A. Do you want me to read it? 2 Q. Yeah. Take a few minutes to read it 3 over. Okay? 4 A. (Witness reviews the document.) 5 Q. Had a chance to read the document? 6 A. Yes, sir. 7 Q. Okay. Mr. Gross, this was written at 8 the time that you were a consultant to United 9 Savings. Right? 10 A. Yes, sir. 11 Q. And that would have been about the same 12 time frame that we saw the first document I showed 13 you, which was your notes regarding United 14 Savings. Remember that? 15 A. Yes, sir. 16 Q. Now, you were involved in 17 substantive -- and by that, I mean on actual -- 18 you were giving advice to Mr. Childress on actual 19 investments or real estate projects at United 20 while you were a consultant, weren't you? 21 A. Well, that is to say, I don't recall. 22 Q. You don't recall whether or not you 20479 1 ever gave substantive advice to Mr. Childress 2 while you were a consultant? 3 A. Would you repeat your first question? 4 That's -- I don't think that's what you said. 5 Q. I'm trying to rephrase it in a way that 6 maybe I can be more clear. 7 While you were a consultant at United 8 Savings, before you became CEO and chairman, you 9 were involved, weren't you, in substantive 10 investment and real estate matters? 11 A. What does the word "substantive" -- how 12 are you using the word "substantive"? I'm not 13 sure I -- 14 Q. You gave advice on particular projects, 15 didn't you? 16 A. As I said, I really don't recall. 17 Q. Well, you had a chance to read this 18 letter from Gross Investments. Right? 19 A. Yes, sir. 20 Q. Do you see yourself in this letter as 21 giving advice on a specific investment to 22 Mr. Childress? 20480 1 A. I can't recall what the letter is 2 talking about or anything else. 3 Q. Look at the "PS" just below where your 4 name appears on this. You say, "PS, even if we're 5 able to make a deal before we really firm it up, I 6 still think somebody needs to go out there on a 7 day when they are landing north/south on that 8 runway and see what sort of noise level you get 9 down on that track. It sure spooks me," end 10 quote. 11 Do you see that? 12 A. Yes, sir. 13 Q. All right. That's what I'm talking 14 about by way of actual advice on an investment. 15 A. As I say, I don't recall writing this. 16 I can't even -- I can't even -- I've been trying 17 to figure out the last week what particular tract 18 it is. I have no earthly idea what it's all 19 about. 20 Q. Does the name David Wolfe ring a bell 21 for you? 22 A. I know David Wolfe. 20481 1 Q. And was David Wolfe involved in a 2 project near the airport in Houston? 3 A. I don't recall. 4 Q. Could we have Tab 1036, T7573, please? 5 T7573, which is Tab 1036, is another 6 document that bears your name on it. 7 Do you remember this document? 8 A. I didn't remember it until I saw it 9 recently. I don't doubt that I did write it. 10 Q. Okay. And that would have been 11 while -- you wrote it while you were a consultant 12 to United Savings, correct? 13 A. Yes, sir. 14 Q. Okay. Can we have Tab 1037, which is 15 T7572, please? 16 Mr. Gross, let me ask you a very 17 similar question. Do you remember this document 18 that bears your name and the date October 24, 19 1984, and is Exhibit No. T7572? 20 A. Again, I didn't remember it; but I 21 think I wrote it. 22 Q. Again -- 20482 1 A. I didn't -- I didn't remember it, but I 2 do think I wrote it. 3 Q. You do think you wrote this? 4 A. Yes. 5 Q. You saw this document, as well as the 6 two previous documents, sometime this week; is 7 that right? 8 A. The last week or two, yes. 9 Q. Last week. 10 Was that in preparation for your 11 testimony here? 12 A. Yes, it was. 13 Q. Okay. This 7572 was the same time 14 frame. That was also written when you were a 15 consultant to United Savings Association of Texas. 16 Right? 17 A. Yes. 18 Q. Now, the reason that you wrote those 19 documents -- the notes regarding United Savings 20 which is T7571 and "proposed solutions" which is 21 T7573, and "future programs" which is T7572 -- the 22 reason that you wrote those was because it was 20483 1 part of your job as a consultant. Right? 2 A. Yes. 3 Q. It's a normal thing that consultants do 4 to write these kinds of memos; is that right? 5 A. Yes. 6 Q. And is it right to say that the reason 7 that you wrote them was to determine where the 8 problems were and to attempt to solve those 9 problems? Is that right? 10 A. Yes, sir. 11 Q. The source of the information in those 12 three specific consultant documents that I showed 13 you regarding real estate came from what source? 14 A. Could I have a minute to look over 15 them? 16 Q. Yeah, sure. 17 A. Thank you. (Witness reviews the 18 document.) The Document No. 1 would primarily be 19 from either having sat in on meetings -- 20 Q. Wait. Before you say "Document No. 1," 21 I'm sorry to interrupt you. We have to go by the 22 "T" number. 20484 1 A. Okay. T7571. 2 Q. All right. 3 A. That would be primarily either from -- 4 well, first of all, I start with the premise that 5 I'm coming in and looking at this from a point of 6 view of an examiner and then I go on to where I 7 got the information, either from meetings with 8 various people sitting in on committee meetings, 9 talking to the various officers and employees, 10 reading reports/memos within the institution, 11 sources such as that. And then some of it just 12 has to do with general observations. 13 And then the solutions are just, of 14 course, my ideas as to what we should do, possible 15 solutions to some of the problems. And I haven't 16 read 7572. 17 Do you want me to read that, too? 18 Q. Where did you get the information 19 regarding the real estate matters that are 20 involved in these three memoranda: 7571, 7572, 21 and 7573? 22 A. Well -- 20485 1 MR. BLANKENSTEIN: Your Honor, I think 2 he just answered the question with regard to the 3 first memo, which is 7571. 4 Is Mr. Leiman asking him to go over 5 that again, or does he want him to move on to one 6 of the two other memos? 7 THE COURT: Which memo are you focused 8 on now, Mr. Leiman? 9 MR. LEIMAN: I'm focused on the first 10 memo. 11 Q. (BY MR. LEIMAN) Let me see if I can 12 clear this up and help you out here, Mr. Gross. 13 A. All right. 14 Q. Do you remember that you gave your 15 deposition in Washington, D.C. in June of 1995? 16 Do you remember that? 17 A. I remember I gave one in Washington, 18 yes. 19 Q. Okay. Do you remember that you and I 20 sat across from each other at a table and you took 21 an oath and you gave testimony to me? 22 Do you remember that? 20486 1 A. Yes. 2 Q. Okay. Do you remember Mr. Blankenstein 3 being there? 4 A. Yes, I do. 5 Q. Do you remember a fellow by the name of 6 Don Carlson from the Williams & Connolly law firm 7 being there, too? 8 A. Yes. 9 Q. Okay. In your deposition at Page 97, I 10 asked you who provided you with information 11 regarding real estate matters? Here's your 12 answer. "It would have been David Graham and Gem 13 Childress." 14 Question, "Anyone else?" 15 Answer, "No." 16 Does that help refresh your memory? 17 A. Yes, sir, it helps. But that's a 18 misstatement. 19 Q. You're saying that what you told me 20 then was a misstatement? 21 A. Yes, sir. 22 Q. Well, maybe we'd better go into this a 20487 1 little bit more. 2 A. All right. 3 Q. Who else gave you information on real 4 estate matters as to -- 5 A. Well, in reading this memo, a lot of it 6 has to do with the residential aspects, which were 7 under Charlie Patterson. And I really don't 8 recall who gave me the information with regard to 9 that area. But the bulk of this memo really deals 10 with that. If you want, I'll go point by point 11 and tell you which is which. 12 Q. I just want to know who you got the 13 information from. 14 A. I don't remember. 15 Q. Was Patterson one of the people you got 16 the information from? 17 A. He might have been. 18 Q. How about David Graham? Is he another 19 person you got information from? 20 A. As I say, if this document was in front 21 of me at the time that question was asked, I 22 misspoke. That's all I can tell you because other 20488 1 people beyond those two did give me information, 2 and I don't -- as I say, probably -- well, I just 3 don't recall. 4 Q. Mr. Gross, did you ever have an 5 opportunity to read over your testimony after you 6 gave it in Washington? 7 A. Yes, sir. 8 Q. All right. And since giving -- did you 9 make any corrections to it, to the best of your 10 recollection? 11 A. I don't recall. 12 Q. Did you ever tell your attorney, either 13 Mr. Blankenstein or Mr. Carlson, that you had made 14 a misstatement? 15 A. You know, I think I told you at the 16 outset that my memory was not what it should be, 17 what it ought to be. I'll be 69 very shortly. I 18 was about 66 at that time. And I answered those 19 questions to the best of my ability. But if -- 20 I'd like -- could I see the deposition? If what 21 you're reading to me is what I said, it's just -- 22 it's a mistake. That's all I can tell you. 20489 1 Q. I'd be happy to provide you with a copy 2 of your deposition. 3 THE COURT: We'll take a short recess. 4 5 (Whereupon, a short break was taken 6 from 9:55 a.m. to 10:20 a.m.) 7 8 THE COURT: Be seated, please. We'll 9 be back on the record. 10 Mr. Leiman, you may continue. 11 Q. (BY MR. LEIMAN) Mr. Gross, if you'd 12 like, I'll show you a copy of the transcript of 13 your testimony in which you stated that the 14 information regarding real estate matters that 15 appears in your notes regarding United Savings at 16 7571, your statement was that it was by -- from 17 Mr. Graham and Childress. Okay? Would you like 18 to see that? 19 A. Yeah. I may have said it; but as I 20 say, if that's all I said, then I misspoke. 21 Q. Were there any other matters in which 22 there were -- are there other -- did you go back 20490 1 over your transcript? 2 A. Yes, sir. 3 Q. Did you do that recently? 4 A. No, sir. 5 Q. When was the last time you read your 6 transcript? 7 A. When was it was sent out? 8 Q. In 1995. 9 A. How many times have I been -- I need 10 some memory refreshing. The first time I was in 11 Washington -- was I up there more than once? 12 Q. Yes. 13 A. With you, I believe. Is that right? 14 Q. Yes. You were there on June 5th, and 15 you were there on June 26th. 16 A. Okay. All right. Well, I -- I know -- 17 in going over my deposition, I know another thing 18 that I made a mistake. As I say, the reason I 19 made a mistake was that's the way I remembered it. 20 And unfortunately, my memory turned out to be 21 wrong. 22 Q. Is your memory better today? 20491 1 A. It's worse. 2 Q. Then how could you then add some new 3 people to the scene, Mr. Patterson and others? 4 A. Because in reading the documents, it 5 dealt with departments that weren't under 6 Mr. Childress and Mr. Graham. So, that's how I 7 knew that I had to get that information from 8 somebody other than from them. And I'm not even 9 sure it was Mr. Patterson. That's all I'm saying. 10 Q. Do you know if there are any other 11 misstatements in the transcript of your 12 deposition? 13 MR. BLANKENSTEIN: Which transcript is 14 Mr. Leiman referring to? 15 MR. LEIMAN: The June 26 -- I apologize 16 to the Court. It was June 7th, not June 5th, 17 1995. June 7th and June 26th of 1995. 18 Q. (BY MR. LEIMAN) Do you know if there 19 are any other misstatements in there, Mr. Gross? 20 A. I specifically know of one, yes, sir. 21 And there may be -- as I say, there may be others, 22 but there's one that I specifically know of. 20492 1 Q. What was that? 2 A. That had to do with the interest on the 3 note that I had with United Financial Group. I 4 thought that it was paid by them, and I now found 5 out that I paid it. So, I know that I misspoke on 6 that, as well. 7 Q. When did you find that out? 8 A. Last week. 9 Q. And have you made efforts to correct 10 the transcript, correct the testimony? 11 A. No, I haven't. 12 Q. Did you tell your lawyer, 13 Mr. Blankenstein? 14 A. Yes, I did. 15 Q. When did you tell him? 16 A. The last day or two. 17 Q. Mr. Gross, in addition to Mr. Charles 18 Patterson who worked in the United Savings real 19 estate department -- right? 20 A. Yes. 21 Q. In addition to him, who were the other 22 heads of the real estate department? 20493 1 A. He was the head of the residential, and 2 then Mr. Graham and Mr. Childress were head of the 3 commercial. 4 Q. Mr. Graham and Mr. Childress were 5 head -- the heads of the commercial? 6 A. Yes. 7 Q. What is the distinction between 8 commercial real estate and residential real 9 estate? 10 A. The residential real estate dealt with 11 things such as single-family houses, condos, 12 townhouses, lots, subdivisions, construction loans 13 on those things. And they may have -- I can't 14 remember where the installment loans -- the 15 portfolio -- that was under Mr. Patterson, I 16 believe. I'm not sure about that, whether it was 17 totally separate or whether they reported to him. 18 Q. You're not an expert in real estate 19 development, are you, in the sense of commercial 20 real estate development? 21 A. I've been involved in it over the 22 years. 20494 1 Q. Okay. Do you feel that you have 2 considerable expertise in that field? 3 A. Yes, sir. 4 Q. And do you have considerable expertise 5 in that -- in regard to development of office 6 buildings and shopping malls? 7 A. No, sir. 8 Q. No? Okay. 9 You said a couple minutes ago that you 10 became aware of another misstatement where you had 11 misspoken in your earlier transcript, the 12 deposition that you gave in Washington. 13 How did you become aware of that? 14 A. We were going over -- just a minute. 15 We were discussing the note that I had with 16 United Financial Group, and I said that I 17 thought -- 18 MR. BLANKENSTEIN: Your Honor, I'm 19 going to object on the grounds of attorney/client 20 privilege. 21 MR. LEIMAN: Your Honor, we have a 22 right to inquire into this matter which is 20495 1 clearly -- which is not only relevant -- 2 THE COURT: It seems to me the 3 privilege has been waived by his opening up the 4 subject. I'll deny it. 5 Q. (BY MR. LEIMAN) You may answer, 6 Mr. Gross. 7 A. We were going over the note, and I was 8 reading it. And I said I thought that United 9 Financial had paid the interest. So, 10 Mr. Blankenstein said, "Well, that's not what the 11 note says." 12 So, I said, "Well, that's what I 13 remember." 14 So, he said, "Do you still have your 15 tax returns for those years?" So, we got them out 16 and we looked at them, and I had paid the 17 interest. 18 Q. How did you know you had made a 19 misstatement in the transcript of your testimony, 20 Mr. Gross, if you hadn't read your transcript 21 recently? 22 A. He told me that I had said that in the 20496 1 deposition. 2 Q. Okay. So, you went over the testimony 3 that you had previously given to the OTS in 4 Washington with Mr. Blankenstein; is that right? 5 A. On that item. 6 Q. Only on that item? 7 A. I didn't review the whole testimony. 8 Q. Could we have Tab 128, A1102, please? 9 Mr. Gross, these are the February 14th, 10 1985 minutes of the board of directors meeting of 11 United Savings Association of Texas. 12 You've seen these before, haven't you? 13 A. Yes, I have. 14 Q. Okay. Do you remember if you've seen 15 these recently? 16 A. Yes, I have. 17 Q. When would that have been? Last week? 18 A. Yes. 19 Q. All right. If you would, turn with me, 20 please, to Page 4 of these minutes. 21 A. Okay. 22 Q. In the second full paragraph on Page 4, 20497 1 it states that on the motion of Dr. Munitz 2 seconded by Mr. Winters, you were elected chairman 3 of the board and CEO. Right? 4 A. Yes, sir. 5 Q. All right. So, prior to February of 6 1985, you had been involved with United Savings as 7 a consultant for -- let's count the months. It 8 would have been at least May, June, July, August, 9 September, October, November, December, January, 10 February? 11 It would have been ten months, nearly a 12 year. Right? 13 A. Pretty close. 14 Q. Okay. Turn with me, please, to Page 17 15 of these minutes and look at the first full 16 paragraph. 17 A. Page 17? Starting "any real estate"? 18 Q. Right. Read that to yourself and tell 19 me what it means. 20 A. (Witness reviews the document.) It 21 says that any real estate or joint venture project 22 which involves total equity and/or debt exposure 20498 1 to the association of 2 and a half million or more 2 shall require prior board ratification. 3 Q. Mr. Gross, is this a policy of United 4 Savings Association of Texas? 5 A. It would appear to be. 6 Q. What does a policy mean in the context 7 of a savings and loan association? 8 A. It sets the ground rules under which 9 the institution operates. 10 Q. And in this case, investments could not 11 exceed $2 and a half million. Right? 12 MR. BLANKENSTEIN: Objection. 13 Mischaracterizes the statement. 14 Q. (BY MR. LEIMAN) Without board 15 approval. Right? Let me amend my question. 16 Without board approval, investments in 17 joint ventures were limited to $2 and a half 18 million; is that right? 19 A. Yes. 20 Q. Okay. Prior to your preparation for 21 testimony, had you read these February 14th, '85 22 minutes? 20499 1 A. Yes. 2 Q. Okay. And you would have read them -- 3 A. I've seen them. I haven't read them 4 through in detail. 5 Q. Would you have read them around the 6 time that you were elected chairman and CEO? 7 A. I don't recall. 8 Q. How would you have become familiar with 9 the ground rules of the institution and its 10 policies if you didn't read the minutes? 11 A. Well, there were certainly other 12 sources for the information other than the 13 minutes. 14 Q. Okay. And what sources would those 15 have been? 16 A. I don't recall. 17 Q. Was there a policy book? 18 A. I'm sure there was. 19 Q. Do you remember what it looked like? 20 A. No, sir. 21 Q. Do you remember ever reading it? 22 A. I'm sure I looked at it, but I don't 20500 1 remember reading it. 2 Q. When you were at Robstown or Gulf 3 Coast, did you have occasion to read their 4 policies regarding limitations on investments and 5 loans? 6 A. I don't recall. 7 Q. Tab 159, T7051, please. 8 A. I'm getting inundated. Should I close 9 these up and set them aside? Is that the way I 10 should work with it? 11 Q. Yes, sir. That would be fine. 12 13 (Discussion held off the record.) 14 15 A. We're on A1643 now? 16 Q. (BY MR. LEIMAN) Yes, sir. 17 A. All right. (Witness reviews the 18 document.) 19 MR. BLANKENSTEIN: Your Honor, I 20 believe this exhibit is in evidence at A1643. 21 THE COURT: I'm looking at an exhibit 22 T7015. Is that the same thing? 20501 1 MR. BLANKENSTEIN: I think it's the 2 same thing, Your Honor. We have it in evidence as 3 A1643. 4 MR. LEIMAN: I believe that's what I 5 said, Your Honor. Tab 159, A1643, which also 6 should be the equivalent exhibit of T7051. 7 THE COURT: 7015. 8 MR. LEIMAN: No. Well, you may be 9 right actually. 10 MR. DUEFFERT: Your Honor, if you'll 11 recall last fall, there was some discussion about 12 this document. I believe Exhibit A1643 has all 13 signatures on the last page, whereas I think the 14 exhibit Mr. Leiman might be working from only has 15 one signature. 16 MR. LEIMAN: No. I am working from 17 Tab 159 which is A1643 which is, in fact, the 18 exhibit that you just mentioned, Mr. Dueffert. 19 THE COURT: Okay. The document I'm 20 looking at, T7015, appears to be a different item 21 altogether. So, what I have now is A1643, which 22 is a proposal on real estate. The other item is a 20502 1 letter -- 2 MR. BLANKENSTEIN: Excuse me? 3 THE COURT: I say T7015, which may -- 4 MR. BLANKENSTEIN: No. It's 7051, I 5 believe. I thought that's what Mr. Leiman said 6 initially, T7051. 7 THE COURT: Okay. Well, let's look at 8 A1643. 9 Is that what you're going to -- 10 MR. LEIMAN: Yes, sir, it is. 11 Q. (BY MR. LEIMAN) Before we get 12 directly into this exhibit, A1643, I want to ask 13 you a couple of questions about how you understood 14 your role as chairman and CEO. All right, 15 Mr. Gross? 16 First, my question is: I'm right, am I 17 not, that the chairman is ultimately responsible 18 for everything at a savings and loan. Right? 19 A. I think the chairman and chief 20 executive would be. 21 Q. Would be what? 22 A. The buck stops there. 20503 1 Q. Responsible for everything. All right. 2 I want to go into a couple of issues 3 regarding Mr. Gerald Williams. 4 Do you remember him? 5 A. Yes, I do. 6 Q. What was his role at the savings and 7 loan in 1985? 8 A. He was president and chief operating 9 officer. 10 Q. Okay. Did he ultimately -- he was 11 fired ultimately, wasn't he? 12 A. I don't know if that -- he was -- he 13 resigned, as I recall. 14 Q. He resigned. 15 And was Mr. Barry Munitz involved in 16 that resignation? 17 A. I believe so. 18 Q. How was he involved in that? 19 A. I think he made the arrangements for 20 Mr. Williams' severance. 21 Q. Okay. Had there been a dispute as to 22 certain issues of policy that related to United 20504 1 Savings' direction at that point in time? 2 A. I believe there had been. 3 Q. Okay. Mr. Williams had a disagreement 4 with Charles Hurwitz, didn't he? 5 A. I don't think that -- I think he just 6 had a basic disagreement with the -- with some of 7 the policies that we had. 8 Q. So, your answer to my question is no, 9 you don't believe he had a disagreement with 10 Charles Hurwitz? 11 A. I really don't know. 12 Q. Would the following statement be true, 13 that if you had a disagreement with Charles 14 Hurwitz, you had a disagreement with Barry Munitz? 15 Would that be true? 16 A. I certainly wouldn't -- I don't think 17 that's a fair statement. 18 Q. Well, that's what you told me, 19 Mr. Gross, in your deposition on June 26, 1995. 20 Page 283. 21 Would you like a copy? 22 A. Please. 20505 1 Q. Here you are, sir. 2 A. I'm sorry. What page? 3 Q. 283 is your answer. My question is on 4 Page 282. 