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06/04/2011 09:37 19735971174 PAC£ 01 exactly the SEC's investigation of Highbridge 21 entailed? A. I do not believe it was on 22 investigation; I believe it was o routine examination. My only reference point as to what 23 actually occurred was contained in a lawsuit from Highbridge's former general counsel that was filed 24 in New York State court. Q. That's the Carol Rubin file? 25 A. Yes. Q. But you haven't seen the letter that 80 1 NONCERT/FIED ROUGH DRAFT - CONFIDENTIAL 01:49:50 2 Highbridge received from the SEC regarding its subadvisory role with Zwirn? 3 A. No, I never sow such o letter. Q. By the way, one of the things that 4 Mr. Metz mentions -- and it's covered in the third star from the bottom, right above a star that 5 says, What is JCX? Do you see that that star that 01:50:20 says, Can you explain the various liquidity 6 redemption options that investors hove in different funds, including key dates? 7 A. Okay. Q. It says, What I want to focus on is how 8 much do you know about what people ore going to do on September 1st. Remind us again why September 9 1st Matters so much. Do you know what he's referring to? 10 MR. O'BRIEN: There's another sentence. 01:50:52 MR. SUSMAN: I don't wont to ask about 11 that. A. A majority of the investors were in a 12 redemption option called one year plus liquidity, which was the same option that Travis Metz 13 personally was in os an investor in the onshore fund. The notice requirement for redemption at 14 the end of the year was 120 days. Therefore September 1st was an important date to know how 15 many people and dollar amounts were going to 01:51:24 redeem under that option. 16 MR. ARFFA: I hadn't realized until now he was an investor. So again we'd ask for 17 confidential treatment of that. (Exhibit 81, DESCRIPTION, marked for 18 identification.) Q. I show you Exhibit 81. Did you 19 participate in the negotiation of this agreement between DSAM and the D.B. 2wirn entities? 20 A. Yes, I did. 01:52:04 Q. Why is it that Mr. Zwirn I'm sorry, 21 Mr. Dubin and Mr. Swteco were being bought out of the management company? 22 A. It was a demand being made in conjunction with the payment of the incentive fee 23 that was owed by Highbridge to O.B. Zwirn & Co. EFTA01075132 06/04/2011 09:37 19735971174 PAC£ 02 Q. In other words, in order for Highbridge Z4 there was -- strike that. There was an incentive fee or 25 management fee that was owed to the management 01:52:44 company from the Highbridge managed account; is 81 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 that right? A. Yes. 3 Q. I understand you're saying Mr. Dubin Said in order for you to get paid that fee from 4 Highbridge you have to buy me out of the management company? 5 A. That's not how he phrased it. 01:53:01 Q. How did he phrase it? 6 A. Meeting in Glenn's conference room sometime in June of 2007, Glenn had a prepared 7 script which he seemed to be reading or paraphrasing from where he said that he would 8 agree to hove Highbridge pay their incentive fees -- and I can't remember exactly what the 9 conditions were for that -- and in addition you will buy me out of my interest in D.O. Zwirn for 10 130 million. And if you don't agree to my 01:53:36 conditions. I will sue you. 11 Q. Did he soy what he would sue you for? A. No. 12 Q. Well, wos one of the conditions for payment of the fee from Highbridge that you let 13 Highbridge's assets go, in effect? MR. O'BRIEN: Objection to farm. 14 A. I think the agreement is self-evident in terms of how the managed account would be 15 managed. So we weren't letting them go; we were 01:54:07 still managing the assets, but subject to their 16 direction. Q. You entered into -- at the same time 17 you entered into Exhibit 81, right, you entered into Exhibit -- what I'll mark as Exhibit 82. 18 (Exhibit 82, DESCRIPTION, marked for identification.) 19 Q. You were involved in negotiating Exhibit 82? 20 A. Yes. 01:54:52 Q. And Exhibit 82 is the settlement 21 agreement in effect between Highbridge -- the entity thot owned the Highbridge managed account 22 and D.B. Zwirn; right? A. Correct. 23 MR. ARFFA: Objection to form. Q. And that agreement calls for a 24 liquidation of the Highbridge managed account and payment, and as well there's a provision that 25 talks about Highbridge will in turn pay the 01:55:15 management company the incentive fees and EFTA01075133 06/04/2011 09:37 19735971174 PAC£ 03 82 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 management fees that are owed. A. Yes. 3 Q. Right? It doesn't tie -- Exhibit 82 does not 4 tie payment of the management fees or incentive fees to buying Mr. Dubin out of the management 5 company; correct? 01:55:36 A. Correct. 6 Q. But you're saying in a meeting Mr. Dubin effectively tied the two together? 7 A. I believe he did. Q. Did Mr. Dubin explain why he thought he 8 was entitled to be bought out of the management company? 