9521 1 UNITED STATES OF AMERICA Before the 2 OFFICE OF THRIFT SUPERVISION DEPARTMENT OF THE TREASURY 3 In the Matter of: ) 4 ) UNITED SAVINGS ASSOCIATION OF ) 5 TEXAS, Houston, Texas, and ) ) 6 UNITED FINANCIAL GROUP, INC., ) Houston, Texas, a Savings ) 7 and Loan Holding Company ) ) OTS Order 8 MAXXAM, INC., Houston, Texas, ) No. AP 95-40 a Diversified Savings and ) Date: 9 Loan Holding Company ) Dec. 26, 1995 ) 10 FEDERATED DEVELOPMENT CO., ) a New York Business Trust, ) 11 ) CHARLES E. HURWITZ, ) 12 Institution-Affiliated Party ) and Present and Former Director ) 13 of United Savings Association ) of Texas, United Financial Group,) 14 and/or MAXXAM, Inc.; and ) ) 15 BARRY A. MUNITZ, JENARD M. GROSS,) ARTHUR S. BERNER, RONALD HUEBSCH,) 16 and MICHAEL CROW, Present and ) Former Directors and/or Officers ) 17 of United Savings Association of ) Texas, United Financial Group, ) 18 and/or MAXXAM, Inc., ) ) 19 Respondents. ) 20 21 TRIAL PROCEEDINGS FOR 12-9-97 22 9522 1 A-P-P-E-A-R-A-N-C-E-S 2 ON BEHALF OF THE AGENCY: 3 KENNETH J. GUIDO, Esquire (Not present) Special Enforcement Counsel 4 PAUL LEIMAN, Esquire SCOTT SCHWARTZ, Esquire 5 BRUCE RINALDI, Esquire RICHARD STEARNS, Esquire (Not present) 6 and BRYAN VEIS, Esquire (Not Present) of: Office of Thrift Supervision 7 Department of the Treasury 1700 G Street, N.W. 8 Washington, D.C. 20552 (202) 906-7395 9 ON BEHALF OF RESPONDENT MAXXAM, INC.: 10 FRANK J. EISENHART, Esquire 11 of: Dechert, Price & Rhoads 1500 K Street, N.W. 12 Washington, D.C. 20005-1208 (202) 626-3306 16 13 DALE A. HEAD (in-house) 14 Managing Counsel MAXXAM, Inc. 15 5847 San Felipe, Suite 2600 Houston, Texas 77057 16 (713) 267-3668 17 ON BEHALF OF RESPONDENT FEDERATED DEVELOPMENT CO. AND CHARLES HURWITZ: 18 RICHARD P. KEETON, Esquire 19 KATHLEEN KOPP, Esquire of: Mayor, Day, Caldwell & Keeton 20 1900 NationsBank Center, 700 Louisiana Houston, Texas 77002 21 (713) 225-7013 22 9523 1 ON BEHALF OF RESPONDENT FEDERATED DEVELOPMENT CO., CHARLES HURWITZ, AND MAXXAM, INC.: 2 JACKS C. NICKENS, Esquire 3 of: Clements, O'Neill, Pierce & Nickens 1000 Louisiana Street, Suite 1800 4 Houston, Texas 77002 (713) 654-7608 5 ON BEHALF OF JENARD M. GROSS: 6 PAUL BLANKENSTEIN, Esquire 7 MARK A. PERRY, Esquire (Not present) of: Gibson, Dunn & Crutcher 8 1050 Connecticut Avenue, N.W. Washington, D.C. 20036-5303 9 (202) 955-8500 10 ON BEHALF OF BERNER, CROW, MUNITZ AND HUEBSCH: 11 JOHN K. VILLA, Esquire MARY CLARK, Esquire (Not present) 12 PAUL DUEFFERT, Esquire of: Williams & Connolly 13 725 Twelfth Street, N.W. Washington, D.C. 20005 14 (202) 434-5000 15 OTS COURT: 16 HONORABLE ARTHUR L. SHIPE Administrative Law Judge 17 Office of Financial Institutions Adjudication 1700 G Street, N.W., 6th Floor 18 Washington, D.C. 20552 Jerry Langdon, Judge Shipe's Clerk 19 REPORTED BY: 20 Ms. Marcy Clark, CSR 21 Ms. Shauna Foreman, CSR 22 9524 1 2 EXAMINATION INDEX 3 4 Page 5 KENNETH GINDY 6 Cont'd Examination by Mr. Leiman.........9525 7 Voir Dire Examination by Mr. Keeton......9704 8 Cont'd Examination by Mr. Leiman.........9706 9 10 11 12 13 14 15 16 17 18 19 20 21 22 9525 1 P-R-O-C-E-E-D-I-N-G-S 2 (9:10 a.m.) 3 THE COURT: Be seated, please. The 4 hearing will come to order. 5 Mr. Leiman, you may continue with your 6 examination. 7 MR. LEIMAN: Thank you, Your Honor. 8 The first order of business, I'd like 9 to move that Exhibit T1 -- T7181 be admitted. 10 MR. KEETON: Just remind me which one 11 that is. 12 MR. NICKENS: Here it is. 13 MR. LEIMAN: It's a May 22, 1985 14 letter. 15 MR. KEETON: No objection. 16 THE COURT: Received. 17 18 CONTINUED EXAMINATION 19 20 21 Q. (BY MR. LEIMAN) New exhibit, T7800. 22 Mr. Gindy, I've handed you T7800, which is a 9526 1 March 4, 1985 letter directed to you from David 2 Graham. 3 Did you get this letter? 4 A. Yes, I did. 5 Q. Okay. Now, yesterday, we saw in 6 Exhibit 7166 your transmittal to Alamo -- 7 A. Yes. 8 Q. -- of some TFRs, thrift financial 9 reports. 10 A. Yes. 11 Q. When you received this letter from 12 Mr. Graham, this March 4th letter -- 13 A. Yes. 14 Q. -- what did you understand him to be 15 saying when he notes that "we all need to be aware 16 that if a final decision is up to Alamo Savings, 17 they may not accept our letter of credit on just 18 general principles." 19 What was he -- did you understand him 20 to be saying? 21 A. I understood that language to mean that 22 he was concerned or questioning whether the 9527 1 reports that I -- he had sent to me attached to 2 that letter that I forwarded on March the 5th 3 would be accepted by Alamo or the supervisors, 4 whatever supervision arrangement Alamo was then 5 under. I didn't dwell into the statements; but I 6 understood that he had some concern or question if 7 it would be accepted, and he had told me that if 8 it wasn't, he could make arrangements to get them 9 accepted. 10 Q. Okay. 11 MR. LEIMAN: Your Honor, I move T7800 12 into evidence. 13 MR. KEETON: Your Honor, I have no 14 objection, but I would want the record to note 15 this was not on the original exhibit list. 16 THE COURT: Received. 17 Q. (BY MR. LEIMAN) Let's turn back to 18 T7173. That's the first document there labeled 19 "collection agreement." We deferred review of 20 this until today. 21 Do you have that in front of you? 22 A. Yes, I do. 9528 1 Q. Mr. Gindy, did you prepare this? 2 A. The collection agreement, yes. 3 Q. Okay. What is this -- what's the 4 significance of the collection agreement? 5 A. At the time Park 410 West Joint Venture 6 bought the land from Alamo Savings Association, 7 there were a number of things that needed to be 8 accomplished after the decision had been made to 9 transfer or change the purchase from an all cash 10 purchase, which was a relatively easy transaction, 11 to a purchase where the buyers, being the 12 Rosenberg/Simpson groups or Simpson/Rosenberg 13 group, Park 410 West Joint Venture, was signing 14 notes or deferred payments by signing promissory 15 notes for the purchase price. 16 What happened is Alamo Savings was 17 under some type of supervision from the thrift 18 industry at the time. I don't recall the type. 19 But it was very important to them that the 20 transaction be structured in a manner that they 21 had the requisite equity or value securing their 22 note that was payable to them or their portion of 9529 1 the purchase price from their venture with 2 Mr. McClintick and Mr. Arburn. 3 So, what we ended up suggesting and 4 finally doing is that we took their partnership, 5 which also was named Park 410 something, and 6 dissolved it, divided the property in undivided 7 interest. Approximately 55 percent was conveyed 8 or transferred out of the partnership on 9 dissolution to Alamo Savings and approximately 10 45 percent was transferred to Mr. McClintick, who 11 had acquired Mr. Auburn's interest, so that the 12 land was owned in undivided interest. 13 Those individuals -- I mean, the 14 association and Mr. McClintick then conveyed their 15 undivided interest to Park 410 West Joint Venture 16 so that it acquired 100 percent of the property. 17 And Park 410 West Joint Venture signed two 18 different notes and two different deeds of trust. 19 The first note was for -- I'll have to refer to 20 this. I believe it was 17 -- no. It was for 21 $21 million, which was the Alamo Savings note, and 22 it was secured by a first lien deed of trust on 9530 1 the property. 2 Q. Now, if we look at page Bates 3 No. CN078109, there is a 21,840,000-dollar 4 non-negotiable promissory note. That Bates number 5 is in the lower right-hand corner. 6 Do you see it? 7 A. Yes. 8 Q. 78109. 9 A. Yes. 10 Q. Is that the note you're talking about? 11 A. Yes. 12 Q. Okay. 13 A. So, this note was secured by 14 100 percent ownership interest in the property so 15 that the 21-million-dollar note was secured not 16 just by the 55 percent that it acquired from Alamo 17 but by 100 percent of the land. And that gave 18 Alamo a first lien on all of the property for -- 19 its decision makers, Mr. Ross and whomever, made 20 the decision that that would provide them adequate 21 collateral for their first lien note. 22 The second note that was signed was a 9531 1 note to Mr. McClintick which, I believe, is the 2 17,177,665.52-dollar note. 3 Q. And that note can be found at CN078098? 4 A. Yes. 5 Q. Is that correct? 6 A. That's correct. And that note was to 7 pay Mr. McClintick for his 45 percent interest in 8 the property. It was secured by a second lien 9 deed of trust on the property so that he was 10 subordinate to Alamo. 11 At that point, we still had some 12 conflicting interest between the parties. 13 Mr. McClintick owed a substantial sum of money, 14 about -- a note that was for $12,925,000 that he 15 had not paid them. That note was included in the 16 17,177,665.52 note as a wrap so that the 17 17-million-dollar note by Park 410 West Joint 18 Venture to Mr. McClintick wrapped around and 19 included in its principal the $12 million that 20 Mr. McClintick owed to Alamo Savings. 21 Q. And that 12-million-dollar note can be 22 found at CN078104; is that right? 9532 1 A. Just a second. 104? Yes, that's 2 correct. So that when Mister -- so that when Park 3 410 West Joint Venture paid Mr. McClintick the 4 17-million-dollar note, that also included payment 5 to Alamo Savings of the 12-million-dollar note. 6 It was a pass-through to pay them off. 7 Okay. At this point, we had different 8 individuals that were concerned about how and 9 where the money would go and make sure things were 10 properly paid to the right people. So, we 11 provided -- on my side, representing Park 410 West 12 Joint Venture, I didn't want the 17-million-dollar 13 note of Mr. McClintick's to, by chance, be 14 transferred to someone else where the payment 15 wouldn't go to Alamo. There were some deferred 16 commissions that we talked about yesterday that 17 was payable to Mr. Grieshaber's firm. He wanted 18 to make sure that when the notes were paid, he got 19 his 1 point some odd percent of the notes that 20 were payable to him as commission. 21 So, I made the notes none negotiable so 22 they couldn't be transferred to a third party and 9533 1 a third party get a holder in court status. They 2 would have to take subject to the terms of this 3 collection arrangement, and we signed this 4 collection agreement where everybody put all the 5 notes with Alamo Savings, the financial 6 institution, for collection. And Alamo Savings 7 then agreed that when it received the money on 8 either the 17-million-dollar note or the 9 21-million-dollar note, it would apply that money 10 as set out in Paragraphs 1 and 2 of this 11 collection agreement. And there is an order of 12 payment and disbursements to make sure the money 13 flowed the way we wanted. The idea was to make 14 sure that this deferred payment for the land by 15 notes, when the cash did come in, if the Park 410 16 West Joint Venture elected to pay the notes off, 17 was disbursed in the requisite or the agreed order 18 to all the people that would have gotten the money 19 had the cash been paid originally when the 20 property was first bought in 1985. I'll get the 21 year right today. 22 Q. Now, looking at the commission note 9534 1 that you just referred to from Grieshaber and 2 Roberts, that would be found at CN078116; is that 3 right? 4 A. Yes. That's the 428,365-dollar note. 5 Q. Okay. Now, looking at each of these 6 individual notes that we've referred to, they all 7 bear a maturity date of March 29th, 1987; is that 8 right? 9 A. That's correct. 10 Q. All right. What's the significance of 11 that date? 12 A. Yesterday, we were going through the 13 earnest -- the addendum to the earnest money 14 contract where Park 410 West agreed to buy it from 15 Alamo Savings. At first, it was a cash purchase. 16 We then changed it from a cash purchase to a 17 purchase for promissory notes or a deferred 18 payment. And the agreed term was two years so 19 that Alamo Savings was carrying the purchase price 20 for a two-year period from closing date. So, the 21 reason it's March 29th, 1987, is that we closed on 22 March 29th and we had -- and that would be two 9535 1 years later. 2 So, for two years, the majority of 3 the -- the entire purchase price for the land was 4 deferred by the promissory notes. 5 MR. LEIMAN: Your Honor, I move the 6 exhibit into evidence, T7173. 7 MR. KEETON: No objection. 8 THE COURT: Received. 9 Q. (BY MR. LEIMAN) T7059. Mr. Gindy, I 10 handed you T7059, which is a May 1, 1985 letter 11 directed to your attention from David Graham. 12 Did you get a copy of this letter? 13 A. Yes, I did. 14 Q. And would that have been on or about 15 the date shown on the letter? 16 A. Yes. 17 Q. What did you understand Mr. Graham to 18 be discussing in the body of the letter? 19 A. In the first paragraph, he's forwarding 20 me two -- he's forwarding me -- "I processed your 21 request for reimbursement." I need to read the 22 letter for a moment. 9536 1 Q. All right. 2 A. (Witness reviews the document.) All 3 right. I'm sorry. The first thing he was doing 4 was sending the 155,000-dollar check payable to 5 Stanley that was in payment of the capital call 6 letter that we discussed yesterday. This 7 indicates to me that Stanley had probably paid the 8 $155,000 and this was reimbursing him for it. 9 The second was there was an invoice 10 that Stanley had submitted for his services in 11 connection with trying to assist United in 12 acquisition of the Park 410 tract. During the 13 process of the letter of intent and negotiations 14 which he was paying, that's the bill that's 15 attached to Page 13321 for $1,300. 16 And then there was also a letter of 17 credit that we had -- I had sent him a bill for 18 which I don't see the attachment that he referred 19 to here, but there was a separate letter of credit 20 fee that we had received an invoice for with the 21 letter of credit, the 2-million-dollar letter of 22 credit that he's indicating United had paid. 9537 1 Q. Now, looking at the second page which 2 is a bill from Oppenheimer, Rosenberg, the law 3 firm, the total invoice is for $1,312.85. And the 4 next page, we see a -- which is Bates 5 No. OW013322, we see a check in that same amount 6 directed to -- made payable to the order of the 7 law firm; is that right? 8 A. That's correct. 9 Q. So, would I be right in concluding that 10 Mr. Rosenberg and the firm were paid for his 11 services in connection with efforts by him and on 12 behalf of United Savings to buy the property from 13 Alamo? 14 A. Yes. 15 Q. Okay. 16 MR. LEIMAN: Your Honor, I move T7059 17 into evidence. 18 MR. KEETON: No objection. 19 THE COURT: Received. 20 Q. (BY MR. LEIMAN) You said yesterday 21 that Mr. Rosenberg was involved in real estate, 22 real estate development in Texas; is that right? 9538 1 A. That's correct. 2 Q. Okay. One of the projects, I think, 3 that we talked about was the Gateway project. 4 Do you remember that? 5 A. I don't remember talking about it, but 6 Gateway was a project that Stanley had some 7 involvement in. It was actually a project of his 8 son-in-law. 9 Q. Okay. Do you remember the amounts of 10 that that were involved? 11 A. I'm not positive. I believe it was 12 4 or $5 million, but I could be wrong. There's 13 several shopping center loans that -- 14 Q. Could we have -- 15 A. -- I could be confused with. 16 Q. Could we have T7119, please? 17 MR. KEETON: Paul, that's not on our 18 pull list. 19 MR. LEIMAN: I'm not going to move this 20 in as an exhibit. I would like to use it to 21 refresh his memory. 22 Q. (BY MR. LEIMAN) Looking at this, the 9539 1 numbers especially on the first page of the 2 exhibit under the -- about the middle of the page, 3 approval of a 9.2-million-dollar loan, do you see 4 that? 5 A. Yes. 6 Q. Does that refresh your memory? 7 A. It does. Apparently it was a 8 9,200,000-dollar loan. 9 Q. Did you have any involvement in that 10 loan? 11 A. Very little. I -- this loan was -- 12 very little involvement. I personally did not do 13 a lot of work on it. 14 Q. Okay. The -- in about 1985, do you 15 have a recollection as to how much Mister -- what 16 Mr. Rosenberg was indicating his net worth was? 17 A. No, I don't. I don't have any -- I 18 don't have the financial statements that I can 19 remember seeing at that point in time. 20 Q. Do you remember if Mr. Rosenberg 21 personally guaranteed real estate projects he was 22 involved in or any portion of them? 9540 1 A. Yes, he did. And I believe he 2 guaranteed a part of this one for Lee. 3 Q. That's your recollection? 4 A. Yes. 5 Q. Do you know where the project was? 6 A. I believe it was Galveston or Houston. 7 There were two shopping centers. I don't remember 8 initially which is which. 9 Q. "Lee" being whom? 10 A. Lee Sandoloski is Stanley's son-in-law. 11 Q. Okay. 12 A. But one was, I believe, in Houston. 13 One was either in -- along the coast of Beaumont, 14 Port Arthur, or Galveston. 15 Q. Looking at the front page, this 16 indicates it was in Beaumont. 17 A. Okay. 18 Q. Does that comport with your memory? 19 A. That would comport with it being on the 20 coast. 21 Q. Oh. Where did Mr. Rosenberg's 22 son-in-law, Sandoloski, Lee Sandoloski, get the 9541 1 loan for this project? 2 A. It's my understanding this was financed 3 at United Savings. 4 Q. Do you remember that, or do you have 5 to -- 6 A. I remember that because I was involved 7 in some financial transactions for Mr. Rosenberg 8 in connection with some other financial 9 institutions, and this loan came up as an item on 10 his financial statement. And that's how I became 11 aware. The involvement I had in connection with 12 the loan was on behalf of Stanley and the 13 recognition of that, working with his -- some of 14 his other creditors. 15 Q. Other creditors when? 16 A. In connection with the loan workout we 17 did for him with Frost Bank. 18 Q. When would that have been? 19 A. Just before he left our law firm. I 20 guess that's 1991, I think. 21 Q. Can you tell us why he was involved in 22 a loan workout, and why you were? 9542 1 A. I was doing work -- I think lots of 2 people in the real estate industry had financial 3 problems at that point, and he was being pressed 4 with some unsuccessful projects. I did some -- I 5 did a workout arrangement for him with the Frost 6 Bank, which is a bank in San Antonio that was one 7 of his major creditors. 8 Q. He was unable to cover personal 9 guaranties, or what was the nature of the workout? 10 A. We were doing a financial workout for 11 him where we restructured his debt that was owed 12 there and with a couple of other creditors because 13 of calls. 14 Q. Could I have T7117, please? 15 MR. KEETON: Paul? 16 MR. LEIMAN: Yes. 17 MR. KEETON: Help us. I mean, this is 18 getting -- 19 20 (Whereupon Mr. Keeton was provided 21 a copy of the exhibit.) 22 9543 1 MR. LEIMAN: Your Honor, I'd like to 2 hold this in abeyance. I'd like to hold this 3 particular document in abeyance. 4 7128, please. 5 THE COURT: Mr. Leiman, we show that 6 your Exhibit T7117 is already in as Exhibit B563. 7 MR. LEIMAN: I'm sorry, Your Honor. I 8 apologize. 9 MR. RINALDI: Is there a tab number on 10 it? 11 MS. RICHARDON: 772. 12 MR. LEIMAN: That may be why it wasn't 13 on the pull list, Your Honor. 14 Thank you, Your Honor, for the 15 information. We'll go back to what I have as 16 T7117, which is also B563. 17 Q. (BY MR. LEIMAN) If you would look at 18 that, Mr. Gindy, please. That's Stanley 19 Rosenberg's balance sheet as of August 1985. 20 A. Yes, sir. 21 Q. Do you recognize this? 22 A. I don't believe I've seen it before. 9544 1 Q. Did you help him -- did you ever help 2 him prepare any of his net worth statements or 3 balance sheets? 4 A. Generally not. They were usually 5 prepared by Mr. Barrett, his accountant. 6 Q. His accountant? Is that his personal 7 accountant? 8 A. His personal accountant, Charles 9 Barrett. 10 Q. Okay. Would -- can you tell if this 11 was prepared by Mr. Barrett? 12 A. It does not have his initials anywhere 13 on it, but it is in the form in which they were 14 routinely done as a balance sheet listing the 15 assets and -- I've seen other statements of his. 16 Q. Looking down the investment list, can 17 you tell me if you're familiar with any or most of 18 these or all of these investments? 19 A. I'm familiar with -- on the first page, 20 our law firm is the first. I'm familiar with most 21 of them on the first page. I'm familiar with 22 everything on the second page. The third page 9545 1 reminds me of where the other shopping center is 2 that we were just talking about. 3 Q. Well, that's -- let me stop you right 4 there and ask you about that. Would that be on 5 Page OW202153 in the lower left-hand side of the 6 page in the bar code? 7 A. 202153, yes. 8 Q. Yes. Okay. 9 MR. KEETON: Mr. Leiman, the admitted 10 exhibit has a different version. 11 THE COURT: I know. It may be -- 12 MR. LEIMAN: I'm sorry. 13 THE COURT: -- a very confused record. 14 MR. LEIMAN: I'll just refer to it as 15 the third page of the exhibit, Your Honor, 16 which -- and I'm looking specifically at the 17 second entry on the third page of the exhibit 18 which is Page 3. And right below it, it says 19 "balance sheet, August 1985." 20 A. Yes. The second entry is the Beaumont 21 Gateway Plaza Shopping Center. 22 Q. (BY MR. LEIMAN) Were you aware that 9546 1 Mr. Rosenberg was indicating that he had a 2 50 percent ownership interest in the Beaumont 3 Gateway Shopping -- 4 A. I understood that he owned half of it. 5 Q. Is that -- 6 A. I did know that, yes. 7 Q. Okay. If you would, just continue 8 looking and tell me if you are familiar with any 9 of the other projects and if any of the other 10 projects are specifically projects in which he 11 shared an interest with Mr. Charles Hurwitz. 12 A. (Witness reviews the document.) I'm 13 familiar with all the other projects on the third 14 page. And you'd asked if he had an interest with 15 Mr. Hurwitz in it? 16 Q. That you're aware of, yes. 17 A. That I know of? None on the third 18 page. I don't believe he had any on the second 19 page. Going to the fourth page, the only one on 20 the -- the only one I believe -- that I'm aware of 21 on the fourth page would be the second from the 22 bottom, which is the 45 percent interest in the 9547 1 Sage lease property off of 610. That was the one 2 I referred to yesterday. 3 Q. That's on Page 4 of this -- 4 A. That's on Page 4, second from the 5 bottom, 2-million-dollar entry. 6 Q. That 12-acre property there? 7 A. Yes. And I think I'm familiar with all 8 but two of the other properties on that page. 9 That's all that I see on this statement. I didn't 10 look -- I guess I need to look back at the first 11 page. (Witness reviews the document.) That's all 12 that I see on here. 13 Q. Looking at Page 5, Mr. Gindy, the third 14 entry down, 25 percent interest in 300 acres at 15 Loop 410 and new Westside Expressway, do you see 16 that? 17 A. Yes. 18 Q. Is that the Park 410 West Joint Venture 19 that we've been talking about this morning? 20 A. Yes. 21 Q. Do you know why Mr. Rosenberg was 22 carrying that at a value of $250,000? 9548 1 A. I do not, other than looking at what he 2 had as a basis in it. 3 Q. Yesterday we talked about the fact that 4 Mr. Rosenberg hadn't actually put any of his own 5 money into it but the money was being provided by 6 United Savings; is that right? 7 A. That's correct. 8 Q. Looking at the 250,000-dollar figure 9 that Mr. Rosenberg -- that's been put here next to 10 this entry, do you have any understanding as to 11 why that would be there? 12 A. It would be -- it could be what he felt 13 at that point was a value or a conservative value 14 of his ownership interest in the property net of 15 all the debts, his interest being half of the 16 50 percent interest that was held in his name so 17 that the other half, presumably, was owned by 18 United. 