5 A. (Witness reviews the document.) 6 Q. Starting at Page 282, Line 23, and 7 carrying over to Line 2 on Page 283, from 282 to 8 283. 9 Do you see that? 10 A. (Witness reviews the document.) Okay. 11 I've read it now. 12 Q. Do you have the context of the 13 question? 14 A. Yes, sir. I'm sorry. Would you repeat 15 the question now? 16 Q. Do you agree with your statement of 17 1995 that if there was a disagreement with 18 Charles, there was a disagreement with Barry? 19 A. That was an offhand remark. It's -- 20 certainly Barry worked for Charles, and I think 21 that they tended to see things similarly. 22 Q. Did they see things -- 20506 1 A. Whether that was -- you know, whether 2 you could make a universal statement like that, 3 you know, I think that's probably -- 4 Q. Are you backing off the statement now, 5 Mr. Gross? 6 A. I think I probably gave a casual answer 7 there. 8 Q. Are you backing off the statement that 9 you made in 1995 to me? 10 A. I'm trying to clarify it. 11 Q. No, sir. I would like an answer to my 12 question. 13 MR. BLANKENSTEIN: Objection. He has 14 answered the question. 15 Q. (BY MR. LEIMAN) Was this a 16 misstatement, Mr. Gross? 17 THE COURT: Can you answer? 18 A. I think it was probably a loose answer. 19 Q. (BY MR. LEIMAN) So, it's incorrect as 20 you stated it? 21 A. It's -- it was -- as I say, it was a 22 casual remark. And I would say that, you know, a 20507 1 lot of times that would be true. Probably 2 sometimes it wasn't. 3 Q. When would it have been true? 4 A. I don't know. 5 Q. Was it true in the case of the firing 6 of Mr. Williams? 7 MR. BLANKENSTEIN: Objection. 8 Misstates the testimony. 9 THE COURT: How does it misstate the 10 testimony? 11 MR. BLANKENSTEIN: Mr. Gross testified 12 that Mr. Williams resigned. Mr. Leiman asked him 13 whether he was fired. Mr. Gross stated that 14 Mr. Williams resigned. 15 THE COURT: All right. Restate the 16 question. Let me ask you this: At Mr. Gross' 17 deposition, did he say he was fired or he 18 resigned? Seems to me Mr. Williams thought he was 19 fired. 20 THE WITNESS: No. It says, "Do you 21 know why he" -- 22 MR. LEIMAN: "Asked to resign," Your 20508 1 Honor. And he was asked to resign by Dr. Munitz. 2 And my question -- 3 THE COURT: All right. Let's use that 4 language then. 5 Q. (BY MR. LEIMAN) I'll reformulate the 6 question, Mr. Gross. 7 Do you disagree with your prior answer 8 that regarding being asked to resign by 9 Dr. Munitz, that Mister -- let me start over. 10 When Mr. Williams was asked to resign 11 by Dr. Munitz, was that a result of a disagreement 12 with Charles Hurwitz? 13 A. No. 14 Q. No, it was not? 15 A. I think it was a result of a 16 disagreement with everybody else on the executive 17 committee. 18 Q. I've just got to ask you to look again 19 at your deposition testimony. I'm sorry. I don't 20 want to quibble over words with you, Mr. Gross. 21 But you say at Line 23 on Page 282 -- I asked you, 22 "Was it a major disagreement with Charles 20509 1 Hurwitz?" 2 Answer, "I think there was certainly 3 disagreement there." 4 MR. BLANKENSTEIN: Your Honor, in all 5 fairness, he should read the preceding question 6 and answer, as well. 7 THE COURT: All right. Read that, 8 Mr. Leiman. 9 A. If you look up above, "And I guess you 10 note nobody else had that comfort level." 11 MR. BLANKENSTEIN: I think the question 12 starts on Line 20. "Who did he disagree with?" 13 And I think the answer is, "I think really nobody 14 else on the executive committee wanted to get that 15 heavily into it." 16 Q. (BY MR. LEIMAN) And my question then 17 is, with that background in mind, Mr. Gross, "Was 18 it a major disagreement with Charles Hurwitz?" 19 Answer, "I think there was certainly 20 disagreement there." 21 "What about Barry Munitz?" 22 Answer, "I would say if there was 20510 1 disagreement with Charles, there was disagreement 2 with Barry." 3 Do you stand by that testimony today, 4 sir? 5 A. With regard to that item, that -- I 6 think that's probably a fair statement. 7 Q. All right, sir. Thank you. 8 MR. KEETON: Your Honor, under optional 9 completeness, I want the next two questions and 10 answers read, please. 11 THE COURT: Why don't you read them? 12 MR. KEETON: I'll be happy to. 13 Question, "Right. So, from your understanding -- 14 I'm not saying that you made any of these 15 decisions. I'm just saying that you understood to 16 be the case was that Gerry Williams wanted to go 17 more heavily into mortgage-backed securities. 18 Charles Hurwitz disagreed with that position. He, 19 among others, disagreed with that position?" 20 Answer, "I think most of us disagreed 21 with it." 22 Question, "Did you disagree with it?" 20511 1 Answer, "Yes, sir." 2 THE COURT: Thank you. 3 Q. (BY MR. LEIMAN) Let's go to A1643. 4 Do you have those minutes in front of you, sir? 5 A. Let me set this aside. 6 Q. All right. 7 A. All right. I have A1643. 8 Q. Okay. Do you know what this is, what 9 A1643 is? 10 A. It looks like a proposal presented to 11 the real estate investment committee of United 12 Savings. 13 Q. And who would have prepared this 14 document? 15 A. I imagine David Graham would have. 16 Q. What do you mean you imagine David 17 Graham would have? 18 A. Usually, the person who makes the 19 presentation prepares the document or somebody 20 under him does. 21 Q. Is David Graham's name mentioned 22 anywhere in this document other than on the 20512 1 signature page? 2 A. Under "comments" -- 3 Q. Yes, sir. 4 A. -- down on Page 3, it says, "This is 5 the same tract that Gem and I tried to purchase 6 last year from Alamo." 7 So, I would assume -- it doesn't name 8 David Graham, but I -- from reading, this I would 9 assume that David Graham was the one that prepared 10 this. 11 Q. Prepared this document. Right? 12 A. Yes, sir. 13 Q. Okay. Now, I see here that you're the 14 No. 1 signer on this document on Page 4. Right? 15 Is that your signature? 16 A. Yes, sir. 17 Q. Okay. And having signed this document 18 in the first slot there, what were you 19 representing in terms of your signature? Were you 20 signing as the chief executive officer, as a 21 member of the real estate committee, investment 22 committee, SLC? 20513 1 What was your role? 2 A. I was signing as a member of the real 3 estate investment committee. 4 Q. Okay. As of March 18th of 1985, at 5 that point, you were the CEO and chairman of USAT. 6 Right? 7 A. Yes. 8 Q. And I think you agreed with me earlier 9 that the buck stopped with you. Right? 10 A. Yes. 11 Q. So, you take responsibility for all of 12 the information and the accuracy of the 13 information in this document; is that right? 14 MR. BLANKENSTEIN: Objection. 15 Mischaracterizes the testimony. 16 A. There is no way -- 17 THE COURT: Well, the witness can 18 answer. 19 A. Well, we had an excellent real estate 20 department and I relied on them to provide 21 accurate information. 22 Q. (BY MR. LEIMAN) Have you finished 20514 1 your answer? 2 A. Would you restate the question? 3 MR. LEIMAN: Read it back, please. 4 5 (The record was read by the court 6 reporter, as requested.) 7 8 A. I relied on -- yes and no. In the end, 9 ultimately, I become responsible in theory. In 10 actuality, I certainly am not -- I'm relying on 11 the people in the real estate department to 12 provide accurate information to the committee. 13 Q. (BY MR. LEIMAN) Tell me this, 14 Mr. Gross. What kind of checking did you do? Did 15 you do any so-called litmus testing to determine 16 whether any of the information in here was right 17 or wrong? 18 A. The -- we had a group of very 19 sophisticated knowledgeable people in the real 20 estate department who did the underwriting on 21 this, who gathered the information on it, who put 22 it together. From time to time, we would have 20515 1 meetings discussing this outside the committee 2 meeting. I don't recall what with this one 3 specifically. But as I say, we had people who 4 provided good information to us and I relied on 5 that. 6 Q. Now I'd like you to try my question. 7 Okay? 8 A. Okay. 9 Q. My question to you is: Did you do any 10 litmus testing to determine the accuracy or 11 inaccuracy of any of the information contained in 12 A1643? 13 MR. BLANKENSTEIN: I'm not sure exactly 14 what "litmus testing" is in this circumstance. 15 Perhaps Mr. Leiman could help Mr. Gross out by 16 exactly what he means in what he was checking, in 17 what -- the nature of that checking that 18 Mr. Leiman is asking him about. 19 MR. KEETON: That's why I'm on my feet, 20 Your Honor. Are we going from pink to blue or 21 blue to pink or what are we doing? 22 Q. (BY MR. LEIMAN) Do you understand the 20516 1 question, Mr. Gross? 2 A. No. 3 Q. You've never heard of litmus testing? 4 A. I took chemistry, and I understood it 5 then very well. 6 MR. BLANKENSTEIN: Your Honor, he's 7 just arguing with the witness. 8 MR. KEETON: He probably can't define 9 it. 10 THE COURT: Restate your question. I 11 have a question of my own about what litmus 12 testing is. 13 MR. LEIMAN: Let me rephrase it, Your 14 Honor. 15 Q. (BY MR. LEIMAN) Did you check the 16 accuracy or inaccuracy of any of the information 17 contained in A1643? 18 A. I probably did at the time, but I don't 19 remember now what I did. 20 Q. When you say you probably did at the 21 time, what's your recollection of the kind of 22 information you would ordinarily check? Would you 20517 1 check the appraisals? 2 A. I really do not recall what I would 3 check from venture to venture. I would -- okay. 4 Something came in -- I would always look at 5 financial statements. I know I did that. And I 6 can't -- things come back in flashes to me. 7 That's one that hits. 8 Q. So, you reviewed the financial 9 statements of the people that were involved as 10 participants in this particular project? 11 A. That's correct. 12 Q. All right. I assume -- let me not make 13 any assumptions. 14 Do you know who was involved as 15 participants in this particular real estate 16 investment? 17 A. Yes, sir. It shows down here on the 18 application. 19 Q. Okay. Who would that be? 20 A. It says Rosenberg/USAT Partnership, 21 Westplex Investment Corp., N.V., and Grieshaber & 22 Roberts Investments. 20518 1 Q. Who's Rosenberg? 2 A. He's a real estate attorney from 3 San Antonio. 4 Q. Is this the same Rosenberg who's a 5 friend with Mr. Charles Hurwitz? 6 A. Yes. 7 Q. Okay. Now, you mentioned earlier -- 8 you referred me to -- I think it was under the 9 "comment" section under Page 3. 10 You said that this is the same property 11 that Gem and I had previously tried to buy in 12 San Antonio. 13 Remember you told me about that? 14 A. Yes. 15 Q. Okay. Mr. Rosenberg was the lawyer 16 involved on behalf of United Savings in 17 purchasing -- attempting to purchase the property 18 in San Antonio. Right? 19 A. Well, it was done before I was there. 20 Looking through some of the papers recently, I 21 think that's probably correct. 22 Q. Okay. Would you have checked to 20519 1 determine whether or not Mr. Rosenberg was 2 involved at the time in the potential purchase on 3 behalf of United Savings of this particular 4 property? 5 A. I don't recall. 6 Q. You don't know whether you would have 7 checked to see that? 8 A. I don't know whether I did now. 9 Q. Would it have been a prudent practice 10 for you as the chairman and the CEO to determine 11 the history of the institution with regard to the 12 same piece of property? 13 A. Yes, sir. And it's my understanding 14 that the institution tried to buy this as an 15 investment on its own back in 1984. And again, 16 I'm getting this from looking at the -- going back 17 in papers I've seen in the last few days. And 18 they were unsuccessful and they terminated their 19 efforts at acquiring it. And subsequent to that, 20 the other people came in and made their offer. 21 Q. All right. Now, that's what you know 22 today? 20520 1 A. That's what I know today. 2 Q. All right. Back at the time that this 3 was done in March of '85, would you have 4 determined what the efforts were on behalf of 5 United Savings to buy the same piece of property? 6 A. I don't recall. 7 Q. You don't remember what you would have 8 checked? All you remember is the financial 9 statements? 10 A. I don't remember what I did check. 11 Q. Okay. You remember checking the -- it 12 was your practice to check financial statements. 13 Right? 14 A. I remember specifically doing that. 15 Q. Okay. Did you check Mr. Rosenberg's 16 financial statement? 17 A. Yes, I did. 18 Q. Do you remember finding that 19 Mr. Rosenberg had some other loans from United 20 Savings? 21 A. I don't recall now. 22 Q. Would that have registered with you? 20521 1 A. In looking back the last few days, I 2 have found that he had another loan. I don't know 3 whether it was before or after this one. 4 Q. Okay. Would it have been important to 5 your analysis in signing this particular document 6 to know that Mr. Rosenberg had a loan with United 7 Savings Association of Texas? 8 A. Wouldn't -- it would not have been 9 important in analyzing whether this was a good 10 venture or good loan or not, no. 11 Q. Well, then, why were you looking at 12 Mr. Rosenberg's financial statement? 13 A. Well, you're looking at people's net 14 worth. You're looking at their cash. You're 15 looking at things of that sort. 16 Q. Well, wouldn't an extension of credit 17 from the same institution have a bearing on that, 18 Mr. Gross? 19 A. It would merely corroborate the fact 20 that they thought he was a good credit risk. 21 Q. So, the more money that you lend to a 22 person, the better the credit of that person; is 20522 1 that right? 2 A. You know, you certainly seek to make 3 loans to strong people. 4 Q. How does having additional money 5 outstanding to one person on behalf of United 6 Savings improve their creditworthiness? 7 A. I don't know that it improves it, but 8 it just shows that somebody has looked at it 9 before and thought that they were creditworthy 10 then. 11 Q. Okay. So, they previously had been 12 adequate for a loan in the past and, therefore, 13 for this loan, they are probably all right? 14 A. But again, I don't even know if they 15 had a loan to him prior to this at this point in 16 time. So, if you could -- you know, I just don't 17 know -- I don't even know if they had a loan 18 outstanding at the time that it was made. 19 Q. All right. 20 A. So, I guess -- 21 Q. Well, what kind of an investment was 22 this exactly, Mr. Gross, that's reflected here in 20523 1 A1643? 2 A. It was a real estate investment. 3 Q. Okay. And as a real estate investment, 4 do you recollect -- or in your review of the 5 documents last week and recently, were you able to 6 tell what the purpose of this investment was on 7 behalf of United Savings? 8 A. It was an investment in a piece of 9 property in San Antonio that was to be developed. 10 Q. Okay. And do you remember anything 11 else about it? 12 A. I'm not sure I know what you're asking. 13 Q. Do you remember the structure of the 14 investment? 15 A. Well, it shows here what the structure 16 was. 17 Q. Where? 18 A. Down here at the bottom of Page 1. 19 Q. Do I then understand that United 20 Savings Association of Texas Partnership/Rosenberg 21 or Rosenberg/USAT partnership -- tell me what that 22 means. 20524 1 A. Having looked at those documents, 2 Stanley Rosenberg had a 50 percent interest in the 3 venture and offered half of that to United. 4 United took half, and then they structured an 5 agreement whereby United would advance the funds 6 for that 50 percent and Rosenberg would be liable 7 for the funds advanced by United. And whatever 8 funds were advanced would be repaid to United and 9 then profits thereafter would be split between the 10 two 50/50 on their portion of the venture. 11 Q. And is that information that -- 12 something you've recently gained? 13 A. Yes, sir. 14 Q. Okay. Do you remember ever asking the 15 question why was Mr. Rosenberg now a co-venturer 16 in the Park 410 project whereas earlier, he was 17 the lawyer for United Savings trying to buy the 18 property that Gem and David Graham had talked 19 about? 20 A. I don't recall. 21 Q. You don't remember asking that 22 question? 20525 1 A. No, sir. 2 Q. Do you think that's an important 3 question that should be answered? 4 A. Well, since Mr. Graham and 5 Mr. Childress had said that they had tried to buy 6 the property and were unable to and were no longer 7 interested and were -- therefore, had abandoned 8 it, I don't know that there would be any relevance 9 in it. 10 Q. You mean there would be no relevance in 11 going back looking at ancient history. Is that 12 it? 13 A. I'm saying that if United had 14 terminated its efforts at acquiring the property 15 and GMR had since tied it up and brought 16 Mr. Rosenberg in as a partner, I don't see that 17 one has any bearing on the other. 18 Q. No question of conflict came to your 19 mind? 20 A. In a situation like that, I don't see 21 any. 22 Q. You just -- there was -- okay. 20526 1 Mr. Rosenberg didn't put any money up, 2 did he, out of his own pocket? 3 A. Yes, sir. 4 Q. He did put money up out of his own 5 pocket for this investment? 6 A. Well, he had already put money up at 7 this time. 8 Q. Was he repaid by United Savings? 9 A. Yes, he was. 10 Q. He was. So, he had -- what was the net 11 amount of Mr. Rosenberg's investment at this point 12 in time, 1985, in the Park 410 project? 13 A. At this point right here? 14 Q. Yes, sir. 15 A. He had a 250,000-dollar letter of 16 credit up. 17 Q. What about after that? 18 A. After that, that got repaid. 19 Q. Okay. And it was repaid by whom? 20 A. By United putting up a letter of 21 credit. 22 Q. After United put up this letter of 20527 1 credit, how much money did Mr. Rosenberg have in 2 this project? 3 A. He didn't have any. 4 Q. Okay. I want to turn, please, to 5 Page 2 of this document, which is OW2153382. Look 6 at the last sentence in the first paragraph. It 7 says, "Mr. Rosenberg's firm has represented this 8 group legally for several years." 9 A. Yes, sir. 10 Q. Do you remember what your understanding 11 of that was at the time? 12 A. I don't. 13 Q. Mr. Gross, this was -- this particular 14 project represented here was an investment in real 15 estate, wasn't it? 16 A. Yes, sir. 17 Q. And this particular investment in real 18 estate would be covered by the policy that we saw 19 a few minutes ago laid out in Exhibit A1102, which 20 is Tab 128. 21 Do you see that 22 two-and-a-half-million-dollar limitation? 20528 1 A. I'm sorry. Which one? 2 Q. That would be A11 -- 3 A. 1102? 4 Q. Yes, sir. 5 A. And whereabouts are we? 6 Q. That would be on Page 17 of that 7 exhibit. 8 A. Let's see. I know it's here somewhere. 9 Oh, here we are. Yes, sir. 10 Q. Is "yes, sir" the answer to my question 11 that it would be covered by the two and a half -- 12 A. Would you restate the question? 13 Q. Sure. The real estate investment 14 represented here in A1643 would be covered by the 15 limitation set out in the board of director 16 minutes on Page 17 of Exhibit A1102. Right? 17 A. Yes. 18 Q. Do you remember determining, 19 calculating, or checking to see whether or not the 20 real estate investment represented in A1643 would 21 exceed the two-and-a-half-million-dollar 22 limitation that we just referred to? 20529 1 A. I don't recall. I've looked at a bunch 2 of documents recently, and I can answer the 3 question in light of what I've seen in the last 4 week or so, if you'd like. But I don't remember 5 what I did then. 6 Q. Would that have been something you 7 would have wanted to know? 8 A. I would want to be sure that it met the 9 policies of the institution. 10 Q. All right. Let's look at the bottom of 11 this exhibit on Page 8 (sic) of A1643. Look at 12 the last sentence on -- 13 A. I'm sorry. Which page are we on? 14 Q. Page 3. 15 A. And where am I looking? 16 Q. The last entry, last line. 17 A. Yes, sir. 18 Q. Would you read that line for me? 19 A. It says "The present appraisal on an 20 as-is basis is $72,550,000." 21 Q. When you signed your name to A1643, had 22 you read the appraisal document that's referred to 20530 1 here at the bottom of Page 3? 2 A. I had not. 3 Q. Okay. 4 A. At least, I don't recall. I'll put it 5 that way. 6 Q. T7139, please. 7 Do you have that in front of you, 8 Mr. Gross? 9 A. Yes, sir. 10 Q. All right. Let me ask you this 11 question: Have you ever seen T7139? 12 A. I don't recall seeing it until the last 13 week or so. 14 Q. Okay. Would you look -- look with me, 15 please, at the number on the first page, at the 16 bottom of the first page. 17 Do you see the number $72,550,000? 18 A. Yes, I do. 19 Q. All right. Does it appear reasonable 20 to you that this would be the appraisal that 21 Mr. Graham was representing in Exhibit A1643? 22 A. I have no idea. 20531 1 Q. You just don't know what kind of 2 appraisal he relied on? 3 A. Well, this was done a year earlier; so, 4 I would think probably not. 5 Q. You don't think this was the appraisal 6 in mind? 7 A. I don't know. 8 Q. You have no way of knowing? 9 A. No, sir. 10 Q. You didn't check at the time? 11 A. I don't remember what I did at the 12 time. 13 Q. Do you remember asking Mr. Graham, 14 "Where did you get this number, $72 and a half 15 million"? 16 A. I don't recall. 17 Q. In terms of what you just mentioned a 18 moment ago, that this was March 22nd, 1984, why 19 would that be significant, Mr. Gross? 20 A. It's a year earlier. 21 Q. So, it's an older appraisal. Right? 22 A. Well, it's not made to United Savings; 20532 1 and I would think that the appraisal that he would 2 be referring to would be one made to United 3 Savings. But I'm just speculating. I have no 4 idea. 5 Q. Why would that be important, Mr. Gross, 6 that it would be made to United Savings -- 7 A. Because that's the way appraisals were 8 done. They were -- well, in conjunction with a 9 loan, I'd have to -- I know in conjunction with a 10 loan, it had to be made to the institution. I'm 11 not sure about on a joint venture. I just don't 12 remember. 