2589 1 97-1427-sf/ed 2 OFFICE OF THRIFT SUPERVISION DEPARTMENT OF THE TREASURY 3 NO. AP 95-40 4 In the Matter of: ) 5 ) UNITED SAVINGS ASSOCIATION OF TEXAS, ) 6 Houston, Texas; and ) ) 7 UNITED FINANCIAL GROUP, INC., ) Houston, Texas, a Savings and ) 8 Loan Holding Company ) --------------------------------------------) 9 MAXXAM, INC., Houston, Texas, a ) Diversified Savings and Loan ) 10 Holding Company ) ) 11 FEDERATED DEVELOPMENT CO., a New York ) Business Trust, ) 12 ) CHARLES E. HURWITZ, Institution-Affiliated ) 13 Party and Present and Former Director ) of United Savings Association of Texas, ) 14 United Financial Group, and/or MAXXAM, ) Inc.; and ) 15 ) HARRY A. MUNITZ, JENARD M. GROSS, ARTHUR ) 16 S. BERNER, RONALD HUEBSCH, and MICHAEL ) CROW, Present and Former Directors and/ ) 17 or Officers of United Savings Association ) of Texas, United Financial Group, and/or ) 18 MAXXAM, Inc., Respondents ) 19 20 TRIAL ROCEEDINGS 10-9-97 21 22 2590 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; and 4 BRUCE RINALDI, Esquire RICHARD STEARNS 5 BRYAN VEIS of: Office of Thrift Supervision 6 Department of the Treasury 1700 Street, N.W. 7 Washington, D.C. (202) 906-7395) 8 9 ON BEHALF OF RESPONDENT MAXXAM, INC.: 10 FRANK J. EISENHART, Esquire of: DECHERT, PRICE & RHOADS 11 1500 K Street, N.W. Washington, D.C. 20005-1208 12 (202) 626-3306 13 DALE A. HEAD, Esquire 14 Managing Counsel of: Maxxam, Inc. 15 5847 San Felipe, Suite 2600 Houston, Texas 77257-2887 16 (713) 267-3668) 17 ON BEHALF OF RESPONDENT FEDERATED DEVELOPMENT CO. 18 AND CHARLES E. HURWITZ: 19 RICHARD P. KEETON DAVID GRIFFITH 20 of: MAYOR, DAY, CALDWELL & KEETON 700 Louisiana, Suite 900 21 Houston, Texas 77002 (713) 225-7000 22 2591 1 A P P E A R A N C E S 2 JACKS C. NICKENS of: CLEMENTS, O'NEILL, PIERCE & NICKENS 3 1000 Louisiana, Suite 1800 Houston, Texas 77002 4 (713) 654-7608 5 6 ON BEHALF OF BERNER, CROW, MUNITZ & HUEBSCH: 7 JOHN K. VILLA MARY CLARK 8 PAUL DUEFFERT of: WILLIAMS & CONNOLLY 9 725 Twelfth Street, N.W. Washington, D.C. 20005 10 (202) 434-5000 11 12 13 14 15 16 17 18 REPORTED BY: 19 Ms. Shauna Foreman, CSR 20 Ms. Erica Davis, CSR 21 . 22 . 2592 1 2 EXAMINATION INDEX 3 4 ARTHUR OLIVER 5 Examination by Mr. Veis..................2593 6 Cross-Examination by Mr. Eisenhart.......2685 7 Cross-Examination by Mr. Keeton..........2722 8 Redirect Examination by Mr. Veis.........2726 9 Recross-Examination by Mr. Eisenhart.....2746 10 Cross-Examination by Mr. Nickens.........2750 11 . 12 . 13 . 14 . 15 . 16 . 17 . 18 . 19 . 20 . 21 . 22 . 2593 1 P R O C E E D I N G S 2 (9:00 a.m.) 3 THE COURT: The hearing will come to 4 order. Mr. Veis, looks like you're ready to 5 proceed. 6 MR. VEIS: I am, Your Honor. OTS calls 7 Arthur Oliver. 8 9 ARTHUR OLIVER, 10 was called as a witness and, having been first 11 duly sworn, testified as follows: 12 EXAMINATION 13 14 MR. EISENHART: Your Honor, if I may, 15 before we start with Mr. Oliver it might be well 16 to put on the record the stipulation that I have 17 agreed to with Mr. Veis concerning a number of the 18 documents that I believe he plans to use this 19 morning. I should add that this was a stipulation 20 that I entered into with Mr. Veis with respect to 21 a number of Drexel-related documents. A related 22 part of the deal was a stipulation that he's 2594 1 entered into with respect to the Williams & 2 Connolly lawyers regarding a number of other 3 documents. But with respect to the Drexel -- or 4 Drexel-related documents that he plans to use this 5 morning, I have stipulated that the documents come 6 from the places that they purport to come from -- 7 that is, they come either from the Drexel files or 8 from the other sources that are indicated on the 9 documents or that Mr. Veis will indicate and that 10 there is no question concerning the authenticity 11 of the documents. That is, we do not believe any 12 of them to be forgeries or anything other than 13 what they purport to be. 14 That is the extent of the stipulation. 15 We have not stipulated to their admissibility 16 necessarily, their completeness, or accuracy. 17 MR. VEIS: That's correct, Your Honor. 18 THE COURT: How about the stipulation 19 as to the individual respondents? Do you have a 20 comparable stipulation? 21 MR. VEIS: I assumed that Mr. Eisenhart 22 was speaking on behalf of the respondents as a 2595 1 group. 2 MR. EISENHART: The other side of this 3 transaction was one I was not involved in, Your 4 Honor. 5 MR. DUEFFERT: The other side of the 6 transaction goes to Peat Marwick work papers 7 concerning USAT work papers from the federal 8 examiners and work papers from the Texas Savings 9 and Loan Commission, and I think somewhere a 10 stipulation will be later in the case as to those. 11 THE COURT: Thank you. Would you state 12 your name? 13 MR. DUEFFERT: My name is Paul 14 Dueffert. I'm with Williams & Connolly. 15 Q. (BY MR. VEIS) Would you please state 16 your name for the record? 17 A. Arthur Thomas Oliver. 18 Q. What's your address? 19 A. 5550 Spring Valley, Unit A-31, Dallas, 20 Texas 75240. 21 Q. What's your business address? 22 A. 122 John -- 122 West John Carpenter 2596 1 Freeway, Irvington, Texas 75269, I think. 2 Q. Mr. Oliver, who is your employer? 3 A. Office of Thrift Supervision. 4 Q. What is your position with the Office 5 of Thrift Supervision? 6 A. My title is senior investigator. 7 Q. Would you please describe your 8 educational background? 9 A. Yes, sir. I went to high school in 10 El Paso, Texas. I went to undergraduate -- I have 11 an undergraduate degree, University of Texas, 12 Texas Christian work -- graduate work at the 13 University of Wisconsin at Madison, after which I 14 was employed by the Office of the Comptroller of 15 the Currency. 16 Q. Do you have a graduate degree from the 17 University of Wisconsin? 18 A. Yes, sir. 19 Q. What is that? 20 A. Master's, history. 21 Q. You said then that you began to work 22 for the Office of the Comptroller of Currency; is 2597 1 that correct? 2 A. Yes, sir. 3 Q. What year was that? 4 A. 1976. 5 Q. What was your first position? 6 A. Assistant national bank examiner. 7 Q. What did your duties entail? 8 A. My primary responsibilities were to 9 assist the national bank examiners in the 10 examination of national banks. 11 Q. How long did you continue in the 12 position of assistant national bank examiner? 13 A. Gee, that was slightly more than -- 14 about six years. 15 Q. What was your next position? 16 A. National bank examiner. 17 Q. I take it you were promoted? 18 A. I was. 19 Q. How long did you continue in the 20 position as a national bank examiner? 21 A. I was national bank examiner from 1982 22 until 1987. 2598 1 Q. What happened in 1987? 2 A. I resigned from the comptroller's 3 office and took employment with the Federal Home 4 Loan Bank of Dallas. 5 Q. What was your position with the Federal 6 Home Loan Bank of Dallas? 7 A. I was an analyst. 8 Q. What did your duties entail as an 9 analyst? 10 A. There was a brief period -- I forgot 11 exactly how long. It was only a few months -- I 12 was known as a supervisory analyst and those 13 analyst -- and those duties entailed monitoring 14 the overall condition of a savings and loans, of a 15 portfolio of savings and loan institutions, after 16 which I became a corporate activities analyst. 17 Q. What did your duties entail then? 18 A. A corporate activities analyst analyzes 19 and makes recommendations on applications, various 20 types of corporate applications that are filed by 21 savings and loan institutions with Federal Home 22 Loan banks and subsequently the Office of Thrift 2599 1 Supervision. 2 Q. These applications are for permission 3 to engage in banking activities that require the 4 approval of the regulatory authorities. 5 What was your next position? 6 A. In 1991, I accepted a position in the 7 chief counsel's division as senior investigator. 8 Q. And you've continued in that position 9 until the present? 10 A. Continuously, yes. 11 Q. Could you please describe your 12 professional qualifications in the area of bank 13 examinations and regulation? 14 A. Well, in the 21 years I've been in the 15 regulatory business, I've been a national bank 16 examiner -- that is a position that requires 17 various types of training and examination, taking 18 tests, passing those tests, and receiving 19 certification as a national bank examiner. 20 Because of that position as a 21 commissioned national bank examiner with the 22 comptroller's office, I was not required to take 2600 1 similar -- that certification was transferred over 2 to the Office of Thrift Supervision without having 3 to go through the usual certification process 4 because I was already certified as a commissioned 5 examiner in another regulatory agency. In those 6 21 years, I have received extensive training in 7 all areas of financial institution examination and 8 regulation. In addition, I've examined national 9 banks of all sizes from the various small 10 5 million-dollar community banks in small towns to 11 large multibillion, multinational national banks 12 in large cities throughout the country. At the 13 office of -- the Federal Home Loan Bank of Dallas 14 and subsequently the Office of Thrift Supervision, 15 I analyzed and made recommendations to senior 16 management on corporate applications coming from, 17 again, a wide variety of savings and loan 18 institutions on a wide variety of activities from 19 lending activities to capital activities to 20 earnings to dividends to permission to engage in a 21 wide variety of banking activities. 22 Q. Now, did that involve a creation and 2601 1 compilation -- creation of spreadsheets and 2 compilation of data? 3 A. Yes, it did. 4 Q. Have you had extensive experience doing 5 that? 6 A. Oh, yes. Throughout my professional 7 career both in the comptroller's office and the 8 Federal Home Loan Bank and the Office of Thrift 9 Supervision, I was required to do extensive 10 financial analysis; and, I guess, beginning in the 11 early Eighties when computers came into the 12 industry, I began using computers in this type of 13 financial analysis and regulatory analysis, 14 examination analysis for, I guess, the last 14, 15 15 years. 16 Q. Mr. Oliver, were you asked to provide 17 services in connection with the case that we 18 presently have here involving United Savings 19 Association of Texas in the compilation and 20 summarization of data? 21 A. Yes, I was. 22 Q. What were you asked to do? 2602 1 A. I was asked to review a set of 2 documents, analyze the financial data in those 3 documents, and then compile a -- what we would 4 call a spreadsheet to reflect those data and then 5 from those spreadsheets develop a pictorial 6 representation of those data. 7 Q. And did you do so? 8 A. I did. 9 Q. In preparation for performing that 10 function, did you read any materials before you 11 began your compilation and summary of data? 12 A. I did. 13 Q. What materials did you read? 14 A. I read what is called a "Notice of 15 Charges." That document provided me with general 16 background of the nature of the case. I read some 17 SEC filings. I read some summaries provided by 18 enforcement staff at the OTS. 19 Q. Now, prior to your being requested to 20 provide these services, the summary and 21 compilation of data, had you ever had any 22 connection to an examination of United Savings 2603 1 Association of Texas? 2 A. No. 3 Q. Had you ever had any connection to any 4 review of an application or other documents 5 relating to either United Financial Group, 6 Incorporated, or United Savings Association of 7 Texas? 8 A. No. 9 MR. VEIS: Let the record reflect that 10 I'm handing the witness a document that has been 11 marked as Exhibit T1213. 12 Q. (BY MR. VEIS) Mr. Oliver, could you 13 please explain what that document is? 14 A. Yes. This is a -- as I testified, I 15 was asked to review certain documents and gather 16 the financial data within those documents into a 17 spreadsheet form. This is the spreadsheet I 18 produced from that activity. 19 Q. There seemed to be -- well, if you 20 would, please explain how the spreadsheet is 21 organized. 22 A. My primary function was to compile data 2604 1 reflecting the purchases, sales, and balances of 2 stock. 3 MR. EISENHART: Your Honor, may we know 4 what document is -- 5 MR. VEIS: I'm sorry. The respondents 6 did not have the exhibit number when I gave them 7 the document. I have extra copies here. 8 Q. (BY MR. VEIS) I'm sorry, Mr. Oliver. 9 Please proceed. 10 A. As I said, I was asked to compile data 11 reflecting stock transactions in UFG common stock 12 in accounts held by Drexel Burnham Lambert. This 13 spreadsheet is a compilation of those 14 transactions. The spreadsheet shows the trade 15 dates and settlement dates of purchases and sales 16 of UFG common stock and then the balance on those 17 days as a result of those transactions. It 18 further reflects the purchase or sale price of 19 those transactions. 20 Q. I notice there's another column headed 21 "per weekly record." 22 Do you see that? 2605 1 A. Yes. 2 Q. What is that column? 3 A. Another set of -- the financial data 4 that I just discussed were derived from documents 5 that were called trade runs, Drexel Burnham 6 Lambert trade runs. Another set of documents I 7 reviewed were called the stock record weekly. The 8 trade runs reflected daily transactions. The 9 stock record weekly reflected summaries of a 10 week's worth of transactions and those -- those 11 transactions -- that is, the balances resulting 12 from those transactions and the week ending dates 13 are reflected in the column that is shaded gray, 14 which is headed "per weekly record." 15 Q. Now, I notice that on the first page it 16 indicates that on the dates there that there was 17 no available data for some period of time; is that 18 correct? Can you explain that, please? 19 A. That's correct. The weekly -- stock 20 record weeklies that I reviewed began in January 21 of 1983, and I was not provided with documents 22 prior to that. 2606 1 Q. So, this document summarizes the 2 information that you did indeed have; is that 3 correct? 4 A. That's correct. 5 Q. Were these stock record weeklies 6 complete? 7 A. No. 8 Q. Would you please explain that? 9 A. Those weeklies ran for, I believe, 10 approximately a six-year period, but within 11 that -- over that six-year period there were 12 numerous sections missing, and I believe those -- 13 those dates that are missing are reflected as a 14 footnote to this document. 15 So, for that six-year period it 16 appeared as if most of the document was there; but 17 there were sections missing, which I highlighted. 18 Q. So, was this a question of doing the 19 best you could with the information that you could 20 obtain? 21 A. Absolutely. 22 Q. I notice there's a third segment of the 2607 1 document or Exhibit T1213 that says "per NASD 2 price quotations, stock bid price"? 3 A. Yes. The third set of documents that I 4 used to compile this spreadsheet were reports from 5 the NA -- National Association of Securities 6 Dealers. These documents showed the high, low, 7 and closing prices of UFG common stock on various 8 dates of trading. And those documents ran from 9 approximately 1982, I believe, until 1988, if I'm 10 not mistaken. Yes, until 1988. 11 Q. Now, you indicated that you had 12 reviewed a number of documents. 13 Did you initially make any effort to 14 determine just what those documents represented? 15 A. Yes. 16 Q. And how did you do that? 17 A. Through a consultation with enforcement 18 staff. 19 Q. Were you provided a copy of a 20 declaration by a Mr. Edward S. Wallach to review? 21 A. I was. 22 MR. VEIS: May the record reflect I'm 2608 1 handing Mr. Oliver a document that has been marked 2 as Exhibit T1192. Your Honor, at this point I 3 would move the admission of Exhibit T1213. 4 MR. EISENHART: Your Honor, I would 5 like, if you would, to ask you to withhold a 6 ruling on the admission of 1213 until we've had an 7 opportunity to cross-examine on it. 8 MR. VEIS: Well, Your Honor, I think -- 9 MR. EISENHART: Or to put it another 10 way, I would object to its admissibility at this 11 time until we've established some minimum 12 reliability, completeness, or accuracy of the 13 document. I would like to have an opportunity to 14 air those questions before you receive it into 15 evidence. 16 MR. VEIS: Your Honor, I believe this 17 is admissible as a summary of voluminous 18 documents. However, I will indeed show Mr. Oliver 19 the documents that he reviewed and we will 20 establish their voluminousity and discuss in some 21 depth the manner in which he compiled this 22 spreadsheet if Your Honor would prefer. 2609 1 MR. EISENHART: I don't challenge the 2 fact that it's a compilation of lengthy or bulky 3 documents. The document, if accurate and 4 reliable, I agree would be admissible under that 5 rule. The standard in this tribunal is, of 6 course, that the document is reliable and 7 reasonably accurate, and I believe we ought to 8 have a chance to test that. 9 MR. VILLA: Your Honor, I join in that 10 objection. If it's under a 1006, I believe we 11 have to be given the opportunity to examine all 12 documents that Mr. Oliver looked at, and he said 13 he reviewed summaries prepared by the enforcement 14 staff. So, we want to make sure that we've seen 15 those summaries before the OTS tries to introduce 16 it under a 1006. 17 THE COURT: All right. I'll defer. 18 MR. VEIS: Well, let me -- 19 MR. STEARNS: May we consult just a 20 moment, Your Honor? 21 22 . 2610 1 (Discussion held off the record.) 2 3 Q. (BY MR. VEIS) Mr. Oliver, did you 4 review Exhibit T1192 prior to commencing your work 5 on the spreadsheet that's marked as Exhibit 1213? 6 A. I did. 7 Q. And what -- what was the purpose of 8 your review of Exhibit T1192? 9 A. I was given a set of documents to 10 compile -- from which to abstract the data and 11 compile them. My job was not to determine either 12 the accuracy or the completeness of the data in 13 those documents. I was given this declaration to 14 review, to satisfy myself as to the authenticity 15 of the documents cited in the Wallach declaration. 