19 Q. And that would be what he -- it would 20 have been valued at? You just don't know? 21 MR. KEETON: Your Honor, this witness 22 has already said to start with that he doesn't 9549 1 know how it was made up. He's being asked to 2 speculate on what this means. 3 THE COURT: All right. Let's move on. 4 Q. (BY MR. LEIMAN) 7128. Mr. Gindy, did 5 you send a November 6th, 1985 letter to Charles 6 White? 7 A. Yes, I did. 8 Q. And you would have enclosed a check 9 along with that? 10 A. I enclosed the attached check. 11 Q. And what would be the purpose of this? 12 A. This was a check that we had requested 13 to make the contribution for the Westside 14 Expressway, the payment. And I had obtained 15 through Stanley and through David Graham the 16 Rosenberg/United Savings portion of the money. It 17 was payable to Park 410 West Joint Venture because 18 it was a contribution of capital or a contribution 19 or advance to the partnership. Park 410 West 20 Joint Venture was then to return to me a check for 21 $400,000 for the Westside Expressway contribution 22 which they, in fact, later did, which would have 9550 1 then have included also the money from the 2 Grieshaber and Roberts group and the money from 3 Noel Simpson's group. 4 Q. The check on the second page of the 5 exhibit was signed by Bruce F. Williams. 6 Do you know who that is? 7 A. I met him once or twice in connection 8 with the loan transaction later on. He's from 9 United. 10 Q. Okay. 11 MR. LEIMAN: Your Honor, I move T7128 12 into evidence. 13 MR. KEETON: No objection. 14 THE COURT: Received. 15 Q. (BY MR. LEIMAN) Tab 816, which would 16 be Exhibit T7182. Mr. Gindy, do you remember 17 receiving a copy of this memorandum? 18 A. Yes. 19 Q. What did you understand Mr. Noel 20 Simpson to be saying in this November 12th, 1985 21 memorandum? 22 A. Well, at this point, we had -- the 9551 1 Park 410 group had already made the decision to 2 start to develop the property and was seeking a 3 lender to take out Alamo Savings or to pay off the 4 Alamo Savings notes that were due in 1987. David 5 Graham had indicated a strong desire to change the 6 relationship from being a venturer with 7 Mr. Rosenberg and suggesting that United be the 8 lender. And before that was done, Noel wanted to 9 go out and look at some other alternatives for 10 financing. And this is kind of a summary of some 11 of the people that were being approached or they 12 were speaking with to see if there was an 13 interest. 14 Q. Looks like your task was to mobilize 15 Stanley Rosenberg in connection with Gibraltar. 16 Right? 17 A. That's correct. That's not uncommon. 18 Q. What do you mean? 19 A. I mean, I frequently would receive from 20 all sorts of people directions to get Stanley's 21 attention to something or to make sure it gets 22 taken care of. 9552 1 Q. And did you do that? 2 A. Yes. We wrote Gibraltar, and he 3 contacted them. 4 Q. There are a number of other 5 institutions listed on this page. 6 A. Yes. 7 Q. Western, First Texas, Commonwealth. 8 A. Yes. 9 Q. SASA, what is that? 10 A. SASA, San Antonio Savings Association. 11 Q. Others are First Continental, Western 12 Savings, and American Life Companies that are 13 referred to? 14 A. Yes. 15 Q. Were any of these -- well, first of 16 all, did any of these institutions participate in 17 the Park 410 matter? 18 A. Yes. First State actually became a 19 venturer in Park -- in the refinance that occurred 20 in 1986. It took a portion of the 50 percent 21 interest owned by Rosenberg. 22 Q. Okay. Anybody else? 9553 1 A. No. 2 Q. No one else on this page? 3 A. (Witness shakes head negatively.) 4 Q. 7183, Tab 817. I'll show you what's 5 been marked -- this is Tab 817. The 6 previously-marked exhibit was T7183. 7 Did you see a copy of this letter? 8 A. Yes, I did. 9 Q. What is Mr. Stahl indicating in his 10 letter? 11 A. Mr. Stahl is circulating or had 12 contacted us and told us that he had a prospective 13 but undisclosed lender that would be interested in 14 making a loan on the Park 410 West project, and 15 this memo from Noel Simpson is forwarding to us 16 information regarding his prospect. 17 Q. This is November 1985, about the same 18 time frame -- 19 A. Yes. 20 Q. -- when you were trying to mobilize 21 Mr. Rosenberg? 22 A. We were trying -- we were trying to 9554 1 contact various lenders with regard to financing 2 prospects. 3 Q. What were the results, if you know, of 4 Mr. Stahl's effort? 5 A. I do know that we did not reach an 6 agreement with Mr. Stahl's prospect. 7 Q. 7185. Tab 820. This is formerly 8 admitted as Tab 820, which is Exhibit 7185. 9 Did you send this letter to Charles 10 White? 11 A. Yes, I did. 12 Q. It's a January 24th, 1986 -- 13 A. Yes. 14 Q. -- letter. By the way, did you ever 15 find out -- first of all, who is Mr. Stahl? 16 A. Mr. Stahl was a loan officer -- a 17 principal, not just loan officer, of Alamo Savings 18 Association. He was involved in the management 19 and had been involved in the Park 410 property 20 when Alamo Savings and Mr. McClintick had been 21 partners or venturers in connection with that 22 transaction or in connection with that land. 9555 1 Q. Did you ever -- go ahead. I'm sorry. 2 A. And he had indicated that he had a 3 contact of someone -- maybe -- I don't know where 4 the source was because he never disclosed it, at 5 least to me -- of someone who might be interested 6 in an arrangement. 7 Q. Thank you, Mr. Gindy. Now, looking -- 8 turning our attention to T7185, this January 24th, 9 1986 letter -- 10 A. Yes. 11 Q. -- and as well as the letter that is 12 enclosed behind it, which was a letter to you. 13 A. Yes. 14 Q. First of all, why did you write this 15 letter to Mr. White? 16 A. I was forwarding to Mister -- to 17 Charles White, who was at the San Antonio office 18 of the Gulf Management group and who was doing 19 much of the work with our San Antonio appraiser, 20 Mr. Dugger, the letter that I had received from 21 David Graham regarding the appraisal, the letter 22 that was attached, and passing on to Charles that 9556 1 David had pretty much instructed us that we needed 2 to go ahead and use Mr. Schulz as the appraiser 3 for United and that we weren't going to -- he 4 wasn't going to be satisfied with the figures that 5 were coming from Mr. Dugger. 6 Q. What do you mean he wouldn't be -- you 7 mean Graham wouldn't be satisfied with the 8 figures? 9 A. Graham or -- I'm speaking of the "he" 10 as being United Savings. 11 Q. What do you mean by that? 12 A. The appraisal figures that were being 13 sought were not being achieved in the -- or 14 reached in the numbers that Mr. Dugger had come up 15 with to support the 80-million-dollar loan or the 16 73-million-dollar loan, depending on which way you 17 worked it, when those improvements were put in in 18 the corner. 19 And Mr. Graham or David came back and 20 had an appraiser from Houston that United worked 21 with on a regular basis, and it was not uncommon 22 to have lenders tell you that they wanted to use a 9557 1 particular appraiser. And so, I was telling 2 Charles that we needed to go ahead and follow 3 David's instructions and use that appraiser. 4 About the same time, David had told me 5 he had met with and talked with Mr. Schulz and 6 that it would not be a problem or the numbers, the 7 appraisals, would probably be based on the 8 information available in the range that they 9 wanted them. 10 Q. You referred to Dugger. Who is that? 11 A. Mr. Dugger from the appraisal firm of 12 Love & Dugger, San Antonio appraiser, one of the 13 larger appraisal offices in town. 14 Q. Did you ever use them? 15 A. All the time. 16 Q. Is the work they do satisfactory? 17 A. Yes. 18 Q. Did you use them back at the time 19 period here -- 20 A. Yes. 21 Q. -- the 1985 period? 22 A. Yes. 9558 1 Q. Did you ever -- 2 A. Before and after. 3 Q. Did you ever have a problem with them? 4 A. No. 5 Q. T7186. Mr. Gindy, this is a letter 6 that's directed to you from Gibraltar Savings? 7 A. Yes. 8 Q. Did you receive this letter? 9 A. Yes, I did. 10 Q. It's February 5th, 1986. Yesterday, we 11 talked a little bit about the fact that Gibraltar 12 had been one of the lenders that was a possibility 13 for Park 410 West going to for a loan. 14 A. That's correct. 15 Q. Were the terms that were set out in 16 this letter, did they differ from the terms that 17 had been discussed with United Savings? 18 A. I mean, these are generally the terms. 19 A bit different on the length of the loan and the 20 fees for continuation and primarily on the points 21 and fees, they are different. 22 Q. And what about the equity investment by 9559 1 the borrower? 2 A. Well, in this case, they were asking 3 for -- this was significantly stronger. They were 4 asking for $16 million in equity or -- which was 5 more than the $10 million of letters of credit 6 that were put up under the Park 410 transaction. 7 MR. LEIMAN: Your Honor, I move T7186. 8 MR. KEETON: No objection. 9 THE COURT: Received. 10 Q. (BY MR. LEIMAN) 7187. This is at 11 Tab 822. This is a February 6th, 1986 letter, 12 Mr. Gindy. 13 A. Yes. 14 Q. That's directed to Stanley Rosenberg as 15 well as to you from Noel Simpson. 16 A. Yes. 17 Q. In connection with Paragraph No. 1, it 18 talks about closing and specifically says "David 19 has instructed attorneys for a March closing." 20 Do you see that? 21 A. Yes. 22 Q. Do you see the last sentence in that 9560 1 paragraph says "We are going straight to closing, 2 not waiting for a formal commitment letter"? 3 A. That's correct. 4 Q. What was the rush? 5 A. David had imposed on us a requirement 6 that we had to close the loan by -- with United by 7 the end of March of 1986 or -- he advised us that 8 United would not be making the loan. 9 Q. Do you know why there was a March date 10 that was imposed? 11 A. I can only presume it had to do with 12 quarter end. 13 Q. "Quarter end" meaning what? 14 A. End of the financial -- the quarter for 15 the loan, for the financial institution that they 16 either wanted the -- well, he wanted to change the 17 arrangement with Stanley from the investment to 18 that of being a lender. And he was very 19 concerned -- he didn't say it necessarily here, 20 but as we came closer to the March date, that they 21 wanted to be able to book or record the loan fees 22 in the first quarter before March, the end of 9561 1 March. 2 Q. Let's look at the second paragraph of 3 the letter talking about an R-41B appraisal. It 4 says "United wants us to use Ed Schulz of Houston, 5 dropping Love & Dugger. This will involve 6 additional unbudgeted expense but if it achieves 7 the desired result, we had better do it. I will 8 now seek to reach Schulz as quickly as possible." 9 What was your understanding as to why 10 Mr. Simpson said "we had better do it"? Did he 11 feel intimidated in some way or jeopardized? 12 A. Not intimidated. Just a fact of life. 13 When lenders tell you that they want to use a 14 particular appraiser, that is the appraiser that 15 the borrower better use or have a very good 16 argument for not. He told us to use Mr. Schulz, 17 and we knew we had to use him. No different than 18 a lender telling you that you're going to use a 19 particular law firm to do lender's papers and the 20 borrower is going to pay for that, too. There is 21 no choice in the world or very little. 22 Q. T7188, please. T7188 is a letter from 9562 1 you to Kurt Adkins at Gibraltar Savings on 2 February 26, '86. 3 A. Right. 4 Q. Apparently, you sent this by Federal 5 Express, looking at the second -- 6 A. Yes. 7 Q. -- page of the exhibit along with what 8 appears to be a partially completed application. 9 A. Yes. 10 Q. Looking in particular at the second 11 full paragraph on the first page of the exhibit, 12 you say here that -- having discussed with 13 Mr. Adkins the matter, you quote, "We would be 14 interested in Gibraltar Savings Association either 15 making the 80-million-dollar development loan, or 16 in lieu thereof, become Mr. Rosenberg's 17 lender/partner for one half of the project. In 18 the event Gibraltar or First Texas Savings would 19 prefer the smaller loan, we would propose a 20 venture between Mr. Rosenberg and Gibraltar and/or 21 First State -- First Texas Savings wherein the 22 lenders would advance the sums required for 9563 1 Mr. Rosenberg's 50 percent interest in the Park 2 410 West Joint Venture." 3 A. Yes. 4 Q. What was your intention in writing 5 this? 6 A. At this point, we were proceeding with 7 the loan from United and looking at that March 8 closing but had not -- I had two goals or two 9 objectives. One was to determine if Gibraltar was 10 interested in possibly doing a better deal for the 11 Park 410 West group either -- or getting us some 12 assurances of a commitment or a loan if we 13 didn't -- since we now were certain that United 14 was going to make the loan, make the loan in March 15 of '86, to see if Gibraltar would commit to make 16 the loan on equal or better terms. It would give 17 us the alternative of waiting. 18 And if not, if they didn't want to do 19 the entire loan transaction as a lender, 20 Mr. Rosenberg was a 50 percent partner in the 21 transaction. And we were -- and Stanley was 22 looking for a potential partner, a lender, that 9564 1 might advance funds to him on a partnership 2 arrangement similar to what he had with United in 3 the Alamo Savings transaction at that time where 4 the lender was putting up or advancing funds to 5 him and had an ownership interest or an equity 6 interest in his half of the venture. 7 Q. Who filled out the application at the 8 back? 9 A. I believe I did. 10 Q. Did you pay a lot of attention to it 11 when you were doing it? 12 A. Not a great deal of detail, but enough 13 attention that I think it's right. It might be 14 wrong. I haven't looked back at it. 15 Q. Looking at Page 4 of the loan 16 application, Mr. Gindy, specifically I'd like to 17 ask you about your comment here about the third 18 item down, whether the project is in the city 19 limits. 20 A. Yes. 21 Q. Was the park -- I don't have our little 22 map up here. 9565 1 Was the Park 410 project -- had that 2 been annexed within the city limits? 3 A. At that point, it had not been annexed 4 into the city. 5 Q. So, that's as of February '86? 6 A. Yes. That's as of February '86. I do 7 not believe it had been annexed into the limits -- 8 city limits of San Antonio. It was on the ETJ, on 9 the property line. 10 Q. What's the ETJ? 11 A. Extra territorial jurisdiction. It's 12 the 5-mile area beyond the current city limits. 13 It floats out with the city limits over which the 14 city has certain platting and development 15 restrictions. They don't have zoning controls; 16 but they do have a lot of other land use -- 17 primarily streets, make sure the streets are built 18 in accordance with the code, make sure that 19 lighting, various safety factors for development 20 requirements were all met. 21 Q. Looking at several items down, about 22 five items down, it says "present zoning of land." 9566 1 It says "being zoned: B3, I1, and R3." 2 A. Yes. 3 Q. So, the land had not yet been zoned yet 4 either; is that right? 5 A. Well, it's not subject to zoning. In 6 order to be zoned, it would have to be within the 7 city limits. We do not have county zoning. So, 8 the only zoning we would have is once it was 9 annexed and we had made and had submitted a plan 10 or I was in the process of processing a plan 11 through the city that once the land was annexed 12 into the city, you may also at that time have the 13 zoning established. 14 If you don't have zoning arrangements 15 made, it will come in always as residential or R1. 16 So, when you're working with a commercial property 17 and being annexed, rather than worry about it 18 being zoned to R1, it's easier to bring it in with 19 a proposed commercial plan. And in this case, we 20 wanted B3, which was a general business, the 21 highest or most intensive category. I1, which is 22 light industry, and R3 which is apartments. And 9567 1 that way, we wouldn't have to worry about future 2 zoning cases. 3 Q. Did the land ultimately become annexed? 4 A. Yes. 5 Q. When was that? 6 A. I believe it was in December of '86. 7 Q. December of when? 8 A. December of '86, I believe. 9 Q. In terms of the process of the 10 annexation, what was the status as of February of 11 1986? 12 A. Application had been submitted to the 13 City to do so. Usually, the City is pretty 14 agreeable about doing annexations. They have to 15 agree to provide us the services; but this was 16 already right on the boundary and they were 17 concerned about starting to work up the Westside 18 Freeway towards Sea World. But this was 19 ultimately annexed. 20 Q. Was there uncertainty about whether or 21 not it would be -- or what was your level of 22 confidence? 9568 1 A. The City will always take taxes. I 2 mean, it's not that -- it's not -- I had no 3 concern that the City would not take it. Their 4 only concern was if they could provide fire 5 service to the area. 6 MR. LEIMAN: Your Honor, I move T7188 7 into evidence. 8 MR. KEETON: No objection. 9 Q. (BY MR. LEIMAN) T7189, please. 10 THE COURT: Received. 11 Q. (BY MR. LEIMAN) Mr. Gindy, I handed 12 you Exhibit T7189, which is a March 6th, 1986 13 letter directed to you from Kurt Adkins of 14 Gibraltar Savings. 15 Did you get that letter? 16 A. Yes, I did. 17 Q. And would you have received it about 18 March 6th, around that date, 1986? 19 A. Yes. 20 Q. I'd like to direct your attention to 21 the second full paragraph. Now, in this 22 paragraph, Mr. Adkins responds to your proposal 9569 1 regarding the funding possibility that you had 2 mentioned as a second option in your letter to 3 Gibraltar about Mr. Rosenberg. 4 A. Right. He does. 5 Q. Mr. Adkins says, "I would like to first 6 address the scenario in which Gibraltar would fund 7 100 percent of Mr. Rosenberg's 50 percent interest 8 in the Park 410 West Joint Venture and, for that 9 funding, receive 50 percent of Mr. Rosenberg's 10 share of all net profits." 11 He says "Such an arrangement would not 12 qualify as a loan and would, rather, be defined as 13 a real estate investment." 14 He goes on to say that Gibraltar is not 15 currently interested in obtaining additional 16 investment in real estate and would not wish to 17 further pursue the matter. 18 Did you have any other discussions with 19 Mr. Adkins about that topic? 20 A. No. I took that as a statement from 21 him that they were not interested in being 22 Stanley's partner in that portion of the -- in the 9570 1 Park 410 property. 2 Q. He goes on to talk about an 3 80-million-dollar development loan, which was 4 another possibility you had mentioned in your 5 letter to Gibraltar. 6 A. Yes. 7 Q. And here he sets out some terms in 8 Paragraph Nos. 1 through 6. 9 Do you see that? 10 A. Yes. 11 Q. 20 percent equity investment by the 12 borrower? 13 A. Yes. 14 Q. With a profit participation by 15 Gibraltar of 30 to 40 percent? 16 A. Yes. 17 Q. And the fifth item is a personal 18 guaranty of 100 percent of all losses up to an 19 amount equalling the sum of 25 percent of the 20 principal plus 100 percent of the interest in the 21 loan? 22 A. Yes. 9571 1 Q. That was a revision, apparently, 2 according to him, due to changes in regulations? 3 A. That was a more stringent guaranty 4 request. 5 Q. Was this proposal by Gibraltar 6 acceptable to Park 410 West Joint Venture? 7 A. I don't know if it was acceptable. It 8 was not -- we did not accept it because we pursued 9 United as a more favorable alternative. 10 Q. When you say "favorable," what do you 11 mean? 12 A. Well, for one thing, the letter of 13 credit requirement was less, or the equity 14 requirement under No. 1. And the -- that was the 15 main reason, I believe. Other than that, we chose 16 to pursue the United loan or the borrowers chose 17 to pursue the United loan. Stanley did not want 18 to go forward with this one. 19 Q. He didn't? Did he have a reason as to 20 why he didn't want to go forward with it? 21 A. I know of no others other than the ones 22 that are on the face of the document. One simply 9572 1 being an almost 50 percent more requirement for 2 letters of credit or equity up front in the 3 letters of -- in the letter of credit or equity 4 requirement. 5 Q. How did Mr. Rosenberg feel about 6 changing the relationship with United from a 7 silent partner relationship in which United funded 8 all of the costs to the loan relationship that was 9 being pursued? 10 A. I don't think he -- he didn't 11 particularly want to do it, although he thought 12 the arrangement was fine at the time and he was 13 happy with it. He was very comfortable with his 14 position with the people he was working with. He 15 went ahead and wanted to do it because United had 16 asked him and told him they wanted to make a 17 change in the structure of the transaction and 18 that he said he would go along with it, and he 19 did. 20 Q. Did he have concerns about the 21 requirements concerning guaranties or letters of 22 credit? 9573 1 A. He had concern that he would be able to 2 generate the partners that he wanted to generate 3 to provide the letters of credit until he located 4 them. He wasn't as concerned about the guaranty. 5 He felt that he had a good relationship with the 6 United people and that there would -- that he 7 would be able to work out any problems he had if 8 any ever developed. 9 Q. What do you mean, "United people"? 10 A. I said before he was -- he had a very 11 good relationship and he was friends with 12 Mr. Hurwitz, who was a principal or had -- in 13 United and the groups that owned portions of 14 United. He and Charles had a very long-standing 15 relationship. He and David Graham appeared to get 16 along very well in our dealings with him. And 17 they -- when I was with them, they constantly 18 referred back and forth to common conversations 19 and events, social events. And he just didn't -- 20 he was not concerned about the guaranty. 21 Q. Did he ever comment to you about -- did 22 you ever raise a question with him about concerns 9574 1 on letters of credit that you might have had? 2 A. I expressed concerns later on as we got 3 into the documentation stage and later on we had 4 the opportunities to possibly -- when we were 5 making some decisions whether to go forward or 6 not, considering exiting when the market had 7 turned and there was not success in selling the 8 property. Stanley told me that he was not 9 concerned particularly with the guaranty, that he 10 didn't feel that anything bad could come of it, 11 that he could work through, or that United would 12 work with him or that Charles would work with him. 13 Q. What do you mean "Charles would work 14 with him"? 15 MR. KEETON: Are you quoting a 16 conversation, or are you just -- 17 THE WITNESS: The conversation. 18 MR. KEETON: No. I mean with Charles. 19 THE WITNESS: With me or with Stanley? 20 MR. KEETON: Stanley. 21 THE WITNESS: My conversations with 22 Stanley. 9575 1 Q. (BY MR. LEIMAN) Go on, Mr. Gindy. 2 MR. NICKENS: Well, Your Honor, I 3 object. I'd like a question. To go on is not a 4 question. 5 MR. LEIMAN: He was interrupted. 6 MR. NICKENS: Well, what is the 7 question? 8 THE COURT: I think we'd better have 9 another question. 10 Q. (BY MR. LEIMAN) What did Stanley say 11 to you about his discussions with Mr. Hurwitz in 12 connection with United Savings and why he wasn't 13 concerned? 