13 Q. Look with me, please, at the text just 14 above the column of numbers, which would be the 15 last full paragraph on Exhibit 7139 where it 16 states -- 17 A. You've lost me. I'm sorry. Just a 18 second. Where are we? 19 Q. It starts with "by virtue." 20 Do you see that? "By virtue of our 21 investigation, it's our opinion that the 22 cumulative undiscounted market value -- the 20533 1 cumulative undiscounted market value of the fee 2 simple interest of the above-described property as 3 if subdivided and ready for development as of 4 March 10th, 1985, was" -- and then -- 5 A. No. 1984. 6 Q. I'm sorry. I misread it. 1984 was 72 7 and a half -- 8 A. We're all human. 9 Q. Well, I'm glad you've given me credit 10 for something. 72 and a half million. Right? 11 A. That's what it says. 12 Q. What does that mean, "cumulative 13 undiscounted market value"? 14 A. It means that's the cumulative value 15 undiscounted. 16 Q. Does that give you a reliable 17 indication of the value of the property, 18 Mr. Gross? 19 A. No. 1, this was not -- this was made to 20 a prior owner a year before. I really -- I don't 21 know what -- there is -- it doesn't have -- I 22 don't know that -- I don't know that United did or 20534 1 didn't have it or what the circumstances are. But 2 I would say that we had to get our own appraisal. 3 Q. Let me go back to my question. It's 4 not even with regard to this. 5 Cumulative undiscounted market value, 6 okay, in an appraisal, does that give the lender 7 an accurate depiction of the value of collateral 8 property? 9 A. Well, you know, this isn't to the 10 lender. This is -- 11 Q. Mr. Graham -- I'm sorry. Mr. Gross, 12 forget about this -- who this is to. I'm just 13 asking you -- 14 A. Could I go back and look at one of the 15 other documents just a moment? 16 Q. If it will help you answer my question, 17 yes. 18 A. Let me look at something here. 19 (Witness reviews the document.) Okay. Thank you. 20 Q. We're -- 21 THE COURT: Restate your question, 22 Mr. Leiman. 20535 1 Q. (BY MR. LEIMAN) What document were 2 you looking at? 3 A. I was just looking at the proposal. 4 Q. A1643? 5 A. Yes, sir. 6 Q. Okay. The Court's asked me to restate 7 my question, which I'll do now. 8 In order to get an accurate depiction 9 of the value of real estate collateral, is it 10 appropriate, in your opinion, to use the 11 cumulative undiscounted market value of the fee 12 simple interest? 13 A. I would think that you would want to 14 discount that back to present day. 15 Q. All right. 16 THE COURT: We'll take a short recess. 17 18 (Whereupon, a short break was taken 19 from 11:13 a.m. to 11:36 a.m.) 20 21 THE COURT: Be seated, please. We'll 22 be back on the record. 20536 1 Mr. Leiman, you may continue. 2 MR. LEIMAN: Thank you, Your Honor. 3 Q. (BY MR. LEIMAN) Mr. Gross, does T7139 4 appear to be the same numerical value, $72 and a 5 half million, that you see stated in 6 Exhibit A1643? 7 A. Yes, it does. 8 Q. Okay. 9 MR. LEIMAN: Your Honor, I move T7139 10 into evidence. 11 MR. BLANKENSTEIN: No objection. 12 THE COURT: Received. 13 Q. (BY MR. LEIMAN) Exhibit T7491, 14 Tab 802. 15 Do you have that in front of you, 16 Mr. Gross? 17 A. Yes, I do. 18 Q. All right. This is a Love & Dugger 19 document that I previously had asked you about 20 during your deposition in Washington. This is a 21 September 20th, 1984 document which purports to 22 give a value of the Park 410 property. 20537 1 Would you look at the second page of 2 this document, please? Do you see the value given 3 there? 4 A. Yes, sir. 5 Q. All right. What's the value given? 6 A. $41,300,000. 7 Q. And the date of this particular letter 8 is September 20th, 1984. Right? 9 A. Yes, it is. 10 Q. All right. That's several months after 11 the March 22, 1984 appraisal that we saw that 12 Mr. Luebbert had done. Right? 13 A. I'm sorry. That Mr. who had done? 14 Q. T7139. 15 A. Yes, that's correct. 16 Q. All right. In fact, it's almost six 17 months later. Right? 18 A. Yes, it is. 19 Q. Now, it would be better to have a more 20 current appraisal, wouldn't it? A more current 21 estimate of value for the property, wouldn't it? 22 A. It would. 20538 1 Q. Okay. And this is a more current 2 estimate of value as of that point in time. 3 Right? 4 THE COURT: I'm not sure I understand 5 your question. Which point in time are you 6 referring to? 7 MR. LEIMAN: Let me go back, Your 8 Honor. 9 Q. (BY MR. LEIMAN) As of the time that 10 you signed A1463, Mr. Gross, what you stated to me 11 in connection with your signature in signing the 12 approval of the real estate investment was that 13 you would want a more current appraisal than one 14 which is a year old. Right? 15 A. Yes. 16 Q. Okay. The Love & Dugger estimate of 17 value, T7491, is more current by some nearly six 18 months. Right? 19 A. Yes. 20 Q. Can you think of any reason why 21 Mr. Graham would not have used this more current 22 estimate of value? 20539 1 A. I have no idea. 2 Q. Do you believe it might be because the 3 value that's given here is some -- over 4 $30 million less? 5 A. I'm sure if he had had this -- I just 6 don't know. But I'm sure he did not -- I don't 7 know whether he used either one of them. I guess 8 that's my best answer for you. 9 Q. You don't know if he used either one of 10 them? 11 A. No, sir. 12 Q. And you know that you didn't see either 13 one of them. Right? 14 A. That's correct. 15 Q. Let's go back for just a moment to 16 T7139. That's the Luebbert appraisal. The number 17 that's given there is $72.5 million, sir. 18 Is that an as-is appraisal? 19 A. Let's see. (Witness reviews the 20 document.) It says it is not an as-is appraisal. 21 Q. Okay. Let's look now for just a moment 22 at A1643 shown at Tab 159. And look at the bottom 20540 1 of Page 3. It says, "The present appraisal on an 2 as-is basis is 72.550" -- $72 and a half million. 3 Right? 4 A. Yes. 5 Q. Does that appear to be wrong to you 6 now? 7 MR. BLANKENSTEIN: Objection. Your 8 Honor, that's a misleading question. He hasn't 9 established that the other appraisal -- that 10 Mr. Gross knows that the other appraisal was the 11 one that supported that value. Mr. Gross 12 testified he didn't know. 13 THE COURT: All right. What is your 14 question, Mr. Leiman? 15 Q. (BY MR. LEIMAN) Does this appear to 16 be -- 17 MR. LEIMAN: Please reread my question. 18 I'm sorry. Mr. Schwartz reminded me. 19 Q. (BY MR. LEIMAN) Does this appear to 20 be wrong, that it's an as-is value of $72 and a 21 half million? Do you know? 22 A. I don't know what appraisal he based it 20541 1 on; so, I can't -- I don't know. 2 Q. But you do know that if he based it on 3 T7139, it would be wrong, wouldn't it? 4 A. Neither one of these is made -- these 5 are made to the prior owner. I have no idea. 6 Q. And if it were made -- if Mr. Graham 7 had used an appraisal made to the prior owner, 8 that would have been inappropriate, wouldn't it? 9 A. I can't speak for Mr. Graham. 10 Q. Would it have been contrary to Federal 11 Home Loan Bank Board regulations? 12 A. I don't -- I just don't believe he 13 would have -- I believe we would have gotten an 14 appraisal. 15 Q. Would it have been contrary, if he did, 16 to Federal Home Loan Bank Board regulations? 17 A. I don't know. 18 Q. Would it have been contrary to USAT 19 policy? 20 A. At this moment, I don't recall what 21 policy was with the joint ventures and I'd just 22 have to look at it to see. I know I saw the loan 20542 1 amount. I don't know what the other requirements 2 are. 3 Q. But sitting here today, you think that 4 there should have been an appraisal that was done 5 for the institution rather than a prior owner. 6 Right? 7 A. Again, assuming that that was one of 8 our requirements, the answer would be yes. But I 9 don't know if it was one of our requirements. 10 Q. And if it wasn't one of your 11 requirements, what would your answer be? 12 A. I would think that we would still have 13 had one done. 14 Q. Why would you want one done? 15 A. To corroborate what the underwriting 16 had already indicated. 17 Q. And where would the number from the 18 underwriting have come from as to the value of the 19 collateral? 20 A. The underwriting would have come from, 21 first of all, the information provided to us by 22 the developer of the property, GMR. And they 20543 1 would have gathered information prior to making an 2 offer on the property, and they had done an 3 analysis -- they would have done an analysis -- 4 again, I'm speaking from things I've seen lately. 5 They had an analysis attached. I don't know 6 whether there was an appraisal attached, but I 7 just -- that, I don't know. 8 Q. What was the purpose of USAT's 9 investment with Mr. Rosenberg in this property? 10 A. The purpose of this investment was to 11 make a profit. 12 Q. Okay. Was the purpose to make a profit 13 by developing the property? 14 A. I believe in the document that was 15 shown, I believe it mentioned two alternatives. 16 One was selling it as was or as is. And the other 17 would be -- I believe there was a development -- 18 let me just take a look before I answer that. 19 Q. It's A1643. 20 A. Let me just look and see. (Witness 21 reviews the document.) They looked at it two 22 different ways. One was -- 20544 1 Q. Where are you reading? What refreshed 2 your memory? 3 A. I'm reading from A1643 where it says 4 "potential profits." 5 Q. What page, sir? 6 A. That's on Page 3. 7 Q. All right. 8 A. And it says it could be -- one assumes 9 selling the property. The other assumes a full 10 development. 11 Q. Let's read this, and I'd like you to 12 tell me what this means. Under "potential 13 profits," it says, "The venture has run several 14 different scenarios. One assumes that based on 15 potential activity occurring in the west part of 16 San Antonio presently, the property can be flipped 17 during the two years." 18 It goes on to say, "The projected IRR 19 on this scenario ranges from 16 percent to 100 20 plus percent. See attached." 21 What do you understand the term 22 "property can be flipped" to mean? 20545 1 A. I think he indicated it could be sold 2 at a higher price during that period of time. 3 Q. During the next year. Right? 4 MR. BLANKENSTEIN: Objection. 5 Misstates the document. 6 Q. (BY MR. LEIMAN) During the next two 7 years; is that right? 8 A. That's what it says. 9 Q. Okay. Would you want to know if the 10 property had previously been flipped by Alamo or 11 any of the prior owners? 12 A. Yes. 13 Q. You would want to know that? 14 A. Yes. 15 Q. Did you take -- did you investigate 16 that as to whether it had been flipped? 17 A. I don't recall at this time. 18 Q. Why would you want to know if it had 19 been flipped, Mr. Gross? 20 A. That just gives us insight as to what's 21 going on in the marketplace. 22 Q. What insight would you be looking for? 20546 1 A. Value change in the area. 2 Q. Wouldn't you be looking to see if the 3 property had been bid up on speculation? Right? 4 A. Well, you know, a property can be bid 5 up without speculation. It can be bid up because 6 of changing circumstances, and that's what was 7 happening in this area. 8 Q. Changing circumstances being what, 9 Mr. Gross? 10 A. Well, for instance, the announcement of 11 the Northwest Freeway, the announcement of Sea 12 World, the developments that were going on in the 13 area in general, the -- and I'm getting this from 14 having read information the last week or two -- 15 and the -- I've lost my train of thought now. 16 Q. Well, if that information about Sea 17 World and the highway and the other surrounding 18 properties was all out on the table, would you 19 have expected that United Savings would have been 20 able to participate in the flip of this property? 21 A. I think as things unfold, values still 22 move up. 20547 1 Q. And so, it was the expectation that 2 that was a realistic possibility, that the 3 property could be flipped? 4 A. That was an option as presented by GMR 5 to the institution. 6 Q. Did you think that was a realistic 7 option? 8 A. Well, there were two options there. 9 And, of course, we looked more on it as a 10 development situation than we did as an 11 opportunity to sell for profit. 12 Q. Is there a different risk level in 13 speculating on a piece of property for flipping it 14 versus developing a piece of property? 15 MR. BLANKENSTEIN: Objection. 16 Mischaracterizing the testimony. There's no 17 testimony this was speculating -- a speculative 18 sale. 19 MR. LEIMAN: Your Honor, I'm not 20 mischaracterizing his testimony. It's a different 21 question. 22 THE COURT: All right. Did you finish 20548 1 your question? 2 MR. LEIMAN: I think so. Could you 3 read it bark, please? 4 THE COURT: Would you answer the 5 question, Mr. Gross? 6 THE WITNESS: No, sir. Would you mind 7 repeating the question, please? 8 9 (The record was read by the court 10 reporter, as requested.) 11 12 Q. (BY MR. LEIMAN) Is there? 13 A. Yeah. In this situation -- I'm sorry. 14 Is there a different risk level in the two? 15 Q. Yes. 16 A. Well, to me, what you've really got is 17 a situation where flipping is -- if you want to 18 use that term, and that's David's term, not 19 mine -- but the possible sale of it at a higher 20 value would be one option. And you know, whenever 21 you look at a property, the more options you have, 22 the more attractive it is. And frankly, a 20549 1 development option is the one that we looked at 2 and we thought would be the one that was going to 3 occur. But he's just presenting the same thing 4 from GMR's presentation, that that was another 5 possibility. 6 Q. It's riskier holding property for 7 speculation to flip it than it is to develop it? 8 Is that what you're saying? 9 A. No. I didn't say that. What I said is 10 that he's presenting the options and saying that, 11 you know, either one is a possibility. And, of 12 course, in our particular situation, we were more 13 interested in development. We were interested 14 primarily in development. 15 Q. Okay. Can you answer my question, 16 though, as to which one of those two options bears 17 greater risk for the institution, for USAT? 18 MR. BLANKENSTEIN: Is he asking him 19 which one of the two options presented in the 20 proposal, or is he asking him a hypothetical 21 question which I thought he had asked him before 22 about speculative land sales and the different 20550 1 risk factor between holding land for speculation 2 and development? I'm not sure which question he's 3 asking now. 4 MR. LEIMAN: I think they are the same 5 question, Your Honor. I'd just like to know if 6 Mr. Gross, in his analysis, was able to do a risk 7 assessment as to which of these two options which 8 talk about potential profits -- 9 THE COURT: As to this property? 10 MR. LEIMAN: As to this property. 11 THE COURT: All right. 12 Q. (BY MR. LEIMAN) Which one would have 13 been a riskier deal for USAT? 14 A. Well, it wasn't an either/or situation. 15 Q. I know that, Mr. Gross. My question is 16 which one, though, bears -- are they equal in 17 risk? 18 A. If you have only one option out of an 19 investment, it's riskier than if you have two. 20 Q. Okay. And so, if I understand your 21 answer, holding it for two years so that it could 22 potentially be flipped bears the same risk as a 20551 1 full development and sale over six years? Is that 2 what you're saying? 3 MR. BLANKENSTEIN: Objection, Your 4 Honor. That's not what he testified at all. He 5 testified -- 6 THE COURT: All right. Sustained. 7 That's not what he said. 8 Q. (BY MR. LEIMAN) I take it then you 9 can't answer my question? You didn't do a risk 10 analysis as to which of these two was -- 11 A. Yeah. I told you before I don't 12 remember what I did 14 years ago. 13 Q. What would you do today if presented 14 with these two options, flipping property versus 15 developing it out? 16 MR. BLANKENSTEIN: I'm not sure what 17 the question is. If he was presented with the 18 same circumstance today, which option would he 19 choose? 20 Q. (BY MR. LEIMAN) Which one bears -- 21 MR. BLANKENSTEIN: Without knowing 22 other facts and circumstances surrounding what the 20552 1 economic circumstances of a property are, what's 2 going on? Are you asking him what he would do 3 today? 4 MR. LEIMAN: Yeah. 5 MR. BLANKENSTEIN: With regard to this 6 property? 7 MR. LEIMAN: No. 8 Q. (BY MR. LEIMAN) Which one has higher 9 risk today looking back? 10 A. I don't look on it that way. 11 MR. BLANKENSTEIN: Your Honor, I'm 12 confused as to what the question is. Is he asking 13 him what he would do today with regard to the 14 property as it currently exists, or is he asking 15 him to look back to what he would have done in 16 1985? 17 THE COURT: All right. What's your 18 question, Mr. Leiman? 19 Q. (BY MR. LEIMAN) My question is: What 20 would you do, looking back, in terms of a risk 21 assessment? Which has more risk with respect to 22 this property? 20553 1 THE COURT: All right. Let's get the 2 answer. Answer it. 3 A. I wouldn't look at the deal that way. 4 I would look at the deal -- the fact that I've got 5 two options. And that's what makes the deal more 6 interesting, because you've got Option A and 7 Option B. And if you only have one option, you'd 8 be in a different ballgame; but you've got two. 9 So, it's -- to say which of the two 10 options is riskier, you know, is -- to me is 11 irrelevant. The important thing is that you've 12 got more than one avenue of utilization of the 13 property. You can either sell it to somebody or 14 you can develop it. And as things unfold, you've 15 got the opportunity to make that decision. 16 Q. (BY MR. LEIMAN) Let me ask you a 17 general question there since -- I mean, I think I 18 understand what you're saying here, Mr. Gross. 19 Generally, does flipping property hold more risk 20 or does developing it have more risk? 21 MR. BLANKENSTEIN: Maybe we can define 22 what "flipping" means as Mr. Leiman is using the 20554 1 term. 2 MR. LEIMAN: No. 3 Q. (BY MR. LEIMAN) As you understand the 4 term that Mr. Graham used. 5 Can you understand the question? 6 A. I don't think you can -- I don't think 7 it's a readily answerable question, I guess. 8 That's my -- because it's not an either/or 9 situation. If you bought a piece of property and 10 say it can only be done for A, then you look at it 11 one way. If you buy it and say it can only be 12 done for B, then you look at it another way. If 13 you say it could be done for A or B, you know, I 14 don't know that you have to arrive at that 15 decision. 16 Q. So, doing this kind of analysis in your 17 underwriting, determining the level of risk for 18 the various options just doesn't play a part. 19 Right? 20 A. No. 21 Q. Okay. That's fine. 22 Now, Mr. Gross, you came on board USAT 20555 1 in March -- in February of 1985. Right? 2 A. Yes, sir. 3 Q. Okay. That was as CEO and chairman? 4 A. Right. 5 Q. And judging from what I've -- we've 6 talked about, would I be right then that you left 7 most of the underwriting of commercial loans to 8 David Graham and Gem Childress? Right? 9 A. That's correct. 10 Q. Okay. Was your time occupied for the 11 most part with looking at REO, real estate owned, 12 problems related to real estate owned? 13 A. I'm sorry. Would you -- 14 Q. Sure. Was your time that you devoted 15 to real estate matters at USAT -- 16 A. Starting in February? 17 Q. Yeah. 18 A. I guess my time was primarily devoted 19 to policy matters, strategic decisions, 20 overseeing -- acting as chief executive officer of 21 the institution. And in addition to that, the 22 real estate department reported to me. 20556 1 Q. Okay. There's something called the 2 senior loan committee. Right? 3 A. Yes. 4 Q. Do you happen to know what the upper 5 limit was as to what the senior loan committee 6 could vote a loan on at USAT? 7 A. I wouldn't have known without having 8 looked at the documents recently, but it was 9 $70 million. 10 Q. That was the uppermost limit? 11 A. Yes, that's correct. 12 Q. All right. Did you need to be in 13 attendance at a senior loan committee meeting for 14 a loan to be approved? 15 A. No, sir. 16 Q. Were senior loan committee meetings, to 17 your knowledge, conducted without your presence? 18 A. Yes, sir. 19 Q. Were loans ever approved without your 20 being around? 21 A. Yes. 22 Q. Being present at the SLC meeting. 20557 1 A. Yes, sir. 2 Q. Okay. Going back to REO, real estate 3 owned, as well as workout problems generally that 4 USAT had in 1985 and thereafter, isn't it true 5 that you would agree with the assessment by then 6 president Gerry Williams, Gerald Williams, that 7 "we've got all this real estate to carry and we 8 need a stream of income to carry it"? 9 A. That's a statement that Gerry made, 10 yes. 11 Q. You agree with that statement? 12 A. Yes, I do. 13 Q. In connection with the senior loan 14 committee meetings and the conduct on the senior 15 loan committee, you would consider yourself more 16 knowledgeable about real estate matters than 17 either Mr. Gerry Williams or Mr. Crow. Right? 18 A. Yes, sir. 19 Q. Okay. Mr. Crow and Mr. Williams were 20 not real estate experts, per se, were they? 21 A. I think that's a fair statement. 22 Q. Did Mr. Crow and Mr. Williams rely upon 20558 1 you for your expertise? 2 A. Well, they relied upon all the other 3 members of the committee. They certainly relied 4 upon me as well as all the other members of the 5 committee. 6 Q. Especially Mr. Graham? 7 A. Mr. Graham was one of them. 8 Q. Let me be sure I understand another 9 matter that we talked about -- we touched on 10 earlier. I want to be sure that this is right. 