16 Q. Did you also determine just what those 17 documents were by reference to Mr Wallach's 18 explanations? 19 A. Yes. He lists them in his declaration. 20 Q. Now, where in the declaration is that 21 listed? 22 A. Well, let's see. I guess on page 2, 2611 1 paragraph 4, he says the law firm of Cahill, 2 Gordon & Reindell supplied the OTS with originals 3 and true copies of the following documents and he 4 lists a Subparagraph A through H and various other 5 documents. 6 MR. EISENHART: Your Honor, I would 7 object to the hearsay testimony now coming in. We 8 have stipulated to the origin of these 9 documents -- that is, that they came from the 10 records of the Drexel Burnham Lambert liquidating 11 trust. Their origin is not an issue. 12 Mr. Wallach's affidavit -- Mr. Wallach is not 13 going to be called as a witness in this case. We 14 have no way of testing any of the information in 15 his affidavit. To the extent the affidavit goes 16 to the fact that the documents came from the 17 Drexel liquidating trust of whom I believe 18 Mr. Wallach is the trustee, that's a matter that's 19 been stipulated to. Beyond that, this would be 20 hearsay. 21 MR. VEIS: Well, Your Honor, my 22 understanding is they have stipulated that this is 2612 1 Mr. Wallach's declaration. It's made under 2 penalty of perjury. I think that that makes it 3 fairly reliable and I would suggest if they wish 4 to cross-examine Mr. Wallach on it, then perhaps 5 we need to adjourn and call Mr. Wallach and 6 apparently I'll have to call Mr. Milken with 7 respect to later documents. I think it's a 8 pointless exercise to have to do that; but if 9 Mr. Oliver can't testify from these documents 10 concerning how he went about his compilation of 11 data, then we'll have to come back and talk to 12 Mr. Oliver another day. 13 MR. EISENHART: The only issue I was 14 asked to stipulate to, Your Honor, was the origin 15 and authenticity of the documents. To my 16 knowledge, that's what the Wallach affidavit went 17 to. However, Mr. Wallach goes back in history and 18 explains where he obtained the documents from, as 19 well. We haven't been asked to stipulate to that 20 information. We have no way of knowing whether 21 it's accurate. For these purposes, I don't think 22 it's all that important. They are introducing 2613 1 these as documents which came from the Drexel 2 liquidating trust. The Wallach affidavit just 3 isn't very helpful. I was not asked to stipulate 4 to this affidavit. 5 MR. VEIS: That's not correct. That is 6 absolutely not correct. That exhibit number is 7 included in the exhibits to which we requested you 8 stipulate, and I was told yesterday that you were 9 doing so. 10 MR. EISENHART: I stipulated to the 11 fact that the documents came from the Drexel 12 liquidating trust. 13 THE COURT: What's your objection to 14 the affidavit? 15 MR. EISENHART: Well, the affidavit, 16 Your Honor, is hearsay. It goes into what the 17 documents purport to show or don't purport to 18 show. It goes into where he got the documents. 19 It goes into what they are. None of that -- none 20 of that is material that I was asked to stipulate 21 to. That's what they, I understood, were going to 22 prove through this witness. 2614 1 THE COURT: If you're challenging that, 2 I agree that the affidavit should not be admitted 3 without the witness. That's what I would find. 4 If there's an objection to it, I won't receive it. 5 MR. STEARNS: Your Honor, may I be 6 heard? 7 THE COURT: Mr. Stearns. 8 MR. STEARNS: The declaration is merely 9 an indication of what documents were provided to 10 this witness for his review for him to summarize 11 and present summary testimony this morning. The 12 stipulation has been made that the documents that 13 he reviewed and is here to summarize today are 14 authentic and came from the Drexel Burnham Lambert 15 liquidating trust. So, there isn't any question 16 as to the origin of the documents. We know the 17 universe of documents and we can ask the 18 witness -- from the liquidating trust that he 19 examined. They are material and he's here to 20 summarize what those documents say. 21 THE COURT: I understand that, but this 22 declaration that you want to be received and to 2615 1 which there's an objection, I think we have to 2 have Mr. Wallach -- 3 MR. STEARNS: Isn't the declaration 4 really -- 5 THE COURT: It may be -- 6 MR. EISENHART: I think it is. 7 THE COURT: We have to talk one at a 8 time. 9 MR. VEIS: I have not yet moved the 10 admission of that document. I'm seeking to 11 examine him concerning his understanding of what 12 documents they may be. He obtained that 13 understanding from the affidavit. 14 MR. EISENHART: I agree he hasn't moved 15 the admission, Your Honor, but he was starting to 16 read portions of it into the record. 17 MR. STEARNS: The point I was making is 18 that the documents that are described have been 19 stipulated as to their authenticity. The witness 20 can describe what documents he reviewed by using 21 the declaration as just a reference point for that 22 description. I don't think we need even the 2616 1 admission of the declaration for him to describe 2 the universe of documents he's reviewed. 3 THE COURT: Let's leave the declaration 4 out and ask him what documents he reviewed. 5 MR. STEARNS: Thank you. 6 MR. VEIS: Your Honor, may the record 7 reflect that I'm handing Mr. Oliver two exhibits, 8 T1206 and T1207. 9 Q. (BY MR. VEIS) Mr. Oliver, do you 10 recognize those documents? 11 A. I do. 12 Q. What are they? 13 A. This is -- these are what I refer in my 14 spreadsheet as the trade runs. My understanding 15 is that these trade runs show on a daily ongoing 16 basis transactions in UFG stock. 17 Q. And how does -- how did these trade 18 runs relate to your compilation of data? 19 A. What I did was to look at the 20 transaction columns and simply transfer the 21 transactions that I saw there onto the 22 spreadsheet. In other words, if I saw a purchase, 2617 1 I put it in the purchase column. If I saw a sale, 2 I put it in the sale column and then determined 3 the balance from that. 4 Q. So, then, the entire set of columns 5 underneath the heading "per trade run" comes from 6 these two documents; is that correct? 7 A. Yes, it does. 8 Q. Now, just to be sure that we have this 9 clear in the record, this relates only to trading 10 activity in UFG common stock by Drexel Burnham 11 Lambert, Inc., in one particular account; is that 12 correct? 13 A. That's correct. 14 Q. What account is that? 15 A. Account No. 0612942-3. 16 Q. Now, let's go back to T1206. Can you 17 explain the dates or the period of time that that 18 covers? 19 A. This covers from February the 16th 20 through December 31st -- I'm sorry. 21 February 16th, 1982, until December 31st, 1985. 22 Q. So, would that take you through page -- 2618 1 page 12 of the compilation? 2 MR. EISENHART: Your Honor, may I know 3 what 1206 is? 4 MR. VEIS: I'm sorry. 5 Q. (BY MR. VEIS) Okay. 6 A. Well, through a portion of page 12, 7 yeah. 8 Q. And would that reflect every entry 9 on -- I'm sorry. Would that reflect every 10 transaction entered on Exhibit T1206? 11 A. Yes, it would; but in some instances, 12 there appears to be some errors. There were some 13 entries made apparently in error, and there were 14 subsequent correcting entries made. So, rather 15 than reflect the erroneous entry and then also 16 reflect the correcting entry, I left out what 17 appeared to be the erroneous entry and simply 18 reflected the correct one. 19 Q. That is to say the net effect of that 20 omission was it was no effect on the balance. The 21 transactions cancelled one another out, the 22 correcting entry and the erroneous entry? 2619 1 A. In some instances, that is correct. 2 Q. Now -- 3 A. Let me clarify that. For example, 4 there may be an entry made with a particular sale 5 price, for example. Then there would be a 6 following entry cancelling that one out. Then 7 there would be a third entry showing the correct 8 sale price. In such an instance, I left the first 9 two out, which essentially cancelled each other 10 out, and entered only the correct entry. 11 Q. And then following December, 1985, was 12 there additional data that you obtained? 13 A. Yes. 14 Q. Where did you obtain that? 15 A. Where? 16 Q. Yes. 17 A. From enforcement staff. 18 Q. What document did you obtain it from? 19 A. Exhibit T1207. 20 Q. Can you explain that document, please? 21 A. That is also a trade run, and it covers 22 the period from January 1st, 1986, through 2620 1 December 31st, 1986. It appears to be a 2 continuation of Exhibit T1206. 3 Q. And does that data run then through 4 Page 16? 5 A. Yes, it does. 6 Q. Now, are there any data in your 7 compilation under the heading "per trade run" that 8 were not taken from Exhibits T1206 and T1207? 9 A. That were not taken? 10 Q. Yes. 11 A. Only in the section labeled trade run? 12 Q. Yes. 13 A. No. They were all taken from the trade 14 runs. 15 Q. Every entry of data on there is taken 16 from the trade run, correct? 17 A. Yes. 18 MR. EISENHART: Counsel has asked one 19 question and the witness has answered another. 20 Counsel asked if any data in T1213 did not come 21 from the trade runs, and the witness answered 22 something else. 2621 1 Q. (BY MR. VEIS) Is there any data in 2 Exhibit T1213 that did not come from Exhibit T1206 3 or T1207? 4 A. All of the data in the section labeled 5 per trade run came from Exhibits T1206 and T1207. 6 Q. Were there any omissions of data 7 reflected in T1206 or T1207 other than the trade 8 cancellation that you have previously -- trade 9 cancellations that you have previously testified 10 to where errors appear to have been made and 11 corrections made subsequently? 12 A. Well, these two exhibits that we're 13 referring to contain a lot of other data besides 14 simply the dates of transactions and the amount of 15 shares or purchases sold and the prices of those 16 transactions. That information I did not include 17 in that spreadsheet. 18 Q. That would be the information under the 19 heading contra broker, customer, and trailer 20 data? 21 A. Yes. There's a column there headed AE, 22 DVP, RVP, contra broker, customer, trailer data. 2622 1 I didn't include those columns of information. Or 2 the column headed security description, I didn't 3 include that. 4 Q. You took the information concerning the 5 trade date, the settlement date, the amount 6 purchased or sold, and purchase price per share or 7 sale price per share; is that correct? 8 A. Yes. 9 Q. Now, the figure under the column 10 balance, is that a derived figure? 11 A. I'm sorry. Could you define "derived"? 12 Q. In other words, that figure does not 13 come from the spreadsheet or from Exhibit T1206 or 14 Exhibit T1207, does it? 15 A. No. That figure is not part of the 16 exhibits, that's correct. 17 Q. And that is -- how do you arrive at 18 that balance figure? 19 A. Well, on Exhibit T1206, the first 20 transaction is for a purchase of 2,000 shares. On 21 my spreadsheet I showed the date of that 22 transaction, the fact that 2,000 shares were 2623 1 purchased, and that the resulting balance was 2 2,000 shares. 3 Q. Is this intended to be a running 4 balance indicating the cumulative effect of the 5 purchases reflected in Exhibit 1213? 6 A. Yes. 7 Q. Now, other than the information you 8 described essentially as extraneous, the account 9 executive and that sort of information, in terms 10 of transactional data were there any transactions 11 that you did not include in your compilation other 12 than the information you have described as 13 appearing to involve corrections where 14 transactions were cancelled or corrected? 15 A. No. I included -- with those 16 exceptions, I included all the data. 17 Q. Thank you. 18 Now, directing your attention to the 19 last page of Exhibit T1213 -- correct that. Let 20 me go to another document. 21 MR. VEIS: Your Honor, may the record 22 reflect I'm handing the witness a copy of 2624 1 Exhibit T1193, the stock record weekly, which was 2 previously admitted when Mr. Diegnan testified. 3 Do you need a copy, Your Honor? 4 THE COURT: I should have a copy. 5 Q. (BY MR. VEIS) Mr. Oliver, do you 6 recognize that document, Exhibit T1193? 7 A. I do. 8 Q. Now, Mr. Oliver, do you recognize 9 Exhibit T1193? 10 A. I do. 11 Q. All right. What is your understanding 12 of what it is? 13 A. This is a Drexel Burnham Lambert report 14 that summarizes the weekly transactions in UFG 15 stock over a period of about, I guess, six years 16 or so. 17 Q. Did you compile information from 18 Exhibit T1193? 19 A. I did. 20 Q. What information did you compile? 21 A. The dates of the report and the stock 22 balances on those dates. 2625 1 Q. Okay. That's with respect to a 2 particular account? 3 A. To a particular account, yes, sir. 4 Q. What account is that? 5 A. That would be account -- let's see 6 here -- 06-12942-3. 7 Q. And did you compare -- I'm sorry. 8 Let's go back. 9 Which balance did you utilize in the 10 compilation of data? There are several columns 11 here, generally of -- one is a long number, short 12 number, and a trade quantity? 13 A. Trade quantity. 14 Q. So, that was the end of week balance, 15 is that -- 16 A. That was my understanding, yes. 17 Q. And you indicated earlier when you were 18 discussing the stock record weekly, that it does 19 not reflect every week during the period it 20 covers; is that correct? 21 A. That is correct. 22 Q. So, there are weeks in which, I take 2626 1 it, you do not have balance data from the stock 2 record weekly in your compilation? 3 A. That is correct. 4 Q. Now, did you make any effort to compare 5 and reconcile the balances between your running 6 balance per trade run and the balance per weekly 7 record? 8 A. I did. 9 Q. And what did you find? 10 A. I found that there were discrepancies. 11 On the trade runs, I simply added up all the 12 purchases and sales and arrived at a net 13 difference, which was the balance on a given date. 14 I looked on the stock record weekly for that date 15 and looked at the balance there, and in some 16 instances they matched and in other instances they 17 did not. 18 Q. Generally speaking, what sort of 19 discrepancies did you find? 20 A. The balances were different. 21 Q. But what amount? 22 A. It varied from time to time. Sometimes 2627 1 there were substantial differences. Other times 2 they were minor differences. 3 Q. An inspection of the compilation would 4 indicate where there are differences; is that 5 correct? 6 A. Yes, sir. 7 Q. Now, was there a running difference of 8 about 71,000 shares between the balances for a 9 period? 10 A. Well, it would vary, but I would say 11 roughly that would be a fair representation. It 12 wasn't always exactly that amount. It fluctuated. 13 The difference would fluctuate. 14 Q. Now, could that be accounted for by the 15 fact that you did not have a beginning balance on 16 the trade run data? 17 MR. EISENHART: Your Honor, I'm going 18 to object to the leading at this point. 19 THE COURT: Sustained. 20 Q. (BY MR. VEIS) Can you account for that 21 difference by reference to the sources of your 22 information? 2628 1 A. No, I do not know why there is a 2 difference. 3 Q. Exhibit T1213 reflects data from the 4 stock record weekly for every week in which -- 5 strike that. 6 Does Exhibit T1213 reflect data from 7 every week for which you had data? 8 A. It does. 9 Q. And all that data was accurately 10 transcribed into the compilation? 11 A. Yes. Now, I'm human and, you know, I 12 won't deny there may have been typographical 13 errors, but I would say yes. 14 MR. VEIS: May the record reflect that 15 I'm handing Mr. Oliver an exhibit that's been 16 marked T1194. It appears to be a cover letter and 17 data compilation from the National Association of 18 Securities Dealers Stock Market, Incorporated. 19 Q. (BY MR. VEIS) Mr. Oliver, do you 20 recognize that document? 21 A. I do. 22 Q. What is it? 2629 1 A. This is a document produced by NASDAQ, 2 National Association of Securities Dealers. It's 3 entitled monthly statistical reports. It reflects 4 trading activity in UFG stock. 5 Q. Did it reflect price information? 6 A. It does. 7 Q. Did you compile that price information? 8 A. I did. 9 Q. Where is that compiled? 10 A. It is in the far right-hand section of 11 the Exhibit 1213 entitled "per NASD price 12 quotations." 13 Q. And I take it -- was that information 14 accurately transcribed to the best of your 15 ability? 16 A. Yes, sir. 17 Q. Now, you had indicated and Mr. Villa 18 noted that you had reviewed summaries. Were the 19 summaries you were referring to the documents we 20 have placed in front of you for purposes of -- 21 with respect to Exhibit T1213? 22 A. No, huh-uh. 2630 1 Q. What summaries were you referring to? 2 A. Well, enforcement staff gave me 3 summaries of stock transactions that they had 4 prepared themselves just as background information 5 for this for just -- to give me an idea of what 6 was happening in this case. The data that I have 7 in my spreadsheet that is Exhibit 1213 came solely 8 from the exhibits we've been discussing here. 9 Q. So, the information you're talking 10 about was by way of background rather than being 11 actually compiled in this document; is that 12 correct? 13 A. Yes, yes. 14 Q. So, all of the information contained in 15 this document, does that come from the documents 16 we have just run through, the exhibits -- 17 A. Yes. All of the data in Exhibit 1213 18 came from Exhibits T1193, T1207, T1206, I think, 19 and T1194: The trade runs, the stock record 20 weeklies, and the NASDAQ price quotations. 21 Q. And there was no other source for that 22 data? 2631 1 A. Not for the spreadsheet, no, sir. 2 MR. EISENHART: Your Honor, I would 3 like to state at this point this witness was 4 deposed. He was identified shortly before trial 5 and was deposed. He was to have produced at that 6 time all of the material that he reviewed in the 7 course of his assignment. I don't believe OTS has 8 ever produced for us the summaries that the 9 enforcement staff gave him; and quite frankly, we 10 would like to see those before we cross-examine 11 this witness. This is material he was given as 12 part of his assignment. We would like to see it. 13 They should have produced it before. 