14 A. Stanley felt that it was -- this was -- 15 restructuring the transaction into the loan was 16 something that United wanted to do and that it was 17 something that he wanted to do or he was willing 18 to do at their request. We had another year to go 19 under the Alamo Savings loan at that time, and we 20 could have waited and taken a look and see if 21 something else developed. There was the United 22 proposal in hand at this moment. There was not 9576 1 any other lenders there. And the question became, 2 "What did you do?" And he wanted to go forward 3 with the United transaction. And I questioned 4 Stanley, especially when we got into the 5 documentation of the guaranties, as to whether or 6 not -- and some of the loan terms, if there were 7 things that he wanted to do or if there were 8 things that he had done that were not -- there 9 were sometimes -- I just questioned him as a 10 principal whether they were matters that he was 11 concerned with, and he told me that he was not. 12 Q. He reassured you? 13 A. Yes, sir. 14 Q. And what did he say in reassuring you? 15 A. He told me he felt that he could work 16 out anything that had to be done with the people 17 from United, and he would refer to David and he 18 would refer to Charles. 19 Q. Charles Hurwitz? 20 A. Yes. 21 Q. Were any of your family members 22 involved with letters of credit in connection with 9577 1 Park 410? 2 A. Yes. My in-laws or family businesses 3 or individuals in the family were partners in the 4 transaction provided some of the letters of credit 5 for Stanley's side of the transaction. 6 Q. And was it in that regard that you had 7 an additional interest regarding the letters of 8 credit? 9 A. Yes. 10 Q. Okay. And what did Stanley say in that 11 regard? 12 MR. KEETON: Your Honor, we get 13 guaranties and letters of credit. The witness is 14 answering guaranties. The question is letters of 15 credit. 16 THE WITNESS: I'm answering letters of 17 credit, sir. 18 MR. KEETON: Okay. 19 A. We provided -- the family provided 20 letters of credit. We did not provide guaranties. 21 Q. (BY MR. LEIMAN) What happened 22 about -- in connection with your concern, 9578 1 Mr. Gindy, for your family's interests? What did 2 Mr. Rosenberg tell you -- 3 A. Nothing different. The same answer. 4 The questions were together. 5 Q. Let's go to 7 -- 6 THE WITNESS: I do want to correct it. 7 Mr. Keeton, we did provide guarantees; but they 8 were covered by the letters of credit, the 9 exposure. 10 Q. (BY MR. LEIMAN) And so we don't jump 11 too far ahead, Mr. Gindy, we'll cover that in the 12 closing binder that you had prepared. Okay? 13 A. Yes. 14 Q. Okay. The next exhibit is T7129. 15 MR. LEIMAN: Ms. Kopp, do you have 16 that? 17 MR. DUEFFERT: The record might reflect 18 that it's already been admitted as A10294 and is 19 at Tab 837. 20 Q. (BY MR. LEIMAN) Mr. Gindy, here's -- 21 we have here in T7129 what appears to be another 22 capital call that's dated March 1, 1986; is that 9579 1 right? 2 A. Yes. 3 Q. Would you have seen this? 4 A. Yes. 5 Q. And in this regard, what is the amount 6 shown for Mr. Rosenberg and his group? 7 A. $1,738,417.22. 8 Q. And the total of the capital 9 contribution was some 3.476 million. Right? 10 A. $3,476,834. 11 Q. Now, it says -- Simpson states here 12 that the checks are to be delivered to you at the 13 law firm. Right? 14 A. Yes. 15 Q. And then what would happen to the 16 checks? 17 A. I was to arrange for payment -- 18 delivery of the interest payments to Alamo 19 Savings. 20 Q. Now, in connection with these 21 particular payments on -- let me ask you this: 22 What was this to cover, this capital contribution? 9580 1 A. I'd have to go back and look at the 2 request. Although the cover letter says it covers 3 the interest payment, I do not know if there were 4 any other expenses included or not. 5 Q. Okay. Do you know if this was actually 6 paid by a check? 7 A. I don't recall without looking at other 8 documentation. 9 Q. Okay. 10 MR. LEIMAN: Your Honor, I want to 11 clean something up and move T7189 into evidence. 12 That was the Gibraltar March 6th, 1986 letter. 13 MR. KEETON: No objection. 14 THE COURT: Received. 15 Q. (BY MR. LEIMAN) Mr. Gindy, about this 16 capital contribution, a total of some 17 $3.47 million, can you explain to me what was 18 the -- was interest actually accruing on the Alamo 19 loans? 20 A. Yes. Interest was accruing on them. 21 Q. And that interest would have been due 22 and payable to Alamo. Right? 9581 1 A. To Alamo Savings and Mr. McClintick and 2 then Mr. McClintick, in turn, would have paid it 3 on to Alamo for his note. 4 Q. T7190. Mr. Gindy, did you send this 5 letter to Mr. Kosberg at First Texas Savings? 6 A. Yes. 7 Q. And what was the purpose of this 8 letter? 9 A. This was a letter to see if First Texas 10 Savings was interested, on behalf of Stanley -- or 11 to make Stanley the loan or become his 50 percent 12 partner in the arrangement, similar to that which 13 he had with United under the new loan with United. 14 Q. And did First Texas Savings do it? Did 15 they get involved? 16 A. They did not. 17 Q. Were these on terms that were similar 18 to the terms that you had previously proposed to 19 Gibraltar as your second option of financing? 20 A. Yes. 21 Q. On behalf of Mr. Rosenberg. Right? 22 A. Yes, sir. 9582 1 Q. Okay. And the terms that you were 2 outlining here were similar to the terms that 3 United Savings was -- had with Mr. Rosenberg at 4 this point in time. Right? 5 A. Under their arrangement for the Alamo 6 transaction, yes. 7 Q. Right. Okay. Now, in the first 8 paragraph, it states that "The Northwest Freeway 9 construction contracts have been let by the State 10 and completion is expected within 18 months." 11 Were you referring to the 12 limited-access roads, or were you referring there 13 to the access roads of the -- of Highway 151? 14 A. The access roads that were what was 15 built approximately 10 years ago and are there 16 today. 17 MR. LEIMAN: Your Honor, I move T7190 18 into evidence. 19 MR. KEETON: No objection. 20 THE COURT: Received. 21 MR. LEIMAN: Your Honor, this might be 22 a good time for a break, if I may suggest that. 9583 1 THE COURT: All right. We'll take a 2 short recess. 3 4 (A short break was taken 5 at 10:28 a.m.) 6 7 THE COURT: Be seated, please. Back on 8 the record. 9 Mr. Leiman, you may continue. 10 MR. LEIMAN: Thank you, Your Honor. 11 (10:59 a.m.) 12 Q. (BY MR. LEIMAN) T7191. Mr. Gindy, 13 this is a March 25, 1986 letter directed to Noel 14 Simpson of the Park 410 West Joint Venture from 15 United Savings. 16 Can you identify the letter? 17 A. Yes. I drafted it. 18 Q. And why did you do that? 19 A. Just a moment. (Witness reviews the 20 document.) They wanted a confirmation that the 21 funds that were advanced would be repaid as a loan 22 or advance for the interest. And we agreed that 9584 1 when we closed the United Savings loan, that the 2 money would be repaid -- I mean, not we. The 3 Park 410 partnership was agreeing how the money 4 would go back. 5 Q. Okay. You used a couple of pronouns. 6 Who is the "they"? 7 A. The letter is -- the letter's addressed 8 to Park 410. It's from United Savings 9 Association, and it's evidencing United Savings' 10 agreement that the interest paid on the two notes 11 would be a reimbursable expense that would be 12 repaid to the various venturers, which include 13 United as a venturer on Rosenberg's side -- 14 Q. Right. 15 A. -- when the loan -- when the United 16 Savings 80-million-dollar loan closed. 17 Q. And were you instructed to prepare this 18 letter? 19 A. Yes. 20 Q. Who told you to write this letter? 21 A. It was between -- a conversation 22 between Noel and David Graham and I. 9585 1 Q. Can you explain to me what the net 2 effect would be of the transaction that you're 3 setting out here? 4 A. Just before the break, we had some 5 documents that indicated there was an interest 6 payment being funded that was due about March the 7 29th, I believe was the date it was due, on the 8 21-million-dollar note and the 17-million-dollar 9 note. 10 Those funds were advanced. 50 percent 11 came from United, through Stanley, for the 12 Rosenberg half of it and from Park 4 -- I mean 13 from the Noel Simpson group and Grieshaber for the 14 other half of it. Those payments were going to be 15 repaid to the venturers at closing of the United 16 Savings loan which it was now, by March 25th, 17 looking like it would not close by the 29th when 18 the interest payment was due to Alamo Savings. 19 And McClintick would be repaid at closing by Park 20 410 West Joint Venture to the two venturers that 21 made the advance so that Noel Simpson got back his 22 half of the money. The half of the interest 9586 1 payment went back to Rosenberg and went back to 2 United. 3 And what we were providing in the last 4 sentence of that letter is that United was not 5 obligated to pay back that interest payment if for 6 some reason United -- the loan didn't close. 7 Q. I see. If United didn't make the 8 loan -- 9 A. -- make the loan, then there was not 10 going to be a refunding of the interest payment 11 that the two venturers had made. 12 Q. But with regard to the interest 13 payments that had been made to Alamo, the -- that 14 money had actually been spent and expensed from 15 the joint venture; is that right? 16 A. Yes. It was spent and paid by the 17 joint venture to Alamo. And then rather than 18 leaving it in as -- I guess you would call it 19 equity or -- it was going to be refunded back out 20 of the United loan. 21 Q. So, in the case of United with regard 22 to the money that it had expensed on behalf of the 9587 1 joint venture and in connection with 2 Mr. Rosenberg, was it then paying itself back? Is 3 that what the objective -- 4 A. Yes, it was. 5 Q. So, the objective here was to do what? 6 A. It paid back each of the two 7 partnership groups -- the Simpson group and the 8 Rosenberg group -- paid them back the interest 9 that they paid on the 29th of March to Alamo. 10 Q. Was the -- what was the -- do you know 11 what the intention was of Mr. Graham? Did he ever 12 state why he wanted to do this or anyone at 13 United? 14 A. I don't recall. I don't recall if 15 he -- if anyone told me the reason. The reason, I 16 know, it was important to the Park 410 side was -- 17 and I would imagine would be the same to the 18 United side -- I mean to the Simpson side -- is it 19 returned to them funds they advanced as venturers 20 into the transaction. Part of what was done, when 21 you get into the transaction binder, is there is a 22 termination of the joint venture between Rosenberg 9588 1 and United. And there would have been a lot of 2 money of United's in the venture between 3 Stanley -- in the partnership between Stanley and 4 United that would not have been repaid had we 5 terminated the partnership between those two and 6 the individual entity. When the United Savings 7 80-million-dollar loan closed, United would still 8 be owed a repayment from that partnership of over 9 a million dollars. 10 So, this was a mechanism to make sure 11 the money was funded back when we dissolved that 12 partnership. 13 MR. LEIMAN: Your Honor, I move T7191 14 into evidence. 15 MR. KEETON: No objection. 16 THE COURT: Received. 17 Mr. Gindy, were funds actually 18 transferred from the partnership to Alamo Savings? 19 THE WITNESS: Yes, sir. They were 20 actually paid. And then later on, on the closing 21 statement that will occur in the next transaction, 22 there will be a reimbursement of almost $4 million 9589 1 back to the partners, about 15, 20 days later. 2 THE COURT: Thank you. 3 Q. (BY MR. LEIMAN) T7194, please. 4 THE COURT: I had another question on 5 this document we just received. Up in the corner, 6 it says "bump." 7 Do you know what that refers to? 8 THE WITNESS: Yes, sir. The questions 9 applied -- this is Mr. Rosenberg's handwriting. 10 And it applied or the inquiry was with the bumps 11 or the discounts. There was a discount on March 12 the 29th that would -- or, actually, March 30th. 13 If Alamo was paid off before March 30th of 1986, 14 the payoff was one figure. If it went into the 15 next month, that's what we called the bumps, those 16 half-million-dollar discounts on the note. 17 THE COURT: Do you know whether the 18 bump was incurred or had the benefit of that -- 19 THE WITNESS: The bump was ultimately 20 delayed. The bump that would have applied on 21 March the 31st was deferred under some separate 22 letter agreements that we haven't seen here, I 9590 1 don't think, yet. And in those, we postponed the 2 date with Alamo Savings so that by the time we 3 actually funded the Alamo Savings loan, we got the 4 advantage of the -- of the discounts and there was 5 no bump in the purchase price as if it had closed 6 on March the 31st. 7 THE COURT: Mr. Leiman. 8 Q. (BY MR. LEIMAN) T7194. Now, 9 Mr. Gindy, T7194 is a March 31, 1986 letter from 10 you to Noel Simpson covering an agreement which 11 appears immediately behind the March 31, '86 12 letter. 13 Have you seen the -- this letter 14 before? 15 A. Yes, I have. I wrote it. 16 Q. You wrote the letter? 17 A. Yes. 18 Q. And have you seen the agreement which 19 appears immediately after the letter? 20 A. Yes. I even signed it. 21 Q. So, you've identified your signature on 22 Page -- it's Bates No. CN079016? 9591 1 A. Yes. 2 Q. You signed on behalf of or as 3 attorney-in-fact for Stanley Rosenberg? 4 A. Yes. 5 Q. Okay. What was the purpose of the 6 agreement? 7 A. This document was the first of a couple 8 instruments, I believe, that extended the date the 9 interest payment was due and extended the bump 10 dates. This one took it from the 29th of March to 11 the 31st of March. And this one also goes on to 12 reduce the amount of the FEMA escrow payment 13 significantly that was to be put up by the Alamo 14 Savings/McClintick group. 15 Q. The judge asked you a few minutes ago 16 about the bumps and the incurring of the bumps, 17 and the -- you responded that there were some -- a 18 number of agreements, letter agreements, that had 19 extended those time periods. 20 Is this one of them that you referred 21 to -- 22 A. Yes. 9592 1 Q. -- in your answer to the judge? 2 A. Yes. This is one of the instruments or 3 agreements that extended the March bump date out 4 into April so that the discount applied or 5 continued it in effect. 6 Q. Looking at Paragraph No. 2 on 7 Page CN079015, what is the significance of the 8 first sentence where it says, "Park 410 West Joint 9 Venture shall be entitled to a discount of 10 $2 million if the notes are prepaid on or before 11 April 1, 1986"? 12 A. The 2-million-dollar discount -- if you 13 took the 21-million-dollar note and the 17 -- I 14 believe it was 17-million-dollar note to 15 Mr. McClintick, those two notes totaled 16 approximately $40 million, and there was a 17 2-million-dollar discount if you paid it -- now, 18 this -- I believe the original bump date was 19 back -- the 29th of March, and this extended it to 20 the 31st of March. 21 Q. So, this discount that we're talking 22 about was $2 million? 9593 1 A. Yes, sir. 2 Q. Looking at the next paragraph numbered 3 3 on the same page, there is a reference to a 4 certificate of reclamation from FEMA. 5 A. Yes, sir. 6 Q. What does that mean? 7 A. The FEMA reclamation we spoke yesterday 8 about the flood plain, the recovery of land out of 9 the flood plain -- 10 Q. Yes. 11 A. -- when we established the drainage 12 easements. The document we received from FEMA is 13 a certificate of reclamation that you have 14 reclaimed or removed certain land from the flood 15 plain. And we had submitted documents in order 16 to -- in the process of doing engineering work to 17 remove portions of the land. The price was 18 computed based upon the land that was in the flood 19 plain or actually outside of the flood plain, and 20 there was property that we had submitted that we 21 felt we were going to be paid for, that we would 22 be able to use but we had not yet received the 9594 1 documentation. And so, an escrow was established 2 for that. 3 THE COURT: For the record, can you 4 tell us what "FEMA" stands for? 5 THE WITNESS: Federal Emergency 6 Management -- and I don't know -- Federal 7 Emergency Management -- I don't know the last one. 8 I don't know if it's -- I think it's -- it may be 9 "agency." I don't know the "A." 10 THE COURT: Thank you. 11 Q. (BY MR. LEIMAN) And in that regard, 12 can you tell us what "LOMR" stands for in 13 Paragraph 3 in the third line from the bottom? 14 A. I do not know what the acronym stands 15 for. I know it's the maps for the area that show 16 where the flood plain is. I can tell you that. I 17 just know them as LOMRs. 18 MR. LEIMAN: Okay. Your Honor, I move 19 T7194 into evidence. 20 MR. KEETON: No objection. 21 THE COURT: Received. 22 Q. (BY MR. LEIMAN) T7195. Mr. Gindy, 9595 1 T7195 is a March 31, 1986 letter from you to Mike 2 Minihan of Alamo Savings with an enclosure which, 3 in this case, is a photocopy of two checks. 4 Did you prepare this letter? 5 A. Yes, I did. 6 Q. And did you send it on to Mr. Minihan? 7 A. Actually, it was delivered to him. 8 Q. Did you deliver it? 9 A. I had it delivered that day. 10 Q. What's the significance of this letter 11 and the checks that were enclosed? 12 A. It was making the interest payments on 13 the note from -- the two notes that were payable 14 by Park 410 West Joint Venture to Mr. McClintick 15 and to Alamo Savings Association. The payments 16 that were due on the 29th and then the document 17 you just saw, the 31st. This forwarded the 18 interest payments to them. 19 Q. When the judge asked you about whether 20 or not actual interest payments had been made, you 21 were referring to payments -- were you referring 22 to these payments that are shown here? 9596 1 A. These two cashed checks. 2 Q. Okay. And that one check is from 3 United Savings. Again, can you make out the 4 signature or printed signature of Bruce Williams 5 and there is a 1.738-million-dollar check from 6 United Savings and separately -- payable to the 7 order of Alamo and, separately, a check from 8 Westplex Investment and IPIC. 9 Would that be GMR? 10 A. That would be the GMR. 11 Q. All right. And that amount would be 12 for $1.521 million; is that right? 13 A. That is correct. 14 Q. Now, what about Grieshaber and Roberts? 15 I see that you mention them in the second full 16 paragraph in your letter and you state that the 17 understanding is that GMR of Grieshaber and 18 Roberts didn't have to submit a check until 7th of 19 1986? 20 A. GMR -- not GMR. Grieshaber and 21 Roberts -- 22 Q. Yes. 9597 1 A. -- had not made their contribution to 2 the partnership, which was part of the side from 3 Westplex or from GMR, Mr. Simpson's side. And 4 they had made an arrangement with -- and Alamo 5 Savings said they were happy to accept that 6 217,000-dollar payment a little bit late, and they 7 had indicated to us that it was acceptable to 8 them. And when Mike told me it was, I put it in 9 this letter to document. Otherwise, the partners 10 would have needed to cover that interest payment 11 not to have been in default. 12 Q. Do you happen to know if Grieshaber and 13 Roberts ever made that payment? 14 A. I believe they did. I'd have to go 15 back and look at the distributions, but I believe 16 they did. I could tell from the paperwork from 17 the closing of the 80-million-dollar loan. 18 MR. LEIMAN: Your Honor, I move T7195 19 into evidence. 20 MR. KEETON: No objection. 21 THE COURT: Received. 22 MR. LEIMAN: The next exhibit is a 9598 1 multi-volume exhibit, which are the closing 2 binders that were prepared by Mr. Gindy. We have 3 sets of those for the witness as well as the 4 Court, Your Honor. 5 Your Honor, I've had prepared and 6 labeled an exhibit numbered T7130. There are 7 individual tab numbers in the exhibit which 8 correspond to specific documents, closing 9 documents, that were prepared by this witness. 10 And what I'd like to do is lay some foundation and 11 then request that the Court accept the entire 12 three-binder set of these closing documents and 13 then get on to individual questions concerning 14 some of the documentation in these binders. 15 THE COURT: All right. Proceed. So, 16 all three volumes are going to be one exhibit? Is 17 that what you're saying? 18 MR. LEIMAN: Yes, Your Honor. 19 Q. (BY MR. LEIMAN) Mr. Gindy, if you 20 would, turn with me, please, to the first page of 21 the exhibit. 22 A. Yes. 9599 1 Q. And tell me, what is it that we're 2 looking at in Volume 1 and then if you would also 3 look at Volume 2 and 3. Tell me what it is we 4 have in front of us. 5 A. Well, what you have in front is 6 three -- in your volumes, three volumes of what is 7 my four-volume set of closing documents for the 8 Park 410 80-million-dollar loan by United Savings 9 Association to the Park 410 West Joint Venture. 10 And it's my practice to prepare closing binders 11 whenever I do a transaction and include in them 12 any documents that I -- file execution, recorded 13 documents, copies of original instruments that I 14 feel may be of importance in the future that are 15 all put together in one booklet, one place, and 16 with one index. And it's the practice I followed. 17 Q. Did you prepare all the documents in 18 this binder? 19 A. Yes. Well, I didn't prepare all of the 20 documents. Some of them will be documents like 21 the title insurance policies or documents that 22 might have been prepared by counsel on either side 9600 1 or attorneys. For instance, there should be 2 included in here some opinion letters from Noel 3 Simpson's English attorneys with regard to some of 4 their -- the corporate formation of their 5 partners. There will be title insurance company 6 documents in here, like the policies, that I 7 didn't prepare. But I reviewed and participated 8 in all of them. 9 Q. How did you decide as to what to put in 10 the binder? 11 A. I tried to put everything in the binder 12 that my experience tells me might be important in 13 the future. I start with a closing checklist for 14 the transaction and include all those documents 15 and other instruments that I feel are pertinent to 16 the transaction. If you need to go to look at 17 someone's agreement, if there is some obligation 18 going forward or it was to cure a public -- or 19 curative documents in the public records, I try to 20 include them all so that you've got an organized 21 index that someone could pick up the books and not 22 have to go digging through our files to find 9601 1 something. 2 Q. To whom do you distribute the binders 3 once they are completed? 4 A. Generally to my client or my clients if 5 there are several of them. Sometimes counsel on 6 the opposite side will also prepare a similar 7 document and will provide those for them so that 8 we're both not doing it or we both have the same 9 set of documents. Sometimes I'll provide it to a 10 lender, and the same courtesy. If I'm doing -- if 11 I'm including everybody's documents, sometimes 12 they will just use mine for everyone. Sometimes 13 they will prepare their own. 14 Q. Did you send a set of this to 15 Schlanger, Cook, Ms. Lain at -- Ellen Lain at 16 Schlanger, Cook? 17 A. Sure I did. I can't believe that I 18 didn't. I mean, I'm positive that I did. 19 Q. Would you have sent this -- would you 20 have retained a copy set at the law firm? 21 A. There is a set at the law firm. There 22 is also a set that was given to Mr. Rosenberg that 9602 1 was at the law firm for a while. I know Noel got 2 a copy. 3 Q. Noel Simpson? 4 A. Noel Simpson. And I believe there was 5 a copy kept at the San Antonio office, which was 6 what Charles White kept. 7 Q. Of GMR? 8 A. Of GMR. 9 Q. Did a copy set go to -- or do you know 10 if a copy set went to United Savings? 11 A. I'm sure a set went to United Savings. 12 Q. Would you have sent it, or would 13 someone else have sent it? 14 A. Ann Grienadier probably would have sent 15 it from my office. 16 MR. LEIMAN: Your Honor, I move T7130 17 into evidence. 18 MR. KEETON: Your Honor, this document 19 and all these attachments are already in evidence. 