11 That by and large, you would not look 12 behind Mr. Graham's representations or do your own 13 analysis with regard to appraisals; is that right? 14 A. With regard to the appraisals, 15 that's -- I'm sorry. I think you -- I'm not sure 16 how many questions you asked there. Would you -- 17 would you restate the question? 18 Are you talking about Mr. Graham's 19 analysis and appraisal or Mr. Graham's analysis of 20 appraisals? 21 MR. BLANKENSTEIN: I think the witness 22 made an objection of a compound question. Perhaps 20559 1 Mr. Leiman would break it up for him. 2 Q. (BY MR. LEIMAN) We'll take it as two 3 questions, Mr. Gross. 4 You would not look behind Mr. Graham's 5 representations about appraisals, would you, in 6 connection with decisions that the SLC took? 7 A. No, sir. 8 Q. Okay. And you would not do your own 9 analysis of appraisals either with regard to the 10 real estate investment committee or the SLC, would 11 you? 12 A. No, sir. Usually, the appraisal -- 13 usually, we issued commitments subject to the 14 issuance of an appraisal. And usually, the 15 appraisal would come in after our approval; so, I 16 wouldn't see it. 17 Q. Did you talk with Charles Hurwitz about 18 the Park 410 project prior to signing the real 19 estate investment committee approval as shown 20 in -- 21 MR. BLANKENSTEIN: Which -- I'm sorry. 22 Q. (BY MR. LEIMAN) -- as shown in 20560 1 A1643? 2 A. I don't recall. 3 Q. Do you know if Mr. Hurwitz saw Park 410 4 as a good opportunity? 5 A. I don't recall, but -- you mean at 6 that -- I guess -- I don't recall at that time. 7 Q. We put your deposition into a binder 8 there. If you'd look at Page 209. 9 THE WITNESS: Your Honor -- I'm sorry. 10 Your Honor -- 11 12 (Discussion held off the record.) 13 14 THE COURT: All right. We'll adjourn 15 until 1:30. 16 17 (Whereupon, a lunch break was taken 18 from 12:03 p.m. to 1:35 p.m.) 19 20 THE COURT: Be seated, please. We'll 21 be back on the record. 22 Mr. Leiman, you may continue with your 20561 1 examination. 2 Q. (BY MR. LEIMAN) Mr. Gross, there is a 3 question pending which I'm going to ask the 4 reporter to read back, please. 5 6 (The record was read by the court 7 reporter, as requested.) 8 9 Q. (BY MR. LEIMAN) The question is, 10 Mr. Gross, your understanding that Mr. Hurwitz saw 11 Park 410 as a good opportunity? 12 MR. BLANKENSTEIN: Object. Are you 13 talking about at the time of the March 1985 14 decision on the investment? 15 MR. LEIMAN: Yes. That's what we've 16 been talking about this morning. 17 A. And my answer was I didn't recall. 18 Q. (BY MR. LEIMAN) You don't remember? 19 A. No, sir. 20 Q. All right. I'd like you to look at 21 Page 209 of the deposition. And specifically, I'd 22 like you to read to yourself Lines 16 through 21. 20562 1 A. (Witness reviews the document.) Yes. 2 Q. Did you read those? 3 A. Yes, sir, I did. 4 Q. Do you see where he says "I think he 5 saw it as a good opportunity"? 6 MR. BLANKENSTEIN: Why don't you have 7 him read the question because I think the question 8 is relevant, as well. Why don't you start on Line 9 16? 10 Q. (BY MR. LEIMAN) "With regard to the 11 USAT 410 loan, do you remember Mr. Hurwitz' 12 discussion with respect to the loan?" 13 A. I said, "Not specifically. I can't 14 recall specific comments one way or the other." 15 Q. Okay. "And do you remember his 16 comments generally?" 17 A. "I think he saw it as a good 18 opportunity." 19 Q. Okay. So, he saw the loan as a good 20 opportunity. Right? 21 A. Yes, sir. 22 Q. Okay. 20563 1 A. That would have been a year later. 2 Q. Okay. So, you don't remember if he saw 3 the real estate investment as a good opportunity? 4 A. I just don't recall. 5 Q. Okay. You don't remember talking to 6 Mr. Hurwitz, do you, about the real estate 7 investment before you signed on? 8 A. I don't recall, no, sir. 9 Q. Do you remember talking to Dr. Munitz 10 about that? 11 A. No, I don't. 12 Q. Do you remember talking to Mr. Graham 13 about whether or not it was a good opportunity? 14 A. I remember -- I don't remember 15 specifically talking to him, but I know that we 16 all thought that it was a good opportunity. But I 17 don't just specifically recall the conversations. 18 Q. And you don't remember any specific 19 person? 20 A. No, sir. 21 Q. With regard to loans and the senior 22 loan committee's actions, Charles Hurwitz would 20564 1 sit in on those on occasion, wouldn't he? 2 A. Yes. 3 Q. Do you remember whether or not he ever 4 had any comment? 5 A. Occasionally. 6 Q. Do you remember what any of his 7 comments were? 8 A. Not specifically. 9 Q. Do you remember if he was ever 10 concerned about fees? 11 A. I don't recall. 12 Q. Do you remember Mr. Hurwitz ever taking 13 any action in connection with origination fees 14 for, for example, Park 410 loan? 15 A. Generally, as I recall, at the loan 16 committee meetings he really did not do that much 17 contributing to those meetings. He listened. He 18 was -- I think he was more in an observation role. 19 As I say, I'm sure he made some comments from time 20 to time; but I can't specifically recall any of 21 them. 22 Q. Can we have Tab 651, please, which is 20565 1 T7065? 2 MR. BLANKENSTEIN: Say the number 3 again. I missed it. I'm sorry, Mr. Leiman. 4 MR. LEIMAN: That would be Tab 651, 5 Exhibit T7065. 6 Q. (BY MR. LEIMAN) Take a moment to look 7 that over, Mr. Gross. 8 A. (Witness reviews the document.) I've 9 read it, sir. 10 Q. Do you see at the top -- first of all, 11 do you remember this memo? 12 A. No. 13 Q. Do you see in the address box, it says 14 to Charles Hurwitz, Jenard Gross, and Gerald 15 Williams? 16 A. Yes, I do. 17 Q. From David Graham. Right? 18 A. Yes. 19 Q. Okay. Would I be right in saying that 20 this memorandum concerns fees, origination fees, 21 for the Park 410 loan? Right? 22 A. I think it includes fees. I think it's 20566 1 just generally discussing the terms of his 2 proposed loan commitment. But fees are mentioned 3 in it. 4 Q. Okay. Do you understand this 5 memorandum to be that Mr. Graham is asking for 6 input from yourself, Mr. Hurwitz, and 7 Mr. Williams? 8 A. That's what it says here. 9 Q. Why was Mr. Graham doing that? 10 A. Mr. Graham would have to speak to that. 11 Q. Did you ever inquire of Mr. Graham as 12 to why he was sending this to Charles Hurwitz? 13 He's not on the senior loan committee. 14 A. I didn't inquire of him. 15 Q. Did it strike you as odd at any time 16 that this memorandum that concerned loan fees was 17 being sent to Mr. Hurwitz who was not an officer 18 of United Savings and was not on the senior loan 19 committee? 20 A. Well, no, sir. 21 Q. Why not? 22 A. Because he was either president or 20567 1 chairman of the holding company at the time, and 2 United was its biggest asset. So, I think he was 3 just probably trying to advise him as to what was 4 going on. And I -- you know, I wouldn't see 5 anything wrong with that. 6 Q. Who was trying to advise -- 7 A. David Graham. 8 Q. Was trying to keep Mr. Hurwitz advised? 9 A. All three of us, yes. 10 Q. Okay. Did you believe it was important 11 to keep Mr. Hurwitz apprised of what was happening 12 at the savings and loan level? 13 A. Yes. 14 Q. Did you endeavor to keep him apprised? 15 A. From time to time, I would let him know 16 what was going on. 17 Q. And how did you do that? 18 A. I don't specifically recall. 19 Q. Did you call him on the telephone? Did 20 you go to his office and meet with him? 21 A. I probably -- I might have done all -- 22 both. I don't recall. But I have the sense that 20568 1 I tried to let -- I guess, if nothing else, I 2 would do it through the times that we would 3 have -- he would occasionally sit on some of the 4 strategic planning committee meetings, if I 5 remember correctly, of -- well, let me stop and 6 think about it for a minute. 7 I think he would sit in on the 8 executive committee meetings at times, and I think 9 that we would fill him in on what was going on at 10 the institution at that time. And occasionally, I 11 would talk to him on the phone or even in person. 12 Q. You considered Mr. Hurwitz' input 13 valuable, didn't you? 14 A. In certain areas, very valuable. 15 Q. What areas would those be? 16 A. Those would primarily be the -- in the 17 corporate bond area, stock arbitrage area, and to 18 a lesser degree, the real estate area. 19 Q. What do you mean "to a lesser degree, 20 the real estate area"? 21 A. Well, he -- he was interested in real 22 estate and involved in real estate, but I looked 20569 1 upon him as having his greatest expertise in 2 stocks and bonds. 3 Q. If Mr. Hurwitz did not approve of a 4 project, would that project go forward in real 5 estate? 6 A. I can't recall that having any bearing 7 one way or another. 8 Q. Are you saying you can't recall whether 9 there was ever such an instance? 10 A. That's correct. 11 Q. So, you can't recall whether Charles 12 Hurwitz ever -- casting a negative vote for a 13 project? 14 A. Well, he wouldn't have voted on a 15 project at the association level. 16 MR. EISENHART: Your Honor, Mr. Leiman 17 is changing the question. His original question 18 was if Mr. Hurwitz did not approve a project which 19 at least suggested to me that he's asking if 20 Mr. Hurwitz specifically approved every project. 21 Now he's talking about casting a negative vote, 22 which is disapproving. Those are really two very 20570 1 different things, and I think he's using them 2 interchangeably. 3 THE COURT: Clarify. 4 Q. (BY MR. LEIMAN) Am I right in 5 thinking, Mr. Gross, that you can recollect no 6 circumstance in which Charles Hurwitz nixed a real 7 estate project while you were the CEO of USAT? 8 A. I can't recall any. 9 Q. Okay. Do you remember whether or not 10 you attended a presentation in San Antonio, Texas, 11 with Charles Hurwitz regarding the Park 410 12 property? 13 A. I believe I did. 14 Q. You did go with him? 15 A. Yes. I don't know if -- I didn't go 16 with him, but we were there. 17 Q. You were there together? 18 A. Yes. 19 Q. All right. Who else was there? 20 A. A lot of people. It was a reception at 21 the Argyle Club. 22 Q. Okay. And how did you end up at the 20571 1 Argyle Club? 2 A. I think -- I'm just going to speculate. 3 GMR put on a reception there, but I don't really 4 remember. 5 Q. Do you know whether or not Stanley 6 Rosenberg was a member of the Argyle Club? 7 A. I don't know. 8 Q. Let's look at Tab 637, which is 9 Exhibit B3822. 10 MR. BLANKENSTEIN: Is that 3822, 11 Mr. Leiman? 12 MR. LEIMAN: Sorry? 13 MR. BLANKENSTEIN: B3822? 14 MR. LEIMAN: Yes, that's right. B, 15 like boy, 3822. 16 MR. BLANKENSTEIN: Thank you. 17 Q. (BY MR. LEIMAN) Mr. Gross, you've 18 seen this before, have you not? 19 A. Yes, I have. 20 Q. When was the last time you saw this 21 exhibit? 22 A. The last week or so. 20572 1 Q. All right. Did you have a chance to 2 read it over? 3 A. I glanced at it. 4 Q. Tell me what it is. 5 A. This is a letter agreement between 6 United Savings and Stanley Rosenberg with regard 7 to a joint venture in the 427-acre tract which we 8 referred to as the Park 410 property. 9 Q. And this is the agreement you referred 10 to earlier today in your testimony, isn't it, with 11 regard to Mr. Rosenberg's participation with USAT. 12 Right? 13 A. Yes, sir. 14 Q. Turn with me to the second page under 15 Paragraph No. 4. Earlier, you said that 16 Mr. Rosenberg would have to repay first out of any 17 proceeds, he'd have to pay USAT. Right? That's 18 in No. 4. Right? 19 A. Yes. 20 Q. It goes on to say, "Profits and losses 21 shall be divided equally between Rosenberg and 22 USAT. Each party shall be liable to each other 20573 1 for their share of their losses." 2 What do you understand that to mean? 3 A. Well, as I understand it, that each 4 party is liable -- we're in this half interest in 5 this venture and to whatever extent we incur any 6 losses, each one would have to bear his share. 7 Q. Let's read it again. "Each party," 8 meaning USAT, "shall be liable to the other 9 party," Rosenberg, "for Rosenberg's share of the 10 losses." 11 A. It says "for their share of the 12 losses." 13 Q. I know that, Mr. Gross. And my 14 question to you is: Did you ever bother to 15 substitute the real names in here to get to the 16 bottom of the meaning of this? 17 MR. BLANKENSTEIN: Objection, Your 18 Honor. I'm not sure what this question means. 19 He's asked him what his interpretation of this 20 sentence was. He's given it to him. I really 21 don't understand the purpose of this question, 22 what testimony it's designed to elicit. 20574 1 MR. LEIMAN: The purpose of the 2 testimony is to determine whether or not Mr. Gross 3 ever determined that this was joint and several 4 liable, Your Honor, which is what it actually is 5 on its face. 6 MR. BLANKENSTEIN: Objection. Is 7 Mr. Leiman going to get on the stand and testify? 8 THE COURT: Well, you can ask him 9 whether that's his understanding. 10 Q. (BY MR. LEIMAN) Do you know what 11 joint and several liability is, Mr. Gross? 12 A. Yes, I do. 13 Q. Okay. Do you understand this to be 14 joint and several liability as laid out in this 15 Paragraph No. 4? 16 A. What I understand this to be is that 17 whatever losses were incurred, we were going to 18 split on a 50/50 basis. He was going to have to 19 reimburse us for any share of his losses, and 20 that's the way it was. 21 Q. Why do you think it says each party 22 shall be liable to each other for their share of 20575 1 the losses? What does that -- why do you think 2 it's couched that way? 3 MR. BLANKENSTEIN: He's asked him this 4 question twice now. This is the third time. It's 5 asked and answered, Your Honor. 6 THE COURT: All right. We'll take it 7 one more time. 8 Q. (BY MR. LEIMAN) Why do you think it's 9 worded that way, Mr. Gross? 10 A. If -- you know, I -- if I had to take a 11 guess -- and that's all I can do because I didn't 12 draw the letter -- I think what -- it's the fact 13 that United is advancing the money and is saying 14 that if there is loss, he's got to pay it back to 15 United. That's the way I would read it. 16 Q. And do you understand that this 17 agreement here, this March 28th, 1985 agreement, 18 is governed by the joint venture agreement that's 19 attached to it as Exhibit B. Right? 20 A. Yes. 21 Q. Now, look with me, if you would, on 22 Page No. 6 of that joint venture agreement. 20576 1 Are you there? 2 A. 106? 3 Q. No, sir. Page No. 6. 4 A. Oh, I'm sorry. I was on 106. I beg 5 your pardon. 6 Q. It's stamped CN080910. 7 A. I've got it. 8 Q. Okay. It says, "The budget is attached 9 as Exhibit C and made a part hereof for 10 reference." 11 Do you see that? 12 MR. BLANKENSTEIN: Maybe you can help 13 me. I'm just not sure where you're reading this 14 one. 15 MR. LEIMAN: The very top of the page, 16 first full sentence. 17 A. I see that. 18 Q. (BY MR. LEIMAN) All right. And it 19 says, "By their execution hereof, the venturers 20 hereby adopt the budget as the approved budget for 21 the venture." 22 It goes on to say, "The manager shall 20577 1 use its good faith, due diligence, and reasonable 2 efforts to implement the budget and shall be 3 authorized without the need for further approval 4 by the venturers to make expenditures and incur 5 the obligations provided for in the budget." 6 Do you see that? 7 A. Yes. 8 Q. Okay. Mr. Gross, did you check the 9 budget to determine how much the budget was and 10 how much was allocated? 11 A. I don't recall. 12 Q. Wouldn't it make a difference if the 13 budget was more than 2 and a half -- sorry -- if 14 the budget exceeded $5 million for Mr. Rosenberg 15 and USAT's half of this venture? 16 THE COURT: I didn't understand that 17 question, Mr. Leiman. 18 Q. (BY MR. LEIMAN) Mr. Gross, let me ask 19 the question a slightly different way. 20 There was a 21 two-and-a-half-million-dollar limitation on real 22 estate investments, wasn't there, without the 20578 1 approval of the board of directors? Right? 2 A. That's correct. 3 Q. Okay. The board of directors did not 4 approved this real estate investment with 5 Park 410, did they? 6 A. I don't recall. I don't remember 7 seeing anything where they did. 8 Q. Okay. Did you ever check the budget 9 that was attached to this document to determine 10 whether or not the two-and-a-half-million-dollar 11 limitation for real estate investments, without 12 board approval, would be violated by entering into 13 this agreement? 14 A. Well, it was my understanding that -- 15 I'm sorry. Ask the question again. 16 MR. LEIMAN: Read it back, please. 17 18 (The record was read by the court 19 reporter, as requested.) 20 21 A. I don't find the budget attached. I'm 22 not sure what we're talking about. 20579 1 Q. (BY MR. LEIMAN) I know that the 2 budget is not attached to this copy. My question 3 is: Did you ever check the budget? 4 A. I don't recall. 5 Q. So, you don't know what the budget was? 6 A. Well, I don't recall what it was. You 7 know, looking here, I can't answer the question 8 because it's not here. 9 Q. Would you have checked the budget as 10 part of your due diligence in connection with this 11 investment, Mr. Gross? 12 MR. BLANKENSTEIN: Is he asking whether 13 Mr. Gross personally would have done that? 14 MR. LEIMAN: That is correct. I'm 15 asking that question. 16 A. I probably would not have. 17 Q. (BY MR. LEIMAN) So, you would not 18 know -- you personally would not have known 19 whether or not this would have exceeded the 20 two-and-a-half-million-dollar limitation without 21 board approval? You wouldn't know that at the 22 time you signed this real estate investment -- 20580 1 signed the real estate investment committee 2 document, A1643? 3 MR. BLANKENSTEIN: The question is 4 misleading. This document -- the agreement is 5 dated March 28th. The real estate investment was 6 approved on March 17th. 7 MR. LEIMAN: Read back the question, 8 please. 9 10 (The record was read by the court 11 reporter, as requested.) 12 13 A. This letter wouldn't have been prepared 14 at that time. 15 Q. (BY MR. LEIMAN) I'm sorry, Mr. Gross. 16 You mean the agreement -- 17 A. Yes. 18 Q. -- binding USAT and Mr. Rosenberg 19 together would not have been prepared at the time 20 that USAT entered into this real estate investment 21 on March 18th? 22 A. I'm just looking at the date on it. I 20581 1 assume it was drawn after the date of the -- after 2 the approval. 3 Q. Let me see if I understand this, 4 Mr. Gross. You signed this document we've called 5 A1643 -- 6 A. Yes, sir. 7 Q. -- as a member of the real estate 8 investment committee, and you didn't know at the 9 time you signed this what the terms and conditions 10 were of your partnership with Stanley Rosenberg? 11 A. No. I said I didn't recall what the 12 budget was. And I said this letter was not 13 prepared as of that date, that the document that 14 you entered into were prepared after the date of 15 an approval and not before. 16 Q. Let me ask you a simpler question, 17 Mr. Gross. 18 A. Okay. 19 Q. Did you know what the terms and 20 conditions would be of USAT's relationship and 21 partnership with Stanley Rosenberg at the time you 22 signed A1643? 20582 1 A. And my answer is I do not recall. 2 Q. A few minutes ago, you told me that 3 this would -- that B3822, the agreement with 4 Rosenberg, would not have been prepared at that 5 time. Right? 6 A. That's correct. 7 Q. So, how did you find out what the terms 8 and conditions were for your relationship and 9 partnership with Stanley Rosenberg and USAT? 10 A. We typically -- and in this case, 11 too -- we approved a loan, an investment, and then 12 the legal department, under the direction of the 13 real estate department, prepares those 14 instruments. And those instruments are not looked 15 at by the members of the real estate committee or 16 the loan committee. It's a delegated authority. 17 Q. So, among the authority -- had you 18 finished your answer? I'm sorry. 19 A. I say just going to say could I look 20 back -- what was the commitment number? What was 21 the loan -- the approval number on it? What 22 was -- what exhibit number is it? 20583 1 Q. I believe it's 1643, Exhibit A1643. 2 A. (Witness reviews the document.) All 3 right. I'm sorry. Now go ahead. 4 Q. What were you looking for, Mr. Gross? 5 A. I was just trying to -- I had 6 remembered the date in there was March 18th. I 7 was just trying to see if that was correct or not. 8 THE COURT: Mr. Gross, I see that the 9 joint venture agreement, on the last page, is 10 executed as of the 3rd of March '85. 11 Do you understand that to mean that it 12 probably wasn't really signed until the 29th, the 13 date of the letter, or -- 14 THE WITNESS: I just do not recall. 15 It's certainly possible it wasn't signed until the 16 29th, but I have no way of knowing. 17 MR. BLANKENSTEIN: Your Honor, if I can 18 just clarify the record, I believe the joint 19 venture agreement that you made reference to is an 20 agreement between Mr. Rosenberg -- the Westplex 21 Investment Corporation and Grieshaber & Roberts, 22 which is a separate agreement from the agreement 20584 1 between Mr. Rosenberg and United. 2 Q. (BY MR. LEIMAN) Mr. Gross -- 3 THE COURT: Well, that is the joint 4 venture agreement that Mr. Leiman's been 5 discussing. 6 MR. BLANKENSTEIN: No. He's been 7 discussing the first two pages -- 8 THE COURT: Just the letter? 9 MR. BLANKENSTEIN: Just the letter 10 agreement. 