14 MR. VEIS: Your Honor, I have to review 15 the matter to see what it is exactly he was 16 provided because at the moment I can't recall what 17 he's talking about. 18 MR. STEARNS: Your Honor, if I may 19 respond also. Mr. Oliver is not here as an expert 20 witness. He's here merely as a summary witness to 21 take voluminous material and provide it in a 22 summary form. He's testified what materials he 2632 1 reviewed and how he prepared his summary 2 compilations and has said that the summaries were 3 not source material for the spreadsheet that he 4 has prepared. I don't see that they have a 5 relevance. There wasn't any obligation to make 6 him available for deposition as a fact witness, 7 but we did make him available and they had an 8 opportunity to depose him and they did so. 9 MR. EISENHART: Your Honor, I don't 10 know what material he's getting in these 11 summaries. 12 THE COURT: Mr. Stearns, would you find 13 the material and turn it over to the respondent? 14 MR. STEARNS: We will do that, yes, 15 Your Honor. 16 THE COURT: All right. 17 MR. VEIS: May the record reflect that 18 I'm handing Mr. Oliver two exhibits previously 19 admitted which have been marked as Exhibits T1198 20 and 1199. Your Honor, those are the trade tickets 21 that I believe were identified by either 22 Mr. Diegnan or Mr. De Remer during the testimony 2633 1 and admitted. 2 THE COURT: What were those numbers 3 again? 4 MR. VEIS: 1198 and 1199. 5 Q. (BY MR. VEIS) Mr. Oliver, do you 6 recognize those documents? 7 A. Yes, I do. 8 MR. VEIS: Your Honor, do you need 9 copies? 10 THE COURT: I'm sure I have them. 11 MR. VEIS: Your Honor, may I provide 12 you these? 13 THE COURT: Thank you. 14 Q. (BY MR. VEIS) Mr. Oliver, do you 15 recognize those documents? 16 A. Yes, I do. 17 Q. Now, in the course of initially 18 preparing Exhibit 1213, did you review those 19 documents? 20 A. I reviewed some of them. 21 Q. But you didn't review all of them; is 22 that right? 2634 1 A. No, I did not. 2 Q. And at your deposition were you asked 3 about whether you had reviewed those documents? 4 A. I believe I was. 5 Q. What did you respond? 6 A. At that point in time, I had already 7 compiled the spreadsheet and what I did was to 8 sample a few of these trade tickets and compare 9 them to the data I found on the trade runs. What 10 I mean by that is I would just go through this 11 stack and pull out a few -- and I forget how many 12 it was. It couldn't be more than maybe eight or 13 ten maybe. Not many. Just a very small number, 14 just to see whether or not the information on the 15 trade ticket compared to what I found on the trade 16 runs. 17 Q. And subsequent to your deposition, did 18 you do a more comprehensive review of 19 Exhibits T1198 and 1199? 20 A. Yes, I did. After the depo, I -- and I 21 forget how much longer afterward -- I looked at 22 each and every trade ticket that was provided to 2635 1 me, and I attempted to compare it to the data I 2 found on the trade runs. 3 Q. And could you tell me how that 4 comparison came out? 5 A. In some instances, I found a trade 6 ticket for which there was no corresponding entry 7 in the trade runs. In other instances, I found 8 entries in the trade runs for which I did not have 9 a trade ticket. 10 Q. Approximately what percentage of the 11 trade tickets were matched to trade run entries? 12 A. Well, very high. I would say maybe 90, 13 95 percent of the time I was able to match a trade 14 ticket to the information on the trade run. 15 Q. So, did that increase your degree of 16 comfort with the material that -- the data you had 17 obtained from the trade runs? 18 A. Yes, it did, to the extent in that it 19 told me that the trade run was fairly accurate as 20 a compilation in itself of trading activity that 21 had occurred in UFG stock. 22 MR. KEETON: Your Honor, I move to 2636 1 strike the answer. He's just now testified as an 2 expert. They just told us he was only going to 3 testify as to summaries. He's now drawing 4 conclusions. Move to strike the last answer, the 5 one calling for an expert and nonresponsive. 6 MR. VEIS: I simply asked him whether 7 the trades matched. 8 THE COURT: I'll deny the objection. 9 Q. (BY MR. VEIS) Now, Mr. Oliver, did you 10 prepare any graphic representations of the data 11 that you compiled? 12 A. I did. 13 Q. And could you describe what you did, 14 please? 15 A. Using a standard graphic software, I 16 prepared a column of various graphs to reflect the 17 amount of shares held by -- amount of UFG common 18 stock held by Drexel Burnham over a period of 19 time. 20 Q. And let me show you what's been marked 21 as Exhibit T1214. Is this the document to which 22 you're referring, the graph of Drexel Burnham 2637 1 common shares? 2 A. That's one of them, yes. 3 Q. And let me -- 4 MR. VEIS: May the record reflect I'm 5 also handing Mr. Oliver a reduced version of the 6 document and one for the Court. 7 Q. (BY MR. VEIS) Mr. Oliver, could you 8 please explain the graph that's been marked as 9 Exhibit T1214? 10 A. Yes. My spreadsheet showed that Drexel 11 Burnham held certain amounts of shares over a 12 period of time of UFG stock. What this graph does 13 is to show beginning as of January -- a quarterly 14 basis beginning January 21st, 1983, the level of 15 holdings that Drexel Burnham held of UFG stock. 16 Q. Now, this reflects the total holding in 17 Account 12942 as of quarterly dates? 18 A. In that particular account, the 42 19 account. 20 Q. Now, the green information reflects 21 that it is subject to a put call agreement. 22 Now, were you informed by enforcement 2638 1 counsel that there was a put call agreement 2 covering 300,000 shares of UFG stock between 3 Drexel Burnham Lambert and UFG Holdings, Inc.? 4 A. I was. 5 Q. Was that the basis for placing the 6 green coloration with the note "subject to put 7 call agreement"? 8 A. Yes. My understanding is there was 9 300,000 shares. So, of the total ownership of UFG 10 stock held by Drexel Burnham after a certain date, 11 300,000 of those shares were restricted and that's 12 what those green columns show, that of the total 13 held on those dates, 300,000 shares were 14 restricted. 15 Q. And does the stock record weekly 16 indicate a restriction of a restricted holding of 17 300,000 shares? 18 A. Exhibit 1193? 19 Q. Yes. 20 A. Yes, it does. 21 Q. And what's the basis for your statement 22 that it did? 2639 1 A. Well, for most of the time period the 2 trading activity was reflected in this 42 account, 3 this 12 dash whatever -- 12 dash -- 12942-3 4 account. After a particular period, the balance 5 inexplicably changed and it seemed to be 300,000 6 shares off. From looking at the stock record 7 weekly, those 300 shares began to be reflected in 8 a different account, an account that had a 9 different number. 10 Q. How did the number differ? 11 A. There is a suffix. It's still the 12 12-942 account but apparently there are subsequent 13 accounts to that and the 300,000 shares were 14 reflected in one of those subsequent accounts. 15 Q. Is that the 07 account? 16 A. I would have to -- 17 Q. Please do. Take a look at -- April, 18 1986, I believe. 19 A. Well, I'm looking at the week ending 20 April 11th, 1986, and there is -- my understanding 21 is the main account, which is labeled 22 06-12942-3-00. That shows 495,598 shares. Then 2640 1 in a subsequent account underneath that 2 06-12942-3-07 there are 300,000 shares showing. 3 Q. Now, prior to testifying this morning, 4 did you have the opportunity to review the 5 testimony of Mr. Diegnan? 6 A. I did. 7 Q. And did Mr. Diegnan's testimony explain 8 the meaning of the 07 suffix? 9 A. Yes, it did. And it confirmed to me 10 what I had assumed, which was that it was a sub 11 account of the overall 12942 account. 12 Q. And what kind of sub account was it? 13 A. I believe the accounts labeled with an 14 07 suffix were restricted in some manner. 15 Q. Thank you. 16 Now, did you prepare a graphic 17 representation of the NASDAQ price quotations of 18 UFG stock? 19 A. Yes, I did. 20 Q. And how did you do that? 21 A. I took, I believe, the closing bid 22 price and over -- over the same period of time -- 2641 1 that is, January of '83 through the end of '88. 2 Q. Did you do that on a quarterly basis? 3 A. Yes, sir. And I just simply plotted 4 over time the closing bid price in UFG stock. 5 Q. So, this would not reflect daily price 6 fluctuations, would it? 7 A. No. It was the price at the end of the 8 quarter. 9 Q. So, it would reflect the trend during 10 the quarter. Is that what it would reflect? 11 MR. KEETON: I object to the form of 12 the question. That's totally inaccurate. 13 THE COURT: Sustained. 14 Q. (BY MR. VEIS) What does it reflect, 15 sir? 16 A. I would look at the last day of the 17 quarter, let's say December 31st, end of the 18 fourth quarter, and I would look at the closing 19 bid price on that day and I used that price to 20 support the graph. 21 Q. Let me show you what's been marked as 22 Exhibit T1215. 2642 1 MR. VEIS: May the record reflect I'm 2 also handing the witness a reduced copy. 3 Q. (BY MR. VEIS) What is that document, 4 sir? 5 A. This is the chart that I prepared to 6 show the end of quarter prices of -- NASDAQ prices 7 of UFG stock and it was designed to match the 8 previous chart that you had up here, that is the 9 ownership of UFG stock held by Drexel Burnham. 10 That is, I used the same quarterly periods and the 11 same beginning date. 12 Q. And are the graphs the same size, the 13 horizontal -- 14 A. The dimensions, physically? 15 Q. Yes. 16 A. Yes. 17 Q. The horizontal scale is the same? 18 A. Yes. 19 Q. Is it possible to superimpose those 20 graphs? 21 A. Yes. 22 Q. Did you do so? 2643 1 A. I did. 2 MR. VEIS: May the record reflect I'm 3 handing a Mr. Oliver a copy of a document marked 4 Exhibit T1216. 5 Q. (BY MR. VEIS) Mr. Oliver, what is 6 that? 7 A. T1216 is a combination of the 8 previous -- of T1214 and T1215. What it attempts 9 to do is to show that on given dates, Drexel 10 Burnham held certain quantities of UFG stock and 11 on those same dates what the closing bid price was 12 of UFG stock. 13 Q. So, on a date -- for example, 14 December 31, 1985, you're telling me that Drexel 15 Burnham Lambert held the number of shares 16 represented here, which looks like about 790,000? 17 A. About 790,000, approximately, yes, sir. 18 Q. And the dollar scale indicates that on 19 that date the price was somewhere between 5 and 20 $6? 21 A. I think 6 and 7. It was about 6.50 or 22 so. 2644 1 Q. So, as time went on, each quarter did 2 you represent that Drexel Burnham Lambert 3 continues to hold somewhere between 7 and 800,000 4 shares through June 30, 1987? 5 A. Yes. The total holding remained fairly 6 constant over that -- roughly that two-year period 7 or so. That is correct. Total holdings remain 8 fairly constant as of the end of the quarters and 9 while the stock price was falling. 10 Q. And the stock price ultimately fell to, 11 looks like, zero; is that correct? 12 A. Well, it fell to zero, but sometime in 13 December of '88 the trading ceased. 14 MR. VEIS: May I have a moment, Your 15 Honor? Your Honor, at this point I would move to 16 admit Exhibits T1213, T1216, 15, and 14. Mr. 17 Oliver has testified that these are accurate 18 representations of, I think, what the Court will 19 agree are voluminous writings which cannot be 20 conveniently examined and the originals of those 21 have previously been made available for 22 examination to the respondents and they have had 2645 1 the opportunity to review both the exhibits 2 underlying Mr. Oliver's compilations and the 3 compilations themselves. 4 MR. EISENHART: Actually, Your Honor, 5 T1213, I believe, was handed to us for the first 6 time this morning. 7 MR. VEIS: No. 8 MR. EISENHART: I think my argument 9 really goes equally to the four exhibits, since 10 the three charts are really derived from T1213. I 11 repeat what I said earlier. I believe there are 12 some substantial inaccuracies in this, and I would 13 like to question Mr. Oliver about those before the 14 Court rules. 15 THE COURT: I've indicated that I will 16 suspend receipt of 1213 and it seems like the 17 others are based on that. I would logically agree 18 to the same, to suspend those, as well. 19 MR. VEIS: Your Honor, I also move to 20 admit Exhibits T119 -- I'm sorry. Exhibits 1202, 21 1207, 1194 and 1206 and 1207. 22 MR. EISENHART: In accordance with the 2646 1 stipulation, I have no objection to 1206, 1207, 2 and 1194. 3 THE COURT: Received. What is 1294? 4 MR. VEIS: 1194, Your Honor. 5 MR. EISENHART: The NASDAQ prices, Your 6 Honor. 7 MR. VEIS: That's correct, Your Honor. 8 MR. STEARNS: So it's clear, Your 9 Honor, 1194, 1206, and 1207 are received? 10 THE COURT: Yes. 11 MR. STEARNS: Thank you. 12 Q. (BY MR. VEIS) Mr. Oliver, in addition, 13 were you requested to compile data concerning 14 accounts related to Lowell and Michael Milken and 15 certain partnerships? 16 A. I was. 17 Q. And what were you asked to do with 18 respect to those? 19 A. To review those -- the monthly 20 statements for those accounts, and to prepare a 21 compilation showing the holdings of those 22 individuals or entities in the stock. 2647 1 Q. And did you do so? 2 A. I did. 3 MR. VEIS: Your Honor, may the record 4 reflect that I'm handing Mr. Oliver an exhibit 5 that's been marked as T1217. It's a -- appears to 6 be a two-page spreadsheet entitled "ownership of 7 MCO Holdings stock by Milken-related entities." 8 It was previously provided in unmarked form to the 9 respondents, but I have copies for them. 10 Q. (BY MR. VEIS) Mr. Oliver, could you 11 please identify Exhibit T1217? 12 A. This is a spreadsheet that I developed 13 after reviewing the monthly statements of seven 14 accounts that were related to Michael and Lowell 15 Milken and/or their various business entities. 16 Q. Would you please explain how you went 17 about creating this spreadsheet? 18 A. Well, I had a stack of monthly 19 statements for an account. I started with the 20 first one and I simply transcribed the amount of 21 stock they owned as of the date of that statement 22 and those are held -- those are shown in the 2648 1 right-hand side of the page which says "individual 2 account balances" and those -- there were seven 3 accounts that I reviewed. And on those dates I 4 simply copied what the balances were near as I 5 could determine it. 6 Q. So -- 7 A. And then I summed up the total holdings 8 of those seven accounts. 9 Q. Well, if you would, go to the first 10 line and explain just the beginning of the -- 11 A. Okay. On the first line I looked at 12 two accounts. The GLJ account -- there were two 13 of them, one at Drexel Burnham Lambert and the 14 account number is underneath there, and then there 15 was another GLJ account which was held at Bear 16 Stearns with the account number underneath there. 17 GLJ was one of the business entities of Milken. A 18 partnership, I believe. And I left the date off 19 there because it was not clear -- it was not clear 20 where those balances came from. As I recall, the 21 statement simply showed that the Drexel Burnham 22 account had 59,500 shares in it. The Bear Stearns 2649 1 account had 41,500 shares in it as of that -- as 2 of the January 1st, 1982, but I don't know when 3 those shares were acquired because I did not have 4 a complete set of the monthly statements. 5 Q. And you had no statements prior to 6 January, 1982, is that what you're telling us? 7 A. That's correct. Prior to 1982, I did 8 not have -- prior to January of 1982, I didn't 9 have any statements. And then it starts with 10 January of '82. And by that point they had 11 acquired in these two accounts 101,000 shares. I 12 don't know when they acquired them; but as of that 13 date, they had them. 14 Q. Look at the second line and explain 15 that, please. 16 A. On January the 8th, 1982, 59,500 shares 17 were transferred from the GLJ account at Drexel 18 Burnham to the -- to the UST -- that's U.S. Trust 19 account -- at Drexel Burnham. So, while the 20 overall total holdings held by the Milken-related 21 entities didn't change, they simply transferred 22 the stock from one account to a different account. 2650 1 Q. That was an account that United States 2 Trust Company of New York? 3 A. Yes, sir. 4 Q. Would you then explain the third line? 5 A. On May 19th, 1983, the United States 6 Trust Account acquired 5,800 shares. It also on 7 that same date aqcuired 2,800 shares. Those 8 acquisitions changed the total outstanding 9 holdings by Milken-related entities to 109,600 10 shares. 11 Q. And were those -- let's just be sure. 12 GLJ-DBL? 13 A. GLJ was one of the Milken-related 14 business entities. I don't know what GLJ stands 15 for. The DBL part is the business account, the 16 GLJ business account that was held at Drexel 17 Burnham Lambert. 18 Q. And what about GLJ/BS? 19 A. Is the account held at Bear Stearns. 20 Q. And what is GLJ/UST? 21 A. That is the account held at U.S. Trust. 22 Q. Now, if you would, go down to the entry 2651 1 for May 20th, 1983. 2 A. Yes. 3 Q. Would you explain that, please? 4 A. The GLJ account at United States Trust 5 acquired 2300 shares and it also -- that same 6 account also acquired 1,100 shares on that same 7 day, thereby increasing the overall holdings of 8 the Milken-related entities to 113,000 shares. 9 Q. And -- then go to the August 8th, 1983, 10 entry and explain that, please. 11 A. On August the 8th, the GLJ account at 12 UST had 13,000 shares transferred out of it and 13 they were transferred over to the GLJ account at 14 Drexel Burnham. That was simply a transfer from 15 one account to another, and it didn't affect the 16 total outstanding shares owned by these entities. 17 Q. And that total was what? 18 A. 113,000 shares. 19 Q. Please go to the next entry, 20 August 9, 1983. 21 A. The next day, on August the 9th, 1983, 22 there were some more transfers. 