20 None of these are Bates stamped. We think there's 21 a few, probably immaterial, differences in what's 22 in evidence in these; but basically we have no 9603 1 objection. 2 THE COURT: Received. It adds a lot of 3 bulk to the record but, on the other hand, it will 4 take a lot of time to determine what's in and 5 where it is and that kind of thing. So, it's 6 received. 7 Q. (BY MR. LEIMAN) Mr. Gindy, look with 8 me, please, at Tab 1. 9 A. Okay. 10 Q. What is it? 11 A. A closing statement dated April 17th, 12 1986. The borrower's settlement statement for a 13 loan by United Savings Association to Park 410 14 West Joint Venture. 15 Q. Now, I'd like you to look about a third 16 of the way down the page where it talks about loan 17 charges and fees due to United Savings. 18 Do you see that? 19 A. Yes. 20 Q. It says "loan fee, $2,400,000." Right? 21 A. That is correct. 22 Q. And the amount of the loan was for 9604 1 $80 million; is that right? 2 A. That is correct. 3 Q. That's stated up near the top? 4 A. That's right. It was an 5 80-million-dollar loan was the amount of the loan. 6 The initial advance was 45,617,000. 7 Q. And the loan fee would represent a 8 3 percent fee; is that correct? 9 A. A 3 percent loan origination fee. 10 Q. Now, in connection with what you 11 described earlier as the discount on the loan from 12 Alamo, you stated that based upon the figures that 13 we saw, there was a 2-million-dollar discount; is 14 that right? 15 A. That's correct. 16 Q. So, the loan fee from Alamo -- I'm 17 sorry -- the loan fee that was charged by United 18 Savings was more than the discount; is that 19 correct? 20 A. By $400,000. 21 Q. Okay. Below that, we see a loan fee 22 going to Stanley D. Rosenberg. 9605 1 A. Yes. 2 Q. What's that about? 3 A. That was a 400,000-dollar fee that was 4 paid to Stanley in connection with arranging the 5 loan. A portion of that fee -- I think 270 some 6 odd -- 275,000, I believe -- I think that was the 7 number -- was paid to our law firm in connection 8 with the work we had done from 1985 to 1986, and 9 the balance was retained. 10 Q. Do you know why this statement records 11 this as a loan fee to Stanley Rosenberg? 12 A. If you look in some of the partnership 13 correspondence between Noel and Stanley, it's 14 referred to as a 400,000-dollar fee in connection 15 with arranging the loan. 16 Q. And when you say "arranging the loan," 17 what does that -- what did that involve, if you 18 know? 19 A. Stanley's involvement in soliciting 20 or -- not soliciting -- arranging or securing 21 financing for the project, the 80-million-dollar 22 Park 410 project. 9606 1 Q. And securing it from whom? 2 A. In this case, it came -- the loan came 3 from United. 4 Q. Is it your understanding that 5 Mr. Rosenberg was instrumental in getting the loan 6 granted? 7 A. He was -- did a lot of the work -- he 8 did a lot of work with United in arranging the 9 loan and working through the terms of the loan. 10 Q. And do you know with whom he worked 11 other than David Graham? 12 A. I know that Mr. Schulz was in his 13 office several times. He had -- the records, I 14 think, will indicate that he had conversations 15 with, I believe, Charles Hurwitz, David Graham, 16 Mr. Schulz. I'm trying -- there is another 17 gentleman who was an engineer for United Savings 18 that I also met in Stanley's office. I don't 19 recall without going back and looking through the 20 statements if there was anyone else. 21 Q. T7147. 22 MR. LEIMAN: This may also be labeled, 9607 1 Your Honor, T7799. I have copies of this for Your 2 Honor if the other side doesn't have it. 3 Do you have it, Mr. Keeton? 4 MR. KEETON: I'm going to object to 5 this exhibit, Your Honor. It's only one page out 6 of a multi-page exhibit. I have the full exhibit 7 here. It's been marked as Exhibit B3952. I have 8 no problem if he wants to renumber it to whatever 9 this number is. I have copies for the Court and 10 counsel. I think the entire exhibit ought to be 11 put in, not this one page. 12 MR. LEIMAN: Well, Your Honor, I only 13 intend to ask the witness about this one page and 14 I don't think that -- excuse me. I'm sorry, 15 Mr. Keeton. I didn't realize the judge had said 16 anything. 17 Your Honor -- 18 MR. KEETON: I haven't said anything 19 either. I just handed it to Jerry. 20 MR. LEIMAN: Your Honor, my purpose in 21 using this one page is to demonstrate a specific 22 point. I don't have any need for the additional 9608 1 pages. If the other exhibit is already in the 2 record, then it is in the record. 3 MR. KEETON: Your Honor, as I said, 4 this exhibit is not in the record yet. I think it 5 is only proper to offer the full copy, not just 6 the one excerpt, particularly since he's going to 7 demonstrate one point and this is the only time 8 that man's name appears in all these 20 pages. 9 THE COURT: All right. I think I'll 10 just receive Mr. Leiman's exhibit, and you can put 11 yours in when you cross-examine. 12 MR. KEETON: That will be fine, Your 13 Honor. 14 THE COURT: You're offering -- 15 MR. KEETON: But I object to that 16 exhibit being offered in this form. 17 THE COURT: All right. Received. 18 19 (Discussion off the record.) 20 21 THE COURT: You're offering this 22 exhibit under T7147? 9609 1 MR. LEIMAN: Yes, Your Honor, I am. 2 THE COURT: All right. Proceed. 3 Received. 4 Q. (BY MR. LEIMAN) Mr. Gindy, I would 5 like to ask you if you're familiar with the 6 billing records that are shown here in 7 -- in 7 T7147. 8 A. Yes. 9 Q. Why are you familiar with them? 10 A. It's a fee statement prepared in our 11 office at my direction. It represented a number 12 of -- it's a cumulative -- it's part of a 13 cumulative bill for the Park 410 transaction 14 closing the permanent loan or the 15 80-million-dollar loan with United. 16 MR. NICKENS: Your Honor, counsel has 17 handed us T7799, indicating that it is another 18 copy of T7147. And I note that the T7147 has had 19 the last line cut off, by looking at 7799. So, 20 what -- I'm asking: What is the status of 7799 in 21 light of the fact that not only is this just the 22 first page of one document, it's missing the last 9610 1 line. 2 THE COURT: Mr. Leiman? 3 MR. LEIMAN: What I was -- Your Honor, 4 I was attempting to accommodate Mr. Keeton and his 5 colleagues by giving them a photocopy of the same 6 page. It's apparently just not as good a copy. 7 If he prefers -- since I do not intend to ask 8 about the last line, which apparently was cut off, 9 I don't see what the relevance of the objection 10 is. 11 THE COURT: Well, I indicated that 12 respondents can put in the entire document. I 13 assume that that would include the last line of 14 the first page. This may not be the first page. 15 If we're going to have the entire document put in, 16 I don't think we need at this point to -- 17 MR. LEIMAN: And I would have no 18 objection, Your Honor, to them inquiring as to 19 anything else in the document if they want to put 20 it in. 21 MR. NICKENS: He just handed us this 22 document. I want to know what the status of it is 9611 1 in light of the fact that it makes clear that 2 T7147 is missing the last line. 3 THE COURT: Well, it has no status. 4 It's a document that he handed to you. So, it's a 5 piece of paper. 6 Q. (BY MR. LEIMAN) Mr. Gindy, let me ask 7 you a question about this billing record. We 8 earlier talked about the fact that initials that 9 appear on billing records with "KMG" refer to you; 10 is that right? 11 A. Yes, sir. 12 Q. Okay. Your name appears -- your 13 initials appear on this record numerous times. Is 14 that true? 15 A. Yes, sir. 16 Q. Okay. Now, I see here on the third 17 entry down dated December 23rd, 1985, "SDR." 18 Who's SDR? 19 A. Stanley Rosenberg. 20 Q. All right. You earlier mentioned in 21 your testimony that Mr. Rosenberg had been paid a 22 loan fee in connection with his involvement with 9612 1 the 80-million-dollar United Savings loan; is that 2 right? 3 A. Mr. Rosenberg received a fee in 4 connection with the closing of the loan. 5 Q. Now, in that regard, one of the items 6 that you mentioned was that he talked to several 7 individuals. Right? 8 A. He participated in -- yes, he did. 9 Q. And one of the people he talked to was 10 Charles Hurwitz. Right? 11 A. That is correct. 12 Q. And David Graham? 13 A. Yes, sir. 14 Q. Do you have any specific knowledge of a 15 conversation with Charles Hurwitz on or about 16 December 23rd, 1985, in which Mr. Rosenberg spoke 17 with Mr. Hurwitz? 18 A. No, I don't. 19 Q. Do you have any knowledge of any other 20 conversations? Were you ever called into 21 Mr. Rosenberg's office when he was discussing any 22 matters related to the Park 410 loan with 9613 1 Mr. Hurwitz? 2 A. On one occasion. 3 Q. And when would that have been? 4 A. In January. 5 Q. Of what year? 6 A. The following -- in '96. 7 Q. '96? 8 A. Excuse me. '86. 9 Q. So, in addition to -- I wanted to ask 10 you something, Mr. Gindy. 11 Was that conversation -- would that 12 have been recorded on this bill? Would that have 13 been an appropriate billing technique? 14 A. If Stanley chose to write it down. 15 Q. But it's not written here. Why is 16 that? 17 A. Stanley chose not to write it, and when 18 Stanley -- I think when you go through the entire 19 bill, there's not -- there are very few entries 20 from Stanley here. I had numerous conversations 21 with Stanley with regard to this loan, and he had 22 numerous conversations with Mr. Simpson and 9614 1 others. I sat in his office in meetings with 2 David Graham. For whatever reasons, he chose not 3 to write them down. 4 Q. So, we couldn't tell from the billing 5 records how many times Rosenberg had spoken with 6 Hurwitz, could we? 7 A. Not with Mr. Hurwitz or with Mr. Graham 8 or with anyone else. 9 Q. Okay. Because it was his practice not 10 to write down his contacts. Right? 11 A. It's a bad habit if you're one of his 12 law partners. 13 Q. Why is that? 14 A. It's nice to get the entries on the 15 billing memos. 16 Q. Okay. Let's turn back to Tab 1 of 17 Exhibit 7130. 18 MR. LEIMAN: Oh, Your Honor, you 19 accepted 77 -- I'm sorry -- 7147? 20 THE COURT: Yes. 21 Q. (BY MR. LEIMAN) Let's turn back to 22 Tab 1, Mr. Gindy. 9615 1 A. Yes, sir. 2 Q. Looking down near the bottom, about 3 two-thirds of the way down the page, it says 4 "Reimburse the Park 410 West Joint Venture." 5 A. Yes, sir. 6 Q. It says "Developer fee-Gulf 7 Management." Right? 8 A. Well, those are two different lines 9 that you've just read. 10 Q. Okay. I apologize. I didn't mingle 11 them. 12 What is the 4.454 million-dollar 13 reimbursement to the Park 410 West Joint Venture? 14 A. The $4,454,333 was the -- was drawn by 15 the Park 410 West Joint Venture on this loan to 16 pay back the advances to the partners that had 17 been made in connection with the -- during the 18 period that it was under the arrangement -- the 19 loan with Alamo Savings. That included the 20 interest payment that we talked about a few 21 minutes ago. I don't remember all the other items 22 that are in there. I don't know if we have the 9616 1 worksheet here or not that shows what made it up. 2 But that was money that was paid back. Half of it 3 went to the Park 410 -- I mean, to the GMR group. 4 Half of it went to the Rosenberg/United Savings 5 group. It was intended to pay them back 6 everything they had heretofore advanced to the 7 partnership. 8 Q. So, they were paying back themselves. 9 Is that what you're saying? 10 A. They were drawing money on the United 11 loan to pay back the money they had put into the 12 partnership earlier. 13 Q. Now, there are two asterisks that refer 14 down to the left side of the page. It says "less 15 $1.53 million due Bank of Dallas." 16 What's that referring to? 17 A. Of that money that's on that entry -- 18 Q. Which money? The 4 -- 19 A. The 4 million 454, there was a payment 20 to the Bank of Dallas on the GMR side from their 21 share of the money. 22 Q. And that's what the 1.5 million refers 9617 1 to? 2 A. Yes. 3 Q. I notice right below the 4 million 454, 4 there is another entry for developer fee for Gulf 5 Management. 6 Do you see that? 7 A. Yes. 8 Q. That's $250,000? 9 A. That's correct. 10 Q. What's that for? 11 A. Gulf Management was the managing 12 partner of the venture, and they were paid a 13 management fee -- were able to draw a management 14 fee from the venture, and that was the initial 15 payment to them. 16 Q. Let's look at the second page of the 17 tab. It's titled "Explanation of payoff of 18 existing mortgages." Right? 19 A. Yes. 20 Q. Would you explain what the first entry 21 means in connection with this payoff? 22 A. Entry No. 1 was the payment of 9618 1 Mr. McClintick's note, the 17,177,000-dollar note 2 that had been signed when the property was 3 acquired from Alamo Savings. The principal 4 balance of the note when we applied the discount, 5 the 2-million-dollar discount, as it was slightly 6 adjusted for the additional days, then was applied 7 pro rata. It ended up with the unpaid principal 8 balance being the agreed sum of 16,334,880.72. 9 And then we had to add to that the accrued 10 interest on the loan that it was unpaid from the 11 29th or the 31st of March. I guess it was 12 April 1st, I think, going forward. And that 13 became the sum that was owing or reflected the 14 money that was owing on the 17,177,665.52 note to 15 Mr. McClintick. And then the -- that's the first 16 one. 17 Q. And the second? 18 A. The second was the same process for the 19 21,840,000-dollar first lien note that was held or 20 originally given to Alamo Savings and held by 21 Alamo Savings for its original interest in the 22 land, applying the discount and then computing the 9619 1 interest on it. 2 Q. And the third? 3 A. The third was the money that had been 4 advanced on the 750,000-dollar development loan 5 that had been made by Alamo Savings for some of 6 the curative work to be done as we went along. 7 And that was the unpaid balance. That was -- 8 there was no discount on it. That was just the 9 amount that happened to have been drawn, I 10 believe, was the 683. And the $22,000 represented 11 the remaining accrued interest. 12 Q. Going to the figure at the bottom right 13 part of the page, 35 million 546? 14 A. Yes. 15 Q. That's the amount that's funded to 16 Alamo? 17 A. That's correct. 18 Q. Okay. 19 A. The difference -- there is a difference 20 between those two numbers. 21 Q. And what's the significance of that? 22 A. Those were the holdbacks. 9620 1 Q. What are holdbacks? 2 A. That's where we collected -- if you 3 look at the statement, we kept a reserve for 4 payment of taxes, the FEMA escrow, money that was 5 set aside to pay the platting fees, the 6 commissions. So, we owed to Alamo Savings 7 37,977,193 and we had agreed at that point to pay 8 them a total of 35 million 546, the difference 9 being withheld. 10 Q. Let's look at Tab No. 8, please. 11 Before we get to that, let me ask you a question 12 about your earlier statement about recollecting 13 the conversation with -- in January when you were 14 in Mr. Rosenberg's office and Mr. Hurwitz was on 15 the speakerphone. 16 Why does that stand out in your mind. 17 MR. KEETON: He may have been on the 18 speakerphone. I didn't hear the witness say he 19 was on the speakerphone. 20 Q. (BY MR. LEIMAN) Was he on the 21 speakerphone? 22 A. Stanley called me into his office at 9621 1 one point to ask me a question about the points on 2 the loan and he was -- he told me he was speaking 3 with Charles on the phone. I heard a voice. I 4 believe it was him on the other end of the phone, 5 but I was asked a question regarding the points 6 and that was all. 7 Q. What do you mean, "the points"? 8 A. The points on the loan that were being 9 charged under the loan. 10 THE COURT: Well, was it on 11 speakerphone or not? 12 THE WITNESS: Yes, sir. 13 Q. (BY MR. LEIMAN) You recognized 14 Mr. Hurwitz' voice? You met him? 15 A. I've met him. I believe it was him. I 16 had no reason not to. I said hello, and then I 17 answered the question and then I left. 18 Q. Would Stanley have misinformed you in 19 that regard? 20 A. I don't believe so. That was the limit 21 of the conversation. 22 Q. What about the fact that it was in 9622 1 January? Was that -- why does that stand out in 2 your mind? 3 A. We were having some discussions at the 4 time regarding the points and how they were to 5 be -- what was to be paid under the note and a 6 desire to reduce the points to what -- to 2 points 7 instead of 3. 8 Q. Looking at Tab 8 in 7130, what is this? 9 A. Tab 8 is a copy of the 10 80-million-dollar note that was signed on -- it's 11 dated April the 8th -- I think it was signed a few 12 days later -- from the Park 410 West Joint Venture 13 to United Savings Association. 14 Q. You said earlier that the loan might 15 have been $73 million or $80 million. This 16 promissory note indicates that it's an 17 80-million-dollar amount. 18 A. Yes. 19 Q. What was the amount of the note? 20 A. United's commitment -- the note was for 21 $80 million. 22 Q. Okay. Is there anything that would 9623 1 reduce that amount or change it? 2 A. Yes, sir. 3 Q. What's that? 4 A. Under the loan agreement, there was a 5 provision that provided that -- that -- I think it 6 was 7 million or maybe a little -- 7 million and 7 some -- a little more than $7 million might be -- 8 was to be advanced in connection with certain 9 work, what they called Phase 3 work, an additional 10 road in the corner of the property, depending on 11 whether they chose to try to break that tract up 12 into smaller parcels or sell it in bulk. And that 13 there was no -- United's obligation to fund that 14 was contingent upon United receiving some 15 additional collateral and -- I'm not sure -- I 16 believe an appraisal or verification of value. 17 That portion of the loan may or may not have been 18 funded. 19 Q. All right. And what about the rest of 20 the loan, however? 21 A. The rest of the loan was an obligation 22 for United to fund it in accordance with the terms 9624 1 of the loan documents. 2 Q. Which I think you indicated would have 3 been somewhere between 72 and 73 million? 4 A. Yes, sir. 5 Q. Let's look at Tab No. 9, please. 6 What is Tab 9? 7 A. Tab 9 is the deed of trust and security 8 agreement that secured a payment of the 9 80-million-dollar note. 10 Q. And who were the parties to this? 11 A. Park 410 is the grantor or the 12 borrower. United Savings Association is the 13 beneficiary of this document as the lender. 14 Mr. Pledger is the trustee on behalf of the 15 lender. 16 Q. What's the significance of the deed of 17 trust in connection with the promissory note? 18 A. The deed of trust conveys or transfers 19 the property. The 427 acres, record title to the 20 trustee, and the trustee agrees to hold that 21 property in trust to secure payment of the 80 -- 22 of the note, the 80-million-dollar note. 9625 1 Q. The date on this deed of trust is 2 April 8th. 3 A. Yes, sir. 4 Q. Right? 5 A. Yes, sir. 6 Q. Looking back at Tab 1, what was the 7 date of the settlement? 8 A. The settlement statement is April 17th. 9 Q. Why was there a difference in the 10 timing? 11 A. Amongst other things, just the time 12 periods for getting the transaction closed. It's 13 not uncommon to date documents as of a specific 14 date and the paperwork, it goes through to close a 15 couple of days or weeks later. 16 Q. What's indicated in the settlement 17 sheet, however, on Tab 1 is that interest was 18 accruing on the Alamo loans up through and 19 including April 17th. Right? 20 A. Yes, sir. That's what would be on 21 Page 2. 22 Q. Yes, sir. Is that right? 9626 1 A. Yes. 2 Q. Do you know -- do you know as of what 3 date United Savings recorded on its own books and 4 records the loan fee that was -- that came into 5 its -- by virtue of the settlement as shown in 6 Tab 1? 7 A. I do not. 8 Q. All right. Would you look, please, at 9 Tab 10? 10 A. Yes, sir. 11 Q. What's Tab 10? 12 A. 10 is the development loan agreement, 13 which is the document that governs the terms or 14 sets out the terms and agreements between the 15 borrower and the lender for advancing funds on the 16 loan and many of the obligations of the parties 17 both ways. 18 Q. I note here that in Roman ID, it states 19 "Initial advance amount funded to borrower this 20 date, $45.617 million." 21 A. Yes. 22 Q. What does that mean? 9627 1 A. That should correspond with the number 2 on the settlement statement as the amount of the 3 initial advance from United Savings Association on 4 the loan. And if you look on No. 1 at the very 5 top, it says "funds received, amount of the loan." 6 United funded 45,617,776.52 on the loan at the 7 time it was closed. 8 Q. Do you know whether or not United 9 Savings' board of directors had considered this 10 loan and voted on it as of April 17th, 1986? Do 11 you know? 12 A. No. 13 Q. When it says "initial advance," does 14 that mean that the money has actually changed 15 hands? 16 A. Well, that's the amount that was to 17 change hands at that point. What, to me, would 18 evidence the actual changing of hands of the money 19 would be the signed closing statement from the 20 title company that acknowledged that the payments 21 and disbursements had occurred in that fashion. 22 Q. And is that what we saw in Tab 1? 9628 1 A. We did, yes. 2 Q. Okay. And could United have had then 3 gotten that money back or is it -- is it gone? 4 A. Well, I mean, in -- the funds had been 5 advanced were beyond its control except for a 6 portion of the $45 million that was coming back to 7 United as part of the refunds for its advances and 8 for the fees that were coming to United. 9 So, some of the money came back. But 10 the majority of the advance, the portions that 11 went to third parties, was funded outside of their 12 control. 13 Q. The next page, Page 2 of the 14 development loan agreement, refers to retainage in 15 H. 16 Do you see that? 17 A. Yes. 18 Q. What does that mean? 19 A. That should be the balance of the loan 20 that was available for funding under this loan and 21 that United had agreed to fund in accordance with 22 the terms of the loan agreement going forward. 9629 1 Q. If I add those two numbers together, 2 the initial advance and the retainage, should I 3 come up with the amount of the loan? 4 A. You should. 5 Q. Without the benefit of a calculator, 6 I'll just add the first two. It appears to me to 7 be some $79 million or more than $79 million. 8 A. If you add the next digits, it's 9 80 million. 10 Q. $80 million? Which comports with the 11 size of the loan, doesn't it? 12 A. Yes. 13 Q. Let's look at Tab No. 20. I'm sorry. 14 Tab 18, a document entitled "guaranty" at the top. 15 A. I'm sorry. Tab -- 16 Q. 18. 17 A. Yes, sir. 18 Q. What's the significance of this 19 document? 20 A. This is the guaranty agreement -- a 21 guaranty agreement from one of the guarantors -- I 22 need to look to see which one -- from 9630 1 Mr. Rosenberg, signed by him, where he guarantees 2 payment of portions of the 80-million-dollar loan 3 to United Savings Association. 4 Q. Looking down the first numbered 5 paragraph, No. 1, I notice there that it says 6 "Guaranty guarantors hereby severally, absolutely, 7 irrevocably, and unconditionally guaranty." 8 A. Yes. 9 Q. The common word "jointly" is missing 10 from this particular statement. Why is that? 11 A. The agreement that was -- the guaranty 12 obligations for the loan transaction were agreed 13 to be several. United Savings' guaranty was 14 for -- one sum of money for its portion of the 15 money would be collected only from Noel Simpson's 16 group. I believe -- I don't know if I said GMR. 17 I'm confused. GMR's guarantee for its portion of 18 the debt was recoverable only from them. The 19 Grieshaber and Roberts portion of it was 20 recoverable only from them. The Rosenberg portion 21 was recoverable only from Rosenberg. Rosenberg 22 was not responsible for the other venturers' 9631 1 guaranties and vice versa. 