11 MR. LEIMAN: That is not correct, 12 Mr. Blankenstein. I've been discussing both, and 13 Mr. Gross has testified as to both. And 14 specifically what Mr. Gross stated was that the 15 agreement that we see here in the front page of 16 this letter of March 28th is governed by the joint 17 venture agreement that we see as Exhibit B. 18 A. And I'm not sure even that that's 19 correct. I don't know if it says in here that it 20 is governed by it. I don't know. 21 Q. (BY MR. LEIMAN) Mr. Gross -- 22 A. Can you show me? 20585 1 Q. Just look at Paragraph 1. And frankly, 2 Mr. Gross, you're the one who told me that it was 3 in your deposition. If you'd like, we could find 4 a page reference for that. 5 MR. EISENHART: Well, now, I'm 6 confused, Your Honor. Is he telling him that he's 7 going to find the words "governed by" in 8 Paragraph 1 because I sure don't see it. 9 MR. LEIMAN: The word "governed by" 10 isn't in there. "Pursuant to" is, however. 11 THE COURT: "Pursuant to"? Where is 12 that? 13 MR. LEIMAN: Paragraph 1 of the letter 14 of March 28th, 1985, Your Honor. 15 MR. BLANKENSTEIN: I'm not sure what 16 the pending question is, Your Honor. 17 THE COURT: I'm not either. You want 18 to state your question? Is there one pending? 19 MR. LEIMAN: I don't think there is a 20 pending question. 21 THE COURT: All right. 22 A. I thought something about "pursuant to" 20586 1 or "governed by" -- 2 Q. (BY MR. LEIMAN) No. I think that was 3 an objection by your lawyer. 4 THE COURT: All right. Let's have a 5 question. 6 Q. (BY MR. LEIMAN) But I do have a 7 question for you, and it relates to Exhibit T7049 8 which is Tab 635. 9 Look with me, please, at Page 13 of 10 this exhibit, of this investment presentation. 11 A. I have it here. 12 Q. Okay. Do you see under the point 1.4.3 13 under "costs" and "total costs"? Do you see that? 14 A. Yes. 15 Q. First of all, let me ask you this: Do 16 you recognize this document? 17 A. I've seen it in the last couple of 18 weeks. 19 Q. What is it? 20 A. It's a -- it's an investment 21 presentation by GMR on Park 410 West. 22 Q. All right. Do you remember seeing this 20587 1 at the time you -- prior to or after you signed 2 your name to Exhibit A1643? 3 A. No, sir. 4 Q. Were you ever able to determine what 5 the development costs would be potentially under 6 the real estate investment that we've seen here as 7 A1643? 8 A. I'm sure it was in the presentation, 9 but I don't recall it. 10 Q. Well, if you would, direct your 11 attention to "total costs" under 1.43 on Page 13 12 of the investment presentation. And do you see 13 where it says total costs, $64,832,000? 14 A. Yes, I do. 15 Q. What would 50 percent of that amount be 16 roughly? 17 A. It would be $32 million. 18 Q. And don't you understand $32 million to 19 be the potential exposure under this development 20 agreement of USAT in connection with the real 21 estate investment that we saw as A1643? 22 MR. BLANKENSTEIN: I'm confused. Is 20588 1 Mr. Leiman representing that this was the budget 2 that he says was attached to the joint venture 3 agreement? Is that what he's representing? 4 Because we don't have that budget. 5 MR. LEIMAN: I am asking whether or not 6 this is the number that he would have seen as the 7 budget. 8 MR. BLANKENSTEIN: If there was a 9 budget, he should ask Mr. Gross whether that's the 10 budget. I'm not sure what this question is -- 11 it's a hypothetical question as to whether 12 Mr. Gross would have thought this was the budget 13 when there apparently was, in fact, a budget. And 14 he doesn't want to show him what that budget was. 15 Q. (BY MR. LEIMAN) Do you remember the 16 budgeted amount, Mr. Gross? 17 A. I do not. 18 Q. Do you remember whether it was 19 $64 million? 20 A. I do not. 21 Q. Do you remember any subsequent 22 correspondence or memorandum that dealt with 20589 1 USAT's exposure under that real estate investment 2 for Park 410? 3 A. No, sir. 4 Q. You remember nothing between you and 5 Mr. Chuck Doolittle? 6 A. You just hit a nerve. I saw a memo 7 this last few days about that, but I didn't recall 8 it until I was shown it. 9 Q. Okay. We'll get to that in a minute. 10 A. Okay. 11 Q. Okay. All right. Mr. Gross, let's -- 12 you stated earlier in your testimony that you had 13 done a lot of building, apartment building 14 throughout I think you said Texas, Florida, and 15 Colorado; is that right? 16 A. And Arkansas and Louisiana. 17 Q. Okay. Did you ever do any building in 18 Houston? 19 A. Yes. 20 Q. Okay. How about Austin? 21 A. We owned property there. We haven't 22 actually built property there. 20590 1 Q. And what about San Antonio? 2 A. Again, we've owned property. I don't 3 think we've actually constructed anything there. 4 Q. So, you have no experience -- you 5 personally had no experience in the San Antonio 6 market at the time you signed your name to A1643; 7 is that right? 8 A. That's correct. 9 Q. Okay. 10 A. No building experience. 11 Q. Okay. What kind of experience did you 12 have there? 13 A. I said we've had other investment 14 experience in those cities, but -- you know, we 15 had owned property there. We hadn't built 16 property there. 17 Q. What was your level of expertise about 18 the San Antonio market? 19 A. Well, we -- with regard to the 20 San Antonio market, we got reports on a monthly 21 and quarterly basis from a group called Metro 22 Studies. 20591 1 Q. Let me just ask you when this was, 2 Mr. Gross. What's the period of time you're 3 discussing? 4 A. In 1985. And we -- United already had 5 investments and had, over an extended period of 6 time, had investments in San Antonio. So, there 7 was a good bit of background information with 8 regard to San Antonio available. 9 Q. Something called the Metro Studies and 10 what else? 11 A. United had had several development 12 investments in San Antonio. In fact, a couple of 13 them along Highway 410, prior to my involvement in 14 United. And so, while I didn't have specific 15 involvement in this area, the other people in the 16 institution did and were familiar with it. 17 Q. Who would those people have been? 18 A. Well, it would have been David Graham. 19 It would have been Gem Childress. It would have 20 been Sonny Bentley. It would have been 21 Gerry Williams, Charlie Patterson, Delores 22 Jackson. I don't know who else. 20592 1 Q. Those are people that were in the real 2 estate department at United Savings? 3 A. Well, Sonny was chairman of United 4 before I was. Gerry was president. And the other 5 people worked either in commercial or residential 6 real estate. 7 Q. And who was the expert in San Antonio? 8 A. Well, both David and Gem were -- had 9 headed that department that had made investments, 10 development in San Antonio. And Charlie 11 Patterson's operations had made both -- had made 12 loans in San Antonio, both home loans and 13 construction loans. 14 Q. Mr. Patterson was responsible for the 15 construction loans made in San Antonio? 16 A. Those involving either subdivisions or 17 single-family builders, things of that sort. 18 Q. What projects or loans was Mr. Graham 19 responsible for or Mr. Childress responsible for? 20 A. They had some commercial joint 21 ventures, had either one or two farther east in 22 the vicinity of Park 410 that I specifically 20593 1 recall. 2 Q. What do you mean "farther east in the 3 vicinity of Park 410"? 4 A. No. I'm sorry. Farther east on 410. 5 Q. Oh, on the east side of Loop 410? 6 A. I think one was on the east side. I 7 think the other was on the west side. 8 Q. Was Mr. Rosenberg a borrower in 9 connection with any of those projects on Loop 410? 10 A. Not that I know of. 11 Q. Okay. Let's take a look once again at 12 the agreement with Mr. Rosenberg, Exhibit B3822. 13 Let me ask you a question about this. 14 Do you know if this document was ever 15 recorded anywhere in any public office, records 16 office? 17 A. I don't know. 18 Q. You don't know? 19 A. No, sir. 20 Q. Would it be important if it were? 21 MR. BLANKENSTEIN: Important to who -- 22 whom? 20594 1 Q. (BY MR. LEIMAN) Would it be important 2 to USAT. 3 A. I wouldn't think so. 4 Q. Why not? 5 A. Because usually, joint venture 6 partnership agreements aren't usually placed of 7 record. 8 Q. They are what? 9 A. They are usually not placed of record. 10 Q. All right. Let me ask you this 11 question: As you understand this March 28th, 1985 12 agreement with Rosenberg, was this USAT's 13 25 percent interest of the investment; or was it 14 one half of Rosenberg's interest? 15 A. I'm sorry. I don't think I'm following 16 the distinction. 17 Q. Well, when I asked you a similar 18 question in your deposition, you drew the 19 distinction for me. You said that it would make a 20 difference -- or there was some significance to 21 USAT owning a 25 percent interest outright versus 22 owning a one-half interest of Rosenberg's 20595 1 50 percent. 2 MR. EISENHART: Your Honor, I'm going 3 to object to him summarizing testimony in a 4 deposition. He can use a deposition to refresh a 5 witness' recollection or to impeach testimony, but 6 he's just standing here giving him his summary of 7 testimony as a predicate to who knows what. 8 MR. LEIMAN: Well, I think what I am 9 doing is summarizing it. I'm asking a question to 10 refresh your memory. 11 MR. EISENHART: It's not clear that his 12 memory needs to be refreshed until he answers the 13 question. 14 MR. BLANKENSTEIN: I think he first has 15 to ask the question and then, depending on what 16 the answer is, try to impeach him by use of the 17 deposition. 18 THE COURT: All right. What's the 19 question? 20 Q. (BY MR. LEIMAN) I'll repeat the 21 question. 22 Is there some significance to a 20596 1 distinction between USAT owning a straight 2 25 percent interest in the Park 410 joint venture 3 versus owning half of Rosenberg's 50 percent? 4 A. At this moment, I can't -- I can't 5 think of a difference. But I gather you're 6 implying that I must have said something at my 7 deposition that's different. So, I'd be happy to 8 read what I said and see if it refreshes my 9 memory. 10 Q. Do you know if it -- if any distinction 11 between those two would bear on the level of risk 12 to USAT? 13 A. Offhand, I can't think of any. 14 Q. Tab 1040, which is Exhibit A1646. 15 Would you take a moment to look this over, 16 Mr. Gross? 17 A. You want me to -- okay. (Witness 18 reviews the document.) 19 Q. Have you had a chance to look it over, 20 Mr. Gross? 21 A. I'm down to the next-to-the-last 22 paragraph. 20597 1 Q. All right. 2 A. I'm a slow reader. (Witness reviews 3 the document.) All right. I've read it. I've 4 read the first page. I haven't read the second 5 one. Do you want me to read this one, too? I've 6 got some January 6th and some January 10th. 7 MR. BLANKENSTEIN: I believe the 8 witness may have the wrong -- 9 MR. LEIMAN: Wrong exhibit he's 10 reading. 11 THE WITNESS: I've got this, and I've 12 got this. 13 14 (Discussion held off the record.) 15 16 MR. SCHWARTZ: Apparently, the folder 17 contained A1646 and A1647. So, that's A1646. 18 Q. (BY MR. LEIMAN) Did you read that? 19 A. Yes, I did. 20 MR. BLANKENSTEIN: I assume, Your 21 Honor, this is not a ploy to embarrass or destroy 22 the credibility of OTS. 20598 1 THE COURT: What's your question, 2 Mr. Leiman? 3 Q. (BY MR. LEIMAN) First of all, I'd 4 like you to note the timing on this document. 5 Do you see the meeting started at 9:10 6 and ended at 9:55. Right? 7 A. Yes. 8 Q. A 45-minute meeting? 9 A. Yes, sir. 10 Q. And among the items considered here 11 were Park 410? 12 A. Yes, sir. 13 Q. That was among the various things, 14 including the Nash Phillips Copus Residential 15 Development and others. Right? I won't go into 16 them all. And we see in attendance at this 17 meeting were yourself, Charles Hurwitz, Barry 18 Munitz, David Graham, Arthur Berner, and others. 19 Right? 20 A. Yes. 21 Q. Okay. Now, earlier, I showed you a 22 letter that was -- it was actually a memorandum 20599 1 that was directed to your attention as well as 2 Mr. Hurwitz' and Mr. Williams. 3 Do you remember that letter? 4 A. Yes, I do. 5 Q. Asking for guidance. Mr. Williams was 6 asking for guidance from the three of you in 7 connection with loan fees. Right? 8 A. That's correct. 9 Q. All right. And here is the meeting at 10 which a decision is made regarding loan fees on 11 the Park 410 proposal. Right? 12 A. That's correct. 13 Q. All right. What does it say? 14 A. It says, "There was discussion on the 15 Park 410 West loan proposal. It was agreed that 16 the minimum 3 percent release fee would remain. 17 However, the renewal fees are to be reduced to 18 one-half percent each." 19 Q. Okay. Do you remember Mr. Hurwitz' 20 contribution to that discussion? 21 A. No, I don't. 22 Q. Do you remember your own? 20600 1 A. No, I don't. 2 Q. Do you remember anybody's contribution 3 to the discussion regarding loan fees that 4 resulted in this -- in this result? 5 A. No, sir. I went back the other day 6 just to do an exercise after looking at all these 7 papers, and I figured that I was at United about 8 900 or so days if I remember correctly, of which 9 750 might have been weekdays. And somewhere in 10 that vicinity -- and probably averaged two plus 11 meetings a day. So, I probably attended 1500, 12 2,000 meetings during my time at United. And you 13 know, trying to go back to one that's now 12 and a 14 half years old and remember what I said at that 15 meeting is just -- I think even if I were younger, 16 it wouldn't be easy. 17 Q. Is one of the things that makes it hard 18 to remember is that it was fairly common for 19 Mr. Hurwitz to attend senior loan committee 20 meetings? 21 MR. BLANKENSTEIN: Objection. I'm not 22 sure what makes it hard. What is it that is hard 20601 1 to remember, that Mr. Hurwitz attended the 2 meetings or what he said? 3 MR. LEIMAN: The fact that he attended 4 so many meetings. 5 A. I don't think he attended that meeting. 6 Q. (BY MR. LEIMAN) He did attend this 7 one? 8 A. He did attend this one. 9 Q. At least according to these minutes. 10 Right? 11 A. That's correct. 12 Q. Let's take a look at T7663, Tab 1364C. 13 A. I have the document. 14 Q. Okay. A short while ago, I made 15 reference to a memorandum from parties Doolittle 16 and Crow. 17 Do you remember that? 18 A. Yes. 19 Q. Okay. Who was Chuck Doolittle? 20 A. He was somebody that worked under 21 Mike Crow, but I don't remember his title. 22 Q. Did you ever meet with him? 20602 1 A. I probably did. 2 Q. What would you have met with him about? 3 A. I have no idea. 4 Q. Could we have T7578, which is Tab 1142, 5 or A13014? 6 MR. BLANKENSTEIN: Mr. Leiman, I'm 7 sorry. Could you give me that last exhibit again? 8 MR. LEIMAN: That would be A13014. 9 A. I guess I should set this aside right 10 now. I think I messed up something here. Do I 11 have -- 12 Q. (BY MR. LEIMAN) You don't have a file 13 folder for that. 14 A. Okay. 15 Q. Mr. Gross, look at the second page of 16 13 -- T7663, which is Tab 1364C. 17 A. I'm looking at 13014, it looks like. 18 Q. It's the one without a folder, 19 Mr. Graham. 20 A. This one right here? All right. I've 21 got it. 22 Q. Look at the second page, please. 20603 1 A. All right. 2 Q. Do you see on -- under the chart for 3 "investment type, original calculation" on the 4 second page? 5 Do you see that? 6 A. I'm sorry. Would you repeat the 7 question? 8 Q. Yes, sir. A third of the way down the 9 page, there is a small chart, "investment type 10 original calculation, resized" -- do you see that? 11 A. Yes, sir. 12 Q. Okay. Do you see where it talks about 13 Park 410 West, the second entry? 14 A. Yes, I do. 15 Q. Do you see the original calculation, 16 39,107,699. Right? 17 A. Yes, I do. 18 Q. All right. Let's note the date of this 19 memorandum, which would be November 4th, 1985. 20 Right? 21 A. Yes, sir. 22 Q. USAT still had a real estate investment 20604 1 relationship with Stanley Rosenberg, didn't it? 2 A. On November 4th, yes, they did. 3 Q. Okay. And do you see Mr. Doolittle 4 does a calculation? Do you see that? 5 A. Yes, I do. 6 Q. And what does he revise his calculation 7 to be? 8 A. With regard to -- I'm sorry. With 9 regard to Park 410? 10 Q. Yes, sir. 11 A. He revises it to 9,754,000. 12 Q. And he comes up with a difference. 13 Right? 14 A. Yes, sir. 15 Q. Okay. And look under -- 16 A. Excuse me. Could I have just a second 17 to finish reading it? 18 Q. Sure. 19 A. (Witness reviews the document.) 20 Somehow or other, he's got his lines crossed on 21 this. 22 Q. What do you mean he has his lines 20605 1 crossed on this? 2 A. Well, the 2-million-dollar letter of 3 credit is on Park 410 West and not on Cinco 4 Watson. 5 Q. What do you mean? 6 A. You see this bottom footnote? It says 7 "The $2 million revised amount represents an 8 outstanding letter of credit," that last note down 9 at the bottom? 10 Q. Uh-huh. 11 A. That's the 2-million-dollar letter of 12 credit on Park 410 West. 13 Q. Oh, it is? 14 A. Yes, sir. 15 Q. How do you remember that, Mr. Gross? 16 A. Well, we just went through it a few 17 minutes ago. 18 Q. Oh, you remember there was no letter of 19 credit in Cinco Watson? 20 A. I don't know. But I know that he 21 doesn't show one on Park 410. I know there is one 22 there. 20606 1 Q. How do you know it's the same one, 2 Mr. Gross? 3 A. I don't, but I -- I'm just saying that 4 I know that there's one there and it doesn't show. 5 Q. Well, then how do you know he made a 6 mistake? Maybe he's including the letter of 7 credit in the revised calculation. 8 A. But -- the reason I know that is 9 because I've looked at some documents in the last 10 week and that's how I know it. And the other 11 documents show this was non-recourse debt. 12 THE COURT: We'll take a short recess. 13 14 (Whereupon, a short break was taken 15 from 2:30 p.m. to 2:55 p.m.) 16 17 THE COURT: Be seated, please. We'll 18 be back on the record. 19 Mr. Leiman, you may continue. 20 MR. LEIMAN: Thank you, Your Honor. 21 Q. (BY MR. LEIMAN) Mr. Gross, just 22 before we had the break, you mentioned that you 20607 1 recollected and you remembered this $2 million 2 here on Exhibit No. T7663. 3 Do you remember we were talking about 4 that? 5 A. Yes, sir. 6 Q. Okay. 7 A. But I don't think that's what I said. 8 I don't think I said I recollected it. I think I 9 said I looked at some documents this past week. 10 Q. Yeah. 11 A. And that's the reason -- and of course, 12 I looked at -- you know, the thing you showed me a 13 while ago showed the 2-million-dollar letter of 14 credit. The proposal that went to the real estate 15 committee called for the 2-million-dollar letter 16 of credit. And that's why I think those two lines 17 are reversed, because that was non-recourse debt. 18 Q. Well, maybe we ought to go back to 19 A1643 on this because I think we might be able to 20 solve part of this mystery, Mr. Gross. And that 21 would be your -- the approval of the real estate 22 investment committee of the Park 410 Joint 20608 1 Venture. 2 A. A1643? 3 Q. Yes. Look on the second page of this 4 document and look at the last full paragraph and 5 look at the second full sentence. Do you see 6 where it says, "It is estimated that at the end of 7 two years, USAT/UFC will have invested $7 and a 8 half million" -- 9 A. I'm sorry. I'm not with you. What 10 page are you on? 11 Q. 2. 12 A. And which paragraph? 13 Q. Bottom paragraph. 14 A. I'm sorry. I was in the one above it. 15 Q. Second full sentence, Mr. Gross. 16 "Estimated at the end of two years, USAT/UFC will 17 have invested $7 and a half million in letters of 18 credit, interest payments, and marketing 19 engineering costs." 20 Do you see that? 21 A. Yes, I do. 22 Q. That would have exceeded the 20609 1 two-and-a-half-million-dollar limitation without 2 board approval, wouldn't it? 3 A. It would appear so, but I'd -- well, I 4 think what really -- if we got that far, that's 5 true. But as I -- I think what it is is you 6 had -- they were going to look at the thing and 7 then decide whether to go forward or not. I don't 8 think that this money was going to be expended at 9 that time. 10 Q. Well, maybe we need to go back to the 11 minutes of the meeting, the board of directors, at 12 which you were made the chairman and CEO. And 13 that would be Exhibit No. A1102, which is Tab 128. 14 A. I'm sorry. What's the exhibit number 15 again? 16 Q. All right, sir. It would be A1102. 17 And turning to Page 17 of this exhibit, it states, 18 "Any real estate and/or joint venture project 19 which involves total equity in or debt exposure to 20 the association of $2.5 million or more shall 21 require prior board ratification." 22 A. Yes, sir. 20610 1 Q. Okay. It's couched as a possible 2 future event. Right? Debt exposure, equity 3 exposure? 4 A. Yes, sir. 5 Q. All right. And what Mr. Graham was 6 talking about here in the last paragraph on Page 2 7 of A1643 was potential exposure of $7 and a half 8 million. Right? 9 MR. BLANKENSTEIN: No. He's talking 10 about a potential investment of that amount. 11 Is Mr. Leiman suggesting that -- is 12 Mr. Leiman asking whether or not a 13 7-and-a-half-million-dollar investment without 14 further board approval would have violated the 15 limitation on the real estate committee's 16 authority? Is that what you're asking? 17 MR. LEIMAN: My question stands. 18 THE COURT: All right. Restate it. 19 Q. (BY MR. LEIMAN) Wouldn't the exposure 20 of $7 and a half million by way of an investment 21 as listed here in A1643 be greater than the limit 22 set out in A1102 of $2 and a half million as total 20611 1 equity and/or debt exposure? 2 MR. BLANKENSTEIN: Is the assumption of 3 the question that they were doing that without 4 obtaining prior board approval? Is that the 5 assumption? 6 MR. LEIMAN: The assumption has nothing 7 to do with obtaining prior board approval at this 8 point. It has to do with the exposure and the 9 potential expenditure of funds by the institution. 10 THE COURT: Can you answer the 11 question, Mr. Gross? 12 A. Well, it sounds to me -- I guess the 13 answer, without -- again, I don't remember the 14 specifics that went on at the time, but I would 15 think that if we were going to exceed the $2 and a 16 half million, we would have to go to the board for 17 approval. 