9 A. No. Q. He just demanded it and sold. If you 10 don't do it, I'm not going to -- or implied if you 01:56:05 don't do it you won't get paid your fees from 11 Highbridge? MR. ARFFA: Objection to form. 12 A. My inference was yes. Q. Well, did you hove any discussion with 13 Mr. Dubin about why he felt entitled to be bought out of the management company? 14 A. With Mr. Dubin? No. Q. Oid in fact the management company use 15 the management fees or incentive fees that 01:56:32 Highbridge paid it to fund the payments to 16 Mr. Dubin? A. In port. Money's fungible. 17 Q. In fairness, who did the -- you negotiated Exhibit 81; right? Strike that. 18 Was there any effort to conceal the existence of Exhibit 81 from Highbridge, to your 19 knowledge? Exhibit 81 is the agreement with Mr. Dubin. 20 A. To conceal? 01:57:04 Q. Yeah. 21 A. No. Q. Highbridge know that both agreements 22 were being entered into at the same time; correct? A. Well, Bob Caruso was the CFO of 23 Highbridge. Bob Caruso was the counterporty from the business side with whom I negotiated. 24 Q. Both agreements? A. Yes. 25 Q. bid Mr. Caruso ever link the payment of 01:57:27 the Highbridge management fees to Mr. -- to the 83 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL EFTA01075134 06/04/2011 09:37 19735971174 PAC£ 04 2 buyout of Mr. Dubin from the management company? A. Not explicitly. 3 Q. Under Exhibit 81 Mr. Dubin -- not Mr. Dubin, Mr. Dubin Swteca asked that management 4 is supposed to be paid 530 million in o series of payments. 5 A. Correct. 01:58:01 Q. Were those payments all made? 6 A. No. Q. Now much of it was paid? 7 A. Let me look of the payment schedule. Q. It's probably in paragraph 2(b), the 8 first page, the very bottom. A. The 3.12 million was paid. The 17 -- 9 the 9.5 was paid. The 17.5 nos not paid. Q. Was it ever paid? It wasn't paid on 10 time, but was it paid at all? 01:58:42 A. NO. 11 Q. Has there been ony sort Of resolution of that outstanding payment? 12 A. Yes. It's my understanding that as of I believe May 1, 2009, DSAM relinquished all 13 claims to any future payments with regard to this agreement. 14 Q. Was there an agreement that memorialized that? 15 A. There nos a letter, I believe. 01:59:08 Q. And what was the background that led to 16 05AM agreeing in May of 2009 to any of these future payments? 17 MR. O'BRIEN: I just caution you not 18 Q. Strike that. Sorry. Wes the May 1, 2009, ogreement 19 connected to the acquisition or takeover by Fortress? 20 MR. ARFFA: Objection to form. 01:59:32 A. I don't know if it was connected, but 21 it did occur coincidently at the some time. Q. Is it your understanding it was 22 designed to facilitate Fortress taking over management of the funds? 23 A. Without their relinquishment, I don't believe the transactions could hove occurred. 24 Q. By the way, there is on Exhibit 81 the necked "whereas" clause. It says, whereas DSAM 2S does not receive through its interest any fees 02:00:03 accruing from D92 L.P.'s management of HCN/Z 84 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Special Opportunities LLC. Was that on accurate recitation? 3 A. I believe so. Q. Well, except I think -- didn't you just 4 tell we in some of the money from Highbridge deal was used to pay for the interests? EFTA01075135 06/04/2011 09:37 19735971174 PAC£ 05 5 A. Once again, money is fungible. Their 02:00:35 capital accounts hod a special allocation to 6 exclude amounts earned from the Highbridge managed account. 7 Q. In Exhibit 81 there's provisions about OSAM releasing alt of its interests in any DEC 8 entity. Did that include Mr. personal interest in the fund, do you know one way or the 9 other? Is that what the intent was? A. No. His personal interest in the 10 onshore fund and I believe in the tax-exempt fund 02:01:15 were completely segregated from this agreement. 11 Q. Now, let's talk briefly about Exhibit 82, the Highbridge agreement. 12 A. Okay. Q. I'll tell you what, to give you o 13 little background, let's just go through this real fast. 14 (Exhibit 83, DESCRIPTION, marked for identification.) 15 Q. I show you Exhibit 83. Exhibit 83 is 02:01:55 the letter that you referred to that you received 16 in late January '07 from Highbridge, Or Series of letters? 17 A. Yes. Q. So from this -- from the time after you 18 received this letter, was the relationship with Highbridge adversarial? 19 A. In terms of actual day-to-day interactions, they were quite cordial. But the 20 presumption was that we were adversaries. 02:02:29 (Exhibit 84, DESCRIPTION, marked for 21 identification.) Q. Exhibit 84. Do you recall receiving or 22 seeing a copy of Exhibit 84 an April 11, 2007, letter to Larry Cutler? 