2 Q. Did you have a hand in preparing this 3 language? 4 A. I certainly -- I did not draft the 5 document. It was drafted by Ellen Lain. But I 6 certainly reviewed it and requested many revisions 7 to it and was -- made sure that the word "jointly" 8 was not there. 9 Q. Why did you do that? 10 A. Because the agreement was that 11 Mr. Rosenberg was not to be responsible for Noel's 12 share of the -- the guaranty from his group or for 13 Grieshaber. The guaranties were to be several, 14 not joint. 15 Q. Did the lender object to this? 16 A. It was the terms that were agreed upon. 17 Q. And they agreed to it? 18 A. They agreed. 19 Q. Was it common in your experience in 20 large commercial transactions in the mid-1980s to 21 have had a several liability without joint and 22 several liability? 9632 1 A. I've seen them both ways. 2 Q. And in this case, you'd prefer that -- 3 A. It was several. If I represent the 4 borrower, I definitely want several. 5 Q. What if you represent the lender? 6 A. I'd pursue joint if that's the 7 agreement. If no one tells me -- if the parties 8 have negotiated it, we write what the parties 9 agree to. But if they don't say anything else, 10 we'll make it joint if we represent a lender. But 11 they didn't have -- I mean, we agreed -- as a 12 borrower's attorney, I knew that it was several 13 and ensured that it was several. 14 Q. Why would a lender want it joint and 15 several? 16 A. It increases the ability to recover -- 17 it increases the amount of the guaranty. You may 18 collect from either of the guarantors in a joint 19 or several guaranty. Usually these guaranties are 20 signed individually. It would be interesting how 21 the joint and several would apply with the 22 limitations. But I mean, the agreement was always 9633 1 several liability. 2 Q. Let's turn to Tab 25. 3 A. Yes, sir. 4 Q. What is Tab 25? 5 A. Tab 25 is a letter of credit agreement, 6 one of several. This happens to also be the one 7 from Mr. Rosenberg's group or Mr. Rosenberg. It's 8 the agreement under which letters of credit were 9 placed with United Savings Association to secure 10 payment under the guaranties. 11 Q. Now, is this an actual letter of 12 credit? 13 A. No, sir. 14 Q. By its terms then, what is it doing? 15 What does this document do? 16 A. This letter describes the obligation or 17 evidences the obligation of Mr. Rosenberg to 18 provide certain letters of credit totaling 19 $5 million to United Savings Association, ensure 20 that they are renewed before maturity, 60 days in 21 advance of maturity, and otherwise set forth the 22 terms under which United Savings Association may 9634 1 in the future present those letters of credit for 2 payments to the drawee's -- to the drawee 3 institution. 4 Q. In connection with the Park 410 loan, 5 an 80-million-dollar loan by United Savings, what 6 was the total amount of the letters of credit that 7 were provided by borrowers? 8 A. $10 million initially. 9 Q. Were there any additional letters of 10 credit? 11 A. Yes, sir. 12 Q. When were those issued? 13 A. Several years later, there was a small 14 supplemental letter of credit provided, or a 15 couple of -- that added up to a small sum of 16 money. 17 Q. What do you mean, "a small sum of 18 money"? 19 A. I believe it was either 25 or $50,000. 20 Q. Okay. And who provided those? 21 A. I believe it came from both sides of 22 the transaction. 9635 1 Q. Do you remember the circumstances under 2 which those were provided? 3 A. Not without going back and looking at 4 the documents. 5 Q. Let's look at Tab 27. What is Tab 27? 6 A. Tab 27 is a letter of credit issued by 7 the Gross Bank in the amount of $1,500,000. 8 Q. Did this represent one of the letters 9 of credit under Rosenberg's 5-million-dollar 10 agreement to provide letters of credit? 11 A. Yes, sir. 12 Q. So, this is a part of that 5 million? 13 A. Yes. 14 Q. There were other letters of credit that 15 added up to that 5 million? 16 A. There were two others. 17 Q. Okay. Who were they from? 18 A. One was from Mr. Kelleher, and the 19 other was from First State Savings. 20 Q. I think yesterday you were describing 21 your family's involvement with this particular 22 transaction. 9636 1 Would this have been the level of the 2 original participation of your family in 3 connection with this loan? 4 A. Yes, it is. The family provided this 5 1,500,000-dollar letter of credit to Stanley's 6 group. 7 Q. What was the nature of -- why did they 8 do that? 9 A. They elected to invest with Stanley in 10 the transaction, believing it was a reasonable and 11 good business investment. 12 Q. Did you give business advice about this 13 particular transaction? 14 A. This one, Stanley worked mostly with 15 my -- with one of my uncles. 16 Q. So, I take it that you didn't give much 17 business advice on this transaction? 18 A. This one I stayed mostly in the 19 documentation of. I didn't -- I was working on 20 Sea World and the area at the time, and I just 21 felt it was better to stay out of it. 22 Q. You mentioned Mr. Kelleher a few 9637 1 moments ago. Let's look at Tab 28. 2 A. Yes, sir. 3 Q. This -- what is this? 4 A. This is a 500,000-dollar letter of 5 credit issued by MBank, also in favor of United 6 Savings, on behalf of Herb Kelleher. It was his 7 contribution or his participation in Stanley's 8 group. He provided this letter of credit. 9 Q. Was that -- did Mr. Kelleher -- was 10 this his own funds? Were these his own funds, or 11 were these Southwest Airlines' funds? 12 A. His own funds. 13 Q. And in connection with the letter of 14 credit that was put up by your family members, 15 Wulfe and Alamo, were those personally-owned 16 businesses? 17 A. Yes. 18 Q. It's not a financial institution, is 19 it? 20 A. The letters of credit are issued by 21 financial institutions, but they are based upon 22 the credit of the individuals and their own funds 9638 1 behind them. 2 Q. Was there another letter -- you stated 3 there was another letter of credit? 4 A. Yes, sir. There was one more from -- I 5 believe it's First State -- on behalf of First 6 State Savings. 7 Q. Would that be found at Tab 26? 8 A. Yes, sir. 9 Q. I don't see an individual's name here 10 in the applicant section. Is that because the 11 applicant was an institution? 12 A. No. I believe the name is First State 13 Savings. 14 Q. And what -- is that an individual? 15 A. No, it's not. It was a savings and 16 loan in San Antonio. The letter of credit was 17 issued by National Bank of Commerce on behalf of 18 First State Savings. 19 Q. You said it was a savings and loan in 20 San Antonio. Is it still there? 21 A. No, sir. 22 Q. What happened to it? 9639 1 A. It was closed. 2 Q. Why? 3 A. I'm not -- I haven't seen the 4 documents, but it failed. 5 Q. A failed institution? 6 A. It was a failed institution or closed 7 institution. It didn't merge with anyone, that 8 I'm aware of. 9 Q. Let's turn to Volume 2 of 71 -- 10 THE COURT: Let's take a recess. We'll 11 recess until 1:30. 12 13 (Luncheon recess taken at 12:04 p.m.) 14 15 THE COURT: Be seated, please. We'll 16 be back on the record. 17 Mr. Leiman, you may continue. 18 MR. LEIMAN: Thank you, Your Honor. 19 (1:37 p.m.) 20 Q. (BY MR. LEIMAN) Mr. Gindy, if we 21 could, let's turn back to Tab No. 18, please. And 22 that would be one of the guaranties on the 9640 1 80-million-dollar United Savings loan. 2 A. Yes, sir. 3 Q. And specifically, I'd like you to refer 4 to Paragraph 14, please, on limitation of 5 liability. 6 A. Yes. 7 Q. Could you explain for me what the 8 significance of this limitation of liability is 9 and how it would operate relative to the guaranty? 10 A. The guaranty starts off as a full 11 guaranty of the 80-million-dollar note, and then 12 it is limited by the language of Section 14 or 13 restricted. It was our -- it was the borrowers' 14 and the guarantors' agreement with United that 15 they were not guarantying the entire 16 80-million-dollar loan but a portion of it. And 17 Section 14 is the restriction or narrowing of the 18 sums or limitation of the sums that are 19 guarantying the portion of the $80 million. 20 Q. And what is the percentage that's 21 actually guaranteed in this case? 22 A. The formula was written for each of the 9641 1 individual guarantors to guaranty a portion of the 2 entire debt. And I think the easiest thing to do 3 is read through the section. "The liability 4 guarantor is limited to 50 percent of (A) 5 25 percent of the principal balance of the note 6 outstanding, all the accrued -- (B), all the 7 accrued interest on the note, (C), any other 8 amounts and expenses due and payable under the 9 security documents other than principal and 10 interest, (D), fraud" -- and then it goes through 11 a whole litany of other types of events where if 12 the borrower were to misappropriate funds like tax 13 insurance reserves, insurance proceeds, things 14 like that, the -- those sums were also added to 15 the guaranteed amount. 16 Q. Now, is this -- is the guaranty and the 17 limitation of liability thereunder affected by the 18 letters of credit? 19 A. Yes. 20 Q. How would that operate? 21 A. Just a minute. (Witness reviews the 22 document.) If you go down towards bottom, ten 9642 1 lines up on the right-hand margin from the bottom 2 of Section 14, it starts off with the word 3 "paragraph." It says "Notwithstanding anything 4 contained herein in the note or security documents 5 to the contrary, guarantors shall receive a credit 6 against their liability specified in this 7 Paragraph 14 for an amount equal to the sum 8 actually received by the lender" -- which is the 9 holder of the note -- "upon the lender's drawing 10 of any letter of credit which the guarantors 11 delivered to the lender as additional security for 12 the loan." So that for every dollar that is 13 collected under a letter of credit, an 14 individual's guaranty is reduced 15 proportionately -- 16 Q. Now, in that -- 17 A. -- by a like amount. 18 Q. I'm sorry. I didn't mean to cut you 19 off. 20 A. By a like amount. 21 Q. In that regard, the language that you 22 edited in in connection with your comments to the 9643 1 lender's attorneys, specifically in Paragraph 1 on 2 the first page of Tab No. 18 where you state that 3 a guarantor is severally liable on a guaranty, 4 does that further impact the nature of the 5 guaranty or define it? 6 A. Well, Section 14 is a further 7 restriction on the amount of what -- of the 8 recovery of a lender or a reduction of the -- in 9 setting the amount guaranteed. The note was for 10 $80 million. The liability -- the guarantors were 11 several, was what was on the first page. Here, 12 each guarantor's liability or this guarantor's 13 liability was 25 percent -- was 50 percent of 14 25 percent of the unpaid -- of the principal 15 balance of the note. 16 It is a further reduction in the 17 guarantor's liability under a broad guaranty -- 18 full guaranty of the note. 19 Q. All right. Now, let's go to Volume 2 20 of your closing binders. Specifically, let's turn 21 to Tab No. 51. 22 Did you have a hand in preparing the 9644 1 documents contained in Tab 51? 2 A. I reviewed it. I didn't draft it. 3 Q. What's the significance of this 4 particular collection of documents? 5 A. This is an estoppel certificate and 6 consent of the borrower -- individuals or 7 principals of the borrower -- informing United to 8 be sure that information that was set forth in 9 loan documents. The borrowers were agreeing that 10 these statements were accurate and that 11 information disclosed was correct. 12 MR. NICKENS: Your Honor, our Tab 51 is 13 clarification of release of easement, which 14 doesn't appear to be what the witness is 15 discussing. 16 THE WITNESS: I'm looking at consent 17 and estoppel affidavit for loan disbursement. 18 MR. NICKENS: This is Tab 51 of 7130 in 19 our set. 20 MR. KEETON: How many tabs are there in 21 all? 22 MR. NICKENS: 77. 9645 1 THE COURT: Mr. Nickens, what's the 2 first tab in Volume 2? 3 MR. NICKENS: Your Honor, ours are not 4 arranged that way because we don't have the 5 same -- it arranged in the same number of volumes. 6 Ours are arranged in two volumes. 7 THE COURT: Let's be off the record for 8 a minute. 9 10 (Discussion off the record.) 11 12 THE COURT: Back on the record. 13 Mr. Leiman. 14 MR. LEIMAN: Dare I move to 59 at this 15 point, Tab 59. 16 (1:52 p.m.) 17 Q. (BY MR. LEIMAN) Mr. Gindy, I believe 18 you referred to Tab 59 earlier, which is the 19 amended and restated Park 410 West Joint Venture 20 agreement? 21 A. Yes. 22 Q. You talked about this earlier in your 9646 1 testimony. 2 What is the significance of this 3 particular document? 4 A. This is the original Park 410 West 5 Joint Venture agreement that was signed at the 6 time the property was bought from Alamo. In 7 connection with the United loan closing, an 8 amended and restated agreement was prepared by 9 Mr. Glast, and he was the author of the document. 10 It was circulated amongst the partners. I believe 11 Mr. Smith represented Mr. Grieshaber, and Stanley 12 reviewed the document as well setting forth the 13 terms of the joint venture agreement for ownership 14 of the Park 410 property. 15 Q. Will you turn with me, please, to 16 Page 6 of this restated agreement? 17 A. Yes. 18 Q. And Section 2.06? 19 A. Right. 20 Q. There is reference to compensation of 21 the managing venturer and manager. 22 A. Yes. 9647 1 Q. And it sets forth a schedule of 2 compensation for the managing venturer. 3 Would that be GMR? 4 A. Yes. 5 Q. And it talks about an annual fee of 6 $50,000 through April 15th, 1986. And in about 7 the middle of the page it starts with "Thereafter 8 Gulf shall be entitled to a quarterly fee" -- 9 A. Yes. 10 Q. -- "of $75,000." It goes on in that 11 same paragraph, about two-thirds down the page 12 above the paragraph that begins "the continuing 13 management fees." 14 A. Yes. 15 Q. In the sentence before that, it says 16 "In addition, as compensation for its services in 17 connection with the negotiation and closing of the 18 loan, Gulf shall be entitled to a special one-time 19 fee of $250,000 payable upon the closing and 20 funding of the loan." 21 A. That's correct. 22 Q. Was that -- would that fee have been in 9648 1 addition to the fee that Mr. Rosenberg earned? 2 And let me -- if I might, I'd like to refer you in 3 that regard to the very last paragraph in this 4 Section 2.06. 5 A. Yes. In the bottom, it's the 6 400,000-dollar fee, Stanley's. The 250,000-dollar 7 fee that was at the end of two paragraphs before 8 that was there, and I believe it's on the last 9 line, the last printed line of the closing 10 statement that's Document No. 1 in Binder No. 1, 11 the 250. 12 Q. It would be Tab 1 in Binder 1? 13 A. Right. 14 Q. The closing statement. Do you know 15 what, in addition to its other services, GMR did 16 in order to earn the 250,000-dollar fee? 17 A. From the very beginning, GMR was 18 involved in the acquisition of the property, doing 19 its own -- pursuing the easement -- the various 20 easement clarifications, development, marketing 21 information, the various other activities that 22 were going on through the Alamo Savings first -- 9649 1 the first year of that two-year note period. This 2 was, in part, compensation, I believe, for all of 3 that. The fee was a one-time fee. There weren't 4 fees paid under the first loan. 5 Q. Let me follow up with that for a 6 second. There were fees pays under the first 7 loan? 8 A. There were not. 9 Q. No fees paid under the first loan? 10 A. There were no fees paid. 11 Q. But GMR was reimbursed in full for any 12 expenses it had in connection with the first joint 13 venture; isn't that right? 14 A. The partnership reimbursed GMR for 15 expenses paid to third parties. It did not pay 16 them for, I believe, expenses such as Charles 17 White or his time in San Antonio or other expenses 18 of their office. I believe the only 19 reimbursements under the first transaction were 20 third-party expenses. That's what I recall. 21 Q. All right. Let's look at Tab 62. What 22 is Tab 62? 9650 1 A. That's the certificate of limited 2 partnership for Rosenberg P 410, Ltd., which is 3 the limited partnership entity that was the 4 Rosenberg partner in Park 410 Joint Venture. 5 Q. And this would set forth what details? 6 A. It set forth the terms of the 7 partnership and the agreement between Stanley, 8 Herb, and the Wulfe family. 9 Q. When you say "Herb," do you mean Herb 10 Kelleher? 11 A. Herb Kelleher. 12 Q. Would First State Savings have been 13 included in this? 14 A. They were ultimately as they became a 15 partner. I believe the partnership was later 16 amended to incorporate them. 17 Q. Let's turn to Volume 3 of T7130. 18 MR. LEIMAN: Your Honor, Mr. Schwartz 19 handed me a note telling me that he had solved the 20 mystery of Tab 51. In fact, the entire tab was 21 there the whole time, but it had been collated 22 improperly. And for that, we apologize to 9651 1 respondents' counsel as well as the Court. 2 Q. (BY MR. LEIMAN) Let's look at Tab 75, 3 please. Tab 75 contains a termination agreement 4 as well as additional documents that are 5 referenced in connection with the termination 6 agreement. 7 Did you prepare this document? 8 A. No. 9 Q. Do you know who did? 10 A. Ellen Lain. 11 Q. Ellen Lain of Schlanger, Cook? 12 A. Yes, I believe so. 13 Q. Would that be the lender's at -- 14 A. The lender's counsel. Well, United's 15 counsel in this transaction. 16 Q. Earlier, we saw -- well, looking -- 17 turn to Page 2, please, of the tab, Tab 75. We 18 previously saw this March 28th, 1985 agreement 19 between United Savings and Mr. Rosenberg. Right? 20 A. That's correct. 21 Q. Apart from this signed agreement, this 22 March 28th, '85 agreement, until this termination 9652 1 agreement of April 8th, 1986, was there any 2 further delineation of the terms and conditions of 3 the relationship and partnership between United 4 Savings and Mr. Rosenberg? 5 A. Not to my knowledge. 6 Q. What does the termination agreement do? 7 A. The termination agreement terminates 8 that partnership arrangement or the agreement that 9 was created under the March 28th, 1985 letter. 10 Q. Look with me, please, at the last 11 substantive sentence in the second paragraph where 12 it says that "Rosenberg shall cause the Park 410 13 West Joint Venture to reimburse United for the 14 expenses incurred by United in connection with the 15 agreement and the property." 16 A. I'm sorry. I was not able to -- 17 Q. You didn't follow that? I'm sorry. 18 A. I didn't follow where you were at. 19 Q. Look at the termination agreement, 20 please. 21 A. Yes. 22 Q. Tab 75. And I'll read the entire final 9653 1 sentence. It says, "Further, upon receipt by the 2 Park 410 West Joint Venture, a Texas joint venture 3 of which Rosenberg is a venturer, of the funds 4 from the refinancing of the property, Rosenberg 5 shall cause the Park 410 West Joint Venture to 6 reimburse United for the expenses incurred by 7 United in connection with the agreement and the 8 property." 9 Do you see that? 10 A. Yes. 11 Q. Was that, in fact, carried out? 12 A. Yes. 13 Q. And where did we see that carried out? 14 A. The reimbursement on the settlement 15 statement, approximately $4 million plus was 16 disbursed back to the partners for reimbursements. 17 Half of that went to United or, actually, went to 18 Stanley's partnership and then from Stanley to 19 United. 20 Q. Would you turn, please, to Tab 76? 21 This is a special power of attorney. Are you 22 familiar with this document? 9654 1 A. Yes. 2 Q. And what does it do? 3 A. It's special power of attorney from 4 Stanley to me authorizing me to execute documents 5 on his behalf in connection with the 6 80-million-dollar loan transaction. 7 Q. Were there any limitations in 8 connection with the special power of attorney that 9 was granted? 10 A. Not really, if it was in connection 11 with that loan or that transaction, the Park 410 12 property. 13 Q. When you say "not really," I mean, I 14 assume you're excluding illegal acts. 15 A. Illegal acts, death, incapacity. If 16 that had happened to Mr. Rosenberg, that would 17 have prevented me from going forward. 18 Q. But apart from those -- 19 A. I had full power to act on his behalf. 20 Q. So, you would have been acting in his 21 stead? 22 A. Yes. 9655 1 Q. Thank you, Mr. Gindy. 2 A. Are we through with these three? 3 Q. Yes. 4 T7148. Have you seen T7148 before? 5 A. Yes. 6 Q. And would you identify, it please? 7 A. It's a check from Stanley to 8 Oppenheimer, Rosenberg, Kelleher, Wheatley, our 9 law firm. 10 Q. It's dated April 23, 1986, and it 11 refers in the memo section of the check to "fees 12 re: P 410 West." 13 A. Right. 14 Q. Do you see that? 15 A. Yes. 16 Q. What were the circumstances under which 17 Mr. Rosenberg paid this? 18 A. These were fees that Mr. Rosenberg paid 19 to the law firm which were for work we had done on 20 the Park 410 transaction from the time the Alamo 21 Savings loan was done or the original Alamo 22 Savings transaction through the closing of the 9656 1 Park 410/United Savings loan transaction from the 2 fee that he received from Park 410 Joint Venture. 3 Q. Did -- what were -- I guess my question 4 is: Did he volunteer this check? Did he come in 5 one day and turn it over to the law firm? 6 A. I reminded him that he owed the fee to 7 the law firm to be paid. The discussions between 8 Noel and Stanley were that Stanley was to pay the 9 fee. Fees were to come out of the 400,000-dollar 10 payment to him and, in fact, that's where they 11 came from. We had the fee statement that was 12 discussed or a portion of it before was produced 13 in part -- was -- in part, evidenced some of the 14 things that were -- of the services that were 15 provided during that time. There were a couple of 16 other files, as well, in connection with Park 410 17 property besides just the United Savings loan that 18 were included in the fee statement. 19 Q. Do you remember what the circumstances 20 were of your reminding him about this? 21 A. Just sat down and had a discussion with 22 regard to the sums that were owed to the firm and 9657 1 how much was to be paid to us. 2 Q. Before you did that, did you talk to 3 other members of your law firm? 4 A. We reviewed the fee with other members 5 of the firm. There was discussion with other 6 members of the firm with regard to the fee. 7 Q. When you say "we did," who do you mean? 8 A. I did. Stanley did. 9 Q. And the end result was payment of this 10 check? 11 A. That's correct. 12 Q. T7201. Mr. Gindy, you prepared -- did 13 you prepare this memo? 14 A. Yes. 15 Q. And what was your purpose in preparing 16 this memorandum? 17 A. I went to many meetings with regard to 18 the Park 410 property and amongst the things I did 19 keep Stanley informed of progress and the issues 20 that were -- of concern or I thought he needed 21 especially to know about. We had just had a 22 marketing meeting. This was already -- this was 9658 1 in October of '86, and Noel and I had discussed 2 some concern with regard to the marketing efforts 3 so far by Grieshaber and Roberts and the -- 4 their -- their presentation of the property to 5 prospective buyers. 6 Q. And in that regard, was there concern 7 about Grieshaber and Roberts' efforts? 8 A. Well, we were -- Noel started -- was 9 concerned that their marketing efforts and the 10 people they had dealt with were primarily local 11 individuals or people in the San Antonio -- in its 12 regional market area and there was not an effort 13 to market the property or not as strong an effort 14 as he wished to see outside that area. Noel 15 wanted to talk about and get some thoughts as to 16 whether we should do something different. 