18 Q. (BY MR. LEIMAN) All right. Now, my 19 question to you, sir, is: Isn't that exactly the 20 issue, the 7-and-a half-million-dollar potential 21 investment that Graham was warning of or talking 22 about in this last paragraph on Page 2 would have 20612 1 qualified as equity and/or debt exposure in excess 2 of $2 and a half million? 3 A. Well, if that had occurred, yes, that's 4 correct. 5 Q. If it had occurred, if the exposure had 6 occurred? 7 A. If they had spent the money, I think 8 that they would have had to go back to the board. 9 They would have had to go back to the board before 10 they could spend more than $2 and a half million. 11 Q. Let me see if I understand this 12 correctly. Are you trying to say, Mr. Gross, that 13 what the two-and-a-half-million-dollar reference 14 is regarding exposure is if they actually spend 15 the money, they need to go get board approval, not 16 whether or not it's the possible exposure of the 17 institution to that? Is that the distinction 18 you're drawing or your counsel is drawing -- 19 A. I don't know. 20 Q. -- in his objections? 21 A. Where is the -- let me look at this 22 again. I see what that says. Now let me see what 20613 1 this says. As best I read it, it says that if we 2 exceed the $2 and a half million expenditures 3 or -- that we should get board approval. 4 Q. What are you deriving that from? 5 A. It says an excess exposure and it 6 says -- it says "which involves a total equity 7 and/or debt exposure of 2 and a half million or 8 more." And I guess what he's laying out is a 9 potential game plan that could entail an 10 expenditure in excess of the $2 and a half 11 million. 12 Q. Yes, sir. I think that's exactly what 13 Mr. Graham is doing. 14 Now, let's go back to T7663, okay, 15 which is at Tab 1364C. And that's the document 16 that -- 17 A. Wait, wait, wait. Which tab are we on 18 now? 19 Q. 1364C. Without a folder. 20 A. Pardon? 21 Q. It's without a folder. 22 A. This one? 20614 1 Q. Yes. 2 A. I have -- T7663? 3 Q. That's it. 4 A. Okay. 5 Q. Mr. Gross, the amount of the investment 6 in March of 1985 in Park 410 was some $39 million, 7 was it not? 8 A. I'm sorry. Would you repeat the 9 question? 10 Q. The purchase price that related to the 11 Park 410 investment in 1985 was $39 and a half 12 million. Right? 13 A. Approximately. 14 Q. Okay. The number that's laid out here 15 in "investment type" is $39.1 million. Right? 16 A. Yes. 17 Q. Okay. Now, you're saying that, in 18 fact, what ought to happen here is the total 19 exposure of USAT should be how much? $2 million? 20 A. 2 million, yes, that's correct. 21 Q. All right. We've already established 22 that it was at least 7 and a half million. Right? 20615 1 MR. BLANKENSTEIN: Objection. I'm not 2 sure how Mr. Leiman has come to that conclusion. 3 MR. LEIMAN: I think that was his 4 testimony, Your Honor, in which he stated that 5 there would be exposure of some $7 and a half 6 million by virtue of what Mr. Graham wrote here in 7 A1643, in the second full -- in the second full 8 sentence of the last paragraph. 9 MR. BLANKENSTEIN: I think -- as I 10 remember the testimony from Mr. Gross, he said 11 that if Mr. Graham was laying out the potential 12 expenditure of $7.5 million, before that could 13 happen, they would have to go back to the board to 14 get approval for that authority to make that 15 expenditure. I didn't hear him say that there 16 was, in fact, an exposure of $7 and a half million 17 at the time they approved the investment in March 18 of 1985. 19 MR. LEIMAN: I did hear him say that, 20 Your Honor. And I guess the record will be what 21 the record is. 22 THE COURT: Well, I think we'd better 20616 1 clarify what his testimony is. 2 Q. (BY MR. LEIMAN) Let's go back then, 3 Mr. Gross. 4 A. All right. 5 Q. Let's go back to 1643 and compare it 6 with 11 -- A1102. 7 A. I've got 1643. I guess at this point 8 in time, United's commitment is $2 million. They 9 have -- at that point in time, if there are more 10 funds expended, seems to me they have got the 11 option of either taking a walk or putting up more 12 money. 13 Q. Mr. Gross, what did Graham estimate the 14 potential exposure to be? 15 MR. BLANKENSTEIN: He keeps saying 16 that. That's not what the language says. It's an 17 estimated investment of that. And if Mr. Leiman 18 would show Mr. Gross the language of the 19 resolution in this regard, I think it will become 20 clear that it was contemplated that before the 21 commencement of activity on an investment, you 22 would have to return to the board to get further 20617 1 authority if the investment was more than $2 and a 2 half million. Mr. Leiman persists in trying to 3 mislead this witness, Your Honor. 4 MR. LEIMAN: Your Honor, I'm a native 5 English speaker, and I can only understand the 6 language as it is written. When it talks about 7 total equity or debt exposure, it doesn't refer to 8 how much money has actually been spent. It's 9 referring to the possibility of money being sent 10 out the door. 11 In this particular case, Your Honor, 12 what we're talking about is an investment, 13 potentially, in two years of $7 and a half million 14 which, in my understanding, translates to an 15 exposure in excess of 2 and a half million, namely 16 an exposure of as much as 7 and a half million as 17 estimated by David Graham in this paragraph. 18 I don't know how else to ask this 19 question. If counsel insists on twisting the 20 language to the extent he is, I don't know -- I 21 don't know how to redefine it. 22 MR. BLANKENSTEIN: Well, let's see -- 20618 1 you know, Mr. Leiman refuses to show Mr. Gross the 2 language of the resolution of February 14th, 1985, 3 with regard to the authority of the real estate 4 investment committee. It says that "certain real 5 estate and joint venture projects which have 6 received approval by the association's real estate 7 and joint venture committee shall be brought 8 before the board of directors for final 9 ratification prior to commencement of activity." 10 What Mr. Graham is describing in his 11 letter is proposed activity in the future. In 12 those circumstances, if that activity, if that 13 investment was made, then approval of the board of 14 directors would have been necessary. But there is 15 no exposure right now. He's talking about a plan 16 or estimated investment. If that would have 17 happened, then the approval of the board would 18 have been required pursuant to the terms of the 19 February 14th, 1985 resolution. That hasn't 20 happened yet. 21 THE COURT: All right. We've had the 22 views of counsel. What is the view of the 20619 1 witness? 2 THE WITNESS: My view is that we had 3 only committed $2 million of which a million was 4 owed back to us by Stanley Rosenberg. 5 THE COURT: All right. Next question. 6 Q. (BY MR. LEIMAN) All right. Let's get 7 back to this -- to T7663. Now, if I understand 8 your reasoning here, Mr. Gross, we ought to see 9 somewhere on this page a reference to some 10 $37 million, $37.1 million because if we were to 11 subtract 2 million from 39.1 million, what we'd 12 end up with is about 37.1 million. Right? 13 A. But that was not -- yes, that's -- and 14 what I'm -- I just think the person preparing this 15 made a mistake because at that time, all that was 16 out was a 2-million-dollar letter of credit. 17 Everything else was non-recourse debt. And he 18 made a mistake, you know. 19 Q. Wouldn't this mistake have been 20 consistent in that there would appear on this page 21 some reference to $37 million if the lines were 22 switched as you originally indicated? 20620 1 A. Well, the line -- the thing that I 2 think is wrong is I think that the $2 million 3 belongs down here under Park 410. I think that's 4 what the mistake is. 5 Q. You know, maybe we can get to the 6 bottom of this by reading the second footnote 7 which says, "Under the Park 410 Joint Venture 8 agreement, we are" -- in Mr. Doolittle's opinion, 9 "we are severally liable for only our 25 percent 10 ownership in the project and cannot be held liable 11 for the entire debt of the venture. The revised 12 figure above represents 25 percent of the original 13 total outstanding debt," in which case was how 14 much, Mr. Gross? 15 A. In which case he's mistaken. We were 16 not liable on that debt. That's the whole issue. 17 That was non-recourse debt. So, we weren't liable 18 on it. 19 Q. And when did you reach this conclusion, 20 Mr. Gross? Was it this week? Last week? 21 A. I've looked at these documents in the 22 last week, and I recall it from -- I mean, it's 20621 1 been -- do I have independent recollection of all 2 of this? Absolutely not. But in going through 3 the numbers and in looking at the money we've 4 spent over here, and I think -- got so much paper 5 here. Let's see. Here we are. If you go look at 6 the loan application -- I mean the joint venture 7 approval here, A1643, if you look under "purchase 8 terms" in the middle of Page 2 on about the third 9 line down, it says, "The whole of the price is 10 separated to three non-recourse purchase money 11 notes payable two years after closing." 12 So, if they are non-recourse notes, 13 they shouldn't be on this page and Mr. Doolittle 14 just made a mistake. 15 Q. And you reached this conclusion in the 16 past couple of weeks. Right? 17 A. Well -- 18 Q. You don't remember it from -- you don't 19 remember it being something you thought about at 20 the time? Is that -- 21 A. No, sir. I can't say that I remember 22 that at that time. If you hadn't showed me the 20622 1 memos, I wouldn't have remembered the memos. 2 Q. So, you just disagree with 3 Mr. Doolittle's analysis. Is that it? 4 A. He's just wrong. I mean, he made a 5 mistake. You know, that's the bottom line. 6 Q. So, you disagree with his analysis. 7 Right? 8 A. Well, this says it's non-recourse debt 9 and I think everything else says it's non-recourse 10 debt, so his analysis was wrong. 11 Q. Would you have gotten a copy of this 12 memo, 7663? 13 A. Probably not. 14 Q. No? 15 A. No. 16 Q. So -- 17 A. It would have gone to Mike Crow. 18 Q. Did you ever discuss direct investment 19 requirements or limits with Mike Crow? 20 A. We discussed direct investment limits 21 frequently, mainly because we were very cognizant 22 of not wanting to exceed liability growth, direct 20623 1 investment growth. We were always interested in 2 staying within the regulations. 3 Q. And it was important to you as the CEO 4 of USAT to make sure that the direct investment 5 limit was not violated. Right? 6 A. That's -- yes, it was. 7 Q. Okay. And one of the ways that that 8 would be accomplished was to be sure that the 9 limitation -- that the limits that are set out in 10 the regulations at the time by the Federal Home 11 Loan Bank Board were observed. Right? 12 A. That's correct. 13 Q. Did you ever have a hand in preparing 14 any memoranda or documents that would have set out 15 what the direct investment total was for USAT in 16 1985? 17 A. Would I have had a direct hand in it? 18 Q. Yes. 19 A. I don't think so. 20 Q. What about in 1986? 21 A. I can't recall any. 22 Q. Take a look at Exhibit No. T7578, which 20624 1 is Tab 1142. 2 A. Do I have that one? 3 Q. I think so, sir. 4 A. 1142? Okay. 5 Q. What I want you to do is look at the 6 first page. These -- 7 THE COURT: Mr. Leiman, am I supposed 8 to have a copy of that? 9 MR. LEIMAN: I'm sorry, sir? 10 THE COURT: Am I supposed to have a 11 copy of that exhibit? 12 MR. LEIMAN: I think it was admitted at 13 Tab 1142 as A13014. 14 MR. EISENHART: I think he simply used 15 a different exhibit number for it, Your Honor. 16 THE COURT: All right. I have A13014. 17 Q. (BY MR. LEIMAN) Of interest to me on 18 this exhibit, Mr. Gross, is your involvement with 19 the direct investment issue. And my question to 20 you, sir, is: Did you prepare this memo? 21 A. It looks like one I would have 22 prepared. 20625 1 Q. All right. And you would have done 2 that in January of 1986. Right? 3 A. Yes, sir. 4 Q. And you would have sent copies to the 5 people that are listed there: Hurwitz, Munitz, 6 Crow, Doolittle? 7 A. That's what is indicated. 8 Q. Okay. USAT was very, very close to its 9 direct investment limit as of January 1986, wasn't 10 it? 11 A. Could I -- is it all right if I read it 12 a minute? 13 Q. Sure. 14 A. Thank you. (Witness reviews the 15 document.) All right. I'm sorry. I'm ready. 16 Q. In January of 1986, USAT was very close 17 to its direct investment limit as set out by the 18 Bank Board regulations. Right? 19 A. That's what would appear. 20 Q. Okay. You, of course, were concerned 21 about that, weren't you? 22 A. Yes, I was. 20626 1 Q. All right. And, in fact, you had 2 directed a review, had you not, of the direct 3 investments in -- that USAT was involved with. 4 Right? 5 A. Yes, I did. 6 Q. Okay. And one of the things that was 7 part of that directive was to determine how direct 8 investments were portrayed with regard to real 9 estate investments. Right? 10 A. Can I flip back through that some more? 11 You know -- yes. By the way, on here, here it is. 12 On the real estate, one of them, it shows Park 410 13 down to 2 million there. 14 Q. I know it does, Mr. Gross. And that's 15 a very interesting observation, that it went from 16 what Mr. Doolittle had concluded as being a 17 9.7-million-dollar exposure down to a 18 2-million-dollar exposure after we see this 19 memorandum with your name on it as of 20 January 15th, 1986. 21 A. My memorandum is after his memorandum. 22 Q. Oh, I see. So, in other words -- 20627 1 A. What he says here in this first -- his 2 is dated December 18th and it's feeding up to me 3 and I'm responding to it in mine of January. And 4 what he says here, "There has been considerable 5 discussion regarding the direct investment issue 6 which includes the state limitations as well as 7 federal limitations. I have included for your 8 review summaries of the federal and state 9 regulations, our present interpretations of these 10 regulations, and proposed weekly reporting formats 11 for each limitation area." And it lists four 12 different types of limitations. And it goes on to 13 discuss each one in here. 14 Q. Mr. Gross, you had been in touch, 15 hadn't you, with Mr. Crow about this issue? 16 A. I don't recall. 17 Q. You don't remember? 18 A. No, sir. 19 Q. Do you remember if you were in touch 20 with Mr. Doolittle about the issue? 21 A. I probably -- I probably would not have 22 been in touch with Mr. Doolittle. I probably 20628 1 would have been in touch with either 2 Gerry Williams or Mike Crow, but I don't recall. 3 Q. All right. Let's turn back to the 4 agreement with Mr. Rosenberg. That's 5 Exhibit B3822. 6 A. Do I have that? 7 Q. Yes, sir, you do. 8 A. B3822. Here we are. 9 Q. Do you have that in front of you now? 10 A. Yes, sir. 11 Q. Okay. 12 A. (Witness reviews the document.) 13 Q. My understanding from my co-counsel, 14 Mr. Schwartz, is that T7051 might have been 15 admitted with Mr. Crow or was admitted with 16 Mr. Crow. 17 MR. SCHWARTZ: Your Honor, if I can 18 clear up the matter. If you'll recall, there were 19 two versions of the approval of this. One had the 20 signature -- the signature of just Mr. Graham, and 21 that was the T7051 version. And then the same 22 document had the signatures of other members of 20629 1 the real estate investment committee. And I had 2 asked Mr. Crow if he had an explanation as to why 3 one version had the signature of just Mr. Graham 4 and the other one had the signatures of others. 5 And I then asked that both versions be admitted. 6 And I believe that the version T7051 was admitted 7 at Tab 1364B. 8 MR. LEIMAN: Mr. Langdon, does the 9 Court have T7051? 10 THE COURT: We'll be off the record for 11 a moment. 12 13 (Discussion held off the record.) 14 15 THE COURT: All right. We'll be back 16 on the record. What we're showing is that there 17 was a document, T7051, that was admitted and it 18 has only Mr. Graham's signature but it has, also, 19 attachments to it: Profit projection, Appendix E, 20 another page called sale price. 21 Now, A1643 has all the signatures but 22 it does not have the attachments that I just 20630 1 described. 2 MR. BLANKENSTEIN: Your Honor, it 3 appears that the attachment -- T7051, which is the 4 document that has the attachment, comes from Texas 5 Savings and Loan Commission. And it's unclear 6 how -- and there is no testimony, as I understand 7 it, that this was -- the approval plus the 8 attachment came out of United's files. The -- 9 MR. SCHWARTZ: Your Honor, my 10 recollection is that the Texas S&L documents were 11 designated TXS&L and a Bates number. This is 12 BUTX. I don't know the source of the BUTX 13 designation. 14 MR. DUEFFERT: Your Honor, I've just 15 been informed it may be Bank United, but we have 16 some uncertainty as to the origin of the document. 17 THE COURT: Well, is there some 18 uncertainty as to whether it was received as an 19 exhibit? 20 MR. BLANKENSTEIN: It was received as 21 an exhibit. My only point is it is unclear to us 22 whether this attachment was originally included or 20631 1 attached to the April -- the March 18th, 1985 2 approval of United's real estate committee of the 3 investment in the Park 410 Joint Venture. 4 THE COURT: But I have a note that I -- 5 that it was -- those attachments were a part of 6 the exhibit. 7 MR. BLANKENSTEIN: Oh, they were. Yes, 8 Your Honor. I understand it was admitted that 9 way. My observation is simply that it's unclear 10 to us and there is no testimony that the 11 attachment was, indeed, attached to the approval 12 at the time it was executed in March of 1985. We 13 don't know when it got attached. 14 MR. LEIMAN: Your Honor, can -- since 15 it's already -- 16 THE COURT: Mr. Leiman. 17 MR. LEIMAN: Since this is an admitted 18 document, I would like to ask the witness about 19 it. 20 THE COURT: All right. Proceed. 21 Q. (BY MR. LEIMAN) Now, do you have a 22 copy of this in front of you? 20632 1 A. The last -- I'm looking at B3822. 2 Q. No. This is T7051. Do you see the 3 resemblance between this document and the one that 4 we saw earlier as A1643, don't you? 5 A. I'm drowning in documents. Okay. 6 Q. Listen -- 7 A. Let me set these aside. 8 Q. Let me strike the question. Okay? 9 Mr. Gross, let me ask you a very simple question. 10 Look at the fifth page of T7051. 11 A. All right. 12 Q. It's sequentially numbered BUTX 1012. 13 This appears to be a budget, does it not? 14 MR. BLANKENSTEIN: Your Honor, it 15 appears -- it's entitled "profit projections." It 16 doesn't appear to be a budget. Mr. Leiman insists 17 on mischaracterizing the document. 18 THE COURT: All right. Well, maybe -- 19 I understand the purpose of calling this witness 20 is to get his testimony. So, let's see what he 21 has to say. 22 What's your question, Mr. Leiman? 20633 1 Q. (BY MR. LEIMAN) Does this appear to 2 be the budget that's referred to in the real 3 estate investment committee proposal? 4 A. Well, can you point me in the right 5 direction here? 6 Q. I'm not sure what the confusion is, 7 Mr. Gross. What don't you understand? 8 THE COURT: Where in this document is 9 it referring to a budget? Why don't you direct 10 his attention to that if it's here. 11 Q. (BY MR. LEIMAN) The reference is on 12 Page 3. 13 A. Page 3. All right. 14 Q. Under "potential profits." 15 Do you see that? 16 A. Yes. 17 Q. Let's take a look at the first full 18 paragraph under "potential profits." Okay? And 19 do you see where it says, "The projected IRR on 20 this scenario ranges from 16 to 100 plus percent. 21 See attached Appendix E." 22 Do you see that? 20634 1 A. Yes, I do. 2 Q. Okay. And do you see in the next 3 paragraph, it refers to the assumption that the 4 project would generate a net profit of 5 $42 million? 6 Do you see that? 7 A. Yes, sir. 8 Q. Okay. Now, do you see on Exhibit T7051 9 about halfway down the page, there is a reference 10 to profit of $42.4 million. 11 Do you see that? 12 A. I do. 13 Q. Do you have any reason to think that 14 the proposal for the real estate investment in 15 Park 410 by USAT did not include the profit 16 projections that are shown here on Page BUTX 1012? 17 A. I really -- I really can't say. 18 Q. Do you think they are referring to some 19 other 42-million-dollar net profit? 20 A. You know, you're asking me what I 21 remember; is that correct? 22 Q. Yes, Mr. Gross. What do you remember? 20635 1 A. I do not. 2 Q. You don't remember whether this was 3 attached? 4 A. I don't know whether this was attached 5 or not. 6 Q. Did you notice in your preparation for 7 testimony -- did you go over the profit 8 projections that are shown here on T7051? 9 A. I don't recall seeing this specific 10 page and going over that. 11 Q. But you would have seen Exhibit A1643. 12 Right? 13 A. That's correct. 14 Q. And you would have seen that there 15 is -- it could potentially generate a net profit. 16 Graham was talking about a net profit of 17 $42 million. Right? 18 A. Yes. 19 Q. Okay. Do you have any idea where 20 Mr. Graham would have gotten that other than from 21 GMR's profit projections and budget? 22 A. No, I do not. 20636 1 Q. Would it be reasonable to assume he got 2 it from GMR? 3 A. If you want me -- I -- it's probably 4 reasonable to assume it, but I don't know. 5 Q. Do you remember what you assumed in 6 1985? 7 A. No, I don't. I really don't. 8 Q. Did you ask Mr. Graham to explain how 9 are we going to possibly make $42 million on this 10 investment? 11 A. I'm sure I did, but I don't recall 12 that. 13 Q. Let's talk about B3822, Mr. Gross. 14 A. Which one is that? Oh, here we go. 15 3822? 16 Q. Yes, sir. 17 A. Now, this one doesn't have a folder; is 18 that right? Is this that 7051? 19 Q. No folder. 20 A. Okay. All right. 