11,375 shares 2652 1 were transferred from the GLJ account at Drexel 2 Burnham and they were transferred to Michael 3 Milken's personal account at Drexel Burnham. On 4 that same day, 1,625 shares were also transferred 5 out of the GLJ account at Drexel Burnham and they 6 were transferred to Lowell Milken's personal 7 account at Drexel Burnham. There again, these are 8 simply transfers from one account to another. 9 They didn't reflect any additional purchases or 10 sales. And, so, the total outstanding holdings 11 did not change. It remained 113,000 shares. 12 Q. Please go to the next entry. 13 A. The next day on August 10th, there were 14 more transfers. 1,623 shares of stock was 15 transferred from Lowell Milken's personal account 16 at Drexel Burnham to the WILCAM account at Drexel 17 Burnham. The WILCAM -- here again, I don't know 18 what the acronym stands for -- was another of the 19 Milken-related business companies. 20 Also, on that same day, 9,197 shares 21 were transferred from Michael Milken's personal 22 account at Drexel Burnham and they were deposited 2653 1 in the WILCAM account at Drexel Burnham. Once 2 again, these are simply transfers from one account 3 to another and did not affect the total 4 outstanding holdings. 5 Q. Please go to the next entry. 6 A. On August the 11th, there were more 7 transfers. Two shares were transferred from 8 Lowell Milken's Drexel Burnham account. They were 9 transferred over to the MLA account. 10 Q. What is MLA? 11 A. MLA is one of the Milken-related 12 business entities. I think it's a partnership, 13 but it's a business account. And I think the "M" 14 stands for Michael and the "L" stands for Lowell 15 and the "A" stands for Associates, if I recall. 16 It's one of their business accounts. 17 That account was also held at Drexel 18 Burnham. So, they transferred -- two shares were 19 transferred from Lowell Milken's personal account 20 over to the MLA account at Drexel Burnham. Also 21 on that same date, 2,178 shares were transferred 22 from Michael Milken's Drexel Burnham account to 2654 1 this same MLA account at Drexel Burnham. As with 2 the previous entries, there was no change in the 3 total outstanding holdings because these simply 4 reflected transfers from one account to another, 5 all of which were owned or controlled by Lowell or 6 Michael Milken. 7 Q. Please go to the next entry. I believe 8 that's July 25th, 1985. 9 A. For about two years there, based on the 10 documents I had, there was no activity. Then on 11 July the 25th, 1985, 41,000 shares -- 41,500 12 shares were transferred from the GLJ account at 13 Bear Stearns to the GLJ account at Drexel Burnham. 14 And here again, it's simply a transfer 15 from one account to another. It did not affect 16 the total outstanding holdings which remained at 17 113,000 shares. 18 Q. Would you then go to the next entry? I 19 believe it's December 31, 1986. 20 A. On that date, December 31st, 1986, 21 58,500 shares were transferred from the GLJ 22 account at United States Trust to the GLJ account 2655 1 at Drexel Burnham. Here again, it was a 2 transfer -- simply a transfer from one account to 3 another and the total outstandings did not change. 4 It stayed the same at 113,000. 5 Q. Would you please go to the next entry 6 which I believe is April 18th, 1988? 7 A. On April the 18th, 1988, there were 8 three sales there. The first one was 8,000 shares 9 of stock were sold from the GLJ account at Drexel 10 Burnham. 11 Q. Had there been any previous activity 12 that you could determine from the materials you 13 had? 14 A. Well, you would have to go back -- you 15 would have to go back to, I guess, 1983 to see 16 any -- any -- 17 Q. I think you misunderstood. Between the 18 dates December 31st, 1986, and April 18th, 1988, 19 was there any activity in the accounts that you 20 could determine? 21 A. No, there was no activity. There was 22 no activity between December 31st, '86, and 2656 1 April 18th, '88. 2 Q. All right. Please continue. 3 A. Okay. Those 8,000 shares were sold out 4 of the GLJ account. 2,081 shares were sold from 5 the MLA account at Drexel Burnham. Also 10,820 6 shares were sold from the WILCAM account at Drexel 7 Burnham. Those transactions zeroed out all of the 8 accounts with the exception of the GLJ account at 9 Drexel Burnham. The effect of all these sales was 10 to reduce the total outstanding holdings held by 11 the Milken-related entities from 113,000 shares to 12 92,000 shares. 13 Q. Was there any subsequent activity? 14 A. A couple days later on April the 15 20th, 1988, 10,000 shares were sold from the GLJ 16 account at Drexel Burnham reducing the total 17 outstanding holdings from 92,000 to 82,000 shares. 18 Q. Turning the page, would you please 19 continue with your explanation? 20 A. On April the 21st, 1988, a thousand 21 shares were sold from the GLJ account at Drexel 22 Burnham which reduced the total outstanding 2657 1 holdings to 81,000 shares. 2 Q. Please continue. 3 A. On April the 22nd, 1988, there were two 4 block sales. One was 4,000 shares were sold from 5 the GLJ account at Drexel Burnham and 5,000 shares 6 in a different block was sold from that same 7 account, thereby reducing the total outstanding 8 holdings from 81,000 shares to 72,000 shares. 9 Q. And what is the final entry? 10 A. The final entry reflects simply 11 transfers of stock. 63,000 shares of stock was 12 transferred -- were transferred from the GLJ 13 account at Drexel Burnham and they were 14 transferred into Michael Milken's Drexel Burnham 15 account. 9,000 shares were transferred from the 16 GLJ account at Drexel Burnham into Lowell Milken's 17 personal account. 18 What this did was to zero out the 19 Drexel Burnham account at -- the GLJ account at 20 Drexel Burnham and put those holdings into Lowell 21 Milken's and Michael Milken's personal account, 22 but the effect on the total outstanding holdings 2658 1 was zero. The balance still remained at 72,000 2 shares. That's the end of the documents that I 3 had to look at. 4 Q. Now, when you were looking at these 5 documents, did you look at both the transactions 6 reflected in the documents and the balances 7 reflected in the documents? 8 A. Yes. 9 Q. And with respect to the entries on 10 Exhibit T1217, do they reflect all transactions 11 that you were -- that you found in the account 12 statements and other materials you examined with 13 respect to stock of MCO Holdings, Incorporated? 14 A. No, they do not. 15 Q. What did you find that was -- 16 A. Well, here again, there were -- let's 17 see. On some days there was both a -- my 18 instructions were to look at the data and compile 19 the data. Simple as that. And my initial 20 preparation of the spreadsheet reflected that 21 literal understanding -- that is, every time I saw 22 an entry, I copied it down and reflected the 2659 1 corresponding change in the outstanding balance on 2 a given date. On occasion, there would be 3 intra-account transfers of identical number of 4 shares that had no effect on the account balances. 5 And, so, what happened was when you simply take 6 every entry and add it up, you would artificially 7 distort the outstanding holdings. For example, on 8 a given day, the total outstanding holdings might 9 be a hundred thousand shares, for example; but 10 there might be some transferring activity or some 11 correcting entry activity and if you cited each 12 entry separately, it would artificially and 13 momentarily distort the balance, but the net 14 effect of that at the end of the day, there would 15 be no change. So, those kinds of entries, I left 16 out. 17 Q. Other than those kinds of entries -- 18 A. In this spreadsheet. 19 Q. Are those the only types of entries 20 that you left out? 21 A. Yes, yes. 22 Q. Now, there are some footnotes on 2660 1 page 2. Could you explain those, please? 2 A. On the first line of the first page, 3 which has a question mark in the date column, as I 4 said earlier, the monthly statements for these 5 accounts show no -- as I recall, didn't show any 6 trading activity, but what they showed was a 7 balance of shares owned as of the date of that 8 statement. That told me that those shares had 9 been acquired at some prior time, but I didn't 10 have the statements for those periods of time in 11 which those shares were acquired. So, if the 12 balance as of January the 1st, for example, in the 13 GLJ account at Drexel Burnham was 59,500 shares, 14 they owned those shares on that date, then they 15 had to acquire them at some previous time. I just 16 didn't know when. 17 Q. And that's why you have a question mark 18 there? 19 A. Yes. The assumption was that they had 20 been acquired and found their way into this 21 account and as of the date reflected here that 22 that was the balance in the account. 2661 1 Q. Now, what about the second footnote 2 regarding source? 3 A. Oh, what that says is that those 4 entries in the comment column highlighted by the 5 asterisks means that the information comes from 6 the monthly statements from Bear Stearns, from 7 Drexel Burnham, and from U.S. Trust. 8 Q. And what about the third footnote? 9 A. On July 25th, 1985, this was -- this 10 transaction was an instance where shares were 11 transferred from one account to another. In this 12 case, 41,500 shares were transferred from the GLJ 13 account at Bear Stearns to the GLJ account at 14 Drexel Burnham. However, the transfer into the 15 GLJ account at Drexel Burnham is reflected on the 16 Drexel Burnham monthly statement. A corresponding 17 entry which you would expect to find was not 18 reflected on the Bear Stearns' statement. 19 Q. Why was that? 20 A. I don't know. I would have to refresh 21 my memory by looking at the precise monthly 22 statement, but as I recall the Drexel Burnham 2662 1 statement said that the shares had come from the 2 Bear Stearns account. 3 Q. Were the Bear Stearns' statements 4 available? 5 A. I believe they were, yes. 6 Q. Take a look at your footnote, please. 7 A. No, no, the Bear Stearns were not 8 available. 9 Q. So, you made an assumption? 10 A. Well, the Drexel Burnham statement said 11 they came from Drexel Burnham, and I had nothing 12 to indicate that wasn't true. 13 THE COURT: I think you misspoke. 14 MR. KEETON: You said Drexel Burnham. 15 Didn't you mean Bear Stearns? 16 A. The Drexel Burnham statements showed 17 that the shares had come from Bear Stearns. Since 18 I didn't have the Bear Stearns documents, I didn't 19 know whether that was true or not, but I had no 20 evidence to show that the Drexel Burnham statement 21 was incorrect or inaccurate. 22 Q. (BY MR. VEIS) Now, let's talk about 2663 1 the documents you reviewed to make this 2 compilation. 3 Do you recall what they were? 4 THE COURT: Let's take a short recess. 5 6 (Short break.) 7 8 THE COURT: We'll be back on the 9 record. 10 Mr. Veis, you may continue. 11 MR. VEIS: Thank you, Your Honor. 12 Your Honor, I think we've reached some 13 agreement on whether it would be necessary to put 14 the documents that Mr. Oliver relied upon in 15 preparing Exhibit T1217 into the record. I would 16 like to note and ask Mr. Oliver if he reviewed and 17 relied upon exhibits that have been marked and 18 provided to the respondents as Exhibits T1153 19 through T1189 in the preparation of Exhibit T1217. 20 Q. (BY MR. VEIS) Mr. Oliver, do you 21 recall this morning you had a chance to go over 22 the documents you reviewed with exhibit numbers 2664 1 attached? 2 A. Yes. 3 Q. Do you recall that those were 4 Exhibit Nos. T1153 through 1189 in preparing the 5 Milken-related spreadsheet? 6 A. I'm sorry. I don't connect the exhibit 7 numbers with the exhibits. 8 Q. That's because you don't have those 9 exhibits in front of you. Let me just place them 10 in front of you so that you can -- if you would 11 note that Book 7 begins with Exhibit T1153 and the 12 documents continue, I will represent, in sequence, 13 through T1188. 14 Do you recall reviewing those this 15 morning? 16 A. Yes, I do. 17 Q. Can you describe generally what those 18 documents consisted of? 19 MR. EISENHART: Your Honor, I believe 20 the defense has agreed among themselves that we 21 have no objection to T1217 as a summary of the 22 transactions that are described in there and I had 2665 1 understood that meant we didn't have to deal with 2 Exhibits 1153 through 1189. 3 MR. VEIS: I was going to ask him to 4 describe very basically what they were. Three 5 questions. 6 Q. (BY MR. VEIS) Did they consist of 7 documents that appeared to reflect ownership of 8 the accounts? 9 A. Yes. 10 Q. Did they consist of documents that 11 appeared to reflect balances in those accounts? 12 A. Yes. 13 Q. Did they consist of documents that 14 appeared to represent transactions in those 15 accounts? 16 A. Yes. 17 MR. VEIS: I have nothing else to ask 18 on that. Your Honor, I move the admission of 19 T1217. 20 MR. EISENHART: No objection, Your 21 Honor. 22 THE COURT: Received. 2666 1 Q. (BY MR. VEIS) Now, Mr. Oliver, did you 2 prepare a graphic representation of the 3 information contained in Exhibit T1217? 4 A. Yes, I did. 5 Q. Let me show you a document that's been 6 marked as Exhibit T1221. 7 What is that document? 8 A. This is a bar graph, a column graph 9 that reflects the holdings of MCO stock by 10 Milken-related entities on various dates. 11 Q. Looking at the first column, I believe 12 that's January 1st, 1982, how does that compare or 13 reflect the information contained in Exhibit 1217? 14 A. Well, on that date their total holdings 15 were $101,000. 16 Q. 101,000 shares, you mean? 17 A. Yes. And that first column there shows 18 101,000 shares. 19 Q. And with respect to the second column, 20 what does that represent? 21 A. On that date, May 19th -- as of 22 May 19th, 1983, outstandings were 109,600 shares 2667 1 and that's what that column reflects. 2 Q. So, the column designated January 1st, 3 1982, represents the amount held from January 1st, 4 1982, up until it changed on May 19th, 1983? 5 A. Yes. My method here was to show on a 6 given date what the total outstanding holdings 7 were, and each column -- the reason I chose these 8 particular dates was because there was no change 9 in the outstanding holdings from date to date. 10 That is, from January 1st, 1982, until May 19th, 11 1983, there was no change in the total outstanding 12 holdings. 13 So, I felt there wasn't any need to 14 have columns showing what the holdings were 15 throughout that year-and-a-half period when it 16 would just be constant. It would be more accurate 17 to reflect that on May 19th, 1983, there was a 18 change in the holdings and that change was from 19 101,000 shares to 109,600 and that same method was 20 used in subsequent dates. 21 Q. So, for each of the bars on the bar 22 graph, the date reflected below is the date on 2668 1 which a transaction or transactions occurred that 2 caused a change in the balance? 3 A. Yes. That's why the last one ends on 4 May 22nd, 1988, is because there was no net change 5 in the total outstandings. 6 MR. VEIS: Your Honor, I move the 7 admission of Exhibit T1221. 8 MR. EISENHART: No objection. 9 THE COURT: Received. 10 Q. (BY MR. VEIS) If I might go back, 11 Mr. Oliver, you had testified earlier when we were 12 discussing the compilation you prepared with 13 respect to Drexel Burnham Lambert holdings of 14 United Financial Group, Inc.'s, stock that you had 15 reviewed summaries given you by enforcement 16 counsel? 17 A. Yes. 18 Q. Have you had an opportunity to consider 19 what those summaries were and what they are 20 related to? 21 A. Yes. As I recall, you were asking me 22 what I relied upon in preparing these 2669 1 compilations, and I had relied -- in preparing the 2 Milken compilations, I had relied on some 3 summaries that had been given to me by enforcement 4 counsel and I confused those two with the other. 5 Q. Let's talk about the summaries that 6 related to Milken. Now, I have here -- I'm sorry 7 I don't have copies. I have here a copy of OTS' 8 motion for modification for discovery order and 9 additional discovery for Drexel-related materials. 10 Is this one of the summaries that you 11 referred to? 12 A. Yes. 13 Q. Did you actually rely upon that 14 document in your analysis of Milken-related 15 materials, or did you simply use it as background? 16 A. No. What I relied upon in preparing 17 the Milken spreadsheet that is Exhibit 1217 was 18 the actual monthly statements. That's what I 19 relied upon. I looked at this motion for 20 modification just for reference and background 21 because, in part, specifically on page 4 of it, 22 there is a table that attempts to show what their 2670 1 ownerships were. I just used it as a reference. 2 I did not rely upon it to prepare my spreadsheet. 3 It was just background. 4 Q. The information in your spreadsheet was 5 obtained, I take it, independently of that 6 document? 7 A. Oh, yes. 8 Q. Let me show you another document. This 9 is an excerpt from a draft pleading that was 10 prepared by enforcement counsel and shown to you. 11 I don't have copies, but I will provide it to 12 respondents as soon as Mr. Oliver indicates what 13 it is. 14 Is that another document that you 15 referred to as a summary? 16 A. Yes. Here again, it's related to the 17 Milken-related entities stock holdings. 18 Q. Was that a document you relied upon in 19 preparing the compilation related to the Milken 20 stock holdings? 21 A. No. Here again, it was just background 22 information to kind of a reference point, a 2671 1 signpost. This summary would say on a certain 2 date they owned a certain number of shares. And 3 as I prepared my spreadsheet, I would look at it 4 and see whether there was any conflict between the 5 two. It was just a reference. I did not rely 6 upon the information in this summary, or whatever 7 you want to call it -- to prepare Exhibit 1217. 8 The data in here came solely from the monthly 9 statements. 10 Q. Thank you. 11 MR. VEIS: May the record reflect I'm 12 giving Mr. Eisenhart copies of both of the 13 documents that Mr. Oliver was just speaking of. I 14 have no intention of marking them and submitting 15 them, Your Honor; but if Mr. Eisenhart wishes to 16 make some use of them to cross-examine Mr. Oliver, 17 I have no objection. 