17 MR. LEIMAN: If I could have a moment, 18 Your Honor. 19 Q. (BY MR. LEIMAN) T7196. 20 MR. LEIMAN: Your Honor, I'd like to 21 move T7148 into evidence, as well as T7201. 22 MR. KEETON: No objection. 9659 1 THE COURT: Received. 2 MR. LEIMAN: And T7196. Oh, let's 3 discuss it first. 4 Q. (BY MR. LEIMAN) Mr. Gindy, have you 5 seen this exclusive listing and commission 6 agreement before? 7 A. Yes, I have. 8 Q. Looking at the last page of the 9 document, it states it was entered into on 10 April 8th, 1986. 11 Do you see that last page? 12 A. Yes. 13 Q. Who selected Grieshaber and Roberts as 14 the exclusive sales agency for the Park 410 15 property? 16 A. Noel Simpson and Stanley. 17 Q. Was there a particular reason that they 18 were selected? 19 A. They had been involved in the property 20 from the beginning. They were a participant in 21 the transaction or active brokers in the 22 San Antonio community. That's where they decided 9660 1 to go. Grieshaber and Roberts and Noel Simpson's 2 group had a very long -- they had a long-standing 3 relationship. I think everything that Noel's 4 group dealt with in the San Antonio area was 5 handled by Grieshaber and Roberts. 6 MR. LEIMAN: Your Honor, I move T7196 7 into evidence. 8 MR. KEETON: No objection. 9 THE COURT: Received. 10 Q. (BY MR. LEIMAN) Mr. Gindy, how long 11 have you lived in San Antonio? 12 A. 32 years, 33 years. 13 Q. And you've been practicing law in 14 San Antonio since what year? 15 A. '76. '74. Excuse me. 16 Q. Is it fair to say that you've seen 17 several business cycles in the city? 18 A. I have. 19 Q. With regard to the business cycle that 20 was prevalent in -- beginning in 1980, how would 21 you characterize that period in terms of real 22 estate? 9661 1 A. The business cycle starting in 1980? 2 Q. That existed in 1980. 3 A. We were looking at a reasonably strong 4 market in the beginning -- in the early Eighties. 5 We saw a great deal of commercial development. 6 I'd say it was a very -- the early part of the 7 Eighties were strong and active. There was a 8 great deal of building going on. Funds were 9 readily available. We saw the advent of the joint 10 venture arrangements or the equity participations 11 with the lenders and savings and loans. It was a 12 very aggressive period at the beginning of the 13 Eighties. 14 Q. Did there come a time when that 15 changed? 16 A. By the end of the 1980s, it was at the 17 opposite end. It had been -- the market was very 18 soft and weak, and there was a surplus of 19 developed properties in the area. In other words, 20 it was definitely at the down end of the cycle 21 instead of the up. 22 Q. What happened in the middle of the 9662 1 Eighties -- 1984, '85, '86? 2 A. Well, the real estate area, one of the 3 most important things that we saw, I believe, was 4 the change in the tax laws. I think it was the 5 '86 that had an impact on investors and the use of 6 passive losses today, made it less -- much more 7 expensive or less desirable for investors to go 8 out and build a property or invest in a project if 9 it wasn't their operating business. 10 We also saw a very strong oversupply, 11 in our area, of almost each of the commodities. 12 With hindsight, we saw a lot of things that 13 happened. Overbuilding. 14 Q. Did you see it while it was happening? 15 A. It's hard to say that you see it when 16 things are happening. You see reports of things 17 that are going on. You see things start -- you 18 always hope it's not the downturn or the end of 19 the bottom -- you know, a dive down. You see 20 things happen. You see delays in -- or sales not 21 occurring, businesses retracting instead of 22 expanding. So, I can't say that you don't see 9663 1 them. You may not see the whole cycle until you 2 look back at it with a view of looking at a 3 history. 4 Q. When did the cycle begin to change or 5 retract in San Antonio? 6 A. I think if we look backwards now, I'd 7 say probably '85, '86, '87, in that range. To me, 8 I probably didn't see or feel that it happened -- 9 we saw -- I looked at the upside of the cycle 10 because I was seeing the future potential of the 11 growth of the amusement or the entertainment 12 business, the recreational tourism in San Antonio 13 which, in fact, it has grown pretty steadily since 14 the Eighties. But if you look at the overall 15 economy looking backwards, we saw a downturn 16 starting in the mid-1980s and probably the worst 17 one in the last 10 years. The only one being 18 worse now is the closing of Kelly. 19 Q. What was your principal client base? 20 Was it borrower or lender oriented in the 21 mid-1980s, '84, '85, '86? 22 A. I'd say it was pretty evenly divided 9664 1 between borrowers and lenders or users -- I 2 represented a large number of lenders. Primarily 3 local banks. And then I had the user side 4 practice, which was predominantly Sea World, and 5 three or four local developers, industrial 6 developers. 7 Q. You said with the closing of Kelly, 8 there has been a significant downturn? 9 A. We see in San Antonio, now that Kelly 10 Air Force Base is being closed -- it employs over 11 15,000 people. With the base closures, we don't 12 see the growth -- we're seeing space becoming -- 13 not growth becoming -- space is relatively full 14 today, but people are concerned to go forward and 15 build or put office space, service center space on 16 line because we believe we are going to see a 17 great deal of the space become available in the 18 southwest quadrant or the west quadrant of the 19 city as the trickle-down effect applies, as 20 businesses that supply Kelly lose their customer 21 in Kelly Air Force Base. They are either going to 22 have to find new uses or downsize. 9665 1 Q. In addition to Kelly Air Force Base, 2 the Air Force, the government being a major 3 employer in San Antonio, are there other major 4 industries there? 5 A. The second largest -- the government 6 and the five military bases have always been the 7 largest. We still have Fort Sam, Lackland, and 8 Randolph, which are major military bases whose 9 missions have not been affected. Brooks Air Force 10 Base, which is aerospace medicine, has been cut 11 back some and there has been talks -- talk of 12 something happening there. But military is still 13 probably our largest or one of our largest 14 employers. In addition to that, we have tourism. 15 Everybody in Texas spends a weekend or something 16 in San Antonio is the saying. 17 Q. Where in San Antonio? 18 A. Traditionally, the River Walk downtown 19 area has been the most popular area. It's where 20 all the attractions were until we saw the tourism 21 business start to build in connection with Sea 22 World where we saw four major facilities built on 9666 1 the outside of the loop -- being Sea World, Hyatt 2 Regency Resort, Fiesta Texas, and then Retama 3 Racetrack were all built along -- between 410 and 4 1604. Everything else is in the downtown area. 5 That's where the majority of the hotel 6 concentration is. 7 Q. When were those three -- apart from Sea 8 World, when was the racetrack built? 9 A. The Racetrack was built in 1993 or '94. 10 I can't remember. It's either 1993 or 1994. 11 Q. And what about the Hyatt Resort? 12 A. Hyatt Regency was built in 1990, maybe 13 '91. Fiesta Texas started in '89. 14 So, those are all -- I view those as 15 being part of the offspring of the decision in 16 that Sea World started to bring in that type of 17 tourist traffic to the city. 18 Another major industry we have is we 19 have a huge -- we've developed a very large 20 telemarketing business. We're in the central time 21 zone, which allows both the east and the west 22 coast to be served by split shifts. We have a 9667 1 large bilingual population. We have a population 2 in San Antonio that -- as far as a wage scale, 3 that that industry is looking for. 4 And so, we see -- we've seen World Com, 5 American Express, Citibank, just a number of other 6 telecommunication type industries come in and 7 gobble up the vacant office space and the vacant 8 office service center space in the city and 9 develop huge telephone marketing bases where we've 10 provided -- that's probably our third -- I would 11 think, from my experience, one of our largest 12 employer bases. 13 And then we have USAA, which is one of 14 our single largest employers which is a major 15 insurance company, and from then it goes to the 16 local EDF activities. 17 Q. You mentioned yesterday that in 18 connection -- when you were describing the aerial 19 photograph, that those new comers to the -- what 20 you call the great northwest had preferred to 21 build their offices or select office space where 22 they could have campus settings; is that right? 9668 1 A. That's correct. 2 Q. What are campus settings? 3 A. We view campus settings as being the 4 opposite of downtown Houston or New York or 5 Washington where we have more grass than we have 6 buildings and paving. Campus settings are usually 7 two- and three-story buildings occupying less than 8 15 percent or 20 percent of the site. The rest of 9 it being, as you would expect to have seen, an 10 urban or rural university campus or school campus 11 left in natural landscape or -- either natural 12 landscaping or at least tailored to be both 13 pleasing and friendly to the environment. 14 Q. Was Park 410 -- was that property ever 15 intended to be a campus-like setting or to be sold 16 as campus-like settings? 17 A. I don't believe we ever tried to market 18 it as campus-type property. 19 Q. Would one of the reasons for that be 20 the cost? 21 A. One would be the cost and, B, the 22 campus environment started, in our areas, to 9669 1 appear just after the Park 410 project started. 2 But it certainly was more expensive than the other 3 parcels. 4 Q. T7198 has been a previously admitted 5 exhibit. 6 Mr. Gindy, have you seen this memo 7 before? 8 A. Yes. 9 Q. This is a June 23rd, 1986 memorandum 10 from Simpson to you and Charles White and to 11 Grieshaber and Al Sachs. This is a discussion of 12 Park 410 property. I'd like you to turn your 13 attention, please, to Paragraph 3. Simpson states 14 here, it is -- referring -- is he referring to the 15 Park 410 property? 16 A. Yes, he is. 17 Q. He says "It is priced and has to be 18 priced to appeal to those buyers constructing a 19 quality product. Here we have no choice." 20 What does that mean? 21 A. What he's saying is that this project 22 is going to have to compete with the Alamo Downs 9670 1 business park and one or two other properties that 2 were very heavily landscaped, had a very nice 3 appearance. Park 410 spent a great deal of money 4 in landscaping. Although it may not be the large 5 campus areas, the deed restrictions and the common 6 area landscaping was intended to make it very 7 attractive, well-landscaped, lots of natural open 8 space where we could put it -- including some of 9 the drainage areas. A small fortune was spent on 10 bringing trees to an area that had been wiped 11 clear of trees by our predecessors. There was 12 extensive planning. Those are all things had an 13 impact on cost, and the people that wanted to put 14 their businesses in the area that carried that 15 type of an appearance is what he was looking for. 16 They were prepared to pay a little bit more for 17 the property. 18 Q. Please turn to the second page of the 19 exhibit. Look at Paragraph 7. Mr. Simpson says, 20 "The question in today's market is, rather, should 21 we be prepared to spend more?" 22 What did you understand Mr. Simpson to 9671 1 be talking about? 2 A. As to whether the landscaping budget 3 that was then in place and projected was 4 sufficient to make the area attractive and to make 5 it the type of multi-use facility or mixed-use 6 campus property project that would be attractive 7 to customers, to users of the property, or would 8 it be necessary to put more elements in and bring 9 it in line with some of the higher-end projects 10 that we had seen in Houston and in Dallas. 11 Q. In Paragraph 8 -- 12 A. Or Austin. 13 Q. I'm sorry. I didn't mean to cut you 14 off. 15 In Paragraph 8, Simpson talks about the 16 sales efforts and whether or not sales can be 17 attracted from outside San Antonio or from the 18 city itself. 19 Do you see that? 20 A. Yes. 21 Q. What was the decision, as you 22 recollect? 9672 1 A. The decision was to pursue both local 2 users and users from outside the area. 3 San Antonio, the economic development foundation 4 was pretty known a -- putting on a very hard push 5 at the time that it was out pursuing business for 6 relocation in the San Antonio area. Park 410 7 participated in those programs, and they put a 8 great deal of their out-of-San Antonio marketing 9 efforts there or they -- I don't know if it was 10 all of their -- to put effort into those types of 11 markets. 12 Q. By June 1986 in San Antonio, what was 13 the nature of the real estate market? 14 A. We had started to see a significant 15 downturn. We were seeing surplus phase and we 16 were not seeing the sales levels that we were 17 seeing before. 18 Q. Hadn't that started before June? 19 A. In comparison to 1982 or '83, there was 20 a difference. I'm not sure where it started. 21 Q. Going on in this memorandum, Paragraph 22 22, Simpson concludes that he needs to assess and 9673 1 keep aware of the competition in Southwest 2 Research property across the street. 3 Why is that? 4 A. At one point, the Southwest Research 5 property immediately across the street, there was 6 talk that Southwest Research was putting that 7 property, which was about 450 or 500 acres of 8 land, up for sale and that they sought to relocate 9 farther out, that they felt their property might 10 be worth more for them to sell it and move a lot 11 of their facilities, including the animal habitats 12 to another area. That, in fact, did not occur and 13 it's just now starting to be talked about again. 14 And that would have been a significant item of 15 competition to Park 410. 16 Q. Looking at Paragraph 20 in Item C, 17 Mr. Simpson states that "We have far less price 18 flexibility in relation to Marty Wender's property 19 over at Westover Hills." 20 Do you see that? 21 A. Yes. 22 Q. Why did Park 410 property have far less 9674 1 price flexibility? 2 A. For one thing, we had very firm, fixed 3 release prices that we had to meet with United in 4 order to release property. We had a pretty 5 substantial release fee as each individual parcel 6 was sold, and we had a cost structure in it that 7 required the prices to be pretty close to where 8 they were set. It's my understanding that some of 9 the other projects weren't as structured with 10 fees. Every time this property -- for each parcel 11 that was sold here, there were additional 12 substantial fees that were paid outside of the 13 ordinary sales price which is was an add on to the 14 customer that they didn't see that we had to pay 15 and just the cost of this property up front. 16 Q. Can you explain that to me? What do 17 you mean by "the cost of the Park 410 property up 18 front"? 19 A. We had a substantial price in it to 20 base the purchase price of that property that had 21 to be recovered. And then on top of that, every 22 time we made a sale, besides those costs, we had 9675 1 sales costs that had to be recovered. 2 Q. T7201. I think you've got this in 3 front of you. 4 A. Which one is it? 5 Q. It's the memo that you wrote to 6 Rosenberg. 7 A. All right. 8 Q. Upon reflection and to your memory, was 9 Grieshaber and Roberts at fault in their marketing 10 efforts? 11 A. I think Grieshaber and Roberts 12 approached everybody in the local market area that 13 was there. I don't know that we can blame them 14 for the overall economy any more than you can 15 blame any other individual. Whether they were 16 outside -- as aggressive outside the San Antonio 17 market, they maybe could have been or should have 18 affiliated with someone that would have. But I 19 don't think there is any blame to be placed. 20 Q. Look at the third page of this 7201 21 exhibit. You got a copy of this, didn't you? 22 A. Yes. 9676 1 Q. Who was Al? 2 A. I presume this is Al Sachs. 3 Q. Okay. There is a list of contacts 4 there. 5 Do you see that? 6 A. That's what it appears to be. 7 Q. And the other heading is "response." 8 Do you see that? 9 A. Yes. 10 Q. Were these -- was this the kind of 11 feedback -- marketing feedback that was causing 12 concern for Mr. Simpson as well as yourself? 13 A. Yes. 14 Q. Had any marketing studies -- 15 specifically, had any marketing studies regarding 16 manufacturing, electrical, and distribution 17 corporate studies been done in connection with the 18 Park 410 property as of October 1986, to your 19 knowledge? 20 A. I believe that those references in this 21 area were references to marketing studies that the 22 city was pursuing and EDF efforts outside of 9677 1 San Antonio were aimed at. No particular project 2 were done -- study was done just for Park 410. 3 Q. So, known in the Park 410 West joint 4 venture had ordered a marketing study? 5 A. Yes. 6 Q. Is that true? 7 A. To my knowledge, it was not done. 8 Q. Had it been done before closing, before 9 the loan closed in April of 1986? 10 A. Beyond the appraisals, I do not believe 11 so. 12 Q. Let's look at T7202, please. 13 Did you get a copy of 7202? 14 A. Yes. 15 Q. And was that a copy that you got from 16 Mr. Simpson? 17 A. Yes. 18 Q. If you would, look, please, at 19 Page CN084294. 20 A. Yes. 21 Q. Did you agree with the assessment that 22 was set out here? 9678 1 MR. DUEFFERT: Your Honor, could we 2 have a little bit more specificity as to the 3 assessment that Mr. Leiman is referring to just to 4 make the record clear? 5 Q. (BY MR. LEIMAN) As to what the 6 majority venturers wished to achieve, that the 7 overriding project priority was to achieve sales 8 that would close in 1987. 9 A. I would say I would agree with that 10 position. 11 Q. Had any sales taken place at the time 12 of this memorandum? 13 A. I don't believe so. 14 Q. And that would have been by February of 15 1987. Right? 16 A. That's correct. 17 Q. Look at -- just down a little bit on 18 this page on Paragraph 4.1 under "sales," it talks 19 about the gross value of the sales pro formas as 20 of March 31, 1987 would have been 17,756,000. 21 A. Yes. 22 Q. It talks about the sales being zero at 9679 1 that point. 2 A. That's correct. 3 Q. Were the conditions that you referred 4 to a few minutes ago in connection with the real 5 estate market declining? Did they continue to 6 deteriorate? 7 A. They continued to deteriorate. 8 Q. What changes were made in the marketing 9 efforts of -- 10 A. Efforts were made to change the release 11 prices on the property to try to pursue sales at 12 lower prices. And users that would come to the 13 property, requests were made, I believe, to change 14 some of the financing and release structures. I 15 believe they occurred after this date. 16 Q. Were those successful? 17 A. For the most part, not really. 18 MR. LEIMAN: Your Honor, I move T7202 19 into evidence. 20 MR. KEETON: No objection. 21 Q. (BY MR. LEIMAN) 7203, please. 22 THE COURT: Received. 9680 1 Q. (BY MR. LEIMAN) Did you prepare this 2 memorandum that's reflected here as Exhibit T7203? 3 A. Yes. 4 Q. And why did you prepare this memo? 5 A. Just a moment and let me refresh 6 myself. It was to provide Stanley with the 7 information that was set out in it. I just don't 8 recall it. (Witness reviews the document.) 9 It was to provide Stanley with 10 information regarding several things that had 11 occurred at a meeting of March 3rd, 1987. One was 12 an inquiry that had been received for a sale of 13 the property in bulk and the price that the 14 partnership had authorized John to respond to the 15 prospect with. 16 Going on, it talked about efforts to 17 change the sales price for some sales of several 18 parcels and that the effort would be made to 19 recover those dollars in sales of property later 20 on in the future. 21 The third item was reporting to him the 22 status of budgeting -- of the budget status on 9681 1 engineering and property taxes on the expense 2 sides of the budget. 3 Q. If any of the -- if the -- as the 4 release prices for the various tracts changed, 5 would that have had an effect as to whether or not 6 losses were booked in connection with -- in this 7 project? 8 A. Could you ask -- 9 Q. Let me rephrase the question. If the 10 original pro forma prices, release prices of the 11 property were lowered, what effect would that have 12 in terms of the overall ability of the borrowers 13 to repay the debt in this project? 14 A. If release prices were lowered to a 15 certain level to where it impacted only profits to 16 the developer, then it would not impact the -- 17 necessarily impact the recovery to the financial 18 institution or lender. 19 If release prices were lowered below 20 that principal cost or loan figures, then it could 21 have an impact on the financial institution's 22 ability to recover all of the profits if later 9682 1 sales or if the market didn't change to where 2 later on in the project, higher dollar sales could 3 be achieved. Alterations in the release price for 4 just one or two tracts may not impact the overall 5 piece. It would depend on the pieces and what 6 happened afterwards. 7 Q. Do you know if that was done? Were 8 prices lowered for individual tracts? 9 A. There was some change of pricing in 10 marketing that was offered, but not a great deal. 11 Q. Did that attract any buyers? 12 A. No. 13 MR. LEIMAN: Your Honor, I move T7203 14 into evidence. 15 MR. KEETON: No objection. 16 THE COURT: Received. 17 Q. (BY MR. LEIMAN) T7204. Mr. Gindy, 18 this is a memo from Grieshaber and Roberts from Al 19 Sachs to you dated May 12, 1987. 20 Did you get a copy of this memorandum? 21 A. Yes, I did. 22 Q. What did you understand Mr. Sachs to be 9683 1 telling you in this case? 2 A. Al was telling me that Mike Gonzales, 3 who was at Caldwell Banker, a commercial broker, 4 had done some research with regard to other cities 5 in which the Sea World parks had been located and 6 he was unable to determine exactly what effect in 7 the marketplace or find a good niche or customer 8 to pursue or that the location of the park in the 9 area would have a particular type of impact or 10 attract a certain type of customer to the area. 11 Q. What did you understand him to mean 12 when he said that in reference to Mr. Gonzales, he 13 had recited that he couldn't determine a growth 14 pattern that followed any of his Sea World 15 locations? What did you understand that to mean? 16 A. That he was not able to determine or 17 find a particular type of development that 18 occurred around each of the individual Sea World 19 parks. There are three others in the country. I 20 would agree he probably couldn't because they are 21 all unique and different. 22 Q. Did you know that at the time you were 9684 1 working on the Sea World project for your law 2 firm? 3 A. Yes. 4 Q. Did anybody ask you about whether or 5 not there was a growth pattern that related to Sea 6 World? 7 A. No one asked me, but I don't know 8 that -- no one asked. 9 Q. Look at Paragraph 4. Do you agree with 10 this statement: "Each of the Sea World locations 11 were very unique. Each is set in a different 12 setting from the other"? 13 A. Do I agree with it? I guess so. 14 Q. Is there a Sea World in Cleveland? 15 A. Yes. 16 Q. And is that Sea World different from 17 the Sea World in San Antonio? 18 A. Yes. 19 Q. And how does it differ? 