21 Q. Do you know how long this letter 22 agreement with Mr. Rosenberg was in force and 20637 1 effect? 2 A. No, I don't. 3 Q. What's the typical -- no. Strike that. 4 You've never personally done a letter 5 agreement in a partnership that exceeded six 6 months, have you? 7 A. I have. I've even done partnership 8 agreements -- I've done deals where we didn't have 9 the agreement written until the deal was finished. 10 Q. Have you done a partnership letter 11 agreement that was in force for greater than six 12 months? 13 A. Yes. 14 Q. Okay. Let's look at your deposition 15 transcript at Page 186. 16 A. Page 186? 17 Q. Yes, sir. 18 A. (Witness reviews the document.) 19 Q. And let's look starting at Page 186, 20 Line 3 in which I ask you about this instrument 21 and instruments of the same form as this letter 22 agreement. "How long are they typically in 20638 1 force?" 2 And you answered me, "Until such time 3 as you can get the other instruments prepared." 4 "Right. And how long is that 5 ordinarily?" 6 Well, "in some of the deals I've been 7 in, you know, it could be sometimes as much as 8 three to six months." 9 Question, "Okay. Anything longer than 10 six months?" 11 Answer, "Not that I personally can 12 recall. That doesn't mean that they aren't done, 13 but I personally have not done any that I recall." 14 Do you see that? 15 A. I do. 16 Q. Now, was that a misstatement in your 17 deposition, Mr. Gross? 18 A. Like I said, I didn't recall them at 19 that time. That's all I said. 20 Q. Was that a misstatement? 21 A. No. 22 Q. Why would you want to have a letter 20639 1 agreement -- strike that. 2 Why would you want a full agreement 3 rather than merely a letter agreement in force and 4 effect? 5 A. Why would you want -- well, just to 6 better set forth specific details of a venture, 7 however this is attached to the venture as such. 8 Q. You would want to cover all of the 9 eventualities as best you can to cover all aspects 10 of the venture. Right? 11 A. That's correct. 12 Q. Because you wouldn't want to be in a 13 position to have confusion as to who's liable or 14 who gets a certain profit participation or things 15 like that. Right? 16 A. It would certainly be better to have it 17 set forth in detail. 18 Q. All right. Let's look at T7067, which 19 is at Tab 714. 20 A. Do I have that one? 21 Q. No, sir. Have you seen this 22 termination agreement previously? 20640 1 A. In the last week, I've seen it. 2 Q. Okay. Do you remember ever seeing it 3 before that? 4 A. No, sir. 5 Q. What do you understand it to be 6 terminating? 7 A. I'm sorry. I didn't read it. Give me 8 a second. (Witness reviews the document.) It 9 looks -- it's a termination of the interest of 10 United as a joint venture partner with Stanley 11 Rosenberg in the Park 410. 12 Q. Do you remember I showed you a copy of 13 this termination agreement at your deposition in 14 1995? 15 A. I don't. 16 Q. Did you realize in 1985 that this 17 termination agreement existed? 18 A. Was that '85 or '86? 19 Q. I'm sorry. 1986. My apologies. 20 A. Did I know then that it existed? 21 Q. Yes, sir. 22 A. I probably did. 20641 1 Q. Let's look at your deposition again. 2 This time, let's have a look at Pages 201 and 202. 3 In particular -- go ahead and take a minute or two 4 to read the context. 5 A. Where do you want me to start on 201? 6 Q. Start with Line 14 on 201, and that 7 proceeds over to Line 23 on Page 202. 8 A. Looks like we made the same mistake 9 then of April 8, '85. And what is the question? 10 Q. Does this refresh your memory as to 11 whether or not you were surprised by this term -- 12 that this termination agreement even existed? 13 A. No, sir. That -- if you read it, what 14 we're saying -- the same thing I just got through 15 saying. You misquoted then, and you referred to 16 April 1985. And I said I was surprised because I 17 thought it was '86. And I go on to say that we 18 did it in '86, that I was aware of it then. 19 Let's see. Let's look at it. Okay. I 20 don't have the exhibits in front of me, but it 21 says, "What's the difference -- the first Page -- 22 of RE-14," whatever that is. And I don't recall 20642 1 seeing it. 2 "Have you ever heard about it?" 3 "No, sir, I haven't. In fact, I'm kind 4 of surprised. I didn't realize this had 5 occurred." 6 "Okay. What makes you surprised about 7 it?" 8 "I just thought, having read that, I 9 thought we just wanted a joint venture and went on 10 down the road. I didn't realize that this came 11 along in here." 12 "If you notice, the termination 13 agreement that's represented by Exhibit RE-14 is 14 dated April 8, 1986." 15 "Yes, sir. Oh, oh, oh, okay. Well, 16 let me stop and think about it. Until you pointed 17 it out, I thought it was April 8th of '85. That's 18 why I was so surprised." 19 "Right." 20 "That was my mistake. I apologize. I 21 still haven't seen it but I guess what this is the 22 termination of the agreement in conjunction 20643 1 without making a loan in '86." 2 Q. That's right, Mr. Gross. You still 3 hadn't seen it whether it was '85 or '86, and 4 that's my question to you. 5 Had you ever -- were you aware that 6 this termination agreement even existed? 7 A. I was aware that it existed, but I 8 hadn't seen it. I knew that the partnership -- 9 that the relationship had terminated, but I hadn't 10 seen the document. 11 Q. Okay. That was my question. 12 A. And that's what I said in here. 13 Q. Let's go to Exhibit B4168, Tab 1042. 14 A. I'm lost. B41 -- 15 Q. Here's a copy of it. 16 A. Oh, I don't have it? Okay. 17 Q. Have you seen this document before? 18 A. Yes, I have. 19 Q. Okay. When did you see it? 20 A. I've seen it in the last week. And 21 because my signature is on the back, I would 22 assume that I must have seen it in 1986, as well. 20644 1 Q. So, in the next-to-the-last page, 2 that's your signature there, Mr. Gross? 3 A. Yes, it is. 4 Q. Is that -- 5 A. I think it's three pages from the end. 6 I have two pages behind it. 7 Q. Okay. Is that next to Mr. Graham's 8 signature or below it? 9 A. I'm sorry? 10 Q. Is your signature the one below 11 Mr. Graham's and to the left of Mr. Crow's 12 signature? 13 A. Yes, it is. 14 Q. Okay. Do you have any recollection of 15 the senior loan committee meeting of March 17th, 16 1986? 17 A. Not really. 18 Q. Was the 80-million-dollar loan approved 19 in Park 410 Joint Venture, Park 410 transaction, 20 the largest loan that USAT had ever approved? 21 A. Yes, it was. 22 Q. Let's look at the second page of the 20645 1 exhibit. Do you see Mr. Hurwitz attended this SLC 2 meeting, as well. Right? 3 A. I'm on -- 4 Q. As well as the one in January? 5 A. I'm on the wrong page. Just a second. 6 Yes, he did. 7 Q. All right. You were there and Williams 8 and Graham and Crow and others. Right? 9 A. Yes. 10 Q. Would the order in which the matters 11 are presented on this piece of paper here be the 12 order in which these matters were taken up by the 13 SLC? 14 A. I don't know. I have no reason to -- I 15 don't know one way or the other, you know. I 16 assume they were, but I can't state that they 17 were. 18 Q. You'll notice that the last item on the 19 agenda -- I'm sorry -- the next-to-the-last item 20 on the agenda states, "David Graham presented a 21 status on the Deauville property in Austin, 22 Texas." Right? 20646 1 A. Yes, sir. 2 Q. So, at this meeting of the SLC, the 3 Deauville property, which is Norwood -- right? 4 A. That's correct. 5 Q. The Deauville property was considered 6 as well as the Park 410 transaction for 7 $80 million. Right? 8 A. I don't -- it doesn't sound like it was 9 considered. Sounds like he just gave us a status 10 report on it. 11 Q. Okay. You also talked about the 12 Woodcreek Shopping Center. Right? 13 A. Yes, we did. 14 Q. And whatever else is discussed here. 15 Right? Do you have any reason to think the 16 minutes are not accurate? 17 A. I don't recall it, but I have no reason 18 to think differently. 19 Q. Okay. I've taken the liberty of 20 calculating the time. It was a 69-minute meeting. 21 Right? 22 A. Yes, it was. 20647 1 Q. Now, let's look what happened at that 2 69-minute meeting. 3 THE COURT: We'll take a short recess. 4 5 (Whereupon, a short break was taken 6 from 3:47 p.m. to 4:10 p.m.) 7 8 THE COURT: Be seated, please. We'll 9 be back on the record. 10 Mr. Leiman, you may continue. 11 Q. (BY MR. LEIMAN) Mr. Gross, I'd like 12 you to look at Exhibit B4168. You should have 13 that in front of you now. 14 A. Yes, sir. 15 Q. You've already testified that you 16 signed and approved of the proposal before the 17 senior loan committee on March 17, 1986. Right? 18 A. I'm sorry. I've looked -- I'm sorry. 19 Would you repeat the question? 20 Q. Yes. You testified a few minutes ago 21 before the break that you had signed this proposal 22 on March -- on or about March 17, 1986, for the 20648 1 Park 410 loan. Right? 2 A. Yes, I did. 3 Q. What date was the loan actually 4 approved? 5 A. Well, I assume it must have been 6 approved the 17th of March. You know, I don't -- 7 I don't know that -- don't have any other reason 8 to think otherwise. 9 Q. If you look under the second caption on 10 the third page of the exhibit under "applicant," 11 there is no reference to the partnership between 12 Stanley Rosenberg and USAT. 13 A. I'm sorry. I'm not sure what you're -- 14 I'm reading "applicant." 15 Q. Yes, sir. There is no reference to the 16 partnership that existed between Stanley Rosenberg 17 and USAT, is there? 18 A. I don't see any. 19 Q. Okay. 20 A. Could I look at something else? 21 (Witness reviews the document.) If -- there is no 22 mention on this page about that. 20649 1 Q. Is there any mention on any other page? 2 A. Yes, sir. 3 Q. All right. Why don't you tell me where 4 that would be. 5 A. Okay. It looks like back here on the 6 next-to-the-last page -- well, maybe I'm not 7 reading it right. I'm not sure. 8 Q. Well, if you found a reference to -- 9 A. I found United Savings on the chart 10 here. 11 Q. Yes. I see that. I saw that myself. 12 You mean on the chart that's attached as 13 US0004056. Right? 14 A. That's correct. 15 Q. But that doesn't show United Savings as 16 a partner with Stanley Rosenberg, does it? 17 A. I can't tell which way -- I think 18 that's probably -- I thought -- you know, when I 19 first saw it, I thought that's probably it; but 20 I'm not sure now. This looks like it's probably 21 the structure after -- after the restructure. 22 Q. Right. After the loan was made 20650 1 already. Right? 2 A. Yes. 3 Q. Well, how would someone then looking at 4 this document who is not familiar with the Stanley 5 Rosenberg/USAT partnership know that that 6 partnership existed as of this time, March 17th, 7 1986? 8 A. Well, from this particular document, I 9 don't know whether they could tell it or not; but 10 there were other documents that had been signed 11 that indicated that there was that. 12 Q. Okay. We saw one of those. That was 13 the termination agreement. Right? 14 A. But we also saw the letter agreement 15 between them. 16 Q. Right. We saw both of those. Right? 17 A. Yes. 18 Q. But you don't remember seeing those at 19 the time, do you? 20 A. No, I would not have seen them. 21 Q. Okay. Now, let's look at the 22 guarantees and the letters of credit. Okay? 20651 1 A. All right. 2 Q. It's about in the middle of the page 3 starting with the word "The principals shall 4 guarantee the top 25 percent of the principal 5 balance." 6 Do you see that? 7 A. I see it. 8 Q. It says, "The 10-million-dollar cash 9 collateral to be provided shall be a part of this 10 guarantee amount and shall serve as a credit on 11 this guarantee obligation." 12 Do you see that? 13 A. I do. 14 Q. 25 percent of this 80-million-dollar 15 loan would be $20 million. Right? 16 A. That's correct. 17 Q. And that's the top 25 percent? 18 A. Yes. 19 Q. Okay. Looking at this, it would appear 20 that there are some $10 million by way of cash 21 collateral. We know those now to be letters of 22 credit, don't we? 20652 1 A. I think letters of credit and CDs. I 2 think there was also some CDs put up. 3 Q. And they would have totaled how much? 4 A. $10 million. 5 Q. Okay. What amount, Mr. Gross -- what 6 part of the $10 million that was put up as a cash 7 collateral as described here, how much money of 8 that amount would serve as a part of the guarantee 9 amount? 10 A. All of it. 11 Q. All right. And what does that mean in 12 terms of the amount of money that then would be -- 13 that the borrowers would then be potentially 14 obligated to pay? 15 A. Well, they would be obligated to pay 16 the $20 million, the 10 that they have got up as 17 collateral and 10 of additional personal 18 liability. 19 Q. Okay. Now, looking down further on 20 this page, you didn't review these financials, did 21 you? 22 A. I have seen them, yeah; and I've gone 20653 1 over them. I did look at them. 2 Q. I'm sorry? 3 A. The answer is yes. 4 Q. You did review them? 5 A. I did look at the financials. 6 Q. Okay. Meaning -- and what you mean by 7 that is you looked at the financials that are 8 shown on this page? 9 A. I looked at the financial statements of 10 the people involved. 11 Q. All right. So, you were able to 12 independently verify that Stanley Rosenberg, as of 13 the date that this was approved on March 17th, 14 '86, had $12 million in cash and a net worth of 15 some $44 and a half million. Right? 16 A. I didn't independently verify that, but 17 I saw it on his financial statement. And we would 18 have gotten a credit report drawn on him. 19 Q. How old was the credit -- financial 20 statement that you saw on Mr. Rosenberg? 21 A. As I told you, I have no idea because 22 it's a matter of some 13 years ago. 20654 1 Q. Did you do the same thing for 2 Grieshaber and Roberts and Mr. Crump and IPIC 3 International Property? 4 A. I'm sorry. Excuse me. As best I 5 recall, I typically looked at financial statements 6 of all the participants in our loans. 7 Q. And what was your purpose in looking at 8 them? 9 A. I wanted to see what their financial 10 strength looked like. 11 Q. And of those financial statements that 12 you reviewed, who had prepared them? 13 A. I don't recall. 14 Q. Do you know if they were prepared by -- 15 were they audited financial statements? 16 A. I have no idea. 17 Q. What's the difference between an 18 audited and an unaudited financial statement? 19 A. An audited financial statement is a 20 statement that's been reviewed by -- usually by a 21 certified public accountant and certified to that 22 effect. 20655 1 Q. And doesn't it also verify that the 2 amounts that are portrayed on the financial 3 statement actually exist? 4 A. Yes, they do. 5 Q. Okay. And that's an audited financial 6 statement, isn't it? 7 A. Yes. 8 Q. But you don't remember seeing those, or 9 you just don't remember -- 10 A. I don't recall. I don't recall whether 11 the statements were audited or unaudited. 12 Q. Mr. Gross, would it have made a 13 difference if it was an unaudited versus an 14 audited financial statement that you saw? 15 A. No, sir. 16 Q. Why not? 17 A. Well, I can't -- you know, I've been in 18 business for some 40 something years now, and I've 19 done business with probably 75 or 100 financial 20 institutions, and I've never had an audited 21 financial statement. So, I -- you know, I think 22 that unless you're a publicly-held company, I 20656 1 don't know that an audit is that relevant. 2 Q. Let's look at the second page of this 3 particular proposal, which is US4052. Turn your 4 attention to location. The Northwest Freeway had 5 not been built at the time this loan was approved; 6 isn't that right? 7 A. That's correct. That's correct. 8 Q. Mr. Gross, did you review any 9 documentation that analyzed the potential impact 10 of Sea World? 11 A. I remember seeing documents with regard 12 to that, and I can't remember what I actually did 13 with it. But I saw an awful lot of material with 14 regard to Sea World. It was in all the papers. 15 We had documents on it. It was common knowledge 16 about Sea World. 17 Q. Did you ever see any specific report 18 devoted solely to the impact of Sea World and what 19 would happen in connection with, among other 20 things, hotel stays? 21 A. I didn't see a document specifically 22 devoted to Sea World. I saw it alluded -- I have 20657 1 since -- I have seen it recently in other 2 documents. 3 Q. Okay. You didn't see it at the time 4 you signed this proposal? 5 A. Yeah. I've told you a half a dozen 6 times, I just -- I got no idea what I saw 12, 13 7 years ago. 8 Q. Mr. Gross, the interest on this 9 80-million-dollar loan was funded from an interest 10 reserve, wasn't it? 11 A. Yes, it was. 12 Q. That would mean that the borrowers did 13 not sign a promissory note -- I'm sorry. Strike 14 that. 15 Would I be right, then, that in 16 connection with their obligation in the amount of 17 $80 million, that the equity of those borrowers 18 was zero? 19 A. I'm sorry. Would you -- 20 Q. What was the amount of equity the 21 borrowers had in the loan? 22 A. In the loan itself? I misunderstood 20658 1 what you were saying. What was their equity in 2 the loan? They had a loan that covered the cost 3 of the land as well as the interest and so forth. 4 Q. Okay. On the next page of the exhibit, 5 there is a reference to the profit participation. 6 That's an equity kicker; is that right? 7 Is that what that's commonly referred to? 8 A. I don't know if I'd use the term 9 "equity kicker." It's additional interest. It's 10 not an equity kicker, I would think, on a loan. 11 Q. All right. Why don't you tell me what 12 an equity kicker is as you understand it. 13 A. I -- you know, it's been a long time 14 since I've heard the term, but I would think -- 15 what I would think is an equity kicker would be a 16 term that would be used in a joint venture, 17 whereas additional interest would be a term used 18 in conjunction with a loan. 19 Q. Well, what would 25 percent of the 20 profits generated from the sale of the land be? 21 A. It will show up as additional interest 22 earned. 20659 1 Q. It will show up as additional interest 2 earned? 3 A. Yes, sir. 4 Q. Let's look at the appraisal section. 5 It says here that Edward Schulz is presently 6 completing a detailed R-41B appraisal which will 7 indicate a present discounted economic value 8 between 86 and $90 million. 9 Do you see that? 10 A. Yes, I do. 11 Q. At the time that you signed your name 12 to this March 1986 document, USAT did not have 13 Schulz' appraisal in hand. Right? 14 A. I think they probably had his verbal 15 number but didn't have the written appraisal in 16 hand. 17 Q. All right. USAT -- neither you nor 18 other members of the SLC had his written appraisal 19 in hand. 20 Is that fair? 21 A. That's correct. 22 Q. Mr. Gross, are you aware or were you 20660 1 aware that any other appraisals had been done in 2 connection with the Park 410 property? 3 A. I don't recall. 4 Q. You don't recall there being any? 5 A. I just don't recall that there were or 6 there weren't. 7 Q. Let's turn to the funding section on 8 the next page. It refers here to "Initial funding 9 shall occur on or before March 31, 1986, and shall 10 be in the magnitude of $42 million net advanced." 11 Do you see that? 12 A. Yes, I do. 13 Q. All right. At the time -- well, do you 14 know if that money was ever advanced? 15 A. I'm sure -- did I see it advanced? No. 16 But I was pretty sure it was. 17 Q. Looking down at the initial allocation 18 of loan funds, do you see that? 19 A. Yes, I do. 20 Q. Do you see the references to a 21 41.8-million-dollar land acquisition cost? 22 A. Yes, I do. 20661 1 Q. Do you see "other costs" and you see 2 "financing"? 3 A. Yes, I do. 4 Q. Interest reserve of $17 million? 5 A. Yes. 6 Q. And financing fees of $2.4 million? 7 A. Yes. 8 Q. For a total loan amount of $80 million. 9 Right? 10 A. Yes, I do. 11 Q. Okay. Now, under special conditions, 12 there is a special provision made with regard to 13 other loans that USAT has on file. 14 Do you see that? Read under "special 15 conditions," No. 1. 16 A. (Witness reviews the document.) I do. 17 Q. Is it your understanding that what USAT 18 is willing to do in connection with this loan, 19 namely the Park 410 loan, is to apply other 20 secured interests that these borrowers have in 21 connection with this loan and the guarantees on 22 it? 20662 1 A. Well, I was trying to read it. I'm not 2 sure I understand what it says. Let's see. It 3 says if they don't agree to the required 4 cross-default provision "that USAT will agree that 5 their guarantees on the particular loan can be 6 secured by their interest in other projects on 7 which USAT has the loans; said interests in other 8 projects shall not be accelerated on default but 9 will continue to secure the guarantees. 10 I'm sorry. Now, what is the question? 11 Q. What do you understand that provision 12 to mean, Mr. Gross? 13 A. I think what -- we must have had a 14 cross-default provision in our loan papers, but I 15 don't remember what it was and I don't know what 16 this relates to. 17 Q. Doesn't this mean that if USAT has 18 another loan from the same borrower, the 19 borrower's equity or the borrower's interest in 20 that other loan can be applied against their 21 guarantees on this loan? 22 A. I think that's what it says. I'm 20663 1 really not sure. 2 Q. And that would, in fact, reduce the 3 amount that they would otherwise have to pay under 4 the guarantees that we saw in the first page of 5 this proposal. Right? From $10 million to 6 whatever those other secured amounts would have 7 been? 8 A. I think that would apply only in the 9 case of a default. 10 Q. Okay. And tell me under what 11 circumstances a guarantee on a loan would come 12 into play other than a default. 