18 Mr. Oliver has now indicated that he 19 relied upon nothing other than the documents that 20 he has testified about in preparing exhibits. So, 21 I would assume with respect to Exhibit 1213 that 22 Mr. Eisenhart's sole objection would be with 2672 1 respect to inaccuracies that he wishes to 2 cross-examine. 3 MR. EISENHART: Well, I still have that 4 objection outstanding, Your Honor. 5 MR. VEIS: Thank you. 6 MR. VILLA: Your Honor, I believe the 7 Court has ruled and directed OTS to provide all 8 documents -- 9 MR. VEIS: Those documents have been 10 provided. 11 MR. VILLA: -- provide all documents 12 that the witness reviewed in preparation for this 13 assignment, which is what he testified to at the 14 outset, not just those he relied upon in 15 preparation of that particular document. If he's 16 prepared to say under oath that these are all the 17 summaries of enforcement counsel that he saw and 18 the conduct of that, then I gather the Court's 19 rule has been complied with. 20 Q. (BY MR. VEIS) Is that the case, 21 Mr. Oliver? 22 A. Those two that you have in your hand, 2673 1 sir, yes. 2 Q. Mr. Oliver, did you also review 3 documents of MCO Holdings to determine the numbers 4 of outstanding shares for the years 1981 through 5 1988? 6 A. Yes. 7 Q. What documents did you review? 8 A. Could you ask that again? 9 Q. Did you review securities filings or 10 annual reports of MCO Holdings, Incorporated? 11 A. Yes. I reviewed some SEC filings. I 12 believe they were 13Gs. I believe they were. 13 Q. No, that's -- 14 A. I'm sorry. 15 Q. Did you review any securities filings 16 with respect to MCO's number of outstanding shares 17 from the period of 1981 to 1988? 18 A. Yes, annual reports. 19 Q. Did you also review a 10K for one year? 20 A. Yes. 21 Q. Let me show you a series of documents 22 that have already been admitted into evidence 2674 1 yesterday during Mr. Lazard's testimony. I have 2 here a Lazard exhibit which is the 1981 10K; the 3 Exhibit A2056 which is the 1984 annual report of 4 MCO Holdings; Exhibit A2057 which is the 1985 5 annual report of MCO Holdings; Exhibit A2058, 6 which is the 1986 annual report of MCO Holdings; 7 Exhibit A2059, which is the 1987 annual report of 8 MCO Holdings; and A2060 which is the 1988 annual 9 report. 10 Do you recognize those documents? 11 A. Yes. 12 Q. Did you review those documents to 13 determine the number of shares outstanding of MCO 14 Holdings? 15 A. Yes, I reviewed these. 16 Q. And did you make such a determination? 17 A. Yes. 18 Q. Now, let me also hand you what's been 19 marked as A2055. I do not believe this is in 20 evidence. This is the 1983 annual report of MCO 21 Holdings, Incorporated. Do you recognize that 22 document? 2675 1 A. Yes. 2 MR. VEIS: Your Honor, if there's no 3 objection, I would move Exhibit 2055 into 4 evidence. There's an MCO annual report. I don't 5 believe there's any controversy concerning it. 6 MR. EISENHART: I have no objection to 7 that, Your Honor. 8 THE COURT: Received. 9 Q. (BY MR. VEIS) Did you prepare a table 10 that indicated the number of shares outstanding of 11 MCO Holdings based upon your review of Exhibit A 12 2055 through 2060 and Lazard Exhibit 14? 13 A. Yes. 14 MR. VEIS: May the record reflect I'm 15 handing Mr. Oliver an exhibit that's been marked 16 T1218. 17 Q. (BY MR. VEIS) Now, Mr. Oliver, could 18 you please explain Exhibit T1218 to the Court? 19 A. I looked at the annual reports and 20 found the total shares outstanding that were 21 reported in those annual reports. Those annual 22 reports also indicated that some of those shares 2676 1 were held as treasury stock -- that is, it's the 2 company's own stock that was owned by the company 3 itself. And I netted that treasury stock out to 4 arrive at a shares outstanding, net shares 5 outstanding, and that's what your half of the 6 table shows. 7 Q. Now, did you then perform a calculation 8 of the percentage ownership of MCO Holdings, 9 Incorporated, common stock that was held in 10 Milken-related entities during those years? 11 A. Yes. I took the figures that you see 12 in the top half there and used the figures that 13 you find in Exhibit 1217 -- that is, the number of 14 shares owned by the Milken-related companies -- 15 and took those Milken holdings as a percentage of 16 the MCO shares outstanding, and that's what you 17 see on the bottom half of the table. 18 Q. Now, it appears that the percentage 19 holdings changes over time. Can you explain how 20 that occurred? 21 A. Well, the percentage changes because, 22 one, number of shares outstanding changed over 2677 1 time and, two, the Milkens' holdings also changed 2 over time. 3 Q. And the figures there, are they a snap 4 shot of the percentage as of December 31st of each 5 of the years noted? 6 A. Yes. 7 MR. VEIS: Your Honor, I move the 8 admission of Exhibit T1218. 9 MR. EISENHART: Your Honor, I would 10 like to ask a few questions about this because 11 there's some things here that just don't look 12 accurate. 13 THE COURT: Well, based on other 14 exhibits that have been received? 15 MR. EISENHART: Well, I see in 1988 he 16 has listed 113,000 shares for Milken-related 17 holdings. Going back to Exhibit 1217, I see 18 numbers for 1988 of 92,000, 82,000, 81,000, and 19 72,000. 20 MR. VEIS: I think that's a fair 21 observation, Your Honor. 22 THE COURT: I'll withhold the ruling 2678 1 until cross-examination. 2 MR. VEIS: With the modification, Your 3 Honor, that -- we would submit this with the 4 modification that reflects that there were not 5 113,000 shares as of December 31, 1988. 6 MR. EISENHART: Your Honor, I wouldn't 7 object to another summary exhibit. This, in my 8 view, hardly falls under the rubric summarization 9 of voluminous data. I think we have about seven 10 annual reports there, seven pieces of data, and 11 Exhibit 1217 shows shares outstanding on specific 12 dates. If OTS can put that together into an 13 accurate graphic exhibit and let us look at it, we 14 probably wouldn't have any objection to it. 15 Seeing this for the first time -- 16 MR. VEIS: It's not the first time. It 17 was given to respondents several weeks ago during 18 Mr. Oliver's deposition. Let me go on. 19 MR. DUEFFERT: Your Honor, for the 20 record I believe that was inaccurate. I don't 21 believe this was given to us several weeks ago in 22 his deposition. 2679 1 MR. VEIS: I think his deposition was 2 several weeks ago. I believe we produced that. I 3 think I came back and brought it over that 4 afternoon. That's what we came back for. I know 5 it was provided some time ago. 6 Your Honor, may I go on? 7 THE COURT: Yes, you may. 8 MR. VEIS: May the record reflect I'm 9 handing Mr. Oliver an exhibit that's marked T1219. 10 Q. (BY MR. VEIS) Mr. Oliver, do you know 11 what that document is? 12 A. Yes. This was a table that I prepared. 13 Q. How did you go about preparing it? 14 A. Well, I took the shares outstanding 15 from the annual reports as of the end of 1986 and 16 compared it to the number of shares held in 17 account 06-12-942 and simply did a percentage. 18 Q. Now, how do you go about obtaining the 19 number of shares held in that account? 20 A. I looked at various statements, monthly 21 statements. 22 Q. And were you instructed to assume at 2680 1 the beginning of your work that there were 233,600 2 shares present held in account 06-12-942 on 3 December 31st, 1986? 4 A. Yes. 5 Q. Did you subsequently review any 6 documents that would independently indicate to you 7 that those shares were, in fact, held in that 8 account on that date? 9 A. Yes. 10 Q. What document was that? 11 A. Well, I don't know that it has a title. 12 I believe it came from Mr. Diegnan. 13 MR. VEIS: Your Honor, may the record 14 reflect that I'm handing Mr. Oliver a copy of what 15 has previously been admitted as Exhibit T1200. It 16 was admitted during Mr. Diegnan's testimony. 17 Q. (BY MR. VEIS) Mr. Oliver, where in 18 that document does it appear to you that it is the 19 case that there are 233,600 shares held in account 20 06-12-942-6 on December 31st, 1986 -- 21 A. Well, there's a brief table of several 22 accounts and shares in those accounts, and it 2681 1 comes from the first line of that. 2 Q. What date is that? 3 A. The date of this the memo is 4 February 23rd, 1987. 5 Q. Are there pages further on in the 6 exhibit that would indicate that it was held 7 earlier than February, 1987? 8 A. Yes. There is a report here to show 9 that. 10 Q. Did you review Mr. -- did you have the 11 opportunity to review Mr. Diegnan's testimony with 12 respect to this exhibit? 13 A. Yes, I did. 14 Q. And did that testimony explain the 15 significance of the dates on that document -- that 16 is, the computer-generated stock record. 17 A. Well, he pointed out that on these 18 dates there were these shares outstanding. They 19 were held in the account. 20 Q. Directing your attention to the entry 21 for account 06-12942-6, do you see that? 22 A. 6? I see 3. 2682 1 Q. I'm sorry. Directing your attention 2 to, yes, the 3. I stand corrected. There's a 3 date there. 4 Do you see that? 5 A. Yes. 6 Q. What is that date? 7 A. October 2nd, 1986. 8 Q. Do you understand from Mr. Diegnan's 9 testimony the significance of that date? 10 A. Well, there were 233,600 shares held on 11 that date. 12 Q. Do you understand that that was the 13 last time there was a change in that account 14 before the stock record was printed out? 15 MR. EISENHART: Your Honor, I object to 16 leading questions. 17 THE COURT: Sustained. 18 Q. (BY MR. VEIS) Do you understand what 19 the significance of the data is? 20 A. My understanding is that this report 21 reflects account balances after changes have 22 occurred and so that on October the 2nd, 1986, 2683 1 there were 233,600 shares. 2 Q. And does the first date indicate that 3 on February 23rd, I believe it was 1987, there 4 were still 233,600 shares in the account? 5 A. Yes. 6 Q. So, did you make an assumption as to 7 the account balance as of December 31, 1986, based 8 upon your review of that document? 9 A. Yes. The assumption was that there had 10 been no change from 233,000 -- there had been no 11 change between the two dates. It was 233,600 in 12 '86 and also in '87. 13 Q. Was that based on Mr. Diegnan's 14 explanation in his testimony? 15 A. Yes. 16 Q. Now, you calculated a percentage 17 holding by Drexel Burnham Lambert as of -- 18 standing alone as of 12/31/86; is that correct? 19 A. Yes. 20 Q. What was that? 21 A. 4.17 percent. 22 Q. And you calculated separately a 2684 1 percentage for MCO Holdings -- I'm sorry -- 2 Milken-related holdings as of that date? 3 A. Yes, 2.02 percent. 4 Q. And then you calculated an aggregate 5 percentage for the 2 -- for Drexel Burnham Lambert 6 and Milken-related holdings; is that correct? 7 A. Yes, 6.19 percent. 8 MR. VEIS: Your Honor, I move the 9 admission of Exhibit T1219. 10 MR. EISENHART: Your Honor, I would 11 like to cross-examine the witness on this document 12 before it's admitted. 13 THE COURT: All right. I'll withhold 14 the admission. 15 MR. VEIS: I have nothing further, Your 16 Honor. 17 THE COURT: All right. Mr. Eisenhart. 18 MR. EISENHART: Thank you, Your Honor. 19 20 21 22 2685 1 2 CROSS-EXAMINATION 3 4 5 Q. (BY MR. EISENHART) Mr. Oliver, let's 6 turn, first, to the last document you were 7 questioned about, which is Exhibit T1219. I 8 gather you state -- you do state here that as of 9 December 31, 1986, there were 233,600 shares of 10 MCO stock in account 06-12942-6; is that correct? 11 A. Yes, sir. 12 Q. Can you point me to a document that 13 says that? 14 A. No, sir. My understanding is that was 15 the account in which these were held. 16 Q. Well, if you can't point me to a 17 document that says that was the number of shares 18 in that account on that date, then you're really 19 not summarizing information that appears in a 20 document, are you? 21 A. Yes, sir. 22 Q. You would agree with that? 2686 1 A. Yes, sir. 2 Q. In fact, you were simply told to assume 3 that that was the balance in that account on that 4 date; is that correct? 5 A. Initially, yes, sir. 6 Q. And you were told to assume that by 7 Mr. Veis? 8 A. Yes, sir. 9 Q. So, you're simply in there, then, you 10 are putting down information you were told by 11 Mr. Veis to put down and you're not summarizing 12 anything you saw in a document; is that correct? 13 A. With regard to the 233,600 shares, 14 that's correct. 15 Q. Well, everything else in Exhibit T1219 16 flows from that initial assumption that that was 17 the amount of shares in that account on December 18 31, 1986, doesn't it? 19 A. Yes, sir. 20 Q. Let's go back to Exhibit 1218. This is 21 your chart of the MCO stock outstanding on 22 December 31 of each of those years? 2687 1 A. Yes, sir. 2 Q. When did you prepare that? 3 A. Oh, I don't recall the exact date. It 4 would have been within the last 30 days, I 5 believe, thereabouts. 6 Q. And I gather your source of information 7 for each of the numbers reflecting shares 8 outstanding came from the annual reports? 9 A. Yes, sir. 10 Q. That number, in fact, appears on the 11 front page of each annual report, doesn't it? 12 A. I forget exactly where. I would have 13 to look at each one. It appears somewhere in the 14 annual report. 15 Q. So, that's a fairly easy number to 16 extract? 17 A. Yes, sir. 18 Q. And then the second half of 1218 19 requires you to look at what you call the 20 Milken-related holdings as of December 31st in 21 each of those years, does it not? 22 A. Yes, sir. 2688 1 Q. Where did you get those numbers from? 2 A. Well, initially those numbers were 3 derived from the monthly statements of the 4 Milken-related holdings and then they were 5 compiled in Exhibit 1217. And then when I 6 prepared this, I used Exhibit 1217. 7 Q. Well, Exhibit 1217 actually doesn't 8 have a total as of December 31st for any year, 9 does it? 10 A. That's correct. 11 Q. Do I understand then that you were 12 simply making the assumption -- for example, if 13 you look at -- well, look at 1983, for example, 14 that there's a number of 113,000 shares that 15 appears on certain dates in 1983. You're simply 16 assuming that was the number that was owned as of 17 December 31 that year; is that correct? 18 A. I am assuming that, yes, sir. 19 Q. And that same assumption holds true for 20 each of these other years? 21 A. Yes, sir. 22 Q. So, again, those numbers of 2689 1 Milken-related holdings as of December 31 for each 2 of those years, there is no document that contains 3 that figure or that number as of December 31st 4 that you can point us to, is there? 5 A. That is correct. However, there were 6 no changes in the holdings from one period to the 7 next. So, the assumption I made was that there 8 had been no changes. 9 Q. There were no changes in the holdings 10 that you could find based on the documents you 11 looked at? 12 A. Yes. If the monthly statements on one 13 date said there was a certain balance of shares 14 and then that balance did not change for several 15 months, I assumed that there were no transactions 16 in there to effect the total balance. 17 Q. Now, the documents that you looked at 18 to put together T1217, these were provided to you 19 by OTS enforcement counsel, were they not? 20 A. Yes, sir. 21 Q. I gather you did no independent 22 research on this, you didn't turn up documents on 2690 1 your own? 2 A. No, sir. 3 Q. Now, the list of accounts that you 4 derive these from, were those account statements 5 complete -- that is, you had one for every month 6 or were there some gaps? 7 A. They were incomplete. 8 Q. And I think Mr. Veis asked you and you 9 agreed that that was the best data you had 10 available to you? 11 A. That was all I had. 12 Q. Okay. And you could only go with what 13 you had? 14 A. Yes, sir. 15 Q. Or to be more accurate, you could only 16 go with what OTS enforcement gave you, right? 17 A. Yes, sir. 18 Q. That was your assignment, right? 19 A. Yes, sir. 20 Q. Now, on Exhibit T1217 there's an 21 opening balance there where you have a question 22 mark as to the date and the opening balance is 2691 1 101,000 shares. Do you see what I refer to? 2 A. Yes, sir. 3 Q. As you sit here, do you have any idea 4 how, when, or under what circumstances those 5 101,000 shares were acquired? 6 A. No, I do not. 7 Q. So, that could have been stock, for all 8 you know, that could have been held for 10 or 15 9 years in one of those accounts? 10 A. That's correct. 11 Q. And as I understand Exhibit T1217, what 12 it shows is that these Milken-related entities 13 started out on some undetermined -- in 1983 they 14 got up to 113,000 shares and then by '88 they were 15 down to 72,000 shares. Is that pretty much it? 16 A. Yes, sir. 17 Q. And as I understand it in putting 18 together Exhibit 1217, you, on your own, deleted a 19 number of transactions that you thought 20 represented offsetting entries? 21 A. Yes, depending on what you mean by 22 offsetting entries. 2692 1 Q. I thought you said that on certain days 2 in addition to the ones you have reflected here 3 where the amounts flowing in and out seemed to 4 offset each other? 5 A. Yes, that's correct. 6 Q. And you simply disregarded them? 7 A. Yes. For example, the one that comes 8 to mind is where some shares were shown being 9 transferred out and then immediately transferred 10 back, and I believe there might have been a 11 comment made in the comment column, correcting 12 entry or something to that effect. So, I assume 13 that that entry should never have been made in the 14 first place. 15 Q. So, whenever you saw what appeared to 16 be an offsetting entry or something that didn't 17 affect the overall total as of that day, you 18 simply disregarded it? 19 A. Well, no. I think that's too broad. 20 You would have to point me to a specific instance 21 where I could explain what my thinking was. I 22 don't want to leave the impression that I just, 2693 1 without basis, deleted or ignored entries. 2 Q. Let me ask you this, Mr. Oliver, 3 because we want to try to get you out of here if 4 we can. How many of these entries -- we'll call 5 them for shorthand purposes offsetting entries. 