20 A. Sea World Park -- well, first of all, 21 it was built 20 years earlier. It was the first 22 of the parks. It was similar to the Sea World in 9685 1 San Antonio in that at the time it was built, it 2 was built more in a rural part of the area 3 northwest of Cleveland. But it also had an 4 amusement park -- it was built on the lake, small 5 lake, and there is an amusement park on the 6 opposite side of the lake. And that's really the 7 only commercial development in the area. It's 8 otherwise basically a residential -- it ultimately 9 grew up to be a residential area around it. It 10 didn't have anywhere near the acreage and the land 11 around that is not anywhere near -- is not the 12 type of commercial development we've seen or 13 pursued here with the Sea World in San Antonio. 14 Q. T7371. 15 MR. LEIMAN: Your Honor, I move T7204. 16 MR. KEETON: No objection. 17 THE COURT: Received. 18 Q. (BY MR. LEIMAN) Mr. Gindy, looking 19 here at T7371, these are file notes of a meeting 20 of September 17th, 1987, at the Oppenheimer law 21 firm. And in particular, I'd like to ask you 22 about the notes under "loan status." And, in 9686 1 particular, Item 1.4. 2 Do you see that? 3 A. Yes, I do. 4 Q. Have you seen these notes before? 5 A. Yes, I have. 6 Q. Okay. By September -- the middle of 7 September 1987, were you -- did you have any 8 concern about the 80-million-dollar Park 410 loan? 9 A. Yes. 10 Q. What concerns did you have? 11 A. We had not seen sales that were 12 expected of the property. 13 Q. And what concerns did that lead you to? 14 A. As to where the transaction would go, 15 what -- I mean, it was becoming obvious or 16 apparent that we would not see sufficient sales to 17 pay the loan back in its remaining term, and that 18 presents problems for the borrower. 19 Q. And in that regard, what kinds of 20 problems would the borrowers have? 21 A. Well, one, the ability to continue in 22 the project, potential losses if they are not able 9687 1 to make the sales. If the loan were to mature and 2 they hadn't sold, they would have their equity 3 investments, their guaranties. And no one likes a 4 project that doesn't succeed. 5 Q. And so, the borrowers met at a meeting 6 on September 17th, 1987? 7 A. It's one of many meetings that -- we 8 met regularly. This was a particular meeting. 9 Q. Okay. And what's reflected here in 10 1.4, would you read that, please? 11 A. "SDR to contact Charles Hurwitz to 12 introduce the topic of loan renegotiation." 13 Q. Can you tell me about -- can you 14 explain what happened in that regard, how that 15 came about, first of all? 16 A. This was a meeting that we scheduled at 17 our law offices. We were sure to include Stanley. 18 It was primarily for the purpose to talk about 19 potential loan restructure and where we were going 20 to go and whether or not it was time to maybe 21 consider shutting down the project, turning the 22 property back to United if it could be done under 9688 1 the loan documents, the various other 2 alternatives, renegotiation of the loan, trying to 3 make some other change to see what could be made 4 of the situation. And amongst the proposals that 5 were discussed was ways that money could be -- if 6 there were budget cutting things that could be 7 done, if a loan could be renegotiated. Stanley 8 felt fairly confident that it could be, and he 9 took on the responsibility that it would be done 10 and he indicated he would do it by contacting 11 Charles. 12 Q. Do you know if he ever did? 13 A. He told me he did, but I don't know 14 that he did. 15 Q. What did he tell you about that? 16 A. He told me that -- he told me that they 17 were going to work on doing a loan restructure and 18 that they would go forward to do that. I mean, 19 that he was going to be working on that. 20 Q. With Mister -- with who? 21 A. He took the responsibility to do it. 22 Q. And that he would be working on that 9689 1 with whom? 2 A. His comments were that he would start 3 it with Mr. Hurwitz. I don't think it would 4 finish with him, but that's who he said he was 5 starting with. 6 Q. Then did you follow up with him on 7 that? 8 A. We would check -- I would check with 9 him on occasion. Most of the loan restructure 10 work was done between Stanley and Noel directly at 11 that point. They were in communications directly 12 and not going through me. 13 MR. LEIMAN: Your Honor, I move T7371. 14 MR. KEETON: No objection. 15 THE COURT: Received. 16 Q. (BY MR. LEIMAN) T7207. Mr. Gindy, 17 I've handed you an exhibit marked T7207, which is 18 a business plan performance summary as of 19 September 30, 1987. 20 Do you know if you've seen this summary 21 before? 22 A. Yes. 9690 1 Q. Were the figures that are -- are the 2 figures that are reflected in this summary the 3 matters about which gave you concern in connection 4 with the viability of the Park 410 property as of 5 September of '87? 6 A. The bottom portion of it. 7 Q. And in that regard, what are you 8 referring to? 9 A. Sales. We were pretty well within our 10 projections -- the project was pretty well within 11 its projections on the expense side as far as 12 building the roads, the streets to bring the 13 infrastructure in, those types of things. Where 14 we were -- where the project was completely off 15 was in sales. They weren't there. 16 MR. LEIMAN: Your Honor, I move T7207 17 into evidence. 18 MR. KEETON: No objection. 19 THE COURT: Received. 20 Q. (BY MR. LEIMAN) T7151. Mr. Gindy, 21 have you seen this statement, the financial 22 condition of Mr. Rosenberg as at December 31, 9691 1 1987, prepared by Ernst & Whinney? 2 A. Yes, I have. 3 Q. What were the circumstances under which 4 you saw it? 5 A. In connection with some work I had done 6 for Stanley. 7 Q. Okay. Would you please look at page -- 8 it's Bates marked in the upper left side OW202161, 9 which is the third page of the report. 10 A. Yes. 11 Q. Whose handwriting is this, if you know? 12 A. I don't know. 13 Q. Would you look at Page 8 of the report, 14 which is OW202166? 15 A. Yes. 16 Q. Look at the sixth project listed from 17 the bottom, 410 Westplex. 18 Do you see that? 19 A. Yes. 20 Q. Would that potential -- total 21 contingent liability of $4.37 million represent -- 22 what does it represent? 9692 1 A. Without computing the exact number at 2 the time, that would represent his exposure under 3 the guaranty that was not covered by the letters 4 of credit. But I'd have to do the computation to 5 see if that -- I don't know the loan balance on 6 that date to confirm that. It's approximately 7 right. 8 Q. Look at the last entry on that -- in 9 that column. "Culebra/1686 Joint Venture." 10 A. Yes. 11 Q. Is that the joint venture that 12 Mr. Rosenberg had with Charles Hurwitz that you 13 referred to earlier? 14 A. It is a -- it's a venture which was 15 involved in the Laredo National Bank transactions 16 which also involved -- I believe it was Federated 17 Development which was, I understand, to be a 18 Charles Hurwitz company. 19 Q. And look about ten entries down from 20 the top of the column. It talks about Gateway 21 Joint Venture. 22 Do you see that? 9693 1 A. Yes. 2 Q. Do you know if the contingent liability 3 that's represented there as being a total of 4 $2.3 million represents the actual contingent 5 liability that Mr. Rosenberg would have had on the 6 Gateway Joint Venture property? 7 A. I don't know that that's the -- I only 8 can tell you that from having reviewed some of his 9 documents, that's approximately the figure of his 10 exposure on his limited guaranty. 11 Q. Do you remember whether it was a 12 limited guaranty -- 13 A. I thought his guaranty was for a third 14 of the loan. 15 Q. Do you remember that to be a fact or -- 16 A. It's my recollection. I may be wrong, 17 but that's my recollection. 18 Q. Okay. 19 MR. LEIMAN: Your Honor, I move T7151 20 into evidence. 21 MR. KEETON: No objection. 22 THE COURT: Received. We'll take a 9694 1 short recess. 2 3 (A short break was taken 4 at 3:00 p.m.) 5 6 THE COURT: Be seated, please. We'll 7 be back on the record. Mr. Leiman. 8 MR. LEIMAN: Thank you, Your Honor. 9 (3:25 p.m.) 10 Q. (BY MR. LEIMAN) The next exhibit I'd 11 like to show you is T7374. Mr. Gindy, this is a 12 memo from you to Stanley Rosenberg dated 13 February 17th, 1988. 14 You wrote this memo? 15 A. Yes. 16 Q. Take a moment to look it over, please. 17 I'd like to ask you a few questions about it. 18 A. (Witness reviews the document.) Yes, 19 I've read it. 20 Q. What was your purpose in writing this 21 memorandum, Mr. Gindy? 22 A. Charles White had contacted me 9695 1 regarding an inquiry Shirley Sturgeon had made or 2 a number of inquiries she had made regarding the 3 original loan closing and some of the 4 disbursements at the time, and I wanted to involve 5 Stanley. I wanted to bring it to his attention. 6 Q. When you say "the original loan 7 closing," which one are you talking about? 8 A. The closing of the 80-million-dollar 9 loan. 10 Q. And specifically, what was the issue? 11 A. The issues they were asking -- they had 12 asked for information regarding the -- two -- the 13 two disburse wants that are listed here, the 14 400,000-dollar disbursement to Stanley and the 15 distribution or the disbursements, the repayment 16 of the money that went back, a portion of it, to 17 United for the Alamo Savings transaction. 18 Q. What was the issue that was being 19 raised by the loan officer? 20 A. I don't know. I never spoke to the 21 loan officer directly about it. But according to 22 the inquiries that were presented to me by Charles 9696 1 White is that he -- that she was asking what the 2 400,000-dollar loan brokerage fee was for and also 3 making inquiry as to whether or not the -- all the 4 money that was due United had been repaid in 5 connection with the disbursement -- the initial 6 loan disbursement. 7 Q. All right. Would you look, please, at 8 the second page of the exhibit? CN215023. 9 A. Uh-huh. (Witness nods head 10 affirmatively.) 11 Q. This is a check from GMR payable to the 12 order of Stanley Rosenberg for $18,750. Right? 13 A. That's correct. 14 Q. And what was that for? 15 A. This was a payment to Stanley for a 16 portion of the management fee that was paid to him 17 under the partnership agreement. 18 Q. Did you ever get any kind of 19 payments -- 20 A. Stanley paid me 10 percent of the sums 21 that he received -- 22 Q. Let's -- 9697 1 A. -- in connection with the management 2 fees. 3 Q. Okay. Let's look at the next page of 4 the exhibit. And I see that -- 5 A. Or actually 5 percent, I guess. 6 Q. I'm sorry. You got what? 7 A. I guess it was 5 percent. 8 Q. You got 5 percent of the fees that 9 manage -- the management fees that were paid to 10 Mr. Rosenberg? 11 A. Yes. 12 Q. What did you -- did you check with your 13 law firm partners to determine whether or not 14 there was a problem with you getting those fees? 15 A. It was disclosed to them. And as long 16 as it was for management and not legal services, 17 for doing things for Stanley that he might 18 otherwise have done with the properties, they did 19 not object. 20 Q. There was no problem with it? 21 A. No. 22 Q. Let's look at the next page of the 9698 1 exhibit. This is the 275,000-dollar check that 2 was paid to the law firm; is that correct? 3 A. Yes. 4 Q. And the next page? 5 A. 125,000-dollar disbursement from 6 Stanley to Funds Unlimited, which is a company of 7 Stanley's. 8 Q. Now, what was this for? 9 A. It says "commission earned," and it 10 looks like it was written at the same time as the 11 275,000-dollar check the day before or maybe the 12 same day. I can't tell. Could be the same day. 13 It's out of sequence. So, it was probably the day 14 before from Stanley's checking account. 15 I understand it to be the difference 16 between the $400,000 that he received and the 17 $275,000 paid to the law firm. 18 Q. Would this have been the loan fee 19 commission? 20 A. The fee -- the balance of the 21 400,000-dollar loan fee or commission to Stanley. 22 Q. Let's look at the next page. Let's 9699 1 look at the second item down on the date of 2 4-17-86. 3 Do you see that? Check No. 666 to 4 Stanley Rosenberg? 5 A. Yes. 6 Q. It says "loan fee"? 7 A. Yes. 8 Q. $400,000. Right? 9 A. That's correct. 10 Q. And farther down in Item No. -- Check 11 No. 670 is the Gulf Management Resources 12 250,000-dollar fee. Right? 13 A. Yes. 14 Q. Let me ask you this: What is Funds 15 Unlimited? 16 A. Funds Unlimited is a company of 17 Stanley's that he did business out of or through. 18 I believe it's wholly owned by him. 19 MR. LEIMAN: Your Honor, I move T7374 20 into evidence. 21 MR. KEETON: No objection. 22 THE COURT: Received. 9700 1 Q. (BY MR. LEIMAN) T7152. Mr. Gindy, 2 T7152 is a March 17th, 1988 letter from Arthur 3 Berner to Stanley Rosenberg. Take a moment to 4 look the letter over, and tell me if you've seen 5 it before. 6 A. (Witness reviews the document.) I've 7 read it. 8 Q. Have you seen this document before? 9 A. Not before today. 10 Q. Not before today? 11 A. No. 12 Q. T7222. This is -- T7222 is a March 31, 13 1988 memo from you to Stanley Rosenberg concerning 14 Park 410 billings with marginalia. 15 Have you seen this before? 16 A. Yes. I wrote it. 17 Q. What was your purpose in writing this? 18 A. I was pointing out to Stanley that we 19 had not received payment from Park 410 for some 20 time on a number of items that we had completed 21 for them in connection with building the 22 infrastructure of the development and we were not 9701 1 being paid. And when I started to press for 2 payment, Noel Simpson raised the issue or the 3 statement that the 400,000-dollar fee payment to 4 Stanley was supposed to cover all of the legal 5 fees. And I was questioning Stanley if that was 6 some agreement that he had made. 7 Q. Did Mr. Rosenberg respond? 8 A. Yes, sir. It's on here. 9 Q. Is his response under your initials? 10 A. Yes, sir. 11 Q. That's his handwriting? 12 A. Yes, sir. Both that and the -- both 13 that and the language to the left. 14 Q. The language to the left, what does 15 that say? Does it say "not realistic and was 16 never inferred nor discussed"? 17 A. That's what I believe it says. 18 Q. And the language to the right of that 19 under your initials says "bullshit"? 20 A. "Bullshit." 21 Q. What was the resolution of this issue? 22 A. At this point, partners and Stanley got 9702 1 into discussion. There really was not a 2 resolution of this issue as far as payments from 3 Park 410. Later on, we reached the decision that 4 we would not do certain other work for them, and 5 we wrote off substantial fees or did not collect. 6 Q. Did Mr. Rosenberg change his position 7 and -- with regard to the additional $125,000 that 8 he had taken as a loan fee? 9 A. No. 10 Q. And so, that was not repaid -- that 11 wasn't paid to the law firm? 12 A. No. 13 MR. LEIMAN: Your Honor, I move T7222 14 into the record. 15 MR. KEETON: No objection. 16 THE COURT: Received. 17 Q. (BY MR. LEIMAN) T7280. Mr. Gindy, 18 I've handed you T7280, which is the -- purports to 19 be audited financial statements of Park 410 West 20 Joint Venture as of June 30, 1988. 21 A. Yes, sir. 22 Q. Have you seen this document before? 9703 1 A. Yes. 2 Q. When would you have seen it? 3 A. About the time it was prepared. 4 Q. What did you use it for? 5 A. It was furnished and used in connection 6 with some -- I believe loan discussions for -- 7 that Stanley was -- and Noel Simpson were pursuing 8 for restructuring the debt of the partnership. 9 MR. LEIMAN: Your Honor, I move T7280 10 into the record. 11 MR. KEETON: No objection. 12 THE COURT: Received. 13 Q. (BY MR. LEIMAN) T7153. T7153 is a 14 memorandum dated August 22, 1988, from -- appears 15 to be from Stanley Rosenberg to you. 16 A. Yes. 17 Q. Did you receive this? 18 A. Yes, I did. I did. 19 Q. What is this -- what is this memorandum 20 talking about? 21 A. This memorandum was in connection -- at 22 this point, there were discussions with United 9704 1 Savings about restructuring and some comments had 2 gone back and forth with regard to things people 3 had or hadn't done, rights or wrongs. And 4 Stanley's referring to a question with regard to 5 the appraisal -- in the appraisal as to whether or 6 not the appraisal that was provided by -- I want 7 to say Mr. Schulz -- 8 MR. KEETON: One moment. May I ask a 9 question on voir dire? This -- 10 MR. LEIMAN: I haven't asked that it be 11 admitted yet, Your Honor. 12 MR. KEETON: That's not the point. The 13 point is this is very cryptic -- 14 THE COURT: All right. Pose your 15 question. 16 17 VOIR DIRE EXAMINATION 18 19 20 Q. (BY MR. KEETON) This is a cryptic 21 note. 22 Are you talking about something you 9705 1 discussed with Mr. Rosenberg, or you just got this 2 document? 3 A. I went back and asked him what it was 4 about. 5 MR. KEETON: Okay. Thank you, Your 6 Honor. 7 THE COURT: Next question. 8 MR. LEIMAN: Thank you, Your Honor. 9 I'm not sure if he was in the middle of 10 an answer. 11 A. I received this memo from Stanley. I 12 was putting it in a time frame, and I wasn't 13 certain that I understood what he meant by it. I 14 went back. Noel -- I believe some of the people 15 in Noel's group had raised questions about trying 16 to find a way to restructure the transaction. And 17 Stanley's comments to me were that we should not 18 overlook the possibility that the loan appraisal 19 that was prepared was not accurate or may have 20 been based on improper information and was 21 provided or was from an appraiser that the lender 22 had suggested or directed. I don't know if this 9706 1 was before or after United had closed. 2 3 CONTINUED EXAMINATION 4 5 6 Q. (BY MR. LEIMAN) What other 7 discussions were there about the appraisal? 8 A. At a point, Stanley went out and hired 9 another attorney. And Noel had contacted other 10 counsel to look at whether there were ways to try 11 to defend an action on the note or the loan or to 12 force a restructure or encourage a restructure of 13 the debt. 14 They looked -- we looked into 15 everything or the parties looked into everything. 16 One of the issues was the appraisal. There were 17 questions that were raised with regard to 18 Stanley's involvement, my involvement. 19 Questions were looked at the language 20 of the guaranties, if the guaranty language, the 21 way it was written for the limitation, if it could 22 be interpreted in a different fashion as the way 9707 1 Mr. Crump -- and I've forgotten who else -- had 2 proposed. There were just different people 3 looking at re-examining the documents with 4 hindsight. 5 Q. Do you remember if there were concerns 6 about whether the appraisal had been unduly high, 7 the appraised value? 8 A. A question if it contained accurate 9 information which, to me, would be unduly high. 10 That would be the question that was there. It 11 wouldn't be if it was too low. If it was 12 accurate, if it was a realistic, reasonable 13 expectation. 14 MR. LEIMAN: Your Honor, I move T7153 15 into evidence. 16 MR. KEETON: No objection. 17 THE COURT: Received. 18 Q. (BY MR. LEIMAN) T7237. Mr. Gindy, I 19 handed you Exhibit T7237, which is a memo from you 20 to Stanley Rosenberg dated April 25th, 1989. 21 A. Yes. 22 Q. Did you initial the memo? 9708 1 A. Yes, I did. 2 Q. Did you write the memo? 3 A. Yes, I did. 4 Q. Okay. Take a moment, if you would, 5 please, to review the memo. I'd like to ask you 6 some questions about it. And specifically, I'd 7 like to ask you about the contention regarding 8 fraudulent appraisal that's mentioned in 9 connection with Mr. Rhodes. 10 A. (Witness reviews the document.) Okay. 11 Q. Have you had a chance to review this 12 memorandum? 13 A. Yes. 14 Q. Do you remember the circumstances under 15 which you wrote it? 16 A. Yes. 17 Q. What were the circumstances? 18 A. This was a point -- Mr. Rhodes was an 19 attorney. He's also, I believe, the 20 brother-in-law of Lee Faris, one of the people 21 involved in the GMR management and now actually 22 handles the management for that group. 9709 1 Q. For which group? 2 A. For GMR. 3 Q. On what property? 4 A. Park 410. And was running it after 5 Noel's departure, took over after Noel -- he was 6 part of Noel's group originally. 7 Q. Uh-huh. 8 A. He and Lee had evaluated or considered 9 the possibility of filing suit or wanted to file 10 suit against United to enjoin the presentation and 11 collection of the letters of credit. We were in 12 the process of renewing letters of credit at the 13 time. There had been some discussion involving 14 some of the renewal language and getting them in 15 from everyone, which is what the second paragraph 16 is about. We did have -- ultimately, that was 17 taken care of with everyone. We had some problem 18 with Mr. McClintick's renewal. 19 The balance of the memo goes on to 20 describe Mr. Rhodes thinking about his desire to 21 file suit against the note holder, being the new 22 United, I believe at that time, to try to prevent 9710 1 collection of the letter of credit and for some 2 type of restructuring of the debt. 3 Q. Now, you write here that "Mr. Rhodes 4 indicates his present thinking on the problem and 5 the research recently done brings him to the 6 recommendation that the most appropriate action to 7 take at this time is to file suit against United 8 for fraud based upon the fraudulent appraisal and, 9 at the same time, seek to enjoin presentation of 10 the letters of credit." 11 How would those two issues relate? 12 A. It was his position or argument that 13 the letter -- that the appraisal that was provided 14 by Mr. Schulz was inaccurate or fraudulent and 15 that, based upon that, United should be able to 16 benefit by the collection of a letter of credit 17 that they had been induced to go into this 18 transaction in part relying upon that appraisal, 19 the partners. 20 Q. And specifically which partners? 21 A. This position, he was talking about 22 himself, his clients, which would have been 9711 1 Mr. Simpson's group. 2 Q. Now, turning to the second page which 3 is Bates No. CN080304, you relate a conversation 4 and some statements by Mr. Rhodes stating that 5 Mr. Rhodes stated that "He felt there may be some 6 conflicting claims between his clients and ours." 7 Who would the "ours" be? What is that 8 referring to? 9 A. Our clients would have been the 10 Rosenberg group. His clients meaning the Noel 11 Simpson's -- the GMR investment group. When I 12 refer to "our clients," I meant Stanley and the 13 partners, Stanley's group. 14 Q. You go on to stay, "I asked what those 15 issues may be and he indicated they included, 16 quote, 'the secret alliance between Stanley and 17 United.'" 18 Was that being raised to you by 19 Mr. Rhodes? 20 A. Mr. Rhodes had asserted, as had Mr. 21 Faris, or raised questions to whether there was 22 some type of special relationship or special deal 9712 1 between them. 2 Q. Did you ask him how he reached that 3 conclusion? 4 A. I did, and he told me that it would 5 come out later. He didn't give me any answer that 6 meant anything. He gave me an answer. It just 7 didn't answer anything. 8 Q. You explained to him that the 9 relationship between Stanley and United was well 10 known to Noel, et al. Is that -- 11 A. That's correct. I told him that there 12 was -- that he -- at this point, Mr. Rhodes was 13 involved -- he was not dealing with Mr. Simpson, 14 who was the head of GMR at the time. And I felt 15 it was quite clear that we had disclosed the 16 United relationship in the first Alamo transaction 17 to the disbursement of the funds and the money in 18 that -- when the first loan closed, the United 19 80-million-dollar loan was very clear, and all the 20 partners were aware of it. 21 Q. You say in the penultimate sentence of 22 the paragraph that "He was also concerned that 9713 1 Stanley may be tied up on a government 2 investigation over dealings with Charles Hurwitz 3 and United." 