23 A. Yes. Q. In the letter Highbridge specifically 24 accuses you of having promised to transfer the shares of GAGFAH on February 15th and then 25 essentially reneging on that promise: right. The 02:03:15 first poragroph, if you're confused, says, David 85 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 Lee assured us at that meeting that the improper activities were under investigation and that Zwirn 3 would immediately begin to transfer assets to us, such as the GAGFAH shares, which were reason ply 4 liquid. Further, since February 15th meeting David Lee has advised us that Zwirn would transfer 5 the GAGFAH shares to us provided we put the 02:03:44 request in writing. We cannot tolerate you taking 6 positions in writing that are in conflict with reassurances made to us verbally. 7 Right? A. I remember this very well. EFTA01075136 06/04/2011 09:37 19735971174 PAC£ 06 8 Q. Their position was you told them that you'd give them the shares if they put it in 9 writing. They did. The fund responded by saying they're not going to do it. And they wrote this 10 letter to you. Right? 02:04:09 A. My recollection -- this is pretty 11 vivid -- is I felt it was bald-faced lying and I had other witnesses in that meeting that 12 corroborated I never mode such assurances. (Exhibit 85, DESCRIPTION, marked for 13 identification.) Q. Look at Exhibit -- I show you Exhibit 14 85. This was a letter that you were sent in connection with the audit of Highbridge from 15 August 10th, 2007, and what it says is that the 02:04:48 NAV of the Highbridge monoged account was $580 16 million os of December 31, 2806. Do you see that? A. Yes. 17 Q. This one -- did you send back anything to confirm whether this was correct or not? 18 A. I believe we hod discussions with Highbridge and with PwC to help assist in the 19 completion of their audit. I don't recall us sending o letter that addressed this letter 20 specifically but that it was more of a process. 02;05:44 Q. All right. So let's just -- I wont to 21 walk through some of the numbers, Exhibit 85. It Says there's an NAY of 580 million. But then 22 there's a paragraph below it that says subsequent to year end we received redemption proceeds of 146 23 million, roughly, which ore not included in the NAV as detailed below -- above. 24 A. Okay. Q. Does that mean that the NAV of the 25 Highbridge managed account was roughly $720 02:06:14 million as of December 31, '06? 86 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 A. I don't know because the ownership in CG Holdings was a liquid stock that hod 3 significant volatility. So that value could have been materially lower or materially higher. 4 Q. CG Holdings is what held the GAGFAH shares? 5 A. The GAGFAH shares. 02:06:53 Q. Does the number of 700 million sound 6 about right as of December 31, '06? A. i don't recall. 7 Q. You don't. Okay. Suffice it to say sometime after December 31 Highbridge got $146 8 million out of the managed account; right? A. Yes. 9 Q. If we could, let's look of Exhibit 82. A. Okay. 10 Q. Do you know os of the time you quit 02:07:33 working at 002 whether there was still any money EFTA01075137 06/04/2011 09:37 19735971174 PAGE 07 11 in the Highbridge managed account or had it al/ been distributed? 12 A. My recollection was that there were still assets in the Highbridge managed account os 13 of May 31, 2010. Q. How significant in size? 14 A. I don't know. Q. Now, if you turn to page 2 -- 15 MR. O'BRIEN: We're on Exhibit 82? 02:08:10 Q. -- of Exhibit 82, there's paragraph D, 16 additional payments. A. Okay. 17 Q. It says essentially it calls COI' the repayment of the loan from the onshore -- to the 18 onshore account; correct? A. Yes. 19 Q. Did that loan get repaid? A. There are essentially two loans. The 20 50 million loon from October of '06 that was 02:08:39 documented was repaid. This is referring to the 21 amount of intercompany or interfund poyables to the Highbridge account that we did not have a 22 definitive answer to because it was pending the completion of the 2006 audits. 23 Q. So by the time of the agreement of Exhibit 82, had the Highbridge -- the 150 million 24 Highbridge loon been repaid in full? A. The loan that was referred to and 25 documented in October '06 had been repaid. 02:09:21 Q. Okay. And then this -- the interfund 87 1 NONCERTIFIED ROUGH DRAFT - CONFIDENTIAL 2 balances that were not reconciled, I guess, as of the time of this agreement, were they ultimately 3 reconciled and repaid to Highbridge by the end of 2007? 4 A. There was a reconciliation. I can't remember when it was paid down. Q. And do you know how much money, 02:09:52 naughty, was paid out to Nighbridge from the 6 managed account from the time of Exhibit 82 until you stopped working of 082 8 Co.? 7 A. I don't know offhand. Q. Do you know if it was hundreds of 8 millions of dollars? Any idea? MR. ARFFA: Objection to form. 9 A. I don't recall. Q. Do you have any ballpark of what 10 percentage of the Highbridge account was actually 02:10:26 liquidated and paid out to Highbridge? 11 A. No. MR. SUSMAN: Let's take a quick break. 12 THE VIOEOGRAPHER: We're off the record. The time is 2:10. 13 (Recess taken from 2:10 to 2:19.) THE V1DEOGRAPHER: We're bock on the EFTA01075138