6 How many of these offsetting entries do you think 7 there were, half dozen or a lot of them? 8 A. Oh, no. Only a handful. Maybe a dozen 9 or so, or less. Certainly less, I would think. 10 There were previous drafts of Exhibit 1217 that 11 were provided to respondents during my deposition, 12 and if you like, I can refer to that, to point you 13 to the entries I'm talking about. 14 Q. Well, I notice that Exhibit 1217 has a 15 little note in the bottom right-hand corner of the 16 first page that says Version 2. Do you see that? 17 A. Yes. 18 Q. When was Version 1 prepared? 19 A. Prior to my deposition. Shortly before 20 my deposition. 21 Q. And when you prepared Version 1, was 22 that submitted to the OTS enforcement counsel? 2694 1 A. Yes. 2 Q. And did they make changes or 3 suggestions to you? 4 A. Well, they didn't make -- they did not 5 make changes to it, but they pointed out to me 6 these correcting entries or these entries that 7 we're talking about and that that didn't 8 accurately reflect what was happening on that day. 9 Q. Well, I want to show you a document, 10 Mr. Oliver, which was marked at your deposition as 11 Oliver Exhibit No. 13. It's headed "MCO stock 12 owned or controlled by Michael Milken held in 13 accounts." Do you recognize that? 14 A. Yes. I prepared this. 15 Q. Is that an earlier version of what came 16 to be 1217? 17 A. Yes, sir, this was the first one. 18 Q. That's about 10 or 12 pages long, isn't 19 it? 20 A. Well, Version 2 is simply a restating 21 of the first two pages of this. The remaining 22 pages are just the transaction activity and the 2695 1 balances in the various accounts. 2 Q. Okay. So, it's really just the first 3 two pages of that, then, that are your Version 1? 4 A. Yes, sir. 5 Q. I see some writing in the right-hand 6 side. Looks like it says "take out corrections," 7 something -- maybe "take out intracompany." 8 Do you see what I refer to? 9 A. Uh-huh. 10 Q. Whose handwriting is that? 11 A. That's mine. 12 Q. When did you write that down? 13 A. During the deposition or, I guess, 14 actually during one of the breaks. 15 Q. Does that reflect instructions that 16 were given to you by OTS enforcement counsel? 17 A. Yes. 18 Q. I'll take that back. Thanks. 19 Now, you testified that the summaries 20 provided to you by OTS enforcement counsel that 21 you looked at in the course of your work consisted 22 just of the two items you were shown here. One 2696 1 was a motion for some additional discovery and the 2 other was a draft of a pleading of some sort? 3 A. Yes, sir. 4 Q. Were those the only two pieces of 5 information -- other than the 36 exhibits that you 6 looked at earlier, were those the only pieces of 7 information provided to you by OTS enforcement 8 counsel in the course of your work? 9 A. I'm sorry. I don't understand that 10 question. 11 Q. Were there any other summaries or sets 12 of information that you were given by OTS 13 enforcement counsel in the course of your work? 14 A. Beyond what has been entered as 15 exhibits? 16 Q. That's right. Beyond things like the 17 annual reports and the data that came from the 18 Drexel liquidating trust, were there any other 19 summaries or material generated apparently 20 internally by OTS that you were given as part of 21 your work? 22 A. Not that I can recall. There was the 2697 1 notice of charges. I looked at that. I don't 2 know if we want to call that a summary. But that 3 had information that I looked at for background 4 understanding of the case. Right offhand I can't 5 recall any. 6 Q. Now, you worked for OTS enforcement in 7 Dallas, right? 8 A. Regional office in Dallas, yes, sir. 9 Q. You work for Gary Anderberg? 10 A. Yes, sir. 11 Q. And he's part of the OTS enforcement 12 staff? 13 A. Yes, sir. 14 Q. And you testified that you have 15 background, apparently, as an analyst. I think 16 you said you started with the comptroller's office 17 and then later moved to the bank board? 18 A. Well, Federal Home Loan Bank of Dallas. 19 There's a difference. 20 Q. Mr. Veis kind of walked you through all 21 your experience as a financial analyst and your 22 education and training. As I understand it, you 2698 1 weren't really called upon to use any of your 2 financial analysis training in this job, were you? 3 A. You mean in the enforcement department? 4 Q. No. I'm talking about the assignment 5 you did in this case. You really didn't do any 6 analysis of any of these numbers? 7 A. That would be correct. I confined my 8 efforts simply to compiling or transcribing data 9 as opposed to analyzing it. 10 Q. You were really extracting the data, 11 putting it onto a spreadsheet, and then portraying 12 it graphically. That's really the nature of your 13 assignment, correct? 14 A. Essentially, yes, sir. 15 Q. Let me talk to you a little bit about 16 what you did in connection with the United 17 Financial Group stock. Your basic document here, 18 as I understand it, is this Exhibit T1213 which is 19 your spreadsheet on trading activity in UFG stock; 20 is that correct? 21 A. Yes, sir. 22 Q. Now, as I look in the lower right-hand 2699 1 corner of Exhibit 1213, I see this is Version 9; 2 is that correct? 3 A. Yes, sir. 4 Q. Implying, I guess, that there were 5 eight prior versions? 6 A. There were. 7 Q. It seems to have gone through a fair 8 amount of revision. How did there come to be nine 9 different versions of this document? 10 A. I think the initial version or maybe 11 the first two or three -- I forget now -- only had 12 the stock transactions and balances. Then I think 13 we added -- I think we may have added the purchase 14 price or maybe that was there all along. Then in 15 a subsequent version, we added the information 16 from the weekly record, stock record weekly. And 17 then we added the NASDAQ price quotations and then 18 I think another version might have been more or 19 less an aesthetic difference, changing the format 20 here. Just various versions, that's how they 21 unfolded. 22 Q. Did each of those changes reflect 2700 1 comments or suggestions given to you by the OTS 2 enforcement staff? 3 A. Yes, sir. 4 Q. So, you would send each version to 5 them, and they would come back and tell you how 6 they wanted you to change it? Is that the way it 7 worked? 8 A. Yes, sir. 9 Q. And I gather this version that we put 10 in today, Version 9, reflects kind of the final 11 consensus on how this ought to look? 12 A. Yes, sir. 13 Q. Now, on some of the occasions when the 14 OTS enforcement lawyers gave you suggestions on 15 the various versions, did they tell you to add or 16 delete specific data? 17 A. What do you mean by "specific data"? 18 Q. Well, to be quite specific, I think you 19 said that at some point you were told that there 20 were 300,000 shares that were optioned and were 21 taken out and put in some sort of restricted 22 account; is that correct? 2701 1 A. Yes, uh-huh. 2 Q. If I understood what you were saying, 3 that wasn't something you found in the data 4 anywhere. That was something you were told by 5 Mr. Veis that you ought to assume and ought to 6 include; is that correct? 7 A. I noticed it in the data, but I did not 8 include it. 9 Q. When you noticed it in the data, did 10 you understand what you were seeing in the data? 11 A. No, I did not. 12 Q. If I recall your testimony, you simply 13 said you saw, at some point, 300,000 shares 14 disappear from the account? 15 A. My initial instruction was to compile 16 the data in a specific account -- that is, the 17 account in the heading of this exhibit. 18 Q. That's the 06-12942 account, correct? 19 A. Dash 3. And that dash 3 suffix is 20 important. That's the only one that I was told to 21 look at, and that's what I did. And, so, I 22 ignored other accounts, even though I noticed 2702 1 there was a another 12942 with a different suffix. 2 I was told to do the dash 3, and that's what I 3 did. 4 Q. Do you understand why you were told to 5 look only at the dash 3 account? 6 A. I was told that the Drexel Burnham 7 holdings of UFG stock were accounted for in that 8 account. 9 Q. And who told you that? 10 A. Mr. Veis. 11 Q. Now, would you take a look at Exhibit 12 T1193? These are the stock record weeklies. 13 A. Okay. 14 Q. I want to refer you to a series of 15 pages starting with the number -- you'll see this 16 number in the lower left-hand corner -- OW025152. 17 A. In the lower left-hand corner? 18 Q. Do you see the bar code? 19 A. Yes. 20 Q. It's OW025152. Should be in about the 21 middle of the stack. 22 A. All right. 2703 1 Q. Now, these are sometimes a little hard 2 to read, Mr. Oliver, are they not? 3 A. They were, yes. 4 Q. I know I had some trouble reading them 5 and making out some of the numbers. As I 6 understand it, this would be the stock record 7 weekly for December 13th, 1985? 8 A. Yes. 9 Q. That's what you would conclude? 10 A. Yes. 11 Q. And what do you understand that this 12 weekly stock record actually shows? 13 A. Well, there's a list -- a whole list of 14 different accounts with their numbers, and a date 15 column. Then there's a column called settlement 16 long, another column settlement short, column 17 trade quantity. My understanding is that this 18 reflects changes in the stock balances in those 19 accounts. 20 Q. Well, I notice that we have a date at 21 the top that says this is the stock record weekly 22 as of December 13th, 1985; but then as you go down 2704 1 the list of accounts, there's also a date by each 2 account. 3 A. Yes. 4 Q. Now, would that indicate, as you 5 understand it, a specific transaction that took 6 place in the account on that date? 7 A. No, I do not know what that date refers 8 to. 9 Q. So, you don't know what the 10 significance of the dates in the left-hand column 11 is? 12 A. That's correct, I do not. 13 Q. If we look at the account that you were 14 told to look at which is 06-12942-3, as I read 15 it -- again, these numbers are a little tough to 16 read -- for the week ending December 13th, 1985, 17 there's a long balance in that account of 790,159 18 shares. Is that how you would read it? 19 A. Yes, sir. 20 Q. And there's no entry at all on the 21 second column, which is the short column? 22 A. Yes, sir. 2705 1 Q. If you go over to the last column, 2 which appears to be headed trade quantity, it 3 looks like the number is 790,459? 4 A. Yes, sir. 5 Q. Do you know why the numbers in the 6 first and third columns would differ by what 7 appears to be 300 shares? 8 A. No. 9 Q. Now, if you were in the course of doing 10 your work if you were extracting a number for that 11 week as the number of shares in that account, 12 which of the two numbers would you use? 13 A. I would use the third column labeled 14 trade quantity. 15 Q. Do you understand what the term "trade 16 quantity" means? 17 A. I was given to understand that was the 18 balance. 19 Q. Now, did you understand that this 20 particular account, the 12942 account, was a 21 Drexel house trading account? 22 A. I don't know that I ever heard that 2706 1 particular terminology. What I was told was that 2 the holdings of the stock were accounted for in 3 this particular account. I don't know that I ever 4 heard a specific terminology as to how you call 5 that account. 6 Q. Well, the reason I asked is you say you 7 decided that you would use the column headed trade 8 quantity as the number you would say was the 9 balance in the account and I wondered if that 10 had -- how you came to make that assumption. 11 A. I derived that from discussions with 12 enforcement counsel. 13 Q. So, they told you to use that number? 14 A. I believe we decided -- I don't know 15 how that came about, but in the various 16 discussions we decided that that was the balance 17 in the account. 18 Q. So, basically you used that column 19 because that's the column that they told you to 20 use? 21 A. Yes. 22 Q. Just to get some idea of how these 2707 1 different weekly trade runs work, let's turn to 2 the next page. This one is dated December 20th, 3 1985, correct? 4 A. Yes. 5 Q. That's just a week later. Did these 6 runs generally appear to be produced weekly? 7 A. Yes. 8 Q. Now, if we go to the first column 9 there, the SETT long column, the number there is 10 790,459, which was the letter in the trade 11 quantity column from the previous week, correct? 12 A. Yes. 13 Q. Now if you go to the trade quantity 14 column for the week of December 20th, the 15 number -- this one really is tough to read -- 16 looks to be either 739 or maybe 789,850. 17 Can you make that number out? 18 A. Not any better than you can. It looks 19 like 789,850 or 350. 20 Q. Do you have any idea from what you did 21 how that number came to change over the course of 22 the week? 2708 1 A. My assumptions were that there had been 2 some transactions that had occurred that caused 3 that change. 4 Q. And actually, on that page on the 5 right-hand side there's a handwritten number which 6 says 789,350 then the date 12/20/85. 7 Whose handwriting is that? 8 A. I don't know. It's not mine. 9 Q. And that handwriting, I guess, was on 10 there when you got this from OTS enforcement? 11 A. I really don't recall specifically. I 12 suppose. I don't know. 13 Q. Was that the number that you used on 14 your chart? 15 A. Which number? 16 Q. The 789,350. 17 A. For which chart? 18 Q. Your Exhibit T1213 where you track the 19 balances. 20 A. No, I would not have used that number. 21 I mean, I didn't use it here because it was 22 handwritten in. That's not where I got the number 2709 1 from that I used. 2 Q. Well, looking at Page 12 of Exhibit 3 T1213 and looking at the per weekly record, that 4 is, in fact, the number you used in your 5 compilation. 6 A. 12/20/85. 7 Q. Right. The number you used is 789,350 8 which is the number that's written in over in the 9 corner. 10 A. Yes, I see what you mean. 11 Q. Now, my question to you is: Did you 12 use that number because somebody had written it in 13 the margin, or did you use that number because at 14 some point you were actually able to read the 15 printout better than you or I can read it now? 16 A. I never used any handwritten markings. 17 Q. How did you come up with the number 18 789,350 because I think you and I both agreed we 19 can't make that number out? 20 A. Well, it looks to me like 789350. 21 Q. Okay. So, you think you can now make 22 it out? 2710 1 A. Well, that's what I thought when I put 2 this spreadsheet together. 3 Q. Okay. Now, take a look at the next 4 sheet, which is December, December 31st, 1985. 5 A. Yes, sir. 6 Q. What's the number that appears there on 7 Account No. 12942-3? 8 A. Looks like 488,931. 9 Q. That's how you would read it from the 10 printout? 11 A. Yes, sir, uh-huh. 12 Q. Now, there's a number written over on 13 the right-hand side again in the handwriting you 14 don't recognize. What's that number? 15 A. 489,931, I guess. Yeah, 931. 16 Q. What's the number you actually used for 17 the December 31st balance on your exhibit T1213? 18 A. I used the 488,931 plus the 300,000 19 shares, added those two together and that's what I 20 put on the spreadsheet. 21 Q. Now, the 300,000 shares you added back 22 in there, that was per instructions by Mr. Veis, 2711 1 correct? 2 A. Yes, sir. 3 Q. Now, I would like to go ahead a couple 4 weeks to -- to the week of February 21st, 1986. 5 That's OW0235160. 6 A. Okay. 7 Q. Now, if we go to our friend 12942-3, 8 that shows a balance that week of what? 9 A. Looks like 486,729. 10 Q. And if we go to Exhibit T1213 for 11 2/21/86, what's your balance there? 12 A. 782,856 -- 356. 856 is what I put down 13 on my spreadsheet. 14 Q. How did you come up with 782,856 shares 15 on your spreadsheet? 16 A. It looks like I inadvertently used the 17 settlement figure of 482,856 plus the 300,000 18 shares. 19 Q. This time you used the number in the 20 first column instead of the third column? 21 A. Yes, sir. It shouldn't have been that 22 way, but looks like that's what I did. 2712 1 Q. Now, if you go down a couple of rows in 2 the stock weekly record, you'll see a reference to 3 an account 06-23 or 25500-6. 4 Do you see what I refer to? 5 A. Yes. 6 Q. And that has a number of 481,426 shares 7 in the first column, does it not? 8 A. Yes. 9 Q. Do you know what that account is? 10 A. No. 11 Q. That's a balance that is actually 12 fairly close to what's in the 12942 account, is it 13 not? 14 A. Looks to be within roughly 5,000 15 shares. It's close. 16 Q. Have you ever seen any significant 17 balances in any of the other accounts other than 18 the 942 account -- that is, significant in the 4 19 or 500 -- 20 A. I never noticed it,sir. 21 Q. If you notice right under it, there 22 is -- it looks like a different account, but it 2713 1 looks like the same number of shares, this time 2 with a balance in the short column. Do you see 3 what I refer to? 4 A. Yes, sir. 5 Q. And, in fact, if you look over to the 6 third column that you've been taking as the total, 7 it shows one account with that number of shares 8 long and one account with that number of shares 9 short? 10 A. Yes. 11 Q. Do you have any idea what that 12 indicates? 13 A. No. 14 Q. And did you make any inquiry to OTS 15 enforcement counsel as to whether that had 16 anything to do with the 942 account that you were 17 looking at? 18 A. No, I never made any such inquiry. 19 Q. Okay. I would like you to go ahead 20 again a few weeks and take a look now at -- the 21 page number is OW025164. 22 A. Okay. 2714 1 Q. Now, the date for that weekly run is 2 pretty tough to make out, isn't it? 3 A. It looks like 3-21. 4 Q. Well, the page before it is March 14th. 5 So, if they were putting them out weekly, 3-21 6 would sound about right? 7 A. Right. 8 Q. So, 3-21 sounds about in the right 9 bracket? 10 A. Yes. 11 Q. Now, in the 942 account, what's the 12 balance that week? 13 A. 790,001 shares. 14 Q. And looking at your Exhibit 1213, you 15 have 788,096? 16 A. Yes, sir. 17 Q. Which would appear that you used, 18 again, the first column instead of the third? 19 A. Yes, sir. 20 Q. Now, directly under that there are two 21 additional accounts, are there not? 22 A. Yes, sir. 2715 1 Q. As we saw before, these have one 2 account with an entry in the long position and one 3 account with an entry in the short position both 4 in the amount of 300,000 shares; is that correct? 