13 A. Let me stop and think about this. I 14 haven't read this -- I don't recall reading -- I'm 15 not really sure what it's saying here. (Witness 16 reviews the document.) 17 From what I'm reading, the first part, 18 must have some sort of cross-default provision, 19 standard clause in our -- I guess in our deed of 20 trust, I guess, would be where it would be. I 21 think what it's doing is saying if they had failed 22 to make their guarantee on this, we could look to 20664 1 their other properties. That's the way I read it. 2 Q. Mr. Gross, point me to the language 3 there where it says that. 4 A. Well, I'm just trying to interpret -- I 5 will say as far as -- I'm not an attorney; but 6 just trying to read this as best I can, that's 7 what it says to me. Now, that may not be what it 8 means, but that's the way I would read it. 9 Q. Who wrote this proposal? 10 A. I imagine that David did. 11 Q. David Graham? 12 A. David Graham. 13 Q. Okay. Do you remember asking Graham to 14 explain that special condition to you? 15 A. I told you I don't remember the 16 meeting. 17 Q. Would you have read this special 18 condition at the time as a matter of your usual 19 business practice? 20 A. I probably would have. 21 Q. And would it have been your practice, 22 your usual and customary business practice, to 20665 1 have asked Mr. Graham about some item that you did 2 not understand in this document? 3 A. As I say, I have no recollection. But 4 I -- you know -- 5 Q. I'm asking you for what your customary 6 business practice was. 7 A. I would think if I didn't understand it 8 at the time, I would have asked him. 9 Q. So, if you did understand it at the 10 time, you wouldn't have asked? 11 A. Reading it today, that's the way I 12 understand it. 13 Q. Let's look at the signature page on 14 this document. 15 A. All right. 16 Q. It says here that "Presently, any loan 17 in excess of $70 million must be approved by the 18 board of directors." 19 Do you see that? 20 A. Yes, sir. 21 Q. That's what you testified to earlier. 22 A. Right. 20666 1 Q. That's the loan limit. It says, "The 2 total amount of funds that can be disbursed under 3 this loan shall be limited to $70 million until 4 formal approval by the board of directors is 5 obtained." Right? 6 A. I see that. 7 Q. Okay. Is it your understanding, 8 Mr. Gross, that USAT could have lent up to 9 $69,999,999 without getting board approval? 10 A. Well, it says in excess of 70 million 11 even. 12 Q. They could have loaned 70 million, and 13 they wouldn't have needed board approval. Right? 14 A. Correct. 15 Q. Could they have made two loans of 16 $40 million each to this borrower or to two 17 entities that purported to be this borrower and 18 still avoided the 70-million-dollar limitation? 19 A. I don't know. 20 Q. Did you ever try that? Did anybody 21 think about that? 22 A. No, not that I know of anyway. 20667 1 Q. Mr. Gross, was there an effort to 2 somehow avoid obtaining the approval of the board 3 of directors for an 80-million-dollar loan -- 4 A. Absolutely -- 5 Q. Let me finish the question -- prior to 6 this approval? Was there any effort? 7 A. To do what now? 8 Q. To avoid getting the board of directors 9 to approve an 80-million-dollar loan? 10 A. Not that I'm aware of. 11 Q. Did the board of directors ever approve 12 this loan? 13 A. Yes, they did. 14 Q. And when would that have been? 15 A. At the next board meeting. 16 Q. Was this loan partially funded prior to 17 the next board meeting, to your recollection? 18 A. I would not have known; but I've looked 19 at the records and yes, it was. 20 Q. It was? So, it was funded prior to the 21 board of directors' approval on this. That's what 22 you're saying? 20668 1 A. Yes. 2 Q. Having sat on the boards of directors 3 of three institutions, can you tell me what the 4 board of directors could have done once the money 5 was out the door? 6 A. Yes, sir. They could have limited the 7 loan to $70 million as it said, and they had 8 delegated that authority to the senior loan 9 committee so that's the way it would have stood. 10 Q. It would have stood as a 11 70-million-dollar loan; is that right? 12 A. Yes, it would. 13 Q. What if they thought that the loan was 14 not a good loan to make, was a bad loan, the 15 80-million-dollar one, this project? 16 A. The board had delegated the authority 17 to the senior loan committee to make loans of 18 $70 million. And the board had confidence in the 19 senior loan committee to make prudent loans and, 20 therefore, there wasn't an issue. 21 Q. Mr. Gross, why would USAT and the 22 senior loan committee have approved an 20669 1 80-million-dollar loan if a 70-million-dollar loan 2 could do just as well? 3 MR. BLANKENSTEIN: Objection. 4 Mischaracterizing testimony. Mr. Gross testified 5 that they approved a 70-million-dollar loan and 6 that the remainder would be approved by the board 7 of directors. 8 THE COURT: Did you understand his 9 question? 10 THE WITNESS: Would you repeat the 11 question? 12 MR. LEIMAN: Please read it. 13 14 (The record was read by the court 15 reporter, as requested.) 16 17 A. We didn't approve an 80-million-dollar 18 loan. We approved a 70-million-dollar one, which 19 is what we said. And we said that the other 20 10 million had to be approved by the board or it 21 wouldn't be approved. 22 Q. (BY MR. LEIMAN) Mr. Gross, did I hear 20670 1 you right? You didn't approve an 2 80-million-dollar loan? Is that what you just 3 said? 4 A. We did not approve the funding of 5 $80 million. 6 Q. You approved an 80-million-dollar loan. 7 Right? 8 A. Well, I guess that's semantics. I 9 would think we approved the funding of 10 $70 million. And if the board said that's all 11 we're going to go, that's all we would have gone. 12 Q. Then why would you bother approving an 13 80-million-dollar loan if 70 would have been 14 enough? What's the answer to that, Mr. Gross? 15 A. I don't understand the question. 16 Q. You mean there was $10 million worth of 17 fluff built into the loan? 18 A. No, sir. I mean, they had $10 million 19 worth of collateral on hand and the deal could 20 have been restructured if the board had not 21 approved the loan. 22 Q. Do you know how much money went out the 20671 1 door with the initial funding? 2 A. I think you said about $42 million, 3 didn't you? 4 Q. Yeah. And was there some way in which 5 that $42 million could have been retrieved by the 6 board of directors? 7 A. We've been over that. The senior loan 8 committee had the delegated authority from the 9 board to make a loan up to $70 million and did not 10 require board approval. 42 million is less than 11 70 million. 12 If the board -- the board had entrusted 13 that responsibility to the senior loan committee. 14 And had the board decided it was wrong of the 15 senior loan committee, they probably would have 16 fired all of us. 17 Q. Would you read back that last answer? 18 19 (The record was read by the court 20 reporter, as requested.) 21 22 Q. (BY MR. LEIMAN) Tab 802, 20672 1 Exhibit T7491. 2 A. Do I have that yet? 3 Q. Yes, sir. You do. 4 A. I'm sorry. What is it? 5 Q. It's Tab 802, and that would be T7491. 6 You should have that in your stack there. It was 7 one of the earlier exhibits I showed you. 8 A. I'm sorry. Could you give me the 9 number again? 802? 10 Q. Yes, sir. 11 A. I've got it. 12 Q. Until recently, Mr. Gross, do you 13 remember hearing of an appraisal firm by the name 14 of Love & Dugger? 15 A. No, sir. 16 Q. Looking at the second page of this 17 exhibit, you notice here that it's a 18 41.3-million-dollar value. Right? 19 A. Yes. 20 Q. Set out in that letter? 21 A. I see that. 22 Q. Now, I'm going to show you another 20673 1 exhibit which is at Tab 634, T7069. 2 THE COURT: Would you repeat that 3 document? 4 MR. LEIMAN: It would be Tab 634, Your 5 Honor, T7069. 6 Q. (BY MR. LEIMAN) Do you see this 7 document, Mr. Gross? 8 A. Yes, I do. 9 Q. Okay. Do you see at the bottom of the 10 front page, it says it was prepared by 11 Love & Dugger? 12 A. Yes. 13 Q. Okay. Have you ever seen this document 14 outside of the context of either reviewing it last 15 week or the week before? 16 A. I don't recall. 17 Q. Do you remember ever having seen this 18 document ever at the time in 1985 or 1986? 19 A. No, I don't. 20 Q. This document, if you look at the 21 second page, is dated August 13th, 1985. Right? 22 A. Yes, it is. 20674 1 Q. USAT was involved in a partnership in 2 Park 410 property with Stanley Rosenberg, wasn't 3 it? 4 A. Yes, it was. 5 Q. Would you expect USAT to have gotten a 6 copy of this document as a partner? 7 A. Well, I can't -- I don't know whether 8 they got it or not. So, as to whether I would 9 expect it, I will say that we typically don't 10 furnish copies of appraisals to our partners in 11 the deals we do. And so, I have no idea whether 12 they got it or not; but I don't not necessarily 13 expect that to happen. 14 Q. Okay. Would you have wanted to have 15 seen this appraisal prior to approving the 16 80-million-dollar loan to Park 410? 17 A. You know, you're always interested in 18 all the information that's available on anything; 19 but we were getting an appraisal at the time of 20 the loan. 21 Q. Please look with me at the fourth page 22 of this exhibit, which is Roman IV. 20675 1 A. Yes, sir. 2 Q. It sets out a value here of some 3 $44 million. 4 Do you see that? 5 A. Yes, sir. 6 Q. Would that have been important for you 7 to know prior to approving an 80-million-dollar 8 loan for the Park 410 property? 9 A. Could I have just a minute to look at 10 that time it, please? 11 Q. Yes, sir. 12 A. Thank you. (Witness reviews the 13 document.) As best I can see from looking at 14 this, without going back into the back of it too 15 much, it looks like an as-is appraisal. And I 16 guess if that's what it is, what it's saying is 17 the property they had bought for $39 million in 18 March of 1985, Love & Dugger was saying was worth 19 4 million in August of '85. 20 So, I guess if I had gotten it, I would 21 have said, "Gosh. Their thing is worth more -- 22 several million dollars more than what the 20676 1 purchase price is." 2 Q. Now, the market value appraisal is 3 different from an as-is appraisal; is that right? 4 A. And I think this is an as-is value 5 appraisal. 6 Q. Oh, is that right? Well, let's look, 7 then, at Page IV. And let's look, if we can, at 8 the third full sentence on that page. 9 A. On what page? 10 Q. That would be Roman IV. And do you see 11 there on Roman IV, the third full sentence, 12 Love & Dugger says, "As a result of our 13 investigation and analysis, it is our opinion that 14 the market value of the appraised property as of 15 July 31, 85, was" -- and then it goes through this 16 per square foot amount -- "with a total market 17 value of $44 million"? 18 A. And that's as a raw piece of land. 19 Q. Is that what that's saying? I thought 20 you just told me that a market value and as-is 21 value were different. 22 A. No. I said as-developed and as-is are 20677 1 different. A development appraisal is different 2 from an as-is appraisal, and this is an as-is 3 appraisal on the land itself and not on the 4 proposed intended use of the property. 5 Q. So, let me be sure I understand. You 6 understand that this appraisal was an as-is value 7 on the land only and did not include an analysis 8 of the market value discounted back from a future 9 value; is that right? 10 A. I haven't seen anything in here -- 11 there may be something, but in flipping through 12 these first pages, I don't see anything that says 13 it's an as-developed -- 14 Q. So, it would not have been -- 15 A. -- appraisal. 16 Q. So, would it or would it not have been 17 important for you to have seen this document? 18 A. I don't think it would have been 19 important. It would have made me feel good if I 20 could have seen it. 21 Q. Wasn't it in the loan files? 22 A. I don't know. 20678 1 Q. Did you ask for any other appraisals? 2 A. As I told you, I don't have -- I don't 3 usually look at appraisals because normally, we 4 get appraisals after the loan. Usually, there is 5 a clause in the loan that says we're making this 6 loan subject to obtaining an R-41B appraisal 7 substantiating the loan amount to be made, and 8 that's because we do the underwriting and we 9 establish the value independently of the 10 appraisal. 11 Q. Exhibit T7143, Tab 711. Just a moment, 12 Mr. Gross. I'd like to understand from you what 13 you mean by "we established the value independent 14 of the appraisal." 15 What is that a reference to? 16 A. I mean that the lending institutions -- 17 first of all, they get the input from the person 18 making the loan, making the application for the 19 loan. They get their input. They get whatever 20 information they provide the institution and then 21 the real estate department goes out and verifies 22 that information and does the other research that 20679 1 they feel is necessary to do prior to making the 2 loan. 3 And so, the appraisal serves merely to 4 support and corroborate the value that you arrive 5 at in the process of evaluating the loan. 6 Q. I take it, then, that the appraisal 7 doesn't play a significant role in your 8 underwriting of the loan amount? 9 A. That's correct. 10 Q. That's based on other factors that 11 you've just mentioned. Right? 12 A. Yes, sir. 13 Q. Did you ever see this particular 14 appraisal from Love & Dugger? 15 A. Not until recently. Not that I recall 16 until just recently. 17 Q. Now, if you would, look with me at, 18 once again, Roman Page IV which sets out a value 19 at this page of $46 and a half million. 20 Do you see that? 21 A. Yes, sir. 22 Q. Now, Mr. Gross, answer this for me. 20680 1 What kind of value do you derive using the 2 developmental approach in real estate appraisal? 3 A. You derive what the value will be after 4 it's developed. 5 Q. So, explain to me what that means. 6 A. That means that you take the costs and 7 spread them out and then you take the selling 8 prices and spread them out and then from that, you 9 come back to a discounted value of the property. 10 Q. But it's as if the property were 11 developed? Is that what the developmental 12 approach is? 13 A. Yes, sir. 14 Q. All right. Looking here at Page Roman 15 IV, Love & Dugger says, "We have also analyzed the 16 appraised value using the developmental approach." 17 Do you see that? 18 A. Yes, I do. 19 Q. All right. And then they explain what 20 they mean by it, that it assumes the appraised 21 property is developed with streets, et cetera. 22 "All expenses necessary to develop and market the 20681 1 appraised property were then deducted from gross 2 proceeds. Result in net cash flows were 3 discounted and then combined to provide an 4 indication for the value of an unimproved 5 property." 6 And the number that Love & Dugger came 7 up with was some $46 and a half million. Right? 8 A. I see that. 9 Q. Okay. Did you ever see this appraisal? 10 A. Not that I recall. 11 Q. Okay. 12 A. Until just, as I say, this last week or 13 so. 14 Q. Would it have been important to you in 15 making your decision as to whether or not to 16 approve the Park 410 loan of $80 million to have 17 seen this appraisal? 18 A. As I said, we would have relied on the 19 appraisal of the person that was preparing the 20 R-41B for the institution. And had they been the 21 ones preparing it, we would have relied on that. 22 As it was, I think we relied on the Schulz 20682 1 appraisal. And I don't know that this was ever 2 provided to the institution. 3 Q. Well, look at the first page. 4 A. I see that. 5 Q. You'll agree with me that USAT was part 6 of the Park 410 West Joint Venture, don't you? 7 A. I do. 8 Q. Okay. You also would agree with me, 9 wouldn't you, that this particular appraisal was 10 prepared for the Park 410 West Joint Venture. It 11 says that right on the front. Right? 12 A. Yes, it does. 13 Q. Do you have any reason to think that 14 this particular appraisal was not forwarded to 15 USAT? 16 A. I have no idea. I'm sorry. Would you 17 restate the question? 18 Q. Do you have any reason to think that 19 this appraisal wasn't forwarded to USAT? 20 A. I just don't know. 21 Q. If it had been forwarded to USAT, 22 Mr. Gross, wouldn't there be some mention of this 20683 1 appraisal and the prior appraisal by Love & Dugger 2 somewhere in the proposal that you signed in that 3 80-million-dollar loan? 4 A. I would think so. 5 Q. Okay. So, it's not unreasonable to 6 assume that neither of these made it into the -- 7 neither T7143 nor T7069, that neither of those 8 made it into the files of USAT? 9 A. I can't -- I don't know. I just know 10 that I didn't see them. 11 Q. Do you have any reason to think that 12 Mr. Graham would have concealed the existence of 13 these two appraisals? 14 A. No, sir. 15 Q. Do you know why they wouldn't have been 16 mentioned in the proposal, which is -- 17 A. By whom? 18 Q. -- Exhibit B4168? 19 A. I can only assume he didn't have them, 20 but I have no idea. 21 Q. I'd like to briefly look at Tab 709, 22 which is T7084. 20684 1 THE COURT: Mr. Leiman, we'll adjourn 2 until 9:00 o'clock tomorrow. 3 MR. EISENHART: Your Honor, one 4 housekeeping detail that we might bring up. I 5 don't know if we can resolve it now, but let me at 6 least bring it up now. 7 I think there continues to be some 8 confusion about Exhibit A1643. We checked during 9 the break, and we have two versions of this 10 document in evidence. It's A1643 itself, which is 11 at Tab 159, and that bears five signatures. It's 12 a four-page document with five signatures. And 13 then we have, at Tab 1364B, a document which is 14 marked A1643A which is the same exhibit with only 15 one signature. 16 We don't have anywhere in our exhibit 17 system, and we cannot find any reference in the 18 transcript at the time these documents were put 19 in, to Exhibit T7051. We have not found any 20 indication in the transcript that T7051 was ever 21 offered or received. 22 MR. SCHWARTZ: Your Honor, if I may 20685 1 speak to this matter. 2 THE COURT: Yes, you may. 3 MR. SCHWARTZ: I'll refer counsel to 4 the transcript at Page 5800 through 5803. This 5 was during the testimony of Mr. Graham. And I 6 don't know if you can recall back -- this was back 7 in October of '97 where Mr. Leiman was questioning 8 Mr. Graham and provided Mr. Graham with a copy of 9 T7051. 10 At that point in time, the document 11 that Mr. Leiman was looking at in his own hand was 12 T7051. Mr. Dueffert at that point stood up and 13 said that the same document was already admitted 14 as Exhibit A1643. 15 MR. DUEFFERT: I think it was with 16 signatures. 17 MR. SCHWARTZ: Right. But it was the 18 understanding of Mr. Leiman at that time that the 19 exhibit that was being referred to by Mr. Dueffert 20 was the same document. And, indeed, if you look 21 at the transcript at Page 5800, when Mr. Graham is 22 looking at the document, he specifically refers to 20686 1 the attachment. 2 And so, the document that Mr. Leiman 3 was presuming was the same document that 4 Mr. Dueffert was referring to was the one with the 5 attachment. 6 At this point, I think it can be 7 cleared up by just substituting A1643 with the one 8 signature of Mr. Graham with T7051, which I think 9 is the document that Mr. Langdon has in Your 10 Honor's files. 11 THE COURT: We have them both. 12 MR. SCHWARTZ: We have no objection to 13 them both being admitted. 14 MR. BLANKENSTEIN: Your Honor -- 15 THE COURT: It's my understanding that 16 A1643 is in evidence, A1643A is in evidence, but 17 T7051 has not been admitted. 18 MR. BLANKENSTEIN: If Mr. Leiman would 19 want to move T7051 into evidence, we would have no 20 objection. 21 THE COURT: I think that might solve 22 the problem. 20687 1 MR. LEIMAN: We would so move it, Your 2 Honor. 3 THE COURT: All right. Received. 4 MR. SCHWARTZ: Thank you, 5 Mr. Blankenstein. 6 THE COURT: All right. We'll adjourn 7 until tomorrow at 9:00 o'clock. 8 9 (Whereupon at 4:58 p.m. 10 the proceedings were recessed.) 11 12 13 14 15 16 17 18 19 20 21 22 20688 1 STATE OF TEXAS COUNTY OF HARRIS 2 REPORTER'S CERTIFICATION 3 TO THE TRIAL PROCEEDINGS 4 I, Marcy Clark, the undersigned Certified 5 Shorthand Reporter in and for the State of Texas, 6 certify that the facts stated in the foregoing 7 pages are true and correct to the best of my ability. 8 I further certify that I am neither 9 attorney nor counsel for, related to nor employed 10 by, any of the parties to the action in which this 11 testimony was taken and, further, I am not a 12 relative or employee of any counsel employed by 13 the parties hereto, or financially interested in 14 the action. 15 SUBSCRIBED AND SWORN TO under my hand 16 and seal of office on this the 24th day of August, 17 1998. 18 ____________________________ MARCY CLARK, CSR 19 Certified Shorthand Reporter In and for the State of Texas 20 Certification No. 4935 Expiration Date: 12-31-99 21 22 20689 1 STATE OF TEXAS COUNTY OF HARRIS 2 REPORTER'S CERTIFICATION 3 TO THE TRIAL PROCEEDINGS 4 I, Shauna Foreman, the undersigned 5 Certified Shorthand Reporter in and for the 6 State of Texas, certify that the facts stated 7 in the foregoing pages are true and correct 8 to the best of my ability. 9 I further certify that I am neither 10 attorney nor counsel for, related to nor employed 11 by, any of the parties to the action in which this 12 testimony was taken and, further, I am not a 13 relative or employee of any counsel employed by 14 the parties hereto, or financially interested in 15 the action. 16 SUBSCRIBED AND SWORN TO under my hand 17 and seal of office on this the 24th day of August, 18 1998. 19 _____________________________ SHAUNA FOREMAN, CSR 20 Certified Shorthand Reporter In and for the State of Texas 21 Certification No. 3786 Expiration Date: 12-31-98 22