4 What did you understand that to mean? 5 A. I have no idea. It's a statement he 6 made to me. 7 Q. Okay. And finally, you recite in the 8 paragraph, "He thought there may be problems with 9 Stanley participating on the MCO board as a 10 director in dealing with United." 11 What was he referring to? 12 A. He raised the issue as to whether 13 Stanley, who is a member of the MCO board, had 14 any -- it was proper for him to have had business 15 dealings with United Savings Association. He was 16 insinuating there might have been some impropriety 17 there. 18 Again, it's my understanding from 19 talking to Stanley that there was not, and that's 20 what I told him. 21 Q. Do you know if a lawsuit was ever 22 drafted? 9714 1 A. Dusty drafted a lawsuit. Mr. Rhodes. 2 Q. Drafted a complaint? 3 A. A complaint, a petition. 4 Q. Okay. And did he file it? 5 A. Not to my knowledge. 6 Q. Do you know why he didn't file it? 7 A. For one thing, Mr. Rosenberg was not in 8 favor of filing suit and felt it should be worked 9 out. And Mr. Rosenberg had hired Jones Day also 10 to look into whether or not -- and make a 11 recommendation as to whether or not a lawsuit 12 should be filed or a course of action, and he was 13 opposed to doing it. Ultimately, Mr. Rhodes and 14 Mr. Faris. Agreed with Stanley not to pursue 15 litigation at the time. 16 Q. So, there was no resolution ultimately 17 in a judicial form of any of these allegations? 18 A. No. 19 MR. LEIMAN: Your Honor, I move T7237 20 into evidence. 21 MR. KEETON: I object, Your Honor. 22 First, it's after the time that USAT was taken 9715 1 over. Second, it's largely hearsay by a lawyer 2 who's speculating on what legal theories he might 3 have, which has no probative evidence. It does 4 contain statements that I consider to be 5 prejudicial. We've got a case we're trying here. 6 If OTS thinks this bolsters their case, let them 7 prove it, not use this kind of document in the 8 record. 9 So, I object to this coming in. 10 THE COURT: Well, it was authored by 11 the witness. I'm going to receive it. 12 MR. KEETON: No, Your Honor. It was -- 13 THE COURT: I said I'm receiving the 14 document. All right. I'll hear you. What did 15 you have to say? 16 MR. KEETON: I was going to say 17 authored by the witness, but it is largely the 18 hearsay of the lawyer that I wanted to point out. 19 So, you might as well say it was authored by the 20 lawyer, who is not any part of this case. 21 THE COURT: All right. Received. 22 Q. (BY MR. LEIMAN) T7226. 9716 1 MR. LEIMAN: Your Honor, I believe 2 this -- I thought this was on our pull list that 3 we had turned over to the respondents' counsel. 4 It's a four-page document and I think we have one 5 copy, extra copy, that we can -- 6 MR. BLANKENSTEIN: Excuse me? 7 MR. LEIMAN: Can you share one copy? 8 MR. KEETON: It's okay. Go ahead. 9 Q. (BY MR. LEIMAN) Mr. Gindy, T7226 is a 10 handwritten memo, in part, as a cover to some 11 information from Caldwell Bankers. 12 Do you see that? 13 A. Yes. 14 Q. Okay. Your initials are up in the top 15 right-hand corner. 16 A. Yes. Stanley gave me this memo. 17 Q. I'm sorry? 18 A. This memo was given to me by Stanley. 19 Q. All right. So, you've seen this memo 20 before? 21 A. Yes. 22 Q. Why did Mr. Rosenberg give you a copy 9717 1 of this? 2 A. He frequently gave me materials that 3 came in that involved property in or around 4 Park 410 or other projects I was working on. This 5 memo came from Steve Baskin, which is his -- one 6 of his son-in-laws, who was a commercial broker in 7 San Antonio. And he was advised -- is informing 8 us of a marketing brochure of Northwest Crossing, 9 which was in the immediate area of the Park 410 10 property, and he's making a comment about pricing 11 in 1988. 12 Q. Where would be the -- where is the 13 property that Mr. Baskin was referring to as seen 14 on this aerial view? 15 A. 258-acre park that has Advanced Micro 16 Devices, which is now the Sony property. 17 Q. Would that be right here just to the 18 north -- 19 A. I believe. 20 Q. -- east of the Park 410 property? 21 A. I believe that's it. It's at the 22 crossroads of Loop 410, Military, and Potranco. 9718 1 Q. Right -- can you point to it for me? 2 A. Potranco. It's this piece in here, 3 this area (indicating). 4 Q. What is Mr. Baskin reporting that the 5 going price of this property is? 6 A. It says in the second paragraph, "Stan 7 McCormick said the industrial sites will go for a 8 $1.25 to 3.50 hotel and retail. He said to make 9 him an offer." 10 Q. At the time, this time in August of 11 1988, do you remember what the industrial sites of 12 Park 410 were selling for, were priced at? 13 A. I'd have to go back and look at the 14 brochure, but I believe they would have been -- 15 one or two of the properties we talked about doing 16 were 2.50 but the majority of them would have been 17 a little above the 3.50 price. 18 Q. Looking at the second page of this and 19 understanding that this is a sales brochure, would 20 it be accurate to say that Park 410 also was ready 21 for development? 22 A. Yes. 9719 1 Q. Park 410 contained utilities? 2 A. Absolutely. 3 Q. Had access to the Westplex corridor? 4 A. It fronted the Westplex corridor. 5 Q. And did the Park 410 property also have 6 outstanding retail corners? 7 A. Yes. 8 Q. Did it have excellent hotel sites 9 available? 10 A. Yes. 11 Q. Did any of those -- did any hotels ever 12 get built on the property where this -- that you 13 pointed out here where Sony took over? 14 A. I believe -- I don't know for sure. 15 Somewhere between here and here (indicating), 16 there has been one small hotel built. 17 Q. What kind of motel was that? 18 A. I don't remember the company. 19 Q. You mentioned a La Quinta Inn. Was 20 that it? 21 A. Well, the La Quinta Inn is on this side 22 of the freeway over here at the corner of Culebra 9720 1 by the Wendy's and by the Alamo Downs business 2 park. And it expanded. It doubled its size in 3 this time frame. But there was another one -- a 4 small one built over here, I believe. 5 Q. Separate from the -- what at the time 6 was the Advanced Micro Devices plant which was, if 7 I understand your testimony, was taken over, 8 bought out by the -- 9 A. Somehow. Now called the Sony plant. 10 Q. Sony plant. Is there anything else on 11 the property that we're talking about here at 12 Northwest Crossroads? 13 A. I don't believe so. I believe Sony's 14 expanded, but I don't believe there is anything 15 else. 16 Q. And apart from the businesses you 17 mentioned, the post office and Albertson's and the 18 small strip mall, there is nothing else on the 410 19 property either. Right? 20 A. There is the office warehouse 21 distribution center. 22 Q. Office warehouse. That's right. 9721 1 MR. LEIMAN: Your Honor, I would move 2 T7226 into evidence. 3 MR. KEETON: No objection. 4 THE COURT: Received. 5 Q. (BY MR. LEIMAN) Before we move off of 6 that exhibit, Mr. Gindy, I'd like to ask you: The 7 price of $1.25 up to $3.50 was a per square foot 8 price. Right? 9 A. Yes. 10 Q. Okay. Could we have 7227, please? 11 Mr. Gindy, I've handed you T7227, which 12 is a November 1, 1988 memo that appears to be 13 authored by you directed to Stanley Rosenberg. 14 Do you recognize this? 15 A. Yes. 16 Q. And beneath -- on the second page of 17 this exhibit is an October 29, 1988 memorandum. 18 Do you recognize that memo? 19 A. Yes. 20 Q. What was your purpose in writing these 21 memoranda? 22 A. First State Savings had, I believe, 9722 1 gone into receivership. And there was litigation 2 between First State Savings versus United 3 regarding the 3-million-dollar letter of credit, 4 or we believed that's what it was aimed at. 5 Q. The second memo, on the second page of 6 the exhibit, you refer to the litigation regarding 7 First State Savings. 8 A. Yes. 9 Q. And the reference here in the middle of 10 the paragraph is to First State Savings officials 11 claiming that they didn't know anything about the 12 transaction with -- on Park 410? 13 A. On Park 410. 14 Q. And that it was really Randy 15 Cadwallader's private dealings with Stanley 16 Rosenberg. 17 Do you see that? 18 A. Yes. 19 Q. Who's Randy Cadwallader? 20 A. Randy Cadwallader is -- at the time was 21 the head of First State Savings Association, and 22 he was the person that Stanley had dealt with in 9723 1 connection with the investment in the Park 410 2 West Joint Venture/Rosenberg partnership, which I 3 think is -- I've forgotten the name of. 4 Rosenberg/P 410, Ltd. And they had made a 5 3-million-dollar -- provided a 3-million-dollar 6 letter of credit. 7 Q. Who was in the litigation that's 8 referred to in this -- in your memo? 9 A. It's my understanding that First State 10 Savings had -- was pursuing recovery or return of 11 the 3-million-dollar letter of credit that had 12 been issued on its behalf by NBC Bank. 13 Q. Did you look into their claim? 14 A. I had made contact with both United 15 attorneys -- well, actually, they are the ones 16 that had notified me of it, the attorneys that 17 were representing United Savings. I had tried to 18 at least investigate it further. I tried to 19 attend the deposition of a First State Savings 20 officer. I was excluded from it. 21 Stanley then -- when I communicated all 22 this with him -- told me that he was taking care 9724 1 of it with people at United and that I didn't need 2 to become involved. 3 Q. Mr. Rosenberg mentioned that he was 4 taking care of it with people at United. 5 Did he tell who you at United he was 6 taking care of it with? 7 A. I don't recall. His instructions were 8 that I didn't need to pursue it, that United -- 9 and ultimately, the letters of credit were cashed 10 and the funds put up and deposited. I was 11 involved in it peripherally. 12 Q. Do you know if at the time that this 13 took place in October of 1988 whether or not First 14 State Savings was in receivership with the FSLIC? 15 A. I don't know the exact date that they 16 went into receivership. 17 Q. Is that why you wrote in here "back to 18 the association and/or FSLIC"? 19 A. Yes. 20 MR. LEIMAN: Your Honor, I move that 21 T7227 be admitted. 22 MR. KEETON: Irrelevant, Your Honor. 9725 1 THE COURT: Received. 2 Q. (BY MR. LEIMAN) Let me ask you 3 another question about this document that you 4 wrote here on the 29th of October, Mr. Gindy. 5 Do you remember whether or not one of 6 the allegations in the suit by officials of First 7 State Savings would have related to any 8 impropriety on the part of Mr. Cadwallader -- 9 A. Cadwallader. 10 Q. -- or misrepresentations by him? Do 11 you know? 12 A. I don't know. 13 Q. Were you ever able to attend any 14 depositions? 15 A. No. 16 Q. And you didn't pursue it after 17 Mr. Rosenberg told you it was being taken care of 18 by United? 19 A. I came back into it later to ensure 20 that -- on some of the documentation when the 21 letters of credit were paid and presented and the 22 funds were deposited with United. 9726 1 Q. T7232. I've handed you Exhibit T7232, 2 Mr. Gindy, which is a fax transmission from -- 3 purports to be from Dan Crump to you of ten pages 4 dated March 2, 1989. 5 A. Yes. I received it. 6 Q. You did get this? 7 A. (Witness nods head affirmatively.) 8 Q. You anticipated my question. 9 A. It's been asked enough times. 10 Q. I reckon you're right. 11 What did you under Mr. Crump to be 12 saying in this memorandum? 13 A. I don't know that I ever fully 14 understood it. Mr. Crump was presenting an 15 argument. He was a guarantor in the Grieshaber 16 Roberts group. Grieshaber Roberts IV4. And he 17 was raising an argument with regard to how the 18 liability was to be computed for the individual 19 guarantors and what their exposure was. He was 20 also raising a question that, you know, we should 21 give notice of termination of our continuing 22 liability under the guaranty to cut it off so that 9727 1 additional debt didn't continue to accrue. It was 2 a -- I don't know that I fully understood his 3 arguments. 4 Q. Would it be fair to say that what 5 Mr. Crump was proposing was a method by which he 6 could limit or avoid further liability in 7 connection with the Park 410 loan? Is that it? 8 A. With regard to the 80-million-dollar 9 loan, yes. 10 Q. Okay. Let's look at the bottom of the 11 first page of his substantive memo. It talks 12 about guarantor's liability exposure is estimated 13 $20,510,000, which is 25 percent of 73 million, 14 loan balance." 15 A. Yes. 16 Q. He computes that at 18.25 million plus 17 100 percent of all of the $2.26 million in accrued 18 interest. 19 A. Yes. 20 Q. He goes on to say that that liability 21 is increasing at the rate of $790,000 a month or 22 $26,000 a day. 9728 1 A. Yes. 2 Q. Did you ever -- did you personally ever 3 verify or compute the figures of potential 4 liability for interest? 5 A. I can tell you -- I am aware that the 6 numbers were in excess of $20,000 a day. 7 Q. How did you know that? 8 A. Just in discussions with Mr. Simpson, 9 with Mr. Rosenberg, Mr. Grieshaber, any and all of 10 them. 11 Q. Was there a discussion among the 12 various borrowers about a way to eliminate the 13 further accrual of interest on the part of United 14 Savings? 15 A. Yes. 16 Q. What was the resolution? 17 A. One of the suggestions was to give 18 notice or to attempt to give notice of termination 19 of the guaranty advising the institution that they 20 would not -- the note holder they would not be 21 responsible for further debt, forcing the 22 institution to go forward with a foreclosure of 9729 1 the debt, taking back -- hopefully taking back the 2 land and bidding the property. And based upon 3 appraisals that were outstanding of the land, 4 reducing the exposure to the guarantors because of 5 the credits that would be received on the debt and 6 on the principal of the note by the application of 7 the foreclosure proceeds. 8 Q. Was that followed up -- was the 9 suggestion followed up on? 10 A. To some extent, yes. 11 Q. What do you mean? 12 A. There is a great deal of 13 correspondence -- correspondence went to United 14 and to Bobby Smith at the time, who was 15 representing United, I believe. 16 Q. Was one of the concerns that 17 potentially, by writing such a termination, it 18 could trigger the foreclosure language? 19 A. And cut off the accrual of liability to 20 the individual guarantors for interest accrual 21 under the loan agreement. 22 MR. LEIMAN: Your Honor, I move T7232 9730 1 into evidence. 2 MR. KEETON: No objection. 3 THE COURT: Received. 4 Q. (BY MR. LEIMAN) May we have T7233, 5 please? 6 T7233, Mr. Gindy, is a March 3rd, 1989 7 memo from you to Stanley Rosenberg. Are those 8 your initials? 9 A. Yes. 10 Q. And you wrote this memo? 11 A. Yes. 12 Q. Would you tell us what it means? 13 A. I was writing -- I had discussed with 14 Martin Camp -- Dan Crump's memo also went to 15 Stanley. I had given him a copy of it. And we 16 discussed it with Mr. Camp, who was the attorney 17 for the Ohio firm -- in Austin, the attorney that 18 Stanley had been using to review the -- Jones, Day 19 firm -- that he was using to review some of the 20 documentation and evaluate his position. 21 We talked about Dan Crump's idea to try 22 to terminate the guaranty without using the very 9731 1 clear -- the language that was in the loan 2 agreement that would start a foreclosure. And 3 also, Mr. Faris' comments which were really Dusty 4 Rhodes' comments about a lawsuit to enjoin the 5 foreclosure sale -- I mean to enjoin presentment 6 of letters of credit. 7 Mr. Camp agreed with me that we didn't 8 think that that would work, that United would 9 prevail if they sought to oppose it. The letter 10 of credit agreement was pretty clear that they 11 could present them if we did certain things and 12 they could proceed with foreclosure if we 13 terminated the guaranty. And I was asking Stanley 14 what direction he wanted me to go, where he wanted 15 to go. 16 Q. What did he tell you? 17 A. Stanley told me that he was going to 18 continue to try to work it out with his friends -- 19 with the people at United. He had been in 20 extensive discussions with them and he thought it 21 would be workable and he did not want to proceed 22 with litigation then. 9732 1 Q. How did he feel about sending out 2 notice letters concerning the interest? 3 A. If it would cut off interest, he felt 4 it would be a good approach. If it was going to 5 trigger foreclosure and presentations of letters 6 of credit, he didn't want it to happen. 7 MR. LEIMAN: Your Honor, I move T7233 8 into evidence. 9 MR. KEETON: I object, Your Honor. 10 It's after the institution was closed down. 11 MR. LEIMAN: Your Honor, this relates 12 to calculation of loss in connection with what the 13 institution -- the United States government 14 ultimately ended up paying. 15 MR. KEETON: I don't see where it 16 relates to that in any way, Your Honor. 17 THE COURT: Received. 18 Q. (BY MR. LEIMAN) T7238. 19 MR. BLANKENSTEIN: Mr. Leiman, we don't 20 seem to have 7238. Do you have an extra copy? 21 22 9733 1 (Whereupon Mr. Blankenstein was 2 handed a copy of the exhibit.) 3 4 Q. (BY MR. LEIMAN) Mr. Gindy, you sent 5 this -- am I right that you sent this letter dated 6 May 4, 1989, to Mr. Jeffrey H. Seidman at United 7 Savings on March 4, 1989; is that right? 8 A. Yes. I think he pronounces it Seidman. 9 Q. Seidman. 10 A. S-E-I-D-M-A-N. 11 Q. And what did you enclose with this? 12 A. I forwarded a recent financial 13 statement of Stanley Rosenberg's. 14 Q. And why were you doing that? 15 A. Jeff, on behalf of United Savings, was 16 requiring financial statements and renewals of 17 letters of credit before the institution wanted to 18 proceed with -- or he wanted to proceed on behalf 19 of the institution with discussions of loan 20 restructuring. 21 Q. Did you review Mr. Rosenberg's 22 financial statement? 9734 1 A. Yes. 2 Q. And why did you -- what was the cause 3 of your reviewing it? 4 A. I wanted to make sure that it was a 5 full document when I forwarded it. 6 Q. Look with me, please, at Page 4 of the 7 financial statement, which is Bates No. CN080269. 8 A. 269? 9 Q. Yes. 10 A. Yes. 11 Q. Do you see the fourth item listed from 12 the bottom of the column indicates MCO Holdings? 13 A. Yes. 14 Q. 2,000 shares? 15 A. Yes. 16 Q. Were you aware that Mr. Rosenberg held 17 a position -- held stock in MCO Holdings as of the 18 date of -- as of December 31, 1988? 19 A. I understood that Stanley had been an 20 investor in MCO Holdings for some period of time. 21 Q. Do you know when he became an investor? 22 A. Back when it had a name even before 9735 1 that, when he was -- he went -- went back some 2 time before. 3 Q. Do you know what MCO Holdings is? 4 A. I know it simply as being a company 5 that he is involved with with Mr. Hurwitz. I 6 don't know the company itself. 7 Q. Let's turn to Page 6 of this statement. 8 I want to ask you -- which is Bates No. CN080271. 9 A. I'm looking for the number. 10 Q. In the lower right-hand corner. 11 A. Yes, sir. 12 Q. I wasn't clear on some of your earlier 13 testimony. You stated something about Child's 14 World or property that was in Houston. 15 My question is whether what's noted 16 here on the top right below "organization," 17 Children's Amusement, is in any way related to 18 Child's World. 19 A. No. Children's Amusement is a company 20 in San Antonio that Stanley owns with one of his 21 son-in-laws called -- it's called Jungle Gyms, is 22 the operating name. 9736 1 Q. You don't know if any of these other 2 organizations were related to Mr. Hurwitz, do you? 3 A. The only one I believe, that is related 4 to him is Sage Southwest. 5 Q. And what is that relationship? 6 A. That's the one that's involved in the 7 property on 610. 8 Q. In Houston? 9 A. Yes. 10 Q. Let's look at Page 15 of this document, 11 which is CN080280. 12 A. 80? Yes, sir. 13 Q. The bottom of the page, we see again 14 the Culebra/1686. 15 Do you see that? 16 A. Yes. 17 Q. Is that the property you had described 18 earlier that ultimately was a venture between, 19 among others, Mr. Hurwitz and -- 20 A. I believe it was -- Federated was the 21 one that was involved. There were two properties. 22 Culebra/1686, Ltd. (RCGC Gas) was one group and 9737 1 the MRD land. All of this was involved in a 2 transaction with Laredo National Bank. 3 Q. Would you look at Page 17, please, 4 which is CN080282? 5 A. Yes. 6 Q. By the time this statement was 7 prepared, were you aware that Mr. Rosenberg's 8 personal guaranties in connection with various 9 ventures had totaled $50 million? 10 A. Was I aware? I don't know that I ever 11 sat down to add them up or count them. 12 Q. Did you ever discuss the personal 13 guaranties that Mr. Rosenberg had made in 14 connection with any of the performance on any of 15 those guaranties? 16 A. Later on we did, in connection with 17 some other work I did for him. 18 Q. Is that the other work -- you mean the 19 work out that you had referred to earlier? 20 A. That would be correct. 21 Q. With Frost Bank? 22 A. Yes. 9738 1 Q. Did you ever talk to Mr. Rosenberg 2 about whether or not he had sufficient cash or 3 capital to cover any liability in connection with 4 Park 410, should it arise? 5 MR. KEETON: Could we have a time 6 frame? 7 Q. (BY MR. LEIMAN) My question is very 8 broad. Did you ever talk to him about that? 9 THE WITNESS: Your Honor, I need to 10 ask, if we could, for a moment to think about 11 something. And I may need to call or contact a 12 partner with regard to a privilege issue. I'm 13 not -- I believe I have a serious problem there, 14 in answering this question. 15 MR. LEIMAN: I'll withdraw the 16 question, Your Honor. 17 THE COURT: All right. How much more 18 do you have with this witness? 19 MR. LEIMAN: I would guess, Your Honor, 20 perhaps another 40 minutes. The problem is I'm 21 losing my voice. I have a sinus infection which 22 is on the way out, luckily, but -- 9739 1 THE WITNESS: Welcome to south Texas. 2 MR. LEIMAN: Thanks. 3 THE COURT: All right. We'll adjourn 4 until 9:00 o'clock tomorrow. 5 6 (Whereupon at 4:29 p.m. 7 the proceedings were recessed.) 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 9740 1 STATE OF TEXAS COUNTY OF HARRIS 2 REPORTER'S CERTIFICATION 3 TO THE TRIAL PROCEEDINGS 4 I, Marcy Clark, the undersigned Certified 5 Shorthand Reporter in and for the State of Texas, 6 certify that the facts stated in the foregoing 7 pages are true and correct to the best of my ability. 8 I further certify that I am neither 9 attorney nor counsel for, related to nor employed 10 by, any of the parties to the action in which this 11 testimony was taken and, further, I am not a 12 relative or employee of any counsel employed by 13 the parties hereto, or financially interested in 14 the action. 15 SUBSCRIBED AND SWORN TO under my hand 16 and seal of office on this the 9th day of 17 December, 1997. 18 ____________________________ MARCY CLARK, CSR 19 Certified Shorthand Reporter In and for the State of Texas 20 Certification No. 4935 Expiration Date: 12-31-97 21 22 9741 1 STATE OF TEXAS COUNTY OF HARRIS 2 REPORTER'S CERTIFICATION 3 TO THE TRIAL PROCEEDINGS 4 I, Shauna Foreman, the undersigned 5 Certified Shorthand Reporter in and for the 6 State of Texas, certify that the facts stated 7 in the foregoing pages are true and correct 8 to the best of my ability. 9 I further certify that I am neither 10 attorney nor counsel for, related to nor employed 11 by, any of the parties to the action in which this 12 testimony was taken and, further, I am not a 13 relative or employee of any counsel employed by 14 the parties hereto, or financially interested in 15 the action. 16 SUBSCRIBED AND SWORN TO under my hand 17 and seal of office on this the 9th day of 18 December, 1997. 19 _____________________________ SHAUNA FOREMAN, CSR 20 Certified Shorthand Reporter In and for the State of Texas 21 Certification No. 3786 Expiration Date: 12-31-98 22