5 A. Yes. 6 Q. Did you understand what that meant? 7 A. Initially, no. 8 Q. How did you come to understand what 9 that meant? 10 A. Subsequent to preparing the spreadsheet 11 and I forget now which version, but subsequent to 12 preparing it Mr. Veis explained to me that the 13 middle set of figures in an account designation, 14 there is a prefix and a suffix or two there -- but 15 that middle five-digit set of numbers is the main 16 account, is the main account designation and then 17 the suffix refers to sub accounts of that main 18 account. That is, for example, one of them -- and 19 I think it was the dash 7 suffix -- indicates that 20 that -- that the balance in that account is 21 restricted in some manner. 22 Q. And one of these two accounts that has 2716 1 the 300,000 share entry has a -07 suffix, does it 2 not? 3 A. Yes. 4 Q. Does that mean that those shares are 5 restricted in some way? 6 A. Yes. 7 Q. Would you understand restricted to mean 8 that Drexel was not free to trade those shares? 9 A. Well, they were restricted in that they 10 were subject to the put call agreement. 11 Q. Did you understand that those 300,000 12 shares that are referenced there are subject to 13 the put call agreement? 14 A. Yes. 15 Q. Those were in a restricted account at 16 Drexel that couldn't be traded, that was your 17 understanding? 18 A. I wouldn't go so far as to say they 19 couldn't be traded, but there were conditions, 20 limitations, restrictions on how they could be 21 handled. 22 Q. Actually, if you go down a couple more 2717 1 lines, you'll see a reference to an account 2 19011-2? 3 A. Uh-huh. 4 Q. That has an entry for 300,000 shares as 5 well, does it not? 6 A. Yes. 7 Q. If you go all the way over to the 8 right, the entry on the right is 300,000 and then 9 SEG and that would, I assume, stand for 10 segregated? 11 A. I don't know. 12 Q. As I understand it, then, when you 13 prepared your chart which is Exhibit 1216 -- 14 actually, two of the three charts, you put that 15 green shaded portion in there specifically at 16 Mr. Veis' direction? 17 A. That's correct. 18 Q. Now, I want to show you a document that 19 I've had marked as Exhibit B3763. Do you 20 recognize B3763 Mr. Oliver? 21 A. Yes, I do. 22 Q. Is that an earlier version of your bar 2718 1 graph? 2 A. Yes, sir. 3 Q. That's actually one that you produced 4 at your deposition, I think, isn't it? 5 A. I believe I did, yes, sir. 6 Q. I want to compare this just briefly 7 with Exhibit T1216 which is one of the graphs 8 you've used here today. 1216, you've put on the 9 red line representing the prices and that's not on 10 D -- B3763? 11 A. No, the red line is not on there. 12 Q. Okay. You do have something else on 13 B3763 that interests me. You have on there what I 14 would call some time lines, do you not? 15 A. You mean the horizontal at the bottom? 16 Q. No, I'm talking about some little 17 vertical lines that are keyed to some language at 18 the top. First one, application filed 6/29/83. 19 A. Yes. 20 Q. What does that mean? 21 A. There was a corporate activities change 22 of control application filed on that date with the 2719 1 Federal Home Loan Bank. 2 Q. That's what's referred to as an H-(e)1 3 application? 4 A. I believe so, yes, sir. 5 Q. And you had marked on there exactly 6 when that was filed, had you not? 7 A. 6/29, yes. 8 Q. You drew that line on your chart 9 corresponding to your time lines at the bottom? 10 A. Yes. 11 Q. Why did you put that time line on 12 there? Did enforcement tell you to do that? 13 A. Yes. 14 Q. And why did you take it off? 15 A. Well, in subsequent versions of that, 16 it wasn't -- it was done for aesthetic purposes. 17 It really didn't add anything to what we were 18 trying to reflect in subsequent versions, and 19 aesthetically we were trying to put a lot of 20 information on there. Since it really wasn't 21 relevant, it gave it a cluttered appearance. It 22 was done, one, for aesthetic purposes and, two, 2720 1 for -- because it really didn't go to the 2 objective of the subsequent versions. 3 Q. Did enforcement counsel tell you to 4 take that line off? 5 A. No, I did it. 6 Q. I'll stick a little Post-it up on your 7 graph for a moment that says H-(e)-1 application 8 filed 6/29/83. The second little line at the top 9 you had was "application approved 12/6/84." 10 A. Yes. 11 Q. That refers to the H-(e)-1 application? 12 A. Yes. That was the date on which the 13 Federal Home Loan Bank Board -- I think it was the 14 bank board -- approved it. 15 Q. I'll put another little sticky up 16 there. The last one you had was you have "change 17 of control abandoned 12/21/87"; is that correct? 18 A. Yes, sir. 19 Q. We'll put that up there, another 20 Post-it with that information on it. 21 Now, if you put these three time 22 indications on your chart, Mr. Oliver, it would 2721 1 appear to me, would it not, that the principal 2 buildup of stock in this account began at roughly 3 the time this application was filed, continued to 4 build up roughly to the time the application was 5 approved, then built up something more, stayed 6 reasonably constant until the time the change of 7 control resolution expired, and then fell off. 8 Would that be about right? 9 A. Yes, sir. I think that would be a 10 reasonable conclusion. 11 Q. And I suppose looking at that chart one 12 might conclude that the people who owned this 13 stock thought this was a pretty good stock as long 14 as the application was filed, thought it was an 15 even better stock once the application was 16 approved, continued to think it was a pretty good 17 stock until the change of control resolution 18 expired and didn't think so highly of it anymore? 19 MR. VEIS: Your Honor, this calls for 20 the witness to give an opinion on matters that are 21 clearly beyond the scope of what he was asked to 22 do. 2722 1 THE COURT: I'm not sure it was a 2 question, but I'll sustain the objection. 3 MR. EISENHART: I'll withdraw the 4 question, Your Honor. 5 I have no further questions for 6 Mr. Oliver, Your Honor. 7 THE COURT: Are there any other 8 questions from the respondents? 9 MS. CLARK: No, Your Honor. 10 MR. DUEFFERT: No, Your Honor. 11 MR. KEETON: I have a couple, Your 12 Honor. 13 14 15 CROSS-EXAMINATION 16 17 18 Q. (BY MR. KEETON) Mr. Oliver, your chart 19 says "Milken-related entities." 20 Do you know who the beneficial owners 21 of those entities are? 22 A. I was shown some documents -- I can't 2723 1 recall what the title was. They were legal 2 documents -- to show who were the partners in 3 those entities, and I think one of them was a 4 document legalizing -- I'm not sure what the term 5 is -- but reflecting a name change in one of the 6 entities. 7 So, I would -- I assumed from reading 8 those that the beneficial owners of those entities 9 were the people who were shown as the partners in 10 those documents. 11 Q. So, it's more than just Michael Milken 12 and his brother Lowell Milken? 13 A. Well, I would have to refresh my 14 memory, but in one of those entities I think they 15 were partners in another partnership and that 16 partnership, along with them, were partners in 17 this entity. It got kind of -- it got 18 complicated. Since that was not a purpose -- 19 those weren't my instructions, to look at that 20 type of information, I didn't focus on it. It 21 wasn't relevant to what I was instructed to do. 22 Q. The title "Milken-related entities" was 2724 1 given to you so you could entitle your charts 2 that? 3 A. No. That was my creation. 4 Q. You just decided to call them that? 5 A. These accounts that I used were 6 described to me by enforcement staff as accounts 7 in which Lowell and Michael Milken and their 8 business entities, in which they owned the stock. 9 Q. No one other than those two? Weren't 10 there other partners in there? 11 A. I think in one of them -- I think their 12 wives -- I think there was a Lori Milken. One of 13 those entities, their wives were involved. 14 Q. So, it's based on what enforcement 15 staff told you that led you to entitle these 16 charts what you did? 17 A. Well, that and going over these legal 18 documents, these partnership agreements and name 19 change documents and other things that I looked 20 at, I didn't -- I didn't see any discrepancies. 21 But here again, my objective was not to ferret out 22 these legal relationships. Mine was simply to add 2725 1 up the stock and prepare a compilation and a 2 graph. It wasn't -- 3 Q. You read the notice of charges. Did 4 you also read the answer that the various 5 respondents filed -- or I should say answers, 6 plural? 7 A. You know, I may have. It would help if 8 you showed it to me. Here again, that document I 9 read simply for background information and it was 10 not an in-depth reading and it didn't go to the 11 heart of what my instructions were of what I was 12 supposed to do. So, I read it very quickly the 13 first day it was given to me, and I don't really 14 think I referred to it much after that. 15 Q. Some might think it's a one-sided 16 background. That's why I asked if you read the -- 17 A. You mean the notice of charges? 18 Q. Yes. 19 A. To me it was just another notice of 20 charges. 21 MR. KEETON: I have no other questions. 22 THE COURT: Redirect? 2726 1 MR. VEIS: Your Honor, I believe I may 2 have substantial redirect examination. It may be 3 convenient to take our lunch recess. 4 5 (Whereupon a luncheon recess 6 was had from 12:00 to 1:30 p.m.) 7 8 FURTHER EXAMINATION 9 10 THE COURT: We'll be back on the 11 record. I believe the OTS has got some redirect. 12 MR. VEIS: When we broke, I indicated I 13 might have substantial redirect. After reviewing 14 my notes and consulting with my colleagues, I 15 believe it to be shorter than I indicated. 16 Q. (BY MR. VEIS) Mr. Oliver, did you have 17 an opportunity to review documents during the 18 break? 19 A. I did. 20 Q. What did you review? 21 A. I reviewed various legal documents that 22 reflected the partnership partners in 2727 1 Milken-related entities. 2 Q. Did you review any other documents? 3 A. I reviewed a transcript of testimony 4 from Mr. Diegnan. 5 Q. And what about transactional or account 6 documents from the various Milken-related 7 partnerships? 8 A. I also reviewed monthly statements on 9 the accounts related to the Milken entities at the 10 various brokerage houses. 11 Q. Did those reviews refresh your 12 recollection as to some of the matters on which 13 you were cross-examined this morning? 14 A. Those are all documents I had seen 15 before. 16 Q. Let me direct your attention to, first 17 off, Exhibit T1219. 18 A. What is that? 19 Q. That is the Milken-related holdings. 20 It's the graph that you prepared that reflected 21 the -- this document. Now, on cross-examination 22 you were asked whether there was any document that 2728 1 supported your assumption in Exhibit T1219 as to 2 there being 233,600 shares being held in account 3 06-12-942 December 31st, 1986. 4 Do you recall that? 5 A. I do. 6 Q. Now, is there any such document? 7 A. There is. 8 Q. What is that? 9 A. Well, there's a couple documents. One 10 is Mr. Diegnan's testimony. The second document 11 is Exhibit T1200, which is a memo to Mr. Diegnan 12 with some attached documents to it. 13 Q. Would you please explain how those 14 documents support the statement in Exhibit T1219 15 that there were 233,600 shares held in Account 16 06-12-942 December 31, 1986? 17 A. All right. As I have testified 18 earlier, there is no specific document that says 19 12/31/86, 233,600 shares. However, if you look at 20 Exhibit T1200, it contains a memo to Mr. Diegnan 21 from Sal Stabile dated February 23rd, 1987, which 22 indicates that there are in that account 233,600 2729 1 shares outstanding. Attached to part of that same 2 exhibit, to the Drexel Burnham report, is a 3 document that reflects changes in that account on 4 various dates. On that -- on October the 2nd, 5 1986, it says that there were 233,600 shares 6 outstanding. Mr. -- and that those -- that 7 nothing changed after that. Mr. Diegnan's 8 transcript, he testified that this report was 9 printed on or about February 23rd, 1987, and 10 indicated that there were 233,000 -- that there 11 were no changes, that this report was printed out 12 when there weren't any changes. So, if you look 13 at October the 2nd, 1986, and 233,000 shares 14 outstanding, those 233,000 shares are still 15 outstanding as we go on down this line in March of 16 '87. 17 So, the assumption then is if those 18 shares, 233,600, were outstanding before 19 December 31st, '86, and continued to be 20 outstanding after December 31st, '86, the 21 assumption is they were outstanding. 22 Q. Did Mr. Diegnan testify concerning a 2730 1 date on that report that would indicate the last 2 change in the account? 3 A. October 2nd, 1986. 4 Q. So, based upon Mr. Diegnan's testimony 5 that the last change in the account was 6 October 2nd, 1986, and Mr. Diegnan's testimony 7 that the document was printed out on or about 8 February 23rd, 1987, what was your conclusion? 9 A. That on December 31st, 1986, 233,600 10 shares were outstanding. 11 Q. Thank you. 12 Now, Mr. Keeton, I believe, asked you 13 some questions about the title of Exhibit 1217 14 which has already been admitted into evidence. 15 Mr. Keeton asked you how you came to call that 16 document a summary of Milken-related account 17 holdings. 18 Now, did you have an opportunity over 19 the lunch recess to review documents to remind you 20 how you came to call it that? 21 A. Yes, I did. 22 Q. What did you do? 2731 1 A. I had previously reviewed documents 2 that showed that Michael and Lowell Milken and 3 other individuals were partners in various 4 entities, and because they were partners in one 5 way or another in these entities, I simply called 6 them Milken-related entities. 7 Q. And who were those other individuals? 8 A. Well, in the GLJ entity, Michael Milken 9 was a partner with Lorsan partnership, which was 10 itself -- which itself consisted of partners of 11 Michael and Lowell Milken. Then ML Associates was 12 Michael and Lowell Milken. WILCAM were Michael 13 and Lowell Milken and their wives, Lori and Sandra 14 Milken. 15 Q. And these were documents that you had 16 previously reviewed in preparation of the exhibit 17 itself? 18 A. Yes, and I think I testified that I had 19 seen these documents early on, yes. 20 Q. Other than Michael Milken, Lowell 21 Milken, and their spouses, were any other 22 ownership interests represented in the documents 2732 1 you reviewed? 2 A. I didn't -- I didn't see any. Now, of 3 course, there was Lorsan, but that consisted of 4 Michael and Lowell. 5 Q. Thank you. 6 Now, Mr. Eisenhart pointed out one 7 point, I believe, during an objection during 8 direct testimony that there was an error in 9 Exhibit T1218, which is -- 10 A. Yes, he did. 11 Q. Do you recall what that error was? 12 A. Yes. He had been questioning me about 13 the shares outstanding at the end of those years 14 there, and I believe he pointed out that there was 15 an error in 1988. 16 Q. Do you recall what the error was? 17 A. Yes. When I prepared this, I just made 18 an error and I showed 113,000 shares outstanding 19 in 1988 when really I believe it was 72,000 20 shares. 21 Q. At the end of 1988? 22 A. Yes, sir. 2733 1 Q. And based upon that information, did 2 you recalculate the percentage of ownership? 3 A. Yes, I did. And after replacing the 4 113,000 there with 72,000, the percentage changes 5 to .96 percent. 6 Q. Now, during cross-examination 7 Mr. Eisenhart also asked you if there were any 8 specific documents that indicated the 9 Milken-related holdings as of December 31st of 10 each of the years on Exhibit T1218. That was 1981 11 through 1988. 12 Do you recall that? 13 A. I do. 14 Q. And can you explain how it is you came 15 to conclude that on each of those years the 16 balance reflected was, in fact, the balance at 17 December 31, 1988? 18 A. As I said earlier, I had reviewed all 19 the monthly statements that had been provided to 20 me on these accounts and when an account balance 21 appeared before December 31st of any given year 22 and remained the same after December 31st, then I 2734 1 concluded that on December 31st there had been no 2 change and the balance had been the same unless 3 there were some other evidence to show otherwise 4 and there wasn't. 5 If there were no transactions and the 6 balance didn't change and December 31st came in 7 the middle of that time line, then the assumption 8 has to be that the balance didn't change. 9 Q. Were there in some or even many cases 10 account statements that reflected balances as of 11 December 31st? 12 A. There were. In some cases there were 13 and in some cases there weren't. 14 Q. Now, in addition, did you testify 15 earlier with respect to Exhibit 1217 that the 16 intervening periods between the transactions 17 reflected were periods in which there had been no 18 transactions in the accounts you examined? 19 A. Yes. I forget my exact words, but I 20 believe that I testified that the dates in the 21 left-hand column, I chose those dates because it 22 was on those dates that activity occurred and that 2735 1 there was no activity, no other activity between 2 those dates. So, for example, on 1/8/82, there 3 was some activity. Between 1/8/82 and the next 4 entry, which is 5/19/83, there was no activity 5 until 5/19/83. And that's why I chose 5/19/83 6 because between January 8th, 1982, and May 19th, 7 1983, I had no documentation to show there was any 8 activity in those accounts. So, the balance 9 between those two dates would have remained the 10 same. 11 MR. VEIS: Your Honor, at this point I 12 would renew my motion to admit Exhibits T1218 and 13 T1219. Those are -- 14 MR. EISENHART: Do I understand he's 15 offering a corrected version of 1218? 16 MR. VEIS: I will ask Mr. Oliver to 17 strike out on his official -- on his witness copy 18 the numbers 113,000 and insert 72,000 and simply 19 strike out 1.50 percent and insert .96 percent. 20 MR. EISENHART: Your Honor, I have no 21 objection to these as demonstrative evidence, but 22 they don't really summarize any data as I've heard 2736 1 described. They include certain assumptions that 2 Mr. Oliver made from the data, but they don't 3 really actually summarize any data. I understood 4 these were going to be offered as summaries of 5 voluminous data. 6 MR. VEIS: Exhibit 1217 is a partial 7 summary. It gives transaction and balance data. 8 1218 simply carries further that information by 9 relating it to the outstanding shares of MCO 10 Holdings, as does Exhibit T1219, which puts 11 together in one place and summarizes the amounts 12 and percentages of ownership by Drexel and the 13 Milken-related entities of MM stock as of 12/31, 14 1996. 15 MR. EISENHART: I understand what the 16 exhibits say, Your Honor. The exhibits are merely 17 arguments that have been made from the data. They 18 don't really summarize the data. So, they are 19 argumentative and not really reflective of what 20 this witness was supposed to do. 21 MR. VEIS: They are mere calculations. 22 THE COURT: All right. They are 2737 1 received. 2 MR. VEIS: Thank you, Your Honor. 3 THE COURT: That is 1219 -- 4 MR. VEIS: And 1218. 5 A. Which exhibit do you want me to make 6 the change to? 7 Q. (BY MR. VEIS) 72,000 shares in the 8 column under 1988 and .96 percent, if that's your 9 testimony. 10 THE COURT: How about T1213 and 14? 11 MR. VEIS: I'm about to go to those, 12 Your Honor. 13 Q. (BY MR. VEIS) Mr. Oliver, 14 Mr. Eisenhart asked you a number of questions in 15 relation to T1213 and specifically he directed 16 your attention to I believe it's T1193, the stock 17 record weekly. 18 Do you recall those questions? 19 A. Yes. 20 Q. Now, do you recall -- we can certainly 21 get the exhibit out. Do you recall the amounts, 22 roughly, of the difference between the entries 2738 1 that Mr. Eisenhart questioned you on where you 2 mistakenly entered figures from the settlement 3 quantity rather than the trade quantity as had 4 been your practice? 5 A. Yes. I can't quote you the precise 6 figure; but it seemed like it was only maybe four 7 or five -- 6,000-share difference in the two 8 totals. 9 Q. Out of a total of 790,000 shares? 10 A. Out of a total of almost 800,000 shares 11 in some instances. 12 Q. Would that even be visible to the naked 13 eye on this graph? 14 A. No, that would not be reflected at all. 15 Q. Now, Mr. Eisenhart also asked you about 16 certain other accounts that reflected share 17 balances with respect to shares of MCO Holdings. 18 Do you recall that? 19 A. Yes. 20 Q. Were you asked to review any other 21 accounts other than the 12-942 account with its 22 various sub accounts? 2739 1 A. I don't understand the question. 2 Q. Were you asked by OTS to review any 3 other accounts other than the 12-942 account? 4 A. Yes. Well, just the 12-942- -- I 5 believe it's 3. I reviewed that account. 6 Q. Did you review any of the other 7 accounts that Mr. Eisenhart directed your 8 attention to? 9 A. No, no. 10 Q. That wasn't within your purview? 11 A. No. I think I testified earlier that I 12 was only to address that particular account. 13 Q. Did you review Mr. Diegnan's testimony 14 with respect to the meaning of the 07 suffix? 15 A. Yes. That was part of the transcript I 16 read. 17 Q. What do you recall of that? 18 A. Well, the 07 suffix represented that 19 the shares in that account were restricted. 20 Q. And with respect to the 12942-3 account 21 and the restricted subsequent account, is that 22 balance at all times 300,000 shares? 2740 1 A. I believe it was, yes. 2 Q. Now, you had also been questioned about 3 the balances that you reflect in the stock record 4 weekly portion of Exhibit T1213 with respect to 5 the period around December, 1985. 6 Do you recall that? That would be on 7 page 12 of the document. 8 A. Yes. 9 Q. Do you recall his questioning you about 10 that? 11 A. Yes. 12 Q. Now, are you aware that there were, in 13 fact, 300,000 shares of United Financial Group 14 stock subject to an option beginning sometime in 15 December, 1985? You've been told that; is that 16 correct? 17 A. Well, I've been told that and I also 18 read it in the notice of charges. 19 Q. That's the basis for your assuming that 20 that is, in fact, the case? 21 A. Yes. All along throughout this 22 process, I knew there were 300,000 shares subject 2741 1 to the put call agreement. 2 Q. Now, when you reviewed the 12/31, 1985, 3 stock record weekly with Mr. Eisenhart, he pointed 4 out that, in fact, the entry was not 788,931 5 shares that you have reflected on page 12 but 6 rather some amount in the neighborhood of 490,000 7 shares. 8 Do you recall that? 9 A. Yes. 10 Q. Now, why did you assume that -- or why 11 did you add the 300,000 shares into the figure 12 when you created the compilation; that is, 13 Exhibit T1213? 14 A. Well, throughout my review of this 15 account and the balances in this account over this 16 six-year period, it was easy to understand what 17 the balances were and then at this time period, at 18 the end of '85, to me, inexplicable the balance 19 changed all of a sudden. It was less by 300,000 20 shares. And I had nothing to tell me specifically 21 why all of a sudden the balance -- the balance 22 changed. It had been running in, roughly, the 2742 1 780, 790,000-dollar range. Then all of a sudden 2 it dropped to 480-something thousand. 3 I knew from having read other documents 4 and discussions with enforcement staff that 5 300,000 shares were subject to the put call 6 agreement and, having reviewed the stock record 7 weekly and the trade runs and other documents, 8 there was nothing to show that 300,000 shares had 9 been sold or transferred or otherwise disposed of. 10 So, the assumption to me was that they were 11 still -- that they were still there but were not 12 being accounted for by Drexel Burnham. So, after 13 discussions with counsel, we decided to put it 14 back in there. 15 Q. Now, at a later point in your testimony 16 or in your analysis, I believe you testified that 17 the 300,000 shares reappeared in the balance. 18 Do you recall that? 19 A. Yes. 20 Q. Can you explain that, please? 21 A. Well, as I said, the balance had been 22 running in the 780,000, 790,000-range and then 2743 1 dropped by 300,000 shares and then at some point a 2 few months later -- I would have to go back -- 3 looks like it was about sometime in March. Then 4 all of a sudden the balance went back up again to 5 the 780-, 790-range without any explanation and 6 other documents so that some time in late '85, the 7 balance you would expect to be changed, reduced, 8 and then a few months later it inexplicably 9 restored itself without any other transactions 10 that I was aware of. There were no disposition or 11 acquisitions of stock that I saw in any documents 12 that I looked at that would explain that. 13 Q. And you had reviewed these trade 14 tickets as well as the trade runs and determined a 15 significant correspondence between them. Is that 16 true? 17 A. That's correct. 18 Q. So, you believe it was reasonable, 19 then, to assume that those 300,000 shares were, in 20 fact -- were, in fact, the 300,000 shares subject 21 to the Drexel option? 22 A. Yes, of course. I mean, if you look at 2744 1 the stock record weekly both before and after this 2 period, the outstandings were in that 790-range 3 with the exception of that brief three- or 4 four-month period. 5 MR. VEIS: Your Honor, at this point I 6 would renew my motion to admit T1213, 1214, 1215, 7 and 1216. 8 MR. EISENHART: With respect to 9 Exhibit T1213, I would urge that that not be 10 admitted. The errors that I brought out on 11 cross-examination were illustrative; but in 12 looking at half a dozen pages we found at least 13 that many instances where he didn't follow his own 14 methodology where he adjusted things on the 15 instruction of Mr. Veis. 16 I would also point out that the trade 17 runs here which he says he then went back and 18 double-checked against the trade tickets, he said 19 initially he checked, I think, six or eight trade 20 tickets and it looked pretty good and he didn't do 21 any more. Then he went back after his deposition 22 and checked all the trade tickets and found a 5 to 2745 1 10 percent error rate. Five to 10 percent error 2 rate may not sound high to Mr. Oliver. I find 3 that astonishingly high. 4 MR. VEIS: I believe Mr. Oliver's 5 testimony with respect to trade tickets is 6 primarily that there were a number of transactions 7 represented in the trade runs of which he couldn't 8 find trade tickets. As I recall, when we argued 9 the admission of the trade tickets in evidence 10 here some days ago, Mr. Eisenhart's main objection 11 was, or one of them, other than sponsoring the 12 witness, was that there was no guarantee that the 13 trade tickets were a complete collection. I think 14 if we have 95 percent of the transactions 15 accounted for between the trade tickets and the 16 trade runs, I think it's an astonishing success. 17 I think that lends credibility to the data in the 18 trade run, and I think it lends substantial 19 support to admitting this document in evidence. 20 MR. EISENHART: I don't recall the 21 witness having said 90 to 95 percent of them were 22 accounted for. What I wrote down that he said was 2746 1 that he looked at the trade tickets, looked at all 2 the trade tickets, compared them to the trade 3 runs, and in about 90 to 95 percent of the 4 instances they agreed, which means 5 to 10 percent 5 of the instances they didn't agree. 6 MR. VEIS: I don't believe that's what 7 he said. 8 THE COURT: Well, it seems to me these 9 records have some presumptive validity. Obviously 10 more could be developed if it were available. I 11 think that they are reasonably reliable, and I'll 12 receive them. 13 MR. VEIS: Thank you, Your Honor. I 14 have nothing further. 15 MR. EISENHART: Your Honor, I have just 16 one piece of redirect or recross, excuse me. 17 18 FURTHER CROSS-EXAMINATION 19 20 21 Q. (BY MR. EISENHART) Do you remember 22 your deposition being taken in this case a while 2747 1 ago, Mr. Oliver? 2 A. Yes, I do. 3 Q. September 19th, actually, three days 4 before the day this trial started? 5 A. Yes. I don't recall the exact date, 6 but it was about that time. 7 Q. And in your deposition you were asked 8 about this business of adding in the 300,000 9 shares and how you came to add it and you were 10 asked the following question: Do you believe your 11 chart is more accurate with inclusion of the 12 300,000 shares or the exclusion of the 300,000 13 shares? 14 You gave this answer: My analysis of 15 the stock record weekly and the trade runs, there 16 was a time period in there where the 300,000 17 shares were not included in the account totals in 18 the account. I don't know why they weren't. So, 19 when I compiled the stock transaction data in that 20 time period, the balances in the account were 21 300,000 shares less because for whatever reason 22 that I am not aware, Drexel Burnham was not 2748 1 reflecting those 300,000 shares. Then after a 2 certain time period they began to show up in the 3 accounts again. So, when I compiled the data per 4 my instructions to compile simply what was in 5 front of me, that's what I did. So, then, for 6 purposes of illustrating the ownership in graphic 7 form, I was told by Mr. Veis that those 300,000 8 shares were always owned by Drexel, that the 9 reason that they were not reflected in the 10 accounts -- we don't know the reason why they 11 weren't reflected -- they were owned by Drexel. I 12 was to go ahead and include the 300,000 shares and 13 that's what I did. 14 Then the next question you were asked 15 was: Is it accurate to say then that the 16 inclusion of the 300,000 shares was not based on 17 information you reviewed to summarize but based on 18 Mr. Veis' suggestion that you include it in the 19 chart? 20 You answered: That is correct. 21 Does that sound like the testimony you 22 gave on September 19th, Mr. Oliver? 2749 1 A. Yes. 2 Q. Seems to me a moment ago when Mr. Veis 3 was questioning you you said that you decided to 4 include the 300,000 shares based on some further 5 analysis and not on anything that Mr. Veis told 6 you. Which is it? 7 A. Well, if you look at the balances in 8 the trade runs for that same time period, they are 9 all up in the 700,000 range. So, it was 10 inexplicable why if you look at the weekly record 11 it's suddenly in the 400,000 range. 12 So, there has to be some reason why the 13 two don't match. When we decided to do those 300, 14 it was reasonable and the evidence that I had 15 confirmed that. So, I saw no reason not to. 16 Q. My question to you is much more basic 17 than that, Mr. Oliver. Did you do this on your 18 own as a result of further analysis, or did you do 19 it because Mr. Veis told you to do it? 20 A. Both. I did further analysis and it 21 supported what Mr. Veis' position was. 22 MR. EISENHART: I have no further 2750 1 questions, Your Honor. 2 3 CROSS-EXAMINATION 4 5 Q. (BY MR. NICKENS) Mr. Oliver, I would 6 like to ask you a few questions about the use of 7 the word "inexplicable." Is that your word? 8 A. That's my choice. 9 Q. You found that there was no way to 10 explain the fact that these 300,000 shares were 11 transferred to another account? 12 A. Let me explain. 13 Q. Well, is that explicable or not? 14 A. My instructions were to look at one 15 particular account and to determine the balances 16 in that account. 17 Q. And you knew that the shares had been 18 transferred to another account? 19 A. At the point I compiled this, I did not 20 know that. 21 Q. You know that now, right? 22 A. I now that now. 2751 1 Q. Is that explicable or not? 2 A. At this point it's explicable, but at 3 the time I didn't know that there were sub 4 accounts. 5 Q. Well, every one of these transactions 6 involves a change in the number of shares from 7 either purchase or sale, right? 8 A. Yes. 9 Q. And other than purchase or sale, there 10 are no other explanations for the changes, right? 11 A. I don't know that to be a fact, no. I 12 can't say that. 13 Q. So, would it be your conclusion that 14 every change on your chart is inexplicable? 15 A. I don't know why all of a sudden that 16 balance dropped by 300,000. Could have been an 17 accounting error, computer error. I have no idea 18 why, and that's why I say it's inexplicable to me 19 because no one has ever explained it to me and 20 I've never seen any document that explains why the 21 stock record weekly had changed. 22 Q. I thought you had just told us that you 2752 1 were aware of the fact that those 300,000 shares 2 were transferred to another Drexel account and, in 3 fact, you identified that account with the 07 4 number? 5 MR. VEIS: Mr. Oliver did not testify 6 that that was another account. He testified it 7 was a sub account within the same account. 8 MR. NICKENS: I have an objection to 9 that, Your Honor. I don't believe that was 10 Mr. Diegnan's testimony. That has been a new term 11 introduced into this by Mr. Veis. I don't think 12 the word "sub account" was used by Mr. Diegnan. 13 MR. VEIS: I think he referred to it as 14 an account type. He indicated that a transfer 15 from one account type to another account type did 16 not indicate a change of ownership. That is in 17 his transcript and we can point out the page on 18 which that statement is in his transcript. 19 MR. NICKENS: I believe, Your Honor, 20 that it will support what I said. 21 Q. (BY MR. NICKENS) Mr. Oliver, you know 22 today that those shares were transferred to 2753 1 another account, right? 2 A. To another account with a different 3 account number, yes, sir. 4 Q. And that's a perfectly logical, 5 reasonable explanation for why this account goes 6 down 300 shares, isn't it? 7 A. Now that I know it, yes. 8 Q. So why are you telling the Court that 9 it is inexplicable? 10 A. Because when I prepared this report, it 11 was inexplicable. 12 MR. VEIS: I have nothing further. 13 THE COURT: All right. Thank you, Mr. 14 Oliver. You may step down. 15 Are there any other matters which -- 16 MR. NICKENS: No, Your Honor. We have 17 discussed the witnesses for next week. I think we 18 have an understanding of that, and we'll be 19 prepared to start on Tuesday. 20 THE COURT: 10:00 o'clock. 21 (Whereupon at 2:10 p.m. the 22 proceedings were recessed.) 2754 1 STATE OF TEXAS 2 COUNTY OF HARRIS 3 4 I, the undersigned certified shorthand reporter and notary public in and for the State of 5 Texas, certify that the facts stated in the foregoing pages are true and correct to the best 6 of my ability. 7 I further certify that I am neither attorney or counsel for, nor related to or 8 employed by, any of the parties to the action in which this transcription is taken and, further, 9 that I am not a relative or employee of any counsel employed by the parties hereto, or 10 financially interested in the action. 11 SUBSCRIBED AND SWORN TO UNDER MY HAND AND SEAL OF OFFICE on this the 9th day of 12 October, 1996. 13 ________________________________ SHAUNA FOREMAN, CSR 14 Certified Shorthand Reporter and Notary Public in and for the 15 State of Texas 16 Certificate No. 3786 Expiration date: 12-31-98 17 My Commission expires: 9-14-99 18 . 19 . 20 . 21 . 22 . 2755 1 STATE OF TEXAS 2 COUNTY OF HARRIS 3 4 I, the undersigned certified shorthand reporter and notary public in and for the State of 5 Texas, certify that the facts stated in the foregoing pages are true and correct to the best 6 of my ability. 7 I further certify that I am neither attorney or counsel for, nor related to or 8 employed by, any of the parties to the action in which this transcription is taken and, further, 9 that I am not a relative or employee of any counsel employed by the parties hereto, or 10 financially interested in the action. 11 SUBSCRIBED AND SWORN TO UNDER MY HAND AND SEAL OF OFFICE on this the 9th day of 12 October, 1996. 13 ________________________________ ERICA DAVIS, CSR 14 Certified Shorthand Reporter and Notary Public in and for the 15 State of Texas 16 Certificate No. 6479 Expiration date: 12-31-98 17 My Commission expires: 9-14-99 18 19 20 21 22